(Ed Note: Well, this is it. Another year in the can.) Times Square Ball Goes Green (AP)
Fitting, given the year we've had that this year the big ball will don energy efficient LEDs. The most energy efficient solution would be no ball at all, but obviously that was never going to happen. Of course, compares to the staggering power consumption of TImes Square, the marginal difference of a green New Year' ball is trivial, but it's the message that counts. Altogether, the ball will costs $1.1 million to assemble, which, given the amount of attention and tourism it'll bring in is well worth it.

Tracinda to Take 35% Stake in Delta (WSJ)
Big investment from Kirk Kerkorian in Delta... Delta Petroleum that is. We've never heard of it either, though the 35 percent stake will cost the firm $684 million, representing a 23 percent premium for the shares. A nice finish for the year for Delta (Petroleum) shareholders.

Existing-Home Sales Edged Up In November, but Still Weak (WSJ)
Mainly bad news on the home front, but a tiny dollop of good news, which is pretty rare these days. October sales of existing homes were actually revised up, and November came in ever so slightly above that. We were going to link to Barry Ritholtz with a note saying to check there for the inevitable tear down of these numbers, but alas even he can't totally demolish the report, so it mast be halfway moderately vaguely decent. Still, he gets in some good shots at the NAR.

'National Treasure' holds No. 1 spot (LA Times)
We haven't seen the movie, but the fact that this is dominating the box offices is great news for the future of the Republic. Also great news for the producers, since they've now got a bona fide franchise on their hands. Can't wait for National Treasure 3-6.

As the Ball Drops, Dieting Companies Take Positions Nearby (NYT)
You probably gained a few pounds over the last week or so, no thanks to us, because we weren't keeping your blood pumping as intensely as we usually do. Food also had something to do with it. Anyway, don't let the diet hucksters feed you any nonsense. The key things: Fresh veggies, unadulterated meat and intense weightlifting. Stay off the treadmill and the sugar and you'll be a-okay for the next 11.5 months.

Stocks Lower on Last Day of '07 (AP)
If you're reading this site today, the last thing you need is a link telling you what the market is doing. Hence we're putting this last.

ING to Sell Reinsurance Unit to Berkshire Hathaway (Bloomberg)
More buying activity from Buffett. Despite some of the troubles that General Re has caused its parent company, Berkshire Hathaway is upping its role in the reinsurance market, buying off a unit from ING for a modest $440 million. Among the areas ING is involved in include possible settlements for tobacco and asbestos claims. ING stil has a US-based reinsurance division that it may hold on to.

Buffett to Start A Bond Insurer For Cities, States (WSJ)
And not only is BRK buying, but it's also entering new lines of business. At least it's talking a good game. Sensing a moment, given the weakness in the major bond insurers, the company says it will enter that business, er, "seek permission" to enter it. Buffett told the WSJ that the company would commit "quite a bit of capital if we like the business." So take that what you will. You really have to hand it to him. The man has dominated the holiday news cycle. All these big announcements on the slowest week of the year, when nothing's going on. The media already loves Buffett, but in the absence of other stories, it's been 24/7 Buffettvision. Well done.

Broadcast of Golden Globes Is in Doubt (NYT)
Sparing the thousands of viewers whose husbands and wives might've made them watch it, there's talk that the Gold Globes -- Hollywood's least respectable award show -- may not get broadcast. You know, there's the whole writer's strike going on, which sorts of casts a pall on any industry-related "festivities". Now if they cancel the Oscars, that might be a big deal. But the Globes? That ranks somewhere below the Cable Ace awards in terms of credibility. We'd rather watch the Tony's even if every Broadway score these days is nothing but a load of a-melodic half-talking/half-singing.

Amazon to Sell Warner Music Minus Copy Protection (NYT)
Amazon will start selling the entire Warner Music catalog as DRM-free MP3s, which is pretty cool. Whether it helps Amazon make gains against iTunes remains to be seen, but it's hard to see the news as anything but an unalloyed good for the company.

Explaining CDOs, Overcollateralization Edition (Portfolio)
There's some famous short story about a group of English majors who sit down over some wine and admit the one book that they're ashamed not to have read. Actually, we don't know whether this was a short story or a short film or a novel, or whether it never even happened in fiction. After all, we heard about it third hand from someone who'd claimed to have read it. Anyway, they all go around until one says that they hadn't read Hamlet and the rest freaked out. That was just too much. Not having read For Whom The Bell Tolls was one thing. Hamlet was quite another. Anyway, in case you feel like that Hamlet-less English major, with respect to your knowledge of CDOs, Felix Salmon gives you a chance to catch up and join the gang.

Where is the Copper Market Headed in 2008? (MetalMiner)
Wouldn't you like to know?

Moments after former Pakistani Prime Minister Benazir Bhutto's horrific assassination was announced, equities futures began to move downward. People at trading desks immediately began to guess what this would mean across a variety of markets. We started getting e-mails from traders, market watchers and even a few readers who are in Pakistan now.

Reminders that we live in an unpredictable and dangerous world tend to unsettle equities markets, so the moves in the major indexes that followed were, well, highly predictable. But some readers wanted to know why this assassination should be viewed as bad news. It sounds cold hearted and ill-mannered to mention it but isn't it possible that the death of the opposition leader in Pakistan could stabilize the country by eliminating a challenger to Pervez Musharraf? Isn't Musharraf our man over there? As one reader put it, shouldn't this be up arrow news?

The reason it's terrible news is that Bhutto was actually a source of stability for the country. She was a reasonable and relatively US-friendly alternative to Musharraf. With her out of the picture, it's unclear what direction the opposition to Musharraf will take. But what is clear is that the opposition will most likely strengthen and act with a greater sense of urgency. The world is slightly more dangerous this afternoon than it was when we went to bed last night.

The $50 Ticket: A Lottery Boon Raises Concern (NYT)
It's pretty ludicrous for the government to crack down on all sorts of gambling, but then promote lottery tickets, which offer a terrible payout ratio.But that's really obvious. An interesting trend is the growth of $10, $20 and $50 scratch off tickets. Naturally, it's got the public-health types freaking out. If these more expensive tickets were causing players to play more scratch off, it would be an interesting study. But it's also possible that the net amount spent is staying the same, and that people are opting to buy one $50 ticket, as opposed to ten $5 tickets. If the latter is the case, that's just efficiency. Plus it's a more concentrated rush. Anyway, in a few years, some academic will do a paper on this, and we'll let you know what they conclude by linking to the abstract in an obscure journal.

Citigroup May Cut Dividend by 40%, Goldman Sachs Says (Bloomberg)
Citi shareholders counting on that fat dividend shouldn't be, at least according to Goldman Sachs. The firm predicted the dividend would be slashed up to 40 percent, in an attempt to shore up capital. Then again, this is sort of old news. Citi's dividend looks big because nobody thinks it will last. For most, it looks like a matter of when, not if.

Why isn't E.W. Scripps a Raging Short? (Infectious Greed)
When the Home Depot opened in Manhattan a few years back, and the city flew into an orgiastic state, we realized that homemaking as pop culture had reached ridiculous proportions. Yes, faucets and lumber are nice, but come on. It's a Home Depot. Not only was the housing boom to blame, but it also had to do with the endless stream of TV shows relating to building homes, remodeling, etc., that tried to make home ownership sexy. So now that the underlying force, the housing boom, has come to an end, what to make of home ownership as pop culture, and how is that an investment play? Paul Kedrosky likes shorting Scripps, the parent company of Home & Garden Television (HGTV), Food Network, DIY Network (DIY), each of which is filled with home-related content that could very well be at its peak. Just something to chew over.

Nokia Delays N-Gage Game Service for a Second Time (Bloomberg)
Shocking, really shocking.

Durable Goods Flat, Business CapEx Spending Falls (Big Picture)
Barry Ritholtz's take on today's punk economic data. Right up his alley.

'Long-Short' Funds Labor to Thrive (WSJ)
Several "long-short" mutual funds that promise hedged, market neutral returns have faired badly this year. Basically, they sound like the poor man's hedge fund. And it sounds like you get what you pay for. Then again, by actually attempting to, you know, hedge, they're probably more hedge fund than a lot of actual hedge funds.

Berkshire to Pay $4.5 Billion for Pritzkers' Marmon (Bloomberg)
WaBu's Berkshire Hathaway will spend $4.5 billion for a 60 percent stake in privately-held Marmon, a Pritzker-family held diversified services firm, whose businesses include hotels and rail services. Buffett describes Marmon as, "our kind of company." Sounds true. Nothing too splashy or flashy. Just some good old Graham & Dodd style operations. Now wait for the spate of stories about how Buffett is back, along with big lists of companies in play.

Retailers hope post-Christmas sales can save the season (USA Today)
And there you have it. More analysis here from Barry.

Amazon.com Wraps Up Its 13th Holiday With Best Season Ever
On the other hand, if you're Amazon.com, and you're the biggest e-tailer in the world, then you had a good season. If there's one statistic to keep in mind, this is it: "If you lined up all of the GPS units Amazon.com sold this holiday, they would make a trail from New York to Philadelphia; however, a new trail wouldn’t be necessary with the use of a GPS."

Home prices post record drop (CNNMoney)
Well, it looks like were were premature in calling a bottom. Several months ago, we said home prices were due to rise, since the Realtors had dropped their bullish spin. That's what you get for relying too much on contrarian indictors. Never again! Anyway, yeah, October. Record fall in house prices.

Luxury Air Travel: Still Not Proven (Felix Salmon)
On the decline of MaxJet.

Our economic education was somewhat unorthodox. Much of it took place in the basement of a library with moveable stacks, located not far the center of campus but very far, intellectually speaking, from the lecture halls where famous economists taught throngs of undergraduates to ignore what they know in favor of what could be depicted in graphs and equations.

We were helped along by a newsletter published by the Ludwig Von Mises institute, the foremost center for Austrian economics in these United States. Each year around this time our favorite edition of the newsletter was printed, the Christmas issue. It usually presented some contrarian take on a famous Christmas story. One year it might be the economics of Santa's workshop. Another year the feature story was about the entrepreneurialism of shiny red noses. Another year about Scrooge's generosity.

The folks who put together the newsletter now run both the Mises.org website and LewRockwell.com. We decided today to take a look at those sites. Sure enough, there was plenty of contrarian Christmas stories that we thought we would pass along.

We'll start with Butler Shaffer's "The Case for Ebeneezer." He makes the case that Mr. Scrooge, who seems to have been a money lender of some sort, may not be quite the villain he is made out to be for much of Charles Dickens' carol. In the first place, if Mr. Scrooge were not in the business he was in--lender money on the expectation of being repaid with interest--the lives of the people of London might have been far poorer. They needed money when they borrowed it, and Mr. Scrooge was willing to part with it for a time. If he was not willing to trust them with his money and if he was not accumulating wealth while practicing this generous art, they would have never had been able to avail themselves of the opportunities that allowed them to start and continue their own businesses and buy and live in their homes.

Lew Rockwell himself explains the economic lessons at the heart of the story of Bethlehem. Remember those wise men and their gifts of gold, frankincense, and myrrh? To hear the preachers of the gospel of poverty, who remind us always about the eyes of needles and camels, you might think that the holy family would have rejected these gifts as too extravagant. But that's not the way it happened. "Far from rejecting them as extravagant, the Holy Family accepted them as gifts worthy of the Divine Messiah," Rockwell writes. "Neither is there a record that suggests that the Holy Family paid any capital gains tax on them, though such gifts vastly increased their net wealth. Hence, another lesson: there is nothing immoral about wealth; wealth is something to be valued, owned privately, given and exchanged."

And if Rockwell's take strikes you as a bit too anti-Roman, we suggest you read Tom Fleming's very different appreciation of Rome's accomplishments. It reminds us of an oath we once took when joining a society of like-minded people while we were undergraduates, which included a plea that if we could not be saints (which was beyond the hopes of most of us in that room that night), then at least we could be like the Romans who made the world in which the first Christmas occurred.

You'll hear a lot about how Christmas is ruined by rampant consumerism. Very few people bother to defend the common practice of buying and giving gifts but the practice continues on. Gary North explains why. "There is great value in satisfying the desires of consumers, a value that goes beyond the prices that consumers pay," he writes. "Producers understand this. Consumers may not." And you won't want to miss North's take on "It's A Wonderful Life."

So why are we back again on Christmas night, writing for the few of you who may still be reading? Well, we're recovering from our Christmas feast and thinking about some of the most important people in our own lives: our readers, our commenters, our sponsors and our investors. You make it possible for us to do this wonderful work each day, and we're grateful for that gift you give to us each day. It's been a happy holiday season for us, and we hope it's been merry for you. We'll raise a glass to you tonight.

As Bess Levin noted on Friday, posting will be light this week. We didn't post yesterday despite the half-day for most US exchanges. Frankly we don't get paid enough to work on Christmas eve and our bosses are not Scrooge-y enough to expect us to. Tomorrow we will pick up publishing with a few updates throughout the day from the staff, and we'll continue at that pace until the New Year. If you find yourself working through the holidays just remember that somebody has to work the desk and just resent that that somebody had to be you. We suggest you walk around the hallways, treat the trading floor like a putting green and otherwise act out your I Am Legend fantasies while no one else is around. You, our friends, are legends. At least today. And at least in your minds and ours.

For Thanksgiving, we wrote a guide to working through that national holiday that pretty much applies to all these kind of days. Read it here and remember that we're thinking of you. Please feel free to carry on the discussion in the comments section. Check out the "recent comments" link to the left. Leave news updates, rumors, links and such in comments below.

Merry Christmas, gang. We'll be back soon.

$$$ Bro, You're A God Among Bros [TO]

$$$ Wall Street's dirty little secret-- EXPOSED. [DealBook]

$$$ Tim Sykes judges you. [Tim Sykes]

Albert Hsu, the former hedge fund manager, Cub Scout leader, and Aleksey Vayner mentor, who got into some trouble with the authorities when they found out he'd posted an ad on Collarme.com looking for someone to "rape and abduct" his former mistress, listed her home address and where she stood on the train platform for her daily commute, so as to really facilitate things for any would-be attackers, might get to spend the holidays at home with his family. Like I told devil worshiper John Carney, my letters to Santa have not been for nothing.

Disgraced Hedge Fund Manager Seeks More Family Time Before Jail [FINalternatives]

Since his little performance during Wednesday's conference call, a lot of people have been taking bets on how long it'll be before Sallie Mae Chief Executive Albert Lord is fired or involuntarily resigns. At Dealbreaker, we think this is ridiculous. This man shouldn't be fired, he should be promoted, and this might seem excessive to shareholders, but we suggest the prominent placement of a bronze statue in Mr. Lord's likeness, inscribed with whatever is Latin for "Let's get the fuck out here." We'll even consider chipping in, since poor Al lost about $200m in that little margin call from his local branch.

As a bit of housekeeping, I'd also like to take this opportunity to offer an apology. Not like the fake one I gave to Goldman last week, but a real, honest apology. Well, actually, it's not so much an apology as a clarification but whatever, let's not argue semantics. After all, it's Christmas. Some of you may remember that the last time we discussed A. Lord, I mentioned that I felt especially close to him because of his "predilection for cutting people down with dismissive statements such as those excerpted above reminds me so much of my father." Apparently my dad saw this mention, and felt that I took artistic liberties in my description. This was largely true, but I figured that since he rarely reads the site, it'd be no probs. Oh, but it was! My mother claims he was hurt-- this I find hard to believe, the man has never exhibited emotion in my presence-- my brother texted, "that thing about dad was cold," though his defense of the man isn't surprising, as he's always been my father's favorite. Anyway, at this time, I would like to say that contrary to what may have been implied earlier, I have a really good dad. To prove this, I've come up with list. Dad:

- you let me have a "Reservoir Dogs" table at my Bat Mitzvah party, where the theme was movies, even though mom thought it was inappropriate.

- you always came to all my field hockey games and cheered the loudest.

