I am not often at a loss for words, but when I found out that New York is going to spend our tax dollars to retrain investment bankers for some kind of useful work, I was speechless. In total, New York will spend $45 million in government money to retrain investment bankers, traders and others who have lost jobs on Wall Street, as well as provide seed capital and office space for new businesses those laid-off bankers might create.

This raises so many questions: Why does an unemployed investment banker need any taxpayer money? Don't retired investment bankers already have tens of millions of dollars stored up? What kind of work could an investment banker be trained to do that someone would pay for? And if so, that other job would pay so much less than investment banking why would a former investment banker would take the job?

The latest proposal from the Obama administration is that the salaries of the executives at firms that take TARP money will be capped at $500,000. While it is not clear which companies will be included, it may be that much of the banking industry will be.

The program may not be as tough as one that was proposed to cap the compensation of every banker on Wall Street at $400,000. But, if the top executives at these firms see the trend going that way, how long will they stay in their current jobs?

Two separate pieces of news hit the market. They did not appear to be directly related, but they do say that employment on Wall Street could drop much further this year.

According to The Wall Street Journal, Citigroup's (NYSE: C) "will dismiss thousands of investment-banking employees world-wide as part of a plan to cut the roughly 65,000-employee group by 10%." The FT reports, Goldman Sachs (NYSE: GS) "is now expected to cut up to 10 per cent of staff in the division that handles mergers and acquisition advice and corporate fundraisings."

Because Goldman is perceived as doing relative well in a tough financial environment, the news is particularly bad.

The information is another sign that the world of Wall Street is not turning around. If these companies saw a second half recovery, they might be less likely to cut so deeply.

But, it is part of a trend. After bottoming in March, U.S. financial stocks started to move back up at the end of Spring. There was talk that the credit crisis had seen its peak.

With new write-offs and thousand of people in the industry about to be out of work, it looks like the April rally was for suckers.

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

The Wall Street Journal [subscription required] suggests that with the collapse of financing for leveraged buyouts -- their share of total M&A rose from 14% in 2000 to 37% through July -- the M&A business is contracting. Deal volume in August fell by more than half from the previous month. Specifically, August deal volume globally was $222 billion -- the lowest monthly total since July 2005 -- a third of the $695 billion figure struck in April and less than half the $579 billion in July.

But hope springs eternal for the deal salesmen. With the drying up of credit for the LBO crowd, M&A professionals are hoping that so-called strategic deals -- merger pacts made between corporations -- will pick up the slack. Tuesday I happened to be watching CNBC when a couple of strategic acquisition cheerleaders tried to outdo each other talking about all the wonderful corporate mergers on the horizon.

The deal bust will have significant economic repercussions in New York. Lower M&A volume means lower bonuses for M&A bankers and those financiers that raise the capital to pay for LBO deals. Moreover, the collapse in the alphabet soup of securities backed by subprime mortgages, credit card receivables and others will lead to more layoffs. Finally, hedge funds which invested in this toxic waste will continue to fold -- diminishing the bonuses of those who run these funds.

Goldman Sachs (NYSE: GS) volatility increase suggests greater Crises. GS is recently down $7.62 to $169.99. GS September option implied volatility of 57 is above its 26-week average of 30 according to Track Data, suggesting larger risk.

Bear Stearns (NYSE: BSC) implied volatility increase suggests greater Crises. BSC is recently down $2.31 to $107.41. James E. Cayne is chairman of the board and CEO of BSC. BSC has been a board member since 1985. BSC call option volume of 7,419 contracts compares to put volume of 10,103 contracts. BSC September option implied volatility of 78 is above its 26-week average of 38 according to Track Data, suggesting larger price movement.

Lehman (NYSE: LEH) September volatility of 73 above 26-week average of 33. LEH is recently down $2.55 to $54.79. LEH call option volume of 18,902 contracts compares to put volume of 33,956 contracts. LEH August 55 straddle is priced at $4.60. LEH September option implied volatility of 73 is above its 26-week average of 33 according to Track Data, suggesting larger risk.

Ben Stein, one of my favorite financial writers, took a look at the issue of liability for investment frauds in his latest piece for the New York Times. In 1994, the Supreme Court inexplicably ruled that investment banks, accounting firms, and similar institutions could not be held liable for aiding and abetting securities fraud. Sound stupid? It is.

