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Citigroup to buy Wachovia banking operations

NEW YORK - In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.


Citigroup will absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.

The deal greatly expands Citigroup's retail outlets and secures its place among the U.S. banking industry's Big Three, along with Bank of America Corp. and J.P. Morgan Chase & Co. But it comes at a cost — Citigroup said Monday it will seek to sell $10 billion in common stock and slashed its quarterly dividend in half to 16 cents to shore up its capital position.

The agreement comes after a fevered weekend courtship in which Citigroup and Wells Fargo & Co. both were reportedly studying the books of Wachovia, which suffers from mounting losses linked to its ill-timed 2006 acquisition of mortgage lender Golden West Financial Corp.

Wachovia, like Washington Mutual Inc., which was seized by the federal government last week, was a big originator of option adjustable-rate mortgages, which offer very low introductory payments and let borrowers defer some interest payments until later years. Delinquencies and defaults on these types of mortgages have skyrocketed in recent months, causing big losses for the banks.

The FDIC asserted Monday that Wachovia did not fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

Federal Reserve Chairman Ben Bernanke, in a statement Monday, said he supports the "timely actions" taken by the FDIC "which demonstrate our government's unwavering commitment to financial and economic stability."

Treasury Secretary Henry Paulson also welcomed the sale of Wachovia to Citigroup, saying it would "mitigate potential market disruptions." Paulson said he agreed with the FDIC and the Fed that a "failure of Wachovia would have posed a systemic risk" to the nation's financial system.

"As I have said before, in this period of market stress, we are committed to taking all actions necessary to protect our financial system and our economy," Paulson said.

As details of its takeover unfolded, Wachovia shares plunged 91 percent to 94 cents. The stock had closed Friday at $10, down 74 percent for the year.

Now that a deal for Wachovia is complete, the most troubled of the nation's largest financial institutions have been dealt with. However, the FDIC estimated there were 117 banks and thrifts in trouble during the second quarter, the highest level since 2003. And that number is likely to have increased during the third quarter.

With the acquisition of Wachovia, Citigroup has reclaimed its title as the biggest U.S. bank by total assets. Including Wachovia, the bank now has assets of $2.91 trillion, as of June 30. That could change, however, as Citigroup shrinks its balance sheet, a decision Chief Executive Vikram Pandit made in May to rid the bank's books of risky debt.

In terms of current market capitalization, Bank of America Corp. remains the largest U.S. bank, followed by JPMorgan Chase & Co. in second and Citigroup in third place.

Just a short time ago, Citigroup was under the scrutiny of investors who worried about the possibility of its collapse given its massive exposure to mortgage-backed securities. The New York-based bank has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.

But the government's proposed $700 billion bailout plan could prove to be the deal's silver lining.

While the plan broadly aims to prevent banks from profiting on the sale of troubled assets to the government, there is an exception made for assets acquired in a merger or buyout, or from companies that have filed for bankruptcy.

This detail could allow Citigroup to sell toxic mortgages and other assets it gained from Wachovia for a higher price than the bank actually paid for them.

The Wachovia deal caps a wave of unprecedented upheaval in the financial sector in the past six months that has redefined the banking industry, starting with the government-led forced sale of Bear Stearns Cos. to JPMorgan in March.

The failure of IndyMac Bancorp in July reignited investors' fears about the stability of the financial sector, which led to the eventual takeover of struggling mortgage lenders Fannie Mae and Freddie Mac.

Earlier this month, officials seized both Fannie and Freddie, temporarily putting them in a government conservatorship, replacing their chief executives and taking a financial stake in the mortgage finance companies.

After U.S. regulators made it clear that they would not bail out struggling investment bank Lehman Brothers Holdings Inc., rival Merrill Lynch & Co. arranged a hasty deal to be bought by Bank of America Corp. for $50 billion in stock.

Lehman Brothers was subsequently forced to declare bankruptcy, the largest ever in the United States. Investor concerns quickly turned to American International Group Inc., the nation's largest insurer. Staving off a failure that could have sent shock waves throughout the global markets, the federal government injected an $85 billion emergency loan into the insurer.

Just days later, the government seized Seattle-based Washington Mutual, marking the largest bank failure in U.S. history. WaMu's deposits and assets were acquired by JPMorgan for $1.9 billion.

These events have now culminated in extraordinary moves by the federal government to try to fix the financial crisis that began more than a year ago. Lawmakers are to vote Monday on an unpopular $700 billion plan to rescue troubled financial companies.