- you wouldn't let me go to prom with [redacted] junior year, because he'd just been caught with two pounds of marijuana in his locker. (I didn't speak to you for two weeks because of it, but I realize now that you had my best interest at heart).

- you paid my fine when I ran into trouble with the RIAA.

-you only yelled at me for a few hours that time I caused thousands of dollars in damage to your car, and lied and said I had no idea what happened. To this day I feign ignorance to how the bottom got ripped out, or what the mechanic was talking about when he told you, "I'm surprised the person driving didn't go through the windshield." To show you that I really do appreciate what a good dad you are, at this time I'm going to admit the truth. To the readers, before you jump at the chance take this annecdote as a reflection on the vehicular capabilities of women, don't. It's not a reflection on the vehicular capabilities of women, it's barely even a reflection on me. I drive really good usually. Anyway, dad: even though it wasn't a lie to say that technically, car parts-wise, I couldn't tell you what happened when I pulled into the parking spot, and when I meant to slam my foot on the brake, hit the accelerator instead, causing the car to jump over the cement divider thing at the end, put the car into reverse and dragged it back down to the ground...that's what happened.

Felt ripped off by this tribute? Here, have this, on me:

Last night after an important meeting, a source made me and Carney go to an ML fixed income holiday situation, which sucked...then he made us go to a no-words-for-it-bad-but-worse-than-the-holocaust-is-a-start club in the meat packing district that I ended up ditching them at (forgetting, rather idiotically, to ask JC for some cash, meaning I got to walk from 29th and 10th to 33rd and Park when it was -10 degrees out, which, if you haven't tried it, is delightful). Prior to that, though, someone gave the driver the wrong address and we ended up outside of Scores...thinking to myself that I'd rather go there than nightlife equivalent of a catheter with spikes, I asked 3 of the bouncers, "What's the crowd like tonight?"...two of them were like "great crowd, great crowd, come in," but one just sort of mumbled "great crowd" with an attitude and didn't make eye contact, which I took issue with. You probably don't know this, on account of my never having shared it before, but people who don't make eye contact seriously piss me off. So I said, as we walked away, "Next time make eye contact, maybe you would've made the sale." I think I made a real impact on him. In retrospect, I should've added, "fat boy," but what can you do. If you found this post to be a phenomenal waste of your time, please send a self-addressed stamped envelope to the DB headquarters, and I'll mail you back 5 dollars. Quick, though, before I change my mind, or take a nap under my desk.

Rush & Molloy send an update from Tigerland. It seems that the tiger striped-tattooed porn star has started to remember Seth Tobias. Christopher Dauenhauer, who goes by Tiger professionally, tells the Daily News columnists that "I often went with Seth to great destinations. He may have talked about me with Filomena during his drug binges. I may have been the only guy he'd ever been with. He may have thought I was his boyfriend. She may have gotten jealous."

There's nothing at all we can add to this story.

A wild Tiger tale in Tobias death [Daily News]

Merrill May Get Capital Infusion (WSJ)
It's become so hard to keep up with these writedowns and capital infusions. If you'd asked us yesterday whether Merill had already taken a big, multi-billion capital infusion we might've said yes. But apparently they're in talks to take one and apparently this is news, because it's the top story at the Journal this morning -- hence the top billing here. Nothing officialy, but probably somewhere on the order of $5 billion from the Singapore government-owned fund Temasek.

Philips to Buy Respironics of U.S. for 5.1 Billion (Bloomberg)
How many more of the EU takes over US company deals are we going to see? Probably lots until the currencies regain some semblence of parity. The latest: Philips acquiring med equipment maker Respironics for $5.1 billion, aka chump change -- the price of a latte in Moscow. Anyway, with all this cash coming into the US, time to build out our own sovereign wealth fund.

China unveils first locally developed regional jet (Reuters)
Interesting, the first China-made regional jet has been unveiled. At some point, China will be competitive in aerospace, but if we had to guess it'll take awhile longer. No need, just yet, for Airbus and Boeing to get too scared. But they can't rely on their laurels too much. Between wiring problems and bolt issues, there's obviously room for improvement. Anyway, the Chinese plane is named "Xiang Feng" or "Flying Phoenix". Btw, before we get the plane, how about the $5000 Chinese car we were promised (hello, Chery QQ).

Sweet Debut For NetSuite (Forbes)
A small step for NetSuite, a giant step for Dutch Auctions or something like that. After routinely dissapointing investors and participating companies, the theoretically sound Dutch Auction turned in a good performance, with the successful IPO of on-demand ERP maker NetSuite. Not only did the deal price high, there was even a good pop in first day trading. Still seems a bit odd though that there was such a pop, given that the market set the IPO price. perhaps there's a participation barrier. People still aren't comfortable buying via auction, so they wait until its on the market before placing their orders.

$$$ Goldman, Lehman, Morgan Lift Bonuses; Bear Cuts Them [Bloomberg]

$$$ Credit Default Swaps: Tick, Tick, Tick, Tick . . . [Overhedged]

$$$ How communication explains Morgan Stanley's losses and Goldman Sachs's profits [Blogging Stocks]

$$$ Where was Jimmy Cayne today? Not on that Bear Stearns earnings call. [Market Beat]

$$$ 101 Dumbest moments in business. [Fortune]

$$$ Wall Strip: We didn’t kill the market.

So after the New York Post reported this morning that Citadel Investment Group had taken a look at Bank of America’s prime brokerage unit, Citdadel attempted to throw cold water on the story by denying it was in negotiations to buy the unit.

But don’t take this denial at face value. The Post reported this morning that Citadel "has recently inspected the books of BofA's prime brokerage business.” And the Citadel denial consisted of the statement that it is “not negotiating to buy” to buy the business. Which doesn’t mean they didn’t look at the books, consider buying it, have talks about buying it or even begin negotiating. Essentially, all the said was that they are not currently in negotiations.

What’s more, the denial comes from an anonymous source at Citadel. The spokeswoman, Katie Spring, declined to comment on the record. If there was nothing at all to the story, why wouldn’t Miss Spring deny it on the record? Bank of America also wouldn’t comment, which means they also haven’t denied shopping the prime brokerage or giving Citadel a look at their books.

None of this means that Citadel is buying the prime brokerage. But it does make the denial a little less plausible. Instead of “throwing cold water” on the Post’s story, it throws some smoke at it.

Citadel not eyeing BoA unit: source [Reuters]

Money managers may start to move their business away from Bear Stearns, according to a low-profile manager of a large investment fund. He tells us that he is pulling away from doing business with Bear Stearns and that casual conversations with colleagues indicate that others may be making similar moves.

Bear Stearns has turned off some money managers with what sometimes appears to be a cavalier attitude towards lenders and other counter-parties. Today the Wall Street Journal reported that Barclay’s was suing Bear Stearns after two funds to which the British bank had lent money collapsed, leaving Barclays with holding the bag. Bear’s response—basically that Barclays should have known that it was risky to lend to the funds—has not endeared fund managers to Bear.

“They bragged about not having the firm’s money in the funds that had their name on it, and then told creditors to take a flying leap,” the fund manager said. “They’re a toxic counter-party. I don’t want them involved in any of my trades, in any way.”

Bear also owned a significant minority stake in ACA, the small bond insurer downgraded yesterday by Standard & Poor’s. Although Bear didn’t have a managerial role in ACA, it’s potential collapse does not sit well with some managers already wary of what the fund manager who spoke to DealBreaker called “the Bear curse.”

“To me, the report that their losses weren’t as bad as they might have been is just another stick in the eye to investors in their funds and counter-parties who lost money with these guys. I’m sure their shareholders are happy,” he said. “But let’s see how happy they are when Bear starts to lose business. People think reputational risk is hooey. Well, they’ll see.”

We didn’t contact Bear Stearns about this story because they still haven’t given us a reasonable explanation for why they blocked DealBreaker. So we’re counter-blocking them by not asking them to tell us they won’t comment on the story.

Update: More on the decline of Bear Stearn's prime brokerage business from the Financial Times. "Bear’s decline in prime brokerage began about three years ago and has been accelerated by its recent mortgage-related troubles, including the collapse of two hedge funds run by the bank’s asset management division," write Ben White and Deborah Brewster. "The troubles have raised questions about its financial stability."

Note to CNBC: That strikes about two thirds of the readers who emailed us about that little promo spot for tonight's "On The Money" as very, very funny. You should give whoever came up with that line a raise.

Citadel is often described as an investment bank masquerading as a hedge fund. And it looks like it may be moving even further in the direction of becoming a full-fledged investment bank. This morning Roddy Boyd and Zach Kouwe report for the New York Post that Citadel is in talks to buy Bank of America's prime brokerage business.

It's not surprise that Bank of America wants to get out of its investment banking business. Ken Lewis made that clear earlier this year, and BofA has been shedding senior bankers ever since. According to the Post, both the head of the prime brokerage unit and the head of its fixed-income business have recently left.

But would hedge funds be comfortable putting their trades through with CItadel on the other end of the line? There is already resentment about the way some prime brokers take positions conflicting with those of their clients. JP Morgan has been sued by Amaranth over such conflicts and there are perennial complaints about Goldman Sachs. Still, both JP Morgan and Goldman make good coin with their prime brokerage business, so the talk about conflicts hasn't hurt them.

Still, there a plenty of folks who are suspicious of anything those boys with the white boards over at Citadel do. They have proven eerily apt at turning positions that ruin competitors into money makers. One hedge fund manager we spoke with this morning laughed out loud when we asked if he would run his trades through Citadel.

"Then again, they seem to know my positions and strategy anyway. So why not? Maybe they'll accidentally tip me off," he said.

Citadel, BofA In Brokerage Sale Talks [New York Post]

Bear Stearns lost a bunch of money ($854 million, $6.90/share) in the fourth quarter, and is being sued by Barclays for allegedly starting a hedge fund in 2006 in order to offload the risky assets in another of its hedge funds that'd it lost interest in making profitable. Bear CEO James Cayne, bless his heart, is said to "not care less" about either piece of news, though a speech writer for Wall Street's Favorite junkie came up with this line, "We are obviously upset with our 2007 results," and attributed it to the guy. As an aside, I would just like to say that that I was not kidding about that thing I mentioned yesterday:

Remember the Craigslist guy from Monday? The one who made exactly $772,000 and was spending Christmas alone. The guy who sounded a bit too American Psycho-ish with his detailed description of his furniture and appliances? Mentioning "custom made oak dresser" and his "viking stove." This one?

Well, guess what? You were right. It's a fake. But it was so brilliantly faked that the author got dozens of responses from women interested in spending the holidays beneath his fifteen foot tall Christmas tree and other outsized objects he mentioned. The author, who writes at a blog called Cajun Boy In the City, has experimented with fake Craigslist in the past but seldom gets responses from women. Until now. Apparently, even bitter, self-centered materialistic guys can get teh attention with women as long as they're hitting the right numbers and work for Goldman Sachs.

So now we're going to send Bess out on a date with the Cajun Boy, as long as he agrees to spend the evening in character.

my holiday gift to you: "fancy being lavished during the holidays?" [Cajun Boy In The City]

Price Increases Lift Profit at General Mills (NYT)
We still haven't seen $100 oil, and for all we know we may never, but there's been a lot of excitement over $10/bushel wheat. It's sort of the poor man''s $100 oil. Perhaps it's a spillover effect, as people look for other stuff to get excited about. A couple years ago, when we first started writing here, we might have said something to the effect of, "oh, is there such thing a 'peak wheat' now too?" But now nobody talks about peak oil anymore, despite the commodity's rise. Pretty much everyone is in agreement that it has more to do with inflation, the weak dollar and overall demand/supply, as opposed to geological factors. So no need to take a pot shot at the peak oil crowd. Meanwhile, wheat king General Mills was able to pass along price increases, though it may not be able to do so in perpetuity. Perhaps it's all just a message: people, stop eating so much damn grain.

The Bear Flu: How It Spread (BusinessWeek)
The Bear Flu is serious, but let's not let it take our eyes of the real killer: bird flu. We must have a dual preventative track to avoid problems.

G.M. Said to Be Selling a Truck Unit (NYT)
GM may sell 'a' truck unit, not its main one, to Navistar, the maker of big industrial rigs. Obviously GM wouldn't sell its core pickup truck unit, since that's still regarded as a key cash cow, but its doubtful that investors will miss its medium-duty truck business. The automaker even shut down production of the vehicles to reduce market supply, never a real positive sign.

Oracle Beats Wall Street’s Expectations for Quarter (NYT)
By all accounts, Oracle is crushing right now.

$$$ Guess who thinks JL Spears's pregnancy matters to investors? [Blogging Stocks]

$$$ Awaiting the Truth about Ralph Cioffi's Departure [Jake Zamansky]

$$$ Church & Dwight Co. Inc. (CHD) [WallStrip]

Is that not a good enough justification for me posting this clip? Well how about this: it's after 5, I've run out of caffeine, I haven't had lunch, I'm tired and I haven't showered yet today. This is my gift to myself, and I don't have to justify shit to you. I might even post the Glengarry Glen Ross speech tomorrow just because I goddamn well feel like it.

I like to imagine that the performance you're about to watch was inspired by the show put on by Alfred Lord this morning, right down to the eye-rolling circa 4:47, and the sequined tank top. Check it out and tell me you disagree. I dare you.

"Investing in a buggy whip after Henry Ford created the Model T was not going to be fruitful no mater how good a buggy whip it was."

Back to Basics (Part Three) - Potential [ThinkBlog]

Bonuses out of Morgan Stanley will increase from $8.39 billion to $9.93 billion this year. The extra spending money will serve MS employees well, when they're all fired to make up for a near-$10 billion writedown. Taking one for the team is CEO John Mack, who will reportedly be pulling a Jimmy Cayne and forgoing his pile of unmarked twenties this year, and however unlikely, we move that for this statement alone, CFO Colm Kelleher should be stripped of his bonus, too, or given his plus Mack's, I can't decide: "If you were to normalize our business and take out this $9.4 billion charge, you would see that we had a record year across the whole enterprise."

Morgan Stanley Bonus Pool Rises as CEO Forgoes Pay [Bloomberg]

John Baudanza, an associate with the Lucchese crime family, one of the "Five Families" that runs New York, was sentenced to seven years in prison, for his part in a $20 million pump-and-dump scam. The racketeering ring, which Baudanza had help running with nine other colleagues from the Bonanno and Colombo families, employed all tactics you'd expect of any good P 'n D, and as well as a few slightly more colorful ones, including "beating a broker with a bat and then stabbing him in the head," "pummeling" a phone solicitor with a golf club, and kidnapping a stock promoter and "chaining him to a parrot until he paid an alleged debt." The whole thing was based out of Staten Island, and operated from 1994 until 2005. The take away here is that whereas your average crooks can typically only keep these things going for one to two years max, these guys did it, and did it well, for over a decade, without getting caught. And also that Italian mafiosos + their Jew accountants = unstoppable combination. Stevie Cohen knows what we're talking about.

Hedge Fund Mobster Gets Seven Years [FINalternatives]
John Baudanza [Wikipedia]

CNBC's Charlie Gasparino informs me that when he reported that Bear Stearns is holding talks to decide whether they're going to get behind Wall Street's favorite junkie or not, he was "hung over, not drunk." Meaning there's a chance JC really could get fired. I'm still choosing to say, "No, I don't believe it," but now, there's a quiver in my voice. Stay tuned.

Earlier: Please Say Charlie Gasparino Is Drunk And Making Shit Up, Please Say Charlie Gasparino Is Drunk And Making Shit Up

I like to think I live without regrets but I more or less want to kill myself for not listening to Sallie Mae's call this morning (a replay is not the same as hearing it live), for two reasons:

a. CEO Albert Lord's comment that although he sold 97 percent of his stock, "that doesn't reflect my optimism for the company. And I'll just leave it at that."

b. CEO Albert Lord's unorthodox (but awesome) way of finishing things up: "There are no more questions, let's get the fuck out of here."

