$$$ Jeffrey Epstein in Real Life [Daily Intel]

$$$ Adventures in Diligence II: The Paper Cut [Going Private]

$$$ Are Walruses Efficient? [LoSC]

$$$ MBIA wins through sheer force of boredom. [Portfolio]

The inquiry into what the banks knew about the structured credit products they built from mortgages has begun to show signs of moral panic and paranoia. Already we’re seeing the typical result: really bad, radical ideas being put forth as sensible, or even obvious reforms.

Take the proposal coming from some securities industry specialists to make public the due-diligence reports provided to banks by independent diligence specialist. “We need to…improve the due-diligence process by standardizing it and by disclosing” the results to ratings agencies and investors, said Rod Dubitsky, head of asset-backed securities research at Credit Suisse Group, told the Wall Street Journal.

We now know that more information does not equal transparency—it often simply muddies things further. Even worse, knowledge that diligence reports will be seen by investors will create incentives for banks and diligence companies to conspire to produce clean reports. A public diligence report would very likely be less diligent than one that can be kept private.

This is not an abstract fear. The pressure to clean up reports already exists for fear of litigation. Everyone who has done this kind of work knows that there are certain things you save for the conference call, the contents of which are far harder to subpoena, request through discovery or conclude. One bank we worked with—in our lives before DealBreaker—regularly requested that no records be kept from diligence and all reports be delivered verbally.

Destroying due diligence won’t save it.

Something’s amiss at UBS. Though the bank was set to pass out bonuses made entirely out of craptastic stock (down 35 percent for the year) and marshmallows today, employees are acting surprisingly calm, almost…too calm. One in wealth management tells us “we’re doing alright…it’s not a bloodbath” and the word from banking and trading is “it’s not the end of the world.” Is it possible that despite blowing a ton of money on worthless (but pretty!) ice sculptures for the holiday party at the Natural History Museum and losing a few billion dollars the other day, the friends o’ the SS aren’t stiffing all on b’s? We’re skeptical. And we remain unconvinced that no one’s angry enough to pull a Merrill. Are you planning something? Let us know.

The news that the police have seized French rogue trader Jerome Kerviel’s personal computer reminds us of a important rule of criminal behavior: don’t have anything incriminating on your home computer. We’re not just talking about a spreadsheet detailing your phony hedges. Anything that is even embarrassing to you or your friends and family can—and probably will—be used against you by the authorities. Legal culpability or admissibility is no guarantee of safety. Emails about an illicit affair? That’ll end up in the papers. Awkward conversations about a drunken weekend? You’ll be hearing about that on the evening news. Huge collection of music downloads? You’re not only a rogue trader, you’re a copyright pirate. That’ll make the news. The point is to drive the accused to confess, by almost any means necessary.

We can hope that this kind of abusive prosecution might someday be stopped. By hoping isn’t a strategy. Erasing your hard-drive is.

SocGen trader’s PC seized from brother’s flat [Reuters]

The rule that all business failures become criminal matters is bearing out in the subprime mess. Yesterday we learned of an FBI probe. (Gary Weiss expertly dissects it over on Portfolio.) This morning we learned that New York Attorney General Andrew Cuomo’s office is considering employing the ancient and dreaded Martin Act against Wall Street.

What makes the state law so powerful is that its broad definition of securities fraud doesn’t require a prosecutors to prove intent. It was a favorite weapon of Loathsome Eliot Spitzer when he held the AG’s office. Now Cuomo is looking to use it to show fraud in the packaging of mortgage bonds and derivatives, according to the Wall Street Journal.

“The attorney general’s office has issued Martin Act subpoenas, which don’t spell out whether matters are civil or criminal in nature, according to people familiar with the matter. So far, the recipients include financial firms Bear Stearns Cos., Deutsche Bank AG, Morgan Stanley, Merrill Lynch & Co., and Lehman Brothers Holdings Inc., possibly among others,” the Journal said.

“When they start using the Martin Act, you don’t run, you don’t hide, you don’t fight. You settle early, and often,” a veteran of an earlier round of Martin Act subpoenas told us.

These investigations can have serious costs for the target banks. Management gets distracted, legal costs skyrocket and settlements usually involve heavy fines. What’s more, the AG office can be much more difficult to deal with than the SEC, and it is much less predictable. Perhaps even more than the SEC, federal prosecutor and FBI investigations, this could spell serious trouble for Wall Street.

State Subprime Probe Takes a New Tack [Wall Street Journal]

Those watching CNBC’s “The Call” circa 11:30 this morning know that Charlie Gasparino lost a bet to Mary Thompson over how big Lloyd Blankfein’s package would be this year, with Melissa Francis officiating. The terms of the wager stated that the loser had to buy dinner at Campagnola. Interestingly enough, No Sleeves claims that he didn’t lose anything, but was simply doing the chivalrous thing that anybody boy worth his Rego Park salt would do, and treating the ladies (his words: “It’s the gentlemanly thing to do, and I am a gentleman”). Bull shit. The fact that said dinner, which came to $412.40, was paid for with a Visa card bearing the name “Gasparino” (expiration date: 09/08) is irrefutable proof that Charlie Gasparino is a terrible judge of size. Anyway. As NS noted, we enjoy chronicling his every move, from “what deli meats [he] eats to where [he] works out,” so obviously we sent Intern Scott to pose as the pepper grinder and take copious notes, as well as the Visa number with which we bought a bunch of shit for ourselves (mostly Italian delicacies filled with nitrates so the theft would go undetected). His report:

- Charlie: Mixed green salad, Dover sole with ketchup (women registered shock and disgust over choice of condiment, and I would agree), steamed broccoli on the side. (Consumption of the salad seemed forced, as though he would’ve preferred another dish but sensed he was being watched)

- Melissa: pasta with some sort of cream sauce (recommended by maître d’ “Frankie”)

- Mary: house salad

- Melissa/Mary: Split a T-bone for 2, home fry potatoes, creamed spinach, steamed broccoli

- Sooprezat on the table, Charlie didn’t touch it (odd)

- White wine

- 1 Napoleon, split three ways

- Charlie gave shit to some Goldman guy

- Frankie mentioned that Charlie had been there the night before, and the night before that

- “A lot of pinky rings”

We also have some brief footage of the dinner, after the jump.

The Wall Street Journal has one of those paint by numbers articles today about how it’s inappropriate to dress casually in the office. It’s full of helpful information like “don’t wear ripped jeans that haven’t been washed in three weeks and smell like wet dog” and “Take off your cock ring before you come to work, unless you plan to ‘liaise’ with your secretary that morning.” So it’s not *entirely* useless.

But my issue is that it seems to be addressing idiots. People who don’t get why cargo pants might not be the best choice to roll up to an interview wearing (full disclosure: I don’t either). Toilet cleaners who are just trying to get by without getting fired. And that’s not you, the highly affluent DealBreaker audience that advertisers love. You’re moving up, or at least you’re attempting a vertical climb and since the Journal won’t belay you up there, DealBreaker will. I’m going to tell you a secret someone once told me: talent doesn’t matter. Same thing with initiative and work ethic in general. All that matters is the clothes, and remembering three words: act as if.

Are you a P&L analyst at SAC looking to impress the grand poobah by mimicking his sartorial picks? You wear a zipup sweater, cookie crumbs, no pants. Bottom feeder at Blackstone? Fine Italian suit with bib. Nobody at Merrill? unitard. Interning for Brian Hunter (unpaid, college credit only)? Shroud yourself in a cloak of failure and call it a day. You get the idea. Now, who’s ready to start dressing the part and making a name for himself?

Law Without Suits: New Hires Flout Tradition [WSJ]

Is Bank of America’s acquisition of Countrywide in trouble? You wouldn’t think so if you’re looking at the spread between where the shares of the two companies are trading. The spread between the shares and the offering price has narrowed dramatically in the last few days, from a high of nearly 25% to the current 15% gap.

But today the Monaco-based hedge fund SRM Global Fund filed a 13D complaining that the merger plan does not deliver “sufficient value” to Countrywide shareholders. SRM has acquired a 5.19% stake in Countrywide.

Most commentary on the deal has focused on whether Bank of America might back out. It has been described as a “bailout” and Bank of America’s role as that of a “White Knight.” The idea that Countrywide’s shareholders would balk at the deal comes as a surprise.

SRM seems to specialize in troubled home lenders. They also have a major stake in Northern Rock.

SRM 13D [SEC]
Countrywide merger criticized, BoA names mortgage exec [Reuters]

Credit Suisse is totally not going steady with Bear Stearns. Ruddy Brady Dougan—the Irishman who is somehow chief executive of the Swiss bank—told Credit Suisse bankers at the meeting of the Committee To Run The World in Davos, Switzerland that a deal to acquire Bear Stearns is a “non-starter,” according to Mark DeCambre at TheStreet.com.

But now everyone is awkward about it. Bear spokespeople decline to comment, look away embarrassed. The Swiss aren’t talking either, just staring down at their shoes mumbling about already having plans and such.

Credit Suisse CEO Squashes Bear Stearns Takeout Talk [TheStreet.Com]

Wes: Yo, dude! What did you do this weekend?
JP: Same old shit, man. You know? Chewed some ice, waterboarded myself.

This message brought to you directly from subprime America.

So who is on this list of 14 companies under investigation by the FBI for their involvement in the subprime mortgage crisis? The FBI apparently intends to keep us in suspense because they won’t give details. All we know is that they are looking into “allegations of fraud at various stages of the mortgage process, from companies that bundled the loans into securities to the banks that ended up holding them.”

So let’s recklessly speculate. Two companies that are sure to be on the list are Bear Stearns—which is already under investigation by federal prosecutors and the SEC—and Countrywide, which is both the biggest home loan lender and also facing an SEC inquiry. Goldman Sachs is very likely on the list. It was accused on the pages of the Sunday New York Times of misleading clients by packaging CDOs while shorting the mortgage market. We know that at least one Senator read the article and has been making a stink, and we know that federal investigators often get their leads by reading the paper. What’s more, Goldman Sachs has said that it is cooperating with an unnamed government agency.

Morgan Stanley has also admitted to cooperating with unnamed government authorities. At first, everyone assumed this was the SEC. But why wouldn’t they come out and say that? More likely they declined to name the agency out of fear that saying they were cooperating with the FBI would tar them with serious criminality—rather than the everyday Wall Street shenanigans implied by an SEC investigation.

So that gives us four good leads. Who else is a cylon on the list? No doubt some additional mortgage companies and some home builders. Maybe the ratings agencies are also. Leave your guesses in the comments section below.

FBI Launches Subprime Probe [Wall Street Journal]

Who remembers that Craiglist ad from the 28 year old Goldman banker looking for someone to lavish with his (pretax) $722k bonus? I’m going to go with all of you because, frankly, it/he was unforgettable. The Viking stove, the custom-made oak dresser, the amazing dinners, the shopping, the great wine, the getting each other off fabulously and, of course, the baby’s arm aren’t things one lets recede from his/her consciousness so easily. Sure, the whole thing turned out to be fake and from the mind of someone named the Cajun Boy who does not really work at Goldman Sachs or at any other financial institution, including Bear Stearns, for that matter, but did anyone give a shit? No, us included. In fact, we were so taken by the imposter— “real” name: Thad— that we asked him if we could reprint parts of his journal on DealBreaker so that you all could live vicariously through his fabulous life. He said yes, if it would help him “score ass.” So if you enjoy the following installment, show your gratitude.

If there’s one thing that I’ve learned in my life to this point it’s that if you want something royally fucked up, leave it to the French. These days I can’t seem to go anywhere without someone yapping about Societe Generale and the “rogue trader.” I can’t even drop a deuce at Megu without the cat in the next stall jabbering into his phone about how the fallout from this shitshow coupled with the rising cost of yacht insurance have left him having to reevaluate the prudence of flying a cobbler in from London to re-sole his John Lobbs versus having the work done locally.

What chaps my sweet bottom most about all of this is that the name of the corner-cubicle dwelling derivatives trading fuckstick that is responsible for all of this is Jerome. In the history of white guys named Jerome, has there ever been a single one that wasn’t a complete toolbox? Negative.

I once met a French guy named Jerome. It pains me deep down where the body meets the soul to merely mention his name. In the times when I have discussed him I usually refer to him as “Cockblockus Maximus,” for he performed on me what will likely go down in the annals of cockblocking as the Waterloo of cockblocks, only that in this instance, the fucking French won. At the time I was on a first date with what I consider to be the holy grail of banking industry poon.

A “Jasian.”

Yesterday Merrill Lynch said that Greg Fleming—the bank’s president and chief operating officer—and Bob McCann—who heads the brokerage business—would not receive bonuses for 2007. This decision was made by the board of directors on Monday, according to a filing with the Securities and Exchange Commission.

Zeroing out executive bonuses has become something of a trend on Wall Street. Bear Stearns and Morgan Stanley have made similar moves. But before you weep for Fleming and McCann you should read the fine print. Both men received their base salary of $350,000 as well as “retention options.”

The real story here, however, is taking place more quietly and behind the scenes. Newly minted chief executive John Thain is working to dismantle some of the institutional hierarchy of Merrill, flattening the leadership structure and having more executives report directly to him. This is widely seen as effectively demoting Greg Fleming—who, for now, still holds the title of President of Merrill—who will no longer be a gatekeeper through whom more junior executives report to the chief executive. There has been some talk by insiders that the unwinding of the hierarchical structure that grew under Stan O’Neal has some executives bristling that they are losing rank and authority.

Yesterday Thain told investors that Merrill is exiting the collateralized debt obligations and structured credit businesses.

Merrill executives received no bonuses for 2007 [Reuters]
Merrill Lynch Filing [SEC]

Derivatives Write-Downs Hit MBIA (WSJ)
Just so you can keep tabs, MBIA lost $2.3 billion, as it took a quarterly writedown of $3.5 billion. The good news: without the writedown, MBIA is making a lot of money. $1.2 billion to be exact. And as typical for these things, the company also closed another $500 million stock sale to Warburg Pincus, as part of its previously announced agreement. Apparently, the company felt folks needed a lot of time to digest the news, since they put the release out just after midnight.

Starbucks axes sandwiches as part of fix (AP)
This is interesting. As part of its re-invention plan, Starbucks plans to eliminate sandwiches from its stores. You know, it’s all about returning to its java roots. It’s not that people aren’t buying them though. They reportedly get each store about $35,000 in annual revenue, around $100 per day that works out to, but we’re guessing that on the bottom line, they’re not all that. Maybe it’s time to install sushi bars.

Isuzu pulls plug on its auto sales (Bloomberg)
Isuzu is getting out of the US auto game, going the way of Mitt Romney’s Dad’s company. The company said it was hurt by a decision from General Motors to stop manufacturing one of its SUVs. That’s too bad. We’re going to miss those Joe Isuzu ads on TV. They’re funny. No, in all seriousness, we recall a few years ago some chatter about bringing that guy back. What happened to that? The company will still do auto parts.

Something New To Worry About: China’s Snowstorms (TechTraderDaily)
That snowstorm we mentioned yesterday, in China, turns out it’s really got people concerned. Some crazy stats: 107,000 buildings collapsed, 42 billion square acres of crops destroyed. And apparently companies are already blaming weak performance on the storm. It’ll be like El Nino is here. If you’ve got weak performance and it happens to be an El Nino season, then you get a little bit of extra credit.

$$$ New Fed Policy: ‘No Rogue Trader Left Behind’ [Jeff Matthews]

$$$ Jerome Kerviel (almost) did what brother Olivier could not. [Telegraph]

$$$ The Big R [WallStrip]

Well that rally didn’t last very long did it?

The word that FGIC Corp’s bond insurance arm was downgraded by Fitch today certainly didn’t help things. Not that this was totally unexpected. We predicted a downgrade today in a post early this morning. Charlie Gasparino was talking about this on Wednesday.

Fitch cut FGIC’s “AAA” insurer financial strength rating by two notches to “AA.” But further cuts may be in the works, as Fitch kept FGIC on negative credit watch.

FGIC has insured about $314.8 billion of outstanding bonds, making it the fourth largest bond insurer according to Reuters.

Bloomberg breaks it down for us: “About 71 percent of FGIC’s guarantees are on municipal bonds, 23 percent are structured finance and 6 percent are international transactions, according to the company’s website. FGIC guaranteed $21 billion of home-equity securities, $8.8 billion of subprime mortgage debt, and $10.3 billion of CDOs backed by subprime mortgages and other loans, the Web site shows.”

