1. Al's Economic Innovation

Al Greenspan still thinks there's a 50/50 chance the U.S. could avoid recession, but there's only a 10% chance of that.

The former Fed chief told The Wall Street Journal this week that if the economy isn't already in recession, it probably will be soon, noting that the odds are "not overwhelming but they are marginally in that direction."

Lucky for him, there appears to be about a 100% chance that the Maestro will benefit nicely from the economic mess that he helped orchestrate. During his tenure, Greenspan kept interest rates at record lows for years to juice the housing market, while ignoring the credit bubble that was developing as a result.

Paulson & Co., a New York-based hedge fund run by billionaire investor John Paulson, announced this week that it's hiring Greenspan , whose frequent public commentaries still move the market, as a member of its "advisory board." The high-profile hiring comes after Paulson entered the annals of Wall Street lore, pocketing huge profits on the housing market's implosion by making timely, contrarian bets on a market meltdown.

Now, along with his iconic new hire, Paulson has turned to charity. The Journal reported that in October, he gave $15 million to the Center for Responsible Lending to fund legal assistance for families facing foreclosure and to support new bankruptcy laws.

"While we never made a subprime loan and are not predatory lenders, we think a lot of homeowners have been victimized," Paulson said.

Greenspan, who has long been a housing market guru, was warned about rampant chicanery in the home lending business by the late Fed governor Ed Gramlich as early as 2001, according to The New York Times, but he declined to take action. Instead, he adopted the Bush Administration's lingo, referring to exotic subprime loan products designed to hoodwink unsophisticated, low-income borrowers as a form of "financial innovation." Now, the self-proclaimed conservative is calling for a government bailout for borrowers.

All this brings to mind the words of Hank Rearden, the hero in "Atlas Shrugged," the great novel authored by Greenspan's muse, Ayn Rand.

"I work for nothing but my own profit -- which I make by selling a product they need to men who are willing and able to buy it," said Rearden, adding later, "I am proud of every penny that I have earned in this manner."

Dumb-O-Meter Score: 95. With Greenspan's new job, Ayn Rand may be experiencing an "Age of Turbulence" in her grave.

2. Wall Street Most Foul

Speaking of subprime slime, apparently someone has yet to reach their bottom.

Earnings week for the financial industry kicked off with widespread chatter about a Merrill Lynch ( MER) employee tracking waste across a trading floor outside the 19th floor men's room at the bank's World Financial Center headquarters on bonus day.

Bonus day must have been a bummer, judging from Merrill's fourth-quarter loss of nearly $10 billion, or $12.01 a share. On top of that, Mother Merrill wrote off $14.6 billion in soured mortgage debt and announced $6.6 billion in new capital from sovereign wealth funds Korean Investment, Kuwait Investment Authority and Mizuho Financial Group. So the foulest thing in headquarters was actually the books.

For its part, China doesn't like the smell of Citigroup ( C). The world's largest financial institution also reported a nearly $10 billion loss for the quarter and said it will write down over $18 billion in bunk mortgage-related investments, slash its dividend by 41% and hand out 4,200 pink slips to employees.

To cushion its dwindling reserves, Citi also announced the sale of a $12.5 billion stake to the Kuwait Investment Authority and several investors tied to foreign governments, including Prince Walid bin Talal of Saudi Arabia. But China, America's chief bankroller, reportedly opted out of the financing package cobbled together by the company's new CEO, Vikram Pandit.

Perhaps the Chinese were turned off by Citi's warnings that it's facing more potential losses on home equity loans, credit card debt and personal loans as credit problems spread and the economy suffers.

But there was more sewage to come. Wells Fargo ( WFC) posted its first decline in earnings in six years, with profits down 38% to $1.36 billion. BofA ( BAC), which agreed to acquire mortgage giant Countrywide Financial ( CFC) at a discount last Friday, said it will axe 12% of its investment banking division, or 650 jobs, and sell its equity prime brokerage. It reports fourth-quarter results next week.

JPMorgan ( JPM) came away as the king of Wall Street despite reporting that its earnings were down 34% to $2.97 billion and writedowns on mortgage-related investments of $1.3 billion. Apparently, we're grading on a curve this week.

Dumb-O-Meter Score: 91. Now, has Wall Street finally wiped away the stench? Somebody go find a mop, please.

3. Mr. Mozilo Goes to Washington

Speaking of the slow-motion train wreck on Wall Street, where have the conductors that steered us into it gone?

Why, they're headed to Capitol Hill, of course, to pay a visit to Henry Waxman, chairman of the House Oversight and Government Reform Committee. Cue up the lights, get the cameras rolling and let the squirming begin.

"According to press reports, you collected tens of millions of dollars in payments and other compensation upon your departure from Citigroup," said Waxman in his written invitation to former Citi CEO Chuck Prince to testify before his committee. "You should plan to address how it aligns with the interests of Citigroup's shareholders and whether this level of compensation is justified in light of your company's recent performance and its role in the national mortgage crisis."

Lest Prince feel guilty about having the stage all to himself, the invitation was also extended to former Merrill Lynch CEO Stan O'Neal and the co-founder, chairman and CEO of Countrywide Financial -- Mr. No-Doc himself -- Angelo Mozilo.

Prince left his throne at Citi in November amid a mountain of subprime losses that are still piling up. Investors were getting frustrated with him when the stock was at $50 last year, having made no significant gains during his tenure, which began in 2003. The stock closed Thursday at $24.96, but Prince left with a parting gift reportedly worth roughly $31 million for a job ... well done?