Say what you want, but I know I can't be the only one who now feels a special connection to this man (because his predilection for cutting people down with dismissive statements such as those excerpted above reminds me so much of my father, and my childhood in general). Viva la A.Lord! But, you know, sell SML. That thing makes SMD look good. Which probably isn't fair, because, to me, SMD always looks good. No more stock tips for today.

Is the Fed's announcement that it's going to start to try and prevent questionable lending practice NOW kind of like Jamie Lynn Spears's boyfriend saying, "Hey, I'm going to run out to the Duane Reade for condoms, you need anything? Gatorade? Q-tips? (Oh, and by the way, do you have any money I can borrow?...I'm good for it...)" THIS MORNING?

CNBC reports that Bear Stearns's board has been holding informal meetings in the 383 Madison Ave. 14th floor men's room to discuss replacing BSC CEO Jimmy Cayne. None of us here understand why something like this would happen! and therefore choose to believe it's not true. We're not going to add another thing to this smear campaign until Englewood Cliff's produces a body. We're just going to lay down on the floor of the DB HQs, get into the fetal position and light up. And maybe cry, though that doesn't have anything to do with this post, it has to do with Britney Spears's 16 year-old sister being pregnant. So in a sense, I guess you could say, yeah, it does have to do with this post.

Bear Stearns Looking for Cayne Successor [CNBC]

[Alternative headline: Morgan Stanley: Okay, We're Thinking Of A Number Between 1 And 4 Billion. Know What It Is? Analysts: Your Credit Score. Your 900 Number. Your- MS: Stop. None Of These Are Right. None Of Them. Analysts: The Number Saltines John Mack Can Eat In A Minute Without Water. MS: Wrong...But Also Right...If You're Picking Up What We're Throwing Down. Preference?]

Morgan Stanley beat analysts' expectations for how badly this last quarter went, when it announced a net loss of $3.59 billion ($3.61/share), compared to last year's net income of $1.54 billion ($1.44/share). Analysts had previously predicted losses of 39 cents/share. The extra dollar or so probably has something to do with the $9.4 billion in write-downs, and unforseen costs related to MSIM's holiday party at the China Club last week. Speaking of China (Investment Corp.), the sovereign wealth fund was on hand to soften the negative $450 million revenue blow, by acquiring a 9.9 percent stake in the company, as China is wont to do. (Watch as it blows up in their faces, it'll be funny.) Also helpful for distracting from the facts was CEO John Mack's comment that "these [are] isolated losses by a small trading team in one part of the firm." I don't want to say we're hoping that the entire team is going to get laid off, because we're not, but should it come to that, wouldn't it be nice if they could go out in style? You know what to do.

Morgan Stanley Swings to Loss Amid Mortgage-Related Woes [WSJ]

Bear Stearns Chiefs to Skip Bonuses (WSJ)
This is going too far. Look, it's been a rough year at Bear (as elsewhere), but skipping bonuses? You gotta eat, right? Then again, you have to wonder how big the bonuses were going to be for Jimmy Cayne & Co. this year. As a totally objective statement, if they were too meaningful, they were probably too big. This is still just a report. It's possible that at the last second, they'll take the money. But all in all, probably some smart PR and a positive message to send to the mass of employees.

Fed's lending proposals too late to save homes (Mercury News)
An op-ed from the San Jose Merc is represenative of the views on the new fed mortgage efforts: too little too late. And you know what: that's awesome. The only good things that the government does are the cosmetic ones. You knew the new proposals were a total joke, because they were "discussed" in a filmed meeting, in what was obviously the most scripted conversation Ben Bernanke's ever been part of. Hilarious.

Martin's Double Vision (WSJ)
Ah, Kevin Martin. On the same day he lifted an old rule on owning newspapers and radio stations in the same market, he imposed a cap on the size of any one cable company. He maddens and infuriates everyone on each side of the aisle. No doubt if asked, he'd whip out the old chestnut, "when I've got big corporations and left-wing activist groups complaining about me, I know I'm doing something right!" (wink)

German business climate at 22-month low (MarketWatch)
See, the EU may not be that picture of economic strength you thought it was. German business statistics have slumped to a 22-month low. And there's all that stuff about shifting demographics, young to old, ethnic strife, socialized health care, enormous public debts. Sounds like us, except more consternation about immigration.

$$$ "The holidays suck. i never thought that i'd ever say that but this is the first time in my life as an adult that i don't have a girlfriend to share in the experience with and it sucks. bad. 3 weeks ago i came home from a night out for steaks and cigars with some of the guys from my office to find that she had cleaned out her drawer in my custom made oak dresser and left a note on my viking stove that simply said "i'm done." i've been texting her like 10 times a day but i haven't heard from her since.

What sucks even more about it is that i just got word from my boss at GS this morning about how much my bonus is going to be this year. wanna guess?

772k.

And you'd think i'd be happy, right? WRONG!" [BL: It goes on, and gets better, if that's possible] [craigslist]

$$$ Goldman’s One Bad Investment: Its Own Stock [Deal Journal]

$$$ Enough with the bonuses, enough with the layoffs: this is the real story of the day, and I don't care if you don't believe me because you obviously have no idea what you're talking about. [NYDN]

$$$ Deals: A Rousing Farewell to 2007?
In our M&A Roundup for the week ended Dec. 16, there's a distinct pick-up, and a harbinger of even bigger things to come. [CFO.com]

About a year ago, management decided to fire a bad trader. Unfortunately, one MD thought that another MD fired him and the other MD thought that one fired him. So, no one told him. Then, one day, he shows up for work and his key card didn't work to get into the building. He talked to security, and they let him up. Then, he couldn't log on to his computer. So, he called IT, and they told him he no longer works for us.

Earlier: Layoffs Watch ’08 Update: Citi CDO In '07

Is our beloved New York Post business section falling apart?

While the hoity-toity media mavens fretted that Rupert Murdoch would do something awful to their beloved Wall Street Journal—exactly what he was going to do or why he would buy a newspaper just to destroy it was never clear—the more enlightened among us worried about the fate of the business section of the New York Post. Would News Corp cannibalize the Post’s business section to bolster the Journal’s staff? Would they have an interest in keeping afloat two competing business news staffs?

Specifically today, and apparently “almost everyone” in New York, which we’re told means more than forty. At this time I would like to offer our condolences to the recent unemployed, but move that we use this opportunity to recall that yesterday, I said we needed to get more creative with how people are getting fired. I came up with a few out of the box ideas (“A game of Assassin,” “turn off all the lights for five minutes and let everyone slap whoever they can at will/random. When the lights come on, the people with the reddest faces should be fired,” “something having to do with a lethal strain of syphilis (the rule is it can't be treated)”), then asked you to come up with your own. No one did and today, those poor kids at Citi were probably brought into some random conference room and told how valuable they are but at this time don’t fit into the bottom line blah blah blah while a chick from HR passed out tissues. Who do they have to thank for that run of the mill, nothing special send off? You. And now you have to live with that.

But! There are so many more layoffs to come, and not just at Citi. What I’m saying is, if you don’t want next week's or next month's lame-ass, “you're a valuable asset to the team but management is restructuring the amount of retards they have working for them*” firings on your conscience, get off your asses and do something.

Earlier: Layoffs Watch '08: Citigroup

If We're Going To Do This, Why Not Have Some Fun With It?

*actually, that’s quite good, though unlikely, except at Bear, where they have no regard for the mentally disabled.

Not surprising given that John Mack used to work at a Gap, but:

"MS bonuses- a few of the high visibility/revenue guys were up as much as 20 percent but, broadly, most YE bonuses were -10 percent vs. 2006 for those in the highest tier in terms of performance appraisal. This applies to wealth management."

Yesterday the lads and lasses at Bear Stearns got their bonus numbers, which means that last night was ridiculous. It’s almost always this way around bonus time, with young bankers drinking themselves stupid either the celebrate a great year or mourn the final, appalling truth about their compensation numbers.

One young Bear-ette who last night found herself drunkenly eating a cheeseburger as she struggled to come to terms with the fact that her hourly wage probably worked out to just about what the guy serving the burger made.

“I haven’t eaten a cheeseburger in three years,” said the toned would-be femme version of a master of the universe. (Mistress of the universe has too many unintended implications.)

Look people. We know it’s tempting to self-medicate with food, but the answer is not in the extra calories. And the only thing worse than being poor is being fat and poor.

We've had word that Morgan Stanley and Bear Stearns had the bonus communications go out last night. Information on both is still sketchy and we'll update you as we get more details. (Send what you know to tips@dealbreaker.com or text it to our text tips hotline: 973-495-0177. We can be instant messaged at TheDealBreakers.)

We told that despite performance by Morgan Stanley's brokerage arm being up over 17 percent, the bonuses were much lower than last years. Bear numbers will also be lower but we're still compiling and collecting this information.

John Thain's plan to revive the fortunes of Merrill Lynch apparently involves undoing some of the slash and burn work of Stan O'Neal, who was widely criticized for forcing out some of the most popular executives at the brokerage. This morning the Wall Street Journal reports that he is bringing back former top bond guy Jeffrey Kronthal. J. Kro will be working as a consultant on subprime portfolio.

But here's where we have to get a bit personal, and for like the third time this morning depart from our usual royal we style. You see, J. Kro apparently got a standing ovation when he appeared on the Merrill trading floor yesterday, and not one of you shared this with us. Bess almost declared an all day blackout on Merrill news when she heard this. Trading floor action is one of the things we're supposed to be good at, lads and lasses, but we can only do this with your help. So, at least until Bess gets back this afternoon, we're not going to black out Merrill news. But you people had better fire up those emails because I don't know if I'll be able to talk her down from this when she gets back.

That said, the end of the Journal's piece on J. Kro's return reads like a help wanted ad: "John Thain, who became Merrill chief executive at the start of December, is seeking senior trading and risk-management executives to oversee the firm's trillion-dollar balance sheet."

Kronthal to Return As Merrill Adviser [Wall Street Journal]

Each day without the name Bear Stearns in the headline must be a relief for Jimmy Cayne. And today Jimmy might need to blaze up a bit more than usual because Bear is back in the headlines.

The worst year ever for the once mighty trading house just got a bit worse. Business Week has uncovered a probe by the Securities & Exchange Commission and the US Attorney’s office in Brooklyn into allegations that Bear Stearns insiders pulled their own money out of Bear Stearns funds while the funds managers were urging investors to hold fast and weather the storm.

And as if that weren’t enough, the collapse of the High Grade Structured Credit Strategies and High Grade Structured Credit Strategies Enhanced Leverage funds are still sending shockwaves through Bear Stearns.
“In recent weeks, BSAM has begun notifying investors in the Bear Stearns Multi-Strategy Fund that it plans to liquidate that $100 million investment vehicle. The fund, which only invested in Bear-managed hedge funds, put several million dollars in the Cioffi-led funds,” Business Week reports.

Probe of Insider Trading at Bear Stearns [Business Week]

I've got some things to tend to and will be gone for the remainder of the morning, meaning I'm going to miss Goldman Sachs's earnings announcement. You know how this pains me. I'll be back eventually this afternoon, but it won't be the same, so I'm going to put in my two cents now. Personally, I don't even think Carney will need to add anything to this even after the numbers are out, but that's his prerogative.

Alright, this is surely jumping the gun and I'm probably going to take it back by sooner rather than later (my money's on this afternoon) but right now, what I'm saying is: the new Wall Street Journal rocks, specifically Page One. Yesterday it was an article on an 150 women taking part in an Assassin-inspired game of competitive knitting ("I got the sock. I'm dead."), today it's a piece the trials and tribulations of putting on a good Nativity scene this holiday season, with a particular emphasis on the issue of animals who are stealing the show from their human co-stars with hijinks so hilarious I'm not entirely convinced they were unplanned.

In Mount Laurel, New Jersey, M and J were headed off to Bethlehem to do their thing when the donkey Mary was riding freaked out and took off. Joe jumped on the ass and tried to stop him but fell off, got caught in the reins, and was dragged for several hundred feet. At First United Methodist Church in Tuckerton, NJ, a camel ate the set. In Orange County, California, at the Crystal Cathedral, a donkey stepped on Joseph's foot and broke his toe. At Mount Olives Lutheran church in Mission Viejo, CA, rehearsals got held up for over an hour because two goats were screwing like animals ("They were just acting very inappropriately," Diane Girard, a co-coordinator of the program said. "We had to break it up.").

What does any of this have to do with business? Don't know, don't care. At all. Maybe I'm just a Jew getting into the Christmas spirit, maybe this article just has me fondly thinking about the time Joseph wrestled Larry to the ground and dislodged a pubic hair from his throat that had been stuck in there for days. I don't know what it is. I just know I like it, and want it to continue. (Thinking ahead for the coming year: how to deal with the ignorant fucks (that phrase should be in the lede) who tell you you've "got some schmutz" on your forehead on Ash Wednesday? The deadly sport of Canasta? These are just for instances, nobody's saying they're going to be used, I'm just trying to get a dialogue going, and you know the 'Journal' likes to come around these parts for story ideas, anyway.)

Awry in a Manger: It Takes a Miracle To Stage This Play [WSJ]

It's not possible that yesterday's Page Six blind item, "WHICH fetching newscaster's bottom line is way in the black? Ladies who lunch noticed, as she exited Le Cirque in a pair of curve-hugging pants, that her asset management is over-leveraged" could've been about anyone other than Maria Bartiromo, right? I'm rusty on my asses but I feel like it's got to be her. Erin's probably too bony, Mark Haines not "fetching" enough (though MH, if you're reading this, I think you're beautiful, and though he'll never admit it, Carney does, too. Interesting that he's admitted it about David Faber, but whatever, another story for another time). Anyway, asses-- whose is it?

Earlier: Another RefreshionTM Success Story? Ben Bernanke.*

Fed to Unveil Home Mortgage Plan (AP)
A plan to protect borrowers from "shady" lenders is actually a clever way of describing a "plan" to "protect" "shady" lenders from themselves, since folks with cash to lend can't help but lend to "shady" borrowers. Among the proposals: "barring or limiting loans that do not require proof of a borrower's income." That's probably wise not to lend to people that can't present proof of income (though we can think of exceptions), but it still reads like a lender-protection scheme, as opposed to something benefiting borrowers.

Stock Futures Up Ahead of Goldman Earns (AP)
We can imagine stocks literally being up ahead of Goldman Earnings, but we can't imagine stocks actually rallying because of (expected) strong Goldman earnings. Isn't the whole Goldman investment thesis based on the idea that they've been able to profit when others lost their heads? If so, why would you buy other stocks based on (expected0 good news at Goldman. Plumb makes no sense.

Amid Strike, 2 NBC Hosts Will Return to the Air (NYT)
You could probably make the argument that the late-night guys are the only TV people miss. Okay, that's an exaggeration, but only so much. Throw in that show with Charlie Scheen, and you've got 90 percent of the reason people watch TV. So now Leno & O'brien are coming back, and Letterman will be back soon. So that just leaves Stewart and Colbert. They'll probably hold out longer, since they've got a lot of politicially-attuned fans, and they don't want to look like picket-line crossers. But clearly, the return of the NBC guys isn't good for the writers.

Money Market Rates Tumble as ECB Injects Record $500 Billion (Bloomberg)
Supply and demand, works every time.

$$$ Who’s Really Worth Their Paycheck on Wall Street? [NYMag]

$$$ Hedgies: Maybe We Do Charge Too Much [Portfolio]

$$$We met at a friend's party, and not one of my friends will tell me who she is. They all are very protective of her; they do not want to tell me her name or give me her phone number. All I know is that she works at the new Fox Business channel and was a trader. I don't know her name or anything. [Missed Connections]

Don Callahan, best bud with new Citigroup head honcho Vikram Pandit from their days at Morgan Stanley, has been appointed to replace the Citi's departing chief administrative officer.

According to Bloomberg, the Morgan Stanley boys are spreading all over Citi.

Callahan is one of at least three of Pandit's former associates from Morgan Stanley to take on management roles at Citigroup. Others include John Havens, who succeeded Pandit as head of the alternative investment business, and Guru Ramakrishnan, now CEO of Old Lane, which remains as a hedge fund managed within the alternative investments unit.

