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With irresponsible borrowing and excessive leverage threatening the financial well-being of so many families, at least one county may be joining them in the soup line.

Jefferson County, Alabama, with a population of 662,047, according to the 2000 U.S. Census, is preparing for a possible bankruptcy filing, according to The New York Times.



The culprit? $3 billion in bonds with rapidly escalating interest rates resulting from the exact same short-sighted financial planning that got so many home owners into trouble: adjustable rate loans (In this case, auction rate securities) that require higher interest payments as interest rates move up. The current turmoil in the credit market has sent the county's rates as high as 10%.

In the margins of Barron's this week there was a smallish note about the government of Venezuela nationalizing Cemex's (NYSE: CX) operations in that country. For some reason the government of Hugo Chavez thinks that stealing all of the private companies in 'his' country will lead to greater prosperity for 'his' people.

While it is a long journey from Venezuela to Zimbabwe, with its exponential inflation rate and a near-total economic breakdown, every journey begins with a first step. Mr. Chavez will move much closer to this inevitable outcome if he continues on his chosen path.

Motley Fool has a good write-up on the subject in which they detail the sour relations between Chavez and foreign businesses. Chavez recently offered to re-open negotiations with Cemex, but since he has already decided to take the company, that offer is suspect -- you can't negotiate with a gun pointing at you. To date, Chavez has nationalized the telecommunications industry, electricity, and oil. How many steps down the road is that? Why would anyone want to invest in Venezuela?

The Observer reports that Lehman Bros. (NYSE: LEH) CEO Richard Fuld could be out of a job by the end of the year. The Observer states that "Whether a Lehman suitor emerges or not, well-placed sources within the bank are certain that Fuld is set to hand over the reins before the end of the year. 'He is involved less and less with day-to-day executive affairs, and his credibility is shot,' one senior Lehman source said."

The sources for the story are extraordinarily vague, and even if they are reasonably credible, it's hard to imagine who would be able to say with certainty that Fuld is on the way out.

It's not a difficult rumor to believe. The incredible part is that Fuld hasn't already been ushered out to a cushy retirement with a thoroughly undeserved severance package. The stock is off more than 80% in 2008, and Lehman's future as a stand-alone public company is very much in doubt.

While Fuld's firing would obviously be well-deserved, it's probably too late for it to matter one way or another. The distraction and expense of paying him to go away and finding someone else with nothing better to do than leap aboard a sinking ship makes it hard to say whether his departure would even do shareholders any good.

Bank of America's (NYSE: BAC) newly-acquired Countrywide Financial is being sued by yet another state attorney general, with Indiana's Steve Carter announcing on Sunday that he's suing the company for deceiving borrowers into loans that they could not afford and/or were not aware of the associated risks.

In a press release announcing the suit, Carter said that "These unfair lending practices may have harmed thousands of people and, in turn, negatively affected our communities and neighborhoods throughout the state." According to Carter, "The most common misrepresentations uncovered to date have been on 1) pre-payment penalty terms, and 2) the time period in which interest rates would be recalculated (resetting ARMs – adjustable rate mortgages)."

Carter is seeking penalties of up to $15,500 per violation, plus investigative costs and restitution.

Countrywide had been sued many times before the Bank of America acquisition, and BofA knew that there would be more to come. But for a deal that is widely considered to have been too expensive and too risky, the distraction and headache of all these lawsuits would seem to make this a deal Ken Lewis probably regrets. Of course, he won't say that publicly.

Biovail (NYSE: BVF), a poster child for accounting fraud and the "blame it on short sellers!" diversion strategy, has hired yet another chief financial officer, announcing that Peggy Mulligan will take over for interim finance chief Adrian A. De Saldanha, who had held the position since March.

In March, Biovail paid $10 million to the SEC to settle charges related to improper accounting and false and misleading statements. Former CFOs Brian Crombie and Kenneth G. Howling were implicated in that mess. So Ms. Mulligan has a tough act to follow: she'll have to produce results legally!

Shares of Biovail are trading near their lowest price of this millennium, understandable given that phony accounting and vast conspiracy theories are no longer there to prop up the stock price.

Biovail plans to spend more than $600 million on research and development over the next five years, in an effort to create real shareholder value.

Third Point Management fund manager Daniel Loeb told his investors last night the firm is the target of a formal investigation being conducted by the Securities & Exchange Commission. According to Loeb, the subject of the investigation is his communications with other hedge funds.

The investigation appears to be an outgrowth of a conspiracy theory that a cadre of hedge funds engaged in nefarious campaigns of rumor-mongering and aggressive short-selling aimed at bringing down companies like Bear Stearns. The fact that the companies crying foul have lost billions and suffered from serious transparency problems is deemed irrelevant; bad management doesn't destroy companies, short sellers do, according to this line of thinking.

Loeb wrote that questions about the fund's communications were first raised during a routine audit last year, but added that its lawyers had said that such communications were legal under federal securities laws.

