All eyes and ears are on the Fed this week. With Bernanke in New York discussing potential new bubbles and the New York Fed getting heat for overpaying AIG’s many creditors, investors are having a tough time knowing exactly who to follow.

For those of you who hold up the “Fire the Fed” signs, move over. I am thinking about joining your camp.

I confess… I got it wrong with gold.

It was one year ago that Lehman Bros. went to the great investment bank in the sky. But it was also when the feds arranged the shotgun marriage of a failing Merrill Lynch to a moribund Bank of America (NYSE:BAC). And AIG’s collapse into federal hands was taking shape, if not yet a done deal.

Morgan Stanley (NYSE: MS) Chief Executive Officer John Mack will step down and be replaced by Co-President James Gorman, who has been running the company’s brokerage and overseeing its merger with Citigroup Inc.’s (NYSE: C) Smith Barney unit.

Our story continues…According to the popular version, Ben Bernanke, our flawed hero, has averted a Second Great Depression. When the crisis came in ’07-’08, he calmly took out the text he had written himself: “Dummies’ Guide to Avoiding a Japan-style Deflation”… or something like that.

Pity the poor rich! Pity the poor! Pity us all!

First-quarter earnings reports for the big banks weren’t bad on the surface. But banks had to pull some rabbits out of the hat to do it. For example, Goldman Sachs skipped December in order to post improved numbers.

“The data we have are accurate reflections of the financial conditions of those banks,” says Fed head Ben Bernanke regarding the stress test results… Hmmm…

On April 21, Treasury Secretary Timothy Geithner said the “vast majority” of U.S. banks have more capital than needed.  Geithner’s remarks come on the heels of a surge in reported quarterly profits by the big banks.

US GDP falls more than expected…FOMC holds course…Canadian dollar has a great week…Oil helps commodity currencies…And Now… Today’s Pfennig!