The New York Times reports that the White House will publicly disclose the results of the stress tests of the 19 biggest banks in the country.

The obvious reason for not disclosing the results of the stress test is the fear that it could lead to a self-fulfilling prophesy: Banks deemed to be poorly positioned for a prolonged economic downturn will experience withdrawals, fleeing employees and less access to credit, making them more likely to fail -- or at least threatening their ability to compete.

If the latest rumors are correct, it looks like Citigroup (NYSE: C) will not change very much from its current structure. So Citi may fail to follow the compelling story arc of repealing Glass-Steagall to form itself in 1998 only to reinstate that 1933 law in 2009 by splitting its investment and commercial banking operations. Instead, it looks like Citi will do a bit of trimming around the edges.

At the core of the problem is $150 billion in toxic assets -- consumer, corporate, and leveraged loans -- which appears to be the amount of cash Citi will need to raise assuming it writes off all that toxic waste and then attempts to raise the same amount of capital through asset sales.

So Citi's new strategy is to find buyers who in total are willing to pay $150 billion for the various pieces of Citi's business. And this push appears to be coming from FDIC chair Sheila Bair who may be representing taxpayers' 7% stake -- the single largest -- in Citi. But after all the selling Citi will still have consumer, commercial, and investment banking operations (basically the same corporate strategy).

So what is Citi going to try to hawk? Here are four candidates:

Wachovia Corp. (NYSE: WB - option chain) shares are falling today with most other financial stocks, but we uncovered some interesting insider activity from this week. On Monday, a director at WB bought one million shares for $11.00. This cost him $11 million and could be interpreted as a sign that the stock is probably not going to go away any time soon. However, it is also a good idea to note that the same director bought 500,000 shares last winter at $38, so he may also just be averaging his position downwards. Either way, if you think that the stock won't fall by too much more in the coming months, then now could be a good time to look at a bullish hedged trade on WB, since the put premiums will be high today.

WB opened this morning at $10.44. So far today the stock has hit a low of $8.50 and a high of $10.91. As of 12:55, WB is trading at $9.55, down $1.96 (17.0%). The chart for WB looks bearish and S&P gives the stock a 2 STARS (out of 5) sell ranking.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $5 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 39.9% return in just one month as long as WB is above $5 at October expiration. Wachovia would have to fall by more than 47% before we would start to lose money. Learn more about this type of trade here.

The recent challenging market conditions created much not only on traders and companies, but also cause some big names to break promises they had made to consumers. Eric Dash of The New York Times tells of one such promise that may now be repealed. Last year, Citigroup Inc. (NYSE: C) promoted the "deal is a deal" slogan, promising to millions of people that the company would no longer lift reserve interest rates on cards at any time, for any reason.

However, as Dash explains, times have changed and in the current weak environment the bank is reconsidering its decision because of financial troubles. A year ago, the company said it would no longer use the "universal default" practice where a card issuers can raise the holder's rate when that person is late paying any bill. What the bank still held was the right to raise rates every two years, when people renew their cards.

At the time, it looked like Citigroup's decision was efficient as rivals such as Chase Card Services followed the company by announcing it would abandon the "universal default."

MarketWatch has an interesting article today about homebuilder and financial ETFs. The article, titled "Analysts say financial, builder ETFs signaling buy," interviews a couple of leading analysts who feel that both sectors have bottomed out and are "screaming buys."

Morningstar analyst Sonya Morris said that the Financial Select Sector SPDR (AMEX: XLF) is trading "at least 25% below what Morningstar thinks they are worth."

MarketWatch said in the same article, "Most of the analysts agree that valuations are attractive right now in the financial sector. They said that once the sector gets past the problems with the subprime crisis, probably by the end of this year, the shares could move fast."

I think these analysts are probably right, but that we're probably not through going down in the short term.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Prosecutors investigating the fraudulent trading scandal involving Jérôme Kerviel and his antics at French bank, Société Générale, have determined there is strong evidence that a crime has been committed and are asking for preliminary charges to be filed. The filing of preliminary charges by a judge would clear the way for investigators to dig deeper into the matter to determine if the case shall be dropped or continue on to trial.

Defense attorney Elisabeth Meyer, speaking on behalf of Kerviel stated that he is being "thrown to the lions before being able to explain himself." Defense attorneys believe that Kerviel is being made a scapegoat in the wake of losses tied to the U.S. sub-prime mortgage meltdown. They claim that Kervial was just trying to be an exceptional trader. Too bad he couldn't have accomplished that above board.

The bank's CEO, Daniel Bouton rejects the notion that Kerviel is being used for cover. He called the idea "stupid", declaring that you can't "hide a hole by another hole." I would tend to agree with that thinking. The judge's pending approval of the filing of charges could clear the way to proving that Kerviel did indeed act with fraudulent intent. It is of no consequence whether or not Kerviel sought personal gain through his alleged misdeeds. It is of no help to him if he thought his actions were noble. What matters here is that he seems to have acted independent of the rules and then sought to cover his tracks in doing so.

