In Sophocles’ play Antigone, a sentry reports the burial of Polyneices to King Creon. The sentry acknowledges that no one loves the bringer of bad news, but is unprepared for the strength of Creon’s reaction. “What you say is intolerable,” the king expostulates. He threatens the sentry with hanging.
Now, 2,500 years later we still attack those who tell us things we find intolerable. Dick Fuld, the former Lehman’s chief, fulminates against short sellers, who – he claims – destroyed his company. Yet most of the copious material that has appeared since Lehman’s demise suggests the finger should be pointed, not at short sellers, but at Mr Fuld. At Enron, Jeff Skilling called a hedge fund manager who queried the balance sheet an “asshole”. He famously drank a glass of champagne to celebrate the news that his company could adopt mark to market accounting. It enabled Enron to take immediate credit for profits it hoped to make in years to come. Recently, Europe’s banks and some of the politicians who speak for them have taken a different view, treating the accountants who insist on marking values to market as Creon treated the watchman. Both the kings of old and the potentates of today prefer to create their own reality than to face the truth.
Conspiracies of short sellers can weaken sound businesses. But there are few proven examples, and more cases where sellers brought the bad news of lies and misrepresentations. David Einhorn, who led the attack on Lehman, wrote a book about his battle to expose malpractice at Allied Capital – a battle that led the Securities and Exchange Commission to investigate, not Allied, but Mr Einhorn’s own business. Events proved Mr Einhorn right. And when regulatory authorities attempted to ban short selling of financial stocks in the autumn of 2008, their objective was not to establish a better informed marketplace but to keep gloomy messengers away from the citadel until the panic had subsided.