THOUGHTS FOR THE WEEKEND

Despite the fact that our guy can't do a quadruple Sowchow, toe loop or tonguestand, my wife tells me we won men's (?) figure skating and the Russians are pissed because their guy can jump. When does the baseball season start? I can't take much more.

Anyway, yesterday just before the sun set, the Fed raised the discount rate, you know, the rate at which banks can borrow from the Fed's discount window which usually occurs only when all other sources of funding are unavailable. Now the Fed never does this at the end of the trading day and rarely does it in the middle of a cycle, so why yesterday afternoon? The only answer I can come up with is that this Fed, forever attuned to the politics around them was afraid that any action of this nature might roil the markets in a very sensitive period. Or, to put it in a somewhat more skeptical light, somebody on the street just might get the bright idea that this stock market recovery is entirely the result of a sea of liquidity and run for the exit at the slightest sign of tightening. Memo to Ben: didn't happen. Just try to do your job please.

Now that's not to say that there is real joy in the recovery theater. There isn't. Markets are still liquidity driven, but when you have a gazillion dollars of excess reserves sloshing around in the Reserve banks, liquidity is not an issue. These guys are even making money on this stuff now. So what happens next?

The boys in the coffee shop here in the fly-over zone still don't like what they see and we all remain a touch concerned when the main street banks start trying to collect on the construction loans and the commercial real estate that's out there. As the Sage of 161st and River Ave. put it, "It ain's over til it's over," and I don't think it's over. Just something to think about over the weekend. By the by, if anybody knows what the hell is the difference between a Sowchow and a Lutz, let me know will you?

Governance and Risk next week.