Citigroup's Pandit Taps Callahan for Administration [Bloomberg]

I can't be the only one who read the article in today's Wall Street Journal about a group of competitive knitters who are currently engaging in an Assassin-like game but with needles and yarn and thought:

1. Is it possible that this is only appearing on Page One in my copy?

2. The day I start knitting is the day I ask you to put a gun in my mouth. Don't pull the trigger but just put it in long enough so I can taste the metal and the fear.

3. The day I start knitting as a competitive sport is the day I ask you to (pick one) put a gun in my mouth and pull the trigger, waterboard me, sell me to the Triad's human trafficking ring, set me on fire and put out the flames just prior to death but after 99% of my body's surface area is turned to scar tissue, push me off a cliff.

4. Wouldn't a game of Assassin be a genius (and fun!) way to decide who gets laid off from all these banks? Think about it: performance, what is that? It's very hard to quantify. Also, it must be really hard for some managers to pick who shall live and who shall die. This takes the guess work out. Finally, it's just a straight-up awesome game. Granted, all the times I've played I haven't been fighting to keep my job but a higher stakes game would make it all the more exciting!

Anyway, I'm just knocking around ideas re: more creative ways to get rid of people. Another one is to turn off all the lights for five minutes and let everyone slap whoever they can at will/random. When the lights come on, the people with the reddest faces should be fired. And maybe one having to do with a lethal strain of syphilis (the rule is it can't be treated), but that would probably take too long. Surely you people can do better.

Sock It to Me: Competitive Knitters Get Deadly Serious [WSJ]

It seems that the forty-percent bonus wipe-out we reported this morning is fast becoming the industry standard, at least for certain fixed-income groups. Merrill Lynch, which reported a $2.24 billion third-quarter loss and was forced to seek help from outsider investors, has given out orders to fixed-income managers to cut 2007 bonuses by an average of 40 percent, according to a Bloomberg report that hit today.

Of course, the bonus wipeouts won’t hit across the fixed income world equally. This morning’s report about the structured products group at JP Morgan showed a total 40% cut despite the fact that the group is not directly involved in mortgages. At Merrill bonus payments may drop by 80 percent for traders specializing in mortgage bonds and collateralized debt obligations, according to Bloomberg. Other groups, however, will not be immune. “Bonuses may drop 20 percent for interest-rate traders and 60 percent in the New York-based firm's corporate bond unit,” the people who gave Bloomberg this information said.

Merrill Lynch to Cut Fixed-Income Bonuses, People Say [Bloomberg]

In spite of atrocious performances from Global Alpha and GEO, which perhaps might be indicators of Goldman's inability to do anything but suck ass when it comes to hedge funds, the firm's latest HF venture is starting out with a record-setting $10 billion, of which it is expected to lose at least 40 percent, taking redemptions and unforseen weather patterns into account, by the end of '08. According to Bloomberg, GSIP, run by Raanan Agus and Kenneth Eberts, is (wisely) treading on the Goldman name and standard of excellence, as if to say, "Hey look, we're not so bad," past performances of existing hedge funds presumably not being taken into account, though you never know (could be good for demonstrating that GS is human and capable of failure. So, so, so much failure.) The best part is that GSIP has actually calculated-- calculated-- that if the current fund, in an imaginary world where time travel existed, had been around since the beginning of '04, it would have returned 18 percent each year through August 2007, beating the S&P 500's 10 percent average. Keep in mind this is all just hearsay and speculation, and that it's entirely possible that the same fund, had it existed since the beginning of '04, could have just as easily returned 79 percent each of those years.

Anyway. I think we all know what time it is:

Tim Carney spends way too much of his time sounding the same theme over and over again: big business loves big government, even though both sides find it convenient to hide the love affair. It’s a shame because his talents* would be much better used if he could focus on a wider array of subjects. Unfortunately, the love affair continues in its not quite open and not nearly notorious enough manner, so he’s stuck with his beat.

This week he’s taking on the pose of John Edwards, the man famous for a very expensive haircut and making speeches about “two Americas.” The gist of his stump speech is that he is a man of the people armed with policies to repair our broken Republic if only the evil forces of business can be overcome. But is big business really so opposed to Edwards’ favorite policies?

Tim reports. You can deride.
• The policy: Addressing global warming. His corporate ally: General Electric.
• The policy: Universal health care. His corporate allies: Basically, the entire health care sector.

“These big businesses and their lobbyists are backing government takeovers of our energy and health sectors not out of “cowardice” or good will, but out of the profit motive. They have positioned themselves to benefit from big government, and their lobbying is just part of the investment,” Carney writes. “But John Edwards needs to maintain his class-warfare narrative in order to rile the crowds. As long as his supporters and the media don’t check his facts, it might just work.”

Edwardian Reality [National Review]

*Tim Carney is still the brother of John Carney, DealBreaker’s editor.

Conrad Black, who was sentenced to six and half years in prison last week on fraud charges, lashes out at two former friends this morning in the pages of the New York Sun for what he sees as their betrayal. It’s the first time that Black, who has been writing a regular column for the past several months, has spoken out about his triaand he’s decided to use it to lambast two prominent erstwhile defenders. Their crime? They have said that maybe Black might have done something or another wrong. They don't realize that Black is fighting the good fight for all of us—or at least all of us that might someday be the target of a RICO investigation by the feds.

Before we send this off into the universe, I would just like to note a few things. First, what we're about to show you is horrifically immature, and if it's meant to be a joke, will probably only succeed in getting our 12 year-old boy readers to laugh, and probably only half of them at that. Second, we've received it from no fewer than twenty people meaning maybe, fingers crossed, I'm not sure in which direction, that it's real. Third, that it's NSFW, unless you work in an environment that's unusually accepting of you watching videos featuring scantily clad old white men. And last, that I believe it to be an impostor who's a good 20 pounds heavier than the real thing. But since I've never seen the big guy without his shirt on, I leave it to you: is this Jimmy Cayne?

In the latest round of bonus wipe-outs, it seems the JP Morgan’s structured credit group is feeling the pain of the credit crunch in its bonus numbers this year. Nearly every member of the small group will see it’s bonuses decline this year as compared to last year, with the total year end incentive pay for the group declining by more than 40%, according to information obtained by DealBreaker. While salaries for the group were slightly higher this year than last, the year end incentive pay numbers are dramatically lower, meaning that nearly every member of the team will receive less total compensation this year. (Two lucky souls, who are not among the top paid members of the structured credit group, are receiving more this year than last year.)

Keep in mind that these compensation numbers are provided by readers. We want more! Please email us your bonus information or just the latest bonus rumors! Send it to tips@dealbreaker.com. JP Morgan would not comment on compensation numbers.

1. Too much with the birds. Everyone knows HP is an environment/animal lover, that fact has been shoved down our throats time a-plenty ("Even though his handshake could break all of your fingers, Hank Paulson is a gentle giant who can often be found talking to wood nymphs and catching butterflies" "When you think Hank Paulson, think furry animals, but not in the way you'd think of Lenny and that mouse who met that unfortunate fate" "Hank Paulson loves animals so much that when he engages in bestiality, he doesn't call it "fucking," he calls it "making love.") We get it-- Hank + Animals, Birds Especially = A Match Made In Heaven, If Only Because They Often Mistake Him For A Tree And He Just Doesn't Say Anything. Are birds an integral part of the story? Yes. Paulson has been offered a job as anchor on a new syndicated news services called Bird News Network (BNN), with Laura Bush as a possible co-host. Does that make it okay? No.

2. It contains a painful reminder of that time Paulson SCREWED Jon Corzine. ("Paulson is such an avid birder that he sometimes puts it first on his agenda. For example, he went on a bird-watching expedition in Brazil instead of attending the crucial New York Stock Exchange board meeting during which former head Dick Grasso's controversial pay package was quietly slipped through. Upon Paulson's return from the expedition, he loudly led the charge to oust Grasso." Wonder if Paulson took a similarly-themed journey just before he changed the username and password on JSC's office computer back in '98.)

3. I don't know, that graphic? And the fact that it's HAUNTING? How 'bout that? Yeah, I just have two issues.

A Perch For Hank [NYP]

That's right, I said '08. The Land o' Vikram is said to be postponing its axings until the second week of January, just before bonuses are announced, though decisions regarding who will soon be signing up for Chuck Prince's "Fired By Citi? You Are Not Alone: A Daily E-mail" have apparently already been made (if he breaks 10,000 subscribers...nothing worth noting will happen). Managers supposedly handed over the names of people in their respective groups who are going down for the dirt nap last week, so if you're reading this and think you might be one of them, I guess it's too late to do anything about it and you might as well keep doing what you're doing, i.e. reading Dealbreaker and chillaxing in general (we've got some great FBN Happy Hour clips coming up this afternoon, if that's something that interests you, and if not, there's always backdating and proxy access to look forward to).

(Why isn't Cody wearing the L&C himself? The only plausible explanation is that he lost a pre-show coin toss. Otherwise you know the Willard would be all over that.)

We hear that Citigroup is poised to name Don Callahan, another newcomer to Citi, as its chief operating administrative officer sometime this morning. The longtime Morgan Stanley marketing executive and a former IBM executive is said to be one of Vikram Pandit's closest advisers. Callahan joined Citi this fall, and has been operating chief of its investment bank and alternative investment group. Citigroup could not be reached for comment this morning.

Ingersoll-Rand Will Acquire Trane for $10.1 Billion (Bloomberg)
Merger Monday is back baby. No, actually, there has been an uptick in the deal flow and size of mergers announced on Monday in the last month or so. At least we recall Deal Journal saying something to that effect the other day. The latest is a big, heavy industrial tie-up, as Ingersoll-Rand is acquiring Trane for a solid $10.1 billion in cash and stock. The idea: refrigerated food transport. Trane makes cooling systems and IR makes refrigerated trucks, so the fit is a natural one, with plenty of redundancies, we're sure.

US, EU reach deal over online gambling (AP)
Great news, the EU and the US have reached a deal over online gambling. Actually, sad news. They did reach a deal, but it doesn't mean the US is set to allow online gambling anytime soon. Instead, the US will make certain concessions to EU businesses in such areas as mail services and testing and analysis. And how pray-tell does that benefit us at all? It doesn't really. Minor good news: Barney Frank recently got a 45th sponsor for a plan to exempt online poker from anti-gambling laws, so that's cool.

Developer Behind Time Warner Center Gets Capital Infusion (WSJ)
Goldman Sachs, Abu Dhabi and others have agreed to invest $1.4 billion in Related Cos. Which related Cos.? No, that's their name -- Related Cos. They're not related to anyone, necessarily. That's the cool thing about being a non-consumer facing brand. No need to worry about branding. Call your firm whatever you want. Related Cos., Equity Office Partners, Vornado, er. Anyway. Related Cos. is the developer behind the Time Warner Building, and the deal will value the company at $5 billion. This is where Warren Buffett steps in and makes a comment about giving Manhattan away for cheap trinkets, er, oil.

H&M Sales Growth Slows in November on Milder Winter (Bloomberg)
We were actually in an H&M yesterday. And, like, it was busy, but not that busy. And you know there's a difference. Seriously, we've been in that place on some days -- not even around a holiday -- and you can barely move. Yesterday wasn't like that. On the other hand, we walked by the A&F store, and it looked like there was going to be a stamped to get into the door. If you're a retail analyst, that was some free market research for ya.

$$$Merrill To Get Crap End Of The Bonuses Because New Guy's Got Something To Prove. [CNBC]

$$$ Searock Capital Liquidating $750 Million Hedge Fund [FINalternatives]

$$$ My Trading Is Bush League [Tim Sykes]

Tired of the ice-storms that have hit Chicago and New York this week? Maybe it’s time to pack away the winter coat, break-out the surf board and move to Newport Beach, California. PIMCO is looking to high a junior portfolio manager with commercial back securities trading or analyst experience. PIMCO is recruiting for a Junior Portfolio Manager with Commercial Mortgage Backed Securities (CMBS) proprietary trading or Analyst experience.

Every week we look through our Career Center to find a special job to bring to your attention. But keep in mind that there are scores of new positions advertised daily. Now is the time to start looking if you’re planning to take the bonus and run!

The Brooklyn bloggers are up in arms after news leaked out on The Brownstoner, a popular blog about Brooklyn real estate, that a Goldman Sachs executive had purchased a brownstone on Joralemon Street in Brooklyn Heights. The Brownstoner went on to report that a broker had said that several Goldman Sachs bankers were looking in the neighborhood and that he knew of two other Goldmanite purchases in the area. We noticed the report this morning when it was picked up by Bloomberg.

Brooklyn Heights has long been popular with those who work in lower Manhattan. Access to several subway lines and the proximity to the Brooklyn Bridge make the commute to Manhattan quick and easy. Former Wall Street Journal editorial page editor long kept a house in Brooklyn Heights. Due to the work of preservationist icon and famed litigator Otis Pearsall,* much of the historic character of the neighborhood known as “America’s first suburb” has been retained. And it’s started to undergo something of a foodie renaissance, with restaurants like Noodle Pudding and Jack the Horse Tavern attracting crowds. CNBC’s Erin Burnett has said that her favorite restaurant in New York is Henry’s End, which sits on Henry Street in the Heights.

But a neighborhood revival is one thing. Three Goldman Sachs bankers moving in is another. The commenters on the blog ranged from those who adopted the pose of old money outraged that brash bankers might undo the genteel nature of their neighborhood to Park Slope socialists worried that yet another people’s republic—seriously, have you people ever been to the Food Co-op there?—might fall to the forces of capitalism next. And, of course, there were more than a few hipster types worried that their borough was losing it’s “special” status.

“Gentrified Brooklyn has gone from this alternative, creative-vibed place into a second-rate bourgeois social/money-climbing environment. Kiss Brooklyn's 'specialness' goodbye. It's worse than what it was alternative too,” one wrote.

All we can say is that it’s a good thing these people don’t know that one third of the permanent DealBreaker staff moved to Brooklyn Heights last March. They’d probably be marching in the streets.

*Full disclosure: Otis Pearsall is related to John Carney.

Next Goldman M&A Target: Brooklyn Heights? [Brownstoner]

Also helpful if you happen to know how to unwind a large amount of exposure to CDOs or hung bridge loans for reckless LBOs, though in no way necessary. But you must be Vietnamese. On this point they are unwavering. Not Vietnamese? Hit the bricks.

Investors in Paul Tudor Jones's Raptor fund have asked for more than $1 billion back after it lost a "mere" 8.5 percent this year, Bloomberg reports. Mathieu Klein, CEO of Paris-based Darius Capital Partners, said: "It's a question of evaluating the validity of their stock-picking themes in this environment. This isn't necessarily a vicious circle, because if returns pick up, investors will stick with them." In other news, if you want to win football games, you have to score points and baseball, if you think about it, is simple: throw the ball, catch the ball, hit the ball.

Tudor Investors Pull More Than $1 Billion From Its Raptor Fund [Bloomberg]

You might think you know me but you have no idea. Though it may seem as though I have a heart of stone and soul as black as night, I am a person with feelings who (occasionally) cares when I've hurt others. After my post on Goldman Sachs only having one bathroom, a few 85 Broad employees e-mailed me to express their disappointment in my commentary, and the pain it caused them. (Perhaps later, if you're good, I'll post the messages.) I can offer apologies 'til I'm blue in the face but when it comes down to it, actions speak louder than words. So I offer the offended parties, who were the subject of my ridicule just one hour ago, this olive branch. It is the greatest gift I have to give. The fact that the lips don't match up to the audio track is just an added bonus.

