$$$ Carlyle to Shutter Blue Wave Hedge Fund

$$$ Plumbing the K.K.R. Un-I.P.O. [DealBook]

$$$ What Would Warren Say? [Jeff Matthews]

$$$ When Are We In a Recession? [LoSC]

One of the great secrets of our success here at DealBreaker is our readers. We have the brightest, wittiest and best informed commenters on the web who help keep our recent comments page always fresh. And our tipsters--often people we have never met who reach out to us through email and phone calls--have helped us break stories and get the insider angle on stories where everyone else is simply re-writing the press release.

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As always, you can rest assured that we will keep your identity confidential. Thanks!

Dennis Berman digs up a fascinating excerpt on short-selling from the 1932 hearings on the stock market crash. it's a shame we don't seem to have anyone in Congress now even capable of formulating the question asked by New York Congressman Frank Oliver: "They blamed the 'shorts,' whereas, as a matter of fact, if the prices were inflated, they should have blamed the 'longs' for having inflated them?"

Following in the footsteps of superstar NFL wide-outs Chad Johnson and Terrell Owens (and former Kansas Senator Bob Dole), Carl Icahn referred to himself in the third-person today on his blog post, "Concerning the Annual Yahoo! Meeting."

"Additionally, if any committee is formed to negotiate a meaningful transaction, Carl Icahn will be a member of that committee," he wrote.

Now, Carl just needs a slick nickname to be right up there with Johnson and Owens. Suggestions?

Anyway, in his latest post, Carl makes it clear that he will not be attending the meeting since the proxy fight is over. He said, "it will not do shareholders or Yahoo! any good to have the annual meeting turn into a media event for no purpose."

Carl reiterated that his minority position on the board is significant because he will be involved in any major transaction that Yahoo explores. The compromise that was reached between the two parties appears to be very beneficial for Icahn, especially since support for his board slate had significantly waned in recent weeks. We will have coverage of the meeting tomorrow.

--Senior third-person correspondent Travis

Were you recently laid off? Don't despair. There is probably a hedge fund out there who wants to hire you. Oddly enough, the strongest demand is for people with experience in structure credit products, especially mortgage backed securities, according to David Ellis at CNNMoney.

Realizing that there could be plenty of opportunities to get good assets on the cheap, distressed opportunity investors want people who can assess the value of these toxic products, notes Pat Wieser, partner and co-head of the global banking and markets practice of the executive recruitment firm Rhodes Associates.

Former Credit Suisse broker Julian Tzolov, under investigation for being a sheep and pushing auction rate securities, is thought to have fled to his native Bulgaria. (Suicide has been ruled out, faking one's own death apparently only be de rigeur among the hedge fund set.) Tzolov resigned from the firm on September 7, 2007, so he's presumably been planning the trip for a while. That, or he's not in Bulgaria at all, and has simply been waiting for his god damn ShroomBurger.

The Journal noted that Credit Suisse itself is not a target of the probe, Tzolov apparently evidently being a go-getter who probably would've been more suited to certain other Swiss banks.

Broker Goes Missing As Securities Charges Near [WSJ]

And don't forget: buy Bear Stearns. [CNBC]

Here's a copy of the formal complaint from the Massachusetts Secretary of the Commonwealth charging Merrill Lynch with fraud in pushing auction rate securities as sweet deals even though the dealers knew that wasn't exactly the case. We haven't slogged through the eighty pages yet, but here's something you might like, from p. 7:

As one executive confided to a personal acquaintance in an email on November 19, 2007: "Market is collapsing. No more $2k dinners at CRU!! The Financials are being invicerated! (sic). More firings over at Citi...Inventory flooding the street. Going to be a great '08 trading environment."

Merrill Complaint [Office of the Secretary of the Commonwealth]

Top first years, S&T: 60k, "plus a 20k increase in base."

Update: another self-described "top" first year in S&T claims it's more like 75K. I don't know what to believe. If only someone signing checks from the inside could comment definitively below.

