This is really interesting. Reading Barry’s comments on the short-selling ban last night, I was thinking something like "are you (Barry) sure you mean all short-selling and not just naked short selling," because this seems crazy in a can-this-be-constitutional? sort of way. Attempting to analyse the issue of short-selling from a property law perspective, it was puzzling me (in case recent events have you uncertain as to what "Property" means, here’s the old definition). Anyway, here’s an excerpt from Barry’s article speculating on the reasons behind the SEC’s action. 
Terror Attack on US Financials? Details of SEC Short Ban
By Barry Ritholtz, at the Big Picture.
Excerpt: "Last night, we discussed the absurdity of banning all short sales. The details of the SEC action have been released (see below). The specifics are a "temporary halt in short selling in 799 financial institutions" until October 2nd.
I have been trying to contextualize this, and I keep coming back to what seemed like a wild theory yesterday that seems a whole lot less wild today. During the day, I had an interesting phone conversation with Joe Besecker of Emerald Asset Management. (We used to do schtick together on Power Lunch, and made for an amusing financial comedy team). 
But Joe is a good money manager, a great stock picker, and a thoughtful guy. He raised an intriguing issue: None of the many hedgies he knew were pressing their bets recently. The bear raids on the banks and brokers were NOT a case of piling on by US based hedge funds. And from what he was seeing and hearing about in terms of order flow, the vast majority of the financial short selling the past week or so were being done overseas. It appears that the lion’s share of shorting was coming out of overseas bourses such as London and Dubai. It may not be a coincidence that the financial short selling ban is both here and in London.
Then there is another coincidence: The huge increase in shorting of the financials occurred on the anniversary of 9/11. And on top of that, the same institutions attacked on 9/11/01 were the ones suffering in recent days.
Joe asked the question: Is anyone investigating whether this is a case of financial terrorism? He wanted to know if someone was at least looking into this question (Joe is buds with Jim Cramer, and mentioned it to him, who then omitted to cite in his column that this was Joe’s theory, not his own). 
Anyway, its an interesting theory, one that seemed kinda out there — until last night’s emergency action. Nothing else really explains the insanity of banning short sales — except for Joe Besecker’s questions. I can think of only 3 other possibilities that explain this insane action:…
…The grand irony of all this is that Naked Shorting has been very profitable for the big broker dealers, like Morgan and Goldman and Merrill and Lehman. They have looked the other way for years, and the SEC has been AWOL on this issue.
…If you want to know who to blame for the past 5 years of naked shorting, you only have two places to look: The Financial brokers themselves, and the nonfeasance of a feckless SEC…."
