But there is one unintended consequence that is wildly bullish. Today is options expiration and all of those who have sold calls or bought September puts are going to have to scramble huge to get their shorts covered lest they come in Monday and shorting is banned. You could see wild put-selling today and call-covering, some of which you saw yesterday.

It could move us to a higher plateau all day.

But make it clear that short-selling with plus ticks and with borrows is just fine with me. The current "legal" short-selling that has plagued us is about knocking stocks down. Unfortunately, the SEC wizards still don't understand the uptick rule -- more on that in a moment -- but now stocks have made up some ground and they can build on those gains if hedge funds can't just recklessly short without borrowing and brokerage houses don't recklessly provide liquidity to buy puts without checking first.

Let's use the case of Citigroup (NYSE: C) (Cramer's Take). This stock rallied hard, just like it did after the SEC decided to enforce the law after July 15. Now you can see how important, again, the enforcement is because even on the whiff of something that is good, the resolution mortgage trust, you can cause a short panic.

Remember, in this market what happens is that the shorts push stocks down and then when there is good news, the stocks come back. There really isn't as much pure long-side activity as there is endless short-covering, true bear market behavior where everyone gets whipsawed.

But the thing that will now be tough to do -- which is to gang up on a stock by selling endless amounts short after buying endless numbers of puts and then spreading endless rumors about the companies will be made harder to do because the short-sellers have to take a break and find if they can borrow stock and borrowing's going to be tougher.

If you can slow the process down, what the uptick and the borrow rules were intending to do, you can actually find real-life actual buyers. If you added the plus-tick rule, the only people who would be able to bang down stocks would be legit owners and they are probably not wanting to do so if they just bought the darned thing and did the work.

Now as everyone says, I have nothing wrong with short-sellers. I just have something wrong with the incredibly ridiculous decision to get rid of these rules -- a decision, by the way, that was wholly supported by the brokerage industry, particularly Dick Fuld, who had the temerity to scoff at me when I suggested bringing back the uptick rule to him.

If we had put on these points and then had that plus tick rule, the points will not be so easily repealed as they were without it. Of course, all bets are off when you have a Lehman failure and an AIG (NYSE: AIG) (Cramer's Take) collapse, but with a resolution mortgage trust, the brokers will not be as pressed for solvency and the shorting of them will seem pretty dangerous again. It hasn't been dangerous at all lately.

So, a rally makes the rules better. They don't help that much in a selloff.

I think that one of the reasons why the rally had legs was because people were afraid to short into it.

Why does this really matter? OK, let's go back to Citigroup.

Right now the stocks, not the companies, are in charge. You bang down the stock, the ratings agencies freak out and they downgrade and then the stock gets banged down some more.

Fear of ratings agency downgrades have driven this market and the agencies are simply reacting to the stocks, whether it be AIG or LEH or Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take). So, if you can bang down the stocks, spread the word through the media that something is wrong and panic people, the agencies downgrade you and it is over. That's what these raids have been all about and we all know it.

By breaking the raids, you give companies a chance to raise capital as Citigroup should, which then keeps the ratings agencies from downgrading good companies and we restore some rationality.

Yep, it all starts with the stock. And if the stock isn't manipulated down the company can tap the equity markets and live to play again.

When the book is written on this era what you will see is this: Cabals that shorted stocks without borrowing the stock (legal), and then drove the stocks down without plus ticks (legal), and then pull their money out of the banks and brokers (legal), and tell the media about it (legal), which then causes the media to report the redemptions and the runs on the banks (legal), which then causes the ratings agencies to downgrade out of fear (legal), and then the companies go belly up or get seized or nationalized (legal).

You break off the head -- the ability to knock down a stock by selling more stock than there is stock outstanding (until yesterday legal) -- you give the capital markets a chance to function and we don't wipe out whole great institutions that didn't do anything wrong (Morgan (NYSE: MS) (Cramer's Take) or Goldman (NYSE: GS) (Cramer's Take)) even as others lose their independence because of recklessness, although even those latter ones could have made it if the rules had just been enforced.

Random musings: Two well-run banks that are ridiculously over-shorted could be M&T Bank (NYSE: MTB) (Cramer's Take) and Susquehanna Bancshares (NASDAQ: SUSQ) (Cramer's Take) -- both make a lot of sense.

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RELATED LINKS:
Would an S&L-Type Fix Work?
SEC Bans Short Sales in Financial Stocks
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Goldman Sachs and Morgan Stanley.