But thus far, I fail to know of any valid reasons to make such action called for.
Short Selling—Is it Justifiable?
Question:
You have commenced your first answer with the words, "I need not point out to your Commission." That is a complimentary assumption, but I don't mind telling you that we here are very little acquainted with the working of the Stock Exchange or the affairs of you Wall Street men in general. What about short selling?
Answer:
I do not mean to take a "holier than thou" attitude, but personally, I have never sold a share of stock short in my life.
Short sellers are born, not made. But if there were not people born who sell short, they would almost have to be invented.
Short selling has a legitimate place in the scheme of things economic. It acts as a check on undue optimism, it tends to counteract the danger of an upward runaway market, it supplies a sustaining force in a heavily declining market at times of unexpected shock or panic. It is a valuable element in preventing extremes of advance and decline.
The short seller contracts to deliver at a certain price a certainShort selling Is it justifiable? quantity of stocks which he does not own at the time, but which he expects the course of the market to permit him to buy at a profit.
In its essence that is not very different from what every contractor and merchant does when in the usual course of business he undertakes to complete a job or to deliver goods without having first secured all of the materials entering into the work or the merchandise.