The rule was eliminated by the SEC, effective July 6, 2007, and my question at the time was: "why would the SEC eliminate a rule that was put in place more than 70 years ago to prevent another market crash?"
The stock market (S&P 500 index) is down about 46% since I wrote the article, and 57% since the rule was eliminated:
As I said at the time, eliminating the uptick rule didn't "cause" the mess we're in, but by helping short sellers drive down the price of stocks, it made it more difficult for businesses (especially banks) to attract new capital to deal with the housing crisis, and ultimately put the economy as a whole at risk.
A couple of weeks ago, in testimony before the House Financial Services Committee, Fed Chairman Ben Bernanke said restoring the rule “might have had some benefit.” Yesterday on CNBC, legendary investor Warren Buffett said "probably the uptick rule is a good idea." And today, Rep. Barney Frank said he has spoken to the SEC, and is "hopeful the uptick rule will be restored within a month," sending markets higher (when something is obvious to Barney Frank, it's obvious to just about everyone).
The truth is that no one really knows how much impact reinstating this rule this will have, and by now it may be too late: trillions of dollars have been lost, and the recovery will take years. The special interests that lobbied to have this rule eliminated have made their fortunes selling America short. Some, like John Paulson of the Paulson & Co. hedge fund will walk away with billions in profits.
This is little more than a footnote in the history of our current economic crisis, but in catering to special interests at the expense of the American people, it says a lot about President Bush's cavalier view of the importance of government regulation, and whose interests he really cared about.
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