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RUSH: David in Upton, Maryland. You’re next as we go back to the phones. Welcome to the EIB Network, sir. Hello.

CALLER: Hi, Rush. Longtime listener, first-time caller.

RUSH: Thank you, sir.

CALLER: I got a situation which I think McCain could take care of, or take advantage of, and it has to do with short selling, and I told your caller, I disagreed with your lack of regulations by the government, and it is this. There is, as far as I know, on the books a regulation in the SEC that doesn’t allow the business of selling short naked. And what that means is people can go into the market without traditionally having to borrow stock to sell short and simply sell short, which creates huge volatilities in the market because they can go in in the opening and just say, ‘Well, we’re going to sell 50,000 or a hundred thousand shares of this preferred or this stock short,’ and they don’t have to borrow the stock to cover that.

RUSH: So they’ve got no stake in it —

CALLER: They’ve got no stake in it except on the way down, and I don’t know, as far as I know —

RUSH: No, they lose big if it goes up.

CALLER: But in this kind of market, they can’t lose, because they can control the market by selling short in a thin market like the insurance market. They can control the market by selling such huge amounts short. These are the hedge funds and so forth. Used to be you had to sell on the way up, sell short on the way up and then wait for it to go down. That’s not the case now. You can sell it on the way down and the kind of market — all they’re doing is making the market much more volatile than it is now, much less orderly–

RUSH: So what you’re saying is these are not people that are profit taking.

CALLER: No, no, no, no, no, no. You understand what a short sale is?

RUSH: I do. You’re saying that the market’s going down here because of short sellers. I’m asking you, are there some people here just simply selling and taking profits?

CALLER: I’m sure there are, but the volatility of the market is caused by these guys, these huge amounts of pools of money that can go into a thinly preferred share, for instance, like Merrill Lynch or whatever, that’s not traded often and just sell it short on bad news, and they don’t have to borrow stock to cover it, they just sell it short. What they’re doing is they’re making up extra shares of stock, they’re printing stock.

RUSH: And what you want is McCain to regulate this?

CALLER: Well, it’s already regulated.

RUSH: All right, then what do you want McCain to do?

CALLER: I think he should take advantage of this — I mean if Schumer and Dodd are head of the finance commission, nobody is investigating this, and it’s like the Wild West; there’s no regulation on this stuff.

RUSH: Oh, I see.

CALLER: The regulation is on the book.

RUSH: Okay, you want McCain to suggest we have an investigation into this and maybe have people look into why this is being allowed to happen as it hasn’t been in the past?

CALLER: Absolutely.

RUSH: All right.

CALLER: And I think it’s the Democrats’ problem.

RUSH: Well, I’ve heard some vestige of this but obviously I’m not as informed on it as you are and therefore I’m limited in what I can say about it, because I’m not doubting you, it’s just I like to assure myself on things like this.

CALLER: Please do, but my information, from a large brokerage house, is that there is a law on or a regulation in the SEC that this practice cannot happen, and yet the practice is happening wholesale. And that’s why stocks go from 25 to three over two days.

RUSH: What stock has done that?

CALLER: I think AIG did. I think Merrill Lynch did.

RUSH: Are you saying that short sellers caused the bankruptcy or near bankruptcy?

CALLER: No, no, no, no, no, no. What I am saying is that short sellers are creating volatility in the market that is making a controlled solution to these situations much worse. That’s what I’m saying.

RUSH: All right. All right. I will investigate that. I have many powerful friends who have all kinds of knowledge about all of this, who I’m sure are tapping me e-mails at this very moment, saying you either don’t even know what you’re talking about, or they are confirming what you’re talking about and helping me get up to speed. I’ll let you know when it happens.

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