We start the new year with the disappearance of two household names in the financial world, Merrill Lynch which sold itself to Bank of America, (NYSE: BAC) fearing the worst of the broadly deteriorating financial markets; and Wachovia that not only feared the worst but lived through it only long enough to be acquired by Wells Fargo (NYSE: WFC). Both transactions completed yesterday while the market was closed.

The market has been up all day and both BAC and WFC can be upbeat as two of the world's survivors of the 2008 minefields that blew up some of the largest and most revered names in many generations.

The BAC deal propels it to be the No. 1 financial institution in the United States with about $2.7 trillion in assets. Merrill Lynch ends a 94 year run. Earlier in the year BAC acquired Countrywide Financial. These two deals allow Bank of America to stand tall as he largest originator and servicing company for new loans, just when home refinancing may take off based on new lower rates becoming available. It may be able to expand financial services when the world is hoping for even a modest recovery.

This is the third in a four part series which I hope gives buyers, sellers, shareholders and dare I say management a platform for discussion.

The most valuable asset eBay (NASDAQ: EBAY) has is PayPal, the dominant internet financial transaction facilitator. When I started imagining what might happen if eBay started auctioning off its parts I envisioned that PayPal would be worth the highest premium.

I think there would be dozens of interested companies that would find it highly advantageous to acquire PayPal.

The reason eBay bought PalPal in the first place was that they had first hand experience trying to compete with it when it was a separate company, and even with its huge base of customers, eBay could not build much traction. As the old saying goes, "if you can't beat them, join them", or in this case buy them.

For starters, all of the major credit card companies would be very interested with MasterCard Inc'A' (NYSE: MA) and Visa (NYSE: V) leading the bidding and beleaguered American Express (NYSE: AXP) trying to find a way too.

Then there are the few prospering banks still left standing that would have to give this potential acquisition strong consideration. Bank of America (NYSE: BAC) which has already bought out Countrywide Financial and will soon add Merrill Lynch (NYSE: MER) would find this a must have. JPMorgan Chase (NYSE: JPM) has added Bear Stearns and Washington Mutual (NYSE: WM) to its group of enterprises and might be best suited to expand the company given its growing resources. Wells Fargo (NYSE: WFC) that recently agreed to acquire Wachovia Corp (NYSE: WB) after staying on the sidelines most of the year might want PayPal, but I do not think it would pay up.

Everything is upside down these days. The folks with all the money and multi-million dollar bonuses are begging for a handout on the pretext that the economy will crash if they do not get one. We're not talking money for coffee or a snack, we're talking billions of dollars.

It is crashing anyway, or at least sinking. It is just a matter of what it takes down along the way. Apparently, the folks at the Treasury and Federal Reserve are now convinced that it will be everything.

The survivors are pawing at the defeated as Wells Fargo tries to grab Wachovia despite its previous tentative agreement with Citigroup Inc. (NYSE: C). While Citigroup gained a point in Wachovia deal over the weekend, the balance has since tilted in favor of Wells Fargo again.

Bank of America (NYSE: BAC) gobbled up Countrywide (done) and Merrill Lynch (NYSE: MER) (a work in progress), while JPMorgan Chase (NYSE: JPM) corralled Bear Stearns and Washington Mutual (NYSE: WM).

Sadly, only the federal government was big enough to swallow the problems of American International Group (NYSE: AIG), Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Otherwise,those in the know think world financial markets would have crumbled due to the collateral damage, (pun intended).

When I posted Congress is screwing up -- think backstop not bailout!, I was concerned with the psychological effect as much as the financial effect of not approving the funding, but no doubt the people suffering the most are not those who created the pain.

Some things never change.

David Sambol, the out-going president of kaput mortgage giant Countrywide Financial Corp., is taking his family on an African vacation -- on Countrywide's Gulfstream IV.