Wachovia's problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation's housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments.

This summer, Wachovia reported a $9.11 billion loss for the second quarter, announced plans to cut 11,350 jobs — mostly in its mortgage business — and slashed its dividend. Wachovia also boosted its provision for loan losses to $5.57 billion during the second quarter, up from $179 million in the year-ago period.

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WaMu becomes biggest bank to fail in US history

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NEW YORK - As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks — Washington Mutual Inc. — has collapsed under the weight of its enormous bad bets on the mortgage market.




The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.

Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse the $40 billion of Continental Illinois National Bank, which failed in 1984, and the $32 billion of IndyMac, which the government seized in July.

One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.

Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion — a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.

"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.

WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.

JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.

JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital.

The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.

WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.

The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed.

WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.

Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.

At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.

As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.

At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.

In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.

The bank in July reported a $3 billion second-quarter loss — the biggest in its history — as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.

JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.

JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.

The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.

"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.

VISUAL TALKING

Turkey Cutlets with Peas and Spring Onions

1/2 cup all-purpose flour
1/2 teaspoon salt, divided
1/4 teaspoon freshly ground pepper
1 pound 1/4-inch-thick turkey breast cutlets or steaks
2 tablespoons extra-virgin olive oil, divided
4 ounces shiitake mushrooms, stemmed and sliced
1 bunch spring onions or scallions, sliced, whites and greens separated
1 cup reduced sodium chicken broth
1/2 cup dry white wine
1 cup peas, fresh or frozen, thawed
1 teaspoon freshly grated lemon zest




2. Cooking Directions
Whisk flour, 1/4 teaspoon salt and pepper in a shallow dish. Dredge each turkey cutlet (or steak) in the flour mixture. Heat 1 tablespoon oil in a large nonstick skillet over medium-high heat. Add the turkey and cook until lightly golden, 2 to 3 minutes per side. Transfer to a plate; cover with foil to keep warm.
Add the remaining 1 tablespoon oil to the pan and heat over medium-high heat. Add mushrooms and onion (or scallion) whites and cook, stirring often, until the mushrooms are browned and the whites are slightly softened, 2 to 3 minutes. Add broth, wine and the remaining 1/4 teaspoon salt; cook, stirring occasionally, until the sauce is slightly reduced, 2 to 3 minutes. Stir in peas and onion (or scallion) greens and cook, stirring, until heated through, about 1 minute. Stir in lemon zest. Nestle the turkey into the vegetables along with any accumulated juices from the plate. Cook, turning the cutlets once, until heated through, 1 to 2 minutes.
Yield: 4 servings

primetime movies

Ike helps uncover mystery vessel on Ala. coast

FORT MORGAN, Ala. - When the waves from Hurricane Ike receded, they left behind a mystery — a ragged shipwreck that archeologists say could be a two-masted Civil War schooner that ran aground in 1862 or another ship from some 70 years later. The



Researchers at the time identified it as the Monticello, a battleship that partially burned when it crashed trying to get past the U.S. Navy and into Mobile Bay during the Civil War.

After examining photos of the wreck post-Ike, Museum of Mobile marine archaeologist Shea McLean agreed it is likely the Monticello, which ran aground in 1862 after sailing from Havana, according to Navy records.

"Based on what we know of ships lost in that area and what I've seen, the Monticello is by far the most likely candidate," McLean said. "You can never be 100 percent certain unless you find the bell with 'Monticello' on it, but this definitely fits."

Other clues indicate it could be an early 20th century schooner that ran aground on the Alabama coast in 1933.

The wrecked ship is 136.9 feet long and 25 feet wide, according to Mike Bailey, site curator at Fort Morgan, who examined it this week. The Monticello was listed in shipping records as 136 feet long, McLean told the Press-Register of Mobile.

But Bailey said a 2000 report by the U.S. Army Corps of Engineers determined the remains were the schooner Rachel, built at Moss Point, Miss., in 1919 and wrecked near Fort Morgan in 1933.

He said the wreckage appears to have components, such as steel cables, that would point to the Rachel rather than an 1860s schooner.

Glenn Forest, another archaeologist who examined the wreck, said a full identification would require an excavation.

"It's a valuable artifact," he said. "They need to get this thing inside before it falls apart or another storm comes along and sends it through those houses there like a bowling ball."

