Just when many thought the banking sector was improving, Wachovia Corporation (NYSE: WB) reported a huge second quarter loss. The financial services company reported a loss of $8.66 billion with a shocking $6.1 billion in writedowns. This compares to a net income of $2.34 billion a year earlier. Shares recovered on the day, but the news remains bearish for the sector.

Even the Chairman shared the disappointment: "These bottom-line results are disappointing and unacceptable," said Chairman Lanty L. Smith. "While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility."

Wachovia also cut its dividend again by 87% in an attempt to conserve about $700 million in capital. Clearly, this was a decision that had to be made in order to help the company stay alive over the long-term. The bank is also fresh off issuing some $8.3 billion in cpaital through preferred stock and other securities.

Finally, Wachovia has hired Goldman Sachs to help it analyze and value the billions of dollars in loans sitting on its balance sheets. Once it has a true idea of the valuation, shareholders will be able to better evaluate the company. Until then, Wachovia remains somewhat of an enigma.

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Yahoo Inc. (NDAQ: YHOO) decided to play it safe and settle with activist investor Carl Icahn. The search giant agreed to provide the billionaire investor with three board seats, which will give it some say but no power. The settlement is the latest in the sage over Microsoft's attempt to take over the company. Interestingly, Icahn expressed his belief that a sale of the company merits "full consideration".

Icahn said in a statement he's pleased with the settlement. "While I continue to believe that the sale of the whole company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo's valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders."

The news of the concession by Yahoo management comes just days after the same management sent a letter to shareholders calling Microsoft's actions "stupifying" and criticizing Carl Icahn for his lack of knowledge of the internet business. However, the move is still seen as a victory for Yahoo. Icahn now has limited voting power while Yahoo management remains in place. So, why did Icahn accept the deal? Many believe that he thought he would end up losing if he went through with the proxy contest.

Perhaps the largest catalyst behind this settlement was Legg Mason's statement that it would back the Yahoo board and urged the two sides to settle their dispute before conducting an actual proxy contest. Carl Icahn owns a 5 percent stake in Yahoo and has been pushing for the company to pursue an acquisition by Microsoft. Eight of Yahoo's directors will now stand for re-election to an expanded 11 member board, including CEO Jerry Yang.

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BlackRock Inc. (NYSE: BLK), the largest publicly traded asset manager, said its second quarter earnings topped estimates as $24.2 billion in new cash flowed into the firm. Net income rose 23 percent as deposits increased the funds under management to $1.43 trillion. Profit was $2.14 per share, which beat the $1.97 per share analysts were predicting.

Investors have moved into BlackRock as its funds have sidestepped the worst of the subprime mortgage collapse and financial sector deterioration. Competitors like Legg Mason were hit with $19 billion of redemptions in the first quarter alone and forced to provide $2.15 billion of its own funds to offset losses tied to mortgage-backed securities.

BlackRock also confirmed that Merrill Lynch & Co (MER) - its largest shareholder - shelved plans to sell its 49 percent stake in order to boost its capital. This is good news for shareholders since it means there won't be a large selling pressure that many were expecting to see.

BlackRock itself is one of the only firms that is able to take advantage of the dislocation in the fixed-income market while it was able to raise $16.7 billion in additional funds. The company also garnered $43.6 billion in advisory assets as investors sought advice on distressed portfolios. Meanwhile, the Federal Reserve picked them to oversee $30 billion in Bear Stearns investments after it was acquired by JP Morgan.

All in all, those looking for a good financial play may want to take a look at BlackRock as it remains a very solid play.

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