China Life Insurance (NYSE: LFC) implied volatility is Elevated as LFC is near a record high. LFC offers products and services, including individual life insurance, accident insurance, and health insurance in China. LFC is recently up $2.97 to $66.21. LFC over all option implied volatility of 46 is above its 26-week average of 39, according to Track Data, suggesting larger price fluctuations.

ICICI Bank (NYSE: IBN) overall implied volatility is Elevated at 47. IBN is India's second largest bank, with total assets of over $79 billion USD as of 3/31/07. IBN over all option implied volatility of 47 is above its 26-week average of 41, according to Track Data, suggesting larger price fluctuations.

Daily options update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Countrywide Financial Corp (NYSE: CFC) September volatility at 116 prior to BAC preferred stock purchase.

CFC, a U.S. home mortgage lender, is recently trading at $25.85 in pre-open trading, above its close of $21.82 yesterday. Bank of America (NYSE: BAC) purchased $2 billion of preferred stock from CFC. Goldman Sachs says this is "a vote of confidence from BAC, but earnings prospects unchanged." CFC September option implied volatility of 116 is above its 26-week average of 59 according to Track Data, indicating larger price fluctuations.

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

More Countrywide Financial news

Peter Cohan: Is Bank of America's (BAC) purchase of Countrwide Financial (CFC) a good bet?
Georges Yared: Bank of America (BAC) makes strategic investment in Countrywide Financial (CFC)
Douglas McIntyre: Will Berkshire Hathaway (BRK) buy parts of Countrywide Financial (CFC)?
Douglas McIntyre: New lay-offs signal Countrywide (CFC) is not out of the woods
Peter Cohan: What the mortgage meltdown means to you
Eric Buscemi: George Bailey, meet Angelo Mozilo
Peter Cohan: Countrywide (CFC) meltdown continues
Michael Fowlkes: Countrywide Financial (CFC) adds to subprime panic
Peter Cohan: Could Countrywide Financial (CFC) be put down?

Last week, the battle between private-equity borrowers and lenders in the debt market that began to unfold in the middle of July hit the equity market in full force.

"Covenant light" loan packages that greatly reduced the terms borrowers had to meet became the norm in the beginning of 2007. However, lenders have now revolted. Major money center bankers are now stuck with $150 billion to $200 billion of loans that they have committed to for their private equity clients.

Borrowers, the Blackstones of the world, are reminding the banks that they committed to the loans, so they have to deal with them. The lenders, the institutions who buy the debt from the banks, are saying they are no longer going to be lenient with their lending terms. It appears this stalemate is going to last into the fall.

For equity investors, the unfortunate reality is that equity markets will remain volatile until this pipeline, which needs to be financed, is worked through. This huge pipeline can be viewed in terms of a widget company having too many widgets, meaning pricing will remain volatile until this excess inventory is worked off.

It looks to be time to pick stocks you want to own for the long term and the price points you want to own them at, stepping up to the plate while everyone else is panicking.

In today's world, people rarely carry large amounts of cash on them. People have credit cards for large purchases or even debit cards to access their checking accounts. ATM machines are on every urban street corner in America. But what happens when you're not at home in that urban setting? What do you do if you're on vacation?

I recently went to the Caribbean with my wife. We knew that most places would accept our cards but we questioned the exchange rate. Eastern Caribbean money isn't that strong in comparison to the U.S. dollar ($2.60 EC to $1 U.S.) and we knew that our credit cards would charge a service fee for purchases made in EC dollars. My wife, whom I consider a "world traveler," has always gone with the traveler's checks and prepaid card route. She would cash the checks in at the hotel and use prepaid cards so she wouldn't put her personal accounts at risk. I always used my credit card on vacation. Before our trip, I was sent to the bank to pick up a pair of prepaid cards and some traveler's checks.

The July issue of Money magazine has a great article regarding the best way to keep exchange costs to a minimum with today's weak dollar.

I found out she was completely wrong - a month too late.

The Fed chairman decided to side with global central bankers rather then direct his comments solely at the U.S. economy earlier this week, saying the central bank remains focused on inflation as "risks remain to the upside."

Ben Bernanke is in a tough spot. On the one hand, economic data suggests the US economy is slowing down, but there is scant anecdotal evidence to suggest this is actually happening. Virtually everywhere you go, the economy looks good, with most employers having trouble finding qualified employees and eateries and other social settings showing little, if any, signs of inactivity. This is despite a meaningful slowdown in the housing market.

Further, the Fed chairman has to decide if inflation is a U.S. or global problem as emerging markets make up more of the global economic pie. While economic data suggest the Fed could be close to dropping rates, very resilient emerging markets, such as China, cannot seem to get their economy to slow down.

What will the Fed do? Very hard call. Properly side with controlling global inflation. Inflation, or lack thereof, has been, for the most part, a global phenomenon. If China is unsuccessful at curbing its higher growth rate and building pricing pressures, it will hurt the economy of the entire world, not just China.

This is why the market got hit this week. Expect Bernanke to continue talking up the fight against inflation as long as emerging-market central bankers are still attempting to slow down growth. While this might cause some short-term pain, it will prove a positive for the long term, particularly for equities which like low inflation environments.

