Subject: File No. S7-20-08
From: Mike Zelvin

July 23, 2008

My 5 year-old son can tell you that if he didn't let you borrow his toy, you can't. And if he lent the toy to one friend, sorry, but all his other friends are out of luck and will have to wait in line. I teach my son about being a good person, and I will eventually get to the word "character". I expect grown-ups, and our institutions, to act with grown-up character.

I have no problems with shorting stocks. If I have an agreement from someone to borrow their shares, or they have an agreement to borrow mine, it's all fine with me. But I have sensed that over the years, many of my holdings have been naked-shorted or lent out multiple times simultaneously. How this is possible is something only a lunatic or a "professional" can rationalize. Yet I turned on CNBC today to find some very loud ("thou dost protest too much") reporters and commentators saying that the government focus on short-sellers is nothing more than scape-goating.

The rants smacked of people trying to protect something suspiciously dear to them...or their friends.

Government enforcement is long overdue. It's not a far stretch to guess that some of my closely-held stock positions over the years have been strategically, and possibly illegally, shorted by competitors aiming to keep open-market secondaries from happening at fair prices. Contracts have been lost tiny companies have gone under or sold out for (unprovably) obscene prices. When there is no government oversight, no price to pay, why not try such maneuvers?

The bile I and managements of many small companies have amassed over the years on this topic is such that this letter should be imagined as stain-soaked and that the only reason expletives are omitted are so as not to sink so low as to match the "Alice through the looking glass" affront which has been reality.

On a less personal scale, American engines of innovation are lost or swallowed up when capital can't be raised by these companies at fair prices. Seems pretty anti-American to me.

Capitalism can run amok, and all regulators, reporters and commentators who worry about "overcompensating" should first recognize the extent of the damage done with no compensating.

I'd like a head. Or two.

PS When I heard in a recent interview on CNBC with Erin Burnett and Christopher Cox that naked shorting wasn't illegal, my jaw dropped. I always thought it was. MAKE IT ILLEGAL FOR ALL COMMON STOCK AT ALL TIMES 3 days to cover, THAT'S IT.