A year ago, a variety of sovereign wealth funds plowed billions into the U.S. financial services industry. Yes, it looked like the "smart money" was making a move. But, of course, it turned out to be a disaster.

Just look at Singapore's Temasek Holdings. The fund unloaded its 3.8% stake in Bank of America (NYSE: BAC). The loss? It appears that it's about $4.6 billion. The stock sales came between January and March.

And the overall portfolio of Temasek suffered a 31% plunge during an eight month period (as of the end of November).

MAJOR PAPERS:

• Verizon Wireless, a joint venture of Vodafone Group Plc (NYSE: VOD) and Verizon Communications Inc (NYSE: VZ), is in talks to acquire Alltel Corp. in a deal valued at about $27B, the Wall Street Journal reported. If successful, the combined companies would create the largest cellphone company, and would be better positioned to compete against AT&T Inc (NYSE: T).
• Gregory B. Penner, the son-in-law of Wal-Mart Stores Inc (NYSE: WMT) chairman S. Robson Walton, is expected to join the company's board of directors, a move seen as the beginning of a leadership change at the company, according to the Wall Street Journal.
• The Financial Times reported that Singaporean sovereign wealth fund Temasek refused to provide funds to Bear Stearns shortly before Bear's sale to JPMorgan Chase & Co (NYSE: JPM). Temasek reportedly refused the request for practical and political reasons.
• Russia's Interior Ministry questioned the head of BP Plc's (NYSE: BP) Russian oil venture as part of a criminal investigation into possible large-scale tax evasion, the Financial Times reported.

The Treasury and some members of Congress are concerned that sovereign funds from the Middle East and Asia may use their investments in US banks and corporations to push their global political goals. Treasury Undersecretary for International Affairs David McCormick said the government-controlled funds may raise "legitimate national security concerns," and may distort markets if not managed properly, according to MarketWatch.

If the large funds walk away from investing in the US, especially when banks and brokerages may need more money to weather the credit crisis, finding large pools of capital may be difficult.

But, one sovereign fund, Singapore state investor Temasek, appears to be willing to agree to make official its intention to put money into US companies for only "financial" reasons. According to Reuters, "A Temasek Holdings executive told a U.S. House of Representatives subcommittee that it supports the aim of U.S. lawmakers to maintain the right balance between national security and investment flows."

General Electric (NYSE: GE) and Merrill Lynch (NYSE: MER) announced a deal Monday, which will result in GE picking up most of Merrill's commercial finance business.

The deal is expected to be completed during the first quarter of 2008, and will add an estimated $10 billion plus in assets to GE Capital. Merrill has been hit pretty hard this year with the subprime mortgage mess, and this deal will result in around $1.3 billion worth of capital that the company will be able to allocate elsewhere.

Merrill, which announced a massive $8.4 billion worth of write downs back in October is in the middle of what it is calling a "strategic focus on divesting non-core assets." This sale is beneficial to Merrill because the firm's commercial-lending business has become reliant on companies that do not posses investment-grade credit ratings and pose a financial risk that Merrill does not need to be assuming, especially after Merrill's recent write down.