Charlie Gasparino reports that former Bear CEO Alan "We've Got Liquidity Coming Out Of Every Orifice" Schwartz will leave Bearpont Morgan Stearns at the end of the summer. Schwartz has apparently been "working on some deals" at Bearpont, but decided--as did senior executives at the firm-- that the fit wasn't quite right. According to Gasparino, Amphibious Al has not yet decided what to do next, though a small boutique firm, major bank (please say Lehman), and private equity shop are all in the hopper.

Earlier: Alan Schwartz Declining Offer From JPMorgan Cayne?

I can barely even type this because I'm so upset that my hands are shaking and I'm experiencing chest pains and a tingly feeling in my left arm. GOLDMAN SACHS HAS BLOCKED ITS EMPLOYEES FROM COMMENTING ON DEALBREAKER, AS REGISTERED USERS OR GUESTS. Mind you, not from *reading* DealBreaker, but from commenting on it. This is unacceptable! I must know what the Masters of the Universe are thinking and feeling at all times! God! I'm going to go throw up now, more info as it comes in.

**Obviously this is some absurd measure from Team No Rumors but if MOTU are spreading rumors I'm sure they have a good reason, and their lies are better in every way than anything anyone from [insert inferior bank here] is going to leave on some random post about Cody Willard's health issues.

Bartiromo: CAN LEHMAN SURVIVE THIS?

Whitney: I -- I THINK -- I DON'T KNOW. I DON'T KNOW.

Future Of Financials [CNBC]

China's Shift on Food Was Key to Trade Impasse (NYT)
Tilt! It was the emerging developed nations to blame for the collapse of the Doha trade rounds, it seems. And here we thought it was all about the US protecting Iowa corn farmers. Turns out it was the Indians and Chinese hoping to protect key agricultural exports. Oh well. It's actually a good sign of the progress of both of those countries that they now behave like aging Western superpowers with something to lose.

Layoffs possible for 22K California state workers (AP)
The other day they were talking about paying all of California's state employees the minimum wage. Now they're talking about laying off 22,000 temporary and part timers to overcome a budget shortfall. Stepping back for a sec, is there any organization more cylically extreme than the California state government. It alternates every few years between crazy surpluses and crazy defecits, and never seems to realize that all good things must come to an end. Perhaps all political units are similarly misbehaved, but since California is a breeding ground for bubbles (tech, socal real estate), they just really feel it hard.

Broker Goes Missing As Securities Charges Near (WSJ)
Here's a shocker. The Credit Suisse broker due to face charges over... something... may have fled the country to Bulgaria where he's from. No official comment from lawyers or anyone, but the prosecutors obviously leaked this to The Journal to get the word out. Anyway, now the public can be on the lookout Julian Tzolov. If you see him, don't confront him directly. He may engage you in some securities fraud or something.

China's Debt Rating Raised to A+ by Standard & Poor's (Bloomberg)
With $1.8 trillion padding the bank account, S&P is growing increasingly confident that China can pay its bills.

We interrupt happy hour to report told that the House Financial Services Committee has finalized a bill introduced earlier this month by Barney Frank that would place increased regulatory scrutiny on bond insurers and rating agencies, according to sources in our nation's capital. The so-called "Municipal Bond Fairness Act" as the legislation is named, would require bond insurers to submit information about their financial soundness. It also requires ratings agencies to use one standard to rate both corporate and municipal bonds.

Frank has been one of the critics of the bond rating system, claiming that the ratings have raised borrowing costs for municipalities despite their relative safety compared with corporate debt. You already know what we think of this theory.

