Here’s a hypothetical situation. Imagine that a company like BofA, which has been downgraded by various analysts, and is selling in the single digits, was the subject of a bear raid. Bear raids were made easier in recent years by the rise of the CDS market and the lapse of the uptick rule in June 2007 — both of which aided short sellers. The risks of a failure to the entire banking system would appear to be a lot lower than in the 9/08-3/09 time frame, when sequentially destroying banks was a cottage industry, but you can’t blame a guy for trying to make a buck, can you? Remember that this is a hypothetical example.

Wait! you say. Didn’t Congress and the administration fix all that? Well, a 2319 page law was passed that regulates everything from whistleblowers, executive pay, and credit card fees, to minority hiring, Chinese drywall and Congolese minerals. But, funny thing about Dodd-Frank. It never did get around to bringing back the uptick rule or delivering timely transparency to the CDS market. As Chris Dodd said a year ago, “No one will know until this is actually in place how it works.” Answer: it doesn’t.

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