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2. Fannie Mae faring well amid settlements, strong market

When it comes to the SAC Capital saga, the information has been sparse at times, leaving the industry with little more than tea-leaf reading, which is always fun.

The latest attempt at informed prognostication comes from none other than Charles Gasparino, who thinks there is some subtle good news for the firm in a recent hire by Goldman Sachs.

"Goldman Sachs recently lured away from arch rival Morgan Stanley a veteran stock salesman who counts as his biggest client SAC Capital. The salesman, Jack Johnston, was offered a lucrative managing director position at the prestigious Wall Street firm — a promotion from his previous job as an executive director at Morgan.

"The move comes as the government continues to weigh possible insider-trading charges against SAC and its founder Steve Cohen. Cohen, through a spokesman, has said he's done nothing wrong, but as many as nine current and former SAC officials have been implicated in the federal crackdown.

"Now, Wall Street executives assessing the likelihood of charges of insider-trading charges against Cohen and SAC are pointing to Johnston's hiring as a good sign for the hedge fund."

One insider was quoted: "There's no way that Goldman would offer someone whose biggest client is SAC a managing director spot if it thought SAC was going away."

So there you have it. It may be unfair to consider Johnston a one-trick pony. And it would be exceedingly unwise for pensions to start investing with SAC Capital again based on this. But it's a lot fun to speculate.

At this point, the odds of the firm avoiding a massive criminal indictment seem pretty good. The ultimate effects of civil litigation, it is indeed filed, remain unclear. But even if SAC Capital ends up a family office, it will still send a lot of business to broker dealers. They'll want his business no matter what.

For more:
- here's the article

Read more about: prime brokerage, SAC Capital
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By Jim Kim

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3. Can Bank of America win in Chicago?

When Bank of America settled with Fannie Mae last year, it seemed that the GSEs were in good shape to seek similar deals with other big mortgage originators. Citigroup has become the next big bank to settle. It agreed this week to pay $968 million to resolve claims pending on a multitude of home loans. That might seem like a lot.

But next to the Bank of America deal, it pales. Recall that Bank of America last year agreed to pay Fannie Mae $6.7 billion to buy back troubled mortgages from Fannie at a discount from their original value. The bank also made $3.6 billion in cash payments to the GSE.

For Fannie Mae, this represents evidence that it is indeed putting the mortgage meltdown behind it. It is generating large amounts of revenue these days, and making fat payments to the Department of Treasury, making a significant fiscal difference for the entire U.S. budget.

The GSE is not yet finished with its review of loans that it purchased from originators in 2005 to 2008. As noted by the Washington Post, "As of the end of March, Fannie said it had reviewed about 80 percent of the loans acquired during that period and expects to complete the process by the end of this year, according to a quarterly filing. It plans to issue repurchase requests to any bank that did not live up to the terms of the purchase agreement."

We'll likely see other lenders ink deals going forward, but the really big settlements seem to be out of the way.

For more:
- here's the article

Read more about: Fannie Mae, GSEs
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By Jim Kim

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4. Icahn presses forward ahead of Dell shareholder vote

Chicago is not an easy city to win over. But give Bank of America credit for trying. Crain's Chicago Business reports that the bank seems bent on carving out greater market share in the Windy City. Unfortunately, that isn't going to be easy for a bank that has seen its once formidable brand name tarnished in the city.

It all goes back to the 2007 purchase of LaSalle. "Scores of commercial bankers left B of A for competitors following (the) purchase of LaSalle, Chicago's largest business bank at the time. Many customers followed, and B of A's loss of market share fueled significant gains at midsized local lenders such as PrivateBancorp Inc. and Wintrust Financial Corp., as well as larger players like BMO Harris Bank N.A."

"There was a real sense B of A abandoned Chicago," one local observer was quoted. "The way they handled LaSalle just solidified that opinion. . . . They've been very dormant. I think it's a tough hole for them to work their way out of."

So how far has Bank of America slipped in the market? "Deposit outflows followed. B of A's deposits in Chicago as of June 30, 2012, the most recent data available, were $23 billion, down 31 percent from $33.2 billion in mid-2009. During that period, total bank deposits in the Chicago area grew 11 percent. In 2011, longtime No. 3 local bank BMO Harris unseated B of A as the second-largest Chicago bank by deposits."

Bank of America remains convinced that it can fare far better. Tim Maloney, Bank of America's Illinois president, told the publication that the bank has emerged from lengthy soul-searching that has led it to change its business approach. "It's not enough to be big and powerful," he says. "It's ultimately a relationship business we're in. That's a culture change." That will sound like rhetoric to some. In the end, the numbers will tell the true story.

For more:
- here's the article

Read more about: Bank of America, Chicago
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By Jim Kim

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5. Wells Fargo analyst: GSE reform is a long-time away

Is Carl Icahn significantly improving his chances of winning the war for Dell?

At this point, you would still have to rate him the underdog. But he is making all the right steps ahead of the July 18 special shareholder vote on the plan put forward by Michael Dell and Silver Lake. Icahn has proposed a leveraged recap to be financed with $7.5 billion of company cash, a $5.2 billion credit facility and $2.9 billion from the sale of receivables. He hit a milestone recently when he was able to secure commitments for the $5.2 million in debt. The financing package includes a $2.2 billion, six-year term loan and a $3 billion, three-and-a-half year term loan, according to Reuters. Pricing on the first term loan is set at Libor plus 400 basis points with a 1 percent Libor floor, while pricing on the other loan is set at Libor plus 350 with a 75 basis-point Libor floor. "Both tranches are offered at a discount of 99.5 cents on the dollar and will carry 101 soft call protection for one year."

Reuters also notes that as an "unusual perk," the lenders "will share in the profits if a different but higher bid prevails. Joint lead arrangers will earn 7.5 percent of the difference between the winning bid and Dell's current $13.65 per share offer times the roughly 227 million shares that Icahn and Southeastern jointly own." The main lender at this point seems to be Jefferies, but more information will likely be released soon.

It's unclear whether this is good enough news to derail passage of the Michael Dell deal at the July 18 vote. But even if that vote goes against him, Icahn may not be willing to give up. Litigation of some kind is always a possibility.

For more:
- here's the article

Read more about: Carl Icahn, Dell
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By Jim Kim

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