Another session came and went in China and stocks closed in the red - again. The 5-day slide is the worst run since 1996 and Wednesday’s 1.3% loss, while certainly an improvement from the harrowing declines logged on Monday and Tuesday, came on the heels of a PBoC desperation rate cut which many hoped would stabilize the market. While the RRR cut was certainly designed to keep money markets loose and free up liquidity that was becoming increasingly scarce with each passing intervention in the FX market, there’s little question that officials in Beijing had hoped the move would have the ancillary benefit of stabilizing stocks. Here’s what we said on Tuesday: But the PBoC likely hopes it can kill two birds with two stones (to adapt the analogy). That is, by bundling a lending rate cut with the RRR cut (which the PBoC also did in June), the central bank may be trying to send a forceful message to the stock market while freeing up liquidity at the same time. If the market gets the message (or perhaps "takes the bait" is the better way to put it), investors will take solace in the move, Chinese stocks will find their footing, and the CSF can quietly fade into the background for a while. That way, should the meltdown begin anew down the road, China can intervene directly with the national team and point to the fact that it hasn’t done so in quite some time. That assumes, of course, that the plunge protection team hasn’t all been arrested and thrown in jail. Overnight we reported that China was making a renewed push to find scapegoats for the market crash and this morning, we detailed the arrest of a prominent investment banker and a journalist. The most amusing part of the stepped up effort to find a culprit - any culprit - is that it now appears as though China may scapegoat the plunge protection team itself, or at least the regulator that controls it. Here’s Bloomberg: Faced with a renewed stock market slide that has wiped out $5 trillion in trading value, China is again on the prowl for scapegoats. Authorities announced a probe of allegations of market malpractice involving the stocks regulator on Tuesday, while the official Xinhua News Agency called for efforts to “purify” the capital markets. The news service also carried remarks by a central bank researcher attributing the global rout to an expected Federal Reserve rate increase. The Shanghai Composite Index has plunged more than 40 percent from its peak, after concerns over the Chinese economy helped snap a months-long rally encouraged by state-run media. Authorities have repeatedly blamed market manipulators and foreign forces since the sell off began in June and led officials to launch an unprecedented stocks-support program. Now, after suspending that program, the administration has embarked on a new round of allegations and fault-finding. “The authorities have been too involved in the stock market and now they’re trying to pass the responsibilities to others,” said Hu Xingdou, an economics professor at the Beijing Institute of Technology. “In fact, they have to be responsible for the market crisis. It’s the authorities trying to act like a referee and a player at the same time.” Police are investigating people connected to the China Securities Regulatory Commission, Citic Securities Co. and Caijing magazine on suspicion of offenses including illegal securities trading and spreading false information, Xinhua reported. Citic Securities said Wednesday in a statement posted to the Shanghai stock exchange that it hasn’t received notice related to the report and said the company’s operating as normal. Caijing in a statement Wednesday confirmed a reporter had been summoned by police. The magazine said it didn’t know the reason and would cooperate with authorities. Calls and a fax to the CSRC went unanswered. Note that China Securities Finance is effectively an arm of CSRC. In other words, the probe into the regulator looks to be the start of a probe into the plunge protection team itself. It's impossible to know where exactly Beijing intends to go with this particular ruse (i.e. whether the the "investigation" will center on CSRC employees or employees of CSF itself) and the story would be amusing enough as it is, but perhaps the most hilariously absurd thing to note here is that less than two months ago, CSRC was busy investigating the same sorts of alleged shenanigans for which it is now being investigated: And while details on the investigation are as yet scarce, Xinhua offered some clues, noting that "we have reason to believe that more criminals and their hidden crimes will be exposed." Yes, "more criminals" and "hidden crimes," crimes which will likely remain hidden although we're quite sure that the punishments doled out will be displayed for all to see. Finally, in yet another irony of ironies, while CSRC is under investigation, it will itself launch new investigations into a series of brokers: Separately, Haitong Securities Co., GF Securities Co., Huatai Securities Co. and Founder Securities Co. -- four of China’s largest brokerages -- said they’re being investigated by the CSRC on suspicion of failing to comply with identity verification and “know-your-clients” requirements, according to statements to the Hong Kong and Shanghai exchanges Tuesday. Summarizing the above in one clip: