Banks could face another mortgage crisis, according to Barron's, if they are forced to buy back subprime, Alt-A and options adjusted home mortgage securities they've sold prior to the financial crisis, mostly as mortgage-backed securities. Already some buyers, like Fannie Mae (FNMA) and Freddie Mac (FMCC), have enjoyed some success returning defective mortgages. And this could be just the beginning.

The banks, of course, are fighting vigorously to fend off these demands. As usual, the courts will have to settle the matter. The focus of the debate seems to be founded on the issue of representations and warranties that may or may not have been violated.

There are no surprises among the 11 banks mentioned. It is the conspicuous absence of names you might expect to find that is.

Wells Fargo (WFC) announced Wednesday that it will lay off 3,800 employees during the next year as the bank attempts to restructure its consumer finance unit. Wells Fargo Financial will be integrated into the company's community banking network -- closing 638 independent consumer finance offices in the process. The firm added that it is no longer going to deal with non-prime mortgage loans.

Reportedly, roughly 27% of the financial firm's Wells Fargo Financial employees will be laid off. In the next two months, 2,800 employees will be sent packing, while 1,000 more will be jettisoned in the next year. According to WFC, these changes will not affect WFC and Wachovia banks across the United States.

Monday morning has greeted the Street on an optimistic note toward large banks, as Goldman Sachs (NYSE: GS) has upped its coverage on the banking sector to "attractive" from "neutral." Goldman went as far as to name some specific banks, including Wells Fargo (NYSE: WFC), which it upped to "buy."

Goldman believes that Wells Fargo's capital position is improving, with it eventually benefiting from its takeover of Wachovia. The brokerage stated that Wells Fargo purchased Wachovia at a "distressed price" and that will help its assets increase 70% from the second quarter of 2007 to the second quarter of 2009.

I have written many times in the past year about Wells Fargo (NYSE: WFC) and since it is up another 23.66% today, I'd like to come back to it. As an investor I have done more than just blab (or blog) about it. I have been loading up on the stock, acquiring shares at $12.00 when the bears were ruling the market only a short time ago -- a very short time ago!

In the last month, Wells is up an amazing 48.41%, and that for the safest bank in the United States. The stock closed today at $24.25, up $4.64.

In addition to buying the stock, I have been playing with naked put options at multiple levels. The extreme negativity in the market created a huge opportunity, so much so that I wrote Chasing Value: Will we be eating out of trash cans? which includes a discussion of naked put options.

Do you feel good about $173 billion of your tax money helping to keep American International Group (NYSE: AIG) from going bust? If you made the decisions that put AIG at death's door you might be. But the odds are pretty good that you had absolutely nothing to do with AIG's failure and received not a penny of compensation during the time when its executives were reporting profits -- and getting millions in compensation that they're not paying back now that it's losing money.

That's one of the reasons why I was arguing on KCRW's To the Point that the U.S. ought to disclose who is getting the taxpayer money that goes to AIG. After all, they just got another $30 billion this week after reporting history's biggest quarterly loss of $61 billion. A professor on the program suggested that we should not disclose the names of the recipients because it would threaten the stability of the financial system. I thought this professor's argument was unpersuasive -- and now we'll get a chance to see who was right.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Altria Group Inc. (NYSE: MO) Q4 profit rose on higher prices, and its forecast matched expectations.
• Amgen Inc. (NASDAQ: AMGN) Q4 earnings grew on cost cutting but revenue remained flat.
• Black & Decker Corp. (NYSE: BDK) shares tanked after the dismal Q4 report, and it announced job cuts.
• Carpenter Technology Corp. (NYSE: CRS) Q2 numbers resulted in a downgrade from one analyst.
• ConocoPhillips (NYSE: COP) reported a Q4 loss due to writedowns from recent acquisitions.
• DuPont (NYSE: DD) swung to a bigger-than-expected Q4 loss and its revenue fell as well.
• Eli Lilly & Co. (NYSE: LLY) swung to a Q4 loss on acquisition costs but reaffirmed its guidance.

Wells Fargo & Co. (NASDAQ: WFC) is scheduled to release fourth-quarter 2008 results tomorrow morning, January 28. To listen to a recorded message about the results from Howard Atkins, chief financial officer, dial 1-866-519-1052 (in U.S. only) after 8:30 AM Eastern, or go to the quarterly earnings page of the company's website to find out how to dial in from elsewhere or to listen to a podcast.

