1. No Rest for the Bearded

Here's hoping Federal Reserve Chairman Ben Bernanke doesn't have any vacation plans this fall. The bearded banker is short-handed and someone needs to stand ready at the printing presses just in case we haven't really seen the worst of the credit crisis yet.

Fed governor Frederic Mishkin submitted his resignation to President Bush this week, with plans to go back to teaching at Columbia University at the end of August. That leaves a whopping three vacancies on the board of the central bank as Wall Street muddles its way through the mortgage mess.

Luckily, rules that once required approval from at least five Fed governors to take emergency monetary action in a crisis were relaxed after 9/11. Now, only support from four governors is required for extraordinary actions like those taken by the Fed in March when it orchestrated the fire sale of Bear Stearns ( BSC) to JPMorgan Chase ( JPM) and opened up the discount window for investment banks facing a liquidity crunch.

Four central bankers are still hanging on at the Fed, and Wall Street needs every one of them -- even poor old Randall Kroszner, whose term has expired. He's permitted to continue serving until a replacement is sworn in, but he's not holding his breath. The President's appointees for vacancies at the Fed are awaiting confirmation in the Senate, where Senate Banking Committee Chairman Chris Dodd (D., Conn.) runs the show.

Dodd takes the blame for the Fed, but what about the Securities and Exchange Commission, where the two commissioner seats saved for Democrats to ensure bipartisanship at Wall Street's watchdog are vacant?

The Washington Post reported this week that with eight months left in the Bush presidency, "scores of senior officials in the federal government already are heading for the exits, leaving nearly half the administration's top political positions vacant or filled by temporary appointees." As of December, 616 top officials at federal agencies were people appointed by President Bush and confirmed by the Senate, amounting to only 56% of the 1,100 officials that are typical at the peak of an administration.

Never mind two wars, the threat of terrorism, soaring oil prices, the weak dollar and economic weakness. The subprime leadership problem looks contained.

Dumb-o-meter score: 95. How many congressional committees does Chris Dodd run, anyway?

2. Investigate Good Trades; Not the Bad

The federal government is doing its best to help homeowners, lenders and investors who made bad decisions in the bubble days of the U.S. housing market. Now, it's going to try and punish those who made good decisions when the bubble popped.

Having scrapped recommendations from a branch office to bring charges against Bear Stearns ( BSC) in 2005 for improperly pricing mortgage securities, the Securities and Exchange Commission is now dutifully investigating investors who cut their exposure to Bear before it was rescued from the brink of bankruptcy by the Federal Reserve.

Such investors stand accused by Bear CEO Alan Schwartz and others of leading a coordinated misinformation campaign designed to bring down the firm for the benefit of short-sellers.

The Wall Street Journal reported this week that Bear will turn over documents to the SEC showing that several financial giants, including Goldman Sachs ( GS), Citadel Investment Group and Paulson & Co., slashed their exposure to the firm in the weeks leading up to its collapse.

Of course, if the Feds are going after those spreading rumors about Bear's troubles in early March, they'll have to detain almost everyone in Lower Manhattan along with their grandmother.

Never mind that anyone who reduced their exposure to Bear before it went down was making a good decision. Good decision-makers have to be held responsible when the free market becomes irrationally fearful, just as bad decision-makers have to be glorified when the free market becomes irrationally exuberant.

This is how things work in Bailout Nation.

Dumb-o-meter score: 91. Who didn't get the memo?

3. Moody's Got the Blues

These are troubled times for the credit ratings industry, but things are looking up for Moody's ( MCO) now.

The financial juggernaut, blessed by federal regulators with unique authority to provide official ratings on investment securities, said this week that its employees may be fired if the firm finds that errors in calculating credit ratings for certain products were covered up, according to a report from The Wall Street Journal citing sources familiar with the matter.

That's a brave step for a firm that is widely blamed for institutionalizing the disastrous idea that securities backed by subprime loans are basically risk-free.

Last week, shares of Moody's took their biggest one-day fall since the firm went public in 1998 after it revealed it's conducting "a thorough review" of whether a computer error caused it to assign AAA rankings to debt securities that did not deserve such a stellar rating, according to company policy.

The Financial Times reported that some senior staff members at Moody's were aware in early 2007 that constant proportion debt obligations, funds that used borrowed money to bet on credit-default swaps, should have been ranked as much as four levels lower than AAA.

