In an extraordinary development, lumbering mortgage finance behemoth Freddie Mac's share price climbed after the company used accounting shenanigans to a report $151 million net loss for the first quarter instead of something that should have been closer to over $2 billion. "Obviously people liked it. Management was selective as to how they applied certain accounting principles,'' Credit Suisse analyst Moshe Orenbuch told Bloomberg.

As Bloomberg's Dawn Kopecki explains, the basic trick was to use Financial Accounting Standard 157 to increase its Level 3 assets, which can only be priced using the company's own valuation models, from $31.9 billion as of December to $156.7 billion! What that meant is that the market could not say how much those assets were worth. You don't like what the market's going to tell you? Shift the goal posts.

And the problem is that the US housing market has got so bad that investors bought the story hook, line and sinker. Just as they did with Freddie Mae the week before.

""Both these companies are clearly going to be insolvent by the end of the year, but everyone knows that Congress will do anything to keep them afloat, because if Fannie and Freddie go under, the entire global financial system will melt down. These companies' earnings don't matter. Their accounting hardly matters. People buy the stock because they believe the federal government will bail them both out if things get," Christopher Whalen, co-founder of research firm Institutional Risk Analytics told the international Herald Tribune.

It's a bad sign and investors are being played for suckers, warns Seeking Alpha.

"It's simply incredible. Not too long ago, the powers that be - Wall Street, the Fed, Credit Rating Agencies - used to tell us it was raining while they pissed on our backs. Now they don't even bother with the weather pronouncements. And investors don't seem to care. It's truly unbelievable.

" Anyone buying into the idea that the credit crisis is over is a patsy. That's all there is to it. Wall Street doesn't even need to dress up its lies anymore, the perma-bulls are more than happy to believe whatever the Street wants them to believe. Please, do not be one of them. This is a sucker's game. And the ones buying into financials and others companies exposed to the credit crunch are going to find out who the sucker's are before the end of the year."