The bill will now likely go to the full House for consideration. We, on the other hand, are going to our local watering hole for drinks.

$$$ 65% of You Failed Level I of the CFA [LoSC]

$$$ KKR Valuation [Breaking Views]

$$$ UBS pays Massachusetts $1 mln to end probe [Reuters]

Can we talk about Australian banks for a moment? Earlier this week, ANZ Bank of Australia warned that its profits could fall by 25% and said it was writing down $1.2 billion (Aussie money) of bad loans. This contributed to a massive sell-off in Australian financial stocks, which were already hurting from last week's news that National Australia Bank was taking a $830 million write down.

ANZ's problems are simply an Australian version of what's been happening in the US--a housing boom was attended by a mortgage boom (or was it the other way around?) and now mortgages are defaulting at unprecedented rates. NAB's problems, on the other hand, aren't even an Australian version of what's happening in the US--they are what's happening in the US. Most of NAB's write-downs came from debt linked to the US mortgage market. NAB said it is suffering a 50% loss on American housing loans.

Veteran Australian business writer Robert Gottliebsen says that this paints a very bleak picture for financial markets around the world, and for the US in particular.

"This is an unprecedented event and means that the cost of bailing out the US financial system is now far beyond the highest estimates. A US recession is now locked in, but more alarmingly, 55 per cent loan losses point to the possibility of a depression," he writes.

Gottliebsen thinks that write-downs of $1,300 billion "and perhaps even more" are "on the cards."

NAB will shock Wall Street [Business Spectator]

Honestly, we never cared much either way about massage enthusiast/Bear Stearns investor Jeff Epstein but we're starting to love The Ladies Man who, according to Page Six, has been spending his incarcerated days "at the [prison] library e-mailing various models he befriended in New York, sending them boxes of chocolates and promising them career help." No sense wasting time getting back in the saddle.

We Hear [NYP]

Top second years: 95k.

Related: Goldman Changes Bonus Schedule To Treat Plankton Like People

The China Securities Regulatory Commission has ordered domestic fund managers to not publicly badmouth any Chinese stocks, in an effort to maintain stability "for the sake of a harmonious and successful Olympic Games."** This is a great idea and one that SEC chairman Christopher Cox would be wise to emulate, though, not being able to trust Wall Street to listen to him ought to think about the old sock in mouth, duct tape around face method which would be both an effective means of policing and amusing to all. Perhaps even pleasurable to some (you know who you are).

So far the moratorium on negativity hasn't done jack, with the Shanghai Composite Index continuing to fall since the CSRC laid down the law but these things take time. And in other China-getting-psyched-for-the-games news.

China Muzzles Its Money Managers [Portfolio]

**Loophole: it said nothing about privately bashing your company of choice via well-timed IMs along the lines of whatever is Chinese for: "I'd sooner give my daughter a presumably lead-laced Barbie doll than give this company my money."

The parent company of Bennigan's, the Irish-themed casual dining place, filed for bankruptcy yesterday, resulting in the closing of 200 Bennigan's sites along with the 50 remaining restaurants of sister spin-off, Steak and Ale.

However, the 138 franchisee-owned restaurants are expected to remain open, though their future is uncertain without the support of the parent company, Metromedia Restaurant Group.

The casual, mid-price dining segment of the industry has struggled badly in recent times because of higher ingredient and labor costs coupled with downturns in consumer spending. People are dining out less or switching to fast food joints to save money.

I never was a fan of Bennigan's, with my preferred casual dining chain currently being The Cheesecake Factory (On a side note, if you are a Cheesecake Factory fan, they are offering $1.50 slices of cheesecake today to celebrate their 30th anniversary). Applebee's, which truly turns my stomach, is extremely popular near me because our local spot offers half-price appetizers after 10 pm, making it the perfect, cheap munchies food. Other than that after 10 pm traffic, I doubt they are getting many diners. Or at least I hope they aren't.

--Food Services Correspondent Travis

Connecticut's Attorney General is suing the three major rating agencies for giving lower ratings to bonds issued by municipalities. Moody's, Standard & Poor's and Fitch Ratings are accused of costing taxpayers "millions of dollars" by AG Richard Blumenthal.

