This is where shorts get taken to the woodshed. They don't want to cover BUT HAVE NO CHOICE...when they can't make margin calls their broker "cover"(buy the stock back) their shorts "at the market" to satisfy the call. You don't want to be in that situation. The other thing that happens is the stock they "borrowed" to short gets called back, again forcing them to buy the stock back in....This happens more than people think.
Yes - I agree, it gets tighter. Less shares to lend, price goes up, margin calls, more buying, price goes up, more margin calls, more buying, price goes up. The headache is getting worse for shorts. Just wait until close of business today, you will get the short interest totals as of the 15th.