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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)

and

Goldman Sachs

(GS)

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)

collapses this week.

Lehman Brothers

undefined

filed for bankruptcy Monday, while

AIG

(AIG)

agreed to a

Federal Reserve

-led bailout.

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