Yes, the guy in charge of the company that sold hundreds of thousands of suspect mortgages to people who couldn't afford them is leaving on a jet plane, for a nice three-week-long vacation in Africa with his family.

But you know, it's been a stressful year for Mr. Sambol, what with his company nearly collapsing and that stressful fire sale to Bank of America (NYSE: BAC). Not to mention being hauled before Congress to account for his part in helping facilitate the global credit crisis.

Marie Antoinette would have understood completely. "Let them take a vacation," she would have said. "An African safari would be nice. The kids will love it."

The Chapter 13 bankruptcy trustee in Pittsburgh accused Countrywide Financial, the poster child for lending practices that were disastrous for both investors and consumers (but worked out quite well for Angelo Mozilo), of losing or destroying more than $500,000 in checks between December 2005 and April 2007, and then charging already downtrodden borrowers for illegitimate late fees and legal costs.

Countrywide recently settled those allegations, and will pay $325,000. That's it. Is that a deterrent? Now that Countrywide is owned by Bank of America (NYSE: BAC), it's barely a rounding error, and certainly not something that will discourage Countrywide or other lenders from ripping people off.

Crime might not pay, but apparently it doesn't cost much either. Given the continuing flow of hugely negative publicity for Countrywide, it's hard to imagine that Bank of America isn't rethinking its plan to keep the Countrywide brand. Why would someone go a company synonymous with foreclosures, bait and switch, and corporate greed when they want a home loan?

TheStreet.com's Jim Cramer says it'll be a huge, bizarre investment that sticks -- not a bid for Wachovia.

Why is there so much chatter about Wachovia (NYSE: WB) (Cramer's Take) getting a bid? Why do people think that its deposit base is worth the heartache of dealing with its mortgage portfolio?

We have all heard the chatter about a potential bid for Wachovia, and it sure would be sweet, because the stock has been one of the worst of the group. It doesn't have a CEO, so that fits the scenario of a company that could be for sale. The franchise was always a solid one until now. And I will admit that the secret to the bulls' case for a better second half is a bid for Wachovia, a premium bid that takes everyone's breath away and causes a short panic.

My problem is that if you wanted to buy Wachovia, why not wait? What's the hurry? Is it that you might miss a chance at a bottom? Is there someone else out there who might want it? Do you perceive a bidding war, for instance, between JPMorgan (NYSE: JPM) (Cramer's Take) and Wells Fargo (NYSE: WFC) (Cramer's Take) for WB? How about USB (NYSE: USB) (Cramer's Take)?

TheStreet.com's Jim Cramer says with few exceptions, the landscape is littered with corpses.

Sell everything. Nothing's working. Revisit when the prices are adjusted for a big recession, soaring inflation and a crushed consumer. Sell at 12,000 and come back at 10,000. Even better: short it.

Are you going to argue with any of that? Do you have a case against it? What's the counter? Takeovers? We've had a couple: Anheuser-Busch (NYSE: BUD) (Cramer's Take), Wrigley (NYSE: WWY) (Cramer's Take). Good if you owned them.

Lower rates? Can the Fed help? We assume the Fed is done. The odds favor higher rates. Bank turnarounds? How, with short-rates going up? With housing prices going down?

Can oil go down? Only with a worldwide crash, and with a worldwide crash, why would we come back at 10,000?

Can the consumer get more liquid? How? Unemployment's going higher. Wages won't go up in that environment.

That's the environment. It's pretty bulletproof when it comes to its logic.

More states have filed charges against Countrywide (NYSE: CFC) for aggressive marketing and giving loans which were highly risky. Washington and California have joined Illinois in the actions.

Up until now, Bank of America (NYSE:BAC), which is buying Countrywide, has been sticking to its story that it will close on its purchase of the mortgages company. The media has written a million times that the big money center bank might pull out of the deal. That actually became a bit more likely with the new states' actions.

