Christopher Cox’s Shorts
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

One of our favorite newspaper stories concerns the behavior of the editor of the financial newspaper Barron’s, Robert Bleiberg, on the day that President Kennedy was assassinated. Bleiberg is now dead, alas, but as we heard the story, he was in his office at Dow Jones & Company, Inc., preparing for coverage of the crisis that would come as markets turned downward after the terrible news. Suddenly came the announcement that trading on the New York Stock Exchange was suspended because of the president’s death. Bleiberg went into a rage,* bellowing something to the effect that a crisis was just exactly when the markets most needed to be able to operate freely.
Well, we’re not in quite the same league with the great Bleiberg when it comes to histrionics. But what in the world is a hero of free market conservatism, Christopher Cox, doing by coming out, as chairman of the Securities and Exchange Commission, with a proposal, now that the markets have turned bearish, to restrict short-selling of the four big New York based non-bank financial institutions, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley? If this is related to the current crisis in the credit markets, not to mention the currency markets, all we can say is, this is a time when the markets need to be at their freest.
We’re tempted to propose that the government be permitted to go ahead and restrict short selling in shares of Goldman, Lehman, Merrill, and Morgan Stanley — so long as those four firms disgorge all of the billions in profits that they earned over the past decade on the short end of trades. But why should those firms be allowed to pay out money to insulate themselves from the price signals the market wants to send in respect of their equity? It’s bad enough that Goldman, which earned $11 billion in profits last year and paid its chief executive $74 million, got a $650 million taxpayer subsidy for its new headquarters. Now the SEC is going to ride to the firm’s rescue when the firm runs into an adverse market?
At least the short-selling restriction was not announced by Secretary Paulson, himself a former chief executive of Goldman. We defended Goldman in a December 20, 2006, editorial, celebrating its success as “what is right about New York and capitalism, not what is wrong with it.” We still wish the company success. It may be that the SEC’s action is actually aimed at protecting Lehman and Merrill, and that Goldman, which appears stronger, was included so as not to create the impression that the other financial institutions were on the verge of going under. But the worst thing the government could do for any of these firms, or for investors anywhere, is restrict them from entering into freely reached market agreements.
If President Bush is so all-fired sure the economy is sound, as he said yesterday, it’s hard to understand why he’s suddenly turning to socialistic remedies — though his decision to lift the executive order banning certain off-shore drilling, announced yesterday, is a step in the right direction. The best thing he could tell the American people is that what we need to do to get out of this economic box is to protect the ability of the market to send its signals so that private individuals can make their own decisions. That means establishing a sound currency, removing the threat of tax increases, executing free trade agreements with the greatest alacrity, easing immigration into America, minimizing regulation, and making sure that law-enforcement is steady and predictable. And ensuring that no special protections will be provided to the biggest institutions that are not also provided to others.
*This rage, the way we heard the story, was such that Bleiberg tore his phone from the wall and threw it to the floor. But this is incorrect, we were told last night by Bleiberg’s successor at Barron’s, Alan Abelson, who said that Bleiberg’s phone did not hang from the wall but sat on his desk at the end of an open newsroom, and that Mr. Abelson, who was there when Kennedy was shot, didn’t see it thrown anywhere. Bleiberg’s fury was, he said, nonetheless evident.