That’s a relatively low ratio of structured finance bonds to safer public finance bonds. Far lower, for instance, than the 36% structured finance at MBIA. This limited exposure to structured finance could limit the damage to banks that have purchased insurance from FGIC. But it also shows that Fitch was willing to cut the insurer despite ongoing talks of a Wall Street bailout, which could mean trouble for larger bond insurers and their customers.

Fitch cuts “AAA” rating of FGIC insurance unit [Reuters]
FGIC Loses AAA Rating at Fitch After Missing Deadline [Bloomberg]

A few weeks ago we reprinted a compilation of Tim Sykes’s hate mail, which he’d forwarded to us completely altruistically besides for the request that we link to his website. There were many gems. Many ad hominem attacks. Many instances of out of the box type insults (my personal favorite: “If I fed you rat poisoning, how long do you think it would take for you to die?”). Then we dared you to do better. None of you did. The latest batch of hate mail is horrible. Flat out sucks. You need to carry your weight, do your duty and push Sykes down—in a strange way, the emails are like the ‘dunk the clown’ stand at the carnival, and you’re to hit the very small target that would register with this idiot and potentially sink his incongruously large ego. There was one message that stood out from the pack in that it sucked slightly less than the rest. It was pithy, and it had a numbered outline differentiating insults. The rest: step up. Those who didn’t email at all: failing grades.

Talk of recession is everywhere. The Fed is cutting like a barber above a pie shop. Consumer confidence is sinking, spending failing to keep up with spending power. You can’t read a Fed statement without coming across worries about the credit crunch. You’d think that we might see an increase in defaults for leveraged loans that fueled the buyout wave that crested last year.

But you’d be wrong. The leverage loan default rate is at the lowest rate in years. We ended 2007 at a 10-year low of 0.1 percent for Moody’s-rated issuers, down from 0.6 percent in 2006.

So what’s going on? Are companies saddled with debt are simply especially healthy right now? Not very likely. What’s holding down the default rate is that it’s so hard for a company to breach a covenant these days these days, according to Reuters Jonathan Keehner and Megan Davis. In fact, it may be hard even to find a covenant that can be breached short of total collapse.

“The problem is that the most recent round of dealmaking partly removed a canary in the coal mine traditionally used by lenders to signal when a deal was in trouble,” he writes.

Lending agreements from the buyout boom had such loose conditions that some were dubbed “covenant lite” because they lacked traditional default triggers called maintenance covenants. Those covenants track a borrower’s ability to meet financial obligations.

Historically, a company that issued leveraged loans would break a maintenance covenant if it ran into liquidity trouble, said Kenneth Emery, who directs Moody’s corporate default research. Lenders would then be alerted to the situation early and could take corrective action, like selling assets, changing management or pushing the company into bankruptcy, according to Emery.

But without such strict covenants, the default rate could react less to liquidity issues at newly private companies — which may be at higher risk in a recession due to the debt load that often accompanies a buyout.

So companies can run into trouble and keep running without tripping covenants, and lenders may not be able to get them to the table until a lot of value has been destroyed. In short, the lower default rate may also lead to a lower recovery rate for lenders.

LBO companies’ health could be worse than it looks [Reuters]

Well, the 47.5% minority of those polled at DealBreaker got it right. The Fed announced a cut of 50 basis points in the target rate and the discount rate, meaning we’ve seen 125 basis points slashed off the Fed Funds target rate in the last week or so. As far as we can remember, this has never happened.

There will be some who wonder whether or not the Fed is misreading economic and market conditions. It notes that credit has tightened despite the easing of the commercial paper market, the refinancing jump in mortgages and a lower LIBOR. Still, it’s the cut that market wanted. Stocks jumped, bonds and the dollar declined. What was that we were saying about converting the dollar into a gift card with a short expiration date?

One thing that’s clear is that the Fed has become a lot less predictable, at least on any long-term basis. Two weeks ago, the chances of a 50 bps cut barely registered in the futures. And since then they’ve jumped all over the place. So it seems that the market isn’t sure what the Fed is going to do week to week. Or perhaps it’s the Fed that isn’t sure.

The full statement after the jump.

Sailfish Capital Partners is blowing up, according to the hedge fund experts at FinAlternatives. Yesterday the traders at the Stamford based fund were ordered to begin liquidating its entire portfolio as quickly as possible.

The trouble began when the two partners, Mark Fishman and Sal Naro, got into a shouting match yesterday. At the conclusion of the argument, they ordered the traders to start reeling in their positions.

“They told everyone to start selling their positions, to liquidate,” a source tells FinAlt. “It’s basically blowing up. Everyone is sending out their resumes. They want out. It’s basically mayhem.”

A spokesman for Sailfish dismissed the notion that there was a fight, describing the event as a “discussion.”

Redemptions are due tomorrow, and many investors are reportedly taking advantage of this date to pull their money. The fund saw major redemptions in October. It has been plagued by rumors of an implosion and employee dissatisfaction for several weeks.

Traders At Hedge Fund Sailfish Ordered To Liquidate Positions [FinAlternatives]

Mary in Indianapolis is a fifty year old single mother dealing with a deadbeat ex-husband who doesn’t pay child support and whose “financial incompetence” is about to drive their home into maybe forclosure*, which Mary is paying for because her name is on the mortgage, even though she’s living elsewhere and he’s shacked up with some floosie. Here’s the thing , and the thing’s two-fold. 1. I shouldn’t be laughing at this because this woman’s obviously going through a difficult time in her life, and, to be honest, there’s something oddly endearing about Dave of “The Dave Ramsey Show,” perhaps the soothingness of his voice, or the way he refers to himself as Mary’s “financial advisor” and to her as his “little sister” but 2. Angelo R. Mozilo woman! Are you seriously calling Fox Business for help here? Why don’t you just ask Jesus what he thinks you should do? He’s always been good with this kind of stuff. Or better yet, give Lon Varney a call. He’s not in the office right now, but try him on his cell:203-890-2000. I’m sure he’ll be able to get you out of this pickle.

*She thinks, she’s not sure.

That’s the question raised yesterday by Deal Journal’s Heidi Moore. Her suggestions:

Tom Cruise - of whom Kerviel’s Paris neighbors say he is a lookalike. But we think Paul Rudd–the romantic love interest from the classic film “Clueless”–wins the resemblance sweepstakes hands-down. Ed Norton, former boyfriend of Francois Pinault’s wife, Salma Hayek, has played men who make things disappear. Patrick Dempsey has the mop and the puppy-dog eyes.

We love this game. At first, the only suggestion the entire DealBreaker Bunker came up with last night was Charlie Sheen. But he already played this role back in Oliver Stone’s Wall Street. And we’d want that Sheen anyway, not Charlie from 2 ½ Men. Scratch Sheen, then.

Then a revelation came: Liev Schreiber should play Kreviel. He was brilliant as Richard Roma in the production of Glengarry Glen Ross a few years ago. He’s got what the New Yorker once described as an “uncanny instinct for isolating the frightened, frail, goofy parts” of characters. And when we saw him in Talk Radio he smoked up a storm, which means he can definitely play French.

Who Would Play Jerome Kerviel in the Movies? [DealJournal]

Update: Now the Telegraph is in on the game too.

There’s a shocking story in today’s Post about how Countrywide’s Angelo Mozillo said the company would be profitable in the fourth-quarter and—HOMG—it wasn’t. An investor in Georgia is “a little bit disappointed” that he lost $3,200 and a lot of people are just plain hurt that they were taken for a ride (in AM’s red Iroc, whose plates read: ‘mohazard’). The shocking part is that the paper is supposedly surprised that Mystic Tan man would lie about the mortgage lender’s outlook, even though it’s been established for some time that Ang. would, in his own words, “screw you for a nickel, or a used tanning bed and some UV goggles.” We’d expect this sort of bright-eyed innocence from Andrew Ross Sorkin or Don Klarney but the Post? You guys are supposed to be better—and more versed in jabroni—than that. Oh well. You know we can’t stay mad at you for too long. Not when you’re turning out graphics like that.

No Bottom Yet [NYP]

Just in case you missed it last night, we’re bringing the reader poll on today’s Fed decision back to the top of the page. There’s about an hour left to vote for this before we shut down the poll and start gearing up to cover the aftermath.

Wrangling over a plan to bail out troubled bond insurers is inviting a downgrade by ratings agencies, according to source familiar with the discussions within one of the agencies. New York state insurance regulators have asked the agencies to postpone a downgrade while they work out a plan with Wall Street banks but a flurry of news stories have suggested that the participants in this discussion have not agreed on a plan and may be hesitant to fund a bailout.

“The story in the Journal this morning may be the last straw. It shows that there is no plan, and it sounds like not much progress has been made,” the source said.

This morning the Wall Street Journal reported that as many of three plans are being discussed. It added that there was no consensus that a plan was even needed or how it would be paid for.

The ratings agencies are concerned about their credibility. They have come under fire recently for failing to spot troubles in the mortgage market and its effect on many derivatives. They are now loathe to be seen holding back at the request of regulators. Yesterday Charlie Gasparino reported on CNBC that a Moody’s spokesman had told him “we don’t forbear on our ratings” based on talks with government officials.

Also contributing to the likelihood of a downgrade this week has been the lack of involvement by the Treasury Department or the Federal Reserve. New York State insurance regulators do not have the prestige or persuasiveness that higher level involvement would, according to the source.

A downgrade could come this week, perhaps as early as today, the source tells DealBreaker.

Good Plan, but Who Will Pay? [Wall Street Journal]

What a difference a day makes. Just two days ago, DealBreaker’s reader poll revealed an almost even split between those who thought the Fed would today announce a 50 basis point rate cut and those predicting a 25 basis point cut. The 50 bps cut had a slight edge, in fact.

Late yesterday we began a new poll asking about the cut, and it shows a dramatic shift in sentiment. The 25 bps cut now leads decisively, garnering support from 58.2% of responding readers. Good economic news, perhaps coupled with suspicions that last Monday’s sell-off and subsequent emergency rate cut was sparked by SocGen selling off positions by their allegedly rouge trader, seems to have persuaded many readers that the Fed cut won’t be as deep.

Others have begun to argue that the Fed won’t cut deeply today in order to preserve some dry powder for later cuts.

“Bernanke has the choice of give his all (meaning 50 to 100 bp) and seeing the market rise briefly, then fall under the weight of ongoing reality. Or he can do 25bp, and watch the market fall,” Finn of the Blax Alternate blog argued in comments. “With the small cut, he can save face and and say, ‘Well, we could have propped the market if we wanted to, but are being responsible’ (all the while praying the market rises). With a 50bp cut or more, he basically tosses all his power into the ring, only to demonstrate to all that the Fed is powerless (as well as desperate, and foolish).”

Becky Quick made a similar argument this morning on Squawk Box.

This shift occurred prior to the release of data this morning showing that the the U.S. economy slowed sharply in the fourth quarter of 2007. Gross domestic product rose at a seasonally adjusted 0.6% annual rate October through December. These numbers were likely available to Ben Bernanke yesterday, and so may have already played a role in the FOMC’s rate cut discussions.

We hear that Cowen & Company has quietly been making cuts to its investment banking units. Like many financials, shares of Cowen & Company have suffered tremendously in the past year. It is down 52% over the past 12 months, worse even than Bear Stearns. A source told DealBreaker that the investment bank had cut several bankers in their consumer division a few weeks ago. Further cuts have also been made in the healthcare group and bankers in the technology group have been quietly informed they should begin looking for new jobs, according to the source.

Cowen & Company could not immediately be reached for comment.

Important Update: Further news arrives on the folks let go from Cowen & Company. According to another source familiar with the matter, the people shown the exit were very junior people who were let go because they were not performing up to expectations.

Also, some readers have protested that this item implied a direct connection between the price of the stock and the layoffs. Perish the thought. We intended no such thing. But we did believe that readers would be interested in hearing how C&C’s stock was doing these days.

China Snow Crisis Shows Vulnerability (AP)
This isn’t a metaphor. The China snow crisis is just that, a crisis about snow. As in the cold white stuff that we’ve had none of this year. Apparently certain parts of the country are getting hammered, leading to all kinds of supply chain issues and shortages of food and fuel. Just like our politicians, the Vice Premier has “repeated calls” on coal deliverers to make sure gets delivered. And we thought only politicians that had to run for office “repeated calls”.

Yahoo Profits Fall 23%, Cuts 1,000 Jobs (InformationWeek)
Investors were expecting a weak forecast and layoffs and that’s what they got from Yahoo. There were probably some people holding their breath, hoping for some sort of shocking, out-of-the-blue surprise, but no. The company is still in shift mode, changing its strategy, realigning, repositioning itself, etc. And it sees “headwinds” this year, which means it’s flying perfectly, but outside forces on which it has no control are slowing it down. Right.

The Bond ‘Transformers’ (WSJ)
Who says government is pure reactive? Well, they’d be right. And who says regulators often foolhardily attempt to fix complex problems with simple, band-aid solutions? Well, they’d be right too. New York regulators are, get this, looking to close a “loophole” that allows bond insurers to dabble in derivates. Great timing on that. You can read the details here, but the point is, it’s pretty rich timing, with the bond insurers knocking on heavens door to start thinking about if they could’ve done business in some safer, more transparent manner.

A Dose of Realism for VMWare (MarketBeat)
After delivering some disappointing numbers on Monday night, VMWare got crushed yesterday, falling over 30 percent. The bloom, as they say, is off the rose. MarketBeat looks at the new sentiment towards the once-hot virtualization company. Funny how things can change overnight. Suddenly, it’s just another enterprise IT play clawing it out for a chunk of scarce dollars.

$$$ This is by far our favorite thing of the day: YouWalkAway.com.

$$$ Barry Ritholtz says farewell to Ben Stein.

$$$ Jerome Kerviel: French National hero?

$$$ Anyone care to venture a guess how early Rudy drops out of the race and endorses McCain?

$$$ Mentors and Strategies [MM]

$$$ Here’s the 74 billion question: Was the Fed’s decision to cut rates last week the indirect result of Kerviel’s unauthorized $74 billion in trading positions, which SocGen was furiously unwinding on MLK day? Bonus round: has the realization that it was one bank’s unwinding made a deep Fed cut less likely tomorrow?

$$$ The question is, why wasn’t Charlie Gasparino quoted in, or at least consulted for, this story? [thestreet.com]

$$$ SocGen: C’est Le Takeover Time? [Deal Journal]

Following this morning’s economic reports the widely expected 50 bps cut from the Fed became a little less widely expected, with the futures showing a drop from 86% to 72%. An internal poll at Morgan Stanley, however, showed the opposite, with 73% of respondents predicting only a 25 bps cut, according to an email sent to clients this afternoon.

Our own polling, which had over 1,700 respondents, showed almost an even split between a 25 bps cut and a 50 bps cut. No other position got a significant number of votes. So we’re asking again, with just two options.

One thing you can always count on is that as geographic scope of businesses and finance grow, someone will call for the harmonization of the relevant legal and regulatory structures. Roger Ehrenberg blasts that familiar horn today, calling for “common regulatory frameworks” in order to minimize regulatory arbitrage and cut down on the “immense friction [involved in] operating regulated businesses across markets due to different rules and standards.” Felix Salmon applauds him, and calls for even more of the same. Somehow this is meant to be a lesson from our current credit crisis.

This is a terrible idea. Competing, conflicting regulatory frameworks may not be as efficient as an ideally-designed comprehensive system but it avoids many of the mistakes and oversights of the kind of harmonized regulatory framework we are ever likely to get. The availability of exit and avoidance, experimentation and local checks on corruption and capture are under-rated sources of regulatory strength. A harmonized system with do away with the nimbleness we praised earlier, and there’s little reason to suspect we’d get a system better able to catch abuses, fraud, waste and errors than that we have now. Less abstractly, if none of the regulators saw our current credit crisis coming, how would having a common framework have helped them avoid it?

We wrote about this ages ago in the context of European takeover law, and what we said still applies: let a thousand regulatory regimes bloom.

