Last week, I did a blog entry attacking the Securities and Exchange Commission for its stunt cracking down on "naked" short selling. At the time, I said it would do nothing to stop market manipulation. It's just a public relations stunt.

Now, a strong editorial in Barrons really spells out exactly why the SEC is so wrong on this. Wrong and irresponsible because aggressive short selling isn't actually a crime. It's just another way of making money out of the market when there's bad news. Nothing wrong with that, it's just the market.

"It is obvious that honest treatment of investors and orderly markets are important factors in capital formation, and that a capitalist society must have a government that enforces contracts. What isn't obvious from the news or from the historical record is whether the SEC understands its mission.

"Does the SEC have its eye on the ball? Hardly. It is the agency that preserved and protected the shared incompetence of a few favored "nationally recognized" credit-rating agencies. It is the agency that watched while auditors became corporate consultants, selling the kind of services that audits should detect and report and eliminate, and even selling methods of hiding deleterious facts from auditors. It is an agency that attempts to regulate speech because it's easier than detecting and prosecuting fraud.

"Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there's no dead bug."

You have to shake your head and wonder about the SEC's campaign This is the same agency that allowed credit rating agencies to talk up stocks that were just junk and that trend masked some deeper issues in the market. Attacking short selling will not solve the problem.