Over a year ago many of you who receive the BDExchange newsletter may recall I speculated that 3 of the 5 top firms on the street were underwater and even went so far as to say that I truly Believe Bear Stearns and Citibank may in fact be under water.  In November of 2007 I felt the Fed chairman was merely lowering rates in the face of inflation in order to allow Citibank and some others to “rob Peter to pay Paul”.

The fact that Bear Stearns collapsed did not surprise me, however a few weeks ago I was stunned when Citibank announced that it was purchasing the struggling Wachovia bank in a deal that was endorsed and financed by the Fed and FDIC.  Under terms tentatively announced at the time. Citibank was going to pay 1.00 per share and would receive assurances from the government that they would not be responsible for up to 300 billion in bad loans.  A few days later, Wells Fargo came in and announced “ we will pay 10.00 per share and do not need any government interference or aid”…..Yet the FDIC and Fed stood by the earlier announced deal and said they think the Citibank deal is in everyone’s best difference.  After a brief threat of lawsuit, Citibank backed down like they were bringing a knife to a gun fight.  Although I know I am know  financial wizard like the men who are running this Bailout Blarney, I do know plain old common sense: 10.00 per share is more then 1.00 a share ( unless of course you ask an Enron Accountant).  I also know that 300 billion in tax payer commitments for bad loans versus NO tax payer commitment for bad loan is a bad thing.  So what gives?

Brace yourself…….I will reiterate what I have previously writing about.  CITBANK is under water and the government is doing everything they can to keep them afloat…even going so far as to create FAKE , that’s right , FAKE takeover notices in which they can fool the American taxpayer into thinking that CITI is on solid ground.  Citi’s ground is about as solid as the ground New Orleans is built on…Silt and mud and just hoping the rain will stop long enough so it can dry our and solidify.  Its not happening.  Citibank is now under 10.00 a share and most likely in a few weeks they could be another asset of JP Morgan or Bank America.

Unless of course the Government gets involved and decides they should help ‘finance a Citibank takeover of GM and Ford”….In this current state, anything is possible.  In reality, the current conduct and statements by the likes of Paulson and Bernanke could be the reason why there is no trust in their Bail out plans. It appears that every time they speak..the market tanks…Perhaps its an indication that most American investors think they are either full of crap or have no idea what they are doing.  However, setting up fake takeover’s using tax payer dollars is just wrong (fraudulent?) and may be a reason why investors are hoarding cash and waiting to see what the real damage is. Citibank is just the beginning…Goldman Sachs appears to be heading down a similar path, and its stock has been pummeled despite reporting some earnings in their latest quarter.  The real question that should be facing investors is:;;  Who can you trust?  The Fed?  Treasury? FDIC?  The company executives? I just want to leave you with one tiny bit of sobering news:  The U.S government just concede that they have now spent 3.5 TRILLION dollars on this Bailout Blarney…..and depite that Citi is under $9.70 per share and Goldman is down 50% since August….Look out below!

On November 15, leaders of 20 nations will convene to create a framework for stabilizing and rebuilding the world financial markets. The meeting is being called Bretton Woods II, after the historic meeting that set the stage for dollar hegemony after WWII. While the meeting is set to review and determine such things as the world reserve currency and world wide financial regulatory regimes, your average joe isn’t really talking about it. Dollar-shmaller, what does it matter? All I can say is wake up. WAKEUP!!

The ramifications of oil priced in Euros or any other currency are huge – and that is just the tip of the iceberg. When change comes, and rest assured it will, or this meeting would not be happening, there will LIKELY be major dislocations as the world digests the new paradigm.  Whilst major politicos from Biden to Powell have suggested that there is a “major test” of the new president in the works in the very near future, and they have even gone so far as to name dates – though nobody will go so far as to say just what that test might be – this could be it.

In any case, consider new regulatory regimes. We could be talking about a restructuring of the entire financial services regulatory matrix. Folks, if you make your money in financial services, this is not just a matter of some obligation to  another report. This could mean the complete restructuring of your business; new licenses, new regulation, different rules and regulations. We all know that old dogs can in fact learn new tricks. It just takes a bit more patience to teach them. Chances are that you, if you are reading this column,  have been engaged in financial services for some time, and are a relative expert. How much patience have you got to see a complete re-definition of your business practice? You can hide your head in the sand as much as you like, but it doesn’t change a thing. You need to get involved. To start looking into and analyzing the potential changes. The point is that you cannot count on non-financial pros to get it right. Hell, you cannot even count on Financial Pros to do the right thing when faced with greed and self interest. But you can, if you have a conscience, assist in the process to make sure that what we wind up with isn’t orders of magnitude more burdensome and destructive. Have you ever dealt with SarBox? One can laugh and say that a camel is a horse made by committee – but it is no longer funny when you are the one that has to ride it. Wake Up. Get Interested. It’s only your entire life’s work that’s on the line.

How? Start by joining the SIPA now. The voice of 800,000 registered people must be heard, loud and clear/

According to the U.K.’s Daily Mail, Goldman is set to pay all 443 partners Christmas Bonuses of approx $4.9M EACH, for total handout (including salary allocations)  appproaching $11.4BL. This on the heels of taking in almost $10BL in BailOut Bux. Meeerrry Christmas!

While I have not seen this confirmed yet in US papers, the above has been widely reported in hundreds of blogs in the UK and continental Europe…

If this is true, thank goodness for Real American Heroes. One might have expected a hint of brazen arrogance, or even callous greed when the bankers were accused of paticipating and fomenting the largest financial meltdown in history. But not from the GS crew! Those selfless execs at GS have apparently decided to “take one for the team”, in a Grand Gesture demonstrating the true level of their collective humility. Thank goodness that profits are only down 47%, and that shareholders have lost a mere 50% of value.  Otherwise those execs might be facing dissapointed shareholders, who might feel that they’d not done enough – and might even feel that more should be done for them!  But how, how could GS Management possibly do more? It’s not like money just grows on trees! One must make sound use of resources in one’s control. It’s what they’re paid to do.

Thank goodness for the triumph of Rational Thought, and the GS Executive Commitment to restoring confidence in our banking system. After this grand gesture, who amongst us could question whether Wall Street suffers from overweening greed?! To those that do, behold GS. Your slack-jawed, mouth agape reaction belies the collective awe that we all must feel when bearing witness to this shocking example of humble contrition.

And the best news of all – lest one fear that these kinds of awe inspiring acts might be one-time aberrations – is that Paulson is heading the Treasury. Paulson, former Chief at Goldman, is credited largely with creating the corporate culture there. May we all rest, assured that he will make equally prudent use of every single last penny in the US Treasury.

The humility of the GS Executive Committee will do nothing less than shock and awe the world.