For the quarter that saw the merger of Wells Fargo and Wachovia, analysts polled by Thomson Reuters expect Wells Fargo to report a profit of $0.33 per share, compared to $0.41 per share in the same period of the previous year. Revenue for the quarter is expected to total $11.7 billion, 14.2% higher than a year ago. Wells Fargo's earnings have topped estimates in the past four quarters.

This post is part of our feature on Money Losers of 2008. See all 20.

There's no doubt about it -- times are tough. People are struggling to find work and to pay the bills as the value of their homes and savings dwindle. The poor get poorer, and the rich get richer.

Or do they? It's all relative, of course, but world's billionaires have been taking some big hits too. We take a look at Sheldon Adelson, Kirk Kerkorian, and Lakshmi Mittal in their own separate posts, but here are some other billionaires who have lost billions this year (courtesy of Forbes and Business Sheet).

• Brothers Anil and Mukesh Ambani of India's private conglomerate Reliance lost $32.5 billion and $28.2 billion, respectively.
• Warren Buffett, the Sage of Omaha, lost $16.5 billion. Shares of Berkshire Hathaway Inc. (NYSE: BRK.A) are down about 32% since the beginning of the year.
• Microsoft (NYSE: MSFT) founders Bill Gates and Paul Allen lost $12.3 billion and $2.6 billion, respectively, while CEO Steve Balmer lost $6.5 billion. Shares of Microsoft are down 46% since the beginning of the year.
• Larry Page and Sergey Brin, cofounders of Google Inc. (NYSE: GOOG), lost $11.9 billion and $11.7 billion, respectively, and CEO Eric Schmidt lost $3.8 billion. The share price of Google has fallen 55% since the beginning of the year.
• Larry Ellison, CEO of Oracle Corp. (NASDAQ: ORCL), lost $8.2 billion. Shares of Oracle are down 21% since the beginning of the year.
• Media maven Sumner Redstone lost $7.2 billion. Shares of his private investment firm National Amusements fell 70% this year.

This post is part of our feature on Money Winners of 2008. See all 20.

This past year has been a pretty rough one for CEOs in general. The stock market has tanked since October of last year, dragging down strong companies' share prices to some extent and weak companies' even further. It has been even worse for most financial executives, who have been ousted as their stocks fall to roughly zero and their company goes bankrupt or is taken over by a stronger institution. While many of these CEOs have golden parachutes that open upon their dismissal, much of their compensation is in the form of the company's stock and when that value dwindles, they feel the pain as well. One of our other 2008 Money Winners, Alan Fishman, who walked away with more than $11 million for three weeks work at Washington Mutual, had 600K shares of WM that he saw evaporate.

James "Jamie" Dimon, CEO and chairman of JPMorgan Chase (NYSE: JPM), has not had this kind of trouble over the past year, which places him squarely in the minority among his peers and makes him a money winner. Strictly speaking, Mr. Dimon raked in a salary for this year of "just" $1 million. His bonus allows for an additional $14.5 million, and the way things have been going for JPM, I'd wager a hefty portion of my savings that he gets the full amount. Plus on top of that, he has exercised options worth about $40.1 million this year, bringing the grand total compensation to $55.6 million.

This has been a terrible year for financial institutions. However, Wells Fargo (NYSE: WFC) has been able to make it through the obstacle course better than most.

The stock has been up and down with the market but the scandals and large write-downs that have tanked other companies have not been a part of the Wells story.

What has me wondering about Wells today is the prospectus I received from the company to purchase shares at $27 each. The offer is for 407,500,000 shares, far more than I could swallow at a cost in excess of $11 billion -- I have never seen that kind of money!

I'm sure they just figured I might take at least a few shares off their hands, and I have in the open market. If memory serves me correctly, this offering was announced about six weeks ago. The strange thing is that this came to me on a day when the stock closed at a price of $21 and change. Who pays $27 for a $21 stock?

We are unfortunately not privy to the backroom deals and promises that are passing between Treasury Secretary Henry Paulson and the honchos who are benefiting from the government's massive bailout. However, two things are becoming increasingly clear: first, the financial industry has not gotten the memo about changing their business practices, and, second, the $700 billion in tax money that is keeping these companies afloat is not finding its way down to the average citizen. The big bailout was originally sold as a desperate maneuver to keep Wall Street afloat. Paulson has indicated that these funds would enable lending companies to service their toxic debt and, in turn, continue lending. In this way, America would be able to count on the credit that kept it running; businesses would be able to meet their payrolls, people would be able to buy houses, and the world would continue to turn.

