EXECUTIVE COMPENSATION CAP - The plan to put a $500,000 cap on salaries for top executives at companies that depend on government support is a great idea...politically. However, there are downsides. Some say this sort of constraint is likely to make bad companies worse and it beckons the “who's next” question...your commissions? Although a pay-cap plan would probably be counterproductive, there's also little to be gained from defending multi-million-dollar pay packages in the current anti-business environment.  For another perspective from Fortune, click here.  The main premise of this article is that corporate boards have become more responsive to executives than to shareholders, "their true masters."  

INSURERS HEALTH – A. M. Best says that U.S. life/health insurers' ratings did well in 2007, but 2008 brought a quick reversal of fortune. In 2008, rating actions for the life/health industry were overwhelmingly negative, with 43 rating downgrades vs. only 14 upgrades.

GOLDMAN WANTS OUT - Goldman Sachs wants to repay the $10.0 billion loan it received from TARP as soon as possible. At least part of the reason is the government's move to tighten control on how TARP recipients use their handouts, including capping executive pay, year-end bonuses and perks.

TARP INVESTMENTS? - So far, TARP investments in AIG and others are not faring well. The $40 million invested in AIG is performing most poorly, a report from a watchdog panel says. The $40 billion invested Sept. 17, 2008 was worth just $14.8 billion a month later. The $20 billion invested in Citigroup was worth about $10 billion.

1,000 BANKS – According to RBC Capital Markets, up to 1,000 banks could fail in the U.S. over the next three to five years due to continuing losses from commercial real estate loans. That won't be a good thing.

CORPORATE DEBT DEFAULTS - U.S. life insurers may experience more losses on securities related to subprime, Alt-A and commercial mortgages. Additionally, the worsening recession could lead to a large jump in the number of corporate defaults.

EU CRISIS? -  National leaders and European Union officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back. The EU is deeply worried at widening spreads on bonds sold by different European countries.

TRADE DEFICIT LOWEST IN 6 YEARS - The Commerce Department said that the trade deficit in December fell 4% to $39.9 billion, from $41.6 billion in November. For the year, the deficit shrank by 3.3% to $677.1 billion. It was the second straight annual decline after five straight years of record deficits.

RELIEF VIA FANNIE/FREDDIE - A mortgage-relief plan being developed by the Obama administration would rely on Fannie Mae and Freddie Mac to ease payments on mortgages facing delinquency. The administration hopes private Wall Street lenders will model their own relief plans on the Fannie/Freddie program. 

TARP FOR INSURERS - Some insurance companies received approval and acquired banks, hoping to participate in the government's $250 billion capital injection program, which is part of the larger bailout fund. The Treasury Department quashed their hopes, however, announcing that "only federally regulated financial institutions will be eligible for the Treasury Department's Capital Purchase Program."  Instead, insurers will be allowed to participate in the portion of the bank-rescue plan that will allow financial institutions to sell "toxic" assets to the private market with government guarantees.

MORE BAD LOANS ON THE WAY – As previously reported, concerns are shifting from subprime loans to "Alt-A" mortgages as they sour at an alarming pace. While credit-rating agencies play catch-up to the dismal reality, bankers are realizing that more trouble may be on the horizon. With U.S. unemployment heading toward 8%, even more loans, including prime mortgages, are expected to go bad.