MAJOR PAPERS:

• Two years after saying it would open about 100 new branches a year, Citigroup Incorporated (NYSE: C) has decided to drastically cut back, and will instead focus on big markets, reported the Wall Street Journal.
• Wal-Mart Stores Inc (NYSE: WMT) wants a piece of the pharmacy benefits business, the Wall Street Journal reported, and will begin an initial program to help "select employers...manage how they process and pay prescription claims," CEO Lee Scott said.
• New York insurance superintendent Eric Dinallo is urging bank executives to provide up to $5B in initial capital to support struggling bond insurers such as MBIA Inc (NYSE: MBI) and Ambac Financial Group Inc (NYSE: ABK), the Financial Times reported. Sources believe the insurance regulator is looking for leading U.S. banks to ultimately commit up to $15B.

• According to the Associated Press, Yahoo! Inc (MASDAQ: YHOO) may be eyeing an online music service, two record company executives familiar with the matter said. As part of an ad-supported service, the sources said Yahoo has held talks with several major record labels to potentially offer unprotected MP3s for free or for sale.

I was surprised and pleased to see the Dow rebound this afternoon. The reason the market rebounded is simple: the New York Insurance regulatory agency met with bond insurers to discuss ways to bail them out of the little mess they're in. Count this as another victory for Jim Cramer.

Just yesterday, Cramer was making his pitch for catastrophe unless somebody saved the bond insurers who were losing their AAA rating and thus being driven out of business. Without bond insurers, all those $3.7 trillion worth of corporate bonds -- and plenty of other municipal and state bonds too -- had nobody to back them up in case the bond issuers defaulted. In Cramer's view, this was spooking the market.

But this afternoon, just as it did last August when Cramer issued the whine heard round the financial world, the government gave Cramer what he wanted. But we didn't get a complete repeat of last August -- when the Fed cut interest rates for Cramer. Today, Bloomberg News reported that the New York Insurance Department is meeting with bond insurers. This includes one of the biggest, MBIA Inc. (NYSE: MBI), which insures $2.4 trillion worth of bonds. It is likely they'll be bailed out. And the market ended up rising about 300 points.

Unfortunately, the market benefit of those government bailouts only last a day or two. What will Cramer whine for next?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in MBIA securities.

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"My favorite picks for 2008 are two monoline bond insurers: MBIA Inc. (NYSE: MBI) and AMBAC (NYSE: ABK)," says Richard Lehmann, editor of The Forbes Lehmann Income Securities Investor.

"These two companies have been heavily shorted by speculators because of their exposure to subprime mortgage defaults. At current pricing, they are selling at half book value and only three times earnings.

"The reason for current concern is that they will lose their AAA credit enhancement ratings and therefore their ability to conduct new business, something I don't think is likely because there are various remedies to forestall such an event.

"For 2008, the demand for their services should grow substantially since the reliance by lenders on credit ratings alone has been seriously eroded. Also, their insurance of CMOs and CDOs only protect the most senior tier of a multi-tiered debt instrument, so their loss exposure is very marginal and years off.

Investors normally jump at the chance of tax free municipal bonds, and cities normally don't have any trouble funding projects they want to do using those types of bonds. Well, the bond funds have dried up for many municipalities that have lower credit ratings, according to the Washington Post this morning. Chicago was forced to cancel a $960 million bond deal, Miami-Dade had to pull a $540 million bond deal for its airport and Washington, D.C. stopped the sale of $350 million in bonds for schools, parks and roads. The municipal bond market is a $2.5 trillion market that raises funds for buildings, ballparks and other key projects for cities and school systems.

Why is this happening? Because the bond insurers, which normally would back these bonds, are overextended due to the mortgage mess. They need to cover steep losses because of the massive mortgage write-downs and they don't have the capital to insure new projects.

Municipalities have to choose between paying higher rates because they can't get the secondary bond insurance or put off intended projects. If they pay higher interest rates, the taxpayers will have to foot the bill. So many cities with lower credit ratings have decided to pull back the bond offers and delay needed projects. They face a double whammy because tax revenues for many of these cities will also drop as their core source of funding -- property taxes -- fall as the value of homes is falling.