Instead, some banks seem to be going on a buying spree, snatching up smaller, less successful institutions while prices are low and the getting is good. Citigroup (NYSE: C), for example, used the Wall Street fire sale to make a bid for Wachovia and pick up Forum Financial, shortly before asking for a second huge bailout. Similarly, Bank of America (NYSE: BAC) has decided to take over Merrill Lynch. A clever MBA could, undoubtedly, filter these purchases through a secret capitalism decoder ring and come up with a logical reason for them, but one wonders how gobbling up companies (and their toxic debt) is likely to help Bank of America and Citigroup to stay afloat, much less enable them to extend money to consumers. It is becoming clearer and clearer that the huge influx of taxpayer money is less about saving consumers than it is about enabling big companies to get even bigger.

The weekend is often the time when boards and the government decide the fates of companies and CEOs. It gives everyone involved at least two days, perhaps more, to weigh options and make decisions without the fury of stock market trading. A board of directors can start work on Friday at 4 PM and weigh options until 8 PM Sunday, when Asia opens, or 8 AM Monday if overseas trading is not an issue.

No one with any sense would believe that the board of Citigroup (NYSE: C), the FDIC, the Fed, and the Treasury are not working through this weekend, again. Most of the government people are so exhausted that those who leave with the current administration will be happy to have the rest.

A lot of options have been thrown around. But, the fate of Citi comes down to two things. At this point, the bank is believed to be in such bad shape that putting in a new CEO, even Jack Welch, would make no difference. Chapter 11 would wipe out too many firms that have non-insured deposits at Citi, too many companies that have loans with a bank that could be called, and too many common, preferred, and bond holders in the financial firm would lose everything.

That leaves the government taking over Citi the way it did AIG (NYSE: AIG) or forcing a sale as it did with WaMu or Wachovia (NYSE: WB).

Monday morning cold be quite a drama.

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

As Citigroup 's (NYSE: C) shares dropped, it was talking to Treasury and the Fed. That should not surprise anyone. The government knows a failure of Citi would damage the world financial system even further and kill consumer confidence in the U.S. banking system.

According to Reuters, "The bank has met with officials from the Federal Reserve and the U.S. Treasury Department in recent days."

The federal government has a number of options. The best is probably to put more money from the Paulson $700 billion bailout package into the bank. What would Citi need? Only its management and regulators know what its balance sheet looks like. Based on guarantees that FDIC might have made on the Wachovia buyout, the need at Citi could be $50 billion.

Cheap for keeping what was once the world's largest bank alive.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Citigroup Inc. (NYSE: C) Chief Executive Vikram Pandit talks a good game about boosting the fortunes of the embattled Wall Street bank. The problem is that it's just that ... talk.

Pandit on Friday announced he had bought $7 million worth of stock in the New York-based bank. Today, he is expected to show his appreciation to those whose hard work made his undeserved bonus possible by firing 53,000 Citigroup employees.

Notice, I used the "f" word and not "layoffs." A "layoff" leaves open the possibility that these workers may get called back. Given the state of the economy, odds are pretty poor that many of these workers will find employment in the financial services industry anytime soon. Many of these "downsized" sell-siders would like to work for buy-side firms such as mutual funds because they are not as subject to the whims of the stock market. Trouble is, they are not doing much hiring these days either. Many former Citigroup workers will have to find work in other industries.

If anyone still hadn't fully digested the severity of the financial crisis, here's additional proof. And, if you thought financial firms just sat back and waited for government aide, you have been wrong. If anyone thought Goldman Sachs (NYSE: GS) was somehow unaffected by Lehman's bankruptcy, or wasn't trying to be proactive once it had happened, then the Financial Times over the weekend revealed just how much Goldman was affected. In fact, there was a lot going on -- and maybe still is -- leading up to the government bailout.

Goldman Sachs CEO Blankfein actually called Citigroup (NYSE: C)'s Pandit last month -- after Goldman changed status to commercial bank -- to discuss a merger. While it is reported that Pandit rejected the idea immediately, this kind of call underscores the severity of the crisis and all the secretive talks that never came to light, with and without the government's blessing, to try and resolve problems.

While Citigroup seemed more interested in Wachovia recently (losing out to Wells Fargo (NYSE: WFC), it may have wanted to consider Goldman's suggestion more seriously as the combined strengths would have been remarkable. With Citi's investment banking operation, it is, however, nearly unthinkable the amount of layoffs this merger would have caused -- much more than the current layoffs each firm is undertaking. And more shocking, it would have caused Goldman to lose its independence.

For now, such a merger is unnecessary given the Treasury's capital injection, not to mention Buffett's investment in Goldman. So far, Citi, though, hasn't seemed to move on any deals, or win the ones it does want.