Speaking as a former Lehman employee, Lehman did not go *poof* as a result only of naked short selling. As much fun as it would to blame pirate hedge funds and evil financiers, Lehman's stock collapsed because it lost billions of dollars. Why? Because Lehman got caught holding tons of subprime MBS it could not move before the market went south. Now I was in the middle of Mojave Viper when most of this went down, but I got filled in by coworkers after the case.
Repeated quarterly losses in the billions were surprises to a marketplace that thought Lehman had sufficient cash on hand to weather a beating that Richard Fuld assured all was well over with after Bear Stearns went down. Market-manipulation is hardly to blame for a falling stock price when a company has losses on the level of Lehman, with no clarity on how much further it was on the hook and no trust left in Richard Fuld.
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