The second half of the calendar year has begun, and earnings return to the spotlight this week. As usual, Alcoa Inc. (NYSE: AA) is among the first of the S&P 500 to report quarterly results. For the second quarter in which Alcoa agreed to sell its wire harness and electrical distribution business and its fastening systems business expanded into Morocco, analysts surveyed by Thomson Reuters expect the New York-based aluminum producer to report swinging to a net loss of $0.34 per share from a profit of $0.66 per share in the year-ago period. Second quarter revenue is expected to have fallen 48.3% to $3.9 billion. The full-year forecast is currently for a loss of $1.04 per share and revenue of $16.7 billion (-38.0%). Alcoa has missed expectations in the past three quarters, by as much as 17 cents per share. The long-term EPS growth forecast is 10.0%, which is better than the sector average. Alcoa slashed its dividend earlier this year, and the First Call consensus recommendation remains to hold AA. However, TheStreet.com recommends it as an against-the-grain pick. At $9.86, shares are down 12.4% since the beginning of the year, and recently have been bumping up against the 200-day moving average.

Well, last week's Beige Book report and other indicators didn't in fact make it clear whether economic recovery is underway. So what do we have to look forward to this week?

There's Treasury Secretary Timothy Geithner's testimony at the House Committee Hearing on the Financial Regulation Plan on Wednesday evening. Or how about the bankruptcy filings for the second quarter or Leading Indicators Index for May, scheduled to be released Monday afternoon and Thursday morning, respectively. Will they provide a clear signal about the direction of the economy? Probably not.

A report today in the New York Post indicates that Western Asset Management Co., a unit of Legg Mason (NYSE: LM), is one of several institutional investors hatching a plan to absorb bad assets from banks. The Post says that LM's unit is "among a growing group of big-name investors looking at establishing vehicles similar to real-estate investment trusts that would sell shares to the public and use the proceeds to buy troubled residential mortgages and commercial real estate."

Other interested parties include Pacific Investment Management Co., as well as billionaire Gerald J. Ford, says the Post. The creation of an REIT-like entity to purchase undervalued mortgage assets would fall under the Public-Private Investment Program described by Treasury Secretary Timothy Geithner earlier this year as part of the government's broader bailout initiative.

In celebration of Barry Ritholtz's critically-acclaimed new book Bailout Nation, he held The Big Picture Conference, which I was fortunate to attend.

Here are the main points from the most reputable speakers, Congressman Alan Grayson, Nassim Taleb, Doug Kass, and Josh Rosner.

Florida Congressman Alan Grayson discussed how systemic risk is an excuse for socialism and that interconnectedness is the main reason that these institutions are "too big to fail." In fact, these institutions no longer hold social or economic purpose, they are simply too big to exist.

U.S. stock futures edged higher Wednesday morning following Tuesday's general declines as economic indicators at home and around the world disappointed.

This morning, though, financials were back in the spot light with Bank of America (NYSE: BAC) raising $13.5 billion through a stock offering to help it meet the government's capital requirements following the recent stress testing. Treasury Secretary Timothy Geithner is also set to testify today.

Meanwhile, there is news the Obama administration may create a regulatory commission to protect consumers of financial products such as credit cards and mortgages, as they try to crack down on abuses.

Tim Geithner hasn't been Treasury Secretary for much more than a month, and already Henry Blodget is calling for his head.

Blodget writes that Geithner's ideas and personality have failed to inspire and, most importantly, he has "Refused to revisit or defend his almost certainly inaccurate view that this crisis is merely a temporary price decline caused by a lack of liquidity, rather than a collapse of a debt-driven economy. You can't cure the patient if you're treating the wrong problem."

A few weeks ago I appeared on CNBC's Closing Bell with Maria Bartiromo to discuss executive pay. One interesting point in the interview was when Ms. Bartiromo argued that it would be difficult to get good people to run big banks if their pay was limited because Wall Streeters are motivated primarily by money. I suggested that if that were true, then you would never see a former CEO of Goldman Sachs Group, Inc. (NYSE: GS) take the enormous pay cut required to become Treasury Secretary.

I am not sure what motivates Wall Streeters to take those pay cuts. But today, another prominent one -- Steve Rattner with whom I worked in the 2004 presidential campaign -- announced he is leaving his private equity firm, Quadrangle Group, and shipping off to Washington to work as Counselor to the Secretary (of the Treasury).

There is no way to know why stocks go up or down every day. That's why I always find it somewhat silly when I see simple explanations for the movement in prices. The explanation offered for today's 494 point rise is that investors are celebrating the rumor that Timothy Geithner will be the next Treasury Secretary. How does the media know that investors are only celebrating Geithner's appointment and not that of Bill Richardson as Commerce Secretary?

Make no mistake. I agree with the choice of Geithner and made a case for him over former Harvard president, Lawrence Summers, and former Fed Chair Paul Volcker. My reasoning for Geithner was that he had excellent interpersonal skills and high energy coupled with an intimate familiarity with the current financial crisis. Unlike Summers, Geithner is highly unlikely to alienate people, and having picked Hillary Clinton as Secretary of State, President-elect Obama will have enough drama on his hands with both Clintons.

Geithner shares something with current Treasury Secretary Hank Paulson -- he graduated from Dartmouth. I hope that he makes far better use of that Ivy League education in the Treasury Secretary's role than his predecessor. While Geithner will be left with a huge mess that was not helped by his fellow Dartmouth alum, it will be difficult for him to do a worse job than Paulson. The world will be depending on him.

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

Hank Paulson is keenly aware that his Goldman Sachs Group (NYSE: GS) and Treasury predecessor, Robert Rubin, helped save the market by encouraging the then-head of the New York Fed to force Wall Street leaders to team up to save Long-Term Capital Management's collapse from taking down the financial markets. Just as George W. Bush needed to recap Iraq, so now does Hank Paulson need to recap that famous meeting in lower Manhattan.

Bloomberg News reports that the meeting -- which took place yesterday afternoon -- involved a rogues gallery of Wall Street executives coupled with Paulson and New York Fed president Tim Geithner. The message these regulators delivered was reportedly a simple one: "You need to solve your own problems, and we're not going to provide any more capital." But Wall Street -- as represented by the likes of "Citigroup, Inc. (NYSE: C)'s Vikram Pandit, JPMorgan Chase (NYSE: JPM) 's Jamie Dimon, Morgan Stanley (NYSE: MS)'s John Mack, Goldman's Lloyd Blankfein, and Merrill Lynch & Co., Inc.'s (NYSE: MER) John Thain" -- are convinced that the Fed will blink when it comes to the 158 year old Lehman Brothers Holdings (NYSE: LEH).

Bank of America (NYSE: BAC) reportedly wants to put in a bid for Lehman contingent on getting government help -- such as the $29 billion JPMorgan got in its Bear Stearns acquisition and its nationalization of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). After these two precedents, Paulson now wants to reverse himself. He says Lehman is different because people have known it was in trouble for a long time and it can access the Fed's discount window. But I think this could just be a little show for the President who is worried about how this will look to history. He may not realize that he has already opened the Pandora's Box of moral hazard and can't shut it now.