LATEST ON AIG BAILOUT - That would be the $150 billion bailout! However, the company has decided not to pay executive bonuses for 2008 and will restrict the top executives' 2009 pay increases.  To our way of thinking, if a company needs a massive tax bailout, perhaps there shouldn't be any pay increases, but then there's Wachovia.  Read on...

$98.1 MILLION SEVERANCE - Wachovia, which lost $33 billion in the last two quarters, says that 10 top executives may be entitled to $98.1 million in severance pay after the bank is acquired by Wells Fargo. 

CITIGROUP BAILOUT - Well, we believe this is now up to $45 billion and it could be a lot more. Here is the latest take:

• Citi will carve out $300-billion in troubled assets, which will remain on its balance sheet
• The first $37-$40 billion in losses on those assets will go to Citi
• The next $5 billion in losses will hit Treasury
• The next $10 billion in losses will go to the FDIC
• Any more losses will go to the Fed
• There will be no management changes at Citi, because, you know, they are all fine and upstanding people who have done nothing wrong
• There will be some compensation limitations, but those have not yet been made clear 

CITI JOB CUTS - Not sure this is with or without the bailout, but some are predicting Citigroup could cut as many as 50,000 jobs.

HOME FOR THE HOLIDAYS - Fannie Mae and Freddie Mac will suspend foreclosures and evictions on delinquent mortgages from now through Jan. 9. The mortgage giants said the move is intended to make it possible to include more struggling homeowners in a program that changes mortgage terms to make them more affordable.

FED RATE AT 0%? - Economists at JPMorgan Chase believe the Federal Reserve will likely drop the federal-funds rate from 1% to 0% by the end of January, then hold it for the rest of 2009. Hey, but what do the folks from JPMorgan know?

INSURERS BUYING BANKS - U.S. life insurance companies have been acquiring small banks and thrifts in an effort to obtain some of the government's rescue funds. Lincoln National, Genworth and Hartford have all announced plans to purchase small financial institutions so they can transform themselves into savings-and-loan holding companies.

UBS TO MAKE COMPENSATION CHANGES - Well, it is better late than never. UBS appears to be the first financial company to take action against absurd upper executive compensation. The company's compensation system for its senior staff will be revised starting next year and its 12 top executives will not receive bonuses for 2008. The changes are part of an overhaul of the company's model for executive compensation and could provide a benchmark for other financial institutions grappling with executive-pay issues during the economic downturn. Look for long bonuses tied to long-term performance (3 years plus) rather than the absurd current short-term programs. If fact, it would be a great improvement to not give bonuses to anyone when a company loses money!

"NO PLAYBOOK" - Treasury Secretary Henry Paulson says he is trying to address the financial crisis with a "one challenge at a time" strategy. "There is no playbook for responding to turmoil we have never faced. We adjusted our strategy to reflect the facts of a severe market crisis, always keeping focused on our goal: to stabilize a financial system that is integral to the everyday lives of all Americans." This statement was made in response to criticism that the Troubled Asset Relief Program has been enacted in a manner that is different than originally conceived in legislation.

WORLD ECONOMIC THINKING - Leaders from the Group of 20 industrialized and emerging nations met in Washington and vowed to avoid protectionism, work quickly toward an overhaul of the regulatory system and shore up growth around the world. The leaders presented a united front while promising to take "whatever further actions are necessary to stabilize the financial system." Observers say that the outcome would depend largely on the Obama administration. This is no time to fumble!

INFRASTRUCTURE - Well, we are not sure how bad the U.S. infrastructure is, but President-elect Barack Obama's promise to upgrade it could benefit the municipal bond market. That pledge could give states more federal funds and a greater need to borrow in the market.

CLEARINGHOUSE FOR CREDIT DERIVATIVES - The Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission are all reviewing proposals to set up a central clearinghouse in the credit derivatives market.  The clearinghouse is aimed at eliminating concerns over lax oversight in the sector, but we suggest they get a definition of exactly what credit derivatives are before they try to regulate them.

• Income tax: Married couples earning over $250,000 and others earning over $200,000 will go back to the top marginal tax rate of 39.6% and will see the phase-out of personal exemptions and itemized deductions continued.  These increases, however, may not be implemented in the near term.  Taxpayers over age 65 who make less than $50,000 will not be subject to income tax.
• AMT:  Don't look for repeal of the alternative minimum tax; the revenues are needed.  At best, look for the AMT exemption to be indexed for inflation.
• Capital gains/dividends:  The 15% tax rate will increase to 20% for upper income taxpayers.  Again, however, the timing is uncertain.
• Tax credits:  An expansion of the existing child tax and saver's credits; perhaps a new tax credit for taxpayers earning less than $75,000.
• Estate/gift tax:  Retain the current top estate tax rate of 45%, but increase the exclusion to $7 million per couple.  No change to the gift tax.