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Frank Rich says the bankruptcy trustee in the Madoff case may do what the Financial Inquiry Commission failed to do, and what the Pecora Senate investigation of 1933 accomplished. Michael Lewis, author of "The Big Short," said of the efforts to prevent a future crisis on MSNBC: "I feel like we're living in a house built on sand because we did'nt reform the system." By not holding people accountable their is risk of the same behaviours recurring. By saying everything went wrong in general Shakespearean terms the Financial Inquiry Commission report did not accomplish the purpose of its investigation.

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U.S. exports increased by about 17% to $1.8 trillion in 2010, according to the Commerce Department. China is now the No. 3 destination for US exports.

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The share of new mortgage loans backed by the US government through Fannie Mae and Freddie Mac is at 92%. This makes the fast overhaul of the two agencies much more difficult. Treasury Secretary Geithner said last week that overhaul of the two agencies could take 5 to 7 years. The problems with Fannie and Freddie are real. The U.S. government subsidizes mortgages through Fannie and Freddie, encouraging Americans to take on more debt. Their balance sheets pose serious risks in another crisis, as long term investments are financed with short term borrowing. Any losses will be the responsibility of the US government. A recent paper from the US Treasury outlined some of the steps needed to wind down both agencies and to reform the way they operated including- requiring larger down payments and lowering loan limits, and increasing the fees charged for the government's guarantees to be more in line with the risk being taken. Slower reform in this area means additional systemic risks in the event of another crisis....

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James Glassman, has published a new book, "Safety Net." In the book he makes an admission that he was wrong in his theory and understanding of the stock market described in his earlier book, "Dow 36,000," published in 1999. That book called for stocks to triple in value in 5 years. Glassman wrote then, at the height of the tech boom, that stocks could immediately double, triple or even quadruple as was happening at that time for tech stocks going public, and they would still not be too expensive. Part of the arguments rely on a definition of risk. Glassman said in his earlier book that stocks and bonds are equally risky in the long run, because stocks had never lost money over the long term and over long periods of time their returns were constant. But Glassman is using a technical definition of risk as how much returns can deviate from the average. What investors face in the real world is a common sense definition of risk, which is- what are the chances you will lose money? This point says Jason Zweig, is clearly stated in Howard Marks coming book, "The Most Important Thing." And what about the point about stocks never losing money, the central point in Glassman's thesis? Here research from Dimson, Marsh and Staunton of London Business School is useful. This research shows that in France from 1912 through 1977, stocks lost money after inflation. The upshot of this is to emphasize the need for looking at risks as real in the real world, where things have changed to the point where the current stock market rally is attributed by the Fed chairman to vigorous efforts to fight a downturn in the economy. For investors these risks are not going away with a sudden surge in stock prices....

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The unravleing of Borders bookstores chain in the US, after Borders management failed to anticipate and build on the new trend to electronic books and made a series of mistakes. Borders filed for Chapter 11 bankruptcy protection in early Feb. 2011. Its online strategies simply failed to come up with answers to the cultural trend to online shopping for books and buying e-book readers. A serious bad decision from which Borders never recovered was to transfer its internet operations to Amazon Inc. in 2001. Amazon quickly built up customer relationships with millions of customers. Other decisions followed which put Borders in an untenable position. Borders increased its debt from $159 million in 2001, to $554 million for the fiscal year ended Feb 2, 2008, using the money for overseas expansion and share buybacks, which did little to address the looming internet problem. By contrast Barnes and Noble took the opposite strategy of paying down all of its $667 million in debt. Borders has modest beginnings starting in 1971, when Tom and Louis Borders, started a small used bookstore. By the 1990's bookstores with tens of thousands of books in one location were changing the bookselling landscape, as smaller bookstores were closing. Borders was able to ride this wave. When the next wave hit in 2010 with the internet, Borders was unable to respond and went into permanent decline. A costly trip through bankruptcy court means Borders will have to close one third of its 674 Borders and Waldenbooks stores, and cut a large part of the 19,500 staff. This will mean customers shifting to Amazon, Barnes& Noble, Apple Inc. and Google Inc. Mike Shazin, CEO of Idea Logical Co, a New York consulting firm, says he expects 50% of bricks and mortar bookstores to go away in 5 years, and 90% to go away in 10 years. ...

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With Republicans elected to a majority in both chambers of the state legislature and a Republican governor, Wisconsin is moving ahead with a sweeping plan to fix its budget deficit. Walker promised he would get public workers' compensation in line with other workers. He is now proposing a plan which will go to the legislature for swift approval that will simply go ahead and cut public employees benefits without negotiating. He says he doesn't have anything to negotiate with, because with the growing deficit he has nothing to give. His plan: limit collective bargaining for most state and local government employees to the issue of wages (instead of to many issues such as vacations, health coverage), require government workers to contribute 5.8% of pay to pensions, and have state employees pay at least 12.6% of health care premiums (instead of the 6% most pay today). The plan will save $30 million in the current budget and $300 million in the next budget. Republican leaders are saying the alternative is to lay off some 6000 state workers, and take away Medicaid coverage for thousands of children, which is a much worse alternative....