Citigroup (NYSE: C) is considering buying Washington Mutual (NYSE: WM), the nation's largest savings and loan. It sounds like Sandy Weill is back in charge and trying to create the kind of financial conglomerate he built in the 1990s and earlier this decade.

According to The Wall Street Journal, "Citigroup and several other banks are reviewing the Seattle thrift holding company's books, which are packed with shaky mortgages."

Just a few months ago, Citi CEO Vikram Pandit was talking about cutting the big bank's expenses by 20% and selling off "non-core" assets. Now he is thinking about buying the most troubled large financial company in America.

Pandit would be better off staying with his first plan. There is a reason WaMu's stock got down to under $2. If mortgage defaults move up and housing prices move down, the mortgage company's financial situation could get much worse.

Pandit is proving to be a "flavor-of-the-month" CEO. Investors never know what he plans to do tomorrow, let alone what he wants to do with Citi over the next year.

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

Lately, there have been signs that private equity powerhouses are getting push back from investors. Look at the Blackstone Group LP (NYSE: BX). In the raise of its latest fund, California State Teachers' Retirement System (Calstrs) invested a mere $250 million. Keep in mind that the pension invested $1.7 billion in Blackstone's prior fund.

However, not all private equity operators are having trouble. Take TPG Capital. The firm is apparently in the process of scooping up $30 billion (this is according to The Wall Street Journal). In fact, about $20 billion will be allocated to TPG's leveraged buyout fund. Who said buyouts are dead?

So why the optimism? Part of it is timing. After all, TPG started its capital raising process earlier.

Another key reason is that TPG has a stunning track record. Since 1985, the internal rate of return is roughly 55% (yep, this is something to get investors excited about).

Back in the 1980s, David Bonderman was the chief dealmaker for Robert Bass, a Texan billionaire. He helped to structure the $550 million buyout of American Savings and Loan Association of California, which was caught in the S&L morass. It was a complex deal, requiring lots of negotiations with federal regulators. But it ultimately turned out to be a great investment. In fact, the bank became a vehicle to finance other deals.

Well, Bonderman is coming back to the future. Now, as the chief of TPG, he's one of the top players in private equity. And he wants to do some finance deals. To this end, he's raising $7 billion for a financial service fund. The investments will range from minority stakes to control situations.

Actually, Bonderman has already been busy with bank deals. For example, he recently assembled the $7 billion equity infusion for Washington Mutual (NYSE: WM). He also approached Merrill Lynch (NYSE: MER) to do an investment, which, so far, hasn't gone anywhere.

Yet, there are many financial institutions that need cash. Moreover, having TPG as a partner is usually a good thing.

As should be no surprise, it looks like TPG is getting traction on the capital raise, with commitments from the New Jersey State Investment Council and the government of Singapore.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

There is good news and bad news in a financing pact for Washington Mutual (NYSE: WM) that has been outlined this morning. It has outlined details of a financial aid or rescue finance package.

The company is raising a total of $7 billion via direct stock sales to an investment vehicle managed by TPG Capital, which includes other top institutional holders.

While this financing pact is great in that it provides needed liquidity, the share placement price is essentially at the low of the stock since the malaise began. The company has also slashed its dividend down to $0.01 and outlined details of its losses.

TPG as the anchor will buy $2 billion in newly issued securities. WaMu is issuing 176 million shares at $8.75 and 55,000 contingently convertible perpetual non-cumulative preferred stock at a purchase price and liquidation preference of $100,000.00 per share with an exercise price of $8.75 per share.

This financing package is more similar to an old fashioned rights offering that is at a deep discount and highly dilutive. You can read the full story from 247WallSt.com..

There was an interesting report that surfaced over the weekend that took greater hold on Monday morning, yet nothing official has been released.

Washington Mutual (NYSE: WM) shares are rising sharply today on "weekend talk" that they will be supported by an investment from private-equity group led by TPG Inc, also known as Texas Pacific Group. The company has been forced to write-down billions on home-mortgages and loan losses since the credit crisis, and WaMu is also one of the large quasi-money-center banks that is at-risk of being in jeopardy on its own. According to Reuters, it said "a source" says the deal could be announced as soon as today

It could be a substantial investment of some $5 billion, although once you get into details the number mysteriously changes wildly among sources as far as terms and as far as dollars. Whatever it is, it's working for the banking giant whose stock has been battered. Shares are up $2.70, over 26%, to $12.87 on the speculation. The 52-week range is $8.72 to $44.66.

What is perhaps more interesting than anything, is that this doesn't necessarily include Wells Fargo (NYSE: WFC). That company has been listed as one of several companies in a position to be a savior for distressed financial companies. This would also lend credibility to a bank or private equity saving grace for National City Corp. (NYSE: NCC), which has also been in the soup.

If private equity ends up being a savior for the banks, even if it is an iconic trend it would be nothing short of ironic if you have been reading about all the private equity deals that have failed.

With Bank of America Corporation's (NYSE: BAC) purchase of Countrywide Financial Corporation (NYSE: CFC), here are two more financial stocks that have gotten crushed and which may be M&A candidates by the end of '08.

E*Trade Financial Corporation (NASDAQ: ETFC), the online brokerage, has lost investors tons of money. The company is shedding non-core divisions and getting back to basics. E*Trade usually is involved in rumors of either joining or buying TD Ameritrade Holding Corporation Corp. (NASDAQ: AMTD), and I think that we are going to see some movement in terms of selling the online brokerage firm. At just around $4 a share, these stocks are beginning to look interesting again.

Washington Mutual, Inc. (NYSE: WM) has seen its stock drop by some 75% over the last year. The stock is trading with a PE of a bit more the four, and has a dividend yield over 17%. Now I would guess that most analysts believe the dividend is going to be cut. I wouldn't be at all surprised to see a foreign bank that wants to get a big foothold in the US to make a play for the bank.

With stocks so low, look for cash rich companies to be on the prowl for interesting financial companies.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has a position and owns stock in ETFC and is long the stock. He has no positions in any other stock mentioned as of 1/10/08.