The sub-prime news (or noise) has gotten front-page coverage galore. Even the French are discussing it over their cafe. Now you know its serious!! But is it? We were in near-panic mode in late 1999 because the dreaded and feared Y2K was coming, and all major systems run by software were going to collapse. Did not happen, not even remotely. A lot of companies spent millions and billions to fortify their computer run systems and we survived.

Now, the new scary expression is sub-prime. Let's understand one thing: the vast majority of Americans pay their rent or mortgage payments on time. There is some exposure, for sure, to sub-prime loans, but is there a catastrophe looming in the weeds? I think not. But, hey it makes for great press and the talking heads can all understand the simplicity of sub-prime.

This all leads me to Washington Mutual, Inc. (NYSE:WM). The stock has become a bit of a poster child for sub-prime loans. Wamu is based in Seattle, Washington and has over 2,225 retail banking centers and over 470 lending "stores." Wamu's sub-prime profile is not way out of the ordinary; about 9% of the bank's loans are sub-prime caliber.

Standard & Poor's Research Division lowered its rating on WM because of this risk, and the fact that 28% of WM's loans are adjustable rate mortgages and they have yet to "be stress tested." Not a very insightful research piece. This analyst is almost assuming, pointing out that all sub-prime loans are valued at zero and written off by WM. There will be some write-off, but the stock has been hit way too hard and is oversold.

WM estimates are for earnings per share this year at $3.90, and next year at $4.35. The current dividend is $2.16 for a robust 5.4% yield. If, and I say if, Wamu has to take a $.30-.50 per share earnings hit to absorb sub-prime and clean it up, no serious analyst thinks the dividend is at risk. This is all worst-case scenario stuff. If WM takes a smaller hit to earnings or even no hit to earnings, the stock at this level is ridiculously cheap!!

Georges Yared is the author of "Stop Losing Money Today" and "Baby Boomer Investing"

With market volatility jumping up in China, it might provide a good entry point to get into HSBC Holdings ADS (NYSE: HBC), the old Hong Kong Shanghai Bank.

David Herro, the long-time successful international fund manager at Oakmark, recommended the stock a few weeks ago in Barron's at $89 per share. The stock is now down to $86 on yesterday's global sell off. Herro liked the stock as a more conservative play on Asia and its many emerging markets.

Chuck Allmon, long-time investor and publisher of Growth Stock Outlook investment newsletter, also likes HSBC. In an interview with Kate Welling at Welling@Weeden, Allmon mentioned he liked the world's fourth largest bank because it has balanced exposure to North America, Europe and Asia. Allmon also liked HSBC's 4% yield and only 11x earnings valuation.

As the lemmings panic over a much needed correction in China, yesterday's sell off provides the level-headed investors with an opportunity to get into this stock.

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX up .02 to 10.25.

Compass Bancshares-(NASDAQ:CBSS) option volume heavy & implied volatility up to 24 from 15. CBSS is recently up $3.91 to $65.67. Compass Bancshares, a financial services firm based in Birmingham, Alabama, is up on unconfirmed chatter SunTrust-(NYSE:STI) is interested in a M&A transaction with CBSS. CBSS call option volume of 3,887 contracts compares to put volume of 999 contracts. CBSS daily average volume over the last ten business days is 424 contracts. CBSS March option implied volatility of 24 is above its 26-week average of 16 according to Track Data, suggesting larger price risks.

Option volume leaders today were: Bank of America (NYSE:BAC), Microsoft Corp. (NASDAQ:MSFT), Boston Scientific (NYSE:BSX), Alcoa (NYSE:AA), Qualcomm (NASDAQ:QCOM) and Bidu (NASDAQ: BIDU).

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Stocks Report.

Union Bancal (NYSE: UB), the holding company for Union Bank California, is the favorite speculative play for 2007 from Doug Hughes, editor of the Banknewsletter.com. He notes, "Union was founded in 1864 and operates as a subsidiary of Bank of Tokyo-Mitsubishi UFJ, Ltd., which owns about 65% of the bank shares. This is among the largest banks we have ever covered, with over 315 branches and over $50 billion in assets. But with the stock trading at multi-year lows, we had to take a look.

"The bank continues to buy back stock; hopefully they will get very aggressive at this over the rest of the year. They certainly have the capital to do it. Look for them to buy 5 to 10% of the stock back this year and next. They have paid much higher prices for their stock in the past, so they will continue.

"Almost every analyst has downgraded this stock. We say buy now. They are in some of the best markets, loans are growing at 12%+, and nonperforming assets are very low at 0.09%. Most importantly, they are being very careful in California real estate not to get in trouble like in the past.

"This is a liquid name that trades plenty, and you get any size position you want now. Buy at $57.25 or less; at under $55.25, this is a steal. While it may take several years to pan out, this is simply an undervalued franchise at today's prices. They have a $30+ book value and 140 million shares outstanding; look for $75 a share 2 to 3 years out, with a cash dividend of 3.3% while we wait. This premier franchise cannot be replaced at today's prices. Downside should be limited to around $55 in a big sell off."

To see Doug's favorite conservative banking stock for 2007, click here.