As part of the Barney Frank proposed Manager's Amendment, which will accompany HR4173, the "Wall Street Reform and Consumer Protection Act of 2009", are three little-noticed rules that, if adopted, will make shorting stocks if not impossible, then extremely problematic and difficult. It is obvious why these rules would end up in an amendment: the outcry from retail and institutional traders would have been huge had these proposals made the full text of the proper Bill, and into the full view of the Mainstream Media. So why bother with these - simple. As everyone is aware, Ponzi schemes only work when constantly growing, as otherwise they blow up, implode under their own weight, once price discovery is attempted by all. Case in point: when Madoff's securities was unable to find another greater fool in the face of collapsing asset values, the jig was up overnight, and the value of the pyramid went from $50+ billion to $0 instantaneously.
In this manner, Ponzies are like sharks - they need to swim to live: any deviation from the norm threatens their very survival. By comparison, shorting has always been the most traditional way to force price discovery: as idiot money pension funds tend to be long-only, selling only occurs in times when book gains have to be realized, and facilitates a rising market without any natural checks and balances. If this amendment passes, the entire equity market will have become Madoff securities to the dot. It will continue going up, until market values are a reflection of no underlying fundamentals, but simply the latest pension fund long-only dumb terminal willing to throw managed capital into the bonfire of an inevitable future stock market collapse. And, to borrow another page from the Madoff analogy, when the inevitable correction does occur, it would not be 10% or 20%: the entire worth of the Ponzi would be gutted.