There's a very important story in today's Wall Street Journal. You can tell it's important by how long and boring it is. So long and boring that you might've a. only read the first paragraph b. just skimmed it for key words and phrases or c. said "No! I'm god damn sick and tired of these motherfucking "How Goldman Sachs won when EVERYONE ELSE LOST" articles! I can't do it! I won't do it!" and not read a single word, choosing instead to settle for a nice relaxing spliff, though, realistically, that reaction probably could've only come from one person, and is sort of beside the point, because he no longer allows copies of the Journal within 1,000 feet of him anyway. Normally we don't pass judgment on your chosen paths/reading material (or lackthereof), but these are extenuating circumstances, and we would be remiss not to tell you that those choosing a, b, or c this morning made terrible, horrible mistakes. Because buried way down the page, after the part about Goldman's "penchant for rolling the dice with its own money," the "home run blasted from...the structured-products trading group's Scotty Pippin and MJ AKA Michael Swenson and Josh Birnbaum," ABX, VaR, jumping rope and lifting weights, broken promises to a wife and two children, and an obligatory Nick Leeson shout-out, contains a deep dark secret. A secret that's sure to make the day for many of you who like to see nothing more than Snarf and his friends fail, because it more or less gives confirmation that in 2008, the team that made GS a large pile of money, is going to shit the bed.

The move everyone but Citi seems to have known was inevitable came to pass last night when Citi announced it would consolidate $49 billion of assets in its seven SIVs. The SIVs were facing a likely ratings downgrade, which would resulted in their immediate collapse. The debt of Citi's SIVs reportedly has ratings covenants that would have been triggered by a downgrade. A default would have required an immediate liquidation because the cost of raising new short term debt that is the lifeblood of the SIVs would have become astronomical, if it were even possible.

Although it is being described as a bold move by newly minted chief executive Vikrham Pandit, the Financial Times describes the move as "embarrassing" Citi, and indeed Citi investors have good reason to object ot the move. By keeping the SIVs off balance-sheet, Citi concealed what turns out to have been real risks from potential investors, many of whom were unaware such off balance-sheet gamesmanship was continuing after the accounting and regulatory reforms of the early years of this century. Citi had insisted it had no obligation to take on the SIVs and no intention of doing so but that seems to have been true only in a technical and legal sense. When it came down to allowing the SIVs to fail, Citi stepped up. Shouldn't they have known they would have done this all along? Are there any circumstances in which the SIVs would have been allowed to fail?

Perhaps Citi can explain the move as a response to "temporary market conditions." Citi maintains that the long-term debt held by the SIVs, 28% of which is mortgage related, is still sound despite the current conditions of the credit markets. It believes that a sale into the current market would result in steep losses, while a strategy of holding the assets until market conditions are better will keep losses, if any, to a minimum.

It's important to note that while Citi now provides the ultimate backstop to the failure of its SIVs, it is not responsible for all their losses. The first $2.5 billion of any lossses will be borne by the junior noteholders. (Thanks to Alea, who we found through Felix Salmon, for pointing this out). This, in part, is why those noteholders have insisted on ratings triggers for their debt.

So what does this mean for the Super Siv, MLEC? It is probably done for, an anachronism done in first by a market skeptical of the bailout plan and finally by the fact that this move by Citi to take the SIVs on-balance sheet obviates much of the need for an off-off-balance sheet rescue vehicle. It seems Citi finally found a rescue vehicle that would work, and it was Citi.

Last night Moody’s cut Citigroup’s long term debt rating from Aa1 to Aaa, citing concerns about its capital ratios. (The rating agency also cut Citigroup's issuer rating to Aa3 from Aa2 and lowered its overall financial strength rating to B from A.) Apparently, the bank still claims it will pay a 54 cent dividend on its shares. But be warned. There is already speculation that Pandit's next "bold move" will be to cut the dividend. Sure, the banks has said it wouldn't do that. But it also said it wasn't going to take the SIVs on-balance sheet.

Citi launches $49bn SIV rescue [Financial Times]
Fact Sheet from Citi [Citigroup]

Earlier: A Serious Question

Dubai's Debt Cloud
(WSJ)
This is a story you won't read about much. The red-hot emirate Dubai is starting to face some questions over its finances. Everybody knows the basic story: no oil, so they invested in all this other stuff, like financial services and tourism, etc. And all that's gone really well. But having oil might've helped a little bit, at least in the cash flow department. Anyway, apparently the ratings services are getting a little skeptical and this time they want to be ahead of the ball (for a change). Just as long as the money comes through for all those crazy buildings, we're happy.

Lufthansa to Buy 19% JetBlue Stake for $300 Million (Bloomberg)
We're not quite sure what the significance of this is just yet. The news started breaking late in the trading day yesterday that Lufthansa would take a major stake in jetBlue, sending the company's shares sharply higher. The company has had a pretty rough year, starting on Valentine's day, and since then has lost a good chunk of its value. Though in fact it was already off its highs even by then. Should be interesting to follow, if nothing else.

Baseball's Drug Bust Casts Wide Net (WSJ)
On the one hand, we're very happy the Mitchell Report came out when it did: we can't help but notice that stocks did a nice turnaround just as news was breaking. On the other hand, it really is a big steaming pile of garbage isn't it? Logically, there are about a million holes to poke in the hole thing, like why didn't the 70 no-name stiffs who took steroids end up hitting 60 homeruns like Bonds, Sosa and McGwire? And how can they legitimately say that taking steroids encourages kids to do the same thing, when the only way kids know they have is when guys like George Mitchell stage big press conferences announcing as such?

F.D.A. Panel Rejects Over-the-Counter Cholesterol Drug (NYT)
No doubt about it: the FDA is looking out for you. A panel has rejected an attempt by Merck to have a low-dose version of its anti-cholesterol drug sold over the counter. The panel noted that in a trial, many who wanted to buy the drug wouldn't have been suited for it. Meanwhile, if you're concerned about your cholesterol, you can always go to your local, all-natural apothecary and find 25 different herbs and tinctures that will supposedly do the job just fine.

$$$ Holiday Sneer [Going Private]

$$$ Citi’s Druskin to Retire [DealBook]

$$$ Six-figure bonus got you down? Radar presents gift ideas for the frugal i-banker [Radar]

$$$ The Blue Man group performed at the DE Shaw holiday party; the cast of Stomp will be at Credit Suisse's gathering at Cipriani's this evening (but as guests, not performers). [NYM]

Does he wear color contacts or are Stevie Cohen's eyes really that blue? (And check out all that chest hair! Kind of ironic, isn't it?)

Merrill Lynch has come to a final agreement to sell Merrill Lynch Capital to GE. An announcement will be made tomorrow.

We do. That’s because a. We spent the last four hours with our ear pressed up against a juice glass pressed up against the door of said office (acting natural every time someone walked by) and they stuck with us since we were escorted out of the building circa 2:30 and b. we are quite good at sensing human suffering (picking up on some right now, actually). There’s no point in dancing around the fact that the cries are Lloyd Blankfein’s and the inconsolable disappointment behind them has to do with today’s report that the Little Fella is set to receive $70 million in compensation this year, up 30 percent from last year’s $54. But down, by some percentage too painful to calculate, from last month’s $75 million as predicted by the New York Post. Sources close to the matter say that even the thought of seeing Stan O’Neal in the elevator of their Park and 81st apartment building, clutching an unemployment check for dear life failed to make LB feel any better because “he’ll look at me and I’ll know what he’ll be thinking: ’70 mill? Ouch.’ No, I can’t face it. I’ll take the stairs.” During this time of unmitigated sadness, I think you all know the question you need to ask yourselves:

The Super Siv is not working out. According to Robin Sidel's article in today’s Wall Street Journal, expected investors are balking. “The nation’s three biggest banks have started to formally ask other financial institutions to join the fund, but some firms that were expected to sign up are now not as interested,” Sidel reports. “As a result, the fund’s ability to provide a solution for the credit crunch is more uncertain than ever, according to people involved in the situation.”

Just the other day, CNBC’s Charlie Gasparino reported that the Super Siv may be whittled down to just a third of its expected size. Can a 30 billion dollar fund really do the job the Super Siv was meant to do? How long until we get to stick a fork in this thing?

Enthusiasm Wanes for Fund to Bail Out SIVs [Wall Street Journal]

So if your Level 3 assets climb from 12% to 13% of your total assets, is that a good thing or a bad thing? Does that mean they are worth more or that you have more of assets that everyone suspects are probably worth less than you say they are? Does anyone understand what’s going on at Lehman?

To be frank, we certainly do not.

You can probably figure out how this works.

You kind of had to root for the Amaranth guys, right? I mean, sure, we weren’t totally psyched about everything thing they did—hushed voice: Solengo—but after the wipe out a lot of very good people found themselves without desks, jobs or reasons to take the train to Greenwich. Even the wild and wooly Calgary office—Brian Hunter, please, just call us, we’ll totally get along—had a lot of good lads who had to polish their resumes when the great “meltdown” (or, if your prefer, “blowup”) sunk the firm.

So it’s with a heavy heat we note that Moore Capital Management has closed its Canadian hedge fund unit. Moore’s Canada team was based out of out Toronto and employed a number of former Amaranth traders. It’s fate was apparently sealed after its mangers lost 15 percent in November on stock and convertible-bond positions.

The Canada team was led by Manos Vourkoutiotis, who cut his teeth at Amaranth. Apparently anumber of other traders were also former Amaranth boys. They managed $1 billion for Moore funds before last month's decline, according to two people who Bloomberg describes as “people with knowledge of the firm.” Moore has about $13 billion, so a 15 percent decline in $1 billion of its assets under management is not exactly something it could afford to shrug off.

Moore Capital Closes Canadian Unit Following Losses [Bloomberg]

Although bonus fears plague much of Wall Street these days—the part that isn’t too terrified of being laid-off to worry about their bonus—Lehman chief executive and chairman Dick Fuld did not get any coal in his stocking this year. As we mentioned in yesterday's Opening Bell, the top man got a stock grant valued at $35 million. This represents a 350 percent jump over last years $10 million bonus.

But what we’re really interested is the broader bonus pool. Send the latest rumors to tips@dealbreaker.com.

Lehman CEO Receives Stock Grant of $35 Million [Wall Street Journal]

ArcelorMittal Offers to Buy All China Oriental Shares (Bloomberg)
They're biggering themselves again. World's largest steel company ArcerlorMittal is snapping up the China Oriental Group, giving it a toehold in the Chinese market. It had already owned a stake in the company, but in order to acquire the whole thing, it offered a 16 percent market premium of $2.4 billion. And on the off chance that Rio and BHP manage to merge, the steel industry is now that much more unified. The picture on the left, of course, is of our friend Lakshmi MIttal presiding over a real wedding, not just a steel merger.

Playing the (Price Arbitrage) Game (MetalMiner)
Speaking of metals, MetalMiner is a new blog that's instantly going in our feedreader. It's all about the world of sourcing metal. Even if metal sourcing isn't your job (and given our demographic, it probably isn't), there's still a lot to learn by reading an industry insider's look at "the game". Anyway, the latest post has to do with metal arbitrage, which should certainly appeal to you.

Asia-Pacific's Economy Likely to Slow (AP)
Even the roaring Asian economy could feel the impact of slowing domestic growth and the credit/mortgage crunch. Indeed, the collective growth rate of East Asian Emerging Economies had been expected at 8.5 percent next year... but now it's at 8 percent. Zouch.

Federal Judge Upholds Law on Emissions in California (NYT)
A judge has upheld a California law allowing it to regulate auto emissions, dealing a setback (maybe) to the auto industry. CAFE standards is not something we've followed closely. The media likes to portray it as the automakers kicking and screaming in an attempt to stop fuel productivity increases, but our guess is that they're not as miffed about the regs as folks claim. Just a hunch.

$$$ This smacks of real fear that the world’s financial system is in trouble. [NYT]

$$$ TFA=BAILOUT [Interfluidity]

$$$ Everything you always wanted to know about the TFA but were afraid to ask. [WSJ]

$$$ The Ben Bernanke Blimp! [Newsgroper]

The backdating panic of last year appears to have largely deflated. The one big conviction from the much-ballyhooed scandal was Greg Reyes, the former head of Brocade. He was tried and convicted in August on charges of conspiracy and fraud in connection to backdating stock options at his company.

But that conviction now looks doubtful. In today’s New York Times, Andrew Ross Sorkin reveals that one of the prosecutions principal witnesses has said that her testimony was untrue.

The Wall Street Journal, which won a Pulitzer Prize for setting off the backdating panic with its breathless, front-page coverage, has oddly enough not found room for this story anywhere on it’s vast website. Is the Journal’s news team not as enthusiastic about backdating? Or do they not hand out Pulitzer’s for writing about how a scandal fades?

Trial Witness Said to Cast Doubt on Part of Testimony [New York Times]

Perhaps the most surprising discovery we made today was the high value the Federal Reserve is willing to assign to some of the asset classes that have lately been causing so much turmoil in the markets. Even as some banks have said that the value of their CDO portfolios is unknowable and the ratings agencies have been mercilessly—if belatedly—downgrading formerly highly rated debt securities, the Federal Reserve has announced it will pay 85 cents on the dollar for CDOs with no market price available. That sounds like a pretty sweet deal in today’s markets.

It’s almost as if the Fed hadn’t been paying attention to the recent turmoil in credit markets. Don’t they know there is widespread skepticism about even triple A rated debt paper these days?

And, apparently, they haven’t been paying attention. The documentation the Fed has provided for collateral values became effective on September 22, 2006—over one year ago! Aside for some minor changes and the addition of some explanatory material at the bottom of their collateral valuation chart, the spreadsheet has not been changed to reflect the repricing of debt in the market place.

Basically, the Fed is turning back the clock on the CDO market. It’s 2006 all over again, boys and girls.

The bonus conversation have begun. We’ve heard word that some folks at Goldman are getting the news today. Yesterday’s big news came from Bear Stearns, where at least some were told that with bonus their total compensation would be between 13% and 16% smaller than last year.

Send us your bonus news and rumors: tips@dealbreaker.com. Your anonymity will be preserved.

Just in case you need the summary version of our earlier post on the new Term Facility Auction, here’s a quick bullet point list of the highlights.

• The Fed will inject $40 billion into the markets in four auctions.
• Banks bid on what interest rate they will pay, which is effectively capped by the discount rate.
• Fed is taking a wider variety of paper, including CDOs and asset backed securities for which no market price is available.
• But they won't take already downgraded, junk CDOs that aren’t trading anywhere.
• The point of this is to make a market—or provide liquidity to the market—in CDOs and other recently illiquid assets. People have begun to call it a "bailout."
• Full list of collateral values is available here.

It should come as no surprise that there are many investors who believe that the primary obligation of the Federal Reserve is not to preserve the value of our currency but the values of their portfolios. But what was surprising is that so many of them also believed, at least until yesterday, that the Federal Reserve shared this tenet of their bullish faith. And when the Fed yesterday seemed to announce its heterodoxy they reacted by all but calling for the a burning of the heretics, who they were suddenly dismissing as “ivory tower” egg-heads. If only the Fed was run by more of their kind—investment fund managers and equity traders—it might make its operations more convenient to their strategies and force the markets to behave according to their models.

But it seems the governors of the Federal Reserve have redeemed themselves in the eyes of the Wall Street faithful, at least for a few hours, with the announcement today of a temporary “term facility auction.” You will be forgiven for not immediately understanding why this new creature marks the return of Ben Bernanke’s congregation to communion with Wall Street. Indeed, so new is the Term Facility Auction that never before has that phrase been uttered by a speaker of the English language—or at least, it has not before today appeared on that vast collection of their words we call the world wide web. A google search for the phrase turns up nothing before today’s announcement.

So what is this term facility auction? Our answer after the jump.

CIBC analyst Meredith said today that Citigroup's conference call to announce Vikram Pandit as CEO went "poorly...as the details were scant and the tone was defensive." To Whitney's credit, she conceded that had the details flowed like Mike's HL and the tone been lighthearted, her report probably would have reamed out the bank for trying to "distract us with particulars and failing to focus on the bigger picture" and "using a tone so delusionally optimistic, given the circumstances, that we wouldn't be surprised if the Citi brass spent its afternoons locked in Win Bischoff's office snorting E and wondering aloud why everyone's always "ragging on the 'group."

