Opening Bell: 04.06.10

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Citigroup’s Chief Shrinks Company, Eyeing Growth (NYT)
THIS IS A REAL QUOTE: “Vikram is looking and sounding a lot more confident and secure,” said one top lieutenant. “He has a smile on his face. He sees the day when he is going to earn more than a $1 a year.”

SEC faces setbacks, skepticism in trying to reform its enforcement image (WaPo)
They're so much more than tranny porn fetishists. Why doesn't anyone get that?

Financial Crisis Inquiry Wrestles With Setbacks (NYT)
In recent months, a top investigator resigned, frustrated by delays in assembling a staff. Behind closed doors the panel’s chairman and vice chairman have had heated disagreements over whether to make public preliminary findings or revelatory documents. Entities like Citigroup and the Treasury have complained that the panel’s requests for information have been vague and voluminous.

Morgan Stanley's Phillips 'board' with his post (NYP)
Charles E. Phillips is leaving the firm's board of directors, a few months after his long-time gal pal, YaVaughnie Wilkins, splashed his face on giant ads across the country. YaVaughnie was unaware that she was Phillips' mistress, because he told her that he had finalized his divorce with Karen in 2003. One of the giant billboards, posted at the corner of West 52nd Street and Broadway, near Times Square, declared "Charles & YaVaughnie." It encouraged onlookers to go to the Web site charlesphillipandyavaughniewilkins.com.

Citigroup Execs Face Grilling over Risky Mortgages (AP)
Mark your calendars-- Chuck Prince, Bob Rubin, and Alan Greenspan are taking the stand on Thursday.

New York Will Approach Daily High Temperature Record Tomorrow (Bloomberg)
Just an FYI and a suggestion to consider 'suddenly coming down with something.'

Photographer Annie Leibovitz Sued In NY For Unpaid Fees (Reuters)
Leibovitz owes Brunswick Capital a 2 percent "success fee" on the more than $40 million loan by Colony secured in early March, according to the suit, as well as more than $315,000 in fees for the firm's services.

Now To Explain The Party Favors (NYT)
Andrew Ross Sorkin wants some answers.

