Whichever side you agree with (I favor Bair's) matters little, because the ultimate winner will be crowned not on merit, but on another factor: access to President Obama.

Of all the massive corporate failures that precipitated our current financial crisis, [[AIG]]’s has stood out because it endangers the overall economy with such a large quantity of distressed assets. Its risks are so acute that the federal government has felt obligated to bail it out not once, twice or three times, but four. The $173 billion already pumped into AIG will likely not be the last of the government’s rescue funds.

As touched on in a comment recently by one of our esteemed members, federal bank regulators are on an 18-month inspection cycle. Let me explain what that means. As long as a bank’s risk profile doesn’t noticeably deteriorate, that bank will get a full evaluation only once every year and a half. To put it in the words of a spokesman for the Office of the Comptroller of the Currency, “They aren’t going to get a lot of attention.”

Banks looking at a one-notch downgrades include:

My amazement stretches from the government's action to AIG's seemingly utter inability to manage its CDS risks to AIG's seemingly boneheaded management to an absolute disgust right now with our nation's financial services system and its after-the-fact regulatory actions.

This was exactly the question contemplated yesterday by Dealbook, the New York Times blog, which offered several valuable suggestions. In this post, however, I’ll address some of those suggestions and present my own.

The Fed has, for some reason, shown its love of JPM by handing Bear Stearns Companies Inc. (BSC) to the commercial bank. But every taxpayer should demand the Fed to explain why it has seemingly not allowed market economics to dictate Bear’s final purchase price.

Bank of America agreed on Januray 11 to buy CFC for about $4 billion, $500 million below the already-depressed trading price of CFC. If the transaction would close right now, BAC would pay around $4.45 billion, or a 10% premium off the current price for a share of CFC.

There are some wild perceptions out there. Let us consider US Bancorp (USB) and Bank of Nova Scotia (known in the marketplace as Scotiabank) (BNS). Both banks are of similar size. US Bancorp has assets of $227.6 billion; Scotiabank $227.1 billion. Market capitalizations are similar, too: $54.7 billion for US Bancorp; $49.5 billion for Scotiabank.

That is when the government-sponsored enterprise is “expected” to begin its registration process with the Securities and Exchange Commission. Why it has taken so long is something every taxpayer should wonder.

Richard F. Syron, the chairman and CEO of Freddie Mac, said in his Beantown drawl Thursday during the company’s earnings call ($211 million loss, thank you very much) that the SEC registration process, as well as audited annual financial results within 60 days of the end of the year – also “expected” in 2008 – “are the last two major building blocks needed so that there would be no question that Freddie Mac stands on the same footing of every other public company, and I think that is a reasonable expectation.”