Bernanke Needs to Cap the Gusher of Cash Leaking From the Equity Well

The plume of cash leaking from the equity well is wide and deep and washing up on the Gold Coast and in the Gulf of Credit. Can Fed chief Ben Bernanke put a cap on the gusher? With all three major U.S. indexes down for the year, just don't call it a top kill, though.

The Investment Company Institute, the mutual-fund trade association, says in its latest weekly report that once again money flowed out of equity funds. That has been the case since late April. The decline of $4.6 billion was the largest since June, although it is well below the panic-induced outflows of last spring, which peaked at more than $24 billion in May, just after the Flash Crash.

Where is the money going? Mostly into fixed income and into gold, which is soaring in price.

Bernanke and FDIC chief Sheila Bair testified today before the Financial Crisis Inquiry Commission. By admitting past mistakes, they seem to be placing a bet on candor as the way to restore confidence in the markets.

Bernanke said he should have made it clear right away that the Fed had no mechanism for saving Lehman Brothers. The company's collapse triggered a crisis of confidence that haunts markets to this day.

"I regret not being more straightforward there because clearly it has supported the mistaken impression that in fact we could have done something we could not have done," he said.

Meanwhile, investors are leaving the equity markets for less contaminated waters.