So Whom Do We Blame for the Financials?

Their payment of 250k I banking bonuses last year for 2nd year associates and pay packages that went to the moon?

We don't blame the banks or the employees. If A-Rod can make tens of millions a year hitting a baseball, why should people not get paid as much as they want?

No, the blame falls on the mutual fund industry, investment consultants, and high net worth firms.

Were not shops like T Rowe Price, Dodge & Cox, Pzena, Fidelity , Vangaurd, and Legg Mason the largest investors in shares of Citi, Morgan Stanley, Fannie, Bear, Countrywide, Indymac and assorted banking stocks?

If they didn't like the pay the banks were giving out, SELL the SHARES! Don't vote for the same board members. Obviously plenty of people shorted the financials. Chanos, Paulson, et al.

Jim Rogers, Marc Faber and Bill Fleckenstein have been publicly dubious of financials' earnings, pay and stock prices for years -long before the stock plummeted and LEH and BSC slipped into eternity.

The blame falls squarely on the legions of bottom-up fundamental analyst with their CFAs that bought the story the banks peddled. The mutual funds were buying Bear and Fannie right up to the collapse! The trend had already reversed, the world knew these companies were doomed.

Then it falls on the investment consultants and their pseudo "due diligence." Who in their right mind would recommend a value fund that was over 40% in financials at the end of 2007 and into 2008?!

Yet they did, by the legions. Why? Because the Russell 1000 Value index was 40% financials and that was their benchmark.

And you see, the largest mutual funds are closet indexers anyway (they get paid on fees). And as investment consultants were are not smart enough to pick the stocks, but we'll pick the funds. So if the R1000 Value index is down 50%, but our "recommended funds are only down 45% we are geniuses! No one ill fire us. Oh and we don't have an original thought in the entire fiber of our beings! We worship American Century, T Rowe, Legg Mason! How could our idols - the fund managers ever be wrong? They are deities! Lets not question them being 45% in financials as the entire sector is collapsing!

If you are an aggrieved investors be mad at your consulting firm, your mutual fund and yourself. You bought a story that was obviously unsustainable.