To Our Clients, Colleagues and Friends:.

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· We were just reading the Wells Fargo presentation from the Dec. 12 Goldman Sachs Financials Services CEO conference.  Here’s one tidbit we found of great interest.  Of the $71.5 billion in HELLOCS they plan to hold in portfolio, a full $11.5 billion (16%) are HELOCS in first lien position.  If you’re ever stuck sitting next to us on a long flight, ask us why we think a 1^st lien HELOC is the ideal mortgage for almost all borrowers.

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· Listed below are the biggest European banks by market cap in dollars.

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$203   HSBC  ( U.K. )

$96    Royal Bank of Scotland

$133   Santander ( Spain )

$95    UBS

$113   Unicredito Italiano

$91    BBVA  ( Portugal )

$ 99   BNP Paribas (France)

$82    Barclays  ( U.K. )

$ 98   Intesa  Saopaolo  ( Italy )

$81    Societe Generale (France)

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We were a bit surprised to not see Deutshce Bank ($61 billion) on the list. We thought they were bigger. And by comparison, Citigroup has a market cap of $151 billion and the Bank of America is at $186 billion.

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· And how about City Bank in the Seattle area?  Are there any banks with more impressive numbers? (a) A net interest margin of 7.56%, (b) an efficiency ratio of 22.4%, (c) a return on average equity of 20%, and (d) a jaw-dropping 3.74% return on assets over the past 12 months.  The only reason their ROE isn’t much higher is that they generate capital faster than they can pay out dividends, buy back stock or grow assets. They do pay out absurdly high dividends, and last year the yield on the regular and special dividends was about 11%.  If you’re not familiar with banking metrics, here’s a baseball analogy: City Bank’s performance is the equivalent of batting .400, hitting 40 home runs, driving in 240 in runs, and then pitching every 5