The Fed today announced that, starting next July, banks can no longer charge overdraft fees on a debit card or when a customer is using an ATM. That new law is moot if a customer has agreed to pay charges for overdrawing their account. Bloomberg has more:

Financial companies will have to explain their overdraft programs and fees, as well as choices available to consumers, the Fed said in a statement today announcing a rule that takes effect next year.

Fed consumer research shows “most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit- card transactions unless they affirmatively consent,” the board said in its statement. Consumers do value overdraft services to ensure payment for important bills, such as rent and utilities, the Fed said.

This sounds like a consumer victory. I do, however, anticipate that banks will find a creative way to milk what few overdraft fees they still can charge.

The complaint alleges there was probable cause to believe Mr. Goffer and his conspirators engaged in insider trading in the acquisitions of Kronos Inc. and Hilton Hotels Corp.

Berkshire Hathaway announced today that it is buying railroad company Burlington Northern Santa Fe (BNI) for $44 billion, or $100/share. It is Berkshire Hathaway’s biggest-ever takeover. Bloomberg has more on Warren Buffett, railroad tycoon:

Berkshire has been building a stake in the Fort Worth, Texas-based railroad for more than two years as Buffett looked for what he called an “elephant”-sized acquisition in which he could deploy his company’s cash hoard, valued at more than $24 billion as of the end of June. Trains stand to become more competitive against trucks with fuel prices high, he has said.

Burlington Northern operates 32,000 miles of track, with 6,700 locomotives, according to its Web site. Most of the carrier’s network is west of the Mississippi, where it competes with Union Pacific. The company hauls cargo including grain, coal and so-called intermodal containers, which can move by a combination of rail, road and sea.

After having time to reflect on Jim Cramer’s email to me (see below), I keep recalling the scene in the movie 300 where the God-King Xerxes tells Leonidas it would be a shame for his people to perish because of a simple misunderstanding. Like Cramer telling me to “take it [my post] down and apologize to me so we can move on,” Xerxes says Leonidas can simply bow down at his royal feet and all will be forgotten.

I do not project myself onto the great Spartan King Leonidas. Rather, I am witnessing a major movement unfolding where real journalists and activists have used the internet to finally battle against the entertainers and eyeball monopolists who have melted the brains and 401(k)s of America.

As we say on Wall Street, “The easy money has been made.” Media oligarchs have manipulated and omitted facts at will because the barrier to rebut their falsehoods was simply too high. But now sites like Zero Hedge, The Big Picture, Minyanville, Wall St. Cheat Sheet, and many others are posting the Truth … and people have been rejuvenated to demand honesty and transparency. Moreover, it’s an open-source effort as insiders and researchers happily share information with journalists for something more meaningful than money: Spartan glory.

Like Cramer’s debate with Jon Stewart, my questions and comments were met with silence. Not because Cramer is the Buddha. Because Cramer cannot dispute the facts (and I didn’t even pull out the smoking guns). There is obviously a new post in the works where a complete collection of Cramer’s nonsense will be compiled for the other side of the scale which holds “In Cramer We Trust.”

But for now, this chapter of the perpetual expose ends with Zero Hedge’s poetic penultimate climax:

“Damien Hoffman over at Wall Street Cheat Sheet seems to have gotten into the crosshairs of none other than book (and stock) promoter extraordinaire James Cramer. Subsequent to our post on TheStreet.com potentially being in regulatory hot water, Damien penned the following post:

Jim Cramer Says Sell, Sell, Sell His Company TheStreet.com

6) Jim Cramer’s true value has been proven in Barron’s and he was waterboarded while (not) debating Jon Stewart.

