Are short sellers the spawn of the devil?

Short sellers have proven the scourge of Bradford & Bingley, HBOS, Bear Stearns, Lehman, and any other institution that looks a little ragged around the edges.

Spurred into action by horrid 'bear raids' on B&B and HBOS, the Financial Services Authority (FSA) has rushed to the rescue with draconian new rules. As of 25 June, short sellers in the UK will have to make public any short position they hold related to 0.25% of a company's stock (FT).

But short sellers have their advantages. Without the likes of David Einhorn (NY Mag), we might, for example, be none the wiser about the $1.1bn alleged discrepancy in the value of level three assets reported by Lehman in its Q1 call vs. its 10Q filing.

Lehman's Fuld has berated Einhorn and his proteges. But according to Einhorn, management teams that complain about short sellers are usually trying to distract investors from serious underlying problems with their business.

Do short sellers provide a valuable service, or are their predatory tactics deserving of vitriol and tighter regulation? Go short or long on the practice below.