During the recent testimony by Fed Chairman Ben Bernanke, Treasury Secretary Hank Paulson and SEC Chairman Christopher Cox, it has become increasingly clear that the Federal Reserve will be forced at least in the near term to extend a financial lifeline to any and all U.S. financial entities that are too big to fail. This refers to entities whose failure cold endanger the U.S. economy and in some cases the global financial markets.

I have learned during my investment career to watch what the Fed does much more than what it says. This has been demonstrated by Chairman Bernanke's extension of the discount window to Fannie Mae and Freddie Mac in recent days despite initial indications by Secretary Paulson to the contrary. Hawkish talk remains just that, not action.

The discount window was initially intended only for regulated banks to prevent a meltdown of the financial system from bank failures. In return for this financial insurance, banks are regulated, including the charging of fees. One can debate the alternatives to such an arrangement. However, this regulatory framework will probably be with us for the foreseeable future.