New York Attorney General Andrew Cuomo is launching a probe into short selling in the financial market, which many have blamed for steep stock losses at

Morgan Stanley

(MS) - Get Report

and

Goldman Sachs

(GS) - Get Report

this week, he said Thursday.

Cuomo said in a conference call that while short-selling is legal, his office had received complaints about false rumors being spread -- which is not. He said the

Securities and Exchange Commission's

ban on

naked short-selling

does not go far enough, advocating a ban on short-selling of financial stocks altogether during the crisis.

The U.K.'s top financial regulator on Thursday did issue a temporary ban on shorting financial stocks, which will run through Jan. 16.

Cuomo also said he would look into possible illegal short-selling that may have played a part in

Lehman Brothers'

and

American International Group's

(AIG) - Get Report

collapses this week.

Lehman Brothers

(LEH)

filed for bankruptcy Monday, while

AIG

(AIG) - Get Report

agreed to a

Federal Reserve

-led bailout.

This article was written by a staff member of TheStreet.com.