The Five Smartest Things on Wall Street This Year

1. Charging Ahead

It's time to give MasterCard (MA Quote) some credit.

The Purchase, N.Y., payment processor was one of 2006's hottest stocks, overcoming chatter about a looming consumer spending slowdown and talk of possible exposure to antitrust litigation.

Those issues -- and poor showings by some other spring initial public offerings -- weighed heavily on MasterCard heading into May's IPO. The company first planned to raise $2.8 billion but ended up taking in about 15% less, as the offering priced below its expected range.

But how the view has changed since then. MasterCard shares are up 151% for 2006. Even in a year that saw huge run-ups in financial services stocks of all stripes, that's a handy little gain for just seven months' work.

If you're in a holiday mood, you might even call it priceless.

2. Fannie Covering

Thanks to a diligent regulator, the geniuses who led Fannie Mae (FNM Quote) into accounting quicksand will have their day in court.

This month the Office of Federal Housing Enterprise Oversight, led by James Lockhart, sued former CEO Franklin Raines. The civil action charges Raines and two other executives with improperly manipulating the firm's earnings to maximize their incentive-driven bonuses.

The feds want to slap Raines and his buddies with civil penalties exceeding $100 million -- and to force them to pay back some $115 million in bonuses. That seems harsh, until you consider that it was on Raines' watch that Fannie overstated its profit by a staggering $6.3 billion.

The defendants' lawyers were predictably petulant, claiming their clients didn't know the accounting was all wrong. One called the allegations "a work of unsubstantiated fiction."

Of course, the same has been said of the Raines-era Fannie's books.