A tiny item this week in The Wall Street Journalthat quoted Wells Fargo (WFC) Chairman and former CEO Dick Kovacevich caught my eye. From what felt like a long interview, the Journalpulled the nugget that Kovacevich acknowledged mistakes Wells made in home-equity loans. That Wells erred there is old news. What was more interesting was Kovacevich’s condemnation of “stated income” or “low documentation” loans, an industry practice he says Wells Fargo eschewed — and paid for in the form of lost market share.

I happen to be a loyal Wells Fargo banking customer. When I bought a mortgage in 2004 I distinctly remember checking with Wells and being surprised they weren’t remotely competitive for the kind of loan I wanted, a 30-year loan whose rate would be fixed for five years and then adjust. I didn’t give it much thought at the time, figuring instead the big bank simply was slow. As it happens, I wasn’t buying an exotic or overly risky mortgage, and I went with one of the few other major banks that has weathered the credit storm fairly well, a unit of JP Morgan Chase (JPM), which, according to my mortgage broker, was making a major effort in the so-called 5/1 ARMs that I was seeking. Still, by and large Wells just wasn’t playing aggressively in that end of the market — and not at all in the riskier part of the market. Its prudence already has been rewarded in the form of a less beaten up stock price.

There’s also a lesson here. When the dust settles, will investors be more interested in what Countrywide Financial (CFC) has to say or Wells Fargo? That one’s easy.

I wrote in (limited) praise of Fred Thompson’s flat tax proposal the other day. My main argument for a flat tax is the beauty of tossing out of work all the leaches on our economy, namely the tax-law specialists. For what it’s worth, and in response to some of the robust comments I’ve been receiving, I certainly meant no offense to tax preparers, who do a job that’s totally needed under the current tax code. They’d be hurt by a flat tax too, of course. But with their knowledge of finance and accounting they’d no doubt find ways to contribute elsewhere.

I did fail to insult one class of people, however, and I was delighted to see the Wall Street Journal editorial page, in an item titled “Flat Tax Fred,” pick up the slack today regarding Beltway lobbyists. Some of their bon mots:

The flat tax has the added political benefit of assaulting the special interests who populate the Gucci Gulch outside Congress’s tax-writing committee rooms. Lower rates and simplify the tax code, and you instantly reduce the opportunities for Beltway corruption. It is both a tax policy and political reform.

I disagree, by the way, with the Journal’s trivialization of Thompson’s failure to specify where the revenue upside would come from imposing a flat tax. But that’s a fight for another day.

I sat down Tuesday afternoon in Mountain View, Calif., with Dan Nye, the newish CEO (he joined earlier this year) of LinkedIn. That’s the company that is like Facebook for grownups, a businessperson’s social networking site. Nye’s looking for press because LinkedIn plans to unveil some nifty new features on Dec. 10. (I got a look, but agreed not to divulge anything yet.) I was interested in hearing what he had to say, in part because of the rumors flying around that LinkedIn plans to sell the company early next year to News Corp. (NWS)

The buyout gossip began with an item last week in the UK version of TechCrunch. Never mind that LinkedIn founder Reid Hoffman (a made man in the PayPal mafia and a buddy of mine) categorically denied the rumor in the Daily Telegraph. Anything that suggests that Rupert Murdoch would expand his social-networking empire is sure to set tongues wagging. Breakingviews.com wrote an intelligent summary of why a LinkedIn acquisition would make sense, largely because of the opportunities to leverage LinkedIn’s tools with the Wall Street Journal readership.

Not surprisingly, Nye didn’t deny that News Corp. made an offer for his company. Instead, he said that when he joined the company he told the board — comprised of Hoffman, Sequoia’s Mark Kvamme and Greylock’s David Sze — that he was only interested in taking the job if the goal was to “go long.” But is he selling out anyway? “We’re excited about building this company,” said Nye. “It would take a helluva lot to get us off that path.” Does that mean $1 billion? “A lot more than that,” said Nye, who worked at Procter & Gamble (PG), Intuit (INTU) and Advent Software (ADVS) before joining LinkedIn.

LinkedIn clearly is playing to win. The company has mushroomed from 60 employees when Nye joined in February to almost 200 today. At the time, LinkedIn had 9 million members; today it has nearly 17 million. Nye predicted revenues will range from $75 million to $100 million next year.

LinkedIn has the virtue of having survived adversity. Before Facebook and MySpace existed — back when Friendster was hot — LinkedIn was just getting going. It’s still going. Independent or part of News Corp., it’s fun watching this plucky company succeed.