The idea behind Blumenthal's complaint is that the market has been mispricing munis for decades based on the assignments of the rating agencies. He asks us to believe that bond investors are unaware of very public facts--including the use of different ratings scales and the fact that the ten year cumulative default rate of muni bonds rated Baa is less than that of AAA rated corporate bonds. It requires, in short, that we subscribe to the idea that the markets have been radically inefficient in bond pricing.

Merrill Lynch needs a new logo to more accurately reflect the trajectory it's been taking of late, and its goals for the future. Though an image of CEO John Thain wearing a custom designed executioner's mask with space cut out for a ball gag would be the logical successor to the bull, this is a family firm and that kind of smut, while fitting, won't fly. Luckily, we have another good candidate for consideration.

The euphoria in financial stocks yesterday seems to have been largely built on the idea of that "cathartic vomit." The idea was that by writing down assets once again and selling off CDOs to Lone Star for 22 percent of their original value, Merrill Lynch had finally purged itself of the junk on its books. Never mind that we've heard that particular tune three times before. Everyone wanted to dance to it again.

But the morning after lots of people are having second thoughts. For starters, Merrill Lynch's financing for the deal is troubling. They put up 75% of the money used to buy the assets, and the loan is apparently non-recourse. This means that if the CDOs drop too much in value, Lone Star can basically put them back to Merrill rather than pay off the financing.

In a report entitled "On Second Thought ... " Bank of America analyst Jeffrey Rosenberg explained that "Merrill now finds itself effectively in the position of having sold off its upside but retaining its downside."

In other words, this alleged sale seems like yet another sleight of hand by Merrill's management, a way to move the CDOs from one column on the balance sheet to another while no one is looking.

Merrill CDO sale not as good as it looks: analyst [Reuters]

Merrill Lynch has banned the use of external hard-drives and other devices that could be used to take documents off its internal networks, a person familiar with the matter said. The company has been stung by suspicions of leaks after its stock moved wildly in the days leading up to its announcement of new write-downs and capital raising efforts.

We're also told that Merrill has circulated a memo to employees warning them against engaging in rumor mongering.

"We have more capital than we need, so we can say to the market that we don't need more injections. We can confirm that we have tackled the problem."

That was John Thain, back in March. Only a few months later, of course, Merrill Lynch had to go back to the market to sell more equity to deal with credit market losses. But this time they swear they really have tackled the problem!

Portfolio's Megan Barnett has a run down of broken promises from banking executives, including Thain's. Perhaps our favorite comes from Ken Thompson, who was the chief executive of Wachovia when he said this back in May 2006: "The mortgage market is going to be a great market in this country for a long time. We've got population growth. We've got people who are always going to want to live in homes that they own. It's going to be a great market."

"I Said What?!" [Portfolio]

As expected, the Federal Reserve is extending the broker-dealer discount window. The special borrowing facility which was launched following the collapse of Bear Stearns was scheduled to terminate in September. Now the Fed says it will stay open until January 30, 2009. The discount window has been cited by folks like Pimco's Bill Gross as the reason why he remains confident that Lehman, among other investment banks, cannot fail.

The Fed also said it will extend the term lending facility that has provided additional liquidity to commercial banks. What's more, they added a longer term borrowing facility, allowing banks to borrow for up to 84 days. Previously, banks borrowing under the facility were limited to 28 day terms.

We figure the weirdest part of Treasury Secretary Hank Paulson's enthusiasm for covered bonds is the untimeliness of the products. In an atmosphere where banks are failing because of bad bets on mortgage assets, having a product that ensures bonds against bank failure with mortgage assets doesn't seem all that exciting.

But, as we've said in this space, maybe the government is counting on investors to buy covered bonds because they are more than they seem. What if covered bonds are "covered" by an implicit government guarantee? That's what Steve Waldman thinks is happening.