What has the Credit Crisis Taught Us? [Information Arbitrage]
Dreaming of Regulatory Cooperation [Portfolio]

We’ve been trying to get in touch with people who knew Jerome Kerviel but the guy seems to be one of those “kept to him over the weekend at Societe Generale. Right now he’s just a name, a face, an accusation, a denial and lots of speculation. We want to find out who he was.

In case you’ve been too busy to notice, Kerviel is just about the most famous name in finance right now. He’s accused of causing a $7 billion loss at SocGen. After a brief period where it seems he may have gone fugitive, he turned up in Paris. After questioning by police it emerged that he admitted to placing the trades but denied any fraud was involved. The court released him on bail and declined to press fraud charges.

Now there are serious questions about what SocGen knew and when about Kerviel’s trading activities. There’s a widespread suspicion that if Kerviel’s trades were exactly authorized by the bank, it may have turned a blind eye to his risky trading. At some point he seems to have been able to make trades totally as much as ten times the losses the bank suffered. How did that happen with no-one noticing? The European futures and options exchange apparently raised questions about Kerviel’s trades back in November. What’s more, as we first learned from our commenters, Soc Gen’s panicked dumping of Kerveil’s positions seems to have worsened the losses.And now, of course, everyone is speculating that Soc Gen might get sold to someone.

We want to avoid all this “lone trader” and “nice boy who kept to himself” stuff. But it’s damned hard when no-one even seems to remember him. The more questions we ask, the more it seems he really was a loner desperately seeking acceptance and a way out of his congenital anonymity. It freaks us out to watch a cliche come to life.

Jim Cramer announced on a “Wall Street Confidential” segment today that he’s renouncing tech, which tech must really be beating itself up over, the loss of Uncle Jimbo’s support. Why is he turning his back on a sector he previously shilled for like Alfonso Reibera for Pepsi? Well, he’s “frustrated” with it. It’s the only cohort where you get a good earnings per share number and the stocks do nothing or go down, it’s the worst risk-reward in the game, no “pizzaz,” no new product cycles. The disappointment of VMware, blah blah blah let’s just cut the bullshit. The real reason Cramer is suddenly saying he was wrong about Tech is that he read a piece from this very website earlier this morning in which the author said he agreed with the bobblehead and it’s just been constant waves of revulsion pulsating through his body ever since. Those close to him say that Cramer has put in motion a two part cleansing process (which he’ll discuss on “Mad Money” later today). Step 1: take back anything he’s ever said about anything ever Step 2: ritual suicide on Fox Business (pay-per-view perhaps, though the particulars are still being hammered out).

Earlier: Street.com Correspondent Gets First Date As Result of iPhone

Cramer Throws in the Tech Towel [thestreet.com]

It’s the new MLEC. And it’s probably not going to work out. Willbur Ross is not about to buy up Ambac. But, hey, everyone can be happy because Warren Buffett is riding to the rescue.

There’s little in Countrywide’s earnings announcement that seem likely to shake Bank of America from its desire to own the home lending giant. Indeed, shares of Countrywide moved up this morning and the merger arb gap narrowed to 80% or so, implying that traders are getting more confident the deal will eventually close.

This morning the Wall Street Journal carried an interesting article that claims to explain why Countrywide agreed to sell out to Bank of America. Pressure from ratings agencies and regulators threatened to end the way Countrywide did business, the article claims, and this drove the mortgageer into the arms of Bank of America.

But to really understand the article you have to read it backwards, like a teenager spinning a record backwards to hear the hidden demonic exhortation. The real story here is how the government has been funding Countrywide by lending it money through the Federal Home Loan Banks system and guaranteeing deposits in its CDs through the Federal Deposit Insurance Corp. Countrywide CDs had enormous interest rates, and those government guarantees allowed depositors to derive risk free yields of more than 5% in recent months. As those deposits grew, so did its ability to borrow through the FHLB, which allows borrowing on up to 50% of a home loan banks deposit assets.

In short, these government programs allowed Countrywide to escape the discipline of the marketplace for several months. And it was only recent attention from lawmakers and regulator that cast doubt on the willingness of the government to continue these subsidies.

Countrywide Deal Driven by Crackdown Fear [Wall Street Journal]

In the demonological pantheon of the subprime crisis orthodoxy, the deepest level of hell are reserved for unscrupulous lenders. Uncreditworthy borrowers live at a slightly higher plane, nearby unvigiliant regulators. But the cant and caterwauling of the orthodox overlooks that much of the world was focused on quite different concerns before the mortgage bills for the ownership society came due.

Despite our best efforts, we’re still cursed with a memory that reaches past this morning’s headlines. We cannot forget that the problem with the CDO market was supposed to be insider trading instead of the weakness of the underlying financial assets. And it was meant to be hedge funds that posed a systemic risk to the financial system rather than our venerable investment banks, money centers, trading houses and brokerages. The great accounting scandal was backdated stock options rather than marked-to-model financial products. In short, all the heat and light generated by our various guardians was aimed in the wrong direction.

Yet so strongly held was the belief in the old orthodoxy that, if you listen closely or read the New York Times business section on Sunday, you can still hear those who wonder whether or not insider trading or hedge fund manipulation is somehow behind our current troubles. There is not much evidence of this, as SEC Commissioner Paul Atkins pointed out recently.

“Although we and our counterparts in government are monitoring and looking into the origins of the events of the last year, it does not seem that hedge funds were the origin of the subprime problems,” Atkins said. If anything, some hedge funds and their investors seem to have been the first casualties of the current debacle rather than the causes.

We don’t mean this as a criticism of those guardians. Rather, it seems to us an indication that the actual risks in our innovative financial world are difficult to detect and that none of our journalistic and political institutions are particularly well-adapted to early detection. What we need is modesty in forward looking, crisis-avoiding regulations—often we may be aiming our resources where they are not needed, and diverting our attention from where they are. As the fellows at Goldman used to say, since we can’t tell where things are going, we’d best stay nimble. There’s a very good chance that once again the orthodoxy is hunting down imaginary demons.

When the cover of the magazine that includes your centerfold is a shot of you spread eagle with so much cum coming at you that you need special sunglasses to prevent semen-in-the-eye, I’d go with maybe. I don’t know, I’m not a doctor. Other random thoughts/questions-

- “Getting the niche of it”?

- “Agents as in plural” v. “One big agent”

- Is the idea of a sex tape really so insane as to be dismissed entirely?

- Cody, you bring up your mother twice. What’s the deal there?

- WHERE IS REBECCA?

Earlier: Market Movers: Dallas Cowboy Cheerleaders
Hot Sluts Are The One Thing Fox Business Can Do Right And They Can’t Even Do That

High ranking sources at Citigroup tell belated-birthday boy Charlie Gasparino that CEO Vikram Pandit is in favor of keeping the comically overweight bank large and in charge (the exact phrasing was “Jiminy Glick-esque”). This is crazy and maybe worthy of a siren because no one at Citigroup has ever expressed resistance regarding breaking up the big C. This is completely new and radical. This is such a drastic change in ideology from the last couple of Citigroup CEO’s that CNBC insiders say Charlie’s been wearing one of those foam neck braces to deal with the ensuing whiplash, though that probably has less to do with shock vis-a-vis Citi and more to do with trying to make a killing at his small claims court appearance later this afternoon, when he’ll argue that “that guy came out of nowhere and rear ended me and I’m not leaving without my fucking money.”

The latest consumer confidence numbers are raising fears that the unwashed masses of the what this once American republic—convinced, perhaps, that Heath Ledger’s death portends bad signs for our economic health—might not spend their allegedly economically stimulating government checks quickly enough or in the right ways. They may, it is feared, decide to save for a rainy day or reduce their own leverage for fears that an economic downturn would reduce their earnings. Quite clearly this would undermine the government’s plans.

Here are the facts: lately, American spending has not grown as fast as our spending power. Indeed, the evidence indicates that it is being converted to saving power, which means that the benefits of the stimulus package to the consumer sector of the economy—which, somehow, means the people who take money from the consumer in exchange for stuff—may be delayed. But this is only because our great and bright have not thought this problem through. The solution was under our Christmas trees this winter, and we only need eyes to see it.

We’re talking, of course, about gift cards. Instead of sending redistribution rebate checks to the people, the government should consider sending gift cards with short expiration dates. Ninety days might do the trick. (Money unspent could be applied to, well, most likely a new round of discount cards but it’s better not to reveal that ahead of time.) It would also save precious time that might otherwise be wasted depositing checks in the bank, where they might be tempted to deposit them in a savings account rather than a checking account.

Perhaps we underestimate our government. It could be that this is exactly what government plans to do anyway. Reducing interest rates should have the marginal effect of reducing savings rates, and increasing inflation will be a multiplier on this effect. At this point, the dollar itself should probably be looked at as a gift card that ought to be spent immediately to avoid its expiration date.

New dip in US consumer confidence [BBC]

Gay pimp Billy Ash sent us some photographs last night, two for what appear to be the purpose of protecting former boss Seth Tobias’s $25 million estate from the talons of his widow Filomena and one for just straight up vanity. Because I’d recently started asking myself whether or not our coverage of this murder case was bordering on disrecpectful, and worried we were blowing our chances of appearing alongside detectives Benson and Stabler in a small screen adaptation of this freakshow, I momentarily considered not posting said pictures.

But then I remembered that Mr. Ash is a former associate of Heidi Fleiss and the first thing Carney ever told me was that he “owes Heidi Fleiss a favor.” I’ll leave it at that. You’ll find the photos after the jump, because our publisher wouldn’t allow them on the main page, claiming they would “scare away [his] advertisers.” Exhibit A. is apparently the $2,250* bottle of champagne that Filomena sent Bill after her husband’s passing with the note, “the scumbag is finally dead.” Exhibit B. is the $15,000* watch B-boy received as a bribe to not testify. Exhibit C. is a photograph of Billy stylin and profilin at the Tiger Cubs’ annual GOP fund raiser. Murder trial or not, I think we can all agree he looks criminally hot.

*Ash’s estimate.

…is that it demonstrates so little contact with reality and finance.

And here’s good round-up of the most recent critiques of Mr. B.S.

These United States long ago cried Uncle but the President went right-on twisting our elbow behind our back yesterday, insisting that the not-even-great boondoggle plotted in our nation’s capitol could be described with terms like “economic” and “stimulus.” As is usually the case, this is a clear sign that there is nothing economic about the plan and little that is stimulating, unless triggering our gag reflex counted.

As our eyes threatened to glaze over we turned our eyes away from the idiot box and toward the mounting mountain of periodicals that demand our attention each week. For no particular reason we can determine, we received three copies of New York magazine last night. This had the surprising effect of convincing us to turn our attention to the magazine. Note to advertisers on dead trees: you may want to insist that magazines mail multiple copies to subscribers. At least it ensures the mass circulation magazine will be picked up and perhaps an eyeball or two will settle on the pricey ads you somehow still believe should be placed there instead of on, ahem, little websites.

Leafing through the magazine we found ourselves experience a bit of intellectual surprise. We were reading a column by a man named James J. Cramer—as he calls himself in print—and we were agreeing with it! We read on, mouths agape. Had this final act of the Bush administration accomplished reconciliation between Cramer and DealBreaker?

More on the potential reconciliation after the jump.

Baucus Stimulus Plan May Spur Conflict (WSJ)
One of those things they teach you in undergrad poli sci is that the Senate doesn’t like to take its cues from the House. The House could pass a resolution calling the Senate the most important of the two bodies, and the Senate would still find something in the language to change. So it’s no surprise that Senators are not quite ready to rubber stamp the eocnomic stimulus first passed in the House. Sen. Max Baucus has proposed an alternative econ stimulus plan, whose main divergence from the House bill seems to be that wealthy folks get a rebate too. There’s also an unemployment insurance extension not in the House. Just proves that the Senate/House divide actually runs deeper than the Democrat/Republican divide, which is actually sort of depressing.

Liberty Media Moves to Take IAC From Diller (WSJ)
The mind-boggling trapezoid known as the John Malone-Barry Diller-Liberty Media-IAC relationship has only continued to get more bizarre in the last week. Ever since IAC decided to split itself into five companies, the various parties have been growing tense and now Libierty wants Diller ousted. Great drama.

Operator of Walk-In Clinics Shuts 23 Located in Wal-Mart Stores (NYT)
This is too bad: we’ve always been optimistic about the role that retail, walk-in clinics could play in the healthcare system. You know, for your garden variety malady, you just walk in, pay $30 to a nurse and get your prescription. But what sounds good on an intellectual level doesn’t always work in business, it would seem. CheckUps, which was operating clinics inside Wal-Marts has decided to shutter 23 of its stores and it’s behind on payments to its nurses. Not sure what’s going on exactly, but obviously not a great sign.

Further revelations dent SocGen’s reputation (FT)
The Kerviel story has legs — which is as you’d expect when you’re talking $7.1 billion. Increasingly, it’s one of those what/when did they know kind of deals. And then when maybe earlier than previously admitted, even if the what isn’t obvious. But apparently warnings were given as early as a year ago about a trader named Jerome Kerviel and how he was trading Eurex derivatives. What exactly those warnings were, however, is not known.

$$$ Our CFO.com M&A roundup reveals that the merger-and-acquisition bust has hit full-force. Last week saw only 33 new transactions worth a total of $3.4 billion.

$$$ The Midtown Journal?[The Observer]

$$$ ______Sperm_Donor___$75-150___per_donation___ (Financial District) [craigslist]

$$$Jerome Kerviel is free on bail. He did it for the bonus. [Times]

$$$ Syms goes to the pink sheets. Blames Sarbox. [Business Wire]

$$$ Hoku [WallStrip]

—Bess Levin is on assignment. She will return tomorrow.

“Legg Mason is expected to announce that Mark Fetting will become its new chief executive, succeeding co-founder Raymond Mason,” the Wall Street Journal is reporting.

The last of the initial round of Term Auction Facility offerings is today, with the results expected to be announced tomorrow. Does this strike anyone else as strange timing?

The FMOC is set to meet for the next two days, and everyone seems to expect that the Federal Reserve will announce a rate cut on Wednesday. (In our poll this morning, a cut of 25 basis points trails close behind a cut of 50 basis points). Should this rate cut make it hard to know where to bid in the auction? If the Fed cuts more than expected, it may wind up penalizing the banks with bid for the TAF. If it cuts less, it could wind up giving them an especially generous deal. This no doubt puts added pressure on the Fed to cut exactly where the market expects, at the fifty basis point level.

Ben Stein was up to his usual silliness in Sunday’s New York Times, this week writing about a conspiracy theory involving traders manipulating the market in search of profit. He gives his theory a name—Financial Realism—because he bases it on something he learned about in law school called Legal Realism. According to his theory, traders have been using fear churned up by the subprime storm to push markets down in search of profits.

It’s a really radically theory of how easily markets can be manipulated. If traders could really move markets like Stein thinks, we wouldn’t already be hearing about January was a terrible month for hedge funds, and quantitative managers went through another 28 sigma event last week. And, as Gary Weiss points out, if Stein were right about this all being a result of manipulation, that would be good news. Because soon the efficiency of the markets would step in, set things right, the Fed wouldn’t have to inflate away are already meager savings and we could live forever on the big rock candy mountain.

“If the current market action is the manifestation of some sort of evil trader genius, they have executed it pretty poorly,” Naked Capitalism writes. “Every major firm should have been net short, not just Goldman. The investment banks, with their sales forces and research arms, are in a much more powerful position to push rumors. If the market fall was by design, pray tell me how it benefited the Street? They have taken over $100 billion in writeoffs, and the fourth quarter results are still coming in.”

After the jump, we get into it with a bit more detail with Stein again.

As long time readers of the site know, we’ve got an unhealthy obsession with the trivial. We write about things like bathroom conditions at Merrill, seating arrangements at SAC Capital, cafeteria sanitation at Bear Stearns. Which is why we’re so bored by most of the stories coming from Davos, where all the masters of the universe have been meeting. It’s all who said what at the panel on global warming, cooling or seizing? Boring! What do these people eat? Drink? Smoke? Where are the small, telling details about what it’s actually like to be at Davos?

Finally, however, Jeff Jarvis has produced the kind of story we can use. After the jump, check out Jarvis’ short video of the real seat of power at Davos.

We guess, according to this theory, short-sellers are Patriots and longs are Giants. Actually, that sounds about right.

The market is likely to surge if the Giants beat the Patriots, according to the Super Bowl Stock Theory by sportswriter Leonard Koppett.