The Wall Street Journal editorial page opined Tuesday about the Al Gore-Kleiner Perkins connection. Predictably, they didn’t have much nice to say about Gore, Kleiner or anyone else who believes there’s a climate-change crisis. Marc Gunther and I wrote a long article in the current issue of Fortune on the subject, which the Journal’s eco-skeptics graciously referenced.

A few of the points in the Journal editorial merit hashing over. First, the Journal rightly focuses on Gore’s financial opportunity. It’s worth quoting the paper in full.

[L]like the energy barons of an earlier age, Mr. Gore has the chance to achieve enormous wealth after being named last week as a new partner at the famously successful venture capital firm Kleiner Perkins. No fewer than three of his new colleagues sit on the Forbes list of wealthiest Americans. If Mr. Gore can develop market-based solutions to environmental challenges, we will cheer the well-deserved riches flowing his way. On the other hand, if he monetizes his Nobel Peace Prize by securing permanent government subsidies for nonmarket science projects, he’ll have earned a different judgment.

The Journal is onto more than it realizes here. Gore has said, and it has been printed in several places, that he’ll donate his (undisclosed) salary at Kleiner to the Alliance for Climate Protection, an advocacy group of which he is chairman and which he founded. (He’s also giving the group his Nobel winnings of $750,000.) What nobody reported on is that he is NOT giving away his profits from Kleiner’s investments. (I know this because I specifically asked Gore’s spokeswoman.) When venture capital is done well the profits, also known as carried interest, are much, much bigger than a partner’s salary. The profits also currently are taxed at a lower rate than ordinary income, which is the subject of current legislation in Congress.

As for the subsidies issue, it’s not like Sand Hill Road never has benefited from government intervention. The Internet itself grew out of a Defense Department project. And the lions of VC-land have lobbied successfully on a range of issue from visas for skilled immigrants to the accounting of stock options.

The Journal’s most salient point, and one we made in our article, is the inherent riskiness of applying venture capital to the energy industry. Energy projects take time and money, and lots of both. VC projects tend to be fast and cheap. As the noted venture capitalist Bill Draper told me recently, when I asked why his firm, Draper Richards, isn’t invested in green tech: “Capital intensity tends to be anathema to a venture capitalist.”

It’s simply too soon to prove the following point, but I believe that Kleiner’s investment in green technology carries with it the highest possibility of failure of anything it’s ever done. Then again, venture capital is the ultimate example of risk capital. Failure is assumed, and one sensational hit can make a fund.

If these guys succeed, not only will Al Gore get richer but the planet most likely will be in better shape. The Journal says it would be “as happy as the Sierra Club if one or more of these new technologies turns out to solve the secrets of cheap, efficient energy.” But could they stomach a breakthrough like that and Al Gore taking credit?

John McCain was the warmup act Tuesday night at the Wall Street Journal’s D5 technology conference at the lush Four Seasons Aviara in Carlsbad, Calif., north of San Diego. It was my second time seeing McCain in action, the first being at Fortune’s Brainstorm conference in Aspen, Colo., last summer. I like McCain, so I was generally pleased with his performance tonight. I feel like his energy level is down slightly, which isn’t an irrelevant gauge of a candidate’s probability of success. That very likely could have to do with the fact that he spends a fair amount of time discussing a dour and unpopular topic, the war in Iraq, which he continues to support. Still, what’s so appealing about McCain is that he speaks his mind. Over the course of the evening he somewhat won over an largely liberal tech-industry crowd.

I won’t go into McCain’s war policy, though many of us chewed it over during dinner, after his speech. Instead, nuggets about his economic policies:

* McCain is an unabashed free trader. He likes to say that regulations usually bring about intended as well as unintended consequences. He specifically said the 1996 Telecommunications Act, which he helped write, is “irrelevant” today.

* Asked if patent reform is high on his list, he replied, “No.”

* McCain says he’d reach out to successful Americans to get them involved in his admininistration. Asked to name names, he offered up Cisco (CSCO) CEO John Chambers and Microsoft (CEO) Steve Ballmer, both of whom were in the room. To read Roger Parloff’s article in the last issue of Fortune, Microsoft Takes on the Free World, Ballmer probably will be excited to know of McCain’s lack of interest in patent reform.)

* On the subject of immigration reform, McCain again flashed his free-trade credentials, saying, “I worry about nativism and protectionism,” implying he’s more comfortable than most politicians with foreign companies and countries investing in U.S. assets.

