But Bloomberg buries in the very last paragraph some key information contrary to its thesis: that the SEC’s budget nearly doubled after Congress passed the Sarbanes-Oxley Act six years ago. Here’s how it says the SEC explains itself:

As the investment banking industry’s main regulator, the SEC tries to ensure that firms have enough funds to meet expected obligations for at least one year during periods of market stress.

That test failed to account for the “unprecedented” situation at Bear Stearns, which couldn’t secure loans even when it offered “high-quality collateral,” (SEC Chairman Christopher) Cox said in April 3 testimony before the Senate Banking Committee. The SEC is reevaluating its approach, he said.

We reckon so.

Fannie Mae slashes dividend by a third

Fannie Mae, the quasi-governmental mortgage buyer that’s now almost single-handedly propping up home sales, reported a $2.2 billion loss in the first quarter and said its losses will get worse next year. It will shore up its weakened capital base by selling about $6 billion in new shares, partially diluting its existing shareholders’ equity, and it will cut its dividend by about a third.

The Washington Post on A1:

The government is relying on Fannie Mae to prop up the troubled real estate market, and the company is eager to expand its business. The challenge is to do both without making Fannie Mae the next bailout candidate.

The NYT reports that Fannie’s president is betting on a recovery, saying it will be a “feast” once prices turn around because of the deals it’s getting right now. Meanwhile, he’s buying those deals with money implicitly backed by taxpayers (Fannie has $3 trillionin mortgage assets). And his regulator loosened restrictions on purchases yesterday for the second time in two months, which the Post says “could” put Fannie at greater risk, but we’d just say “does” so.

The Post puts the capital-raising in nice perspective, noting that Fannie can buy $35 in mortgages or $193 in mortgage guarantees for every dollar in capital it gets. The WSJ on C2 notes that the new $6 billion would be additional to the $7 billion it raised just six months ago.

In other real estate news, homebuilder Beazer is in default with bondholders after failing to file earnings reports, the WSJ says. And the paper on C1 writes that one of the more egregious commercial real-estate lenders, Wachovia’s Robert “Large Loan” Verrone, is out at the bank, which has written down some $1.6 billion in commercial mortgages.

Steep discounts drive retail sales up

The WSJ on B1 writes that April retail sales are expected to look better in a report this morning than they have in months, but they’re being driven by steep discounting—even at above-the-fray luxury merchants like Neiman Marcus—that could end up hurting retailers. An analyst says a measure of promotions has increased by a third from last year.

Retailers generally try to maintain profits by selling as much as they can at full price. But sales have fallen more sharply than many anticipated since orders were sent to suppliers several months ago…

Faced with higher food and fuel bills and sagging home prices, consumers have cut back on discretionary spending. Overall, retailers are expected to report that April sales at stores open at least a year rose 2.2% from a year earlier, according to researcher Retail Metrics. But the numbers are deceptive: In addition to padding by heavy discounting, April sales this year were buoyed by an extra shopping day due to an early Easter holiday.

Wanted: Cayne and Greenberg cage match

The NYT has an interesting story on the eruption of high-level hostilities at what’s left of Bear Stearns. Seems old-timer Alan “Ace” Greenberg and Jimmy “Bridge Man” Cayne are fussing as their “fortunes have now sharply diverged.”

Mr. Greenberg, who cashed out the bulk of his Bear fortune through regular sales over the years, has just signed a lucrative agreement with JPMorgan to stay on as vice chairman emeritus. He will be paid 40 percent of the trading commissions he generates. And he recently began work on his memoirs.

Mr. Cayne, by contrast, has become a public piñata — blamed by Bear employees, a presidential candidate and others for the firm’s untimely end. His ties with Bear will be formally severed in June.

Although he still holds the title of chairman, he spends his days in relative seclusion, seeing few outside of the tight circle of his family, his two assistants and his lawyers. He personally lost about $900 million when Bear Stearns’s stock price collapsed.

Mr. Greenberg wonders about Mr. Cayne’s continued presence at Bear Stearns. “I don’t understand why he comes in,” Mr. Greenberg said. “He is not employed here anymore.”

Ouch.

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