It says the market goes up if the Super Bowl champ was in the NFL before it merged with the AFL in 1970.

The Patriots joined the AFL in 1960; the Giants have been part of the NFL since 1925.

Weird But True [New York Post]

Last week the Prime Minister of Qatar told CNBC’s Maria Bartiromo that the Qatar Investment Authority was “doing something” with one of the Swiss banks, prompting many conclude that the rumors of a large capital injection were true. But the Prime Minister insisted that he wasn’t taking a passive “capital injecting” role but had been out in the market buying stocks.

So which Swiss bank was the QIA “doing something” with and what were they doing? That coy little primte minister wasn’t saying last week but this morning the Sunday Telegraph reports that the QIA is considering buying as much as a 5% stake in Credit Suisse. The rules of the Swiss stock exchange require disclosure if an investment his 3 per cent of the company, and so far no disclosure has been forthcoming.

The Telegraph puts this in context:

Sovereign wealth funds from Abu Dhabi, China, Dubai and Singapore have snapped up large stakes in banks such as Citigroup, Merrill Lynch, Morgan Stanley and UBS as they wilted under the weight of huge losses related to the implosion of the American sub-prime mortgage industry.

Any investment in Credit Suisse by the QIA or another sovereign investor would, however, be seen differently. Other than a $1.9bn writedown related to the sub-prime crisis announced in November, the bank has so far emerged comparatively unscathed from the credit crunch and has avoided the need to seek recourse to cash-rich foreign governments in order to recapitalise its balance sheet.

Qataris poised to snap up $3bn stake in Credit Suisse [Sunday Telegraph]

How big has the global sell-off that began last summer been? Simply huge. Record numbers of stocks have traded hands on exchanges in Chicago, London, New York and Frankfurt, according to Bloomberg. But don’t get too long the exchanges yet. Fees are down, and many investors may simply be exiting the market altogether. The news out of Davos isn’t pretty.

“It’s been a good outcome for us in the short term, but we certainly have our concerns,” NASDAQ CEO Robert Greifeld told Bloomberg from Gnomeland. “We recognize that longer term, if we have economic issues, the trading volume will tend to go down. Our clients are all very concerned.”

Replace if with when (or, perhaps even with “now that”) in that quote and you’ll understand why even the exchanges aren’t popping champagne corks over the recent volume spike.

Seized-Up Credit Market Spurs Record Stock Trading [Bloomberg]

As hard as it is to believe, the guy who ran the market risk team at Merrill Lynch from March of 2005 right into last year’s Summer of Blood still has is job. In fact, Ahmass Fakahany was named co-president with Greg Fleming in May. But the dancing had to stop at some point since the music ended months ago. And this morning, Charlie Gasparino of CNBC reported that Am-Fak is set to resign later to day.

Update: Charlie G says that there are going to be more layoffs. There is a review of the brokerage business that is expected to result in job cuts. But no-one really fires brokers, you just don’t pay them if they aren’t earning for the firm. So these cuts will most likely be support staff folks.

Our polls have an excellent track record of correctly calling the Fed’s interest rate moves. The masters of the economy meet again this week, so it’s time for another reader poll!

We spend a lot of time picking on the columnists at the New York Times business section, particularly Ben Stein and Gretchen Morgenstern. They can be fun to read simply because they are often so laughably wrong. But, laughing aside, the best economic columnist at the Times doesn’t write for the business section at all. He writes for the Op-Ed page as an occasional contributor and his name is James Grant.

This past Sunday he delivered the not-exactly laughable message that pushing down interest rates to below the measured rate for inflation is not exactly a way of building a healthy economy.

Last week, as the Fed delivered its emergency cut of three-quarters of 1 percent, dropping the funds rate to 3.5 percent, the cost of living was rising on the order of 4 percent a year. Yet inflation was almost an afterthought in the press release in which the Federal Open Market Committee, the central bank’s policy-making arm, explained its surprise intervention: “The committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.”

If stability leads to instability, it follows that instability will eventually restore tranquillity. But first must come the tallying up of the errors, misjudgments and outright criminality that blossomed during the Great Moderation. Mr. Bernanke, in an attempt to limit the damage and hasten the healing, is likely to keep the Fed’s rate low — lower, even, than the measured inflation rate.

SocGen’s Kerviel Charged With Attempted Fraud (Bloomberg)
Jerome Kerviel didn’t flee. He’s in custody and now they’ve formerly slapped him with charges, the most serious of which, abuse of trust, could carry a seven year jail term and 750,000 eur fine. But although he didn’t book it to Tahiti, Kerviel isn’t taking the charges lying down. It sounds like his lawyers plan to make a vigorous defense, which is cool. His lawyer claim that the whole thing is a charade, designed to conceal losses elsewhere. Until he’s proven guilty, we’ll presume him innocent and we can only hope for a long, dramatic trial which gives us deeper insight into the bank and the world of a rogue trader, if indeed he is one.

Countrywide’s Mozilo Forgoing $37.5M (AP)
There’s a reason they call him “Honest” Angelo Mozilo. The Countrywide CEO has agreed to give up $37.5 million in severance pay, considering the troubles that this company is going through. And you thought it was because he looked like a used car salesman. Hogwash. Among the perks he’s giving up is access to the company’s private plane. Some day he’ll be waiting on a tarmac for five hours and start regretting that one.

Sears Holdings Names W. Bruce Johnson Interim CEO
Sears says its CEO Aylwin B. Lewis is stepping down immediately and will be replaced on an interim basis by W. Bruce Johnson, who joined K-Mart in 2003. Interestingly enough, Johnson actually has a real retail background, which is a sign of the company’s acknowledgment that Sears, sadly, remains first and foremost a store where people buy stuff. Of course he’s just the interim, so we’ll see where they go with the position.

Shares End Sharply Lower; Nippon Steel Weighs on Tokyo (WSJ)
Another ugly day internationally, as stocks across Asia fell sharply while you were sleeping. Shanghai was down 7.2 percent, while Japan fell by nearly 4 percent. Hong Kong also lost over 4 percent. The big loser in Japan was Nippon Steel, which warned of weak US demand in its latest quarter.

$$$ List of trading losses [Wikipedia]

$$$ Erin Burnett’s On-Air Swearing Incident: We Saw It! [Silicon Alley Insider]

$$$ Muff on Sykes [MuffMarkets]

$$$ Adventures in Diligence II: The Paper Cut [GP]

$$$ John McCain Is Not An Expert On Wall Street.

—Ron Paul contributed to this edition of write-offs.

Laid off? Worried about getting laid off? Pissed off about your bonus? Don’t crap on the floor. Find a new gig instead. The hardest part is getting started, which is why we spend some time each week searching our extensive Career Center to find you a new job. Tell them to take that job and shove it. You don’t need to work there anymore.

Mortgages are making a comeback, baby. A leading financial firm is on the hunt for a senior mortgage modeler. Here’s the job: On a daily basis, you’ll be a senior member of the mortgage research team, designing, estimating and developing MBS prepayment/default models. You will be the hands on architect for developing next generation prime prepayment models using statistical tools.

To land this, you’ll need at least 5 years of experience as a senior mortgage modeler including experience with regard to model factors, forecasts, performance and security valuation implications.

Growing industries usually want to be left alone but lawmakers have trouble seeing other people have fun without them. Hedge funds are finding this out right now. Once these industries come to Washington, however, laissez-faire goes out the window, and public-policy profiteering takes over. Tim Carney (who is Bess Levin’s brother) continues the chronicle of the hedge-fund industry’s entrance into Washington–namely, hiring away a Congressman to be their top-lobbyist.

Regulate your way to riches [Washington Examiner]

I would say I’m offering up these two gems because it’s the weekend and we all deserve something special (me especially) but let’s be honest, even if you hadn’t earned it, it’d take gale force winds to stop me from sending these latest boy toys out into the universe. First up we have Gary, who is the logical extension of Tanner, in that Tanner was a towel boy and Gary loves to stand in still bodies of water. Gary is 29 and a commodities trader. Next is Monte, a 27 year old analyst who legitimately looks like a member of the Hitler Youth. Now I know I say that about a lot of people, but this time it’s true. Which is ironic, because Monte is employed by an insurer founded by Jews. Yes, it’s like Stalag 17 all over again.

Later: More Sykes Hate Mail. Don’t act like you’re not excited.

*His reasoning re: Tim Sykes not being a household name two years ago is that his fund was too small to get press on it its own and SEC rules prevented him from acting like the media whore we know and love today.

Update: Tim contacted me to elaborate on the above:

CilantroFP (12:02:04 PM): thanks to all my media now i get interested investors all the time, but now its too late for me
DBBL (12:02:10 PM): yes
CilantroFP (12:02:17 PM): the SEC fucked me
CilantroFP (12:02:27 PM): and now i’m trying to save others from getting fucked
CilantroFP (12:02:28 PM): or raped
CilantroFP (12:02:32 PM): the SEC are rapists
CilantroFP (12:03:00 PM): and everyone’s who’s been raped by them is too scared to come forward
CilantroFP (12:03:02 PM): i’m not
DBBL (12:03:12 PM): you’re a pioneer
CilantroFP (12:03:22 PM): i just don’t think rape is ok
CilantroFP (12:03:32 PM): and its gonna continue cuz they’re a predator
CilantroFP (12:03:41 PM): they won’t change unless the victims unite
CilantroFP (12:03:55 PM): and say “its not our fault”
CilantroFP (12:03:59 PM): “its not our fault”
DBBL (12:04:03 PM): take back the night
CilantroFP (12:04:36 PM): i invite everyone to become part of the solution
CilantroFP (12:04:48 PM): TimothySykes.com is a place free from financial assualt and abuse
CilantroFP (12:06:08 PM): yeah, don’t forget to link to my site!

According to John Mack’s assistant (I kid, of course, though the tip was anonymous so it’s a fifty-fifty chance it could’ve come from her), Morgan Stanley’s population restructuring project will affect “more than just [the rumored] 1,000 brokers,” with cuts occurring in all departments but most heavily in IBD, and impacting 10-15% of total employees. But layoffs, these things happen all the time, and I don’t want to say I’m not beside myself with this news, but I’m not losing any sleep over it. Know what I am losing sleep over? Know what’s seriously cutting into my mid-morning nap schedule? Weighing on my mind? Distracting me from my Mark Haines fantasies? Infringing on my ability to stare off into space? This news (smut, rather) about Goldman Sachs—GOLDMAN SACHS—being forced into this pedestrian layoffs business. Cutting one person—VP, associate, analyst, trader, CEO, secretary, janitor—from Goldman Sachs is too many; according to Reuters, GS will be cutting a whopping 5 percent of its global workforce. I would like to know where the hell God, Goldman Sach’s co-pilot, is during all of this. What he could possibly be doing that’s more important than protecting his children. The only plausible explanation that I can come up with is that he was busy ghost writing this. If that happens to be the case, cool. It was worth it and “Who knows how many men unwittingly dropped their pants under the government’s watchful eye”? That was inspired my friend. Otherwise, we have a problem.

Wall Street, even Goldman, faces ‘08 slowdown [Reuters]
What Happens in Men’s Room, Stays in Men’s Room [Bloomberg]

Rogue Trader’s Story Raises More Questions Than Answers (Dealbook)
Given the extent of Jerome Kerviel’s losses, folks aren’t quite ready to believe he was a jackal working alone. We think it probably was though. But for now, people would rather believe that there was a conspiracy of sorts, rather than believe that a little knowledge of SocGen’s computer system was able to render its entire risk management infrastructure 100 percent useless. People like to call big “nine-sigma” events black swans, but they’re really not, because we get once-in-a-millennium perfect storms once every five years or so. But nobody’s got a formula that knows how to take into account one trader that knows how to bypass security checks.

Trader Turns Societe Generale Report Into a Nightmare (Bloomberg)
Someone suggested yesterday that this whole story was a coverup for deep subprime losses. Better to pin it on a 31-year old kid that didn’t even go to an elite college than on the upper ranks. We doubt it. Nobody would’ve blinked if the company had lost another $7 billion on writedowns. As it is, the company actually reported a big subprime writedown and nobody even noticed.

Scottish & Newcastle Agrees To Buyout by Carlsberg, Heineken (WSJ)
Beer consolidation, bring it on. Scottsh & Newcastle looks set to approve a sale to Carlsberg and Heineken in a deal worth $15.4 billion. That’s a lot of money, for beer. With the deal, Scottish and Newcastle will be broken up, with Carlsberg and Heineken each taking over certain regional assets.

Buying Randy Newsom (Ideoblog)
Have you heard about this baseball player that’s going to sell chunks of his future income to the public? Yeah, for as little as $20, you can buy a slice of infielder Randy Newsom’s future earnings stream. Larry Ribstein looks at some of the legal issues and wonders whether this counts as a security that, theoretically, would be regulated by the SEC.

$$$ “I always knew it was a bad idea to let kids run the global financial system.” [DealBook]

$$$ Jerome Kerviel is down to ONE FRIEND on Facebook, from eleven this morning. Let this be a warning to all of you contemplating breaking the law. [Facebook]

$$$ Crash [WallStrip]

Don’t Forget: tonight on MOJO, the people who brought Tim Sykes into all our lives—Wall Street Warriors, season 2 (9:00 PM), Bobby G: Adventure Capitalist (9:30 PM), Start Up Junkies (10:00 PM). Discussion groups tomorrow.

Radar has the details of the first suit brought against massage enthusiast Jeffrey Epstein in court (in November Epstein decided to take his chances and forgo a plea bargain. Ballsy. I like it.) The plaintiff, “Jane Doe,” is seeking $50 million from the Palm Beach billionaire. Unfortunately, it’s for pretty standard-issue Epstein stuff, and at no time mentions a transsexual named Maximilian. I’ve anticipated how disappointed DealBreaker readers will be to hear this news, and have enclosed a little treat which you’ll get shortly. First, the complaint from JD: the girl was underage, lured to Epstein’s house by personal assistant Sarah Kellan under the pretense of “giv[ing] a wealthy man a massage for monetary compensation” while wearing only a towel, forced to stand there awkwardly while Epstein masturbated into a towel, and sometimes be touched with a purple vibrator. On several occasions she was asked to bring friends. Now, the treat:

Earlier: Outrage Davos

Alright, so there may have been some sort of mix-up with Société Générale’s accounting but Risk wants you to know that it continues to believe that the French bank deserves the equity derivatives house of the year award. The prize was given on the basis of SG’s innovation in derivatives in 2007, and we submit that in order to scale the heights of an illustrious list of criminals that includes everyone from Nick Lesson to that inimitable puppy lover, and in doing so dethrone the immortal Brian Hunter, Jerome Kerviel must’ve done a little if not a lot of “thinking outside the box.” Plus, it would be a bitch to take the honor back and give to someone else, as the plaque has already been engraved. In other news, Billion Dollar Fraud Quarterly also plans on rewarding SG for its innovation this year, and there’s power in numbers. DealBook’s Andrew Ross Sorkin is also giving props in a blog post later this afternoon and Ron Blarney has been rallying behind SG in AOL chat rooms since he woke up.

In our defence [Risk Magazine]
Equity Derivatives House of the Year - Société Générale [Risk Magazine]

A (very) recently fired Credit Suisse employee tells us that “Every conference room on the CMBS floor has an HR representative working through people as they show up for work. Analysts and Associates seem to be the first out the door.” We understand that for the victims, this might seem like bad news, and yeah, you’ll probably feel weird about going to Shake Shack for a while, but the flipside is that you won’t have to deal with the embarrassment of being employed by Bear Stearns, when the two banks merge. In related news, Morgan Stanley has announced plans for its own population restructuring, as modeled after the redistribution project in the Sudan. If you have any other info, feel free to share, or not share, otherwise, enjoy this one on me:

The man picture at left is, purportedly, Jerome Kerviel, the Société Générale employee who executed a bunch of “elaborate, fictitious transactions” that cost the bank a bunch of money. Not to treat him like an object because obviously he’s a person with feelings, but we’re a bit taken a back by how good looking he is. And not like “rogue trader hot,” like “hot, hot” without qualifiers (direct quote from Ron Blarney: “I’m don’t even like Two and A Half Men and I still fuck him”). This attractiveness will serve him well in the event of a nationally televised trial, and even better in prison.