Meanwhile, curious beach-goers have been drawn to the remains of the wooden hull filled with rusted iron fittings. Fort Morgan was used by Confederate soldiers as Union forces attacked in 1864 during the Battle of Mobile Bay.

"It's interesting, I can tell you that," said Terri Williams. "I've lived down here most of my life and I've never seen anything like this, and it's been right here."

television

Devastating Ike roars ashore in Galveston, Texas

GALVESTON, Texas - Massive Hurricane Ike ravaged southeast Texas early Saturday, battering the coast with driving rain and ferocious wind gusts as residents who

Though it would be daybreak before the storm's toll was clear, already, the damage was extensive. Thousands of homes and government buildings had flooded, roads were washed out, 2.9 million people lost power and several fires burned unabated as crews could not reach them. But the biggest fear was that tens of thousands of people had defied orders to flee and would need to be rescued from submerged homes and neighborhoods.

"The unfortunate truth is we're going to have to go in ... and put our people in the tough situation to save people who did not choose wisely. We'll probably do the largest search and rescue operation that's ever been conducted in the state of Texas," said Andrew Barlow, spokesman for Gov. Rick Perry.

Several fires were burning untended across Houston and 911 operators received about 1,250 calls in 24 hours, said Frank Michel, spokesman for Houston Mayor Bill White.

Streets around the city's theater district became rushing streams and shards of glass were falling from the sparkling skyscrapers that define the skyline of America's fourth-largest city. Winds were estimated to be 20-30 mph faster at the top of the steel and glass towers than they were at ground level.

The stubborn storm remained a Category 2 hurricane with winds topping 100 mph, but started moving away from Houston on Saturday morning. It was about 15 miles east-northeast of George Bush Intercontinental Airport, and was expected to turn toward Arkansas later in the day.

The eye of the storm powered ashore at 3:10 a.m. EDT at Galveston with 110 mph winds, just shy of a Category 3 storm. Because Ike was so huge — nearly as big as Texas itself — hurricane winds pounded the coast for hours before landfall and would continue through much of the morning, forecasters said.

"For us, it was a 10," Galveston Fire Chief Mike Varela said when asked to compare Ike to earlier hurricanes like 2005's Rita. Varela said firefighters responded to about 60 rescue calls before suspending operations around 8 p.m. Friday.

More than 1.3 million customers — or 2.9 million people — had lost power, and suppliers warned it could be weeks before all the service was restored. The only parts of Houston with power were downtown and the massive medical center section.

Forecasters said the worst winds and rain would come after the center came ashore.

Though 1 million people fled coastal communities near where the storm made landfall, authorities in four counties alone said roughly 140,000 ignored mandatory evacuation orders and stayed behind. Other counties were unable to provide numbers but officials said they were concerned that many decided to brave deadly conditions rather than flee.

As the front of the storm moved into Galveston, fire crews rescued nearly 300 people who changed their minds and fled at the last minute, wading through floodwaters carrying clothes and other possessions.

Even before Ike made landfall, Coast Guard helicopters had rescued 103 people in the Bolivar Peninsula near Galveston Island, said Petty Officer 3rd Class Ayla Stevens.

"Some people were on roofs, some people in cars," she said.

"We don't know what we are going to find. We hope we will find the people who are left here alive and well," Galveston Mayor Lyda Ann Thomas said. "We are keeping our fingers crossed all the people who stayed on Galveston Island managed to survive this."

Some 30 miles inland, storm surge pushing up through Galveston Bay was sending water into a neighborhood near Johnson Space Center where White had made rounds earlier with a bullhorn trying to compel people to leave. Nearby, the popular Kemah Boardwalk at the mouth of Galveston Bay, ringed by million-dollar homes, was submerged, state officials said.

Thousands of homes could be damaged, a spokesman for the mayor said, but it was too dangerous to go out to assess the neighborhood at the height of the storm.

A landmark restaurant, Brennan's of Houston, was destroyed by flames when firefighters were thwarted by high winds. Across Houston's downtown, car alarms screeched and light poles swayed like small trees.

On the far east side of Houston, 34-year-old Claudia Macias was awake with her newborn and was trying unsuccessfully not to think about the trees swaying outside her doors, or the wind vibrating through her windows. She had been through other storms, but this time was different because she was a new mother.

"I don't know who's going to sleep here tonight, maybe the baby," Macias said.

