Ever since the Super SIV (structured investment vehicles) story broke last week, I've been seeing hints that mutual fund shareholders might be caught up in the mess and not even know it. Well it's true. I've found significant holdings in non-government backed collateralized mortgage and asset-back securities in a number of mutual funds. That means if you have a mutual fund with a security that does default, that mutual fund will have to write-down those assets and may have to lower the Net Asset Value (NAV, essentially the selling price) of your mutual fund.

I've found significant holdings in various types of bond funds, including Total Return Bond Funds, Short-Term Bond Funds and Ultra-Short Bond Funds. There are thousands of funds out there, so I can't guarantee I've located all the funds with possible problems, but I can tell you what to look for in any funds you hold.

If your funds hold primarily bonds graded lower than AAA, it's worth a closer look. Next, look at the mortgage and credit holdings of the fund. If your fund holds a significant amount of mortgage pass throughs, collateralized mortgage obligations (CMOs), commercial mortgage-backed securities (CMBS) or asset-back securities (ABS), these could be the types of securities that are now tied up in the Super SIV story. In order to know whether or not you have a problem, you would need to look at the actual portfolio holdings and find out exactly what is being held.

Hank Paulson and Ben Bernanke are finally getting around to admitting that the subprime problem is not "contained." Regrettably, their grudging admission of reality also comes with a price -- they are unwilling to offer a solution to a problem whose magnitude they cannot even count.

This is the scariest part. According to the New York Times, at a speech in New York last night Bernanke said, "I'd like to know what those damn things are worth. Until investors are confident in their evaluations, they are not going to be willing to fund these vehicles."

This spring, Paulson and Bernanke were singing the same hymn: "subprime is contained." The reasons? The administration's trademark combination of religion -- the desire to avoid a "moral hazard" -- coupled with incompetence -- a lack of awareness of the magnitude of the problem or how to solve it. Moral hazard is a concept I happen to agree with -- investors should get the benefits and pay the costs of their risky bets rather than asking the government to bail them out of their mistakes.

This morning UBS AG (NYSE: UBS) said it expects a loss of up to $690 million while Citigroup (NYSE: C) said it expects a 60% decline in profit -- but still managed to expect a profit. The difference? European banks like UBS were only marginally brighter than the poor U.S. subprime mortgage borrowers because they actually fell for the line that packages of subprime mortgages were safe, high yielding investments.

It's worth remembering that the mortgage industry value network is complex. No longer does a mortgage bank issue a mortgage and keep it on its books. What happens now is that a mortgage broker convinces a borrower to sign a mortgage contract. The originating mortgage bank then turns around and sells that mortgage to a Wall Street investment bank that packages the mortgage into a mortgage-backed security (MBS) which it quickly gets off its books -- and onto those of European and Asian investors, like UBS, which are now paying the price for their gullibility.

How big of a price? UBS is taking a $690 million loss and firing 1,500 workers due to the $3.4 billion writedown of the value of its MBSs -- but I think it's curious that it still has $19 billion of MBSs with which it is "comfortable." Meanwhile Citigroup's problems are more complex -- it will take $1.4 billion in pretax write-downs on leveraged buyouts it is helping to finance, $1.3 billion in pretax losses on subprime MBSs and $600 million in pretax losses on fixed-income trading.

Citigroup looks like a better diversified sucker. While Citigroup took pain from its MBSs, it also suffered from LBO loan writedowns. Nevertheless, Citigroup looks like it will stay in profitable territory.

But with its shares down 16% in 2007, its performance is nothing to cheer about.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup shares and has no financial interest in UBS.

The New York Times [registration required] suggests that General Electric Company's (NYSE: GE) CNBC's Jim Cramer has had little effect on Fed Chair Ben Bernanke -- this despite his famous video rant in favor of cutting interest rates.

Cramer is used to having tantrums and getting his way. But his responsibility is limited to providing a unique mix of entertainment and stock touting. Bernanke, on the other hand, has a slightly bigger responsibility -- managing the first global financial panic of his 18-month tenure. To do that, he issued $62 billion of short-term government loans (known as repos) -- accepting mortgage backed securities (MBSs) as collateral -- in an effort to restore confidence to the markets.

Meanwhile Cramer is trying to get Bernanke to bail out his buddies at The Goldman Sachs Group (NYSE: GS), whose formerly eight-figure-bonus-worthy trades are now blowing up in their faces. Simply put, Cramer wants the Fed to grant Wall Street all the upside while shifting the costs of its mistakes onto society. But Bernanke does not want to play along.