French Bank Finds $7.14 Billion Fraud (AP)
These days, a loss of $7 billion at a major bank is hardly anything to get excited about. It’s all in a days work. But this time it’s different. At Societe General, a single trader is said to have been responsible for more than $7 billion in fraud. This sounds like a story that will take some time to unpack, because it’s still not totally clear what’s happened. Evidently, he used his knowledge of the bank’s security systems (a little odd) to conceal his actions, which involved a scheme of “elaborate, fictitious transactions”. Though apparently they weren’t so fictitious that they didn’t cost the bank money. Anyway, trading in SG shares has been suspended and, this is rich, the trader apparently tendered his resignation, which was accepted. Good chance the trader has more pain coming to him. WSJ has more. and AlphaVille liveblogged the conference call, which sounded like a mess. S[eaking of messy conference calls, did you see that SLM boss Albert Lord apologized for his behavior on that call last year? Too bad. He should’ve stuck to his guns.

Leeson for sale, before he goes on holiday (to Paris) (FT Alphaville)
Not surprisingly, the real winner of this Societe Generale news is Nick Leeson, the man who’s name is synonymous with rogue trading. His losses were lower than this, but he had the bad luck of winding up in a Singapore Prison. The man’s turned himself around over the years and last we heard he was working for a football (soccer) club as a GM or something. Anyway, word is that he’s going to charge more than £1,000 per interview. That doesn’t seem like very much.

Asian Markets Mixed After Dow’s Rebound (AP)
After the US staged a dramatic reversal of fortune, the good kind, not the bad kind, the rest of the world turned in a mixed performance overnight. Some markets were up, while others were down. That’s what we like to see though. Markets moving in lock step, either up or down, are always a bit scary — sort of like lockstep soldiers walking over a bridge. Always good when they break things up a bit and do their own thing.

Next on the Worry List: Shaky Insurers of Bonds (NYT)
Apparently there are these companies called bond insurers and apparently they play a big, under-appreciated role in the economy. And supposedly they’ve taken on too much risk and may collapse, resulting in untold calamity. Have you heard of them? Probably not, cause they’re the next worry. Something to watch out for though, for sure.

$$$ Pessimistic Bulls, or Optimistic Bears? [DealBook]

$$$ Adventures in Diligence [Going Private]

$$$ Collapse [YouTube]

Earlier today, we gave you a taste of the latest toy seeking kept-boy status as part of PocketChangeNYC’s upcoming (2/7!) speed dating event for “rich older women and hot younger men.” This particular BT was a lacrosse playing derivatives broker named Tom. Not bad on the eyes, and appeared to have a summer share down the shore which equalled points in Blarney’s book. Later, Tom contacted us to express his displeasure at seeing the photos he’d sent to PCNYC up on our site. And then he contacted us again. And then he contacted us a third time. Below is the transcript.

From: [redacted]

To: tips@dealbreaker.com

Sent: Wednesday, January 23, 2008 4:36 PM

Subject: DealBreaker Tip

Who can I talk to about removing the post “just me and my lax stick kicking it tonight?” I don’t know where this came from but would like it to be removed.
______________________________________________________________________

Today was the day that was supposed to happen yesterday. The market plunged in the morning and then “staged a turnaround” or “bounced back” or whatever metaphor you want to use for the increasing share prices. The Dow Jones Industrial Average swung more than 600 points.

What’s going on? We’re allergic to explanations of market movements but we’ll venture a bit of speculation. There were rumors of a quant hedge fund liquidating it’s positions that helped drive sellers afraid of a repeat of the turmoil from last August. These might have helped fuel the downward draft. On the upside,
word spread that Wall Street banks might bailout the bond insurers. Since the weakness of the bond insurers has been depressing banking stocks and the failure of a major bond insurer could result in more losses for banks, it’s not surprising that Wall Street would be interested in rescuing them. Shades of Long Term Capital Management.

The movement for the insurers was huge. Shares of insurer Ambac jumped 72%. MBIA was up 33%. The bank stocks surged as well, with Citi climbing something like 9% and JP Morgan Chase surging 12%.

Ben White and Aline van Duyn broke the story wide open in the Financial Times, making what had been a whispered rumor into something much more concrete. According to White and van Duyn, the details of the bailout are still being worked out but “contributions to the bail-out fund would not necessarily be based on how much exposure each individual bank has to the insurers, known as monolines.”

Banks pressed to bail out bond insurers [Financial Times]
LTCM 2.0: Should Wall Street Bail Out the Bond Insurers? [DealJournal]
 

Earlier today, in the name of justice, gay pimp Billy Ash emailed the latest filings from the Seth Tobias probate case, to a motley crew of recipients that included private investigators, two hedge fund mangers, some fellow pimps, a bunch of Howard Stern show employees and John Carney, Esq. The papers enumerate the occasions on which Filomena abused Seth (one time she struck him so hard that the “force of the slap turned S. Tobias’ head and made a loud popping sound,” another time she threw a phone at him, and once she kicked a door), as well as one instance in which the tables were turned and Tobias “pulled [Filomena’s] pony tail.” Mr. Ash also included this impassioned plea:

“I’m trying to keep pressure on the police to move on this bizarre case forward. I need some type of closure. It has been written about in over 5 country’s [sic], over 100 papers and over 500 articles. We need your help to solve this case.”

Normally we wouldn’t suggest that you involve yourselves in a murder case, but since it’s been written about in six countries, we’re saying yes, stop what you’re doing and help us solve this sordid tale. We’ve agreed to organize and co-host a trip down to Palm Beach and have already reserved a van. Duty calls and all that. All those interested in volunteering should shoot an e-mail to andrewross.sorkin@nytimes.com, or try him on his cell at 203-890-2000.

—Stan O’Neal in New York contributed to this report.

Court filing [PDF]

Rumors are swirling that Alopex Capital, the equity volatility arbitrage hedege fund manager founded by ex-Goldman Sachs and Soros trader Peter Van Dooijeweert is shutting down. The Global Vega Fund (no relation to Vega Asset management) was apparently seeded by Tudor Investments in 2003 and in a document filed with the SEC in April 2006 the company listed only $226 million in assets under management –although people we spoke with list current assets significantly higher.

Looking for info from anyone who knows anything. Alopex could not be reached for comment.

—DealBreaker contributor A. Barber.

PR overlord Eric Starkman, who lent his name to Starkman & Associates, has some suggestions on how to improve Bess Levin’s favorite Fox Business Network show. After the jump, read his memo to FBN uber-boss Roger Ailes.

We’re hearing that a Boston based quant fund has been liquidating its positions today, perhaps concerned about margin calls from its brokers. So far, we haven’t been able to track down a name. J W Henry & Co are the only quants in Boston who come to mind but they haven’t returned our calls yet. And it hardly seems fair to tag them as liquidating positions just because they are the only folks who came to mind. Then again, four out of five of their “programs” had losses, last year. Two had double digit losses.

Update: Probably not JWH. Assets under management down below $300 million so probably not enough to move the markets. And we’re told that they’ve had a gangbuster January. (Although JWH still hasn’t returned our phone calls. Not cool at all.)

But new clues have emerged. DealBreaker is told that State Street prime brokerage services the fund. Numeric, which is based somewhere near MIT, has emerged as a favorite contender among the rumor mongers.

Who remembers that Craiglist ad from the 28 year old Goldman banker looking for someone to lavish with his (pretax) $722k bonus? I’m going to go with all of you because, frankly, it/he was unforgettable. The Viking stove, the custom-made oak dresser, the amazing dinners, the shopping, the great wine, the getting each other off fabulously and, of course, the baby’s arm aren’t things one lets recede from his/her consciousness so easily. Sure, the whole thing turned out to be fake and from the mind of someone named the Cajun Boy who does not really work at Goldman Sachs or at any other financial institution, including Bear Stearns, for that matter, but did anyone give a shit? No, us included. In fact, we were so taken by the imposter— “real” name: Thad— that we asked him if we could reprint parts of his journal on DealBreaker so that you all could live vicariously through his fabulous life. He said yes, if it would help him “score ass.” So if you enjoy the following installment, show your gratitude.

This past weekend was one of the greatest weekends in the history of an already ridiculously great life. I know that even in an average life that there are moments that are simply unforgettable, moments where the person experiencing the greatness will never forget where they were and what they were doing in that parcel of time, moments for the average person such as getting your first Rolex or German car.

But few things can top this.

What could be so great you ask? Having a fucking American Express Black card emblazoned with the name Thaddeus Quincy Cockburn arrive at your door, that’s what! Never again will I have to endure the shame of having to throw down a Gold or Platinum card when playing credit card roulette to see who pays the tab at a restaurant or club. To celebrate the occasion, I decided to throw a party pronto at my condo.

A black party.

The World Economic Conference in Davos, Switzerland is the social event of the year for people who have no real social lives. Kidding! In all seriousness, it’s a cute little grass-roots gathering up in the mountains that affords attendees the opportunity to sneak into parties they’re not invited to and fantasize about what Maria Bartiromo looks like under her parka. Basically, it’s the staff of the FT (WSJ, NYT, et al.)’s high school experience all over again, except this time they get to drop acid without worrying about anyone’s parents walking in. It’s also a great place to spot celebrities, with huge stars like Claudia Schiffer, Sharon Stone, and Peter Gabriel showing up in year’s past. In 2008, however, a dark cloud has settled over Davos.

The New York Sun reports that several big names are notably absent from the marquee. And I’m not talking about Brad Pitt and Angelina, though they too were snubbed and are said to be so devastated that they may never adopt again. Need a hint? Let’s play this Jeopardy-style. The answer is: They were all recently fired. The question? What is the one unifying factor among Davos non-attendees Chuck Prince, Stan O’Neal and Jimmy Cayne. Actually, I fucked that one up, because the boys have a couple other things in common, including but not limited to: first-in-class ability to stay cool while losing billions upon billions of dollars, and an inability to conquer their smack habits, though, to be honest, I think they just plain don’t feel like it. Regardless, this is clearly a major blow to the event; the accumulated pearls of wisdom/previously slated presentation from that group vis-a-vis how “run a bank” and inconspicuously freebase under your desk will be sorely missed, and God knows Thain won’t be stepping up to the plate so early in his tenure.

—Prince Alwaleed Bin Talal Alsaud in Riyadh, Saudi Arabia, contributed to this report.

World Events Moving Too Fast For Davos Planners [NYS]

Layoffs have begun to hit Bank of America. On yesterday’s earnings call, Bank of America’s chief financial officer said that the bank is planning layoffs in its corporate and investment-banking unit. Now we are hearing reports from a variety of sources that the layoffs are underway.

Last week, Bank of America announced it would cut 650 new job reductions. The bank has been conducting a strategic review and reportedly concluded that it should largely exit the investment banking business. The banks has announced 3,650 layoffs since October but more are expected.

On yesterday’s call, CFO Joe Price said units that have been particularly hard hit by the credit crunch would see further layoffs. The capital markets and advisory group was named specifically.

“The headcount reductions will include the 650 front-office associates we announced last week, and there will be infrastructure reductions to come as well,” Price said.

Got the inside scoop? Send more details to tips@dealbreaker.com or leave a comment below.

I’ll be the first to admit that we haven’t exactly had our priorities in line around here. Too much time spent focussing on the market crashing and not enough on the stuff that really matters, like a speed dating event for Sugar Mamas and Boy Toys, and whether or not a tube top is appropriate attire for Ron Blarney’s next appearance on CNBC. The latter we can check off the list right now: it is (tube tops can be casual yet serious, and slutty without being skanky, making them the perfect choice, especially for RB’s shoulders). With that out of the way, let’s move on to scrutinizing today’s 18-35 year old male toy. He’s a 26 year old derivatives broker named Tom, and even if not everyone in the audience gets down with co-ed naked rape, I think we can all agree that the strategically placed lacrosse stick is a nice touch, as is the red solo cup, and the towel on the couch. Basically, what I’m getting at, is that none of you are too good to pass up a weekend at what appears to be Tom’s summer share (in Long Beach?), and if you’d like, I’ll put you in touch. (Later in the show, we’ll spotlight a eunuch from Citigroup, information we know on account of the fact that in posing for photos, he took a cue from towel boy Tanner, and then took it one step further. No athletic equipment to speak of but good lighting and cool novelty sunglasses. )

— Steven A. Cohen in Stamford, Ct., contributed to this report.

Fox Business’s “Happy Hour” had the Dallas Cowboy cheerleaders on yesterday as the third installment of a thirty-part series entitled “Hot Bitches For Cody To Make A Fool Of Himself In Front Of” (parts one and two were the strippers and Neil Patrick Harris, respectively; CNBC’s Charlie Gasparino is slated for part four). Apparently the girls are partnered with a plumbing company called “Roto-Rooters” which opened the door for Cody to ask “When does the reality show ‘Pimp My Toilet’ come out?” and the redhead to fake laugh at the joke. The best part of the skit is when Rebecca asks if the cowgirls are getting paid for promoting bathroom fixtures and Polly Pocket responds that while they answer may be “yes,” it’s honestly just an honor to be able to work with them [the plumbers]. Also up there is blondie’s last name— Swicegood. And when Cody goes, “Okay, I want to talk business with you.” And basically just the entire thing. Yeah, I love it all.

We’re hearing rumors that Deloitte’s securitization transaction practice group, said to be the biggest player in the mortgage, asset backed and CDO arena, held a meeting with the entire group last week announcing a major reorganization involving layoffs, relocations and transfers. The moves are expected in the coming 3-6 weeks, according to our source.

Deloitte calls this story inaccurate but hints that it may indeed be moving people out of its securitization practice.

“As with any other business, Deloitte continually looks at its workforce to determine how best to service its clients. That occasionally means deploying people in other areas that need more resources. While the economy may have slowed securitizations transactions across the industry, clients of Deloitte are still doing deals,” a Deloitte spokesperson said.

The moves may be an indication that Deloitte does not believe the securitization practice is likely to return any time soon.

Merger arbitrageurs were widely expected to be even more concerned about Bank of America’s plan to buy Countrywide Financial yesterday but, surprisingly, they seem to have become more confident. In early morning trading yesterday, Bank of America stock slid 6 percent and Countrywide fell 12 percent. As both stocks hit their lows for the day shortly after 10 am Tuesday morning, the spread between the share prices of the two companies and acquisition price they agreed to more than a week ago grew to its widest level since the deal was announced on January 11th. But as the day wore on, shares of Countrywide climbed back for a gain of 7.86 percent and Bank of America climbed 4 percent, the share prices and the agreed acquisition price narrowed a bit.

Regional Indexes Rebound (WSJ)
It’s been a volatile week and it’s only Wednesday. After two days of fear, the foreign markets reversed course, with several former big losers surging by 5 percent. The big winner was Hong Kong, which tacked on a cool 10.7 percent. Japan sort of lagged, gaining only 2. So will we take our cues from abroad?

U.S. Futures Fall, Point to Sixth Straight Drop for S&P 500 (Bloomberg)
Probably not. It’s sort of hard to get excited about a rate cut and a surge overseas when iPod unit sales are only growing by 5 percent and when the growth story of the decade reports conservative first quarter guidance. In addition, we’ve got eBay and Motorola on tap today, so could be more bad news. Nobody wants to hear that Motorola’s new strategy revolves around more iterations of the RAZR. That’ll be good for another half a percentage fall on the S&P.

Stocks May Drop to Reflect Recession, Strategists Say (Bloomberg)
This is awfully specific. An analyst at Bank of America says stocks need to drop another 4 percent to really price in a recession. Apparently the withering declines have so far been profit taking, or basically they’re just not enough. 4 percent’s pretty minimal though. What he’s essentially saying is that a recession will be fully priced in sometime this afternoon, or maybe Thursday or Friday.

