Sept. 18 (Bloomberg) -- America has gone Marxist. Wall Street bankers are fleeing the wreckage with boxes of mystery files. And so what confidence-inspiring initiative do we get from our nation's top securities cop on the beat?

Another red herring.

Somebody, please, give Securities and Exchange Chairman Christopher Cox the hook. Or at least get him some clothes. Nobody wants to see an emperor naked.

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.

The last time the SEC came out demagoguing against naked shorts, back in July, it listed 19 companies deemed worthy of the agency's protection. And it wound up being a veritable hit list. Four of the companies are toast. While AIG wasn't on the SEC's list, Freddie, Fannie and Lehman were, as was Merrill Lynch. So was Morgan Stanley, whose chief executive officer, John Mack, yesterday blamed shorts for whacking his shares, in a companywide memo straight out of Lehman CEO Richard Fuld's playbook.

Under an emergency order, effective today, the SEC is banning ``abusive'' naked shorting on all companies' stocks, to the extent it wasn't already banned before. A 30-day comment period will be permitted, but only after the rule has taken effect. Cox might as well have told the world to short the United States of America, which actually has been a profitable trade recently.

If Ever

The normal way to go short is to borrow shares and sell them, hoping to buy them back at a lower price for a profit. In naked short sales, the trader sells first and borrows later -- if ever. From now on, the SEC said, short sellers and brokers will face new penalties if the shares aren't delivered to the buyer within three days.

It's not that the rule is so awful. Who could be against delivering things to people who buy them from you? What's striking is that this is what the SEC is focusing on now. On the list of the commission's priorities, cracking down on naked shorting should be just ahead of investor-protection seminars for federal prison inmates.

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.

Into the Void

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. For the first time in 13 years, a money-market fund broke the buck. U.S. taxpayers just bought 80 percent of AIG for $85 billion, marking the nation's official coming-out party as a socialist state, only with fewer social-welfare benefits for the bottom 99 percent.

More bailouts are a near certainty, after the Federal Reserve and Treasury crossed the line in the sand they drew just three days ago when they let Lehman fail. Nobody knows what the criteria for a bailout are, only that Fed chief Ben Bernanke and Treasury's Hank Paulson might know it when they see it.

The CEOs of busted companies have reaped obscene pay packages, fueled by years of bogus earnings. And Cox can't think of a more pressing concern than to declare war on the naked shorting bogeyman? Investors won't fall for this.

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!

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

Last Updated: September 17, 2008 19:01 EDT