Last night, CNBC’s Jim Cramer interviewed Senator Ted Kaufman about the problem of abusive short selling.

The Senator said: “We gotta have people feel that they’re getting a fair share and the market’s on the level…Clearly, every indication is that things went on in terms of short selling – both in Bear Stearns and Lehman Brothers, but in others – where abusive short selling drove the price down and legitimate people in the market got mauled.”

That is to say: rampant naked short selling (hedge funds illegally selling phantom stock to destroy public companies for profit) helped trigger the greatest financial disaster since the Great Depression.

This is a scandal of some magnitude. That is why members of Congress on both sides of the aisle have demanded that the Securities and Exchange Commission take action. But aside from Cramer, the media remains silent. And the SEC is hopeless.

Today the SEC held a special meeting to discuss short selling, and it was a whitewash. The focus was on reinstating the uptick rule, which is precisely where the short sellers wanted the focus to be. No talk of taking the necessary steps to wipe out illegal naked short selling.

Instead, the SEC recommended “caution” in cracking down on the criminals and suggested that new short selling rules (enacted in the midst of last September’s meltdown) are “working.” The new rules are basically the same as the old rules. Whereas previously short sellers were required  to deliver shares within three days, now short sellers are really required to deliver the stock within three days.

This new regime, like the old regime, has several shortcomings. The first is that hedge funds can continue to sell unlimited amounts of phantom shares within the three-day window. During these three days, the stock price naturally tanks, at which point the hedge funds buy the cheapened stock and cover their “short sales” (which are really fake long sales, for no stock was ever borrowed) at a profit. The hedge funds repeat this process over and over, every three days, until the stock is in the single digits and the company’s lenders panic, cutting off credit.

The second shortcoming of the new regime is that hedge funds and their brokers are not, in fact, delivering stock within three days. The SEC’s list of companies whose stock was failing to deliver in excessive quantities shortened considerably after September, but that is partly because the short sellers had finished the job – the market was already destroyed.  As the market recovered from its low in March, the abusive short selling resumed, and the number of companies on the list increased from 55 to around 75 companies today.

Given that nearly every one of those companies are targeted by hedge fund managers who are using a variety of other tricks (spreading false information, scheming to cut off  companies’ access to credit, etc.) it is clear that the failures to deliver are not mere mechanical errors, but the result of strategic, illegal naked short selling. That is, at least 75 companies are getting raped every day and we remain witness to the bizarre spectacle of the sheriff publishing the list of victims while keeping the names of the perpetrators a secret.

More importantly, there are good reasons to suspect that the vast majority of naked short selling occurs in corners of the market (ex-clearing, desk trades; off-shore, etc.) that do not register in the SEC’s published data. We know this because we have received trading records in court discovery and because we have identified brokerages that appear to be transacting massive volumes of trades that are not cleared through the Depository Trust and Clearing Corp. (which supplies the data that is published by the SEC).

The market has recovered some in recent weeks, but it seems just a matter of time before the shorts unleash another round of carnage.

There is only one way to prevent this from happening: force hedge funds and brokers to purchase or borrow stock before selling it. This seems simple enough, yet today’s meeting at the SEC suggests that officials remain captured by the hedge fund lobby, which used to insist that naked short selling never occurred, but now says that the very functioning of free markets depends on the SEC allowing naked short selling to occur.

To support this argument, the short sellers continue to haul out the same few professors who purport to show that naked short selling enhances “market liquidity.” In every case, the reports published by these professors have contained multitudes of cherry-picked statistics and calculations so erroneous that we are left to assume that the professors either slept through seventh grade math or realized at some later stage in life that there is benefit to be derived from spewing balderdash in service to Wall Street’s most powerful billionaires.

As Senator Kaufman put it last night, the short sellers and their professors argue “out of both sides of their mouth…they’re willing to throw any mud against the wall and see if it sticks.” The Senator added that he believes SEC commissioners buy this “market liquidity” nonsense – even as the Senate, the House, the American Chamber of Commerce, the leaders of the nation’s biggest banks, and all of the major stock exchanges have called for an end to naked short selling – simply because the commissioners previously denied the problem existed and now they “don’t want to admit they made a mistake.”

Perhaps the same can be said of some of the nation’s most “prominent” journalists, who churned out countless stories arguing that naked short selling does not occur (only “conspiracy theorists” see phantom stock, the journalists said), but who have been oddly silent on the issue ever since phantom stock helped bring about the near total evisceration of our financial system.

Cramer crusades against naked short selling, but he began doing so only after Deep Capture  implicated him in a cover-up of the scandal. Never mind—I’m glad to have his support, forgiveness for past sins, etc. etc.  But the rest of CNBC, a network over which Cramer wields considerable influence, utters not a word about naked short selling. Better to leave the reporting on the world’s most damaging financial crime to a “reporter” who says “Boohyah!” while pushing buttons that make clownish sound effects.

To allow one of CNBC’s more reputable journalists to report the facts would be to give the facts credence. And to do that would be to admit that CNBC royally screwed up by failing to report the story in the first place.

Same goes for The Wall Street Journal. I know there are reporters at the Journal who understand this issue and its  importance. But how to report on it now? This is the newspaper that described Deep Capture reporter Patrick Byrne’s theories about naked short selling as a cross between “Where’s Waldo and the DaVinci Code.” This is a newspaper that not only vehemently denied that naked short selling was a problem, but published worshipful profiles of the short sellers most likely to have been committing the crime.

How can this newspaper now publish a story – a real investigative story that would show definitively that naked short selling is a very serious problem? The answer is, it’s hard to do without looking mighty stupid.

But The Journal needs to swallow its pride. There is too much at stake.

And what about that other newspaper of record – The New York Times?  How about that paper’s top business columnist, Joe Nocera?  He once told an audience of his media colleagues that “life’s too short” to investigate naked short selling. But he nonetheless found time to write countless articles denying that naked short selling is a problem and covering up other crimes committed by his short selling friends. What can Joe possibly say  now? He could say, “Sorry.” But big time columnists don’t do that.

For reasons I cannot quite fathom, the rest of The New York Times staff  remains silent, too. The only exception is the ever-befuddled Floyd Norris, who wrote a column last week stating that the new regulations seemed to have solved the naked short selling problem. That was different from his earlier contentions that there was no problem to be solved, but the latest column contained much of the familiar goofy-headed logic.

My favorite was Mr. Norris’s assurance that we don’t have to worry about naked short selling because if naked short sellers drive a stock low enough, somebody will step in to buy the company. I doubt most readers need this to be explained, but just in case, I’ll clarify  – it is illegal for naked short sellers to drive a company’s stock price down to single digits so that it can be taken over by some corporate raider. It was illegal and cataclysmic that short sellers aired false rumors about Bear Stearns while selling 13 million phantom shares in the company – never mind that somebody stepped in and bought Bear Stearns after it had been mutilated.

Good grief…I know this is complicated, but one expects more from our top financial journalists. Alas, maybe it’s time to give up on the financial press. Maybe it’s time we call Oprah…Oprah could do better…

Yes, Oprah will understand.

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Mark Mitchell is a reporter for DeepCapture.com . He previously worked as an editorial page writer for The Wall Street Journal in Europe, a business correspondent for Time magazine in Asia, and as an assistant managing editor responsible for the Columbia Journalism Review’s online critique of business journalism. He holds an MBA from the Kellogg Graduate School of Management at Northwestern University. Email: mitch0033@gmail.com