The Fed did the right thing to not get involved, to remove the moral hazard of institutions ignoring the risk of their counterparties going bankrupt.

I do think it means that Goldman Sachs and Morgan Stanley will try and find partners sooner than later. Today, as a counterparty, they have to charge less than firms with less leverage like JP Morgan or Bank of America. It used to be if you were going to do a transaction, you would go with whoever could get it done more cheaply for you. Now, there's a sense of why take the risk to enter into a counterparty transaction with a highly levered institution? So if you compare how Merrill Lynch worked out to how Lehman Brothers or Bear Stearns worked out, under CEO John Thain, Merrill Lynch has always been more aggressive about raising more capital sooner and was more aggressive about selling out sooner. So I think that's the lesson for Goldman Sachs and Morgan Stanley: You've got to get out while the going is good.

Because I think the whole business model of a brokerage firm is broken. The business model where the employees take 50 percent of the revenue, and no risk if the transaction doesn't work out, is shot. Even if they're not thieves, the employees' financial self-interest is to focus on current year's earnings, this year's bonus. That's what the culture of the company was telling them to do. 'If you generate a lot of earnings this year, we will pay you for it.'

But these things come home to roost and possibly the people who created the transactions are no longer around, or if they are around, they already got paid for previous transactions. Meanwhile the leverage is just incredible compared to even a bank"which is a highly levered institution too. I think Goldman Sachs and Morgan Stanley will ultimately recognize that and are in a relatively good position to get the maximum possible price.

Fortunately for our customers, our concerns about leverage and our experience in declining real-estate markets kept us away from financials even though many pundits were telling us that avoiding financials was 'last year's trade.'

I still believe that in the end we're going to end up in a world where housing is more affordable"where one doesn't have to be rich to afford a middle-class house. But we are not in that world yet. In the South and the Midwest, things have been adjusted in terms of pricing; we're still waiting on the Northeast and West.

I think we'll also get to a point where the American worker will be able to make a living working as opposed to flipping houses, which is what they were told to do by the government and culture in a way.

The destination should be good, but the journey getting there is scary, with a lot of financial uncertainty along the way."