We don’t have a position in MB Financial (MBFI), but the company is getting such a good deal in its acquisition of the branches of the just-seized Corus Bankshares that I can’t help but make a comment.

• Escalating trade tensions. On Friday, the U.S. announced a tariff on Chinese tires in a move some say may actually be a precursor to a campaign to reduce trade barriers. Each of the four presidents that served before Obama moved to protect domestic industries early in their term before making a push for freer trade. Whatever the end goal may be, China 'strongly opposes' the tariffs and said it may turn to the WTO to intervene, and yesterday announced it's initiating antidumping procedures against imported U.S. chicken and auto products.
• Obama renews push for financial reforms. Just ahead of the one year anniversary of Lehman Brothers' collapse, Obama is heading to Wall Street to explain how the government plans to unwind its involvement in the financial sector and to renew his push for regulatory reform. Obama is expected to ask for the support of the financial community in implementing new market regulations and will call for greater global coordination on financial oversight. In conjunction with Obama's remarks, the Treasury will release a document called "The Next Phase" (.pdf), outlining ways in which emergency measures are being reduced.
• Deutsche Telekom sprints for next deal. Just days after announcing plans to merge U.K. operations with France Telecom (FTE), Deutsche Telekom (DT) is reportedly considering a bid for Sprint Nextel (S). Deutsche Telekom, a distant fourth in the U.S. market behind Sprint, Verizon Wireless (VZ) and AT&T (T), has apparently been researching a possible Sprint tie-up for over a year, but began serious due diligence three months ago. A potentially costly offer could be submitted in the next few weeks. DT -1.4%, S +10.1% premarket (7:00 ET).
• J&J renegotiates Elan deal. Johnson & Johnson (JNJ) is reportedly in talks to cut the price of its $1.5B deal with Elan (ELN), following a court order that the J&J tie-up violates a partnership between Elan and Biogen Idec (BIIB). J&J wants to reduce the deal's price tag by at least $100M, and new terms could be announced in the coming days.
• Plenty of suitors for JAL. American Airlines (AMR) and Delta Air Lines (DAL) are both said to be considering rival investments in Japan Airlines, with Delta prepared to inject up to ¥50B in a tie-up that would include code sharing on international flights. American Airlines is looking to buy equity in JAL in part to prevent it from switching over to a rival airline network, though both American and Delta also see this as a way to grow revenue from Asia. JAL is Asia's largest airline by revenue but lost $1B last quarter and is under pressure to cut costs and raise money.
• BIS: Higher taxes for larger banks. The Bank for International Settlements [BIS] published its Quarterly Review (.pdf) yesterday, expressing 'cautious optimism' on the state of the global economy but noting that interbank lending fell $812B during the previous quarter. The BIS recommended that big banks pay higher taxes to offset the disproportionately large systemic risks they pose.
• BlackRock plans internal trading platform. BlackRock (BLK) is set to create its own global trading platform, allowing BlackRock clients to conduct deals with one another through internal trades that completely bypass Wall Street. BlackRock says it's not trying to marginalize Wall Street, though the move is certainly a sign of increased resistance to paying fees for securities trades that have small margins and rely on large volumes to achieve profitability. The plan is still in early stages, and will probably be introduced for stocks first, followed by fixed income.
• Gas firms give go-ahead on Gorgon. Chevron (CVX), Exxon Mobil (XOM) and Royal Dutch Shell (RDS.A) approved development of the Gorgon liquefied natural gas project in Australia, paving the way for a venture that could earn A$300B ($258B) in gas sales to China, India and Japan in its first twenty years. The project's first phase will cost A$43B with the first LNG exports expected in 2014.
• China in power-plant talks with AES. Sovereign wealth fund China Investment Corp. is said to be in talks to take a significant minority stake in power-plant developer AES Corp. (AES). Sources said the two sides are also discussing a possible joint venture in which China Investment Corp. would contribute capital to fund AES' plans to develop power plants around the globe.
• Friday failures. Three more bank failures on Friday, bringing this year's total to 92 and costing the FDIC's insurance fund around $2B. Most of those losses come from the seizure of Corus Bank, whose 11 branches and $7B in deposits will be assumed by MB Financial (MBFI). (Read the FDIC's press releases: I, II, III)

Today's Markets

Asia closed mostly down. European markets and U.S. futures start the week in the red.

Many of the ten big banks repaid their TARP preferred stock loans on Wednesday, June 17, 2009. This means that they can begin negotiations to repurchase the warrants that they issued to taxpayers. I estimate that the warrants issued by those banks are worth $4.2 billion. That is over one third of the value of the taxpayers' warrants. Yet, if history is any guide, we taxpayers could expect to get 50 cents or less on the dollar. My hope is that the U.S. Treasury will take a hard line in these negotiations and take steps to create markets in the TARP warrants. The best prices will come from taxpayers selling their warrants to third party investors.

One of the problems that plagues the valuation of the TARP warrants is the cancellation provisions. Apparently, to encourage banks to raise equity on their own, the purchase agreements for the TARP capital infusions say that half the taxpayers’ warrants will be cancelled if the bank issues equity in the amount of the U.S. Treasury's investment. Recent valuations by Credit Suisse and Bloomberg have assumed a zero chance of cancellation. These studies systematically overvalue the taxpayer's warrants for this reason. Moreover, they most overvalue the banks which are the most likely to cancel half the TARP warrants. Of the 10 big banks due to pay back TARP yesterday, Morgan Stanley (MS) and Goldman Sachs (GS) have such high share prices and have already issued so much equity that they have a 90 and 80 percent chance respectively of issuing enough equity to cancel half the taxpayer’s warrants by year end, according to my estimates. That means that both Bloomberg and Credit Suisse are overvaluing the taxpayers’ warrants in these companies by 45 to 40 percent, if you believe their estimates of volatility and dividend yield.

By Scott J. Wilson

Is 60 Minutes the new propaganda department of the FDIC, or what? Again, they drop the ball in their coverage of the mortgage crisis, leaving viewers more misinformed than ever.

As a bit of an experiment, I decided to examine insider activity at a large group of commercial banks. I appraised over 230 different commercial banks for this survey and gathered my list of banks off of Motley Fool's tagged “commercial banks”. I did not examine some of the banks with extremely small market caps and I only examined a handful of banks that were not on this list, so it is by no means exhaustive, but it is a fairly large sample that should provide some ideas and insight.

The goal of this survey is to classify insider activity at various commercial banks, take a closer examination at some of the banks that get emphasized, and track the results over time. This article is essentially “Part I” of this experiment and deals exclusively with categorization of the banks.

Q4 2008 Earnings Call

January 30, 2009 11:00 AM ET

Q3 2008 Earnings Call

October 31, 2008 11:00 am ET

Q2 2008 Earnings Call

July 25, 2008 11:00 am ET

MB Financial, Inc. (MBFI)

Q1 2008 Earnings Call

Q4 2007 Earnings Call

January 25, 2008 10:00 am ET

MB Financial Inc. (MBFI)

Q3 2007 Earnings Call

Bullish calls: