Deals wrap: Seeking clarity on Fannie and Freddie
The Obama administration will pick the brains of housing finance leaders on how to fix Fannie Mae and Freddie Mac, but made one thing is clear: there is no going back to their pre-crisis structure. *View article
BHP Billiton may see potash as an ideal fit within its portfolio but today Potash Corp’s board rejected BHP’s unsolicited $38.6 billion offer, terming it as “grossly inadequate.” *View article
Energy stocks ranked among the worst performers in the second quarter on jitters about a double-dip recession. What did the top fund managers do? They staked out the sector much like they did with financial companies earlier in the year. *View article
The rising yen is helping reignite a push by Japanese companies to snap up overseas assets and secure growth outside their sluggish home market. Japanese companies have a patchy reputation for dealmaking that stems from famously overpaying for trophy properties but executives are more worried about being left behind by hard-charging global rivals. *View article *View factbox on the yen
Deals wrap: Who’s interested in AIA?
AIG has started talks with potential investors to sell stakes in its Asian life insurance business AIA ahead of AIA’s planned IPO, sources say. *View article* In a related matter, Prudential says its failed bid for AIA, which collapsed in May, will cost less than first expected. *View article
General Motors posts its biggest quarterly profit in six years a day ahead of an expected IPO filing. *View article *View article
Private equity firms that benefited from Dubai’s boom years are now looking to the emirate for reforms needed to revive the sector, writes Nicolas Parasie and Dinesh Nair. *View analysis
Robert F.X. Sillerman is again making a bid for control of entertainment company CKX and “The Deal Professor” looks into the nitty-gritty of the deal. *View NYT article
In an Op-Ed piece, William Poole discusses the best way to put Fannie and Freddie to rest. *View NYT article
Bank dealmaking circus=recruiting bait?
Some in the financial industry apparently smell opportunity in the latest round of mergers and blood-letting among top banks.
Referring to the Wells Fargo takeover of Wachovia as the WWF and placing Bank of America CEO Ken Lewis atop a bucking Merrill Lynch bull are just a couple of the attention-getting devices financial sector recruiting firm RJ & Makay uses in its latest promotional You Tube video.
Branching out from a previous video aimed at Merrill Lynch brokers, the new “Billion Dollar Video” (the company claims assets from advisers brought to them via these viral recruiting tools represent billions of dollars) targets all financial advisers but specifically appeals to those currently at Merrill Lynch and Wachovia.
Those brokers are grappling with with the question of whether to accept a retention/transition package, move to another firm or go independent. RJ & Mackay is clearly hoping they’ll opt to walk and chose the firm to advise them on where to go next.
The just over four-minute short could help at least get their attention. It’s an equal opportunity stick poker, targeting all the big hits of this financial season. JP Morgan Chase, Bear Stearns, Fannie and Freddie are all in there along with Lehman, Buffett, Goldman, AIG, Morgan Stanley, Bernanke, Paulson, the government bailout, executive greed, executive kool-aide dispensers and dealing with those pesky gnats, known as recruiters.
Watch here:
Before the Bell: Buffett’s ball
There’s nothing like a belle to bring a festive mood to an otherwise gloomy ball, and today that honor belongs to Goldman Sachs, which has drawn attention – and money – from none other than Warren Buffett.
Stock futures are pointing up on news of the uber-investor’s plan to purchase a $5 billion stake in the bank. And Japanese media say that Sumitomo Mitsui Financial Group is also looking to buy in.
But the fate of the Wall Street bailout plan remains the $700 billion question. Congress is continuing discussions today, with Fed chief Ben Bernanke testifying before the House Financial Services Committee.
At the same time, CNN is reporting that the FBI is investigating potential mortgage fraud at Fannie Mae, Freddie Mac, Lehman Brothers and American International Group – the very companies at the heart of this financial services meltdown.
Oil prices are up ahead of weekly data expected to show the fifth consecutive decline in U.S. crude inventories.
The dollar is down against an index of major currencies. Longer-term U.S. Treasuries are higher.
Mr. Buffet is following his own mantra stringently buy low sell high. Now that the toxic assets will off the Goldman’s book, it’s definitely a good buy!!
http://vikramsjourney.blogspot.com/
This one’s a gusher
Once again the government has had to open up its check book to sort out a private sector problem, citing systemic risks to the global financial system. The GSEs may have been more obvious candidates than Bear Stearns, given their assets had carried an implied seal of sovereign support – support that it is now clear had never been meant for shareholders.
After weeks of burble about government takeovers and bailouts, management shuffles and a thrashing of their stocks, things seemed to have gone quiet on the Fannie / Freddie front. How much worse had things gotten by last week? What was Hank Paulson seeing from the windows at Treasury that forced him to take such dramatic action?
Markets are very excited - banking stocks around the world shot up overnight on, if not the bottomless wallets of the American people, then the end of some uncertainty. Early this morning, Paulson was at pains to emphasize that conservatorship would protect tax payers, not shareholders. Fannie and Freddie stocks are halted this morning after falling close to wipe out levels, so the latter part is clearly sinking in. Getting taxpayers to believe that the move protects them may be a harder sell. Warren Buffett told CNBC this morning taxpayers would suffer.
Other deals of the day:
* Origin Energy , fending off an $11 billion hostile bid from Britain’s BG Group, has partnered U.S. major ConocoPhillips to help develop its coal seam gas through a liquefied natural gas (LNG) project.
* Cigarette maker Altria Group has agreed to buy Skoal and Copenhagen smokeless tobacco maker UST Inc for about $10.3 billion in cash.
* Australia’s St George Bank has recommended a sweetened A$17.9 billion ($14.8 billion) takeover offer from Westpac Banking in what would be Australia’s biggest banking takeover.
How Fannie and Freddie work
Freddie Mac on Wednesday posted its fourth straight quarterly loss as it braced for a prolonged housing crisis by setting aside twice as much money for bad loans and setting plans to slash its dividend by at least 80 percent.
The worse-than-expected results come just three weeks after U.S. authorities orchestrated a sweeping effort to prop up the second-biggest provider of U.S. residential mortgage funding and its fellow government-sponsored rival, Fannie Mae.
Click the arrows below to understand how Fannie Mae and Freddie Mac work, and how their troubles could influence the economy and potentially cost taxpayers billions.
Back in 1990 when the S&L scandal was still in our minds (Banks went bankrupt then because of Real Estate..)
The only mortgage programs available were Federally backed by FHA and VA (changing mortgage insurance premiums to cover potential losses) and conventional programs (majority backed by Fannie Mae and Freddie Mac) with a required downpayment and a mountain of requirements.
Mortgages had to make sense. As time passed and the Republican congress of the late 90′s deregulated the mortgage backed securities markets, avalanches of new rogue mortgage programs flodded small and mid-sized mortgage companies, and the results were thousands of mortgages that did not make sense, waiting to default.
Add to this the fact that the economy has faultered since 2001 and you have a bad recepie of Millions of people living off their credit and the equity of their homes for almost all this decade.
It is not only a mortgage markets problem, is it the decimation of our economy and our way of living.
