• Talks between Citigroup and Morgan Stanley continue as the two banks discuss a plan to combine Citi's Smith Barney unit with Morgan Stanley's brokerage division in a joint venture worth $20 billion. [FT, Bloomberg, WSJ]
• It remains unclear if Vikram Pandit will be able to hang on as Citigroup's CEO, especially amid rumors the bank will report a $10 billion loss for the fourth quarter. In the meantime, banking regulators are pushing for the removal of Citi's chairman, Win Bischoff. [NYT, WSJ]
• The man who will likely lead the Citi-Morgan Stanley joint venture, James Gorman, is now considered the frontrunner to take over for Morgan Stanley CEO John Mack when he retires next year. [Bloomberg]
• Phil Falcone's Harbinger is the latest hedge fund to limit redemptions. [DB]
• The board of the Federal Reserve of New York met with candidates over the weekend as part of their effort to find a replacement for Tim Geithner. [NYT]

The Wall Street Journal reports that Bob Rubin is leaving Citigroup and Citi is now in active discussions to unload its Smith Barney unit. Possible bidders include Morgan Stanley and JP Morgan, but there's probably still time to get in on the action if you're interested in picking up a venerated brokerage brand for bargain basement prices. Just shoot a quick email over to vikram.pandit@citi.com. [WSJ]

• A judge has yet to decide whether Bernie Madoff can stay at home or if he'll have to report to prison for violating the terms of his bail by handing over $1 million jewelry to his sons on Christmas Eve. [NYT]
• The trustee liquidating Madoff's firm has found $830 million in assets. [BN]
• Merrill brokerage chief Bob McCann is leaving the firm now that the sale of Merrill to Bank of America is complete. [WSJ]
• Rumor has it Wesley Edens is exploring the possibility of taking his beleaguered hedge fund/private equity shop private. [FT]
• Who will replace Morgan Stanley chief John Mack? The bank's board is now exploring the options in preparation for Mack's retirement in 2010. [WSJ]
• Flailing billionaire Ron Perelman is hoping to squeeze more cash out of Morgan Stanley as part of a 10-year-old legal dispute. [NYP]

Everyone wants a neat explanation of the panic that destroyed the economy and put the government in charge of Wall Street. Good luck with that! Here's a look back on the year money forgot.

• The Journal is reporting that GM and Chrysler have resumed merger talks, although both companies have denied it. Chrysler has, however, said that it plans to shut down production for a month. [WSJ, Bloomberg, DB]
• Morgan Stanley employees will see bonuses drop by half this year. [NYP]
• Partners at Goldman Sachs may see bonuses fall by 80 percent. [FT]
• Mary Schapiro will head up the SEC in the Obama administration. [MW]
• More on the efforts to expose Bernie Madoff many years earlier, concerns that were brought to the SEC and ignored. [WSJ]
• Real estate execs in NYC have been particularly hard hit by Madoff. [NYT]
• What to do if you lost a fortune to Bernie Madoff? Sue someone. [FT, NYP]

• The SEC admitted last night that it failed to follow up on repeated warnings over the years to investigate Bernie Madoff's firm and says it plans to conduct an internal investigation; it also is looking into the relationship between Eric Swanson, a former lawyer at the agency, and Shana Madoff, a niece of Bernie, who later got married. [WSJ, NYT, ABC]
• A look at Walter M. Noel, the founder of the Fairfax Greenwich Group and the middle-man who handed over $7.5 billion to Madoff's firm. [NYT]
• More on Bernie's lifestyle, including his fondness for manicures, steak dinners at the Palm, and trips aboard his boat named Bull. [Bloomberg]
• Morgan Stanley reported a fourth quarter loss of $2.29 billion. [WSJ, CNN]
• To cut costs, Citigroup has announced that it plans to combine its corporate and investment banking businesses. [DB, Dealbreaker]

♦ The events of the past few months signal that "there is no more Wall Street," according to Ace Greenberg, the former chief of Bear Stearns. [Bloomberg]
♦ Hedge funds dropped another 2.7 percent last month. [WSJ]
♦ Morgan Stanley's new bonus plan has a "claw-back" provision. [NYT]
♦ The hedge fund Copper River Management has closed its doors. [WSJ]
♦ Cowen Group has rejected an unsolicited takeover offer. [MW]
♦ In corporate layoff news, Sony plans to cut 8,000 full-time workers and the same number of part-timers. Other companies cutting back today: Wyndham Worldwide and Danaher Corp. [Bloomberg, CNN]
♦ Citi may be keeping its high-priced sponsorship of the new Mets stadium, but a holiday toy-train exhibit wasn't quite as lucky. [Bloomberg]

♦ The Big Three automakers are putting finishing touches on new business plans to take to Congress this week, part of a last-ditch effort to secure a federal bailout. [WSJ, Bloomberg, NYT]
♦ Shoppers spent $41 billion over the four-day weekend, up 7.2 percent from the year before. That was better than expected, but retail experts are still pessimistic about the holiday season outlook. [CNNMoney, WSJ]
♦ Hedge funder Paul Tudor Jones has suspended withdrawals as he splits his $10 billion flagship fund into two. [FT]
♦ The bailout has already cost more than World War II, in case you're keeping count at home. [Clusterstock]

