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Ban on Short Selling Could Have Negative Consequences for Options Market

The SEC has exempted market makers from the no shorting rule for financials but they still must locate shares to short. They are not exempted from the naked shorting ban. The naked shorting ban was implemented in SEC 2008-204 which was not affected.

Accounting Antics Lift I-Bank Earnings - Barron's

This practice will become the standard as the GAAP and IFRS standards converge.

The other side is when the debt is securitized and simply passed through to other investors. The asset has to be marked to market which books a loss but the liability could not until the recent FaS Rule 159 became effective. Mortgage REITs have large negative EPS simply because the of the writedown of only one side. When FAS 159 is applied the book values of these companies take a good positive jump. They have their problems and risks but as a group have a 25% short interest, yield 20% in dividends and will show a large jump in book value when Q1 earnings are released.

In this case, FAS Rule 159 makes a lot of sense.