Fast forward to Enron. Last month, a three-judge panel in New Orleans ruled that a class-action lawsuit against investment banks involved with the company could not proceed. According to Stein, "The panel held that although its ruling might prevent justice from being done and satisfaction from being had, the acts of the investment bankers were at most aiding and abetting, not direct acts, and therefore not actionable under 10(b) as construed in the Central Bank case."

The case is now destined for the Supreme Court, and Ben Stein and I hope that they will do the right thing and hold banks accountable for participating in schemes that dupe investors. Given that most companies are insolvent after their collapses due to fraud, the banks and accountants are pretty much investors' only hope of getting some money back.

Apollo Management LP may become the next private equity company to sell shares of itself to investors, according to the Wall Street Journal (subscription required).

Goldman Sachs Group (NYSE:GS) and JPMorgan Chase (NYSE: JPM) have been retained to "explore" a potential public offering for a small percentage of Apollo valued at about $1.5 billion, the paper said, quoting "people close to the investment banks."

Interestingly, Apollo is downplaying the Journal's story. That makes me think that these people "close to the bank" probably work for one or both of them. Perhaps Apollo is being stubborn and Goldman Sachs and JP Morgan decided to nudge them along by leaking details of their potential deal to the press.

This happens more often than you think. My guess is that either a banker or a flack are the people in question here. I've been part of the negotiations that occur between these sources and reporters over the name they should be called in a merger story. Sometimes, they can become so convoluted that your head starts to spin.

If the Apollo deal happens, other private equity IPOs would follow. Quoting "people familiar with the matter", the Journal reported that bankers are pushing KKR to sell shares of itself to the public. Perhaps those same people who are trying to nudge Apollo are doing the same thing to KKR. If that's so, you can bet that other big private equity shops such as Texas Pacific Group and Carlyle Group will follow.

This is starting to get really interesting.

This year Wall Street bonuses are looking to hit a new record. Last year, they hit a record of $21.5 billion and I've seen estimates that they'll be up between 10% and 25% in 2006.

One expert, Options Group, estimates that the big winners will be investment bankers and equity underwriters and traders. Driven by a record year in mergers, investment bankers will receive bonuses 20% to 25% higher than in 2005, as will those in equity derivatives sales. The "losers" will be fixed-income proprietary traders, who will earn the same or less than they did in 2005.

This year, the best place for bonus babies is the Goldman Sachs Group (NYSE:GS), which is distributing $16.5 billion worth of bonuses among its 36,000 employees -- up 40% from 2005. While this averages out to $623,418 per full-time employee, a few traders will take home $100 million.

How can any company justify paying so much money to one person? That $100 million bonus is 2,159 times the $46,326 that the median U.S. family earns every year! Do traders really work 2,159 times harder than the average family? Are their lives really 2,159 more stressful? How can any CEO justify paying out so much money?

If it's November, it must be time for some mergers. Sometime back in late July, a bored investment banking VP, mad at being stuck in the office shepherding the summer associates while all the managing directors were at their houses in the Hamptons, came up with a plan. A pitch. A huge acquisition. A strategic merger! The summer associate, blinded by the glamor of writing something that would one day soon be on the desk of the CEO of Bank of America Corporation (NYSE:BAC), or Nasdaq Stock Market Inc. (NASDAQ:NDAQ), or Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), made it look fabulous. The synergies would be mind-blowing, the financial impact, in the billions.

When the managing director was wooed back from the Hamptons with the promise of a meeting with Ken Lewis at Bank of America, or the Blackstone Group's patrician Jonathan D. Gray, she realized this was a brilliant idea. And immediately saw the M&A fee, like hundreds of gallons of revenue pushing the millwheel of the group's bonus pool. The summer associate carried the dozen color copies of the pitchbook to some vastly inferior city and the CEO was convinced.

Come November, the summer associate is pouring back Yuenglings at business school, basking in the full-time job offer he received to return to the investment bank, and in the nick of time, right before the managing director checks out for the holiday season, the mergers have been launched. They're not all successful, but that's part of the fun: that bored vice president will be ever more busy and will naturally have to cancel his trip home to Maine for Thanksgiving launching a counter-offer. Here's a rundown of the successful and not-so-successful deals of the day: