The 1920s saw the greatest stock market expansion of all time. This expansion was largely the result of an overvalued, overbought and ridiculously bullish market that had little relation to economic reality. The bigger they are, the harder they fall, and the fall the market experienced in the 1929 Crash was a hard one indeed. Short selling was quickly blamed and banned. Abuses perpetrated through its practice by unscrupulous individuals such as Albert Wiggin. He sold short dozens of thousands of shares of his own bank, Chase National Bank, and exacerbated the Crash, perfectly fitted the narrative of short selling only being a force for bad.

Short selling was not as widely practiced in 1920s as it had been during the latter half of the 19^th century. If it had been and the excessively bullish mentality of the decade would had been tempered with a more sceptical/bearish approach, perhaps the bubble would not have grown as large and the Crash would not have been as painful. Regardless, President Hoover launched a Senate investigation and Congress passed key securities markets regulations that set up the Securities Exchange Commission (SEC) and gave it wide powers to regulate short selling. Short selling was banned shortly afterwards. However, there is strong evidence that the ban was not justified. In November 1932, New York Stock Exchange economist, Edward Meeker, published a book titled “Short Selling”. In it he claimed that short sellers did not participate in the Great Crash. He showed that only around one hundredth of one percent of outstanding shares listed in the NYSE had been sold short. And a 1931 study found that the short interest had risen to 3/5 of one percent of the total market value. More than ten times as many shares were held on margin.