Looks like the circus may be leaving town …

The fearless leader of Mad Money and the possessor of the world’s spottiest stock recommendation track record apparently took offense to Damien’s ideas, and at the cost of taking some time away from promoting his book on CNBC and elsewhere, felt compelled to respond with the following email, titled with the ironic “Some decorum and some fairness” subject line:

Subject: Some decorum and some fairness From: “James Cramer” Date: Mon, October 26, 2009 5:30 am To:

While I understand your need to be “on the map,” and I understand the “public figure” exception to the libel laws, I do think that given your backgrounds and your histories, you are taking too much license with your Jim Cramer says Sell TheStreet.com . I believe that level of lack of responsibility is beneath you. So please take it down and apologize to me so we can move on. Fair? Think about it. Think about how much better you are than that? If you really need to sell subs just sell them, don’t trash me to do it. jjcramer

Indeed, one expects Mr. Cramer should know all about levels of responsibility and how far one must stoop to end up below them. In either case, a diplomatic Damien Hoffman retorts:

Jim,

First, as you can appreciate, good content still needs to be entertaining. No one knows that better than you.

Second, this is not personal. I have bought all your books, was a huge fan of your show for years, and my brother and I were guests in your first ever live audience. We even have a picture with you.

If you are interested in sending over a retort to our cited claims, please feel free and I will post it. There is no libel in the post. The excerpt says “According to Jim Cramer’s rules …” Your rules in your book/show are to sell a stock and ask questions later when execs and board members start bailing. The same for companies which delay their filings. Therefore, according to what you have taught us, this is the action we must take. Are you saying TSCM is an exception? If so, why?

Lastly, I think the biggest disappointment as a fan of yours for over 10 years was the way nothing has changed since after you went on The Daily Show and promised to us you would be more clear your show was entertainment and NOT investing advice (which would have been nice years ago). CNBC still runs “In Cramer We Trust” and other similar ads. I am sorry Jim, but many people I know (including family members) think of you as a guru based on the way CNBC presents you. They have lost a lot of money following even your “Top Pick of the Year” New York Stock Exchange and repeated “The Only Stock to Own” SHLD. I know others who lost money following Dykstra as his subscriber. It was your responsibility to prevent a conman from working at TheStreet with your full endorsement. And the psychics on The Street, well, I think that speaks volumes about whether you are running a financial media company or something completely different. Consequently, I don’t think censoring the truth is a respectable option regarding our post.

Further, if you look at the sales page for Kass’s newsletter, you have conveniently left out his HORRIBLE Jan 2008 “Buy the Financials” call and MANY of his other bad calls. If we are nitpicking what is “beneath” us, I’d put that at the top of the list before throwing stones at me. The same for claiming Ron Insana’s track record was associated with his newsletter performance BEFORE it even launched. We are both trained as lawyers and know there is a way to present anything, but it can still be a lie.

I am calling it as I see it. If you feel otherwise, I will print your opinion. I am not an asshole. I am part of a movement of people who are trying to put truth back into financial media.

FYI: None of our posts in The Scoop sell subs. That’s not our core business model.

Regards,

Damien

Editor-in-Chief Wall St. Cheat Sheet

We look forward to getting more clarity on not only TheStreet.com sorely missed 10-Q, but on the potential escalation of how far Mr. Cramer is willing to go to address perceived “lack of responsibility.” We are fairly confident that many of Jim Cramer’s “fans” would be willing to hold Mr. Cramer to the exact same degree of responsible conduct that the latter suddenly seems to deem appropriate. Maybe Mr. Hoffman should just stick to presenting Buy stock recommendations for major Wall Street firms, especially ahead of 90%+ price drops in their respective stocks.”

Damien Hoffman is the Editor-in-Chief of Wall St. Cheat Sheet.

CIT Group (CIT) filed for bankruptcy protection Sunday with broad support from its debtholders, but taxpayers will lose the $2.3B invested in CIT, marking the first definitive loss in the government’s rescue of the financial system.

