Opening Bell: 06.05.12

Germany Pushes EU Bank Oversight (WSJ) Though Berlin has resisted a banking union, Ms. Merkel's initiative shows Germany is willing to talk about an overhaul and is trying to focus the debate on Europe's biggest banks. "We will discuss to what extent we need to put systemically relevant banks under a specific European supervisory authority so that national interests do not play such a large role," Ms. Merkel told reporters ahead of a meeting in Berlin with European Commission President José Manuel Barroso, referring to the June 28-29 summit. Citi Bets That Proof Leads To Profits (WSJ) Seeking a shot in the arm for the ailing banking business, Citigroup Inc. C -2.30% is expanding into a little-known but fast-growing field known as identity proofing—the tedious and time-consuming task of proving people are who they say they are. The third-biggest U.S. bank by assets later this month will begin issuing digital-identity badges to the employees of Defense Department contractors, ranging from makers of high-tech engineering parts to the janitors who clean the bathrooms. Citigroup is the only financial institution that has clearance to sell the identity cards and grab a piece of a market whose annual sales could reach into the billions of dollars. But the badge business is just the beginning. Citigroup's hope is that the contractors will eventually use the plastic on which the badges are issued for more than just identity verification. If companies adopt the technology, their employees will be able to collect paychecks and pay business expenses using the cards—enabling Citigroup to collect fees on all of those transactions. John Paulson Buys Saudi Prince’s $49 Million Aspen Palace (CNBC) The lavish ranch, sold by Saudi Prince Bandar bin Sultan, was once the most expensive estate ever listed in the U.S., with a price tag in 2006 of $135 million. The property includes a main house with 15-bedrooms, 16-baths, and 56,000-square-feet. It also includes several side buildings, as well as a water treatment plant, gas pumps and other high-tech features. Mr. Paulson’s $49 million purchase included two properties — the 90-acre main property as well as a 38-acre property nearby called Bear Ranch. Bear Ranch and Hala Ranch together might have once fetched more than $150 million in 2006 or 2007, according to Aspen real-estate experts. Blankfein: Nyet to Petersburg leaks (NYP) Goldman Sachs CEO Lloyd Blankfein yesterday squarely disputed his former director Rajat Gupta’s claim that Gupta was permitted to speak about details of a 2008 board meeting with his alleged co-conspirator, hedge-fund titan Raj Rajaratnam. “Did you authorize Mr. Gupta to reveal any of the confidential information discussed at the board meeting in St. Petersburg, Russia?” prosecutor Reed Brodsky asked the CEO. “No,” Blankfein said. The details included directors discussing the possibility of Goldman buying a commercial bank or insurance company, including AIG, in the early days of the mortgage crisis. MF Global Trustee Sees $3 Billion in Potential Claims (Reuters) MF Global Holdings could have more than $3 billion in claims against its former affiliates, Louis Freeh, the trustee overseeing the wind-down of the parent company of the collapsed broker-dealer, said in his first status report. The potential recoveries for the parent company's creditors will come primarily from such claims, Freeh said in his 119-page report that was submitted to the bankruptcy court. Former bath-salts addict: 'It felt so evil' (CNN) The man is strapped onto a gurney and restrained, yet he is singing, making faces and twitching. "You know where you're at?" a paramedic asks him, but Freddy Sharp can't answer. He was, he explained later, off in his own world after overdosing on the synthetic drug known as "bath salts." "I'd never experienced anything like that," Sharp told CNN's Don Lemon. "It really actually scared me pretty bad." He said he was hallucinating about being in a mental hospital and being possessed by Jason Voorhees, the character from the "Friday the 13th" movies. "I just felt all kinds of crazy," said Sharp, now 27, of Tennessee, who says he hasn't used bath salts in months. "It felt so evil. It felt like the darkest, evilest thing imaginable." The drug made national headlines recently after a horrific crime in Miami, where a naked man chewed the face off a homeless man in what has been called a zombie-like attack. Australia Central Bank Cuts Rates to Fight Global Gloom (Reuters) Australia's central bank cut interest rates for a second month running on Tuesday in a bid to shore up confidence at home, just as finance chiefs of advanced economies around the world prepare to hold emergency talks on the euro zone debt crisis. Citing a weaker outlook abroad and only modest domestic growth, the Reserve Bank of Australia cut its cash rate by 25 basis points to 3.5 percent. Burbank Bets On Global Recession With Subprime Conviction (Bloomberg) In the dozen years that John Burbank has run his $3.4 billion Passport Capital hedge fund, he’s never been as negative on global stocks as he is now. Burbank, 48, expects that the U.S. and much of the rest of the world will slide into a recession, and he’s setting up for that event with a big wager that global stocks will fall. Most of his peers are still betting that stocks, especially those in the U.S., are more likely to rise than decline. “You have a great contrarian outcome here that will be obvious in hindsight, just like subprime was,” Burbank said in an interview last month. “I have a lot of conviction about something that others don’t seem to see clearly.” In Facebook, Options Traders Shift to Post-Earnings Bets (WSJ) While June and July bets have been most active since Facebook options began trading last Tuesday—accounting for more than half of the total options outstanding—contracts expiring in August and September have been picking up steam. Downside options that expire after the company's first public earnings report—expected at the end of July, though no date has been set—were the most actively traded Monday. The most popular positions included bets Facebook would fall below $25 a share over the next two to three months. Real life Garfield eats his way to 40-pound frame (NYDN) A tubby tabby named Garfield was dropped off at the North Shore Animal League last week tipping the scales at nearly 40 pounds, and now the no-kill shelter is hoping to turn him into the biggest loser. “He needs to lose at least 20 pounds,” shelter spokeswoman Devera Lynn said. “He’s so big, he’s like a dog. He actually has his own room.” Garfield meanders slowly in smaller spaces. He’s being moved to a foster home Tuesday in hopes that a next of kin claims the orange-and-white kitty. But if that doesn’t happen, the North Shore Animal League has received several applications from folks willing to give him a permanent home. Lynn said they’ll work with an owner to put the cat on a healthier track. “He’s actually outgoing for a cat,” Lynn said. “Once he loses that weight, he’s going to be a rock star.”
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Germany Pushes EU Bank Oversight (WSJ)
Though Berlin has resisted a banking union, Ms. Merkel's initiative shows Germany is willing to talk about an overhaul and is trying to focus the debate on Europe's biggest banks. "We will discuss to what extent we need to put systemically relevant banks under a specific European supervisory authority so that national interests do not play such a large role," Ms. Merkel told reporters ahead of a meeting in Berlin with European Commission President José Manuel Barroso, referring to the June 28-29 summit.

