Now that Lehman Brothers' bankruptcy examiner has put to rest any notion that short sellers caused the securities firm's collapse, it's time to revisit another narrative from Wall Street's propaganda machine: Whatever happened to the investigations of all those short sellers who supposedly drove Morgan Stanley and other banks to the brink?

Just like O.J. Simpson's search for "the real killer", it seems they were just another cynical ploy.

It's been 554 days since Morgan Stanley Chairman John Mack sent his infamous September 17, 2008, memo to employees, saying that "short sellers are driving our stock down". The bank's senior leaders, he said, were "taking every step possible to stop this irresponsible action in the market". Those steps included pressing Hank Paulson, Treasury Secretary at the time, and then- Securities and Exchange Commission Chairman Christopher Cox to do something about it.

Mack's claim, for which he offered no evidence, was implausible on its face. As of mid-September 2008, the short- interest ratio, or the number of Morgan Stanley shares sold short relative to average daily trading, represented less than two days worth of volume, according to data compiled by Bloomberg. This suggests that those betting against Morgan Stanley didn't have a large presence in the market.

With Morgan Stanley teetering, though, the government acted quickly amid the panic that ensued that week after Lehman filed for bankruptcy and American International Group Inc. landed a federal bailout.

Broad investigation

Two days after Mack's memo, the SEC temporarily banned short sales of hundreds of financial companies' stocks. It announced a broad investigation into "market manipulation" by short sellers. Even New York Attorney General Andrew Cuomo got in on the act, launching his own probe into whether shorts were spreading false rumours about Morgan Stanley and other large financial firms.

Eighteen months later, we're still waiting to see if they'll ever turn up anything. There's probably a simple explanation for why they haven't.

Short sellers, who sell borrowed shares in hopes of buying them back at lower prices and keeping the difference, weren't responsible for the problems at these companies. The people who ran them were, though for any of these visionaries to have such an outbreak of candour is hard to imagine.