My Two Cents

It was a rough weekend to be a Tiger. All five Division I-A football programs with Tiger mascots (can you name them all?) lost. Two other weekend losers: small banks in Northville, Michigan and Eldred, Illinois that were closed Friday by the FDIC. For those counting, there have been 15 failures so far this year.

If the events of the last two weeks have provided any lessons, one near the top of the list should be “Perception IS Reality”. Whether it is an inaccurate statement made forcefully during a debate or an opinion voiced by a talking head, many people hear what they want to hear, accept inaccurate statements as fact and allow fear to snowball into irrational behavior. When you add the lifting of short sale restrictions on financial stocks, margin calls that create 2:00pm market crashes and the “who’s failing next” rumor mill to the mix, should we really be surprised that the turmoil continues? I wonder how much of this mess could have been avoided if we had removed ANY ONE of the following pieces from the equation:

· Mark to Market accounting rules

· The 2008 election cycle

· Hedge funds, short sellers and margin calls

· The FOMC’s excessively easy money stance from 2001 to 2005

Of course, if we had removed sub-prime mortgage paper from the market, perhaps Bear, Lehman, AIG, WaMu, Wachovia, Fannie & Freddie and others would still be healthy and I could spend more time talking about football. In case you were wondering, the five programs with tiger mascots are LSU, Auburn, Missouri, Clemson and Memphis. Taking the “Bad weekend to be a Tiger” theme a bit further, the failed bank in Eldred, IL is a short drive from the University of Missouri, and the failed bank in Northville, MI is not far from Detroit, home of the Detroit Tigers, who also had a dismal year. Good luck to all the Tigers this weekend, and good luck to the banks that are on the FDIC's failures-in-waiting list...