Cramer: SEC's Deadly Waffling

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A headline came over the wires yesterday, and it caused me to throw my hands up in shock: The SEC is debating new short-selling rules for the market.

I said to myself, "They have to be kidding."

How can they be so obtuse?

How can they not get what is going on?

When the market bottomed on July 15, three things occurred:

• the Congress got religion on the housing bill, and the president went along;
• gasoline and oil peaked; and
• the SEC finally decided to crack down on the reckless bear raids that were making it impossible for our financials to refinance.

The financials then rallied huge, just huge, and the prudent ones, like Merrill's (MER Quote - Cramer on MER - Stock Picks) John Thain, took advantage of the short-selling crackdown and first, brilliantly, said he didn't need capital, exacerbating the plight of the shorts, and then jammed on a gigantic equity offering that will let Merrill get through this period.

That alone was worth the price of the anti-manipulation ban.

Then, somehow, somewhere, in the bowels of the laissez-faire SEC, somewhere within the classrooms of academics they employ, someone had the bright idea that the anti-manipulation rules didn't do anything. The academics were abetted by a series of articles, clueless articles, informed by short-sellers, that the anti-manipulation ban didn't work!

I was aghast at this, given that the powerful rally off the July 15 lows clearly needed those rules to allow capital to be rebuilt. As soon as I saw the SEC didn't re-up the rules, I recognized that any financial that hadn't taken advantage of the momentary hike to first say it didn't need capital and then pull a Thain was in big trouble. That meant Fannie (FNM Quote - Cramer on FNM - Stock Picks), Freddie (FRE Quote - Cramer on FRE - Stock Picks) and Lehman (LEH Quote - Cramer on LEH - Stock Picks).

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