The (Unlisted) Hot Tickets at Davos (Dealbook)
Dealbook’s Davos Diary reports, unsurprisingly, that the hot tickets at the World Economic Forum are not the main panels, but the private panels, lunches and after-parties hosted by top names, like Rupert Murdoch and the Google Guys. Makes sense. It’s the same with SxSW down in Austin. Sure you can be like everyone else and go see Feist, or if you know what’s hot, you can go to some listening party/bbq with the Pixies. Anyway, to us Davos has always seemed to attract more attention than it’s worth. Yes, we understand that anytime you have the super-famous ans super-powerful hanging out in Switzerland together it’s news. Fine. But we’ve never heard of anything of substance or meaning coming out. It’s basically a chance for George Soros to be a boldface, right? Back in the day when it was all Bono, Bill Gats and Kofi Annan — that seemed like its metaphysical peak.

$$$ Deals: Oracle Jumpstarts Activity: In our M&A Roundup for the week ended Jan. 20, its $6.63-billion BEA purchase leads a week-to-week doubling of deal volume.

$$$ The Jezebel Portfolio [Jezebel]

$$$ Way of the Muff [MM]

$$$ “The bigger the rate cut, the harder Wall Street falls in love with me“— Ben Bernanke [NewsGroper]

$$$ “Less talking, more cleaning“— SS [NG]

$$$ Man who sold Paul Tudor Jones II his Australian home is dead. [Gawker]

$$$ Headline of the day: Bush Optimistic on Package [Washington Post]

Listening to this clip. Specifically from around 5’30. My one complaint is that Gasparino doesn’t punctuate “deleveraging is a bitch” with ‘la putta!’ or something, but that’s a minor gripe in a meat locker full of Soppresata.

Go check out Eddy Elfeinbein and Greg Newton, who are are “liveblogging” the markets this morning.

From Eddy: “How’s this for a crazy market? Two weeks ago, Bed Bath & Beyond (BBBY) gave us a nasty earnings warning. The stock dropped 4.4% on 18 million shares in volume. Today it’s rallying on an upgrade and Fed rate cut to above where it was before the warning.”

From Greg: “It’s looking like just another of those days that we’ve seen so often in recent months. A raucous 400 point rally off the bottom—Buy financials! Buy retailers! Buy homebuilders! —but it’s being sold. Kudlow wants taxes cut to zero: therezzashock. Still just watching (insert Yogi-ism here).”

Also, later today Bess will be issuing some investing advice for younger women.

This week may be the first real test for the Fox Business Network, TV Decoder’s Brian Stelter points out today. Market turmoil tends to drive up viewership for television business news, and FBN is running hard to catch the wave of attention directed at the rocky markets.

While CNBC was basically shut down yesterday, FBN carried the news of yesterday’s global meltdown live. CNBC, however, is responding with a two hour “Market Survival Guide” special that will air tonight from 7-9 PM. Because, see, CNBC is quick and nimble—like the Fed.

CNBC pulled out all the stops this morning, throwing Cramer on the floor of the New York Stock Exchange to echo the sentiment of some traders that the Fed should cut another 50 basis points. Charlie Gasparino got a little rough, declaring that “deleveraging is a bitch.”

We asked Bess what Fox did this morning and she replied, “I didn’t go to Burger King.”

Stocks Down, Interest In Business News Up [TVDecoder]

Joe mentioned this earlier but we have something to add so just deal with it. The above clip is our nomination for Worst Fake Freak Out Over A Market Swoon of the year. While there are a few good lines (“Let’s watch it go to the depths of fucking hell,” “Whoever’s short, congratulations,” “Thank you Mr. Motherfucking Stock Market”) there’s NO dancing around the fact that this guy is a horrible actor, and I’m not buying his little performance. He makes Tim Sykes look like Sydney Poitier and I don’t say that just because yesterday was Martin Luther King’s birthday. There’s no dread in his eyes, real or feigned. Also, and this my biggest directorial complaint, he should’ve done more with the walking off set (3’10) and then coming back on, something reminiscent of the “Happy Gilmore” scene when his girlfriend’s leaving and he screams “Fine, get the hell out of here! Who needs you?!” retreats and then runs back to the intercom and is all “I’m sorry baby, come up and Happy will make it okay” and then she goes “No!” and he responds “Fine! Get out of here! You know you’re a lousy Kindergarten teacher; I’ve seen those finger paintings you bring home and they suck!” [pause] “I’m sorry baby, I love your finger paintings. PLEASE don’t go” and then sleeps with the older Chinese woman. If he’d wanted this to be believable, he should’ve freaked out, left, come back and whispered sweet nothings to the market. Then freaked out again, left, sweet nothings. Freak out, leave, sweet nothings. Freak out, leave, sweet nothings. That’s how you make the market work for you. Larry Robbins knows what I’m talking about.

Earlier this morning, I received the following instant message-“RonBlarneyIsGod (08:58:46 AM): whoa, for a second there it was almost like 1929 again!” Because this person is prone to hyperbole and lies, I ignored it. Then Opening Bell Joe emailed me about some “worse than usual” fight Cramer had with Rick Santelli. Cramer making a spectacle of himself for ratings-didn’t sound like a big d to me, but OBJ usually knows what he’s talking about, so I made a little “hmm” noise before going back to sleep. When my very enchanting and aesthetically-pleasing roommate got cancelled on by four of tonight’s five dates, all citing “margin calls,” I finally opened myself to the notion that maybe something was up (lucky number five is on the Bear mortgage desk and as of 10:00 am, had no idea anything was going on. He does now but doesn’t much care and just wants to know if “6 at the Olive Garden is still good?”).

I tried to console her with a little history lesson, and the writer even offered to read the post out loud over the phone, because “its sheer brilliance might not transfer to the page” but it was useless. Then, a lightbulb. What’s the one thing that always makes everyone feel better about themselves, even when they really have no conceivable reason whatsoever to get out of bed in the morning? When they should just pack it in and give up entirely? When they’re staring down the barrel of a gun and even Mrs. Blarney’s going, “You know I like to look on the bright side of things but you should probably just pull the thing and be done with it”?

Obviously the answer is ex-hedge fund manager Seth Tobias and his stripper boyfriend Tiger who can’t remember if they’d ever had sex because he’s slept with “too many” hedge fund managers to keep track, gay pimp/personal assistant Billy Ash, widow Filomena, and celebrity fitness trainer Doug Caporrino. Below I invite you to help yourselves to a conversation between Ftobias8 (Filomena) and Sneffer (Seth), which have been entered into evidence by lawyers attempting to prevent Fil. from helping herself to the deceased’s $25 million estate. It helped ROB (Roommate of Bess) get through this difficult time, and I think it might help you, too. ROB’s favorite part is “Ftobias8: I hope you rot in hell you sick fuck. Ftobias8: After this last hurrah…enjoy you [sic] pathetic life…..in your rat hole house with your drugs and alcohol…I hope you get aids with all the whores your [sic] fuk [sic] too. Ftobias8 signed off at 4:48:27 PM. Ftobias8 signed on at 6:48:26 PM. Ftobias8 is idle at 7:08:55 PM.” What’s yours?

IM Convo [PDF]

Let’s take a step back from the Fed and stock markets for a moment to reflect on some history. Joe Flaherty was a legend in New York journalism. Drink was his muse, words his first love, and telling the truth his only paying talent. Of course he started his career on Wall Street. He began as a “squad boy” on the floor of the New York Stock Exchange, where his job was to take recorded sales and send them up a pneumatic tube. It didn’t last long.

Here’s Joe describing his short stint on the floor in the late 1940s:

“Every morning I flew up the subway stairs at the Wall Street stop, sporting my Billy Eckstine-collared shirt and looking like a Dow-Jones Dumbo. Everything went quietly at first—tragically, too quietly. There were a couple of minor skirmishes with summer-working college boys who made remarks about my shirt or one of my ever present pocket books they dared put the knock on Mike Hammer!). The latter worked to my advantage, since one of my critics goaded me into reading James Jones From Here To Eternity, and a new world opened for me. But alas, enough was not going on. Even employing the fantasy of a wing commander sending endless bombers airborne didn’t stem the ennui. So games had to be devised. The favorite was to write a bogus sale on a piece of paper—usually 2,000,000 shares of GM at 60 3/4 –and pass it to the new squad boy to skyrocket up the tube. Nobody ever fell for it till one day I found a true believer who sent GM soaring. I was fired immediately and walked to the subway hugging the building to avoid being flattened by leapers.”

Fed funds and discount window. The talk all morning has been that this was coming. The Fed had no stomach for testing the lows.

Why did the Fed swing so hard in favor of cuts? It’s hard to escape the impression that the Fed is taking orders from the stock markets. Forget the blather about credit and housing markets; the Fed could have waited till the regular meeting to deal with those problems. Today’s cut is all too clearly a response to the action in the global equities markets. So what is the market saying now? The fed fund futures market is already predicting/demanding another cut at the regular meeting at the regular meeting. Cramerica is saying that this cut is “too little, too late.”

Our sources say that the view within the Fed right now is that there’s at least another 25 basis points coming at the end of the month. But the view within the Fed keeps changing every few weeks, so maybe we should stop wondering what the Fed is planning.

Full release after the jump.

Stocks Poised to Take Losses (WSJ)
Two words: car nage. After a terrible Monday, during which the US got a reprieve, the markets roared lower again while you were sleeping. Hong Kong gave up another 8.7 percent and Japan another 5.7 percent. But you know this already, because you were probably receiving text alerts every :30 in your sleep, not that there was much you could do. Oh and the futures. Yeah, bad. All down around the 5 percent marker. The good news: if the earlier declines were a correction, we must be getting really correct right about now. Also, as of this moment, there hasn’t been an emergency rate cut announced, which a few folks were chatting about yesterday. It’s still possible, sort of like an interstitial ad at Forbes.com. You think you’re about to load the article, but then an ad pops up about about 5 seconds right at the last moment. So yeah, an interstitial rate cut still could be.

Loan Morsels (WSJ)
More on the credit crunch, from a small business perspective. The point: it’s not just homeowners with a crappy income and a history of not paying their credit card bills that can’t get loans. Small businesses that have tapped the well several times in the past can’t raise cash either — or they’re at least having a hard time doing it. But at least there’s money for small businesses coming out of Asia. It’s not all Wall St.-bound.

Crude oil falls on U.S. recession concerns (Bloomberg via Tribune)
The good news continues to be that oil is dropping, which should bring some much-needed relief to US consumers. That’s meant to be a joke.

Chinese Bank Shares Fall Sharply (AP)
More from the gloom & doom edition: Shares of Chinese banks have been whacked on anticipation of big — of course — subprime writedowns. The real issue is that shares of the Bank of China fell 4.1 percent in Shanghai and 6.1 percent in Hong Kong, confounding efficient markets theorists everywhere. So the question is: who’s going to come through with the capital infusion the bank needs? The Chinese Development Bank or Abu Dhabi?

$$$ No Brangelina at this year’s Davos conference— WEAK. [DealBook]

$$$ Charles Prince Asks $6 Million for Greenwich House [Bloomberg]

$$$Interactive Brokers Group, Inc. (IBKR) [WallStrip]

Major Indexes Drop Sharply On Worries Over U.S. Economy (WSJ)
An ugly start to the week on a global level with, with several world indexes dropping in the 4-5 percent range. Of course, it’s all because they’re worried for us, supposedly. The Indian market, which has held up strong lately, gave up 7.1 percent. Thankfully we have the day off. We still need some time to cool our jets.

Oil Falls Below $89 on Economy Concerns (Reuters)
At least with all of these stock market sell offs, the price of the dirty stuff is coming down as well.

SEC urged not to revive “terrorist” watch list (Reuters)
This is an idea that should probably be relegated to the dustbin of history. The SEC, apparently, offered a tool at one point to help investors search which companies did business in terror-sponsoring countries. Granted, it’s easy enough to do a word search for Iran if you’re interested in seeing what comes up among filings, but specifically hiving off a section for companies that may have an investment in Iran or Syria seems a bit ridiculous, no? The SEC is currently deciding whether to bring back the tool.

The Super Bowl Point Spread (CrossingWallStreet)
It’s the Giants +13 or +14. Interestingly, the spread is being set extra high in order to induce underdog betters, since there’s the perception that the Giants have no chance. So if you think there’s a distortion, get your bets in.

Back in the Black (American)
This is the most shocking piece of business news we can recall seeing in a long, long time. The NHL is a profitable enterprise. We were sure that America’ 6th or 7th biggest sports league (behind NFL, MLB, NBA, NASCAR, PBA, Arena League and the Professional Bullriding Tour) was a big ol’ money sink, but things are actually okay. Not great, mind you. Very few people watch the game anymore, but with some financial engineering and cost containment, it would appear that the NHL will remain a going concern, which is definitely good.

$$$ So many crabs [Reuters]

$$$ T.I.M.: Up $219 on the Day [Tim Sykes]

$$$ Tom Perkins: ‘I Love Bubbles’ [DealBook]

Laid off? Worried about getting laid off? Pissed off about your bonus? Don’t crap on the floor. Find a new gig instead. The hardest part is getting started, which is why we spend some time each week searching our extensive Career Center to find you a new job. Tell them to take that job and shove it. You don’t need to work there anymore.

Everyone has been coming down hard on CDOs lately, which is why this week we’ve decided to find you hard working CDO boys and girls a new job. A large European bank located in New York City is looking for a junior CDO Structurer to join their Asset Securitization group. This position will be responsible for structuring new issue CDO’s backed by various asset classes including, ABS, MBS, and other CDO’s. Don’t let them tell you it’s over baby. It has just begun.

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

The New York Post is making a big to do about Jim Cramer losing a $50,000 wager to Eric Bolling, having bet that financial services would be the “hottest sector” of ’07 (Bolling said oil and gold). People who watch Cramer’s show (…) and took his advice lost a bunch of money which the paper think is an OUTRAGE, and a crime worthy of jail time. We pretty much think this falls under the Countrywide Clause (which states that anyone dumb enough to give Angelo “Tanning Bed” Mozillo their money deserves to get screwed) but what the hey, we’ll play along.

‘MAD’ JIM CRAMER LOSES GOLDEN $50K BET [NYP]

So how violent was the protest at Wharton’s Private Equity and Venture Capital conference
today? Accounts of the disruption vary, with some claiming that punches were thrown and others saying that it was just scuffling or jostling.

As we first reported this morning, shortly after David Rubenstein of the Carlyle Group had begun his keynote address, protesters from the Service Employees International Union swarmed the room, unfurling banners and shouting slogans, sometimes through a megaphone.

Eyewitness accounts report that around forty protesters were in the room (the Philadelphia Inquirer says only two-dozen), although protestors had been handing out fliers (click here to download a pdf of the flier or here for a grainy pop-up photo of the flier taken on the scene) outside the event earlier. Rubenstein was described as “speechless” in the moments after the protests began.

“They looked like they are going to kill the guy [Rubenstein],” a witness said over email as it unfolded. “They are on both balconies and have control of the floor. No sign of security. The speaker is in shock. One thing we now know about the venture crowd; don’t count on them in a fire fight. You’d be better off with Donald Duck as a wingman.”

After a short time, a dialogue of sorts—as much as any back-and-forth that involves bullhorns can be described as a “dialogue”—began between the protesters, the audience and Rubenstein, lasting for between ten and fifteen minutes.

“Rubenstein remained on stage and agreed to address questions from a woman with a mega-phone, who said she was a Manor Care employee, and lit into him,” George White of the Deal reports.

[More after the jump]

Just in from our Wharton Conference Correspondent:

The event has been taken over by protesters. For real. The police are coming. They are protesting the speaker from Carlyle Group - Its amazing really - The room is out of control…becoming violent. Wharton staff not prepared for the demonstration. Literally just watching them take over the room …. Rubinstein is speechless and standing there alone on the stage facing it ….. Carlyle bought manor care a few weeks ago and layoffs are coming. Its like - France. Pushing, shoving, punching - everywhere. No sign of Bowie still. Rubenstein just told a protester on a bullhorn to “take a remedial course in English before you go any further.”

I’ve seen a lot in the markets in all my years — the nightmare of ‘73-‘74, which led to my barbituate phase (and my first divorce, but who’s counting?); the joys of being at the ground floor when JWM was gearing up the boys at Solly (chronicled in my book, ‘Liar’s Poker’); the coke-fueled days riding the Nasdaq like a Thai hooker during the late ’90s, then riding it down. Since I’ve made and lost fortunes and made them again, in markets like this I like to pass along my accumulated wisdom and historical perspective to the younguns on the desks today. I was cutting my teeth trading EM bonds when most of you were crapping yellow, so you should listen to me. Here are two not unrelated thoughts to put this week in a little perspective. The first comes from my boy JK Galbraith (don’t get me started telling stories; God, I miss him). Might sound familiar to a few putting money to work today. The second is a more recent vintage; keep it in mind when your broker calls you saying it’s time to buy.

