Investors interpreted Citi’s move as a sign that financial institutions were repairing the damage from a meltdown in the U.S. subprime mortgage market and the resulting credit crunch, which has been a big factor behind recent dollar weakness.

Unfortunately, just because things look good for the financial sector today, doesn’t mean that they’ll look the same tomorrow. Fortune on CNN Money points out something that has yet to really hit the fan in the financial sector:

One likely new trouble spot: Conduits, the opaque structures banks set up to provide debt funding to borrowers. Often, the debt issued by the conduits is collateralized with assets, like mortgages.

Conduits typically aren’t consolidated on a bank’s balance sheet. But banks are often on the hook to fund them if investors stop buying the debt they’ve issued. When that happens, a lot of risk can get moved onto the balance sheet.

This is a continuation of the disclosure issues plaguing the financial sector. In Quarter 3, it was losses due to under-disclosed CDOs (collateralized debt obligations) that blindsided investors and added an extra helping of blood to the bloodbath following the subprime mortgage mess.

So, are the financial sector problems really at an end? Or have we just seen the tip of a rather large iceberg? Only time will really tell, but I think that more substantial changes to the way companies in the financial sector do things are needed. A “cash infusion” from a foreign investor is really band-aid.

The good news is that eventually the financial sector will probably recover. Just choose carefully which stocks you buy at a bargain price, and make sure you have the risk tolerance to hold onto them for the next couple of years. It’s going to be a bumpy ride.

Disclaimer: I am not an investing professional, merely an enthusiastic amateur. All investment carries risk, and you should do your own research and/or seek advice from an investment professional.

Post from: EveryJoe

Investing Warning: Financial Sector Problems are Just Beginning

Even though mortgage lenders and other creditors, such as credit card companies, do deserve some of the blame for the current credit crisis situation, some of the blame does rest on us. After all, we were the ones that bought into the idea of easy money that can help us get what we want now.

The bottom line is that more education is needed in order to help more Americans take responsibility for their personal finance situations. We need to spread bet word about credit used wisely, and the virtues of buying only what we can actually afford.

Until that happens, any predatory lending bill will only address part of the problem.

Post from: EveryJoe

Predatory Lending Bill Does Little in Way of Education

Yet still, despite falling house prices, soaring energy prices, a credit crisis hitting the financial sector, and increasing concern about more violence in the Middle East, the amazingly resilient American consumer continues to pack malls, restaurants, highways, popular air routes, concerts, and sporting events, as if the bill for all these hijinks will never come due.

More, now than ever, is the time to start paying for what we want with the money that we have.

Post from: EveryJoe

What Are American Consumers THINKING?