In related news, Morgan Stanley said it agrees with Bob Rub about shorting Citigroup in 2008.

Citigroup Continues Fighting the Previous War [MarketBeat]
Citigroup: Morgan Stanley's Top Short Idea for 2008 [Seeking Alpha]

Who: Mario Gabelli, some other industry people

What: Barron's Roundtable Discussion

Where: I don't know, a Sheraton?

When: 23 January 1995

Barron's guy: "Name the most important events of 1994."

Industry people: "Peso devaluation blah blah blah rate hikes blah blah blah."

Gabelli: "The major events of last year, as far as I'm concerned, were Feb. 4, March 14, Nov. 8, Aug. 12, and Oct. 14. On Feb. 4, the Fed hiked interest rates. On March 14 came General Electric's hostile takeover bid for Kemper. That was a big gong sounding for a whole new wave of takeovers -- which I will get into. Nov. 8 was, obviously, when the Republicans came into power. Aug. 12 was the baseball strike. And Oct. 14 was when Pulp Fiction opened."

Here's the letter Bob Rubin sent out to Citigroup yesterday to announce the Vikram Pandit's promotion. It's vaguely convincing, until you realize that in invisible ink reads the message, "I'm telling you as a friend, short this thing like you'd short a sinking ship" (on hard copies of the note, of course, not electronic versions, I know how this stuff works). And also, that Rubes asked his buddy in IT if there was a way to "make it so the e-mail goes directly to spam? Or put it in some sort of an attachment that no one can open?"

Sallie Mae sounded almost melancholy today when it announced that it had finally given up its attempt to sell itself to a group of investors led by JC Flowers. Like some desperate girl who had fallen under the delusion that she was being courted by a wealthy young man who actually wanted nothing to do with her, Sallie Mae spent the last eight weeks attempting to make its offers look attractive. No matter how many ways JC Flowers said no, Sallie Mae understood him to be asking for a better offer.

Now, at last, it has become apparent that no offer would be good enough to win back the interest of JC Flowers. Apparently there were quite a few investors who had shared the delusions of Miss Mae, and the resulting ticker of SLM looks absolutely bloody as investors are faced with the fact that this deal not getting done at any price. What's more, at least a few must finally have begun to wonder what exactly it is that JC Flowers found when it reached into Sallie Mae's chamber pot and fled forevermore.

Readers of DealBreaker, of course, have long known this deal was dead. Way back in September we told you that this deal was "Over, Done, Not Happening." In case this was too subtle we included a video game graphic reading "Game Over." In October we said it again. Since then we've mostly kept quiet on the grounds that if we hadn't already convinced you on this point, you probably could never be convinced.

Acquirers Abandon Sallie Deal [Wall Street Journal]

From: [redacted]

Sent: Tuesday, December 11, 2007 4:33 PM

To: Gabelli All

Subject: Holiday Party at The Water Club

Due to market volatility, we are shortening the cocktail hour. It will start promptly at 7:00 PM and end 7:30 PM. Please be there at 7:00 PM sharp.

We will admit that we were among the carpers and the skeptics of the early leaks supposedly coming from the Federal Reserve last night. The refusal to slash interest rates by more than the minimal amount struck as a sign of intellectual health. Ben Bernanke, at least for a few hours, had seemed to discover his place among the vertebrates once more.

So when word began to spread through the tavern where we spend probably too many of our evenings that the Federal Reserve was still talking after its meeting—and specifically talking about how the rate cuts were not the sum of its efforts to create looser credit markets—we were disappointed. Had it only taken one day of downward facing Dow to strip the governors of the Federal Reserve of their resolve?

And spare me your "53 percent return for clients after fees this year," "the shorter the man, the better the performance" bull shit. Adam Sender, pictured here in front of 43 monitors, each one special and unique in its own way, spent $250,000 on pair of totem poles made out of golf bags.

Sender Skips Miami Parties, Buys Art as Hedge Fund Gains 53% [Bloomberg]

“At Least” (CrossingWallStreet)
Did you catch what happened with GE yesterday? The company put out an earnings forecast and the news was that it was a disappointing one because it was only forecasting 10 percent earnings growth. But someone forgot to do the last edit. Turns out they meant to call for "at least" 10 percent earnings growth, which sounds a lot better. Wonder if the mistake was at GE or some PR company, cause you know that if it was at GE, then someone lost their job.

POSCO Orders 2 FuelCell Power Plants (AP)
What is this, the first clean tech bubble? Fuel Cell Energy (the company that changed its name from... blanking, back in 2001 just to better cash in on the fuel cell craze) has sold two fuel cell power plants to Korean steelmaker POSCO. If we know POSCO (and we do, because it was a moneymaker for us over the past few years), then it probably represents a strong endorsement of the company and the technology, because POSCO's got a serious jones for efficiency.

Exxon plans floating natural gas terminal (AP)
At first we thought that Exxon was planning an IPO for a natural gas terminal, which seemed cool, if not a little narrow. Not quite though. THe company is literally looking to float (as in float on water) a natural gas terminal, which will supply energy to New York and New Jersey. The $1 billion project could supply 1.2 billion cubic feet of the stuff per day.

Italian Truckers Defy Government Order to Halt Strike (Bloomberg)
We tend to think most strikes are silly, because they don't accomplish anything that couldn't be accomplished by, say, negotiating (or so economics tells us), but European strikes are different, since they seem to be a deeper part of the culture. Anyway, Italian truckdrivers are striking over something and they're defying orders to halt it. Good. A strike is ridiculously pointless if you're just going to roll over anytime the government tells you.

$$$ The Next Investing Frontier: North Korea [Deal Journal]

$$$ Next Goldman M&A Target: Brooklyn Heights? [Brownstoner]

$$$ Thoughts As People Attempt to Put Their Carry-On Luggage In Overhead Bins on Commuter Flights [LoSC]

You've really got to hand it to Citigroup. No one wanted to touch the the place with a fifty foot pole and when it finally finds a guy who will take the job, it acts as though *it* is too good for *him.* Like *it* had people lined up around the block. Like *it* could barely keep track of the number of people who didn't say they'd sooner die. Like *it* was *beating them off with a stick.* Way to break out the welcome wagon, guys! If you didn't want Pandit to be CEO, you shouldn't have given him the job. Nobody put a gun to your head and said "do it or I'll shoot*." But you did do it, and when you should've been getting behind your pick, you were figuring out ways to make "We'd just like to say that the dude we're about to name as CEO of our company sucks dick! But nevertheless, please welcome him" sound less severe. That'll inspire some confidence in your precipitously declining stock. I can't wait to see what Meredith Whitney's going to do to you. Oh, and congratulations, VP. God only knows why you want this job, but it's not like you could possibly make things any worse (though if any has any office pools going, we want in) so, nice one?

Citigroup Names Pandit CEO [WSJ]

*But if someone were going to do that, who would it be?

Reactions to the Fed rate cut came fast and sometimes furious. Here's a quick round-up of the reactions that caught our attention.

FOMC: Voted Most Unpopular David Gaffen, MarketBeat: "The Federal Reserve, essentially, decided to make nobody happy."

Kow-Tow Ka-Bang! Herb Greenberg, on MarketWatch: "By cutting just a quarter of a percent, the Fed showed a sense of responsibility (waiting to see how the consumer really holds up this holiday season) but also gave a sign that it is not kowtowing to Wall Street."

Mr. Market Is Pissed! Barry Ritholtz, The Big Picture: "Mr. Market no-likey the no-happy talk."

Real men cut rates! Eddy Elfenbein, Crossing Wall Street: "Frickin wimps."

Yawn. Felix Salmon, Market Movers: "A quarter-point cut isn't enough to stave off recession, if indeed we're headed in that direction, and it's not even enough to stave off expectations for another cut at the next meeting. Meanwhile, Pandit is a dull technocrat who has never achieved very much but who has somehow managed to maneuver his way into the top job at Citigroup."

One of the reasons we love the Swiss is that they live beyond their means, without apology. While some of the other banks negatively affected by subprime, someone's drug problem, etc. are scaling back their holiday parties (for instance, Bear is holding its main event at the Sizzler and the plan is to skip out check), UBS is saying "$10 billion and counting writedown be damned, 2007's winter solstice shall be the grandest of them all." This year's wealth management funfest will begin at 7 pm on the evening of the 17th at the Museum of Natural History. Now, I know some of you want to say, "Well, 2006's party was at Rockefeller Center so, relatively speaking, this is a downgrade," but you're wrong. Whale beats tree. It's that simple. Upgrade. (UBS's IBD get together is tonight at 583 Park, which isn't a bad venue for a unit maybe worth negative 22 billion dollars.)

The Federal Reserve showed the kind of restraint we haven't seen from that august body since sometime before this summer. It lowered its key lending rate a third-straight time, talked about the economy slowing down and left the door wide open to future cuts. But it didn't cut the discount window as far as many had expected and it refused to stop talking about inflation risks, although it noted that indicators on "core inflation have improved modestly this year."

This refusal to change this balancing outlook and the lower than expected cut in the discount window will dominate the way most people look at today's move. Although it conveyed broader concerns about the economy than it has in the past, the Fed certainly didn't send a message that it was in a rate cutting mood. Despite the growing view among economists and the general public that we are headed for a recession, the Fed refused to let the slowing economy become it's dominant policy concern.

The short message: economy slowing, inflation risk still remains, we're taking it slow, let's see what happens.

The quick reaction from Mr. Market: You're a wimp. I'm selling everything.

Reaction from Erin Burnett: She wears the infamous giraffe dress to bring out Jim Cramer's animal spirits. Cramer takes the bait, telling her that banks will fail, we'll have more bailouts and Hank Paulson's job of saving the economy from itself just got tougher.

Full statement from the Fed after the jump.

developing...

The Federal Reserve likes to project the image of it is independence and discernment but it is increasingly regarded as under the sway of Wall Street. At least three times now, pressure from Wall Street seems to have swayed the Fed to reconsider it's judgments about the condition of the markets and the economy. The most recent took place during the course of November and early December, when the Federal Reserve moved from describing the US economy as balanced to the current view that everyone agrees will most likely result in a rate cut any minute now!

Now the Fed being influenced by Wall Street isn't necessarily a bad thing. There's a good case to be made that there are two many bureaucrats and academics at the Fed and not enough people with real-world experience in the markets or running companies.

But it does run counter to the image the Fed likes to present of stalwart independence. A story from Reuters out yesterday clearly indicates that many institutional investors don't buy this independence line anymore. They're convinced that they are able to push the Fed in the direction they desire. You have to read between the lines but we think the implication is pretty clear.

"The Fed initially saw this as a problem contained to financial markets but have changed their position. I think they're right on top of it," Mary Miller, director of fixed income at T. Rowe Price, tells Reuters.

And what happened in the intervening period? Thirteen firms that are part of the Securities Industry & Financial Markets Association, met with officials from the Fed, the Treasury and the White House in November.

Investors raised Fed awareness of credit crisis [Reuters]

Just something to pass the time while everyone waits for the Fed announcement.

We give Loathsome Eliot Spitzer a hard time around here for the bully boy tactics both he and his staff reportedly practiced when he was New York's attorney general, tactics that he apparently kept practicing once elected governor. But it's worth remembering that Spitzer hardly invented the role of the aggressive prosecutor who builds his reputation by going after Wall Street and attacks his opponents with leaks to the press. Credit there probably belongs to Rudolph Giuliani. Yesterday the New York Times ran a healthy reminder of the Giuliani we knew before he became New York's mayor, and long before he became September 11ths mayor.

"Mr. Giuliani, who was 38 when he became United States attorney in 1983, threatened his targets with long prison sentences, and he infuriated judges with leaks of grand jury testimony to the press," Michael Powell writes. "His agents handcuffed Wall Street arbitrageurs before prosecutors investigated them. Apology was weakness; skeptics were 'jerks.'

Powell mentions the case of Princeton/Newport Partners, which was shut down in a raid by 50 armed marshals. They were charged with racketeering, a crime created to prosecute organized crime but which later became a regular feature of financial prosecutions thanks to the zealous creativity of prosecutors, including Giuliani, who realized that just because financiers weren't mobsters didn't mean they couldn't be treated as if they were. Although a federal appeals court later overturned the convictions, Princeton/Newport was ruined.

The prosecution of Michael Milken and the destruction of Drexel Lambert stand out in public memory but its worth remembering that Giuliani's career as a Wall Street foe hardly began or ended there. Executives from Kidder Peabody to those at Goldman Sachs were led out of their offices in handcuffs. There's a good case to be made that Giuliani's aggressiveness retarded financial innovation for years, as many were afraid that any unorthodox financial strategies or products might be deemed criminal by the US attorney's office.

“He was very creative about wielding power.” Those of the words one law professor uses to describe Giuliani, and we can't imagine a more fitting epitaph. Except that they were written too early, and Giuliani quite obviously has no intention of vanishing from the scene any time soon. We may yet have to write more about the way Giuliani wields power.

(More on this article from Tom Kirkendall and Larry Ribstein.)

Crime Buster With Eye on the Future [New York Times]

Longtime readers of this website and those tuning in for the first time just this morning probably know that we've been into Fox Business for a while. Longtime readers of this website and those tuning in for the first time just this morning probably don't know that we've been into a guy named Neil Patrick Harris (NPH) for-I don't know-ever. Apparently we're not alone with our fondnesses because at least half the room at a LEH holiday party last week admitted to the same. But we all agreed that while you might wonder what it would be like to have both-- HH and NPH-- at the same time, and maybe fantasize about it on a regular basis, you never actually dare to imagine it could happen. Something about "self-preservation" a Brother in equities mumbled. And even though he trailed off, we all heard what he said and nodded in agreement. Well mumble no longer, Brother. In fact, don't even say anything at all, because that day we wouldn't allow ourselves to dream about coming has come and gone. Thanks to YouTube, and not Fox Business, which only makes its 8 or so most recent videos available, though, it's here to stay. That's right-- I'm talking Neil Patrick Harris and I'm talking Neil Patrick Harris as a guest on Fox Business's "Happy Hour." Apparently NPH was born and raised in the same town (Ruidoso, New Mexico) as HH co-anchor Cody Willard and now we (us and Cody) are reaping the benefits. Since some of you work at Fascist establishments that won't allow you to play YouTube clips, even in extraordinary circumstances like the one before us, I've more or less reproduced the show below. Everyone else: avert your eyes and hit play. Unless you want to follow along with a guide, in which case, carry on.

00:13: Rebecca introduces NPH as the star of "When I Met Your Mother." Classic Fox Business. Was this gaffe unplanned? Producers cornering the "dumb as rocks" market? Just Becks being silly? Just Becks being wasted? I don't know, I'm not a doctor but I can tell you this much: NPH does not look pleased and at

00:17: he flashes a look of disgust at Cody intended for Rebecca and snarls, "Thank you, Cody, it's called 'How I Met Your Mother,' but thanks." Has anyone else noticed how NPH has really started to own his bitchiness since he came out?

00:22: Rebecca hasn't: she does the upper-arm touch thing that really only works on straight guys and slurs, "It's still my favorite show!"

00:29: "Neil! Neil!" "Yes, Cody?" Never before have those two words been imbued with such dismissiveness. I fucking love this guy.

00:36: Cody reminds NPH that they've known each other since they were two years old. NPH looks embarrassed.

00:49: Cody goes for street cred with a Chris Rock reference.

00:51: Cody asks NPH how long it's been since he was back in their hometown.

00:53: A good year, NPH is sad to say.

00:55: But he's going home for Christmas!

00:57: "You're going back for Christmas??!!" Cody asks NPH even though that's exactly what he just said. There is so much excitement in his voice you know he's about to suggest that they share a cab from the airport and maybe meet up with the old gang on xmas eve, we could even head over to the bar together I'm sure I can convince my dad to let me borrow the car and tell me if this is being too forward but do you have plans for New Year's? Because I was just thinking, since we're the two big movie stars in town that we could--

01:01: NPH isn't technically going home-home, just the major city near home, and he's kind of already got plans.

