Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-16
Driving Out the Wolves.

The reason resentment against short
selling" and bear raids" on the market
has never been taken very seriously in
the past is that the whole thing is
forgotten and forgiven as soon as the
skies clear and stocks begin to rise
again. When times are good everybody
| laughs at a pessimist, but when times
are bad he is regarded as prophet
of evil.
It Is natural however, that the full
measure of condemnation should
descend now on the practice Of short
selling, with little attempt to differen-
tiate between the fundamental necessity
of the practice in preserving a free and
open" market and the reprehensible
tactics of organized spectators who
deliberately run down the price of
securities on the strength of alarming
rumors and whispered tales of impend-
ing disaster. And if the of1icials and
defenders of the New York Stock Ex-
change would spend less time unfolding
the economics and sanctity of short
selling as principle and devote some
extraordinary energy to exposing and
Furnishing those who abuse it, the stock
market and the country at large would
bensfit.
That there is abuse now is pretty
generally admitted. The fluctuations in
stocks themselves might be considered
as prima facie evidence. Nobody seems
to condone such abuse Everybody con-
dennis it and resents it. AS for the
public, which became q heavy investor
in securities in the relatively recent past
and for the first time learned to study
the stock market, the psychological eff
fects of bear raiding are neither to be
denied nor discounted. Instead of buy
ing-and depression will be over when
the public begins to buy-the public
reads of another crash in stocks and
ties up all its loose coin in sock. The
public has come to regard the stock
market as true index to prosperity,
and whether the index is right or wrong
has nothing to do with it.
81 personally do not believe that it
Is proper for persons to sell stocks in
volume and in a manner that is
calculated to depress prices artificially,"
said President Whitney of the New
York Stock Exchange a few days ago.
But "the prohibition of all short SELL
ing, which might result in the destruc-
ton of the market, is too high price
to pay for the elimination Of the few
who abuse this legitimate privilege"
That is undoubtedly sound logic. But
what the officials of the New York
Stock Exchange may or may not realize
is that once public sentiment becomes
really aroused and sufficiently outraged
over the abuses of short selling, it is
not going TO stop short Of prohibition
or anything else to clean up the abuse.
The depression will loom large in the
debates in Congress this Winter. 1t
can be taken for granted that If de-
preston can be blamed on anything so
tangible as practices condoned by the
New York Stock Exchange, and there
are plenty who are willing so to Ak the
blame, legislative remedies will be pro-
posed thick and fast; an investigation
Of the New York Stock Exchange has
been proposed, and the time is ripe
| for these to meet with favor.
1t is not known what subjects were
discussed by President Hoover, Mr..
| Whitney and Allen Lindley, chairman
of the Exchange Business Conduct
Committee, at their conference Satur-
day night The President might have
told them both that it is more desira-
BILE, from their point Of view, to find
ways and means of ending abuses of
short selling than to wait around and
have somebody else do it for them.
Defense of the principle Of short
selling is neither here nor there. A
confession by the Stock Exchange on
Gals that they are unable to corral
the wolves and get rid of them is
merely an invitation for somebody else
to do it for them. The process will
| no doubt become unduly drastic