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Wall Street Breakfast: Must-Know News

So, who was president of the NY Fed when they paid off AIG's counterparties at 100% on the dollar for their credit default swaps? Our very own Timmy Geithner. In over his head from the beginning.

Wall Street Breakfast: Must-Know News

The "watchdog" criticism of the FDIC for not saving two banks is a good example of Washington politics. Sheila Bair, the head of the FDIC, was the hero of the housing bubble for raising early alarms when nobody wanted to listen, and for having a sensible approach to foreclosure mitigation. She is also out of step with the administration on new regulatory reform proposals - with the FDIC put to a junior partner position behind Geithner's Treasury. She is a fiscally-responsible Kansas Republican in the land of Barney Frank. There was an excellent article about her in a recent New Yorker Magazine - available in most doctors' offices.

Wall Street Breakfast: Must-Know News

Looking for some signs of realistic progress:
- The big banks are starting to readjust mortgages, and Fannie/Freddie seem to be ready also. But,
- We got home ownership up to 70%, when the underlying support level should be about 65%. In other words, we-ve got 10% too many homes - and too big at that. And,
- Home prices have fallen, but to get back to the long term trend-line, they need to go down another 10%. And,
- Nobody seems to be interested in spending the $700 billion on the toxic mortgage derivatives. Instead, we're buying banks, insurance companies, and soon car companies. Where was that in the Congressional testimony?
Obama would do well to stand back for awhile. Let the bad ideas be discredited, and let the full blame be laid at the feet of others. Hopefully he can come in as a breath of fresh air rather than a continuation of this path.

Wall Street Breakfast: Must-Know News

Today's big news is the meeting of Obama with the group of economic leaders - and his first opportunity to express his views as a manager, rather than a campaigner. Particularly, whether he will take on Nancy Pelosi's decision to lead on the bailout of Detroit and the development of another stimulus package. Nature abhors a vacuum, the Bush administration is AWOL (perhaps thankfully), and this is the first test of Obama's ability / desire to provide balanced leadership. An optimist would hope that is why he selected Rahm Emanuel - to take on Pelosi.

Wall Street Breakfast: Must-Know News

It is amazing that so much of the financial health of the western world hinges on the performance of these public / private entities Fannie and Freddie. I was once a stockholder (liked the dividend), but sold when it became apparent to me a few years ago that I did not understand who the management worked for. If they are a cornerstone of the economy, the performance of their management needs to be judged by a standard of security, not growth of EPS, which drove them away from their government mission toward chasing the returns of sub-prime loans. Then the government wanted them to broaden the size of loans that they would handle. Despite hating a larger role for government, I have reluctantly come to the conclusion that they neeed to be publicly owned and directed. Ugh. I can't believe that I said that.