♦ Don't expect another winning day on Wall Street: Stock futures pointed lower following grim news about unemployment and consumer spending. [WSJ]
♦ Consumer spending fell 1 percent in October, the steppest decline in seven years. And the four-week average of new jobless claims hasn't been this high since January 1983. [CNN, WSJ]
♦ Good news: Shares of Citigroup appear to have stabilized. Bad news: Not everyone is convinced the rescue plan will be enough to keep Citigroup solvent. And it's never a good sign of things to come when your head of human resources suddenly jumps ship. [WSJ]

♦ Following a weekend of non-stop negotiations, a deal is now in place to stabilize Citigroup: The bank will get a $20 billion cash injection from the Treasury Department and the government will guarantee $306 billion worth of toxic assets. [Bloomberg, NYT, WSJ]
♦ The next group in line for a bailout? Home builders, who are now lobbying Congress for a $250 billion stimulus package. [WSJ]
♦ The U.S. economy may need $300 billion and $600 billion more to survive the crisis, says George Soros. [DB]

The chief executives of the big three American auto manufacturers were blasted by lawmakers in Washington yesterday for having the audacity to turn up on Capitol Hill with their tin cups in hand after having just stepped off their lavish corporate jets. The episode turned into a PR disaster for GM, Ford, and Chrysler—and damaged their chances of scoring a deal and landing billions in taxpayer dollars—but at least they were using the jets on company business. Even more eyebrow-raising is how often these palaces in the sky are used to ferry top execs on vacation, or to hang out at events like the Olympics. Of course, there's no way to be sure that GE execs weren't just negotiating a new microwave manufacturing contract when the company's Gulfstream touched down in Puerto Rico on the eve of a holiday weekend. But if you click here, you can see how two of the companies now collecting billions in taxpayer dollars have been making use of their jets over the last few months.

♦ Dick Parsons is the frontrunner to replace Sir Win Bischoff as chairman of Citigroup. [Reuters]
♦ Steve Rattner is shutting down the Quadrangle Group's hedge fund amid weak performance and investor redemptions. [WSJ]
♦ Phil Falcone, Ken Griffin, John Paulson, Jim Simons and George Soros will appear in front of a House panel today. [DB]
♦ Hank Paulson is taking a beating following the news that the Treasury will now focus on struggling consumers, instead of financial institutions. Paulson has become "a reduced figure, damaged by the financial-market meltdown that happened on his watch and by the government's struggles to respond to it." [WSJ, DB, Bloomberg]

The Post is hearing rumors that Morgan Stanley plans to lay off 10 percent of the company's 50,000 workforce on Thursday and that "those given the ax shouldn't expect a very generous severance package." [NYP via Dealbreaker]

Morgan Stanley has cancelled its series of holiday parties. But at least (some) employees will still get big bonuses! [NYP]

Think the meltdown on Wall Street will ruin bonus season for bankers in town? Not necessarily! Merrill Lynch has set aside $6.7 billion to pay annual bonuses. Goldman Sachs plans to dole out $6.85 billion in total, an average of $210,300 for each employee. And Morgan Stanley has $6.44 billion for bonuses, or $138,700 per person. And you were concerned the $700 billion bailout would be misspent. [Bloomberg]

♦ Another bad day ahead? U.S. futures are down sharply after losses in Asia and Europe. [Marketwatch]
♦ The Fed starts making loans to American companies today. [WSJ]
♦ Turns out there were some pretty dark days at Goldman last month: Lloyd Blankfein called Citi chief Vikram Pandit to discuss a merger just after Lehman went bankrupt. [FT, WSJ]
♦ Citadel's Ken Griffin remains in the hot seat after rumors of steep losses led him to hold a rare conference call on Friday evening. [NYP, NYT]

Former Morgan Stanley co-president Zoe Cruz is back. Or she might be! Demonstrating once again that timing is not her forte, she's now thinking about "possibly raising money to start a hedge fund." Or she might just take another job at big company because "she enjoyed being a high-level manager at a large prestigious firm." A large prestigious firm? Those don't exist anymore, silly! [TheStreet via Dealbreaker]

♦ Morgan Stanley closed its deal with Mitsubishi UFJ Financial Group. The $9 billion investment on the part of MUFJ gives it a 21 percent stake in the beleaguered bank. [WSJ, DB]
♦ U.S. stock futures rallied on Monday morning as government efforts to beef up the banking system reassured panicky investors. [WSJ]
♦ Treasury official Neel Kashkari outlined the government's efforts to bail out the financial system and resuscitate the economy this morning, although details were few and far between. [CNNMoney]
♦ New York Times columnist and Princeton economist Paul Krugman won the Nobel economics prize this morning. He'll collect a $1.4 million check for the honor. [Economix]

The most unhappy man on Wall Street today might very be John Mack, the CEO of Morgan Stanley, who watched the banking giant's stock price dip below $10 today. Morgan Stanley is now frantically reassuring investors that a deal with Mitsubishi UFJ to inject $9 billion into the beleaguered bank is still going to go ahead, notwithstanding the grim fact that Morgan Stanley's stock has slid 70 percent since Mitsubishi cemented the deal with Mack on September 22nd.

♦ Citigroup dropped efforts to block a deal between Wachovia and Wells Fargo yesterday afternoon; it will, however, continue to press ahead with its $60 billion lawsuit. [NYT, WSJ]
♦ Morgan Stanley CEO John Mack is back on the defensive today after the bank's shares dropped nearly 26 percent yesterday to $12.45, the lowest closing price in a decade. [DB, WSJ]
♦ Barclays, which acquired the assets of Lehman Brothers last month, now plans to cut another 3,000 jobs. [Fortune]