News You Can Use for Monday -- Bank Failure Extravaganza

Today, the big news that could move commodities is not in China or the Middle East -- it's right here at home. US banks are failing and the Federal Government is going to bail out Fannie Mae and Freddie Mac. I think this has big implications for the US dollar, and not in a good way. I'll be writing more about this in Wednesday's Money and Markets. For now, here is some news of interest ...

Fannie, Freddie Too Critical to Fail, Lawmakers Say
A government takeover of one or both companies is among several options that have been considered by White House officials, according to a person familiar with the discussions who spoke on condition of anonymity. Senior Bush administration officials are considering placing either or both firms in a conservatorship if their problems get worse, the person said.

Paulson Puts Treasury Behind Fannie Mae, Freddie Mac in Bid to Calm Market
Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank. Fannie and Freddie shares surged in Frankfurt trading.

After IndyMac, Who's Next?
Thornberg says, “We’re still early in this cycle.” He says regional banks don’t suffer the bulk of their problems until late in a credit downturn. We can expect to see home loan delinquencies to continue to spread to personal loans, car loans and student loans. He also says the next big shoe to drop is regional banks with a lot of exposure to builders, including commercial builders who are building condos or other projects that will fail.

Oil Brings Americans Closer to OPEC Debtor Dependence Supplanting Japanese

Holdings of Treasuries by oil producers and institutions such as U.K. banks that are proxies for Middle East nations rose 44 percent this year to $510.8 billion through April, four times faster than the rest of the world, according to the Treasury Department's most recent data. At the current pace, they'll surpass Japan, which holds $592.2 billion, as the largest owner this month.

Sean's Special Comment ...

Jerry Bowyer is a right-wing hack. As long as Mr. Bowyer is blaming Sen. Schumer for causing IndyMac's failure -- a blatant impossibility -- let's call Mr. Bowyer what he is: A right-wing hack who would blame Democrats for a rainy day.

Both parties, Republican and Democrat, are culpable for the crisis in our financial system, but it's not due to what Bowyer and other hack-ologists are blaming Schumer, who pointed out IndyMac's shortcomings. It's the way Congress covered for and enabled the "Casino Mentality" in the financial sector, where banks made bad loans and pawned them off on investors with reckless abandon, not worried if any of those particular loans came up snake eyes.

If you gamble recklessly and continually, eventually, you'll lose.

Now, America is going to foot the bill for Wall Street's losing streak. Here's an idea: Let's go after the pay packages over the last 10 years of all the top executives and board members of banks and lenders that fueled this insane mortgage mess. That might be a lesson that Wall Street will remember the next time it decides to head to the Big Casino with your money.

And there will probably be a lot of money to collect. More than 300 banks could fail in the next three years, said RBC Capital Markets analyst Gerard Cassidy, who had in February estimated no more than 150.

That said, I don't think garnishing the wages of Wall Street bankers is a solution that Washington will actually pursue (it's too logical). But when the house is on fire, it's time to find workable solutions -- and quickly -- and not waste time trying to place blame on those who raised the alarm.

Check out my new gold and energy blog at MoneyAndMarkets.com