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SAC’s Cohen May Face SEC Suit as Deposition Hurts Case (Bloomberg) U.S. investigators have subpoenaed a 2011 deposition of SAC Capital Advisors LP founder Steven Cohen, whose sworn statements on insider-trading compliance may hurt him as he tries to persuade regulators not to file a lawsuit with the potential to shut his $14 billion firm. The SEC told the hedge fund Nov. 20 that it planned to sue SAC for securities fraud and so-called control-person liability for failing to supervise employees. The same day, the agency accused an ex-SAC portfolio manager and his hedge-fund unit of insider trading for persuading Cohen, 56, to make $700 million in illegal trades. Prosecutors also indicted the manager. Cohen’s testimony, reviewed by Bloomberg News, establishes his personal control over the unit, CR Intrinsic, and records his unfamiliarity with his firm’s compliance and ethics policies on insider trading. “I’ve read the compliance manual, but I don’t remember exactly what it says,” Cohen said. Morgan Stanley Strives to Coordinate 2 Departments Often at Odds (Dealbook) Traditionally, traders and investment bankers think of themselves as the elite of Wall Street and look down on the retail business, seeing it as pedestrian...Yet since Morgan Stanley moved to acquire control of the Smith Barney brokerage business from Citigroup in 2009, the balance of power has shifted to wealth management, which now accounts for almost 52 percent of the company’s earnings, up from roughly 16 percent in 2006. Paulson Leads Funds to Bermuda Tax Dodge Aiding Billionaires (Bloomberg) A decade after the U.S. Internal Revenue Service threatened to crack down on what it said were abuses by hedge-fund backed reinsurers, more high-profile money managers are setting up shop in tax havens. Paulson, SAC Capital Advisors LP’s Steven A. Cohen and Third Point LLC’s Daniel Loeb have started Bermuda reinsurance companies since 2011, following a similar Cayman Islands venture by Greenlight Capital Inc.’s David Einhorn. Options Activity Questioned Again (WSJ) Over the past year, unusually large positions were established shortly in advance of news that moved shares of Nexen Inc., Youku Inc., Human Genome Sciences Inc., Constellation Brands Inc. and, most recently, CBS Corp. All turned profitable after the news. A spokeswoman for the SEC, which regulates stock and options trading, said the agency would neither confirm nor deny the existence of inquiries into trading tied to those companies. No charges have been filed in the Heinz case, which was linked to a Swiss trading account, but the move to freeze the assets is one of the fastest enforcement actions ever filed by the agency, according to officials. The SEC said Friday that the timing and size of the trades were highly suspicious given the account had no history of trading in Heinz securities in the last six months. Prosecutors, Shifting Strategy, Build New Wall Street Cases (Dealbook) Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks. In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations...The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks’ Japanese subsidiaries pleaded guilty to felony wire fraud. Russians Wade Into the Snow to Seek Treasure From the Sky (NYT) Ever since the meteor exploded somewhere over this impoverished Siberian town, Larisa V. Briyukova wondered what to do with the fist-size stone she found under a hole in the roof tiles of her woodshed. On Monday, a stranger knocked on her door, offering about $60, Ms. Briyukova said. After some haggling, they settled on a price of $230. A few hours later, another man pulled up, looked at the hole in the roof and offered $1,300. “Now I regret selling it,” said Ms. Briyukova, a 43-year-old homemaker. “But then, who knows? The police might have come and taken it away anyway.” On Friday, terror rained from the skies, blowing out windows and scaring people over an enormous swath of Siberia. But by Monday, for many people what fell from the sky had turned to pure gold, and it touched off a rush to retrieve the fragments, many buried in deep February snows. Many of those out prospecting looked a lot like Sasha Zarezina, 8, who happily plunged into a snowbank here in this village of a thousand, laughing, kicking and throwing up plumes of powdery snow. Then she stopped, bent over and started to dig. “I found one!” she yelled. A warm breath and a rub on her pants later, a small black pebble, oval like a river rock, charred and smooth, was freed of ice. While trade in material from meteorites is largely illegal, there is a flourishing global market, with fragments widely available for sale on the Internet, usually at modest prices. At least one from the recent meteor was available on eBay on Monday for $32, and there is a Web site called Star-bits.com devoted to the trade — much to the displeasure of scientists and the countries where the objects were found. UK's Lloyds fined $6.7 million for mis-sold insurance (Reuters) Britain's financial regulator on Tuesday fined Lloyds Banking Group 4.3 million pounds ($6.7 million) for failing to handle complaints relating to insurance sold on loans and mortgages properly. The Financial Services Authority (FSA) said failings in the bank's systems and controls resulted in up to 140,000 customers experiencing delays in receiving compensation for being mis-sold payment protection insurance (PPI). Horsemeat Scandal Draws in Nestlé (FT) Switzerland-based Nestle on Monday removed pasta meals from shelves in Italy and Spain and suspended deliveries of all processed products containing meat from German supplier, H.J. Schypke, after tests revealed traces of horse DNA above 1 per cent. Nestle said it had informed the authorities. Is Berlusconi Getting a Poll Bounce From Tax Evaders? (CNBC) The media mogul, who has been convicted of tax fraud, has promised to introduce a tax amnesty for evaders if elected and to abolish the real estate tax. Swelling U.S. Labor Force Keeps Fed at Ease (Bloomberg) In the short run, the larger labor force will have an unfortunate side effect: It will slow the fall in unemployment. Mellman sees the jobless rate dropping to 7.5 percent by year- end from 7.9 percent now. It fell 0.7 percentage point in 2012. In the longer run, a bigger supply of labor is good news because it swells the pool of Americans available and willing to work, enhancing the economy’s potential to grow, according to Julie Hotchkiss, a policy adviser at the Federal Reserve Bank of Atlanta. It also has a silver lining for investors. The gradual fall in unemployment will allow policy makers to keep monetary policy looser for longer without having to worry about igniting a wage- driven rise in inflation. Couple Getting Affectionate Drive Through Home (WO) "She told the investigating trooper that her and the boyfriend were getting a little amorous and the trooper suspects that's probably why she lost control of the vehicle," said Florida Highway Patrol spokeswoman Kim Montes. Walker lost control of the vehicle and slammed into an unoccupied home. The vehicle went all the way through the house. The impact was so dramatic, the pressure blew a window in another part of the house out. Florida Highway Patrol troopers said Walker was injured when debris fell inside the vehicle. She was taken to Halifax Medical Center to be checked out. Her boyfriend, Charles Phillips, was not hurt.