Upset about paying $3.80 a gallon for gasoline? Hank Paulson, former Goldman Sachs Group (NYSE: GS) CEO, argued that it was all supply and demand so quit your bellyaching. I thought speculation was playing a big part -- traders who bought oil and sold the dollar to drive up the price. Indeed, a few months agao I found a source who thinks 60% of the volume was from speculators.

Seems even that was too low an estimate. The Washington Post reported Wednesday that the Commodities Futures Trading Commission (CFTC) has analyzed the books of oil traders and calculated that 81% of oil trading volume was conducted by speculators.

Guess who broke open the opportunity for oil speculators to trade oil in a loosely regulated fashion? Goldman. The Post reports that In 1991, its J. Aron unit argued that "it should be granted the same exemption given to commercial traders because its business of buying commodities on behalf of investors was similar to the middlemen who broker commodity transactions for commercial firms."

SEC Chairman Chris Cox, who has been off battling the imaginary dragon of naked short selling as actual securities fraud continues to be as easy as ever to get away with, has a message for you about the recently-expired naked-short selling rule.

He said that failures to deliver in the 19 financial stocks affected "were reduced substantially" and added that "It was a very effective order from that standpoint." Fair enough. But then he dropped this bomb shell: "We expected and intended to have no impact whatsoever on the direction of prices. That's not the purpose of regulations."

Uh-oh. That takes quite a bit of the wind out of the sails of the naked shore-selling conspiracy theorists -- if naked short selling was an evil scheme driving down share prices, then wouldn't regulation designed to curb it be expected to impact the direction of share prices? That statement from Mr. Cox would seem to be an admission that failures to deliver are a procedural issue, not some conspiracy to drive down stocks involving crooked journalists and a "sith lord" as Overstock (NASDAQ: OSTK) CEO Patrick Byrne infamously suggested.

For a summary of the commentary on this mess, check out this post from Gary Weiss.

Recent reports reveal a surprising amount of criminal activity in the mortgage business. This is particularly true in states whose names end in the letter A, such as Florida and Nevada. Two particular forms of illegal behavior are the licensing of mortgage brokers with criminal records and homebuilders' use of bribes -- or 'incentives' -- to encourage people to buy over-priced houses without disclosing them to lenders as required by law. Think I'm kidding?

DSNews reports that last week, Florida's mortgage commissioner resigned after it was revealed that he granted mortgage brokerage licenses to people with criminal records. Specifically, DSNews wrote that Don Saxon, who had been Chairman of the Office of Financial Regulation (OFR) had "allowed more than 10,000 people with criminal histories – including bank robbers, racketeers, defrauders, embezzlers, identity thieves, and tax evaders, among others – to work in Florida's mortgage lending industry between 2000 and 2007. These convicted felons had expropriated more than $85 million from lenders and homeowners during that time."

Meanwhile, things were not much more legal in Nevada. That's where the Wall Street Journal reports that the Las Vegas, NV branch of home builder Centex (NYSE: CTX) paid off the credit cards and mortgages of potential borrowers to entice people to buy homes priced from $350,000 to $550,000. The FBI is investigating allegations that Centex did not always disclose these 'incentives' to lenders as required by law.

It was a publicity nightmare for the Walt Disney Co. (NYSE: DIS): Tinkerbell, Snow White, Pinocchio, and Minnie Mouse being handcuffed and hauled away from Disneyland in a police van.

32 costumed protesters were arrested for failing to obey a police order and traffic violations on Thursday. The protest was part of a labor dispute involving 2,300 workers at Disney's hotels: the Paradise Pier, the Grand Californian and the Disneyland Hotel.

The union's contract expired in February, and workers complain that the new offer from Disney management would make health care unaffordable and, according to the president of Unite Here Local 681, workers are comparable local hotels make $2-3 an hour more. You can read the details of the dispute here.

I can't imagine that stuff like this is good for traffic at Disneyland: imagine showing up for a day of fun rides with your family, only to have your 4-year old ask why Mickey and Goofy are being hauled off in handcuffs!

A Disney spokesman told the USA Today that "Publicity stunts are not productive and are extremely disruptive to the resort district."

But won't disrupting the resort district "encourage" Disney to meet its workers' demands? If so, that sounds productive to me!

One of the most common rebuttals to the naked short selling conspiracy theories is this: Name one company that has been hurt by naked short selling.

In a July 22nd interview with Fox Business, Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne gave an example: Force Protection (NASDAQ: FRPT). "Makes vehicles for soldiers in Iraq. . . stock was at $25, got naked shorted down to $4, canceled the secondary. . . Some soldiers are going to die in Iraq this week because some hedge fund guys need a new Ferrari."