A guarantee by the issuing bank has gotta be worth something. If it were 2002 again and the banking industry had adopted this originate and guarantee model (rather than the originate and forget model they chose), perhaps we wouldn't be in the current mess. But it is not 2002. These bonds will be offered by banks that would already have collapsed without vast support to the financial system by the Fed and the US Treasury. Guarantees by money-center banks are no longer bonds of confidence in the prudence or skill of bank managers. The value of such guarantees comes from a different place, from the notion that it is unthinkable the state would permit these banks to fail. A covered bond offered by Citi or Bank of America would only default if a titan collapsed. Investors might reasonably believe that would not be permitted to happen. If they are right, then these bonds are indeed covered. They are covered by you, dear taxpayer.

We're all Fannie Mae now.

Covered by whom? Bonds on what? [Interfluidity]

Next up: a cumulative total of what John Thain has spent on size 12 high heels and tickets to Epcot since taking office (we all have our coping mechanisms, people).

[Econompic Data via Big Picture]

The commercials for used catheters on CNBC-- why?

The SEC has extended its emergency limit on short sales, which was supposed to be over yesterday, to August 12. Sadly, the companies--Wachovia, National City, WaMu-- begging to be added to the 19-man roster, have been denied. Not that those being left out of the fun are ready to see it this way just yet, but this is actually a good thing. If the SEC threw you a bone, you'd be required to spend at least a few hours coming up with another person or organization (Corey Haim) to blame for your company being in the toilet.

SEC Extends Limit on Short Sales of Brokers, Fannie, Freddie [Bloomberg]

Oil down below $122 on demand worries (AP)
Is this a head fake? A consolidation at a lower level as oil prepares to race towards $200? Or are we on the back side of a parabolic curve, that will now see things hurtle towards $50 or $80. It wouldn't shock us if demand for oil meaningfully declined in this country. We've heard more than a few anecdotes about people pulling back. But then if gas gets down to $3 per share, it's time to take out the Hummer again, right?

Nintendo reports jump in quarter profit on hit Wii (AP)
No idea what expectations were on this one, so can't really tell you whether Nintendo had a good quarter on the back of its Wii gaming console. Profit in the quarter shot up 34 percent, so that's something. And total sales were $996 million (almost $1 billion) so that too is something. Just the Wii Fit addition sold 3.42 million units, which seems impressive.

After 7 Years, Talks on Trade Collapse (NYT)
Jeez, the Doha round has been going for seven years. Pretty sure we mentioned yesterday that it wasn't doing so hot, but yeah, seven years of futility cause they couldn't agree on farm subsidies. Of course we're against them here at the OB for all kindsa reasons, and we suspect that they hurt farmers in developing countries. But, just for the hell of it, is there a contrarian take that argues they don't really affect farmers in the developing world? Give it your best shot.

Dell Tests Player to Renew iPod Battle (WSJ)
Dell, really? A new MP3 player that comes with its own store. Really? Of course they've already tried this before to little avail. This time they're going with a more complete strategy, building out a new store and playing nice with others. But really? Then again, maybe Dell have learned something. SAI gave nice reviews to the design elemants on a new mini PC. But still.

$$$ "KKR will soon suck donkey balls in public"-- Steve Schwarzman [NewsGroper]

$$$ Outrageous claims: Goldman Sachs isn't omniscient. [TheDeal]

$$$ Prerequisite to Attaining Florida Mortgage Broker License: Criminal Record [1-2]

Earlier this month the U.S. attorney for the Southern District in New York charged 26 people with taking part in a mortgage fraud scheme companies that brokered loans with a total face value of more than $200 million. Many of the defendants worked for Galina Zhigun, who owns a Brooklyn-based mortgage brokerage called AGA Capital, which later became Lending Universe. The indictment said that the the scammer companies earned at least $4 million in commissions and fees. Lenders lost at least $4.5 million because they relied on false information.

So what kind of business was Lending Universe? After the jump, watching a video they produced to show you how easy it is to get a loan. And then write yourself a note not to trust mortgage brokers who play first person shooter games where they gun down lenders.