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Economy Adds 171,000 Jobs (WSJ) U.S. payrolls increased by a seasonally adjusted 171,000 jobs last month, the Labor Department said Friday. The politically important unemployment rate, obtained by a separate survey of U.S. households, rose one-tenth of a percentage point to 7.9%. Economists surveyed by Dow Jones Newswires expected a gain of 125,000 in payrolls and a 7.9% jobless rate. Hedge Fund Cashes In On Greek Bonds (Reuters) London-based hedge fund Adelante Asset Management has made a 70 percent gain on a sale of Greek bonds, showing the potential for big profits from betting on a recovery in the fortunes of a country effectively off-limits to investors a few months ago...Since the restructuring, Greek government bond prices have strengthened, allowing Adelante to sell them for around 24 cents on the euro, having bought them for around 14 cents in June, the company said. A Greek government bond maturing in 2042, for example, is currently trading at around 20.8 cents on the euro, Thomson Reuters data shows. Other hedge funds have made similar bets. Third Point, a high profile New York hedge fund, for example, has been a significant buying of cut-price Greek bonds. RBS Eyes Libor Settlement Soon (WSJ) RBS wants to seal a settlement with regulators over its alleged rigging of key interest rates in the coming months, as the partstate-owned bank looks to draw a line under the scandal. Speaking to reporters at the bank's third-quarter results presentation, Chief Executive Stephen Hester said he would be "disappointed" if he couldn't provide details on a settlement by February. "We are up for settling with all and everyone as soon as they are ready. But each regulator has to satisfy itself that it has all the facts," he said. Deutsche Bank Faces Top Surcharge as FSB Shuffles Tiers (Bloomberg) Deutsche Bank would be required to hold more capital and Bank of America Corp.’s burden stands to be reduced as global regulators shuffled the competitive balance among the world’s biggest banks. Citigroup, HSBC and JPMorgan join Deutsche Bank as firms that will be targeted for a capital surcharge of 2.5 percent, according to an updated list published yesterday by the Financial Stability Board. The change means Bank of America already exceeds requirements, while Deutsche Bank would be more than 2 percentage points below the new minimum of 9.5 percent. “That limits earnings potential for Citigroup, JPMorgan and Deutsche Bank compared to Bank of America, all other things being equal, so it’s certainly a competitive advantage for them,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. Short-Sellers of Europe Set to Be Unmasked (CNBC) The European Securities and Markets Authority (ESMA), the EU regulator, has issued new rules on the short-selling of securities indicating that anyone with short positions of greater than 0.2 percent in an EU company’s shares must report it to regulators. Positions of more than 0.5 percent will be publicly released, naming both the company and the short-seller. Public disclosure is triggered any time that level is hit with each 0.1 percent increase or decrease after that. NYSE Open For Business Shows Wall Street Still Vulnerable (Bloomberg) The Securities and Exchange Commission may consider whether exchanges’ emergency regimens need to be bolstered, according to a person familiar with the regulator’s thinking who asked not to be named because the matter is private. The industry’s decision to halt equities and bond trading shows the challenge of maintaining markets when a catastrophe threatens New York City, home to 168,700 securities industry workers. “One of the purposes of having electronic exchanges and basing them away from New York City is for the market to be more robust and stay open,” Charles Jones, a finance professor at Columbia Business School in New York, said in a phone interview. “This is what the back-up plans were designed for. But the markets didn’t open.” David Blaine Entertains New Yorkers After Hurricane Sandy (NYP) When a backup generator at Old Homestead Steakhouse sputtered, the restaurant started serving hundreds of pounds of steaks, burgers, lobster tails and shrimp on the street outside for downtown denizens. David Blaine, the modern-day Harry Houdini who spent days recently being shocked