Short-Selling Vs. Naked Short-Selling: An Explanation

In "Wall Street's Naked Swindle," Matt Taibbi examines how a scheme to flood the market with counterfeit stocks helped kill Bears Stearns and Lehman Brothers — and the feds have yet to bust the culprits. The scheme that helped do in two of the five major investment banks in the U.S. is known as naked short-selling — the sale of shares you don't have or won't deliver. Normal short-selling, however, is legal and good for the market: it lets investors bet against companies that they believe will decrease in value.

To help explain his story, Taibbi heads to the white board and breaks down the differences between the two: click above to watch him explain short-selling (our buyer: Wilford Brimley, broker: Count Chocula, short-seller: Hervé Villechaize), and below for a discussion of its evil twin, naked short-selling. — Rolling Stone

For more on naked short-selling, see Caught On Tape: A Naked Swindle.

UPDATE: The full "Wall Street's Naked Swindle" is available on the Web now.

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