Peter, thats very easy to explain and something I forcasted in advance when short selling was banned.
http://www.aspecttrading.com/Reports/SSR.pdf
The tail end of a bear market (which can be where most damage is done) isn't really a result of news or new information, its just fear. People are scared to buy and current investors are scared and can not stomach anymore losses - they dump into a thin market.
The only people in the market who are prepard to buy are short sellers who have profits. In a bear market they are plentifull.
Short sellers cover in a confidence crisis, creating support in the market, haulting the decline and restoring investor confidence.
As a result, share prices bottom and move sideways.
Thus, short sellers had a bullish impact.
Secondly, without short sellers covering and creating this support there is nothing in the market to sure up confidence, the panic gets worse and worse until people get sick of selling and thus the downward spiral gets real nasty - especially in modern day markets where debt is used and people HAVE to sell.
And thus, obviously, banning short selling resulted in the speed of the decline increasing.