in a steel suit, pitched in to provide spontaneous street entertainment. “David was rumbling by on his motorcycle, and he stopped to see why there was a line on 14th Street,” said a spy, adding 800 chowed down. Blaine then asked restaurant co-owner Greg Sherry if there was a deck of cards in the house. Blaine used the full deck and some spare silverware to perform magic tricks outside for an hour and a half. The magic man, an Old Homestead regular, was offered a doggie bag but said he’s on a special diet in preparation for his next stunt. Romney Faces Sale With A Win (WSJ) Mr. Romney's assets, valued at between $190 million and $250 million, include investments in hedge funds, private-equity funds and partnerships at Bain Capital, which he ran for 15 years. These entities have ownership stakes in dozens of companies that could be affected by government action, such as radio firm Clear Channel Communications Inc. and a video-surveillance firm based in China. Many businessmen and wealthy individuals have entered government service and sold off holdings. But a Romney sale would be especially complicated. Investments in private-equity funds can be difficult to value and seldom change hands. Any sale would have to be handled carefully to avoid any appearance that the incoming president was getting favorable treatment from a buyer. What Do Asia Markets Fear? Romney As President (CNBC) At a time of heightened uncertainty, with the ongoing European debt crisis and the upcoming leadership transition in China, a new president in the world’s largest economy will cause additional nervousness among Asian investors, experts told CNBC. “Asian traders don’t like change in leadership. You would see weakness in the markets if Romney won, because people would question how well he would deal with the impending doom of the ‘fiscal cliff.’ Obama would be a safer bet, as investors would enjoy continuity at a time of a lot of uncertainty,” said Justin Harper, market strategist, at IG Markets...Besides, Romney’s stance on China is particularly worrying feels Harper. The presidential hopeful has said he will name China a “currency manipulator,” which could lead to more tensions with the mainland, including on the trade front. “You would expect trade between the two nations to suffer, this would have a knee-jerk reaction on trade in the region,” he added. Fed Up With Fees (NYP) The manager of a large public pension’s private-equity program said for the last 24 months he has not committed money to any new private-equity fund that doesn’t give all fees it charges its companies back to investors. He is doing this because he wants an alignment of interest where he and the private-equity firm only make money by reselling a business. PE firms, he believes, will stop charging their companies fees if there is little in it for them. So, KKR, for example — responding to pressure — has agreed to give all fees it charges its companies in its new fund back to investors, the pension manager said. KKR is not the only firm making this change. Apax Partners, Blackstone Group, Centerbridge Partners, Providence Equity and TPG Capital are among those making the same concessions, the pension manager said. Local shelter mistakenly euthanizes family pet (WRCB) After waiting 10 days to be reunited with his dog, a local college student learned the family's pet had been euthanized by mistake. The Lab mix was being held at McKamey Animal Center, where administrators say a paperwork mix up led to the dog's death. Matt Sadler adopted the three-year-old Lab mix when he was just a puppy. "That was my best friend," Sadler says. "He was there for me through my parents' divorce and a lot of really hard tough times in my life." It was hard for Matt when Zion was quarantined last week, after jumping on a pizza delivery driver. "The lady didn't want to press charges, it wasn't anything serious, but the law has a 10-day quarantine period," he says. Because Zion was a month past due on his yearly rabies vaccine, he was held for the full 10 days at McKamey Animal Center. Thursday, Matt eagerly returned to the facility to take Zion home. "She says, ‘I'm sorry, Matt, we accidentally euthanized your dog'," Sadler says...McKamey has offered to cremate Zion, and allow Matt to adopt any dog he chooses.

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