Reaction to short-selling crackdown

NEW YORK (Reuters) - A global crackdown on the short-selling of financial stocks gathered pace on Friday, kick-started by a move from the UK's Financial Services Authority.

Regulators in the United States and Ireland are among those following suit, while several large European and U.S. pension funds have banned stock lending in the financial sector.

Markets have staged a widespread recovery this morning on hopes the move will help restore investor confidence.

INDUSTRY / FUND MANAGEMENT REACTION JOHN STANDERFER, VP FINANCIAL SERVICES, S3 MATCHING

TECHNOLOGIES, AUSTIN, TEXAS

"Short sellers provide an important reality check to the unbridled enthusiasm that generally emanates from the companies themselves.

"It was short sellers who first uncovered the problems at Enron and Worldcom and asked the hard questions on the conference calls and via the media.

"The root-cause analysis of this problem is not 'short-selling' but that these companies took on obligations far in excess of their capital, and when some of those obligations came due, they did not have the money to meet them."

JIM CHANOS, PRESIDENT, KYNIKOS ASSOCIATES & CHAIRMAN, COALITION OF PRIVATE INVESTMENT COMPANIES

"We are very concerned that these emergency orders will not enhance long term market integrity nor will they address the fundamental economic issues that have been afflicting our financial sector.

"We also believe that markets cannot withstand for long constantly changing rules in which each new regulation is announced in the middle of the night without any public comment or participation.

"Far from being the cause of the crisis, many short sellers were warning months and years ago about problems in this area.

"Simply put: short selling is a vital investment strategy that responds to market fundamentals and contributes to the integrity of stock prices.

"Investors are best served when they can hear both the reasons to buy and the reasons to sell any given security. These emergency orders limit the free flow of information and ultimately will not work to help the United States maintain the freest, strongest and most liquid capital markets in the world."

ERIC NEWMAN, PORTFOLIO MANAGER AT TFS CAPITAL

"In July, Christopher Cox said that ordinary short selling 'is a healthy and necessary part of a free market.' Maybe banning short selling was a necessary step to save the market. But let's stop blaming the short sellers.