We have seen that Blackrock will buy about $1 billion of the shares itself as part of a share repurchase plan.  Still, that leaves about $5 billion that the market will have to absorb and this comes at a time when it is an understatement to say that Main Street is not exactly hot on Wall Street investment banking and money management firms.

Barclays is unloading these shares before new Basel rules apply which would have forced the company to count the share stake as capital. The offering is being conducted by Barclays itself along with the firms of Morgan Stanley and BofA Merrill Lynch.  Barclays owns 32,178,505 shares of the series B convertible preferred stock and 3,031,651 common shares per the filing, and this comes to roughly a 19.6% economic interest in Blackrock.  The applicable percentage of ownership for the selling stockholder is based on 139,564,123 shares of common stock outstanding as of March 31, 2012.

Blackrock also has a filing for a note offering which will ultimately be led by Citigroup, J.P. Morgan, and by Wells Fargo Securities.  Blackrock shares were at $180 as recently as May 11 and the shares closed at $171.91 just this last Friday.  Shares closed at $167.73 on Monday and now shares are down another 1.2% to $165.86 in mid-day trading in New York.

Blackrock’s big issue here is that it rarely trades 1 million shares in a day, with only 8 trading days of 1 million or more shares in just the last three months and just ten trading sessions with 1 million shares or more in the prior three-month period.

Blackrock has traded in a range of $137.00 to $209.37 over the last 52-weeks.  The market value today is $29.8 billion, so this is going to be a large offering to absorb.

Dow Jones has listed that the secondary offering is set to price on Wednesday evening for Thursday trading.

JON C. OGG

The admission of a $2 billion loss due to improper hedging losses was one thing from J.P. Morgan.  The problem is that Jamie Dimon signaled that the losses could widen out further in the months ahead.  Ultimately the bank will be out of those trades, but these are apparently illiquid enough that the bank cannot simply say “market-sell order” to another trading desk.  J.P. Morgan Chase also has exposure to Europe and elsewhere at a time when BRIC growth has been slowing substantially and while Europe is in meltdown mode.

Wells Fargo is just more of a traditional bank that makes its money off of deposit management, client advisory services, brokerage, loans, and mortgages.  The bank also still trades at a premium to its book value of $25.45 as of March 31, 2012. Its share price is $31.37 after a 1.4% gain today and the 52-week range is $22.58 to $34.59.

J.P. Morgan Chase & Co. (NYSE: JPM) has now joined Bank of America Corporation (NYSE: BAC) and Citigroup, Inc. (NYSE: C) in trading at substantial discounts to their prior book values.  As we have said over and over, book value is the ceiling right now rather than the floor. When investors believe that book values will be dropping or that a bank’s earnings power is drained, does book value even matter?  It is not as though the banks could auction off those assets and realize that price overnight.

The book value of J.P. Morgan Chase & Co. (NYSE: JPM) was $47.60 at the end of the first quarter.  That compares to $46.59 the previous quarter and compares to $43.34 in the first quarter of 2011.  J.P. Morgan shares are down 2.6% at $32.62 after two broker downgrades today.

Bank of America Corporation (NYSE: BAC) reported that its stated book value is $19.83 per share, and its tangible book value was $12.87 per share.  BofA trades at $6.88 after a 2% drop today.

Citigroup, Inc. (NYSE: C) reported that its book value was $61.90 on the stated value methodology and its tangible book value was $50.90 at the end of March.  Citi trades at $26.18 after a 0.6% gain today.

Jamie Dimon might still be the strongest CEO in the room, but as of now it is Wells Fargo that is the safest of the big money-center banks.

JON C. OGG

National Bank of Greece SA (NYSE: NBG) appears to be challenging all-time lows on an adjusted basis as shares are down 12% at $1.51 in active trading.  The Global X FTSE Greece 20 ETF (AMEX: GREK) is down 1.9% at $10.90 and this hit a new low today as Greek shares have reportedly hit lows not seen in years and years.

What is interesting is that Coca-Cola Hellenic Bottling Company S.A. (NYSE: CCH) is actually up 5.3% at $16.25 against a 52-week trading range of $14.75 to $27.40.  This outfit is the bottler of The Coca-Cola Company’s products located in Athens which distributes some 90 brands (including Coke) up into parts of the developed nations in Europe and into Eastern Europe and a few other select nearby markets.

We are seeing a mixed move in other banks in the lands of the PIIGS in ADR trading in New York. The Bank of Ireland (NYSE: IRE) is up 4% at $5.13; Banco Santander, S.A. (NYSE: STD) is down 1.5% at $5.72; and Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 0.7% at $6.24.

Here is a comment from a speech from ECB President Mario Draghi today: “Before concluding, let me comment briefly on the difficult situation in Greece. Since the Treaty does not foresee anything on exit, this is not a matter for the ECB to decide. While the ECB will continue to comply with the mandate of keeping price stability over the medium term in line with Treaty provisions and preserving the integrity of our balance sheet, I want to state that our strong preference is that Greece will continue to stay in the euro area.”

