Bloomberg News reports that the Federal Reserve Bank's 75 basis point emergency rate cut this morning has not damped fears in the market. The Fed said this along with its cut: "While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate. The Federal Open Market Committee took the action in view of a weakening of the economic outlook and increasing downside risks to growth."

And yet, U.S. futures markets seem to have recovered somewhat from where they were before the announcement. For example, the S&P 500 Index futures expiring in March retreated 40.5, or 3.1%, to 1,284.8 as of 8:36 a.m. in New York after earlier slumping as much as 5.3%. And The Dow Jones Stoxx 600 Index added 1.5% after earlier dropping as much as 4.1%.

I think the problem is that investors holding mortgage-related securities such as Collateralized Debt Obligations (CDOs) need to mark them to market and raise capital. Cutting interest rates 75 basis points lowers the value of the dollar and contributes to higher oil prices, but it's not clear how it helps CDO investors raise capital.

If the only tool you have is a hammer, every problem looks like a nail.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

The Associated Press reports that Merrill Lynch & Co. (NYSE: MER) is in talks to accept a $5 billion investment from Singapore's Temasek Holdings. This is the latest in a string of investments from Asian and Middle Eastern government funds -- called Sovereign Wealth Funds (SWFs) -- which oversee between $2 trillion and $15 trillion.

Of the countries that are buying up big chunks of our financial system, Singapore is among the least threatening. I have visited there several times and find it a beautiful country. However, it has some puritanical social policies -- such as prohibiting people from chewing gum -- a ban it relaxed in 2002. I doubt its investment in Merrill will lead Singapore to impose its gum chewing ban on the U.S..

Merrill is soon to announce additional write-downs of assets thanks to the ratings downgrade of bond insurer ACA Financial Guarantee Holdings. One estimate suggested Merrill would write down $3 billion because ACA's lack of capital transfers the cost of bad Collateralized Debt Obligation (CDO) investments from ACA to Merrill.

But who knows? There's no reason to think we've reached the bottom -- of either the asset write-downs or the SWF buy-up of our banking system.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Merrill Lynch securities.

The Associated Press reports that, not surprisingly, there is a huge surge in the demand for non-profit mortgage counselors in the wake of the subprime meltdown.

A few things come to mind. At the height of the housing bubble, The Wall Street Journal ran a feature story on a former school counselor turned mortgage salesman who was on pace to earn $200,000 in a single year dealing with low-documentation, high interest mortgages -- probably subprime -- at a company called Benchmark.

That former school counselor is earning about 5 times what a nonprofit mortgage counselor makes. Is it any wonder that we ended up with a crisis? High-octane salesmen are earning 5 times as much on commission as these good-hearted souls who are brought in to clean up the mess.

And, because of the way the system is structured, these salesmen probably didn't give a darn whether the loans were any good: "Like many mortgage originators, Benchmark doesn't keep its mortgages long. Of its 2,176 loans last year, all but seven were sold to Wall Street firms and bigger mortgage companies, to be repackaged as bond-like instruments for insurers, pension funds and other investors. Benchmark nets about 1.5% of the value of the loan for its trouble, while freeing up capital to start the lending cycle again. It also means Benchmark doesn't have a major stake in the long-term fate of its mortgages."

Maybe the solution is to require mortgage salesman to take the same training program as mortgage counselors. Maybe they'd think twice about selling people mortgages they couldn't afford. At the very least, they'd be able to make themselves useful when the toxic mortgages they sold to unsuspecting consumers go bad.

A month ago, I suggested that Countrywide Financial Corp. (NYSE:CFC) could be this year's version of Enron. One reason: Enron's Ken Lay and Countrywide's CEO Angelo Mozilo both publicly boosted their companies' prospects as they dumped their shares.

Today's New York Times [registration required] seconds that motion by reporting that North Carolina's Treasurer, Richard Moore, has asked the SEC to investigate Mozilo's $132 million in stock profits -- which he took as Countrywide traded above $40 -- it's now trading at $18.80 -- right before the subprime mess heated up starting in October 2006.