Oops. On August 14th, Force Protection dropped some bad news on its shareholders. In addition to having missed the deadline for filing its 10-K, the NASDAQ is now threatening to de-list Force Protection's stock for failing to file its 10-Q for the quarter ended June 30, 2008. This comes after the company changed auditors and, back in March, disclosed "certain material weaknesses in internal control over financial reporting."

And that is, according to a message Patrick Byrne left on a message board (View the post for a video of the interview) the "easiest way to explain this problem to Congressmen, Senators, and most Americans."

Note to Byrne: I, and I suspect many others, will be more convinced when a company without serious accounting/internal controls problems and/or a failed business model complains about naked short selling. So far we haven't heard anything like that.

The Washington Post reports that the number of bank failures has been surprisingly low. But the crunch count is likely to grow as the problem bank list triples from 90 to 300 over the next three years. Meanwhile, the Federal Deposit Insurance Corporation (FDIC) could run out of money to pay off depositors of future failed banks unless it raises its deposit insurance rates from their current 5.4 cents per $100 deposits.

But the most interesting question is whether the White House is propping up banks that should fail so that it can push the biggest part of the cleanup into the lap of the next President. It is certainly bringing out all the biggest economic guns to delay the inevitable reckoning from the $8 trillion credit collapse. It spent $29 billion bailing out Bear Stearns, sent $160 billion worth of checks to taxpayers, cut interest rates from 5.25% to 2%, and seems belatedly to be enforcing regulations against manipulation of oil trading.

The Post quotes industry experts who think that the FDIC is propping up many banks. For instance, Bert Ely of Ely & Co., a bank consulting firm in Alexandria, VA, told the Post, "They are dragging their feet in forcing these banks to reserve realistically. Some of these banks could have been closed two or three quarters earlier." And Ken Thomas, a lecturer in finance at the Wharton School at the University of Pennsylvania, told the Post that the FDIC's foot dragging would only cost taxpayers more in the long run. Thomas said, "In some of these cases, I believe regulators should act sooner than later to prevent future losses to the fund."

In a tough economy, the income tax burden on individuals becomes more of a weight. Add the payments to higher gas prices, mortgages that are being reset at lofty levels and rising food costs and the results can be awful.

But at least corporations are paying income taxes to carry part of the burden of running the federal government, right? Too bad that it turns out that this assumption is wrong. As The New York Times writes, "Two out of every three United States corporations paid no federal income taxes from 1998 through 2005, according to a report released Tuesday by the Government Accountability Office, the investigative arm of Congress"

How sweet a deal is that?

Part of the trick is that many companies move money to countries outside the U.S. where the tax burden is lower.

In a period where the federal deficit is at nose bleed levels and individual tax payers are being crushed, Congress will probably be upset enough to pass bills to correct the inequity.

How the companies got away with it for so long is a question that is pretty disturbing.

Douglas A. McIntyre is an editor at 247wallst.com.

Rumors have swirled about the rapid collapse of Bear Stearns, with a lot of people -- even some normally credible commentators -- absolutely convinced that the company was a victim of a bear raid and naked short selling, and malicious rumor mongering that led to a run on the bank, sealing the bank's fate.

An interesting piece from Bloomberg discusses the suspicious options trading in the stock: on March 11th, someone bought $1.7 million worth of put options, effectively betting that shares of Bear Stearns would decline by nearly 50%. Bloomberg reports that "options specialists are convinced that the buyer, or buyers, made a concerted effort to drive the fifth-biggest U.S. securities firm out of business and, in the process, reap a profit of more than $270 million."

Interesting. But isn't it also possible that the puts were purchased by someone with insider information about the company's disastrous financial position? Must we assume that the only person who would be willing to bet big on Bear's collapse was a malicious short seller who was spreading rumors like Perez Hilton, working overtime to assure a run on the bank? It just seems a little melodramatic. It's not even James Bond -- more like Mack Bolan.

Before we feel to bad for Bear Stearns -- and record it in the history books as a victim of an outside invasion -- it's important to keep in mind what allowed rumor mongers to destroy it, if indeed they did: the company had no credibility, a result of its long insistence that everything was fine.

Bear Stearns was a company that treated its shareholders with scorn, never leveled on the company's true financial condition, and didn't even bother to disclose that its bridge-playing, allegedly marijuana-smoking CEO was seriously ill in the hospital while the credit crisis raged on.

The U.S. Department of Justice is challenging (subscription required) a settlement Countrywide Financial reached with a Pittsburgh bankruptcy court that had alleged that Countrywide was intentionally mishandling mortgage payments it received as part of a scheme to extract large fees and penalties from struggling borrowers.

The Justice Department says that a non-disparagement clause in the settlement could "impede, impair or otherwise chill witness testimony in the U.S. Trustee's ongoing investigation of Countrywide."

The non-disparagement clause required court official and whistle blower Ronda Winnecour to agree not to "in any manner, whether directly or indirectly, disparage" Countrywide, and to assure that her employees didn't disparage the company either.