Keep in mind a report from Reuters yesterday from Italian Industry Minister Corrado Passera saying that the Euro could survive even if Greece were to leave the union’s single currency. Trusting anything from any minister in Italy is a hard issues when you consider that Italy is one of the PIIGS and is a larger problem for the Euro than all other four PIIGS combined.

This is one of those situations where wording on headlines has to be closely watched… and interpretation depends upon many things.  Traders and investors will shoot first and ask questions later.

JON C. OGG

Here is where the news really gets interesting for GE… In addition to the second quarter dividend from GECC, the unit is now planning to pay a special dividend of $4.5 billion to GE in 2012.

GECC had to suspend the historical dividend in 2009 during the financial crisis.   As a result of the dividend and the special dividend, General Electric said that it plans to accelerate its common stock buyback starting in the second quarter if market conditions permit.

GE shares are up 1.8% at $18.73 against a 52-week trading range of $14.02 to $21.00 and its dividend on the common stock is currently almost 3.6% paid to public shareholders.

JON C. OGG

The Thursday disclosure of a loss of about $2 billion due to egregious failures in risk management now puts J.P. Morgan Chase in the same league as Bank of America Corporation (NYSE: BAC) and Citigroup, Inc. (NYSE: C).  Jamie Dimon has been the most vocal bank executive out there and this is not exactly going to help Dimon in any of his future arguments against more and more bank regulations.

Simon Johnson at MIT’s Sloan School of Management is shown here calling for the possibility of a resignation of Jamie Dimon.  Johnson went on to note that if any other company lost this much then the person responsible would be forced to resign.  He did note that it is not going to happen in banking where regulators move to oust Jamie Dimon.  Johnson is one of the voices calling for the break-up of the big banks

Dimon noted that this trade did not violate the Volcker Rule but it did violate the Dimon Principle.  What happens when your hedges are wrong hedges?  The loss could cost another $1 billion over the next quarter or two as well as the trade was called flawed synthetic credit derivatives which are volatile.

So, back to this call for a Dimon resignation.  Dimon remains one of the top executives out there in banking and in corporate America.  He was recently cleared to lift the common stock dividend and to buy back stock.  Dimon always said that he would buy stock back when its price made sense to do.  A drop of almost 8% down to $37.60 takes this banking stock down to prices not seen since February 16, 2012.  The dividend-adjusted closing price at the end of 2011 was $32.80.

There is another call for Dimon’s role of Chairman and CEO to be split as well.  AFSCME sent out an email noting, “After JP Morgan’s Jamie Dimon lost $2 Billion in risky trading, today, AFSCME issued a renewed call for the shareholders of JPM to end Dimon’s reign as Chairman and CEO and adopt an independent board chair.”  In short, the call is keep Dimon on as CEO but to bring in a new Chairman of the Board that is independent of the company.

Congressman Barney Frank (co-author of Dodd-Frank) has publicly said, “JP Morgan Chase, entirely without any help from the government has lost, in this one set of transactions, five times the amount they claim financial regulation is costing them. The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today.”

Jamie Dimon may have taken a body blow here, but the notion that this will cause his resignation seems very unlikely.  The next risk is the pending downgrade of more than 100 of the top global banks from Moody’s.

FBR was one of the firms which downgraded J.P. Morgan shares this Friday and the target was taken down to $37 from $50 previously.

JON C. OGG

The Wall Street Journal reports that Fisher responded by repeating his call for smaller banks:

We don’t feel that we should have institutions that are ‘too big to fail. We don’t think we should allow a system that gives big institutions a subsidy over you of 20 to 100 basis points on their cost of borrowing. …

What I’m very worried about is that you can reach a size of complexity that risk management becomes a mathematical modeling exercise and you lose touch with your customer. What concerns me here, without referencing that bank, is … at what size do you not realize what’s going on underneath you? If you’ve gotten to that point, you’re too big. Period.

Fisher seems to be saying that ‘too big to fail’ is also ‘too big to manage’. His implication is clearly that Jamie Dimon could not possibly know what JPM’s traders were doing all the time and that when that’s the case, the bank is too big to manage.

Yet the Federal Reserve has done little to call the country’s largest banks to account. Capital requirements have been raised, but many critics argue that the requirements haven’t been raised enough.

In the recent round of bank stress tests, JPMorgan was recognized as one of the better capitalized and better run banks. If JPMorgan’s $2 billion loss is only the tip of a much larger iceberg, we’ll soon find out if the stress tests measured anything worth knowing.

