ABA sues the Fed; Dimon's savvy investment

Receiving Wide Coverage ...

ABA vs. the Fed: The American Bankers Association sued the Federal Reserve Thursday over a 2015 law that cut bank dividend payments from the Fed and diverted the funds to the federal highway trust fund. The ABA, which was joined in the class-action suit by Seattle-based Washington Federal, said the law violates the contract between banks and the government and seeks reimbursement of the lost payments.

The 1913 law that created the Fed required that banks purchase stock in regional Fed banks in exchange for a fixed 6% annual dividend. The 2015 transportation act changed those payments from a fixed 6% to the yield on the most recent 10-year Treasury note auction, whichever is smaller, with the difference to help pay for highways and other projects. Since then, of course, the yield on the T-note has been well below 2.5%. Wall Street Journal, Financial Times, American Banker

Wall Street Journal

Bottom fisher: Talk about market timing. A year ago Saturday, JPMorgan Chase chairman and CEO Jamie Dimon bought $26.6 million of his company's shares, at a time when they were down 20% and the overall market was down 10%. Since then, the S&P 500 has jumped 26%, led by a 40% surge in bank stocks, including a 62% gain in JPM. That means Dimon is sitting on a $17 million paper profit.

For sale: Société Générale "has been quietly building a big and profitable car-leasing business," the Journal reports, and is now planning to sell part of the unit, called ALD, to the public. The unit reportedly has 1.4 million vehicles in its portfolio, which would make it the second largest leasing company in Europe, behind only Volkswagen's. It's also the French bank's most profitable unit.

Sell signal: Nearly two-thirds of investment newsletter writers are bullish on the stock market, the highest percentage since 2004. That could be a signal to get out of the market. "The gauge has become something of a contrarian indicator," the Moneybeat column notes. "It tends to reach peak euphoria ahead of a market top, and pessimism typically peaks at market bottoms."

Moving?: Morgan Stanley is considering moving its headquarters from midtown Manhattan to the new Hudson Yards development on the West Side, where money manager BlackRock is also expected to move.

New York Times

Bad bet: The smallest college endowments outperformed their largest rivals in investment performance for the second straight year. The National Association of College and University Business Officers and the Commonfund Institute said endowments with total assets under $25 million lost an average 1% in the 2016 fiscal year, which ended June 30. But that was much better than those with assets of $1 billion-plus, which lost 1.9%. Endowments of $500 million to $1 billion lost on average 2.2%. By comparison, the S&P 500 returned 4% over the same period.

Smart bet: Student loans are becoming an inviting target for investors looking to make money on assets that go bad. FlowPoint Capital in Andover, Mass., for example, has earned fivefold returns by selling short shares of certain student-loan-related companies. The fund has also made similar big returns on other education-related short trades. Despite FlowPoint's success in this area, trying to make money on the "college bubble" isn't easy.

Quotable ...

"The change to the statutory dividend rate upended Federal Reserve System policy that has been in place for more than 100 years." — American Bankers Association President Rob Nichols