I can see a conditional case for banning the short selling of bank shares during a crisis.
That said, I agree that there is a fundament problem when commercial banks behave in a manner that is detrimental to the stability of a system of which they are a integral part.
Commercial banks are a crucial element in any financial system. They fund the economy and facilitate payments. They are the financial conduit between government and non-government sectors. So it is a bit rich if the behave in a manner that threatens the stability of that system.
Government support for banks should come at a price.
Commercial banks accepting government backing should play no role in the capital markets. I think that there should be a return to a Glass-Steagall model where Commercial banks and investment banks are separate and distinct.
Under that model, the restriction of short selling of commercial bank shares would be protect systemic stability. Investment banks should be left to live and die by the sword.