One final point: JPMorgan was given approval to pay dividends and re-purchase stock following the stress tests. Dimon said yesterday that he wants to continue both practices. The Fed should stop that immediately, at least until the extent of the damage to JPMorgan’s balance sheet is determined. The added advantage is that by hitting the bank’s shareholders in the wallet, perhaps shareholders will get more interested in how their bank is run and whether Dimon is the crackerjack CEO and risk manager he is purported to be.

Paul Ausick

The Federal Reserve and Treasury supported an AIG bailout in 2008 because its huge number of relationships with other financial firms would have caused catastrophic rippled through the credit system. The Treasury will sell the stock at $30.30, about 5% below where it has recently traded. AIG may buy back some of the shares on its own.

Deutsche Bank AG (NYSE: DB) is down 3.7% today at $40.70.  Banco Santander, S.A. (NYSE: STD) hit a new 52-week low this week and shares are down $0.01 at $6.02 today for its ADR in New York trading.  National Bank of Greece SA (NYSE: NBG) is up only $0.01 at $2.18 for its ADR in New York.

Meredith Whitney told Bloomberg today that first quarter bank results were boosted from one-time issues and that after a very dismal April it will be challenging in the second and third quarters of this year.  It is no wonder that investors are still betting against banks here in the United States when you see Europe in a mess and when you keep getting come-along analyst calls driving things down.

Bank of America Corporation has broken down back under $8.00 today to $7.93 after a 2.8% drop. That marks only the second time being under $8.00 for a lowest print on the day going back to early March and it is down from peak of just over $10.00 back on March 26.  Citigroup, Inc. (NYSE: C) is down less than 1% today at $32.41 in late-day trading and that is down from almost $36.00 as recently as April 18.

J.P. Morgan Chase & Co. (NYSE: JPM) is down 0.7% at $42.91 in late Thursday trading and this was a $46.00 stock at the start of April.  This one has held up better considering that it is one of the two healthiest U.S. banks in America.  Wells Fargo & Co. (NYSE: WFC) is down 0.5% at $33.40 and still at a premium to its book value and down only $1.20 from its 52-week high of $34.59.

The long and short of the matter is that investors are still abandoning Bank of America even though the bank showed only a small exposure in total to the PIIGS in Europe.  The fear is either surrounding more mortgage woes or more European bank woes… or both.

JON C. OGG

So you have some of the negative cases against public private equity shops.  So why is the IPO for Carlyle being considered a win or at worst a mixed bag?  The reduced pricing was deemed to be aiming very low at the offering price because other private equity IPOs have seen the value of their interests (share equivalents) drop after coming public.

The 30.5 million common unit offering priced at $22.00 per unit and that is shy of the $23.00 to $25.00 originally projected.  This While it depends upon which valuation metric you use, Carlyle was thought to be valued at as much as half of rival private equity shop The Blackstone Group LP (NYSE: BX) despite a $6.5 billion market valuation for the rival.  Those valuation comparisons may need some caveats but the idea was to get the shares out at a price that was attractive to Carlyle partners AND attractive to investors.

Kohlberg Kravis Roberts & Co. (NYSE: KKR) and Apollo Global Management, LLC (NYSE: APO) are both relatively new as publicly traded private equity shops worth $3.07 billion and $1.55 billion, respectively.

The last amended filing showed that if the 30.5 million common units were sold without relation to the overallotment option that some 304,500,000 common units would be outstanding if all outstanding Carlyle Holdings partnership units held by existing owners were exchanged for newly issued common units on a one-for-one basis.  We will wait for a new filing to see exactly what the share count is in the coming weeks but that at least offers a read into the full value of the company.

Now Carlyle has to join the ranks of other public companies and open up its books each quarter.  Shares have fluctuated between slightly positive and slightly negative so far on the debut and some 8 million shares having traded with a last print of $22.08 at the 11:30 AM time stamp.

JON C. OGG

The trick is that Visa divulged in a filing that the Department of Justice has a civil investigative demand as an official request for information over its pricing structure and over recent pricing adjustments.  It needs to be known that Visa has received inquiries of this nature before and the CEO noted that it could take up to a year to resolve.

Perhaps what is of a larger concern to investors is that this inquiry came in March, and it is now May.  Even if it came at the very end of the month that means that Visa sat on the news for a whole month allowing its shares to rise from $118 to $125 before it divulged the news.

Visa shares hit $125.25 on May 1 as a new high and pulled back on Wednesday to $122.19 before the drop of 1.5% to $120.40 this Thursday.  Mastercard hit a high of $466.98 on May 1 and pulled back to $451.45 on Wednesday before its 0.6% drop this morning to $448.20.

Department of Justice inquires do not mean that anything wrong has been done, but right now investors treat any form of investigation with caution.  It is caution that should be expected, and frankly the stocks have held up better than many might have expected.  This won’t be going away any time soon and we would expect that analysts will be chiming on this matter for the rest of the week.

JON C. OGG