According to The Wall Street Journal, Kurt Eggert, a law professor at the School of Law at Chapman University said, "Countrywide could be required to give back its profit on all those loans and conceivably give back houses on which it has foreclosed." Since that number could be well into the billions of dollars, the potential damages are rising fast.

Countrywide could spend tens of millions of dollars on legal fees and countless hours in court over the next several years. That has become much clearer in the last few days.

BAC would be better off to let CFC go out of business and just buy its assets. Maybe the bank never intended to close the deal. Maybe that was its plan all along.

Douglas A. McIntyre is an editor at 247wallst.com.

U.S. stock futures were higher Wednesday morning, ahead of several economic reports and the Federal Reserve's policy statement on interest rates. While trading might be affected by the upcoming economic data, the real test will be in early afternoon, when Fed chairman Bernanke will read the policy statement. Some on Wall Street believe a strong statement could help markets recover.

U.S. stocks ended lower on Tuesday, as markets just couldn't pull it together ahead of the Federal Reserve rate decision. Combine that with worries over the economy, oil, struggling financials and the the Dow industrials fell another 34 points, or 0.29%, the Nasdaq Composite 17 points, 0.73%, and the S&P 500 3 points, or 0.28%.

At 8:30 a.m. EDT, the first economic reading of the day will be reported -- May durable goods orders. At 10:00 a.m., May statistics for new home sales is due out. Neither are likely to show any improvement in their respective sectors.

Then, at 10:30 a.m., weekly crude inventories will be released. Lately, this statistic has affected oil prices more than it once did. While the report may show diminishing supplies, it could also show lessened demand.

The biggest event of the day will then come at 2:15 p.m. EDT, when Bernanke will read the Fed's policy statement. No action on interest rate is expected, but a shift in focus where the Fed considers inflation as a risk to the economy rather than slow growth. This could be a signal for future rate hikes.

Bank of America (NYSE: BAC) closed at $28.14 Thursday.

BAC aims to complete its planned acquisition of Countrywide Financial (NYSE: CFC) on July 1. BAC announced in January of 2008 the planned acquisition of CFC for 0.1822 per share of BAC for each share they own, $5.13 based on BAC closing share price of $28.14. CFC closed at $4.83.

BAC July option implied volatility of 51 is above its 26-week average of 40 according to Track Data, suggesting larger price fluctuations.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

TheStreet.com's Jim Cramer says the acquired Bear Stearns portfolio is worth even less than he thought.

How bad was that Bear Stearns portfolio? I am beginning to believe that JPMorgan's (NYSE: JPM) (Cramer's Take) buy of Bear is looking like a big mistake. It can only be justified by what might have been an even bigger problem for JPM -- the collapse of the trades that Bear made, which were being processed by JPM's clearing.

We are now beginning to get a real sense of the worthlessness of the mortgage portfolios. Not that we got any help from the SEC, which has taken a "we don't care what's in the mortgages as long as you tell us you have mortgages" attitude. That's been worthless for investors, and maybe even for JPMorgan.

The losses now exceed $400 billion, according to my modeling (if you simply assumed that 50% of the exotic mortgages that were issued from 2005 to 2007 eventually went into default). That's amazing, but it looks like I dramatically underestimated the losses. UNDERESTIMATED!

The most egregious issuers of these exotic mortgages were Bear, Merrill Lynch (NYSE: MER) (Cramer's Take) and Lehman Brothers (NYSE: LEH) (Cramer's Take). I believe that JPM has taken in a huge number of uninsurable, non-hedgeable mortgage instruments that are a pure write-off. And that means they are probably underwater on everything they took in.

Thornburg Mortgage (NYSE:TMA) was one of the larger mortgage lenders in the US. Its stock now trades at $.65, down from almost $27 a year ago. That means it market cap was $5 billion then.

According to The Wall Street Journal, TMA said in a federal filing that "the future of the home-mortgage finance company as a viable business remains in doubt." The company is trying to raise over $1.3 billion, but, by many accounts, that is not going well.