Before it came ashore, the storm was 600 miles across. Because of the hurricane's size, the state's shallow coastal waters and its largely unprotected coastline, forecasters said the biggest threat would be flooding and storm surge, with Ike expected to hurl a wall of water two stories high — 20 to 25 feet — at the coast.

Firefighters left three buildings to burn Galveston because water was too high for fire trucks to reach them. Six feet of water had collected in the Galveston County Courthouse on the island's downtown, and the University of Texas Medical Branch at Galveston was flooded, according to local storm reports on the National Weather Service's Web site.

But there was some good news: a stranded freighter with 22 men aboard made it through the brunt of the storm safely, and a tugboat was on the way to save them. And an evacuee from Calhoun County gave birth to a baby girl in the restroom of a shelter with the aid of an expert in geriatric psychiatry who delivered his first baby in two decades.

"It's kind of like riding a bike," Dr. Mark Burns told the New Braunfels Herald-Zeitung after he helped Ku Paw welcome her fourth child.

The Federal Emergency Management Agency said more than 5.5 million prepackaged meals were being sent to the region, along with more than 230 generators and 5.6 million liters of water. At least 3,500 FEMA officials were stationed in Texas and Louisiana.

If Ike is as bad as feared, the storm could travel up Galveston Bay and send a surge up the Houston Ship Channel and into the port of Houston. The port is the nation's second-busiest, and is an economically vital complex of docks, pipelines, depots and warehouses that receives automobiles, consumer products, industrial equipment and other cargo from around the world and ships out vast amounts of petrochemicals and agricultural products.

The storm also could force water up the seven bayous that thread through Houston, swamping neighborhoods so flood-prone that they get inundated during ordinary rainstorms.

The oil and gas industry was closely watching Ike because it was headed straight for the nation's biggest complex of refineries and petrochemical plants. Wholesale gasoline prices jumped to around $4.85 a gallon for fear of shortages.

Ike is the first major hurricane to hit a U.S. metropolitan area since Katrina devastated New Orleans three years ago. For Houston, it would be the first major hurricane since Alicia in August 1983 came ashore on Galveston Island, killing 21 people and causing $2 billion in damage. Houston has since then seen a population explosion, so many of the residents now in the storm's path have never experienced the full wrath of a hurricane.

On its way through the Gulf toward Texas, Ike spawned thunderstorms, shut down schools and knocked out power throughout southern Louisiana on Friday. An estimated 1,200 people were in state shelters in Monroe and Shreveport, and another 220 in medical needs shelters.

In southeastern Louisiana near Houma, Ike breached levees, and flooded more than 1,800 homes. More than 160 people had to be rescued from sites of severe flooding, and Gov. Bobby Jindal said he expected those numbers to grow. In some extreme instances, residents of low-lying communities where waters continued to rise continued to refuse National Guard assistance to flee their homes, authorities said.

No deaths had been officially reported, but crews expected to resume searching at daybreak near Corpus Christi for a man believed swept out to sea as Ike closed in.

___

Juan A. Lozano reported from Galveston. Chris Duncan reported from Houston. Associated Press writers Jim Vertuno and Jay Root in Austin, Eileen Sullivan in Washington, Schuyler Dixon and Paul Weber in Dallas, John Porretto, Monica Rhor and Pauline Arrillaga in Houston, Michael Kunzelman in Lake Charles, La., Brian Skoloff in West Palm Beach, Fla., April Castro and Andre Coe in College Station, and Allen G. Breed and video journalist Rich Matthews in Surfside Beach also contributed.

HURRICANE IKE

This September 12, 2008 NOAA satellite handout photo shows Hurricane Ike located southeast of Galveston, Texas. A strengthening Hurricane Ike bore down on Houston, forcing hundreds of thousands to flee and sparking a dire warning that those remaining in low-lying areas "face certain death

Film shows McCain's release from Vietnamese prison

STOCKHOLM, Sweden - Swedish broadcaster SVT on Thursday released a previously unseen film clip purportedly showing the release of presidential candidate John McCain to the U.S. military in Hanoi in 1973.



A former SVT reporter, Erik Eriksson, said he found the video in the network's archives when he was looking for footage for a book he was writing about his experiences as a war correspondent in Vietnam.

SVT posted the edited 39-second clip on its Web site on Thursday. It shows McCain stepping off a bus with other prisoners. He has a pronounced limp but is not using crutches.

