too big to fail? Or perhaps a better question is, has there become a total abdication of accountability?

So how big is too big to fail? Or perhaps a better question is, has there become a total abdication of accountability? For some time it has appeared that regulators were more interested in protecting vested interests in the industry than joe average investor. The answer to everything has been to blame the lowly retail stock broker for everything up to the imminent demise of western civilization.
But the facts seem to suggest otherwise. Your broker at the end of the day for better or worse is the only person beside yourself that is responsible for what goes on in your account. Basically he or she has to pick up the phone.

Account representatives are held accountable thru two major rules 1) know your customer and 2) suitability. It is amazing that you and your broker are the only ones held to these standards. Yes firms have supervisory responsibilities but lets face it in the era of Sarbanes Oxley they seem to be falling far short .Basically applying different standards to large political contributors such as Fannie Mae and Freddie Mac .Given Sarbanes Oxley and industry grips about implementation costs It is incomprehensible that large firms like Lehman Brothers can have such opaque balance sheets.

The main focus of every investor right now should be financial transparency and again accountability. Over times firms that come clean and stay clean will be rewarded and like or not you may want to start with your local broker who is already sticking his neck out

What a difference a day makes?

What a difference a day makes? A FED bailout tosses Freddie and Fannie shareholders under the bus. While investors ask is it really over? Is this a fundamental turning point for the financials? It is certainly a boost short term for both bond and stock markets. But weather a government bail out fixes the fundamental problems of the current banking crisis, remains to be seen. For decades Fannie and Freddie provided liquidity to the US mortgage market allowing “Joe 6 pack “to take out a 30 mortgage. In recent years however both Fannie and Freddie have strayed from their original purpose according to some critics growing far to large in scope and following the industry decline in lending standards . Many including the former chair of the FED Alan Greenspan warned the Freddie and Fannie should be rained in and in time pose a significant liability to the treasury, well that day is upon us. And once again let me repeat that a government bailout of Fannie and Freddie is NO bailout for shareholders.

The Treasury Secretary put on a grand show over the weekend in an attempt to avoid a Bastille Day route of the financials

The Treasury Secretary put on a grand show over the weekend in an attempt to avoid a Bastille Day route of the financials and in typical fashion as we have seen time and time again Federal reassurances often have the opposite effect not reassuring traders at all. The Secretary outlined the possibilities of a Fanny and Freddie bailout reiterating what this blogger finds all to obvious with the “implied guarantee” nature of the relationship that the two agencies have with the federal government. Some market participants however seemed quite surprised by seeing it all outlined on national TV.

Tuesday the grand show will continue when the FED Chairs testifying before congress and there is nothing more entertaining than a bunch of congressmen and women with little to no understanding of the banking system and the economy in general grandstanding and looking to pass the buck in an election year .Makes for very good daytime TV but I am afraid it is hardly a substitute for sound fiscal policy.

Other issues such as the more permanent nature of the inflation picture coupled with anemic US growth rate it is thought leave the FED little wiggle room. It does seem to this blogger that given the disconnection of the FED funds rate with more general consumer loan rates that the FED has more wiggle room that one might think .A small increase in the FED funds rate seems fairly insignificant to overall economic growth yet it might just do the trick boosting the dollar higher and reassuring markets that this FED really means business on inflation.

Fannie and Freddie may be forced in to receivership, yikes!

Fannie and Freddie may be forced in to receivership, yikes! Perhaps we all should have paid more heed to the warnings of the previous FED Chair as he pinned over how much on the hook the Treasury could be with its implied guarantee’s .Perhaps this is the climatic event that from which my past experience signals the end of the crisis and the beginning of a rebound in financials. I had long surmised that this current crisis would end with some major bank teetering on the edge of disaster. My regular readers will remember several times I pointed out that in financial crises of the later half of the 20th century all roads led to Citi bank but a crash and burn act from Fannie and Freddie might just do the trick .Apparently it would be an understatement to say that things are a bit worse than even the most negative commentator has led us to believe! Folks I am not ready to say buy yet but as Baron Rothschild once said,” buy when there is blood in the streets” and at this moment it’s starting to look pretty gory.