The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. —John Kenneth Galbraith, “The Great Crash”

For my second Pearl o’ W, please turn to Page 2

From: Ask Billy [billy@askbilly.com]

To: tips@dealbreaker.com

Sent: Friday, January 18, 2008 5:19 AM

Subject: 380 CRUSHED AMBIEN FOUND IN FILOMENA’S SAFE!!!!

According to court documents, a crime lab chemistry report shows that two Ziploc bags seized from the couple’s home the night of Seth Tobias’ death contained .28 grams of cocaine and 3.86 grams of crushed up Ambien. Lawyers said that, according to a drug handbook, 3.86 grams is the equivalent of at least 380 doses of Ambien.

Earlier: Let’s Get Serious

The worst fears of investment bankers regarding bonuses have not come to pass. Declining profits at many Wall Street banks, record breaking losses at some, and dire predictions from compensation experts gave rise to a fear that bonuses paid to bankers, traders and brokers would decline precipitously. That has not happened.

Wall Street bonuses grew in 2007 to a total of $39.34 billion, up from $36.19 billion in 2006. That is good news for many of our readers on Wall Street. But the news of that 8.7% increase will likely lend confidence to the cozy consensus that there is something seriously unsound with Wall Street’s compensation model and that a new paradigm needs adopting, perhaps with the very visible hand of the state pushing banks and brokerages into the new mould.

The sentiment that there is something wrong with the system that results in paying some on Wall Street more in a year than many Americans—including many journalists—will be paid in a lifetime has a long track record. Last year’s record bonus numbers, for instance, also summoned forth carping about allegedly “outsized” compensation. But in the best of times—when firms were registering record profits and shareholders reaped the benefits of huge dividends and rises in share prices—this view could be dismissed as the dividend of envy. In more troubled times, however, the calls for compensation reform can seduce even more balanced minds.

Before this goes any further, it’s important to see these calls for what they are—which is yet another attempt to substitute a rational plan backed by government coercion for a market process. Planning is conceit that will never die regardless of how often we hear about the triumph of free markets and the end of eras of big government. Many among us remain as dependent planning as a drunk is on booze. They can go a long way without the intoxicant but certain triggers are sure to see them back at the bar.

[More after the jump]

There’s a lot to love in this interview with Neil Cavuto and Don Trump (Cavuto’s expressions (he’s definitely been practicing these, go to 9:02 and tell me I’m wrong); Cavuto’s jokes (DT: “Ben Bernanke could’ve been a leader, instead he was a follower” NC: “He should’ve read Think Big And Kick Ass In Business And In Life”) ; Cavuto’s ass-kissing (“I love when you say ‘You’re fired,’ I love when you do that”) but if I had to choose my favorite moment I’d go with:

Trump: If i were president right now, you’d have $30 oil. I would call up Saudi Arabia and say “That fucking price is coming down and it’s coming down now” and you know what? They’d lower that price so quick and it’d be so easy.

Cavuto: What if they didn’t?

Trump: They will.

MBIA, Ambac Bond Default Risk Exceeds 70%, Swaps Show (Bloomberg)
Maybe, just maybe the ratings agencies are going to have to lower their numbers on MBIA and Ambac. It’s just a possibility. While they’re humming and hawing on this question, a new analysis of default swaps done by JPMorgan pegs their risk of a bankruptcy during the next five years at 71 percent. Financial peace of mind indeed.

Germany says talks needed over Nokia plant closure (Reuters)
Nokia recently announced plans to close a plant in Germany and move it to Romani. But Germany will have none of that, of course. A German official said that talks were needed and that the company had to explain the move. Here’s what they’re going to say: cheaper costs of doing business. QED.

NYSE Euronext to Acquire American Stock Exchange (Reuters)
We mentioned this last night, but wanted to add one thing. Shouldn’t the Amex’s slogan be “Three letter tickers without the burdensome listing requirements”? Assuming they keep the Amex as a standalone market, there’s no reason this couldn’t still be its slogan.

Nikko Cordial Stock Swap To Proceed Despite Citi’s Woes (Dow Jones)
If you follow Citi closely, this was probably somewhere near the top of your list of concerns, but have no worry: the company’s bid for Japan’s Nikko Cordial is still on, despite the precipitous decline in Citi stock.

$$$ Lehman to Cut 1,300 Mortgage Jobs [DealBook]

$$$ The Ballad of Jim Cramer [Crossing Wall Street]

$$$ Loaded hedge fund guy on a quest for a fuck buddy. [Craigslist]

As it turns out, the American Stock Exchange still exists and it’s being acquired for $260 million in stock by NYSE Euronext.

The deal had been rumored forever. One person very familiar with the American Stock Exchange told DealBreaker: “Finally! This deal should have happened 15 years ago.”

After the jump, read the full press release.

Tomorrow the Wharton School is holding it’s annual private equity & venture capital conference at the Park Hyatt at the Bellevue in Philadelphia. We’ve got a press pass to the conference but at the last minute our correspondent fell through. So we’re recruiting from our readership. Who wants to go to the conference? We’ll supply you with a press pass, in exchange you supply us with a few hundred words on what happens. If you’ve got a digital camera and can take some snapshots, that’s a huge bonus.

We’d go ourselves but half of our team has been banned by the bartenders union of Philadelphia from ever entering the city unless we’re willing to pay off our bar tab and leave some sort of damage deposit for injuries inflicted upon the fixtures. And Bess doesn’t do conferences. We need you. Email us at tips@dealbreaker.com with a brief explanation of why you should be DealBreaker’s correspondent at the conference.

Earlier this afternoon I was performing my daily task of scrutinizing pics of the males taking part in PocketChangeNYC’s speed dating event for “Rich Older Women and Hot Young Men (Sugar Mamas and Boy Toys),” AKA The Saddest Story Ever Told/The Greatest Spectator Sport Of All Time (if enough of you agree to show up on the 7th to watch, they’ll consider bringing in bleachers). Unfortunately for me, today’s batch of applicants were about as exciting as proxy access. No pool cleaners, no horses, NO CRUSHED VELVET. I was considering writing to PCNYC to vent my frustrations vis-a-vis their paint drying BTs but decided to retract my claws and give them one more chance (I’ve lately been taking my cues from Little Bunny Foo Foo’s F.G., except the shit about field mice, because those assholes have it coming), when I came across something that can only be described as smelling like Eau de Hunter, i.e. FISHY.

A 33 year old toy claiming to be “Mike Darda,” an economist with MKM Partners and CNBC commentator, enclosed five photos. The first three were all of him on CNBC, which I thought was a little weird and narcissistic and not necessarily an attribute I’d assign a “boy toy,” who’s supposed to be the submissive one that gets told what to do. But I reasoned that maybe he didn’t have any recent photographs of himself and besides, he looked pretty attractive in the screenshots— essential to his success at the event. Then I scrolled down to pics 4 and 5. Imagine my surprise and downright horror to find that the chappie* in the last two were decidedly NOT Mike Darda. I forwarded them to a few people who confirmed that I was not crazy (in this specific instance only), and that the five shots were definitely of two different dudes. But why would somebody do that? Steal a CNBC commentator’s identity to gain entry to a dating service? And then fuck it up by including two different faces? Or was the application actually submitted by Mike Darda, and he added a couple pictures of a less attractive dude, relatively speaking, to come off as what? Less intimidating to the senior citizens?

I had to shut off my computer and walk out of the room. I needed to get away from the notion that someone would take something so innocent and pure like a speed dating event for rich old women and hot young men and taint it with some sort of sick game. Now, several hours later, I still don’t understand. I’m hoping that it was just a case of incompetence on the part of PCNYC, and two applicants’ portfolios got mixed. But I’m not holding my breath. If you have any ideas, preferably ones that’ll talk me off the ledge, I implore you to share them now.

—Jewish Nancy Drew, DealBreaker correspondent.

*male form of “chippie”

The best part of our day, apart from lunch at Bobby Van’s, happened when Congresswoman Marcy Kaptur started praising Fed Chairman Ben Bernanke’s for his role running Goldman Sachs.

It seemed to have made the day of a lot of others too, because laughter immediately filled the room.

“Did I get the wrong firm?” she asked.

Sorry lady. You got the wrong guy altogether.

Bernanke didn’t let her hang for very long. Through a thin smile he said, “I was chief executive of the Princeton economics department.”

Apparently Kaptur was confused about which bald headed lord of finance she was speaking to.

To judge from the comments and our email, many of our readers think we’ve lost our minds on Merrill Lynch. We were impressed by the performance of Thain and Co. on this morning’s earnings call and wrote a good deal about it early this morning. We thought it was a strong performance but readers point out that shares of Merrill have been plummeting all day long. They say this indicates that the market doesn’t buy our evaluation of the earnings call. We’re not so sure. It may have been far worse if Thain and his guys had come off as badly at Vikram Pandit’s guys did on Tuesday.

We aren’t yet at the point where we’re going to be swallowing Thain’s kool-aid but our attention to his words might have led us to overlook something in his interview with CNBC’s Maria Bartiromo. This afternoon Street Insider points out that the interview took place on the fixed income trading floor. Why do it there? Well, perhaps to prove that people are still trading fixed income—or that the place has totally been totally cleaned up since that unspeakable incident we wouldn’t stop talking about earlier this week and last week. (Update: They were on the seventh floor, twelve floors below the scene of last week’s crime.)

But this might not have had the desired effect. The traders on the fixed income floor seemed oddly unoccupied, gathering in the background and looking at their boss—or perhaps themselves—on television monitors. This has people wondering why these folks weren’t busy engaging in actual trading.

“Traders usually do not have time to do many other things, than trade, but this morning this small group of traders were more concerned with their tv appearance than making money for Merrill Lynch,” Street Insider says. “I don’t know if this should tell you something about how John Thain runs Merrill, or if this was just a few traders that had a slight lapse in judgment, in what has been very tough days for Merrill Lynch workers in recent weeks.”

Merrill Lynch Traders Do Not Appear Too Busy [Street Insider]

I’ve long wondered whether or not at one time being employed by Amaranth Advisors would be the professional equivalent of pulling a Merrill e.g. would it make you unemployable (except at Bear Stearns or Think Equity — the IB equivalent of Frank Stallone)? Apparently the answer is ‘no,’ but a qualified no, that qualification being that you’re neither Brian Hunter nor Nick Maounis. For instance, former AA chief operating officer Charles Winkler recently joined multi-strategy shop Hudson Bay Capital, and the entire investor relations team, which was known for being all sorts of “cheesy hot,” found work at Scores (watch for them on “Happy Hour” next week).

Sadly, not everyone has had as much luck as Fonzie and the girls. Though Brian Hunter technically owns his own firm, insiders say that the market manipulator’s venture is really just a front to fund legal fees associated with suing various websites for merely sharing his ideas on how he plans to fuck future clients. AA founder Rick Moranis is now in Tampa, trying, unsuccessfully so far, to get a telemarketing firm that defrauds the elderly off the ground. Anyway. I think we all know what time is:

We are renaming our business Global Banking and Markets, effective immediately. The name Corporate, Investment Banking and Markets will be demised. There will be a series of communications over the next few weeks outlining guidelines for implementing the name change across electronic and print documents, etc.

The name change to Global Banking and Markets does not signal a change in strategy — we’ve already changed our strategy. We launched our emerging markets-led and financing-focused strategy in the fourth quarter of 2006 and completed implementation over the course of 2007. Renaming ourselves Global Banking and Markets marks the end of the implementation of the change to our strategy.

When we introduced our new strategy more than a year ago we promised to be clearer about who we are and what we do. We committed to do a better job of explaining our business to our shareholders, colleagues and clients. Our new name is straightforward and direct and aligns with how the business is organised. We have been preparing for this name change for some time. For example, we stopped using the CIBM name in our advertising in mid-2007.

Please do not shorten Global Banking and Markets to GBM. We need to stop bombarding clients with HSBC acronyms and abbreviations.

Separately, Group Investment Businesses is changing its name to HSBC Global Asset Management. Mark McCombe will send out a note explaining that change in more detail but it is in the same spirit as the change to Global Banking and Markets.

Some of you will remember that Global Markets was called Treasury and Capital Markets for many years. The change from TCM to Global Markets was a success. I’m sure the same will be true of the change from CIBM to Global Banking and Markets.

Stuart Gulliver
Chief Executive
Global Banking and Markets

After his well-received conference call and an appearance on CNBC, Merrill Lynch chief executive John Thain spoke to employees about the firm’s future. His confident and well-informed remarks about the CDO market were peppered with wise-cracks that left the crowd of employees laughing out loud, according to a source present at the talk. The mood on the floor is said to be much almost cheerful. It’s a great vote of confidence for the new CEO from a group that was wary of being lead outsider said to be sometimes robotic.

“Much improved from Stan’s lame town halls,” the source said.

We pressed our source for more information about the meeting but John Thain had to take another call.*

Merrill Lynch could not immediately comment on this story. We’re pretty sure they were afraid we were going to ask them about the Turd War again.

The name “John Thain” has been changed to protect the identity of our source.

If you missed the Merrill Lynch earnings call and are frustrated you can’t find a transcript yet, we suggest you check out David Gaffen’s live blogging the call. David’s been doing this for quite sometime and they keep getting better. And, while you’re at it, you can read Felix Salmon’s summary of the call. Felix says Merrill handled the call just right. The results: “A decidedly modest drop in the share price. Yes, it’s down about 2.5% from where it closed on Wednesday, but it’s up from where it closed on Tuesday, when the capital infusions were announced. And at $53.70, it’s already up more than 10% from its 2008 lows. Well done, that man!”

Already people are saying that Thain has poured a little Goldman magic on Merrill.

We’re getting flooded by emails from analysts complaining that the posts this morning have a been a bit fluffy, and not the serious business journalism they come to DealBreaker for during the workday. “When I log on to your site, I expect hardcore market analysis and not meaningless bull shit that I can’t use to get ahead. DealBreaker is supposed to inform, educate and edify me, teaching me things about the industry in which I ply my trade that I didn’t know and for one reason or another, DealBreaker’s editors do,” one of you wrote. You want it, you got it:

Given that economic cycles are largely driven by monetary policy, it’s always a bit sick-making to hear a chairman of the Federal Reserve calling for a fiscal solution to avoid a recession. Federal Reserve Chairman Ben Bernanke just endorsed a fiscal stimulus package, just as long as it would be implemented “quickly.” He said a stimulus package would give the Fed more tools as it works to avoid an economic downturn. At certain times he seemed to be talking from another planet, noting that it was important that a stimulus package not lead to a loss of “fiscal discipline.” Has he even listened to the spending plans of our leading presidential candidates? Fiscal discipline is long gone, baby, and it’s not likely to make a comeback any time soon.

It’s hard not to look at this as Bernanke trying a little CYA in advance. Later, when the stimulus package becomes a spending boondoggle, he can say: “Look, I warned you people. This isn’t what I called for. So this isn’t my fault at all.” He’s clearly been reading Alan Greenspan’s memoirs.

One of the things that is very apparent from Merrill’s earning’s statement is that the banks face serious counter-party risk now that bond insurers have run into trouble. Merrill took “credit valuation adjustments” of $2.6 billion related to hedges with financial guarantors on US ABS CDOs.

“These amounts reflect the write down of the firm’s current exposure to a non-investment grade counterparty from which the firm had purchased hedges covering a range of asset classes including U.S. super senior ABS CDOs,” Merrill stated.

But this could only be the tip of the iceberg. The downgraded counterparty is said to be ACA. But other bond insurers, including the giant Ambac, are facing write-down risk. Last night Moody’s told the market that Ambac is in serious risk of a downgrade.

According the FT Alphaville, the bank’s total exposure via credit default swaps purchased from the bond insurers for super senior CDOs is $19.9 billion, so if there are more downgrades there is a potential for even larger “credit valuation” write-downs. And that’s just Merrill.

We’re getting flooded by emails from analysts who are complaining that our earlier post taking them to task for getting this week’s earnings so dramatically wrong isn’t fair. They have to put out numbers, and are encouraged to put out numbers by both their employers, clients and the companies on which they report. In short, they’re just following orders.

But what excuses the performance on today’s Merrill conference call? More than one got on the call to challenge Merrill’s write-downs—on the basis that Merrill had gone to far. From our perspective, it sounded like a lot of analysts were attempting to defend their own inadequate calls by raising questions about Merrill’s numbers. At the very least, this is the impression we go from Citigroup’s comments.