Do these political speeches at business conferences translate into votes? Can you picture John Chambers as Secretary of Commerce? Sure.

At first glance, there’s not much new about today’s report in the New York Post that Microsoft (MSFT) has formally re-approached Yahoo (YHOO) about a merger. The article reads like banker talk: Investment bankers on one side or the other (or, better, a banker who couldn’t get a seat at the table) chatting up a deal to get things moving. It’s also not new news. A desperation merger between the two weaker online advertising players has been in the rumor mill for more than a year. Tim Arango and I speculated on such a move (among others) last October, for example, and UBS analyst Ben Schacter has justified a bullish call on Yahoo’s stock for quite a while predicated on Microsoft buying Yahoo if it got too cheap.

Does a deal make sense? Absolutely. Yahoo effectively could become MSN on steroids. The two search-advertising also-rans finally would be able to push serious traffic through their ad-search delivery platforms. Microsoft would bring major financial resources to Yahoo, which because of its underperformance in search has been cost-cutting elsewhere. (An Internet business cost-cutting during an advertising boom is a sad thing to see.) A tie-up also might explain why Yahoo CEO Terry Semel is still around. Everyone assumed he’d be gone by now. But Semel is a dealmaker, and this is an enormous deal.

Having said that, every time I’ve discussed a Microsoft-Yahoo merger with people who know the two companies well, they remark on what a disaster it would be. Those ad-search platforms, for example: each company has spent a fortune developing their own. It’d be a bitter pill to ditch one. Microsoft remains light years behind in truly understanding the Internet, at least compared with Google’s mastery. Google (GOOG) would love this deal, at least for a couple years, in the same way Dell (DELL) was ecstatic when HP (HPQ) bought Compaq. (Dell squandered an opportunity by not taking that deal seriously enough, but I digress.)

The market, of course, takes this report extremely seriously. Investors don’t care if a banker is trying to pump up a deal or if this talk is old or new. Yahoo’s stock was up 19% by late morning. Like the response to News Corp.’s (NWS) bid for Dow Jones (DJ) , the market’s reaction might make this deal a reality.

I interviewed Rupert Murdoch a couple years ago in his expansive West Coast office on the historic Fox lot in Los Angeles for an article about his Internet ambitions. This was after the MySpace acquisition but before the rest of the world realized that Murdoch has gotten it right this time. As we wrapped up the interview — Murdoch graciously apologized for cutting things off, but he had to scoot for his regular physical at UCLA’s hospital — he stood to shake my hand and said, “Hope you got some good copy.”

Right there I was reminded why journalists are so smitten with Murdoch, even the ones who disagree passionately with his politics. The guy loves journalism. I mean, he really loves the give and take, the analysis, the insight, the nasty fights and so on. The same stuff journalists love. He’s also passionate about business, which is why he never has made a secret about coveting The Wall Street Journal, in his — and everyone else’s view — the class act of daily business journalism in the English language. He has watched the Journal maintain its greatness, even as it demeans itself with a smaller size and endless lifestyle stories. Not that Murdoch judges. His papers publish the lowest of the low and the highest of the high. The Journal would find its place at the top of the News Corp. (NWS) heap. (My bias should be noted. I write day and night for Fortune Magazine, but I’m also a regular commentator on the Fox News Channel, a News Corp. property.)

Will the Bancroft family sell? The market has an opinion on the answer to that question. It bid up shares of Dow Jones (DJ) by 57% moments after Dow Jones disclosed Murdoch’s offer. Who else might jump in? When one of the greatest properties around is up for grabs, everyone needs to look. That will include the Washington Post Company (WPO), Gannett (GCI) and Pearson (PSO). Goldman Sachs (GS) just raised a new $20 billion investment fund. Who knows? Maybe Goldman dreams of better coverage in the Wall Street Journal.

A final note. Shares of News Corp. have been on fire for a while now. Since the acquisition of MySpace parent Intermix, actually. And the market approves of its bold move today, initially sending the shares down less than 3%. People forget, however, that for years Wall Street punished News Corp. with a “Murdoch discount.” Investors worried about the downside of a long-term-focused chief executive who periodically makes giant bets that don’t always pay off. An example: The Wall Street Journal recently highlighted the bizarre story (subscription required) of Gemstar (GMST) CEO Henry Yuen, in which News Corp. invested and ended up taking $6 billion in writedowns. The Journal called that move “a low point in Mr. Murdoch’s career as an investor.”

I’m guessing the Journal’s reporters and editors — and investors — won’t view Murdoch’s latest gambit as a low point of any kind.