A financial sector that has been battered recently by credit and liquidity concerns saw its fortunes brighten at least temporarily on Wednesday morning. Moves by both the Securities and Exchange Commission and the Federal Reserve on Wednesday served as the latest attempt to prop up a broad financial system that's been searching for -- and, so far, not finding -- a bottom to an ongoing credit crunch. The SEC said it was extending a previous order to limit naked short selling through August 12; but, notably, did not extend the protections to firms beyond the 19 specified in the original order, as some had expected. "The order is designed to protect legitimate short selling in these securities, but helps prevent illegitimate naked short selling and potential 'distort and short' manipulation," said SEC chairman Christopher Cox. Not all market participants that spoke with HW saw the order that way, however, and decried what they saw as unwarranted government intervention in an otherwise free market. The American Bankers Association said Wednesday that it was concerned that the SEC did not signal protection for other at-risk financial firms; most analysts have singled out Wachovia Corp. (WB) and Washington Mutual (WM) in particular as examples of what claim is the SEC's "selective protection" strategy. "We are disappointed and deeply concerned about the decision of the Securities and Exchange Commission to extend the emergency order banning the short selling of 19 financial stocks without including all publicly-traded banks," said ABA president Edward Yingling in a press statement. "ABA is concerned that those market participants that are actively involved in executing short selling strategies will focus their naked short selling strategies on those publicly traded banks and bank holding companies not covered by the order." For whatever it's worth, Wachovia shares were up 7.32 percent, to $16.85, when this story was published; Washington Mutual shares were at $4.66, up 5.19 percent. Fed extends lending facility In conjunction with the move by the SEC, the Federal Reserve said Wednesday morning that it would extend an emergency lending facility to non-bank financial institutions -- that's investment banks -- through the end of January. The primary dealer credit facility gives investment banks access to the Fed's discount window, and was thrown open during the March blowup at Bear Stearns & Co. The Fed said it was taking these steps "in light of continued fragile circumstances in financial markets." Given the state of the markets, investors clearly welcomed the news, although the extension also opens up an ongoing debate over the Fed's role in regulating investment banks. Commercial bankers have remarked for months now that the Fed should have regulatory authority over investment banks if they'll be lending money for any meaningful period of time -- a sentiment clearly rooted in the fact that the commercial banks face such regulation, and likely feel at a competitive disadvantage to their Wall Street-based counterparts. A story in the Wall Street Journal went so far as to suggest that the Fed's move had less to do with the state of the investment banks, than it does with ensuring that the Fed itself remains in the driver's seat with respect to the tone of the capital markets. The Fed also said it would expand its Term Auction Facility, starting to sell 84-day loans to commercial banks under the program, in addition to the 28-day loans that have been sold since December. Specifically, the Fed said it would conduct biweekly TAF auctions, alternating between auctions of $75 billion of 28-day credit and auctions of $25 billion of 84-day credit. Currently, the Federal Reserve auctions $75 billion of 28-day funds every two weeks. All of which extends and expands upon programs originally put into place to as temporary solutions to "short term and extraordinary circumstances." Either the temporary market disruptions that began last year have yet to abate, or these temporary programs are morphing into something considerably more permanent. Disclosure: The author held various put option contracts on WB and WM when this story was published; additional indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.