SEC in the Hunt - This Should Be Good

"July 16 (Bloomberg) -- The U.S. Securities and Exchange Commission subpoenaed Wall Street's biggest firms and hedge-fund advisers in a widening effort to crack down on suspected manipulation of Lehman Brothers Holdings Inc. and Bear Stearns Cos. shares, said three people with knowledge of the matter. "

Gee. Yesterday, the head of the SEC pulled off the regulatory piece de resistance of making something illegal that was already illegal. Or he did something else but nobody is sure what it was.

Now the SEC is going after Goldman Sachs and the question of whether Goldman or any of the other brokers had an unfair role in the stock price decline of Bear Stearns or Lehman. Goldman summarily denies it:

""We went out of our way to be supportive of Bear and were rigorous about conducting business as usual," spokesman Lucas van Praag said. He said Goldman never altered its terms for doing business with Bear, even as lenders pulled their financing and some trading partners retreated..."

Goldman is scary good at what they do. If the Keysone Cops at the SEC find a hair out of place on Goldman, I'll be very surprised.

Has Jamie Dimon Been Working Too Hard?

Jamie Dimon, CEO of JP Morgan, is battling under the weight of Bear Stearns' nasty balance sheet and the credit crunch that won't stop inflicting pain. This week he is adding to his to do list a crusade against any short seller who made money from the Bear Stearns decline. Presumably only JPM itself was supposed to profit from Bear's misery.

Dimon talked to Charlie Rose Monday night, and offered the following:

"This is even worse than insider trading. This is deliberate and malicious destruction of value and people's lives," Dimon said. "They shouldn't go to jail for a short period of time. If I was the SEC, I'd find out who made the money and I'd investigate like they do when they come after us all the time, e-mails, phone records, you name it, and I'd find out."

That is nonsense. I applaud anyone who correctly identified the fact that Bear's balance sheet was in jeopardy and made money on the short side.

If you were an institution with counterparty exposure to Bear, and you got short the stock or helped others do so, then either pulled your counterparty agreement or threatened to do so, or spread a rumor that you were going to do so, you have a problem. If you did good research and shorted Bear, good for you.