Subject: File No. S7-20-08
From: Bernard Gress, Ph.D.
Affiliation: Economist, Fannie Mae

August 9, 2008

Please get rid of naked-shorts entirely. I only recently learned what these were - naturally in light of the recent collapse in share price of my company, Fannie Mae - and was surprised to discover that such a device would be allowed at all. It seems clear to me that this is an instrument and loophole solely created to benefit brokers and large investors. Brokers as they can reap additional profits from lending others' stocks large investors as they can flood the market of an individual security with the 'virtual stocks' created by shorting, achieving a self-fulfilling fall in price and guaranteeing their profits. Both regular shorting and naked shorting have this problem, but the leveraging multiplier effect from naked shorting must certainly be larger. This non-regulation, as well as the repeal of the up-tick rule, seems to me to be a glaring oversight by the SEC, presumably due to corporate manipulation by the brokers and large investment banks. I would hope that the SEC would rule in favour of the good of the market and against the good of a few key players.


B Gress