Nearly 90% of CIT’s bondholders voted in favor of the prepackaged bankruptcy, which CIT says will enable it to reduce total debt by $10B, significantly reduce its liquidity needs over the next three years, enhance its capital ratios and accelerate its return to profitability. Bondholders will receive about $0.70 on the dollar, a number that could have fallen as low as $0.06 had CIT entered a freefall bankruptcy. With $71B in assets and $65B in liabilities, CIT’s bankruptcy ranks among the largest in corporate history.

CIT, which is not related to Citigroup, is a commercial and consumer finance company that received $2.3 billion from the TARP program. Now the CIT is filing for bankruptcy, common and preferred stock will get wiped out. However, bondholders will get a return of $0.70 on the dollar. In other words, taxpayers foot the bill.

Spend Matters analyzes what CIT’s bankruptcy means for the retail supply chain:

Kurt Cavano, Chairman and CEO of TradeCard and an expert in the area of global retail trade, stated this morning that CIT provided financing lifeblood for an important portion of the retail supply chain. While many exporters and importers — not to mention actual retailers, who are not always direct importers — pay a reasonable APR if their credit rating is strong (e.g., LIBOR + 200 basis points), Kurt suggests, for companies with less than perfect credit, trade financing costs can easily reach a 10-12% APR. I’ve personally seen actual APRs hit over 20% based on some research I’ve done in the apparel supply chain in the case of global suppliers who accepted early payment discounts.

According to Kurt, “CIT made a great living working the edge of the bad credit companies with high rates and keeping the risk down. This worked well until everything cracked. Then the 8-10% they were charging was not enough when defaults rocketed. Combine this with the fact that the management team was levering up the returns by investing in exotic instruments on Wall Street (e.g., CDOs) and it created a perfect storm.” However, it was not always this way. Kurt notes that, “CIT had always done a great job of profiting and working with those firms on the edge of bad credit.” But going forward, the question remains whether this group will be able to find the liquidity they need to run their businesses if CIT does not come back out with the same type of credit capacity. This is critical because as Kurt suggests, “a huge portion of the retail sector runs on very thin margins” and “use the credit of companies like CIT to run their businesses”.

The Atlantic Wire has a nice summation of who wins and loses as a result of the CIT bankruptcy. Losers, as mentioned above, include retailers and the US taxpayer. Winners: Carl Icahn, CIT itself, and (surprise!) Goldman Sachs.

USA Today reports:

A Treasury Department watchdog is warning that a key $700 billion bailout program has damaged the government’s credibility, won’t earn taxpayers all their money back and has done little to change a culture of recklessness on Wall Street.

“We don’t even know where the money went,” says Rep. Daniel Lipinski, D-Ill., who recently called for TARP assistance to end in December, when it’s set to expire. The Treasury has the authority to extend the program until next October.

More.

Bank of America will sell San Francisco-based First Republic Bank to two private equity groups. The deal is set to go through next year. Bloomberg has the details:

Bank of America Corp. said it agreed to sell First Republic Bank to a group led by private-equity firms General Atlantic LLC and Colony Capital LLC. The Wall Street Journal reported earlier today that the group will pay more than $1 billion, citing unidentified people familiar with the situation.

Bank of America inherited First Republic when it bought Merrill Lynch & Co. in January. Merrill Lynch bought the bank, which had assets of $19 billion on Sept. 30, for $1.8 billion in 2007. First Republic serves affluent clients in California, Connecticut New York and Nevada.

Almost two years ago, soon-to-be-ex-CEO Ken Lewis said that as a big bank, “it’s your prerogative to use ‘retreat’ or ‘retrench” (as quoted from the New York Times). Looks like “retreat” is winning. The Wall Street Journal explains:

The long-expected sale of First Republic is the result of a review of Bank of America assets. The bank is working to bolster its capital ratios and shed any units that are no longer strategic fits. Last month it sold the long-term asset management business of Columbia Management to Ameriprise Financial Inc. for up to $1.2 billion.

kaChing, an investing website started under the name FSX in 2008, has automated the process of imitating successful investors (something Warren Buffett calls “riding coattails”). Simply select the portfolio of one of kaChing’s certified “investing geniuses,” then set your own portfolio to mimic it. kaChing’s website describes how they select geniuses:

