If the first day of the SEC’s Securities Lending and Short Sale Roundtable and today’s list of panelists are any indication, the SEC has no intention of curbing naked short selling.

Rolling Stone’s Matt Taibbi writes:

“What’s interesting about this round table is that virtually none of the invited speakers represent shareholders or companies that might be targets of naked short-selling, or indeed any activists of any kind in favor of tougher rules against the practice. Instead, all of the invitees are either banks, financial firms, or companies that sell stuff to the first two groups.”

Sens. Ted Kaufman (D-DE) and Johnny Isakson (R-GA) also took note of the guest list and released this statement yesterday:

Tomorrow’s SEC roundtable is long awaited, but it is clear that the panel is stacked against the need for restrictions on naked short selling. In the recent financial decline, there was abusive short selling enabled by the repeal of the 70-year-old uptick rule and a lack of so-called pre-borrow or hard locate requirements.

The recent bull market, however, has lulled us into a false sense of security. If we do not enact these proposals – the uptick rule and either a pre-borrow or hard locate requirement – the same people who drove down certain stocks in the past will just do it again.

We need to focus on giving the SEC’s Enforcement Division the tools to end naked short selling once and for all.”

Deep Capture’s Judd Bagley left yesterday’s event with the well-founded impression that the SEC doesn’t get it: “In the simplest terms, I’d say the situation at the SEC is one of extreme disconnection. This is an agency that has completely lost track of its founding mission.”

Naked short selling is an abusive form of stock manipulation in which an individual sells shares without ever borrowing them, creating Fails to Deliver and “counterfeit” or “phantom” stock and driving a stock’s price way down. The illegal practice has been blamed for the failures of Bear Stearns and Lehman Brothers.

But there are always a few journalists who rush to the defense of naked short selling when it becomes the subject of public debate.

In a critique of Taibbi’s piece, John Carney of Business Insider suggests that naked short selling doesn’t hurt any party involved because there is “no counterfeiting of shares involved at all, and no more downward pressure on the stock than would be involved in a traditional short sale.”

Carney mainly discusses short selling - which is a totally different animal than naked short selling - and doesn’t broach the subjects of illegality or fail to delivers, but why would he?

No, concern over naked short selling is overblown. He writes (his bold):

“Much of the fear of naked shorting seems to be based on a very simple mistake. People assume that most naked short sellers are momentum traders accelerating the decline of a troubled company. That’s actually not true at all. The overwhelming amount of naked shorting takes place when companies announce abnormally positive results and contrarian traders scramble to fight the tape. They aren’t seeking to manipulate the market—they’re betting against the crowd.”

But the fact that naked short sellers are “betting against the crowd” doesn’t exculpate them at all. As TocqueDeville notes on Daily Kos, “naked short sellers will often try to pump a stock before they trash it to create a wider spread and, consequently, more profit.”

CNBC’s Jim Cramer has explained at length how hedge funds routinely generate profits through manipulation:

The great thing about the market is that it’s got nothing to do with the actual stocks. Maybe two weeks from now the buyers will come to their senses and realize that everything they heard was a lie. But then again Fannie Mae lied about their earnings for $6 billion. It’s just fiction and fiction and fiction. And I think it’s important for people to recognize that the way the market really works is to have that nexus of: Hit the brokerage houses with a series of orders that can push it down. Then leak it to the press. And then get it on CNBC — that’s also very important. And then you have kind of a vicious cycle down. And it’s a pretty good game. It can be played for a percent or two.

Cramer is familiar with this process because he’s done it himself and has admitted that it’s “actually blatantly illegal.”

But all of the complaining by victims of naked short selling is just sour grapes. These victims are pissed they were robbed greedy people.

“Corporate executives tend to hate short-sellers, and want use their connections to politicians to inhibit short-selling,” Carney writes. “And this, really, is what’s going on here. While it’s not quite as blatant as the short-selling ban we saw last year, the crack down on naked shorting is really meant to increase the costs and risks of short-selling generally.”

Expect to hear more of the same from the participants in today’s SEC discussion on naked short selling.