Bearish skeptics of the CDO write-downs have raised concerns that Wall Street banks may still be too confident that the market for CDOs will recover soon. They’ve accused banks of holding CDOs at above market value based on a belief that the market is facing a temporary, unprecedented “squeeze” rather than a fundamental shift in the risk outlook for these assets.

On today’s call, John Thain made it clear that Merrill Lynch is taking the opposite position. When asked by an analyst at CItigroup about the deeper than expected write-downs, Thain replied that in Merrill’s view it is unlikely that the market for CDOs is going to recover. He said that the “fundamental assumptions” related to home prices and mortgage defaults had changed. In short, the problem is not a short-term liquidity squeeze but a new view of underlying value. Forget the credit crunch. This is a real shift of economic reality.

Thain also displayed a very detailed understanding of the loss assumptions that underlie Merrill’s write downs, noting that the firm is using cumulative loss assumptions on the mortgages underlying asset backed securities of between 16 and 21 percent. This is not quite a “sky is falling” assumption but it is relatively conservative and shows that Merrill is certainly not, to mix metaphors, following the pie-in-the-sky, temporary squeeze assumptions that informed, for instance, Stan O’Neal’s comments on last quarter’s earnings call.

Let’s take a few moments away from Merrill Lynch’s conference call to discuss the dismal performance of Wall Street analysts this quarter. Did they get anything at all right? The analysts had pegged Citi to lose 97 cents per share; on Tuesday it announced a loss of $1.99 per share. JPMorgan was expected to make 94 cents per share; it actually came in at 86 cents per share. They had Merrill Lynch down for losses of $4.57 per share. Instead they booked a net loss of $12.01 per share.

I called a few analysts this morning to ask them about what went wrong. They all offered similar excuses: the credit market write-downs are still largely discretionary since they are based on some complicated accounting, and it just isn’t possible to anticipate how management will handle these things. That’s satisfactory as far as it goes but it raises the question: why keep pretending you can estimate earnings when you admit you cannot. If market conditions have made accurately predicting earnings for financial institutions impossible, perhaps that’s exactly what the analysts should say. Instead they have been putting out earnings estimates that turn out exactly wrong.

Does being an analyst really mean never being able to say “I have no clue?” Because sometimes admitting what you don’t know is the first step to not being a total monkey.

People used to talk about “first mover advantage” but sometimes going second can have a distinct advantage. CItigroup’s conference call left analysts and investors concerned that the bank could not confidently discuss its write-downs, and worried that more write-downs for asset backed securities may yet loom in the bank’s future. Merrill Lynch’s team has done a much better job at assuring those listening into its call that it has a firm grasp on its credit market exposure.

Perhaps the first correction from Citi’s approach is that where Pandit sat out most of the question and answer session, Merrill’s Thain stayed involved in the call the entire time. When UBS’s Glenn Schorr asked about whether write-downs on illiquid assets were deep enough that the firm could now transfer them at par value—basically, whether they had marked the assets to a market-clearing price—Thain jumped in and confidently announced that he was confident the assets were saleable as now valued.

The next correction was demonstrating a firm understanding of the risks faced by the firm. Where Citi CFO Gary “the Critter” Crittenden was forced to admit he had a weak understanding of many of the risks involved with asset backed securities, Merrill chief financial officer Nelson Chai and Thain both began discussing how Merrill’s $23 billion in short hedges reduced its risk in the CDO hedges.

It’s a marked contrast in how Citi handled its earnings call. Thain displayed a hands-on style, and obviously had drilled rather deeply into his firm’s numbers. The ghost of O’Neal has been exorcised.

John Thain’s comments on today’s earnings conference call confirm reports that Merrill Lynch’s new chief executive plans to rely on the brokerage business to restore the profitability and reputation of the company. We’ve been reporting that John Thain’s new plan for Merrill Lynch will include a new emphasis on core strength’s, primarily its wealth management business.

Describing Merrill as “a world class franchise.” Thain went on to say that he has been very impressed with the commitment on employees to the company. He immediately began talking about the strength of Merrill’s culture which he saw at a conference in Arizona. That’s the same conference of managers of the firm’s wealth management business that DealBreaker first reported earlier this week.

“I have been very impressed with how many of the Merrill employees talk about their commitment to the company and talk about their long tenure at the company,” Thain said.

This is a one-hundred and eighty degree turnaround from the way that former CEO Stan O’Neal talked about his firm. This kind of emphasis on the brokers is meant to boost morale with a sign of respect to Merrill’s legendary thundering herd.

Merrill Results Send Futures Lower (CNBC.com)
This is why they keep likening investing in the financials like catching a falling knife. There are so many of these big writedown reports yet to come ( we assume) that it’s really hard to get excited about the sector. The details: Merrill lost $9.8 billion on a $14 billion writedown, which was obviously its biggest loss of all time. Of course, ex-writedown, they would’ve made some serious money, so don’t forget that! Merill is down pre-market, as is the broader market. The announcement is here.

Bernanke Likely to Support Stimulus Effort (WSJ)
Economics observers have been forecasting a recession for a while now. It varies though. Some saw clear signs early in the summer, while others really only got on board late last year. And then there are our politicians, who are real finger-in-the-wind types and now they’re all talking stimulus. But none were talking stimulus, say, 1 week ago. The S-word has really spiked in usage, basically since the beginning of this week. We tend to fall into the let there be pain camp, but if the government were going to do anything, it might’ve acted earlier. Also, people should lay off Bernanke. We’ll just leave that at that.

When 3rd Place on the Rich List Just Isn’t Enough (NYT)
NYT profiles casino mogul Sheldon Anderson, No. 3 on the list of richest Americans. It notes that a lot of falks haven’t heard of the man. Don’t worry Shel, we have.

$$$ Should the Feds Set Banker Pay? [Deal Journal]

$$$ ‘Portfolio’ Still Looking Elsewhere for Inspiration [NYM]

$$$ New Oriental Education & Tech. Group Inc. [WallStrip]

Who remembers that Craiglist ad from the 28 year old Goldman banker looking for someone to lavish with his (pretax) $722k bonus? I’m going to go with all of you because, frankly, it/he was unforgettable. The Viking stove, the custom-made oak dresser, the amazing dinners, the shopping, the great wine, the getting each other off fabulously and, of course, the baby’s arm aren’t things one lets recede from his/her consciousness so easily. Sure, the whole thing turned out to be fake and from the mind of someone named the Cajun Boy who does not really work at Goldman Sachs or at any other financial institution, including Bear Stearns, for that matter, but did anyone give a shit? No. In fact, several of the women who originally responded to the ad sent follow-up messages to CB, telling him that if he’d agree to stay in character— for those who don’t know, his name is “Thad”—their rather open-ended offers of what he could do to them remained on the table. We thought that was special and decided to set up an interview with Mr. T. Unfortunately, some of us— I’ll say it, me— have been grappling with some crippling laziness this past week and found it difficult to make time for Thad, what with our busy schedule of sleeping and not doing anything. He even came by the office but we only spoke for a few minutes cause our shows were on. So Thad was forced to do the interview to himself with the part of “Bess” being played by, in Thad’s words, “my right hand.” Enjoy.

“Bess”: Hello. Nice to meet you.

Thad: Hi there.

“Bess”: I suppose that I should begin by asking you a few questions about your infamous Craigslist ad. Did you receive lots of responses?

Thad: Hundreds. Thousands. Hundreds of thousands. Can you blame any girl who read that ad NOT to respond? C’mon, I’d bet that you even sent in a response under an anonymous email address. You actually look kind of familiar. Did you send a picture with your response?

Speaking of dating, let’s revisit PocketChangeNYC’s upcoming speed dating event for “Rich Older Women and Hot Young Men (Sugar Mamas and Boy Toys).” Female participants must be over be over 35 and qualify (with documented proof) on at least one of the following financial criteria: $500k+ salary, $4mm+ liquid assets, $4mm+ entrusted assets, $4mm+ divorce settlement, plus pay a $500 event fee. Males are required to provide five headshots to be judged for beauty, be under 35, and pay a $50 event fee. I told you guys/old ladies to get out there and sign up and represent DB. Some of you did. Good work. For those guys not interested in being subsidized by mom or ladies not looking for a hot younger man to smack around because you make the money and that makes you the boss, your loss. But you can still participate from the sidelines. Apparently there’s some sort of voting component that lets anyone, even DealBreaker readers, vote for their favorite SM or BT. Each day we’ll be looking at few of the candidates. Yesterday you got a peak at towel boy, and we also asked who you wanted to see next, The Horse Whisperer or Claus von Bülow in-training. 55.6 percent voted for Claus but we’re feeling giving today SO YOU GET BOTH. THW is 26 and an investment banker at a tiny bulge bracket. Claus is 34, which we’re not sure qualifies him as a “boy toy” but whatevs, and an analyst at “a full service investment bank.” He’s also very good at staring intently at something to the right of the camera, and coordinated enough to hold a beverage while doing so. POINTS.

It bothers the legal scholars to see the court make decisions based on policy rather than legal doctrine but we couldn’t help but smile when we read Justice Anthony Kennedy noticing that the “scheme liability” scam urged on the court by trial lawyers would likely deter companies from offering securities on U.S. exchanges.

“Overseas firms with no other exposure to our securities laws could be deterred from doing business here,” Kennedy wrote in the majority opinion for Stoneridge. “This, in turn, may raise the cost of being a publicly traded company under our law and shift securities offerings away from domestic capital markets.”

Maybe it’s not properly the court’s job to worry about that but it’s nice to know that someone is.

(While I’m stroking it, I’m also saying, please do not question my judgment in agreeing to pose like this. Not that I have to defend myself to you, but I think this is exactly the way America would like to see its Fed chairman, at this time especially. Anyway. Email me for the pics that didn’t make it to print: beardofunderstanding (all one word) at yahoo dot com.)

Many of you may have been wondering if the much discussed onshore meeting between DealBreaker readers ‘1-2’ and ‘girl’ will actually come to pass. I seem to remember telling you it would so I’m not actually sure why you would have any doubt in your mind, but for the record, the date will be going down (if all goes well). Due to scheduling conflicts (‘1-2’ is leaving for the X-games Friday, ‘girl’ is judging a wet Villebrequin contest of the Top 30 Traders under 30 for the rest of the week), you’re going to have to wait approximately ten days to hear about it. But now that we have the luxury of time, there’s something important I need to discuss with you so we can all— ‘1-2,’ ‘girl,’ me, DB readers— make this the best date possible. I was trying to come up with an appropriate venue at which to chaperone the event when it hit me— just get a hotel room. This was a great idea on my part, for several reasons. 1. I’m amused by the idea of answering the door and saying “Welcome to your date.” 2. Don’t have to worry about the bar being too loud, and my taperecorder not picking up all the hilarious nuances that are sure to transpire. 3. There’s a TV, in case no one has anything to say to each other. 4. Room to stretch out. 5. If things go well, oh, hey, we’re in a hotel room 6. If things don’t go well, ‘1-2’ and ‘girl’ can go their separate ways and I’ll get to stay in a hotel room for a night, which is always fun (like a little vacation, yes?).

I brought this great idea up to our publisher. He didn’t go for it, and gave me a bunch of reasons why not which I wasn’t listening to because I was so blind with rage (he was signing them to me). So what I’m asking you guys to do is take sides. Do you side with killjoy publisher, who says ixnay on the otel room-hay, or with me, who says, yes, let us get that hotel room? And if you do think I’m right, would you be willing to contribute whatever you think would be a reasonable donation to a little thing I like to call The Hotel Room Fund, in exchange for my (fingers crossed) hilarious write up of the night? If enough people get the answer right, I think we should at least be able to do this at the W. If for some reason I can’t even fathom, you think I’m wrong, feel free to leave your suggestions for an alternative venue below.

We hear that Merrill is bailing out of at least two big private equity funds that are concentrated on real estate, selling it’s limited partnership shares back to the fund managers at a discount. This is igniting speculation that Merrill could pull out of other investments as well, perhaps in an effort to raise capital before announcing earnings tomorrow. The two funds Merrill is said to have left are thought to be managed by Blackstone.

“Merrill Lynch must be in really doo-doo,” a source with knowledge of the matter said.

Last night CNBC held a little party for the one year anniversary of “Fast Money.” I wouldn’t call it the “best” party for a cable show about finance I’ve ever been to (that would be Mark Haines’s last soiree. Theme: nude congo line), but it wasn’t the “worst” party for a cable show about finance I’ve ever been to (that would be Cody Willard’s short-lived telephone hotline singles ‘party line’). I would peg it as a “very good” party (for a cable show about finance).

Sadly, we arrived too late for Maria Bartiromo, who jetted off after the first 20 minutes, but had ample time to check out Melissa Francis in her black leather boots. Charlie Gasparino was there, and he spent a good part of the night complaining about the lack of (his words/pronunciation) “GABA-GOUL” (he was also heard telling a slight young man that when you’re walking through the East Village at night, you have to show “No fear, NO FEAR,” or risk being mugged). Dylan Ratigan made an unsolicited but much appreciated promise to us that he’d buy Charles a Champion sweatshirt, take the time to cut off the sleeves, and make the boy from Rego Park wear it the next time he’s on the show. In the event that Ratigan comes through, I will definitely start watching Fast Money.

The single greatest part of the evening was the genius dessert gimmick. In the center of every “Fast Money” cupcake was a rolled up five dollar bill (wrapped in plastic). Watching guests lunge for every mini cake they could get their hands on no matter the obstacle (physical or conversational: Melissa Francis nearly got trampled by two asset managers, and Ron Blarney got cut off talking about proxy access by at least four different people), you’d think there were, I don’t know, tens in them. Obviously, DealBreaker was not above this sort of animal behavior, which you can see after the jump. The pics were taken on a camera phone and are a bit grainy and classless, but so is shoving money in dessert food and making your guests fight for it, without the promise of at least one cupcake having a 100.

It had to happen at some point. With falling returns and increased risk, the quarter after quarter growth of money flowing into hedge funds had to stop. And finally, in the fourth quarter of 2007, it did stop.

Hedge fund inflows declined by 33 percent, according to Hedge Fund Research Inc. New investment in hedge funds totaled just $30.4 billion in the final three months of the year, down from $45.2 billion in the prior quarter.

Hedge-Fund Deposits Declined 33% in Fourth Quarter [Bloomberg]

JPMorgan Fourth-Quarter Earnings Fall, Miss Analyst Estimates (Bloomberg)
A miss. JP Morgan net income declined to $2.97 billion, from last year’s $4.53 billion, owing in part to a $1.3 billion loss on subprime debt. The company missed estimates by little, though at this point, it’s hard to get too worked up over that part. Nobody really knew anything. Here’s the full release. Have at it.

Asian Stock Markets Plunge (AP)
So goes Intel, so goes the world. One of the ugliest days of an ugly year turned extremely ugly post-bell yesterday, when Intel came in light and plunged double digits. And you know, it’s a biggie. So the world took the queue overnight and did the same, with the Asian markets getting particularly battered. Hang Seng down 5.4 percent; Nikkei down 3.4 percent, with declines pretty much everywhere else as well.

Bull Market for Clones: Studs, Not Stock (AP)
So here’s the deal: the FDA says that milk and meat from cloned animals is kosher… well, not the Kosher kosher, but kosher for sale. But at this point (supposedly), you’re not actually going to be eating cloned beef or milk from cloned cows. Instead, the industry is likely to use cloning only for the best of the breed — the stud animals whose genes they really want to propagate. The chattel, for now, are just that.

Stimulus Deal May Be Possible (WSJ)
Back a few years ago, when things started really coming out of the post-bubble doldrums, the prevailing attitude was basically: look, we’ve seen tax cuts, lowered interest rates and heavy government spending and there’s a lot of damn cash coming into the system right now. It never meant anything fundamentally good to the economy, but cash finds its way to corporate coffers and it made their stocks go up (at least that’s a common read of history). So now we’re talking about it all over again. More mondo rate cutes might be on the way, and there’s even some talk of more tax cuts. In an interview, congressmen Barney Frank said he could support a stimulus package if it didn’t involve making the Bush tax cuts permanent. Either way, the question for investors, is can they make the same thing work again?