01:03: I almost feel bad for Cody.

01:07: Rebecca: "This New Mexico stuff!"

01:11: Rebecca's "read" that NPH has been "acting for a really, really long time."

01:16: I don't know where "Happy Hour" is getting its reading material but it goes way, way back-- apparently, NPH's first play was the "Wizard of Oz," in which he played Toto.

01:18: Cody was at that play. He remembers it like it was yesterday, probably because he still has his playbill and the lock of hair he stole from a comb in NPH's dressing room on opening night.

01:22: Becks asks NPH if he had to get "down on all fours" for the part.

01:27: Becks and Cody crack up at the "down on all fours" joke.

01:31: Becks says "down on all fours" again.

02:21: One time NPH and Cody were acting out a play in the Willard family living room and Cody fell while he had a popsicle stick in his mouth and it almost went all the way through his cheek. I don't want to say this episode isn't Emmy-material, because it is, but had they recreated this particular scene that statue would be in. the. bag.

02:37: They also used to lip synch "Another One Bites The Dust." NPH gives us a taste of what that was like, Cody looks cool by association.

02:43: Rebecca: "Sing Annie! Sing Annie!"

02:45: NPH: (ignoring request in pursuit of question begging to be answered) "What are you guys going to do when your hair gets to gets to the same length?"

02:52: Cody tries to change the subject

02:55: and is unsuccessful (no one can stop a NPH in pursuit of the truth! No one!). NPH: "I think a ponytail might be the best way to go."

02:57: Rebecca: "Was his hair long as a child?"

03:00: NPH: "No, it was short and normal. None of this renegade nonsense." This guy needs to be on every show always, and not just "Happy Hour," and not just Fox Business. Can you think of another person better suited to cut down Jim Cramer? Seriously, NPH would eviscerate him without breaking a sweat. And I don't want to say I'm dying to see what would happen if you got Charlie Gasparino and NPH in a room together with a bunch of cameras rolling, but I'm dying to see what would happen if you got Charlie Gasparino and NPH in a room together with a bunch of cameras rolling.

03:08 Rebecca: "Tell us something good about Cody! Tell us something we don't know about Cody!" (apparently these two are interchangeable)

03:12: While NPH thinks, Cody butters him up by sharing that he would not have successfully started a hedge fund without the money NPH fronted him. I don't think it's common practice for investors to send letters to managers during down months, or at least official ones, but I can see NPH doing it and I can see it being awesome.

03:20: NPH used to invest in Krispey Kreme. Cody remembers telling NPH to get the hell out of that one, so much so that he says it three times. Fuck you, Cody! He's NPH, he can invest in whatever he wants.

03:31: NPH makes lukewarm joke about recently having heard of a stock called "goo...goo?" Cody says, "Google you mean?" I submit NPH only did this because he feels bad for Cody and is trying his hardest not to always come off as the smart/funny one. He really the kid doctor with a heart of gold.

04:31: NPH wants to know where his damn drink is. Cody guesses he wants a vodka/cranberry. NPH: (with disgust) "No, I want a Scotch, on the rocks...idiot."

04:55: Speaking of drinks? Rebecca Gomez-- the girl is shitfaced. I am honestly surprised she doesn't fall off her bar stool. If NPH were straight he'd probably be all, "In about two seconds this girl is going to black out and I will nail her." But he's not! And is doing an awesome job of calling her out on a being a drunk bitch* with just facial expressions.

05:08: I am the drunk bitch. That is not Rebecca Gomez, it's someone named Tracy Byrnes.

05:12: In my defense, they've dressed her up exactly like Rebecca (red sweater, black skirt) and the imposter could easily be Rebecca's twin. I submit that other people thought it was Rebecca, too. This is oddly reminiscent of Marta being played by two different actresses (first by Lenor Varela, then by Patricia Velasquez). Regardless, I'm going to continue referring to the girl as Rebecca, it's just easier that way.

05:21: Taking a cue from Rebecca, Cody says "Harold and Maude" when he means to say "Harold and Kumar."

06:22: Someone calls the show NPH stars in something other than "How I Met Your Mother," again.

07:33: NPH jokes about taking over Cody's job at "Happy Hour," meaning he (and not CW) would be in our lives 5 times/week. Which is sort of like getting your kicks by visiting orphanages on the weekends and messing with one of the sadder-looking kids about rescuing him/her from whatever sort of hellish existence he/she's living under some monstrous warden with unusually long hair for a male, and talking about taking him/her to a house in the country, where he/she can run free** and be part of a real family, and the cruel warden with the unusually long hair for a man is but a distant memory when you really have no intention of doing any of that at all, and even though, hilariously, you've even signed a bunch of official-looking documents that seem to imply you have every intention of taking this parentless child home with you. The utter cruelty outweighs the humor, though, objectively, it'll make you laugh, if you've got a few hours on a Saturday or Sunday.

No matter! If Fox Business doesn't bring the (additional) NPH to us, we will just have to go get the (additional) NPH for ourselves. What follows is a mix tape, of sorts, from me to you. A mix tape NPH-style, that is. Get ready to shove a fist in your mouth or bite down on a piece of leather, because unless you are dead inside, it's ass laughing off time.

Morgan Stanley is now saying that there will definitely be a recession and there's nothing you can do to stop it so you might as well just give up. We're all going to die eventually, it's just a matter of when. Related/unrelated? At MS's IED party last night, "There was a slideshow on a large screen that contained awkward photos of associates and analysts (most people were not smiling)...a lot of Sean Paul...a MD walking around with a blinged out Santa hat giving his business card to anyone that would compliment his style...and one very sad analyst talking to the bartender about how even the low hanging fruit he hoping to score with wouldn't give him the time of day."

Morgan Stanley issues full US recession alert [Telegraph]
Recession Watch: Morgan Stanley Finally Sees Weakness [Alley Insider]

The Wall Street Journal only ran a tiny thumbnail of the Bernanke-as-sheriff cartoon you see at left, that some graphics guy obviously worked really hard on, next to this morning's recession story, and only on the site's main page? If you're going to be the New York Post under a fake name, you don't just dip your toes in the water, you fucking own it. Next time we want to see the tramp stamp alongside the article in full-size, with a click to enlarge option.

On the other hand, bravo to whoever had the idea to put a story about men who dye their hair on A1. Good to see someone came to work today.

*Beating them off WITH A STICK I tell you.

Libya May Invest $100 Billion Abroad, Premier Says (Bloomberg)
When Libya buys out Bear Stearns, then the political blowback will begin. Nah, that's not going to happen, but while major investments from Abu Dhabi and Dubai are politically palatable (because they're fun-loving, secular capitalists, just like us), major Libyan investments won't go down so easily, even if they aren't officially working on WMDs or anything.. And with $100 billion in cash reserves and stated plans to invest abroad, it's only a matter of time before those investments come.

NYSE Euronext joins march of bourses to Beijing (Reuters)
Just a hunch, but it seems like this China thing is going to be big. Certainly if we were placed in charge of some major international financial institution, we'd be all over it, so it makes sense that the NYSE is opening up offies in Beijing, as it lookis to rustle up some business there. Actually, we've been pretty floored at the sheer level of stock market capitalization coming out of the country lately. Seriously, it's staggering. The NYSE is already getting its fare share, but the more the better.

U.S. Employers Trim First-Quarter Hiring Plans, Manpower Says (Bloomberg)
We tend to trust private corporate surveys more than government surveys, though there's nothing like sitting down with a good beige book and a glass of Pinot Noir on a Saturday evening. But the the latest survey from Manpower is not very good. Looking ahead to Q1, which is barely two weeks way, corporate hiring levels look anemic. Then again, maybe it doesn't have anything to do with the economy, rather it's simple a matter of increased, inflation-fighting productivity.

Rio To BHP: Put Up Or Shut Up (Forbes)
Turns out, BHP hasn't actually put a formal offer out yet. That's annoying for Rio, because there's technically nothing for it to reject. Now Rio is requesting that BHP put an offer on the table, or get the hell out of (Phelps) Dodge, so to speak.

$$$ Deals: A Calgary Stampede
In our M&A Roundup for the week ended Dec. 9, companies in the Alberta city are involved in 3 of the 10 largest deals during what otherwise was a slow seven days, with a continuing international emphasis. [CFO.com]

$$$ A Tag Team at the Top of Citi? [DealBook]

$$$ Shutterfly [WallStrip]

Here's one you (Random Banker) might like-- Seth Tobias's alleged erstwhile boyfriend-- alleged by alleged personal assistant-cum-gay pimp Billy Ash AKA Mr. Madam-- may not have been Seth Tobias's bf at all. Speaking to the New York Daily News after having been forwarded the Times' story last week by the author himself with the note, "Let me know what you think," Tiger, whose real name is Christopher Dauenhauer said that while he's flattered to have his and his club's named mentioned in the story, he's pretty sure he never met Mr. Tobias, unless it was in during a private show in a dark room, in which case, he may've met a lot of hedge fund managers he can't recall (Larry Robbins, Dan Loeb). Tiger, who's really much more of a Tiger than a Chris, says that while he really has zero connection to the case, and was "at work in Nevada" at the time of death, he can understand the confusion. "This guy may have had a fantasy about me...maybe during one of his drug binges, he got into this frame of mind where he built our [a supposed] meeting into a relationship...or maybe he'd seen one of my videos [like "Roar of the Tiger"]." And that all makes sense. But now that you mention it? Tiger says that actually he and Tobias "probably" had sex and there's a good chance Tobias "may have been this one guy I went with to the horse races." Anyway. Cupid's management tells us off the record that the Times has booked a room for the week to get to the bottom of this, so sit tight.

Gay porn star comes clean about link to murdered hedge funder Seth Tobias [NYDN]

It's hard to believe that it's been twenty years since "Bonfire of the Vanities" was published. Much of what was groundbreaking in Wolfe's novel has now entertained the common culture so that it is almost hard to appreciate how original his tale of the moral mayhem into which we were descending was when it was published. Remember, back then it was supposed to be Morning In America. Wolfe showed us that there was some truly dangerous under-currents brewing. We've since passed through that period, shuffling off some off its aspects--especially crime, which has been underperforming for years now--and adopting some it into the very heart of our culture--wealth worship and political correctness.

Today, the New York Times asks some of the people who characters in the book were based on about how New York has changed. The most interesting remark, however, comes from Wolfe himself.

He tells the Times:

The big excitement in the financial world, hedge funds, have already shifted their center of gravity out of the city, he said.

Greenwich, Conn., is the new Wall Street, and New York is the Chicago Commodities Exchange.

We're not really sure whether Tom's upgrading Chicago or downgrading New York. But if he is downgrading Chicago, he should probably spend some time learning about Chicago derivatives traders.

Looking Back on the Bonfire of the 1980s [New York Times]

A quick follow-up to this morning's story about the Columbia asset management fund. It is saying that it is closing its enhanced, private-placement money-market fund but that investors are being offered the option of cash redemptions or of switching their assets into other Columbia-managed funds. Because what are the odds that two funds would go down at the same place?

Bank of America says closing money market fund [Reuters]

Breaking: Conrad Black sentenced to 6.5 years in prison!

Update: Told to report to prison in 12 weeks. Time to break out the good stuff, Conrad. It won't be there when you get out.

Update: Reuters link here.

So much to mine from today’s New York feature on Jeffrey Epstein but the most basic thing is this: that man should be acquitted of all the charges. And we say this as people who were never the raging Epophiles you might find in the Times newsroom (I have pictures) or on the Goldman prop desk (I have video). We liked him okay, though we thought he was pretty stupid for getting caught and found his powers of perception to be somewhat lacking. But now we are converts. In fact, we’re writing this to you from the Church of Epstein. I’m sitting in the front row pew, Carney’s on his knees at the alter. You, too, will be joining us after you realize that this man:

+ Apologizes for being half an hour late with the excuse: “I never realized how many one-way streets and no-right-turns there are in midtown.”

+ Refers journalists looking for character witnesses to scientists (Nobel Prize winners, natch).

+ When compared to Icarus, asks: “Did Icarus like massages?”

+ Tells detectives (via his lawyer) that the reason he had so many massages is that he’s “very passionate about massages.”

+Lives “like a pasha.”

+ Nicknames his girls “Egg Beaters,” then has the brass to make them pay for the mugs and T’s he had made on Café Press.

+ While he may not have displayed the same innovative sexual deviancy as others, at least had the good sense not to get lured to his death by a shrewish wife who still hasn’t compensated the god damn pool cleaners for their services.

The authorities are clearly after the wrong person here. Jeffrey Epstein should not be behind bars. You know who should be behind bars? Teri Karush Rogers, and the 16 other current and former townhouse owners interviewed by the Times for an article about how much vertical living sucks (“You hate when you come home from a trip with a lot of luggage and have to drag it up the stairs, or you’re in a huge hurry to leave and you have to run back up to the third or fourth floor dressed up in high-heeled shoes because you’ve forgotten something,” “At first, she said, ‘it was sort of fun going up and down, and then we started bickering like little children about whose turn it was to get something’,” “What really stinks is when the doorbell rings and you’re breast-feeding on the fourth floor.”). Teri Karush Rogers and everyone at the NYT with three names. Those are the people who deserve caps in their asses. (Though that's just a for instance. Have a better execution ideas? Let us know.)

The Fantaist [NYM]

Sovereign funds have been very much in the news lately. Purchases of stakes in large financial institutions, such as Citigroup and UBS, have sometimes raised concerns about the influence of these giant funds. Today Gary Becker and Richard Posner take a look at the operations of these funds and reach some surprising conclusions: the funds may be beneficial for the United States but bad for the nations that operate them.

The board members of Citigroup and managers of Blackstone will probably not be surprised by Posner's assertion that the rise of sovereign funds is a benefit to the US. Both received large investments from such funds at critical junctures. Posner's argument is that the investment in US companies gives foreign governments a stake in US prosperity.

"It does not undermine our national security just because the purchaser is a foreign government, but on the contrary enhances our security because the investment is a hostage," Posner writes. "It's as if to guarantee China's good behavior the president of China sent his family to live in the United States."

Becker, for his part, argues that having taxpayers as a source of funding coupled with the lack of transparency sets up poor performance incentives. Taxpayers cannot refuse to invest or send in redemption notifications, and it is often hard to tell what exactly they are getting for their investment. "Lack of transparency is a major obstacle to citizens of countries with secretive sovereign funds in determining whether the money that automatically flows to the funds is being well spent," Becker writes.

What's more, the incentive structure of the funds seems guaranteed to produce an overly conservative strategy.

Becker again:

Compounding the adverse effects of the extreme secrecy is that managers of these funds, being government employees on fixed salaries, have only limited financial incentives to try to achieve higher returns for given risk. Even when those in charge of sovereign funds hire private managers for some of their capital, there is still what economists call a principal-agent problem because government officials choose the managers. As a result, one would expect that the management of these funds would be excessively conservative to avoid investment blunders and bad publicity, or that managers would be tempted toward corruption by companies that want to attract investments from these funds.

Sovereign-Wealth Funds-Posner's Comment [Becker-Posner Blog]

Why Sovereign Funds? Becker [Becker-Posner Blog]

The Federal Reserve's Open Market Committee meets tomorrow and is widely expected to cut rates. When we polled readers last week, a plurality of 34% predicted a 25 basis point cut. The second favorite was a fifty bip cut, garnering 22 percent of the vote. Close behind, however, were those who predicted no cut: 19%.

Have expectations moved over the last couple of days? Will the continuing story of credit driven write-downs from major financial institutions push the Fed into an even greater cut? Or does the dollar's recovery this morning indicate that the Fed is going to hold the line on interest rates? Cast your vote below.

Incidentally, our polls have a very good record of predicting Fed moves. Later today we'll make it more challenging by asking readers to predict any changes in the discount rate.

The last time Becky Quick met with Warren Buffett her arch-rival Erin Burnett started the scurrilous rumor that quick was pregnant by asking why Quick had foregone the champagne on Buffett's private plane. That's the way we remember it anyway.