One of the issues that the Thornburg problems opens, again, is why Bank of America (NYSE:BAC) is so anxious to buy Countrywide (NYSE:CFC). While the largest mortgage lender may have problems which are not quite as severe as Thornburg's, it still faces a growing number of customer defaults.

Many on Wall St. would argue that Countrywide would trade well below its current price of $4.67,down from its 52-week high of $38.89, if BAC had not made its offer. It has traded as low as $3.95. CFC has had trouble with regulators, write-offs and in being probed for its lending practices.

Could Countrywide have fallen below $1 if it did not have a firm buy-out offer? Certainly.

Douglas A. McIntyre is an editor at 247wallst.com.

TheStreet.com's Jim Cramer says that rather than merging, these banks will have to raise money through dilutive offerings.

The big difference between 1990s bank implosion and this one is that nobody at other banks sees any value in owning the ones that are faltering.

Key (NYSE: KEY) (Cramer's Take) is the latest example. Key's everywhere, it is grandfathered to be in every state. You would think there was some bank out there that would want it. Nope. No one. So they have to do this down round that destroys the common. Nobody wants Sovereign (NYSE: SOV) (Cramer's Take) either. Or Nat City (NYSE: NCC) (Cramer's Take). Or Washington Mutual (NYSE: WM) (Cramer's Take). The latter's really interesting now that Hudson City (NYSE: HCBK) (Cramer's Take) has passed it in market size because it says that all of those branches and all of that deposit base just doesn't mean anything. Or worse, the losses are so bad that unless the Fed takes the losses and puts them on its balance sheet, there can be no consolidation.

Yet consolidation is the only way to go. Now, we are much more laissez-faire then we were in 1990. The administration then felt engaged to move quickly to set up mergers instead of the charade of down rounds. I call them charades because none of them yet has produced a return for anyone who has put the money up.

TheStreet.com's Jim Cramer says that with this bank going back to the well, there are too many questions to risk buying in this space.

Why doesn't Lehman (NYSE: LEH) (Cramer's Take) raise $15 billion? Or $20 billion. How about $30 billion?

Would it then not have to come back to the market? Maybe for $40 billion we could lose what has become a cancer on the market.

The question we all must ask this morning is how bad are the portfolios that these firms are stuck with, and how bad is every attempt to undo them? Where did they come from? Who put them into these bonds? Which clients dumped them on Lehman? Who allowed this? Have they been fired? Why did the firm exude any confidence? Why did it hold on to this stuff for so long? How undercapitalized was it really?

All of these things spring to mind because the previous capital raise, the preferred raise, clearly meant nothing. No more than the raises that Merrill (NYSE: MER) (Cramer's Take) has done and will no doubt have to do more of.

It's the denials that get me. Or the "soft denials," the ones that tell us, "Look, things are fine." Because that's all quicksand.

Almost everyone believes that Countrywide Financial (NYSE: CFC) CEO Angelo Mozilo is a thug. But, it turns out he is a smart one. Some fairly powerful people got special loans from his company. They were often people Mozilo needed as pals.

According to The Wall Street Journal (subscription required), "These borrowers, known internally as 'friends of Angelo' or FoA, include two former CEOs of Fannie Mae, the biggest buyer of Countrywide's mortgages."

Two of the people involved were James Johnson, who does some work for Barack Obama, and Franklin Raines, who had some scandal problems before he left Fannie Mae (NYSE: FNM).

Since Countrywide had business dealings with Fannie Mae, the whole deal looks a bit tawdry.

No one knows whether these loans will cause legal problems for any of the parties involved. But, it does, once again, raise the question of the wisdom of Bank of America (NYSE: BAC) buying a company with such an ugly past and so many chapters of less-than-ethical behavior.

Perhaps no one cares about the ethics part if there is money to be made.

Douglas A. McIntyre is an editor at 247wallst.com.