My friend is telling me that this isn't a good thing and only hurts the little guys in the end (people's pensions and stuff like that). That this doesn't affect the big guys at all. Is that the case? I don't know enough about this to understand what's happening in the bigger picture
Retirement funds don't tend to mess around with the kind of games that are being "punished" here. If your money is in a retirement fund that goes around shorting stocks, then you've probably willfully entered a very risky fund.
The big guys, meaning the big individuals, are indeed being very very affected by this, which is why you see the entire system taking off the mask and convulsing right before everyone's eyes in an attempt to mitigate the damage being done and prevent it from spreading.