We immediately went to work following up on the story. And by following-up we mean cutting and pasting a semi-pornographic photoshop job of Quick onto the cover of Portfolio. Oh, we also emailed Quick to ask whether she would confirm the story but she was in China and totally ignored us! It seems that Quick is not in fact pregnant, however. So Erin probably owes her an apology.

For our part we're doing her one better. Tomorrow Quick is meeting with Buffett again. We'd like to make her job a bit easier by providing some questions for her to ask Buffett. In the comments below, please give Quick the list of what you'd like to ask her the tax-dodging Oracle of Omaha. At the end of the day, we'll send her the list of the best questions.

• Monday:
Morgan Stanley (sales, trading & research), 583 Park Avenue (the Christian Science building), 6 pm

• Tuesday:
AIG (domestic brokerage group), Cipriani Wall Street, 5:30 pm

BSC, Flute, 6 pm (NB: all employees who work in units that lost Bear X number of dollars this year will be required to pay a cover.)

• Wednesday:
Cerberus, W (541 Lexington), 6 pm

Morgan Stanley (investment management), China Club, 7 pm (According to our MSIM tipster: “This will be a party worth crashing. All that is needed is a Morgan Stanley business card to get in. As an insider, this group has the best talent I have ever seen in this business. The assistants we have would make a porn star blush.” Carney’s been camped outside the club since we received this tip, so it’s assumed he’ll be attending if that's a deciding factor for any of you.)

• Thursday:
Citi (FIG), 583 Park Avenue, 6 pm

Credit Suisse (alternative investments): Cipriani 23rd Street, 6 pm

Lehman Brothers (IBD): no idea where but maybe Pier Sixty and possibly at 6 pm

None of these events officially call for costumes but should you find yourself in the mood to mix things up, we suggest you take a cue from these geniuses:

CNBC online editor Charlie Gasparino is reporting that his sources tell him that that Bank of American has frozen a money market fund tailored towards institutional investors.

The fund is called the Colombia Strategic Cash Portfolio. Apparently Bank of America has sent a letter to investors notifying them that the fund will no longer take subscriptions or redemptions. The fund is invested in debt securities that are caught up in the crunch. He says Bank of America has not yet confirmed the story.

Update: And now they have. Gasparino says Bank of America confirms the story of the fund freeze. Anyone know who has money caught up in this fund?

Update: Both CNBC and our commenters report that it's not a straight money-market fund but a fund intended to achieve money-market type results. It's heavily invested in SIV paper, we're told. Where's that MLEC thing when you need it?

Shares of mortgage insurer MBIA are halted, news pending. The company is widely expected to announce it is raising new capital but rumors persist that it may be darker news. What are you hearing?

Update (thirty seconds later): Oh, never mind. They've announced. Warburg Pincus is buying a $1 billion stake.

Update (30 minutes later): Of course, there was darker news. Word of this investment comes with news of that the mortgage insurer faces significantly higher losses from a decline in the value of securities it guarantees. Here's a link to the Bloomberg story.

We've found ourselves in the uncomfortable position of being part of a large chorus of skeptics of the Bush administration's plan to forestall foreclosures through a combination of fast-tracked refinancings (mostly aimed at people who would be better off defaulting and moving into a rental) and freezes. We prefer to take contrarian, controversialist stances but the risks of this plan seem overwhelmingly obvious.

If you've got a brighter picture of the plan to paint, please email us your ideas or leave them in comments. Even if it's just a link to a likely best-case scenario we'd like to read it. In truth, we're so uncomfortable with being in the majority that we start to re-think our position. But even on second and third thought we don't like the plan.

This morning we learned of Peter Schiff's argument that the plan will dampen demand for housing by depressing credit availability. It's so totally obvious that once you see it spelled out for you, you almost imagine you had already thought of it. But you hadn't.

"Without question, the Bush administration’s mortgage" rescue plan will exacerbate, not alleviate, the problems in the housing market. As the plan will sharply reduce the ability of new buyers to make purchases, it really amounts to a stay of execution and not a pardon," Schiff writes. "Although there are mountains of uncertainty as to how the plan will be structured and implemented, there is no question that as lenders factor in the added risk of having their contracts re-written or of being held liable for defaulting borrowers, lending standards for new loans will become increasingly severe (higher down payments, mortgage rates, and required Fico scores, lower loan to income ratios, and perhaps the death of adjustable rate loans altogether). The result will be additional downward pressure on home prices, despite the fact that in the short term fewer homes will be sold in foreclosure than what might have been without the rescue plan."

The Mother of all Bad Ideas [Euro Pacific Capital]

Conrad Black has been anything but contrite since being found guilty of fraud and obstruction of justice. He has vigorously maintained his innocence and is appealing his conviction every which way he can. His lawyers say that won't change today, when he appears before a judge in Chicago to be sentenced. His camp says this shows he is "principled" but others point out that refusing to follow the usual confessional script may result in a stiffer sentence.

Prosecutors are calling for up to 30 years in prison for Black. His lawyers say that based on these convictions, he deserves more like 2 years. Get your bid in now. We'll reward the closest bidder who doesn't go over (Price is Right rules) with a free copy of Charlie Gasparino's King of The Club. (If you need a bit more incentive, Business Week says "Gasparino's detailed account of Wall Street insider machinations, and the tick-tock of boardroom negotiations during the worst crisis in NYSE history, makes for riveting reading.")

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This morning the Telegraph reported that Blackstone was preparing an "audacious plan" to break up mining giant Rio Tinto. None of our usual sources has yet recovered from spending the weekend dressed as Santa Claus so we haven't been able to reach anyone on it. But DealBook, which has shown that its got some very good Blackstone sources in the past, has just reported that the story is "rubbish."

According to the Telegraph, Blackstone's bid is in the advanced planning stages. It is reaching out to a Chinese sovereign wealth fund and other possible partners and has appointed lawyers, spoken with bankers and got public relations folks on ready.

But DealBook calls bullshit on the entire story. We'd like to know what you think.

Blackstone plans audacious bid for Rio Tinto [Telegraph]
Bad Rumor: Blackstone’s ‘Bid’ for Rio Tinto [New York Times]

Unsurprisingly, only one of these little elves is smiling.

UBS to Sell Stakes After $10 Billion in Writedowns (Bloomberg)
Zing. You knew we weren't done with these UBS peeled of a cool $10 billion in writedowns and is selling $11.5 billion in bonds to the government of Singapore and Mid-East investors in a bid to recapitalize. Up until recently, it had been forecasting a Q4 profit, which is obviously not in the cards anymore. And it's not clear whether it'll see a full year loss, although that hardly seems significant at this point. Anyway, kudos to the bank for having the funding announcement all ready to go.

Black Monday (Sun-Times)
Other than a few notable cases, this hasn't been a big year for white collar prosecutions, at least by our reckoning. All the wonderful promise of backdating fizzled out, as we've noted several times. Perhaps subprime will produce a flurry of fraud charges -- we'll have to wait and see. But for you junkies out there, take note that it's sentencing day for Lord Black, Conrad Black that is, and it's expected that he may get 30 years. Think he'll get less? Put in a guess.

ArcelorMittal to raise long steel prices in Mideast, Mediterranean, Black Sea (Thomson)
The multi-year bull market in steel that some thought would end in 2003 isn't coming to an end. ArcelorMittal plans to raise steel prices, er, prices on "long steel" in key markets, including the Mideast, come Jan 1 2008. The company is citing raw material costs as well as "unprecedented demand" for the move. If you're curious what some of this steel might go to, check out this collection of nine extraordinary buildings currently under construction around the world. Seriously mindblowing stuff. Not surprisingly, a good many are in the Mideast.

Did Authorities Miss a Chance To Ease Crunch? (WSJ)
The Journal asks whether regulators missed a chance to head off the credit crunch back in 2005, when Eliot Spitzer & Co. started an investigation into CDO pricing at Bear. You can read the article for yourself and make a decision on whether you think there's any merit to this, but suffice to say, we don't think so. Here's what's funny though, apparently both the SEC and Eliot Spitzer dropped the matter after an initial investigation, though the reason is unclear. In other words, of all of the big things that Spitzer was looking at, mis-priced CDOs might have been the biggest, by far (whether it's criminal is another matter, but certainly it's turned out to be a big story). So of all the crusades that Spitzer went on during his time as AG, it looks very likely that he took his eyes off the ball the one time he was on to something significant.

$$$ DB Commenter AJ made famous on DealBook. [DealBook]

$$$ Glad That My EQUITIES Magazine Keynote Speech Was A Hit…Oh Yeah, Shouldn’t I Have Been Trading? [Tim Sykes]

$$$ Special Report: The So-Called Subprime Bailout [thestreet.com]

The turmoil in the credit markets have left a lot of people with credit experience and skills wondering about their future. DealBreaker is here for you! For our job of the week we’re pleased to announce that a premier U.S. investment bank is seeking an experienced high yield analyst to join their team. Ideal candidate will have 2-4 years of experience in credit research. Sector experience is not important, strong credit skills a must. Must have a strong understanding of covenants and indentures, expertise in looking at financial statements.

There are dozens of new jobs each week in the DealBreaker Career Center. If your worried about your bonus or layoffs, it’s probably time you took a look-see.

Although it was billed as the latest financial crime of the century, backdating is turning out to have some very minor results. Few prosecutions, stalled or failed lawsuits and increasingly fading from its never prominent place in the ranks of public concerns. But this doesn’t mean the panic hasn’t had serious costs. Public companies have lost a number of top executives and a handful of the accused have been actually prosecuted as criminals
Yesterday we got the news that former UnitedHealth Group executive William McGuire had agreed to forfeit $620 million in compensation to settle backdating is giving back $620 million in compensation to settle backdating claims. It’s unlikely that he will face any criminal charges.

As Larry Ribstein points out today, this is in marked contrast to the fate of Brocade's former hr director, Stephanie Jensen, who never personally benefitted from backdating but who was found guilty of two criminal counts. “In one the chief executive and main beneficiary likely will walk away with hundreds of millions of dollars. In the other, an underling who didn't profit from the offenses likely will go to jail,” Ribstein points out.

The point isn’t that McGuire needs to serve jail time. Rather, the point Ribstein is making here is that the criminal process is wildly inappropriate for these kind of cases. It amounts, Ribstein writes, to a corporate crime lottery: the winners pay fines and the losers go to jail.

“These two cases are only the most recent examples of the lottery in action. Not much is gained from criminalizing this conduct over the many remedies, including the corporation's own right of recovery, available for any wrongs that occurred (mostly inadequate disclosure). But much is lost from the odor of injustice that wafts over these disparate results,” he writes.

The backdating lottery continues [Ideoblog]

We began our quick analysis of President Bush’s loan modification plan yesterday by calling it a bailout. Today we hearing from all over that the plan is not a bailout. In fact, Felix Salmon has issued a public plea for everyone to stop calling it a bailout. And, more recently, he’s began recording a “bailout hall of shame” for those who have called this a bailout. This morning, Edmund Andrews emphatically insisted on the point in the New York Times. “At least one thing is clear about President Bush’s plan to help people trapped by the mortgage meltdown: it is an industry-led plan, not a government bailout,” Andrews wrote. And this afternoon the madness that is Jim Cramer unloosed itself on Erin Burnett to the same effect.

The main argument against calling this a government bailout is two-fold. First, it is said that the terms of the plan were set by the mortgage industry and Wall Street firms rather than bureaucrats. Second, it is stressed that the effort is voluntary on the part of lenders, borrowers and loan servicers. As comforting as it might be to consider this an outcome of market processes rather than government fiat, we’re not persuaded.

[More after the jump]

Subject: Pirate News - Isa's leaving

Sent: Friday, December 07, 2007 2:41 PM

You replied on 12/7/2007 2:41 PM.

To: tips_dealbreaker

From: redacted

Unfortunately it looks one of Bess' favorite combinations - Pirate Capital and Michael Bolton - has come to and end. Isa Bolotin is going to Silver Point Capital in Greenwich.

Luckily, Bolton Daughter #2, Holly, is still on the ship's payroll, though for what, we're not sure. Still, Isa's departure is obviously a significant loss, inflicting wounds on our souls that only soft rock ballads can (attempt) to heal.

Earlier: Things At Pirate Capital Worse Than We Thought

It’s common knowledge that Tom Hudson has pretty much run Pirate Capital into the ground, by allowing Michael Bolton’s daughters to construct all discounted cash flow models, structure all pair trades and calculate the firm's daily alpha. You knew that, we knew that, the employees at the Local PetSmart, who work on commission and had come to expect a minimum buy/day of whatever a truckload of minnows costs from Hudson knew that. Fucking Michael Bolton knew that. The one person who didn’t know that, or wouldn’t admit it to investors (“We’re having a great year!" "Don’t buy the hype!" "I’ve got a great pick called SMD that’s going to make us all rich!” he wrote last month) was Tom Hudson. Brother was in serious denial and was getting hard to watch. No longer.

In a terrific display of holiday togetherness, the employees of SAC Capital convened in Stamford last night to bask in the mediocrity and obscurity of the past year. To create the perfect atmosphere for such an event, the holiday gala was held in a plastic tent behind the company's headquarters. Despite their better efforts, however, everyone seemed to have a good time, fueled by a live reggae/soul band (interesting choice) and several PMs dispensing bonuses by raining hundreds from a platform over the crowd (no one is really sure whether this was actually their bonus or if they will still be receiving one today). The whole night was summed up in the inspiring, albeit slurred, drunken cry overheard as people piled into taxis outside of the after party: "I can't believe we fucking work at SAC. I mean, I'm a total idiot, you saw me tonight. And yet here I am." A breakdown by the numbers:

UBS's investment bank, which is said (by its chief rival) to be worth negative twenty billion dollars and will be awarding neither cash bonuses nor bonuses paid in cases of Mike’s this year, is nearly doubling its staff in India. Though the firm claims that the addition of 80 bankers (bringing the total to 180) has to do with its “desire to remain among the top three investment banks in India,” and to continue “leapfrogging” over rivals, we’re told the additional staff is an attempt to make a dent in the negative $1 million price tag Credit Suisse assigned the firm’s 22,000 employees, if negligibly. Any current UBS workers given the pink slip in the next several weeks, provided UBS makes good on its promise to announce a $7.999 billion writedown, are encouraged to apply, but will in no way be given preference over outsiders. And if you want to go there, UBS India has actually said internally that it hopes to fill the new positions with former Citigroup employees. Anyway, good luck to all the candidates.

Earlier: UBS Still Taking It Up The Tailpipe

UBS Too Poor To Award Real Bonuses This Year

UBS to raise India investment bank staff [Reuters]

"Why is it good for a lender to be forced to make concessions to borrowers?" Floyd Norris asked last night.

It's a good question. On the face of it, the Bush administration's plan to freeze mortgage rates would seem to place a burden on lenders by restricting them from exercising their contractual rights. What's more, if a freeze doesn't burden lenders--if it benefits them--why would we need a government organized plan to bring it about? Shouldn't the self-interest of mortgage lenders have arrived at this through the action of the free market?

But few, if any, lenders or investors are complaining. Indeed, most seem enthusiastic about the plan. Stocks of lenders such as Countrywide rallied on the news. This implies that the Bush freeze is good for at least some lenders. We've got our own ideas about this that we'll revisit later today (hint: it's a collective action problem.) But for now we want your opinion. In comments, leave your answers to Norris' question. And, after the jump, feel free to vote in our poll asking whether Floyd Norris and investors buying up shares in lenders are right: is the freeze good for lenders.

Would You Like a $1 House? [New York Times]

What drives banks to move in herds? In the late nineties we saw a number of venerable so-called Wall Street institutions flee lower Manhattan for midtown. Now it seems that investment banks are clustering around the World Trade Center site. Today a bit of a debate has broken out across the internets about why these headquartering trends occur.

John Gapper of the Financial Times kicks things off by noticing the rapid development of West Kowloon, in Hong Kong. This seems to be developing into the prime alt