Leveraging its “Radical Transparency,” kaChing developed Investing IQ, the first objective and data-driven metric that separates the lucky from the good. Investing IQ is based on the same three factors used by Ivy League Endowment managers, the world’s premier evaluators of investment talent, to rate investment managers:

An investor on kaChing who earns an Investing IQ score of 140 or greater is dubbed a “Genius.” kaChing customers can then automatically invest like the Genius by mirroring the Genius’s virtual portfolio trades in their own brokerage accounts. Investors who qualify as Geniuses on kaChing range from talented amateurs to investment management firms that have $400 million under management.

kaChing offers followers the option to receive emails whenever their geniuses execute a trade. They also offer linked accounts with Interactive Brokers that give you an automated way to replicate that investor’s trades, so you don’t have to lift a finger.

Mirroring an investor also cuts out the need to have a fund manager, which is precisely what kaChing is going for. BloggingStocks has more on kaChing’s strategy:

(Cofounder/CEO Andy) Rachleff’s new venture is a for-pay website that will provide advice to investors that don’t really trust Wall Street any more. kaChing is a registered financial adviser that’s using an angle consisting of lower fees, transparency, and easy-to-use technology to attract users. Since many financial professionals are starting to come under attack because of the fees they’re charging, kaChing thinks there’s room to win by coming in cheap and overdelivering information.

Unlike most of what we saw before the financial crisis, in which the big gun clients are the hottest turf, kaChing is going after investors with net worths below $1 million. This group has invested an aggregate $3.7 trillion in mutual funds, so a company that can get some traction has plenty of upside. To expand its reach and make it easier to grow rapidly in a large community of smaller investors, kaChing’s capabilities are being extended to the Apple (NASDAQ: AAPL) iPhone, Yahoo! (NASDAQ: YHOO) websites, and Facebook.

The financial industry certainly needs more transparency. These guys could be onto something. Warren Buffett has cautioned investors against riding coattails (or “mirroring,” as kaChing calls it), but then again, people have been scoring wins by riding his for decades. There’s no reason that harnessing technology to help investors do something they do anyway won’t succeed, either.

After criticizing finance company CIT’s reorganization as an attempt to purchase votes, Carl Icahn is offering $6bn of his own money as a replacement loan. Bloomberg has more:

Investor Carl Icahn offered to provide a $6 billion loan to CIT Group Inc., saying the terms of the 101-year-old commercial lender’s plan to raise the same amount from bondholders penalizes investors.

CIT is seeking to reduce debt by at least $5.7 billion after being locked out of the unsecured debt markets it relies on for funding and posting nine quarters of losses totaling more than $5 billion. At the same time CIT pursues the out-of-court debt swap, it’s also asking bondholders to vote on a prepackaged bankruptcy plan.

More here.

Icahn is CIT’s biggest creditor.

Incidentally, Icahn’s firm is also currently entangled with Goldman Sachs. GS is suing Icahn’s company for shorting Delphi’s bank debt, then not paying up after the market price of Delphi’s bank debt subsequently increased. Forbes has that story.

Goldman Sachs’ stellar third quarter will lead to record bonuses, according to the Wall Street Journal:

The nimble investment banking giant parlayed increased risk taking to cash in on trading and investments with its own money. Results, while not record-setting, demonstrate how the firm continues to distance itself from still-weakened competitors.

That effort comes as the New York-based company set aside $16.71 billion for compensation and benefits during the first nine months of 2009, which is enough to pay $568,367 to each of its employees. The performance during the third quarter puts compensation on track to beat the record $20.2 billion paid out during the market’s peak two years ago. Levels are already outpacing the $10.9 billion doled out in 2008 at the height of the financial crisis.

Barry Ritholz has an apt reaction to this latest piece of Goldman Sachs news.