Originally Posted by Lane

(i might be partially pulling the following out of my ass)

Shorting allows people to make money on a declining market, so that investors don't completely pull out, which might be even more catastrophic.

Look at real estate. Once the market started seeing a decline, all the investors fled away and sales completely plummeted. Without the sales volume, it's having a very hard time to get back on it's feet.

Short selling might be a necessary evil to keep gears turning in wall street.