Moore's letter expressed his anger: "As an investor and a Countrywide shareholder, I was shocked to learn that C.E.O. Angelo Mozilo apparently manipulated his trading plans to cash in, just as the subprime crisis was heating up and Countrywide's fortunes were cooling off." How is this like Enron's Ken Lay? As I posted before, Ken Lay sold about $100 million worth of shares even as he was telling Enron employees what a great investment its shares were.

Will the SEC investigate? Will Mitt Romney keep Mozilo's campaign contribution? Stay tuned for the next episode.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Countrywide securities.

More Countrywide Financial news

Douglas McIntyre: Countrywide (CFC) CEO stock sales questioned
Zac Bissonette: Countrywide (CFC) has a new PR campaign, but what about real change?
Eric Buscemi: Countrywide (CFC) showing some class and good business sense
Peter Cohan: Is Countrywide (CFC) too big to fail?
Douglas McIntyre: Could subprime problems hurt search engines?
Peter Cohan: Is Bank of America's (BAC) purchase of Countrywide Financial (CFC) a good bet?
Joseph Lazzaro: The (still) foggy subprime mortgage sector
Peter Cohan: What the mortgage meltdown means to you
Michael Fowlkes: Countrywide Financial (CFC) adds to subprime panic
Peter Cohan: Could Countrywide Financial (CFC) be put down?

Yesterday's MarketBeat excerpted my post on Alan Greenspan, which got me thinking about how to resolve his bundle of contradictions. This morning the answer popped into my head -- having survived under seven different presidents in Washington, Alan Greenspan is a better politician than economist.

The Fed Chair is appointed by the president. Thus, in order to be appointed and reappointed, Greenspan needed to support the policies of whomever was in office during his term at the Fed. For instance, under the current president, Greenspan supported $1.6 trillion worth of tax cuts along with the subprime market -- which broadened home ownership -- a key political goal. And now that he has left Washington, Greenspan is trying to appeal to a different constituency -- historians who will ultimately write his legacy.

By supporting the subprime market and the securitization of these dodgy mortgages, Greenspan was appealing to a politically broad set of constituents that helped the president and -- by extension -- Greenspan stay in office. How so? Subprime opened up the housing market to people who otherwise would rent, rather than buy. This appealed to the president and to those who ended up buying homes. And it also appealed to Wall Street which made hundreds of billions off securitization -- a fraction of which found its way to the president's re-election campaign.

Alan Greenspan, interviewed by the FT ahead of the release of his new book, said that he expects housing prices to drop sharply from "current levels." There is still some hope in the market, perhaps misplaced, that the sharp fall in homes values will be largely restricted to the subprime market.

Greenspan's comments are unlikely to help shares of beaten down homebuilders such as Lennar (NYSE: LEN). The FT writes that Mr Greenspan said he would expect "as a minimum, large single-digit" percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was "in double digits".

If Greenspan is right, and he often is, the fall-out in home devaluations would likely be fairly deep and lead to a long recession. A very sharp drop in home values, coupled with rising consumer credit card debt, and high oil prices would likely be a set of straws that would break the back of US consumers.

Greenspan's opinion has not been echoed by current members of the Fed. Perhaps they are hoping against hope that a rate cute will save the US economy from negative growth.

But, as each day passes, Greenspan's view look more likely to be true.

Douglas A. McIntyre is a partner at 24/7 Wall St.com.

Contrary to the words of our economic cheerleaders -- Ben Bernanke and Hank Paulson -- the subprime mortgage meltdown refuses to stay contained. This economic cancer has now spread to the lumber and title insurance industries.

Reuters reports that one of the biggest lumber companies, Weyerhaeuser Company (NYSE: WY), will probably have to close plants and restrict operations because of weak market conditions. This should not come as a surprise since dropping home prices may crimp new home construction -- leading to less demand for lumber, roofing material, nails, concrete, and all the other materials and labor that go into building a house.

But the Wall Street Journal [subscription required] surprised me by reporting that the title insurance industry -- which issues policies that essentially guarantee a homebuyer is the rightful owner of a property -- also is taking a dive. The paper reports that claims against leading title insurers -- due, in part, to a rise in subcontractors who file a lien for unpaid work on a house -- have spiked 52%. Moreover, title insurance revenues are down which indicates a drop in new mortgages that require title searches to get approved.