"Big firings" across JPMorgan credit today? Securitized products group, trading, etc? Anyone? Okay.

Oil billionaire T. Boone Pickens took a bath by betting with Carl Icahn in the battle to take over Yahoo. Pickens says he sold his 10 million shares of Yahoo. Pickens, who says he was simply following Icahn and admits he doesn't know how to send an email, bought his shares in early may, likely paying between $25 and $27. Yahoo is now trading five dollars lower, in the $20 to $22 range. That puts Pickens' loss at around $50 million.

Pickens rips Yahoo management, says he dumped shares at a loss [San Francisco Chronicle]

In a mere 69 years. As the logical bubble bursting follow-up to the Washington Post's report that FBN averaged 8,000 viewers during daytime programming and 20,000 viewers in primetime for July, up from 6,000 and 15,000 at the start of the year, Portfolio's Jeff Bercovici crunched some numbers and found that victory over CNBC is just around the corner. Assuming there is no growth from Englewood Cliffs--which is not likely, given the networks plans to introduce three hours of mid-day programming that will bring a sweaty, screaming, bench pressing Charlie Gasparino onto your trading floors--Fox will overtake CNBC and its 284,000-person daytime audience in 3,588 weeks (and with regard to primetime, a measly 884 weeks though I'm not sure who gives a rat's a about that).

Which reminds me--not a single one of you has sent us a commercial to air on FBN for the bargain price of $250-$900 for a 30-second spot. DO IT NOW, before it's too late, and the cost of achieving Foxtastic glory rises above what Cody managed at his hedge fund.

Fox Business Just Seven Decades From Victory [Portfolio]

The New York Sun has the clearest explanation of covered bond that we've seen.

A covered bond offers the holder what is known as a dual recourse. Normally, a bond is backed either by collateral or by a guarantee from the issuer. A covered bond is backed by both: One issued by Bank of America is backed by mortgages on the bank's balance sheet, as well as by the solvency of the bank itself. If the bank fails, the bond holder has a claim on the mortgages; if the mortgages fail, the holder has a claim on the bank.

If you're wondering how that helps a troubled bank in the midst of a mortgage default explosion, you aren't alone.

Treasury Plan To Boost Covered Bonds Greeted Warmly

There are so many questions about Merrill Lynch's sale of its CDO portfolio that have gone unanswered. For starters, is the seventy-five percent financing a recourse loan or a non-recourse loan? Is it secured by the assets Merrill just sold? And, most importantly, how did the value of the portfolio drop nearly 40% in just a few weeks?

After the jump, Antony Currie of BreakingViews explains: "Pricing is about as clear as mud."

Stop what you're doing and give me your full attention because we've got a scandal bigger than Merrill on our hands. Here is the shit, feel free, nay encouraged, nay obligated to disseminate because that's how super serious it is:

Yesterday Treasury Secretary Hank Paulson set forth guidelines on covered bonds, the secured debt instrument being urged by the government as a way to ease the credit crisis. Now we are wondering whether taxpayers might be on the hook for covered bonds if a bank fails.

The question was raised by a statement on covered bonds from the FDIC.

"As conservator or receiver for an IDI, the FDIC has three options in responding to a properly structured covered bond transaction of the IDI: 1) continue to perform on the covered bond transaction under its terms; 2) pay-off the covered bonds in cash up to the value of the pledged collateral; or 3) allow liquidation of the pledged collateral to pay-off the covered bonds."

If we're reading this right, it seems the FDIC is saying that a failed bank could be permitted to perform on its covered bonds. Allowing funds to continue to be funneled to bondholders could raise the cost of bank failures by leaving less money for depositors. There's no indication that the "continue to perform" obligations would be limited to the value of the collateral.

Emboldened by Merrill's courting of public embarrassment, Citi is likely to post third-quarter write-downs of about $8 billion from its exposure to collateralized debt obligations, according to Deutsche Bank analyst Mike Mayo.

