“That makes like 10 people we know who were caught up in this,” said one of the guys.

As I pretended to listen to what my wife was saying I focused on their conversation – hoping to hear a name I might know.

“This is crazy,” the other guy said. “We’re talking billions of dollars. I talked to my mother today and she said some more friends of ours are caught up in this.”

These guys looked wealthy – as did their female companions. But it made me think about that in the small world of the ultra rich this must be like one of those small-town scandals when the preacher cheats on his wife or something. All these high-income people must be gossiping about who got hit. Who was duped? And who won’t be able to recover.

Then I read the WSJ story on scam and found out that none other than Mets owner Fred Wilpon (pictured below).

New York Mets owner Fred Wilpon, GMAC LLC Chairman J. Ezra Merkin and former Philadelphia Eagles owner Norman Braman were among the dozens of seemingly sophisticated investors who placed money on what could prove to be history’s largest financial scam…

Mets owner Mr. Wilpon, who also owns real-estate investor Sterling Equities, often raved about Mr. Madoff’s investment prowess and invested tens of millions of dollars of both his own money and the team’s with his company, say financiers who have worked with him. Mr. Madoff handled investments for the Judy & Fred Wilpon Family Foundation, which distributed about $1 million a year in 2005 and 2006 to charities, according to its most recent federal tax returns..

Mets spokesman Jay Horowitz declined to comment Friday. Mr. Wilpon’s Sterling Equities said in a statement: “We are shocked by recent events and, like all investors, will continue to monitor the situation.”

Then I read the New York Times story on Wilpon and Madoff and find out that they grew up in the same Brooklyn neighborhood. And that even reinforced the small-town feel this must have to upper-crust of New Yorkers.

The Times’ story also looked at how Wilpon’s losses, which included some of the team’s money, might affect the Mets. Wilpon’s total investments with Madoff wasn’t known but a big loss could hurt the team’s ability to afford the second-largest payroll in baseball and the recent signing of reliever Franscisco Rodriguez to a $37 million contract over three years.

For Wilpon and the Mets, this could be a tough season. They are moving into a new ballpark, Citi Field, that bares the name of troubled financial firm, Citigroup, at a time when the New York economy is already in a recession. And their division rival, the Philadelphia Phillies, are World Series champs (this is especially for Damian).

The Yankees bagged 28-year-old Sabathia this week with a seven-year, $161 million deal that includes an opt-out clause after three years. Combined with the $82.5 million spent on Burnett, that’s $243.5 million in five days.

Vikram Pandit, Citigroup CEO

Late last night, the government and Citigroup came up with a radical plan to stabilize the huge financial conglomerate.  The Citigroup bailout dwarfs some of the federal government’s stabilization plans for other companies, with the government planning to directly invest $20 billion in Citigroup, and agreeing to back $306 billion of their loans and securities.  Why Citigroup and not Lehman? Well, Citigroup definitely falls in the category of ‘too big to fail.’  

The massive financial company has over 200 million accounts worldwide, employs over 350,000 people (though is planning to lay off 50,000!), and is a major dealer in U.S. Treasury securities.  The magnitude of a Citi collapse would shake up Wall Street in ways few of us could even imagine- a market earthquake that could have made October 2008 look completely rosy.  So far, Wall Street seems to be responding favorably to this latest bailout, with Citigroup (NYSE: C) up 52 percent for the day.  Last week, the market ripped apart Citi, with its stock losing half of its value in four days.  In the past four quarters, Citi has consistently posted losses, and its consumer loans seem now as toxic as its mortgage-back securities.

How will the government pay for the losses it’s guaranteeing through public money? Citigroup will absorb ten percent of its losses, and the government has agreed to absorb the other 90 percent.  First, the Treasury Department will absorb the first $5 billion in losses, the FDIC will bear the next $10 billion, and the Federal Reserve will guarantee any additional losses.

This morning, president-elect Obama announced his economic positions in his cabinet, attempting to both calm Wall Street and the larger American public.

“Right now, our economy is trapped in a vicious cycle: the turmoil on Wall Street means a new round of belt-tightening for families and businesses on Main Street,” said Obama.  ”As folks produce less and consume less, that just deepens the problems in our financial markets. These extraordinary stresses on our financial system require extraordinary policy responses. And my Administration will honor the public commitments made by the current Administration to address this crisis.”

Obama’s speech came at a critical time, with the radical plan for Citigroup just announced, and increasing anxiety about unemployment, foreclosures, and the auto industry.  ”The news this past week, including this morning’s news about Citigroup, has made it even more clear that we are facing an economic crisis of historic proportions,” said Obama.

Wall Street’s mood has been nervous or skittish at best during the past month and a half, and whether even the investment of billions of dollars of public money into Citigroup will continue to reassure investors remains to be seen.

Obama's Econ Experts At Press Conference This Morning