Wall Street is playing games with our economy and betting on the consumer and also the down fall of many financial institutions. Welcome to the wonderful and highly profitable world known as “shorting” or “hedging”.

The Securities and Exchange Commission (SEC) has finally said enough is enough and issued a moratorium on what is known in the financial hedge world has ”naked trading”.

Sounds sexy, doesn’t it?

LA Times:

The subprime mortgage meltdown has taken a toll on the financial sector, triggering the collapse of one of Wall Street’s oldest firms, wild gyrations in the market and a loss of faith by investors in some institutional cornerstones. Yet the most vigorous responses have come from the Federal Reserve and the Treasury Department, not the cop on the beat — the Securities and Exchange Commission.

This month, the SEC appeared to rouse itself from its torpor. Motivated in part by the precipitous demise of Bear Stearns Cos., the commission is investigating whether traders are spreading false rumors to manipulate the price of certain stocks. As part of that probe, it has subpoenaed data from more than 50 large hedge funds. It has also called a temporary halt to a questionable trading tactic — “naked short selling” — on the shares issued by 19 companies in the finance industry, including Fannie Mae and Freddie Mac, whose stocks have plummeted. Some longtime critics of such sales, in which the sellers don’t actually hold the shares they’re unloading, say the commission should go even further and ban them on all stocks.