Or, if you prefer, AIG.

That was the news this morning.

And folks, it really is as serious as it sounds, and more.

Why?

Because their auditors are the ones who forced the issue.

That's right - their auditors.

So what does this tell us about "The Street" in general?

Simple - firms have been and continue to have poor internal controls, they continue to attempt to report horse****, and the result is that what you're being told in "earnings reports" IS NOT THE TRUTH.

Is the impact of this material? I don't know - you tell me - it appears to be about one quarter of AIG's full-year earnings estimates!

Is that "material"? I'd say so.

Is this local to one company? I don't know - would you like to bet that there is only one cockroach?

Yet the market, for the most part, shrugged it off on the broader indices, confining most of the damage to AIG and others in the insurance sector.

I think that is a huge mistake.

Oh, and Friday night we got news that BAC had received a "Wells Notice" from the SEC related to alleged bid-rigging in the "guaranteed income" and "swap" areas of the municipal debt market. Allegedly, there are other firms that either have or are expecting to receive similar notices.

Those are good too, right? Rigging bids is a positive thing?

And while you're at it, don't look behind the LCDX curtain. You'll find some real pain back there, with the most serious of it being the fact that over $150 billion in leveraged loans is "hung" on bank balance sheets - nobody wants it! And how's it trading? Well, if you believe the LCDX, at 90 cents on the dollar - which implies yet another $15 billion worth of writedowns not yet taken or reflected in prices, and that assumes the pain stops here - it probably won't.

So exactly when do we get some clarity here?

Will it be before or after the economy goes into an economic depression due to the credit market totally seizing up? Would you loan someone money if you didn't know if they were being honest with you about the state of their balance sheet?

Well, if you have money in a bank, guess what - you are!

How certain are you that (1) the bank's financials fairly represent its fiscal health, and (2) that if they don't, the problems aren't so systemic that the FDIC will be unable to bail YOU out?

And speaking of which, why is the FDIC, OCC and OTS not all over this? After all, if there are falsehoods (or just plain old-fashioned "hidden truths") on bank balance sheets they will be the ones who have to clean up the mess and make depositors whole!

Back to my familiar refrain - WHERE ARE THE COPS?

This is getting well beyond reasonable and into the realm of pure insanity.

At some point you have to ask yourself whether all of the "surprises" are "honest mistakes" or whether we are instead talking about rampant, systemic, organized and collusive fraud.

Or even, pehraps..... racketeering?

Heh, I don't have those answers, but this much I do know - when you have ratings agencies stating right up front that they are "aware of" (and therefore responding to) the consequences of downgrading the credit rating of the monolines, instead of just rating them on their merits, we have falsely-propped-up balance sheets, and now the auditors are throwing up over all of this and are saying "we ain't signing that!", exactly what sort of conclusions are we supposed to draw?

The balance sheets of these firms must be deleveraged and the truth exposed or the credit markets will not heal.

We will NOT have a healthy market nor economy until this happens.

We can either have it happen NOW, via government intervention and the jackboot of regulation being applied to the NECK of these institutions for their misdeeds - the proper role of government in all its forms - or the market will do it for us in a much more painful way for everyone in the United States.

The politicians, being in an election year, are NOTABLY ABSENT on this issue.

Have you heard ANY of the Presidential Candidates come out and raise hell about this?

Nope.

Nor will you, even though from a standpoint of the American Public this should be THE issue of the campaign!

Why?

They are all in these firm's back pockets!

So who's left?

It appears, Cuomo and a few other STATE law enforcement agencies, such as Dann of Ohio.

Well guys, I have one thing to say to these fine folks on that: GIDDYUP!

Here's your technical!