It then shows McCain standing in a lineup when his name is called. He walks up to salute and shake hands with U.S. military officers. The last part of the clip shows a U.S. Air Force jet taxiing on a runway.

Eriksson said the footage was filmed in Hanoi on March 14, 1973, by a Vietnamese photographer whom he had contracted to film the release of U.S. prisoners.

"I don't know if there is another film from his release. I haven't seen all the films in the world, but as far as I know there are no others," Eriksson told The Associated Press.

Tina Wolter, an archive sales executive at SVT, said it was not possible to determine the exact date of the McCain sequence. However, she said other clips from the same material were used in a TV news report on March 24, 1973. Those clips showed other U.S. prisoners being released, but not McCain.

Eriksson said the clip was included on a DVD that he released with his book.

"This summer when I was preparing the release of my book we were putting together a DVD with some of my reports from Vietnam and then I thought, 'I wonder if we have McCain here?'" Eriksson said.

Per Yng, head of SVT's national news, confirmed that Eriksson found the film in the network's archives.

"It's our material. So we can confirm its authenticity," Yng said. He could not confirm the date and location of the film, but he said he had no reason to doubt Eriksson's information.

Eriksson said he was covering the Vietnam war for SVT as well as U.S. networks CBS and NBC.

Eriksson could not recall the name of the Vietnamese cameraman and said he had not been in contact with him after finding the clip

My Niece's visit

The airplane in this picture is owned by my niece's boyfriend. They flew from Alabama down here in Bremen,Georgia in order to visit us. We had a great time spending with my niece during their visit. They stayed in our house for two hours and left for Alabama by 7:15 pm. We watched them while they took off. My son was so happy while watching the airplane was taking off.

Red Velvet Cake with Cream Cheese Ice Cream

1. Ingredients2 cups skim milk
1 cup heavy cream
1 pound cream cheese, cut into cubes, at room temperature
6 ounces white chocolate, coarsely chopped
12 large egg yolks
1 cup sugar
Pinch of salt
2 1/2 cups all-purpose flour
1 1/2 cups sugar
1 tablespoon cocoa powder
1 teaspoon baking soda
1 teaspoon salt
1 1/2 cups vegetable oil
1 cup buttermilk
2 large eggs
2 tablespoons red food coloring
1 teaspoon distilled white vinegar
1 teaspoon pure vanilla extract
Confectioners' sugar, for serving
1 cup sugar
1/4 cup water
1 cup pecan halves, toasted


2. Cooking Directions
MAKE THE ICE CREAM: In a medium saucepan, warm the milk and cream. In a large bowl, combine the cream cheese and white chocolate. In a medium bowl, whisk the egg yolks with the sugar and salt until thick and pale. Gradually whisk the hot milk and cream into the yolks. Pour the mixture into the saucepan and cook over moderately low heat, stirring constantly, until it coats the back of a wooden spoon, 6 minutes; do not let it boil. Strain through a fine sieve over the cheese and chocolate. Let stand for 1 minute, then stir until smooth. Refrigerate until chilled, 4 hours.
Pour the custard into an ice cream maker and churn. Transfer the ice cream to an airtight container and freeze until firm, about 4 hours.
MEANWHILE, MAKE THE CAKE: Preheat the oven to 350 degrees F. Butter and flour a 12-inch round cake pan. In a large bowl, whisk the flour with the sugar, cocoa powder, baking soda and salt. In a medium bowl, whisk the oil with the buttermilk, eggs, food coloring, vinegar and vanilla. Whisk the liquid ingredients into the flour mixture. Pour the batter into the prepared pan and bake for 40 minutes. Transfer the cake to a rack and let it cool completely in the pan, 2 hours.
MAKE THE PECAN PRALINE: Line a baking sheet with parchment paper. In a heavy, medium saucepan, combine the sugar and water. Cook over moderate heat without stirring until a deep amber caramel forms, about 15 minutes. Remove the pan from the heat and stir in the pecans. Pour the praline onto the parchment-lined baking sheet and spread in an even layer. Let cool until hardened, then chop medium-fine and transfer to a bowl.
Line the baking sheet with another sheet of parchment paper. Scoop 12 balls of the cream-cheese ice cream and set them on the baking sheet. Freeze the balls.
Slice the cake into 12 wedges and dust with confectioners' sugar. Transfer to plates. Roll the ice cream balls in the pecan praline. Serve with the cake.
Yield: 12 servings