It’s not news that Carl Icahn loves a good fight. But watching hedgie v. hedgie in a grudge match just seems dull. Who does one root for?

Activist investor Carl Icahn is under fire from a hedge fund that accuses the billionaire investor of enriching himself at the expense of minority shareholders in XO Holdings Inc (XOHO.OB), a company he controls.

R2 Investments LDC in June filed a lawsuit in New York state court complaining that Icahn tried to take XO’s $3.5 billion of net operating losses (NOLs) for his own use but at an inadequate price. NOLs are valuable because they can offset income in later periods to reduce taxes.

Ok, who is going to be the first Dealbreaker reader to make an electronic exchange for NOLs that actually works?

Hedge fund suit says Icahn hurt XO investors [Reuters]

For those bankers and other finance professionals looking to escape centrally dictated pay caps, cross Germany off the list of havens.

Bankers who take unjustifiable risks in business deals will be forced to repay their bonuses under new rules unveiled by German financial watchdog Bafin on Friday.

“Aggressive compensation systems, along with other factors, contributed to the financial crisis in that they set the wrong incentives,” Bafin said in a statement on changes it is making to its Minimum Requirements for Risk Management standards.

We would wonder aloud who rules on what is “unjustified,” but we suspect we already know the answer. Nothing exciting goes on in Germany anyway so… no big loss.

German watchdog takes aim at banker bonuses [Reuters]

Perhaps the details of Mayor Daley’s reputation were not entirely explained to the deal team at Mesirow.

The Metropolitan Water Reclamation District of Greater Chicago, in a debt offering typical of President Barack Obama’s Build America Bonds, raised $600 million this week, relying on advice from Mesirow Financial Inc., a 72-year-old investment bank based in the city. Within 12 hours, the firm assured itself and investors a profit of at least 2 percent as the bonds appreciated as much as $25.82 for each $1,000 face amount, according to the Municipal Securities Rulemaking Board.

Wall Street fleecing financially naive municipalities is a practice as old as sin, but you would think Chicago had the wherewithal to protect itself a bit better from this kind of nonsense. Then again, perhaps we are selling the City short. In this context, one wonders how much overlap there might be between Mesirow and the City elders.

Even Mayor Daley Can’t Get Rates Taxpayers Deserve for Chicago [Bloomberg]

Yes, yes. Everything is good in the world. Except that banks have been quietly sucking wind for quite some time and their collective instability is daunting. Sez Bloomberg:

More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.

The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged. Almost 300 reported 3 percent or more of their loans were nonperforming, a term for commercial and consumer debt that has stopped collecting interest or will no longer be paid in full.

Expect great things in future from Friday FDIC announcements.

Toxic Loans Topping 5% May Push 150 Banks to Point of No Return [Bloomberg]

First of all, what the hell is France doing emerging from recession anything other than 4 years too late? Who authorized that waiver?

Second, Germany is not allowed to prosper at the expense of the rest of Europe again ever. What part of that memo was unclear, exactly?

Germany and France achieved a shock return to economic growth in the second quarter of the year, ending their recessions earlier than many policymakers and economists expected, but failed to drag the euro zone with them.

German gross domestic product rose by 0.3 percent in the second quarter, bringing an end to the country’s deepest recession since World War Two.

French GDP also grew by 0.3 percent in the second quarter. The consensus in a Reuters poll of economists had predicted a 0.3 percent quarterly contraction in both countries.

How was it done?

Kidnap executives and hold them for ransom (pay hikes). Note: If German, talk about “bossnapping,” but do nothing. Last thing we need is another Simon Wiesenthal snooping around here). Still even the French shouldn’t do too much gloating as they totally stole the idea from the Americans:

Cash for Clunkers. Germany’s two-fer, keeping autoworkers busyworked and and consumers spending like the missiles are already flying. What better way to perpetual motion the system than using taxpayer dollars to subsidize the purchase by taxpayers of taxpayer dollar produced automobiles?

“Invest in Green.” (That is, make everything more expensive to bring the relative cost of “going green” in line with the umwelt schmutzig alternatives and create thousands of busywork jobs for unskilled labor installing government certified insulation panels).