Analyst sees $8 billion Citi writeoff after Merrill move [Reuters]

[via AP]

Related: You Say Harem, I Say Whorehouse
And Yet, This Is Still Preferable To Ace Greenberg Giving Us Intimate Details About Barbara Walters

In addition the sale of new stock, Merrill Lynch announced last night that it was selling CDO assets that had once been on the books at over $30 billion for just $6.7 billion, twenty-two cents on the dollar. What's more, Merrill itself is financing 75% of the purchase. That means that Merrill took in just $1.7 billion in cash for the assets it once said were worth $30 billion.

Perhaps the most troubling aspect of the sale is that just a couple of weeks ago Merrill marked these CDOs at $11 billion. If Merrill's CDOs can lose 40% of their value over a couple of weeks, how confident can anyone be in their other marks or the marks of other investment banks?

Hey there aspiring Little Steves-- nows your chance to sidle up to the big guy and remark, "Looks like we have the same taste in art, though mine clearly veers a little more towards the Renaissance Fair-inspired, gay works." Artist Damien Hirst is selling some new pieces from his 'animal-in-formaldehyde' schtick collection. Up for grabs at Sotheby's from September 15-16 will be "The Golden Calf," a calf in a-- wait for it-- glass tank of formaldehyde, "The Incredible Journey," a zebra in a-- wait for it-- glass tank of formaldehyde, and "The Dream Foal," the unicorn pictured above in a-- wait for it-- glass tank of formaldehyde, among others. Get them while they're hot. One item we'd recommend bowing out of is "The Kingdom," a tiger shark in a glass tank, which cannot please Stevie-boy, who is supposed to be the only one who owns such a display of badassery. Hirst had originally promised SC that the follow-up shark would be submerged in a tank of jello, in order to clearly delineate alpha v. beta fish, but it's been whispered that he ditched the gelatin at the last second, just to "see what happens." Spoiler alert: since what will happen is the BG ripping your face off, you'd be wise to let him have this one, unless of course you're into that sort of thing, in which case, proceed.

Artist Hirst Jumps The Shark, Cuts Out Dealers [NYP]
Golden calf, bull's heart, a new shark: Hirst's latest works may fetch £65m [Guardian]

Are we done with the nonsense about rumor mongers pushing down the stocks of broker-dealers? The only false rumors we've heard lately have come from the c-suites of Wall Street. John Thain repeatedly denied that Merrill Lynch needed to raise capital, but now Merrill is taking an enormous $5.7 billion write-down and raising $8.5 billion by selling new stock.

"We deliberately raised more capital than we lost last year ... we believe that will allow us to not have to go back to the equity market in the foreseeable future," Thain said in Tokyo in April. Apparently three-months later was not foreseeable.

Cue the chorus of "the worst is now over" and the reassurances that this is the last round of write-offs. Raising questions about whether Merrill understands its own balance sheet is probably rumor-mongering so we won't even get started on that.

Quotes from Merrill's Thain on capital needs [Reuters]

This is the one we've been waiting for, people. Manhattan Federal Judge Colleen McMahon, none too pleased with the stunts pulled by Sam Israel, is taking away his toys. McMahon signed a preliminary agreement yesterday demanding the industry's biggest M*A*S*H fan hand over the scooter he tooled around on after faking his death, the RV he was hiding out in, a Tiffany watch and the $932 that was in his pocket when he was arrested on July 2 in Southwick, Massachusetts. Here's where we come in: all the items are being sold, with any profits-- and if I know the DealBreaker audience and its sick fetishes, there will be many-- going toward the $150 million Israel owes in restitution. We'll post more information about the sale as soon as it's available, and, in the meantime, pray to God authorities will recover the love tokens Israel had stashed around his apartment in anticipation of his reunion with the egret, and the condom they used on their last night together (just kidding-- Israel convinced her to go without, noting that any man-bird that came of it was meant to be).

