Imagine a world where you’re only allowed to bet for–not against.

A world where the house always wins.

“Unthinkable,” says Efraim Durg, CEO of Durgometrics, a hedge fund which specializes in high-risk sports betting.

But that’s what the SEC created yesterday when it banned the short selling of 799 financial stocks.

According to Business Week the companies covered are an “A to Z of nation’s powerhouse financial institutions, including Goldman Sachs and Morgan Stanley and commercial banks running the gamut from Bank of America to Charles Schwab to (Warren Buffet’s $147,000 a share) Berkshire Hathaway.”

The SEC’s action was echoed by the UK’s Financial Services ban on all short selling in Great Britain. By the end of business CALPERS (California Public Employees Retirement Service) announced that it would no longer lend stocks to short sellers.

“The fat cats are really stacking the deck this time,” Durg says.

Short sellers are the pessimists of the market. They borrow a company’s stock and sell it immediately, then buy it back when it goes down and pocket the difference. Short selling is a legal, respectable form of trading and is credited with keeping markets healthy by identifying corrupt and mismanaged companies. It’s been in existence since 1609 when a Dutch trader oversold his own company, betting that the English Navy would sink his ships. It was blamed for the Dutch Black Tulip crisis, which tumbled the bourses of Europe in the 17th. Century. Herbert Hoover blamed short sellers for the Great Depression, while J Edgar Hoover (no relation) threatened to investigate and imprison them.

Hedge funds were invented by short sellers to allow them to make larger bets. Recently short sellers were actually credited with forcing down the price of oil. Now they are the convenient scapegoats for a crisis caused by the greed and stupidity of “long” sellers who believe their assets should keep on appreciating no matter badly they are managed.

The anti short-selling rules had the predictable result of driving up the market, the Dow rising by close to four hundred points. Some stocks saw a 20 to 30% rise in their value.

“What goes up must come down” says Durg. “It was the perfect market for a short seller. And I was the only game in town.”

As an unlicensed, unlisted and unregulated hedge fund, Durg could create a market of his own. He started small, making a “proposition” to his few “clients.”

“I told them to pick a stock,” Durg says. “They would pay me a small premium which would be my “vig.” If the stock went down after a negotiated period I’d be stuck the difference. If it went up they’d be stuck…”

Durg’s eyes widen as he relates what happened next. “I started with four thousand in reserve capital, but as word spread through the neighborhood I suddenly had twenty-six thousand dollars in action.”

Looking to cover his bets, Durg went to Bolek Bernankovicz who takes numbers out of Paulsenki’s Paint Store. Bolek kicked in forty thousand in exchange for twenty per cent of the profits.

“But it wasn’t enough,” Durg says. “I blame the Internet and credit crisis. All these execs from Bear Stearns and Lehman sitting around with nothing to do until they’re indicted. By lunch I was looking at a $213,000 in bets.”

Durg couldn’t stop now. The market was skyrocketing. He was making a fortune

Durg called the Bank of Wroclaw, but couldn’t get a loan. He was desperate.

“I ‘m a bookie, I can’t operate on leverage,” he says. “I have to back my bets with real money.”

In a panic Durg and Bolek called Fat Funzi, a private lender in Red Hook. Funzi drove a hard bargain demanding half of Durg’s action.

“I was carving myself up, but I needed the cash,” Durg says.

In the next hour there was a rash of bank robberies, smash and grabs and senior muggings as Funzi raised the capital for his investment.

But it still wasn’t enough. Durg’s phone was ringing. His web site was crashing.

“I was getting calls from Tiblisi and Kandahar,” he says. “PayPal said they would expedite for five per cent. I had no choice.”

By close of business Durg had $17 million on his books and counting. “I was doing great in this short term bull session,” he says. “As long as the big boys tried to cover up all the bad news I’d be okay. But it would only take a rumor to send the market plunging. I could see myself doing the perp walk…”

Durg panicked. “I called the Treasury Department and got a voice message saying there was a 17 day wait to talk to a bailout specialist.”

Then, Durg had a miraculous visitation. “It was like I rubbed a lamp and a genie appeared.”

Mahmoud, who owns Saudi Sundries on Huron Street came with a proposition of his own. There was a call to Riyadh.

“It was late at night,” Durg recalls. “I could hear music, women laughing. A guy called Bin Taleeb came on the phone. I like your business plan, my friend, he said. I will buy fifty per cent.”

Taleeb bought out Bolek for $100,000 and Funzi for $250,000. By morning with over $30 million on the books and more coming, Durg put an ad on Craig’s list for “Certified Financial Advisors.” In an hour he had eleven thousand applications.

He had been running his operation out of the walk-in box at Golubchik’s, but is now negotiating for the executive suite in the soon to be empty Lehman Building.

It all happened so quickly, he says. “I got rich. There was nothing to it.”

But now Durg has time to plan his next move. He has put together a Board of Directors of Wall Street veterans, among them Stan O’Neal, Richard Fuld and Jimmy Cayne.

“I’m thinking of cutting my bets into tranches and issuing short-sale backed securities,” he says. “Derivatives is where the real money is.”