Blue States Contributing to Market Woes?

Several of the largest state pension funds (most of which happen to be liberal states), including New York, New Jersey and California, have helped contribute to the recent market malaise. By lending out their shares of certain financial stocks to short sellers (they get a profit for lending them out), pension funds have been allowing short-sellers to attack certain financial stocks, including Lehman Brothers, AIG, Merrill Lynch, Morgan Stanley and Goldman Sachs. The states have decided to put a moratorium in place to disallow lending the shares.