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I had to do a double-take when I saw a Reuters story that said MBIA (NYSE:MBI) planned to urge lawmakers at a Congressional committee hearing Thursday to curtail “the unscrupulous and dangerous market manipulation of short-sellers.”

Memo to MBIA: Take a number and get in line. The bond insurer is the latest in a long list of companies that, over the years, have pleaded with the government to do something — anything — about those dastardly short-sellers who have dared raise red flags over their precious companies.

That’s right: They should tar-and-feather the likes of Bill Ackman of Pershing Square Capital, the most vocal bear on MBIA, who had the audacity to very publicly write a 60-page paper in December 2002 headlined, “Is MBIA Triple A?”. They should further tar-and-feather the guy, and those like him, for taking the other side of the bullish bet on company’s like MBIA — and telling the world they’re doing so — because of their conviction and willingness to warn others about what they believe is looming trouble. (Funny, nobody ever complains about “dangerous market manipulation of longs,” but I digress…) And they should tar-and feather the guy for being right and pretty much forecasting what has happened.

It was, after all, in that paper five years ago that Ackman started warning about the very kind of collateralized debt obligations that have landed MBIA in hot water and, as Ackman suggested at the time, put its Triple-A rating at risk. “In the 1990s,” he explained at the time, “MBIA expanded its risk tolerance and guarantee portfolio to include domestic and global structured fianance guarantees on asset classes including subprime home equity mortgages…” This, of course, was back when nobody cared about anything having to do with subprime or any kind of asset-backed acronym.

At the same time Ackman also was first to point out that MBIA had engaged in a questionable transaction that, in effect, involved insuring a loss after the loss and then collecting on the insurance. (I wrote about it several times; nobody gave a hoot.) The issue, which strikes to the heart of the company’s culture, prompted an investigation by regulators; MBIA settled the civil securities fraud charges last year by paying $75 million.

So, here we are, five years after Ackman first surfaced on MBIA. The ratings agencies have downgraded thousands of CDOs. Thousand of others have been put on credit watch. MBIA had had to pay that fine for engaging in questionable practices. And its stock has been crushed.

Now, rather than accept the reality that it caused its own problems with bad business and actuarial decisions, MBIA is complaining to Congress about the guy who blew the whistle.

Seems that rather than crucify him, they should give him the Congressional Medal of Honor. Okay, that’s a little over the top. But you get the point. And, besides, I’m sure investors who heeded Ackman’s warnings in a free market that encourages a free-exchange of ideas think he deserves one.

P.S.: Don’t be surprised if anti-naked-shorting bandwagon somehow latches itself onto this, blurs the line between legal and illegal short-selling, and somehow blames the naked shorts not only for the fall of MBIA, but for the decline of Western Civilization.

The beat goes on…

Source: MBIA vs. The Evil Short Sellers