Wall St. Swindler Loses Scooter [NYDN]

Alcatel-Lucent Announces Chairman Serge Tchuruk and CEO Pat Russo to Step Down
When Lucent merged with Alcatel, it was always known that CEO Patricia Russo would stand down before too long, basically once the integration was done. Actually, it's a little surprising she stayed in her post this long, given that they've been merged for quite a while, and the fact that the combination has yet to bear any fruit. It posted yet another loss this morning. Beyond that, the company's chairman is stepping down, as it prepares to do a bigger board shakeup that will see a smaller board and fresh faces. Out with the old entirely.

Unilever hangs on to European laundry list (FT)
Everywhere you look, folks are selling units here and there, just to pocket some extra cash. Unilever has should its laundry business in the US, though it's keeping the European laundry business. The US unit was sold for $1.45 billion to Vestar Capital Partners. Given the voracious appetite for cash, it seems like it might be a good time for the Vestar Capitals of this world... selectively picking up assets from sellers desperate for scratch. It's kind of like being in the pawn broker business, no?

Still no mark to market (Information Processing)
The math on Merrill's big stake sale: "Mortgage-backed assets with face value of $30.6B were just sold by Merrill for $6.7B. 1) obviously, this reflects huge losses and forward looking expectations of a very high default rate on the underlying mortgages (over 50%?) 2) but, amazingly, this 80% loss on the securities only gives a kind of upper bound on their value: Merrill had to provide 75% of the financing to the buyer! Even with an 80% haircut Merrill might not have found a real buyer for the assets at this price." He then notes the similarity to the go-go .com days when companies, to make their number, would finance their customers' purchase of expensive networking gear -- though that was before the bloom was totally off the rose. Also, at that time, companies were financing gear purchases by giving their customers stock, which was pretty crazy.

Monitor110 Learnings: The Good, The Bad, and The Really Bad (InformationArbitrage)
The death of Monitor110 got a lot of attention a couple weeks ago, particularly as the company had raised quite a bit of money and was the recipient of a lot of media attention over the last couple years. Anyway, key principal and investor Roger Ehrenberg has written a couple of excellent post-mortems that are well worth your time. So check it out.

$$$Deals: From Feast Back to Famine?
In our M&A Roundup for the period ended July 26, blockbusters finally run out after two big weeks of dominated by InBev and Dow Chemical. [CFO.com]

$$$ Dead chickens, secret formulas, a rumor investigation, a ban on naked people shorting. [TheDeal]

$$$ Countrywide Wins 'Worst Company In America' Award [Consumerist]

Related: Dick Bove's Going To Make You Rich

More Bank Failures Likely Before Financials Recover [CNBC]

Standing alongside representatives of Bank of America and Washington Mutual, Treasury Secretary Hank Paulson sought to strengthen financial institutions by issuing "Best Practices for Residential Covered Bonds," a move some hope will make it easier for banks to borrow money.

Hold on. We have that wrong. It turns out that Washington Mutual, which is the one of the only two issuers of covered bonds in the United States, didn't get its place in the spotlight today. Instead, Paulson was surrounded by Bank of America (the other issue of covered bonds), JP Morgan Chase, Citigroup and Wells Fargo. Did someone just forget to invite Washington Mutual to the party? Or does the impending doom of Washington Mutual make them an awkward guest at the party?

Long before we were told by the Securities and Exchange Commission that short-sellers and rumor mongers were behind our credit market crisis, blame was being heaped on the ratings agencies. While we've since moved on here in these United States, attention in Europe has largely remained focused on the ratings agencies. The Europeans are proposing that regulators take on oversight responsibility for the agencies, on the dubious assumption that regulators will better be able to determine errors in credit quality assessment than market processes.

But we have a better idea.

All the financials are down today but taking the lead is Merrill Lynch, closing in on a ten percent decline. We want to know why. There was some talk on Friday about a report by Mffais.com that said