Readers who joined the business press conversation only recently must getting a headache by now.

Wall Street is imploding, and what’s all this about short sellers? Are they really naked? Is “marking to market” really bad? It sounds so good. We just had to learn what a credit-default swap was. Help!

Audit prescription: Take one Weil, one Eisinger, and call us in the morning.

Basically, all the smart kids are saying that you can bone up on the “uptick rule” all you want, but it has nothing to do with the price of A.I.G. in China or the problems on Wall Street.

Weil:

American International Group Inc., Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc. — lobotomized, in one form or another. And all Cox and the SEC can come up with this week is a new ban on “naked short selling,” like that has anything to do with the world’s financial problems.

Cox is SEC chairman Christopher Cox, who, to plagiarize myself, long ago became the Mr. Bill of the financial crisis. There goes Lehman. Oooo! Similarly, Andrew Cuomo is vying to become the Inspector Clouseau.

But back to Weil:

Maybe naked shorting is a huge problem somewhere. Maybe it’s not. Who knows? The SEC has never given us any evidence that it is. And the practice has had nothing to do with the meltdown of big companies like AIG and Fannie, shares of which never were hard to borrow.

Meanwhile, we’re staring into the abyss. Mr. Market doesn’t believe any major U.S. bank’s balance sheet, partly because the SEC has done all it can to buy them time…

What’s taking down these grand financial icons such as Lehman and A.I.G.? It couldn’t possibly be that the companies themselves made stupid and shortsighted decisions. So it must be a conspiracy of the short-sellers. It must be some wrong-headed accounting rules and bad regulation.


Read the whole thing, but don’t skip the end:


If we’re ever going to get investor confidence back, what we need at the SEC is a Wyatt Earp. Naked short sellers? How about doing something useful, like sending subpoenas to Lehman Brothers and its auditor, Ernst & Young LLP, and making sure the world finds out about them. Or take a hint from Marvin K. Mooney, the Dr. Seuss storybook character who overstayed his welcome.

The time has come. The time is now. Just go. Go. GO! I don’t care how. You can go by foot. You can go by cow. C. Christopher Cox, will you please go now!

Pretty funny. Who does Weil think he is? The Audit?

Jesse Eisinger of Portfolio says the same thing, and he’s just as right:

What’s taking down these grand financial icons such as Lehman and A.I.G.? It couldn’t possibly be that the companies themselves made stupid and shortsighted decisions. So it must be a conspiracy of the short-sellers. It must be some wrong-headed accounting rules and bad regulation.

Read that whole thing, too.

And if you really must know what the uptick rule is, read this WSJ editorial, which, it kills me to say, is quite good.

Then there’s Mr. McCain’s tirade against the “uptick rule,” a Depression-era chestnut that investors could only short stock after a rise in that stock’s price. The SEC staff studied the effect of the uptick rule on prices for years, in a controlled experiment involving thousands of stocks. It found the rule had no effect. Other studies, including those that examined the uptick rule’s effect on stocks disclosing bad news, also found that it “protected” no one. The SEC’s permanent staff has long supported repeal and the SEC’s commissioners voted to do so unanimously in June 2007.

So, there: one less thing you have to learn about.

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014).

Follow Dean on Twitter: @deanstarkman.