O'Neal was ousted under similar circumstances after holding the reins at Merrill for five years. Through the beginning of last year, his performance far outpaced that of Prince in terms of shareholder returns, but since then, shares of Merrill have dropped about 40%, wiping out over three years' worth of gains and some $30 billion in market cap.

Still, Merrill said at the time of his departure that O'Neal would be charging shareholders about $161.5 million in stock awards and benefits on his departure.

But Angelo the Orange of Countrywide will be the star of the show. CFC agreed to be sold to BofA last Friday for $4 billion, or $7.16 a share -- an 83% discount to where its shares stood one year ago. The company made impressive gains in earnings and share price in the years before that, and its bronzed leader, Mozilo, was a Wall Street superstar.

Last year, however, it became clear amid a spike in home foreclosures that Countrywide's loose lending practices were behind its success, and they would ultimately be the cause of its downfall. Now, Mozilo is the prime target for critics of the predatory lending practices that rose to prominence in recent years.

Mozilo is expected to leave after the sale closes in the third quarter, and The New York Times reports that he could be entitled to an exit package of roughly $72 million on top of $410 million in pay, including $285 million in option gains , that Mr. Mozilo has taken home since he became Countrywide's chief executive in 1999.

Angelo, did you really think you could leave your shareholders in a tailspin and sail off into the sunset in your golden parachute without paying a visit to the people's house? After all, the "country" in Countrywide is a democracy, and it's an election year, so don't be late.

Dumb-O-Meter Score: 85. We wouldn't want an invitation to become a subpoena now, would we?

4. The Uninsurables

If you're still not convinced by hedge fund activist Bill Ackman's prediction of impending doom for the bond insurance giants, Ambac ( ABK) has some insurance it wants to sell you.

"Ambac continues to believe that the balance of the mark-to-market losses taken to date are not predictive of future claims and that, in the absence of further credit impairment, the cumulative marks would be expected to reverse over the remaining life of the insured transactions," the company said this week.

The statement came along with the news that Ambac expects to report a fourth-quarter loss of $32.83 a share after cutting the fair market value of its credit derivative portfolio by $5.4 billion.

That was not a typo -- $32.83 a share in red ink. Excluding mark-to-market losses, Ambac said it expects an operating loss for the quarter of $5.80 a share. Analysts, on average, were expecting earnings of $1.68 a share.

Needless to say, Ambac's CEO, Robert Genader, is out, and the company is also slashing its quarterly dividend by two-thirds.

Further diluting its shares, Ambac said it's trying to raise at least $1 billion in new capital in a desperate bid to maintain the company's Triple-A credit rating, without which it could not survive. Bond insurers use their good credit to sell insurance on debt offerings, providing a credit-rating boost to municipalities and other issuers that aren't Triple-A.

The market was unimpressed by Ambac's efforts. Its stock dropped 39% following the Wednesday announcement.

Even credit ratings agencies that Ambac compensates richly for easy grading were not impressed. Feeling what's left of its own reputation slipping away, Moody's Investors Service said Thursday morning it was putting the company on review for a possible downgrade, sending the stock tumbling another 60%.

As for its larger rival, MBIA's ( MBI) shares were down more than 30% Thursday on speculation that its Triple-A days are also numbered.

Bill Ackman of Pershing Square Capital began predicting all this in 2002, publishing a controversial report calling MBIA's Triple-A credit rating into question. Now, he has big short bets on both MBIA and Ambac, and he has pledged to donate his own returns on the investment to charity.

Dumb-O-Meter Score: 79. In a recent presentation, Ackman wondered, "How can a company be rated Triple-A if it cannot withstand even a single-notch downgrade?"

5. Bad Intel

The sun is shining as bright as ever in Silicon Valley, according to Intel ( INTC) CEO Paul Otellini.

Never mind that the Nasdaq Composite has lost 16% since the beginning of November.

As TheStreet.com's Alexei Oreskovic reported Wednesday , Otellini stressed on a fourth-quarter earnings conference call that Intel wasn't seeing any signs of an economic slowdown, despite the warning signs that are showing up elsewhere in the economy.

Intel reported a 51% increase in fourth-quarter earnings to $2.27 billion, meeting expectations on Wall Street, so everything is hunky-dory at the world's largest chipmaker, right?

Wrong. Behind the rhetoric, Intel fed investors below-seasonal sales guidance, which called for first-quarter revenue between $9.4 billion and $10 billion. The average analyst expectation called for $10 billion. The midpoint of the revenue guidance represents a 9% sequential drop in sales, compared with the average decline of 7% at this time of year.

After boosting its gross margins to 58% in the quarter, up from 49.6% in the same quarter last year, Intel expects its gross margin to dip back down to 56% in the first quarter and to 57% for all of 2008. That got investors wondering whether the company has run to the end of its leash in expanding its profit margins.

"They gave all these reasons why their gross margins were going to improve and then basically guided to flat gross margin," a hedge fund analyst told Oreskovic.

Shares of Intel dropped 15% in response to the report.

Still, Otellini seemed to determined to sell the widely circulated notion that technology can offer investors a safe haven in the downturn that has hit financials and consumer discretionary.

"At this point we don't see anything on the horizon; our customers don't see anything on the horizon," Otellini said regarding a slowdown in spending on computers.

Dumb-O-Meter Score: 68. Forget about the horizon, Paul. Take a look at the writing on the wall.