Rather than fix the problem, Moody's reportedly covered up the error by altering some assumptions in its rating model and crossing its fingers.

A skeptic might say that such activity represents the inherent boondoggle in Moody's business model: it gets paid for its ratings by the very debt issuers that depend on high ratings to sell their products.

"It's as if movie studios hired film critics to review their movies, and paid them only if the reviews were positive enough to get lots of people to see a movie," former Labor Secretary Robert Reich wrote on his blog. "The whole thing rested on a conflict of interest analogous to that of stock analysts who, before the dot-com bubble burst, advised clients to buy stocks their own investment banks were issuing."

Like its counterparts, Standard & Poor's and Fitch Ratings, Moody's is now facing an investigation into its business practices by federal regulators, and its largest shareholder, Berkshire Hathaway ( BRK-A) CEO Warren Buffett said that if it finds that someone in its management ranks did something wrong, "they should go."

As for that internal investigation, it's being performed by Sullivan & Cromwell, the same law firm that represents Moody's in class-action lawsuits -- the kind of liability that Moody's could face in a huge way if it's found to have engaged in a cover-up of ratings errors.

Dumb-o-meter score: 85. When your entire business model rests on a conflict of interest, you might as well hire a law firm with conflicts of interest for good measure.

4. An Incoherent Truth

Exxon Mobil's ( XOM) chairman and CEO, Rex Tillerson, faced some unruly shareholders at the oil giant's company meeting this week. We're guessing this is the part of the job he hates.

Tillerson has delivered record profits to shareholders amid soaring oil and gas prices in the two and a half years since he took the helm. He has also softened the company's stance on global warming from the days of his predecessor, Lee Raymond, a noted skeptic on the issue.

Thanks to this performance, Tillerson had to spend the meeting fending off a shareholder resolution aimed at separating his dual role as chairman and CEO -- a corporate governance measure that has been adopted by other oil empires like BP ( BP), Chevron ( CVX) and Royal Dutch Shell ( RDS-B). The resolution only received 39.5% of the vote, down from last year's 40%.

Still, Tillerson and his supporters had to endure listening to the spoiled descendants of John D. Rockefeller, founder of Standard Oil Trust, whine about how such a measure could expose the company's management to fresh voices about a long-term strategy for adapting to a renewable energy future.

"We are asking you to consider more closely the changing needs of Exxon Mobil's customers," said Peter O'Neill, a private equity investor and great-great grandson of John D. Rockefeller.

In defense of the company, Tillerson directed his comments to those shareholders without a trust fund. He said the company should focus on developing more oil and gas reserves, and that oil and gas would remain the world's primary fuel source for decades to come.

He noted that "the combined contribution of wind, solar and biofuels to meet total global energy demand in the year 2030 is still expected to be only 2%."

Dumb-o-meter score: 79. If the Rockefeller family wants to invest in wind, solar and biofuels, it seems like they may want to try another company.

5. Cheeseburger in ... Jersey?

Jimmy Buffett to Donald Trump: Yer fired!

The Parrot Heads will be replacing The Apprentices in Atlantic City's cutthroat casino market, where America's loudest billionaire couldn't make ends meet.

Trump Entertainment Resorts ( TRMP) announced this week it will sell its Trump Marina Hotel Casino in Jersey's Sin City for $316 million to Coastal Marina LLC, an affiliate of Coastal Development LLC.

Trump's casino was wasting away there, and the new owners will try to rejuvenate the property by bringing Buffett's "Margaritaville" brand to the armpit of America.

Coastal Marina will partner with Margaritaville Holdings LLC, a business owned by the tropical bard that includes a string of restaurants and retail shops, featuring a Florida Keys theme. Together, they'll compete against the Borgata Hotel Casino & Spa and Harrah's ( HET) Atlantic City.

They may want to consider hiring Bruce Springsteen and Jon Bon Jovi as consultants.

In the meantime, Trump will be putting his makeup on and fixing his hair pretty, focusing on his remaining casinos in Atlantic City: The Trump Taj Mahal Casino Resort, and Trump Plaza Hotel and Casino.

Dumb-o-meter score: 68." Everything dies, baby, that's a fact.

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