Brilliant!

Germany and France Exit Recession [Reuters]

Warren Buffett’s Berkshire Hathaway Inc. underestimated the risks of falling stock prices to its billions of dollars of derivatives bets, yet still believes it is valuing the contracts fairly.

Noooo, get out!

Berkshire revealed its error in a June 26 letter to the U.S. Securities and Exchange Commission, one of several pieces of correspondence with the regulator about the company’s annual report, and made public on Thursday.

We tend to think that these options get overblown, and that the oracle deserves a bit of room on these issues. Seriously, the guy could slip a sexually suggestive comment into a cub scout dinner and no one would even notice. What could a few harmless options do? What more could you want from a finance guy?

Jeffrey Epstein, put your hand down!

How’d you like to get this on your “360 Review?”:

Citigroup “did not manage its business in such a manner as to provide the level of service and security necessary for any security broker and the plaintiff to attract and/or retain clients,” he wrote. The bank was “unstable, mismanaged and not a secure place for” his clients, “as can be seen from the value of defendant’s stock today.”

Ah, hindsight is 20-20. Nay?

Sure, this missive issued from a member of the Plaintiff’s bar, but you just have to like an article that manages to cut Castle Vikula’s supply line, lay a devastating siege and begin tunneling under the north wall all in about three sentences.

Nice.

Citigroup Sued Over Signing-Bonus Loans by Broker [Bloomberg]

This will make a simply outstanding race for the bottom study some day some years from now. Dueling regulators, burning to impose salary caps of the like that would trigger severe, acute male pattern baldness in Erin Callan, but restrained by the sinister hand of Regulation No 1612/68 as thousands pour out of the latest salary cap obsessed jurisdiction towards countries where the average level of economic understanding actually cracks the fifth grade ceiling. Sayeth the evil 1612/68:

…mobility of labour within the Community must be one of the means by which the worker is guaranteed the possibility of improving his living and working conditions and promoting his social advancement.

Quitters never win, you capitalist expatriates! We hope you enjoy your time as a stateless drifter, and die poor and without a penny left in your unearned family estate’s coffers too. (Can we have your car?)

It is the same old argument. The key objection from banks to a new code from the U.K. Financial Services Authority on bonuses is that it will harm competitiveness, as jobs and tax revenues move to friendlier climates. The argument risks watering down regulatory responses to the recent crisis, as banks grow more confident they are out of danger.

The line has held some sway at the FSA, disappointing those hoping for a stronger stance on pay. Detailed provisions on deferring a significant portion of bonuses and linking the deferred component to firmwide performance now will apply only to senior bankers, rather than everyone. Banks will still be able to pay bonuses if they rack up losses. The FSA argues it is sticking to its guns and that it is determined to enforce these rules.

Yes, we must impose pay caps on every financial center in the known universe.

An Allied Force Is Needed for Bankers’ Pay [The Wall Street Journal]

Full Disclosure: Dealbreaker is long popcorn.

And we wonder why insurance firms needed a bailout in the first place?

Hartford Financial Services Group Inc., the insurer that took a $3.4 billion U.S. bailout, was ordered by a Florida regulator to return $48.2 million to clients after profits on some policies exceeded state rules.

“Hartford must provide refunds or renewal credits within 60 days from the date of this order,” the Florida Office of Insurance Regulation, headed by Commissioner Kevin McCarty, said today in a statement. The ruling applies to workers’ compensation policies from 2004 to 2006.

Hartford Ordered to Refund $48 Million After Too Much Profit [Bloomberg]

The mystery began on July 24, when the 15 crew members of the Arctic Sea said they were tied up and beaten by a group of up to 10 men who boarded the ship off the Swedish island of Oland. The masked men identified themselves as police officers — but Swedish police said they hadn’t been searching ships in that area.

Swedish police investigator Ingemar Isaksson said the crew then claimed that the men left the ship 12 hours later in a high-speed inflatable boat.

“We were very puzzled when we first heard about this,” Isaksson said then. “I have never heard of anything like this in Swedish waters.”

Ship Passes Through Channel and Then Disappears [The New York Times]