Citi Bets That Proof Leads To Profits (WSJ)
Seeking a shot in the arm for the ailing banking business, Citigroup Inc. C -2.30% is expanding into a little-known but fast-growing field known as identity proofing—the tedious and time-consuming task of proving people are who they say they are. The third-biggest U.S. bank by assets later this month will begin issuing digital-identity badges to the employees of Defense Department contractors, ranging from makers of high-tech engineering parts to the janitors who clean the bathrooms. Citigroup is the only financial institution that has clearance to sell the identity cards and grab a piece of a market whose annual sales could reach into the billions of dollars. But the badge business is just the beginning. Citigroup's hope is that the contractors will eventually use the plastic on which the badges are issued for more than just identity verification. If companies adopt the technology, their employees will be able to collect paychecks and pay business expenses using the cards—enabling Citigroup to collect fees on all of those transactions.

John Paulson Buys Saudi Prince’s $49 Million Aspen Palace (CNBC)
The lavish ranch, sold by Saudi Prince Bandar bin Sultan, was once the most expensive estate ever listed in the U.S., with a price tag in 2006 of $135 million. The property includes a main house with 15-bedrooms, 16-baths, and 56,000-square-feet. It also includes several side buildings, as well as a water treatment plant, gas pumps and other high-tech features. Mr. Paulson’s $49 million purchase included two properties — the 90-acre main property as well as a 38-acre property nearby called Bear Ranch. Bear Ranch and Hala Ranch together might have once fetched more than $150 million in 2006 or 2007, according to Aspen real-estate experts.

Blankfein: Nyet to Petersburg leaks (NYP)
Goldman Sachs CEO Lloyd Blankfein yesterday squarely disputed his former director Rajat Gupta’s claim that Gupta was permitted to speak about details of a 2008 board meeting with his alleged co-conspirator, hedge-fund titan Raj Rajaratnam. “Did you authorize Mr. Gupta to reveal any of the confidential information discussed at the board meeting in St. Petersburg, Russia?” prosecutor Reed Brodsky asked the CEO. “No,” Blankfein said. The details included directors discussing the possibility of Goldman buying a commercial bank or insurance company, including AIG, in the early days of the mortgage crisis.

MF Global Trustee Sees $3 Billion in Potential Claims (Reuters)
MF Global Holdings could have more than $3 billion in claims against its former affiliates, Louis Freeh, the trustee overseeing the wind-down of the parent company of the collapsed broker-dealer, said in his first status report. The potential recoveries for the parent company's creditors will come primarily from such claims, Freeh said in his 119-page report that was submitted to the bankruptcy court.

Former bath-salts addict: 'It felt so evil' (CNN)
The man is strapped onto a gurney and restrained, yet he is singing, making faces and twitching. "You know where you're at?" a paramedic asks him, but Freddy Sharp can't answer. He was, he explained later, off in his own world after overdosing on the synthetic drug known as "bath salts." "I'd never experienced anything like that," Sharp told CNN's Don Lemon. "It really actually scared me pretty bad." He said he was hallucinating about being in a mental hospital and being possessed by Jason Voorhees, the character from the "Friday the 13th" movies. "I just felt all kinds of crazy," said Sharp, now 27, of Tennessee, who says he hasn't used bath salts in months. "It felt so evil. It felt like the darkest, evilest thing imaginable." The drug made national headlines recently after a horrific crime in Miami, where a naked man chewed the face off a homeless man in what has been called a zombie-like attack.

Australia Central Bank Cuts Rates to Fight Global Gloom (Reuters)
Australia's central bank cut interest rates for a second month running on Tuesday in a bid to shore up confidence at home, just as finance chiefs of advanced economies around the world prepare to hold emergency talks on the euro zone debt crisis. Citing a weaker outlook abroad and only modest domestic growth, the Reserve Bank of Australia cut its cash rate by 25 basis points to 3.5 percent.

Burbank Bets On Global Recession With Subprime Conviction (Bloomberg)
In the dozen years that John Burbank has run his $3.4 billion Passport Capital hedge fund, he’s never been as negative on global stocks as he is now. Burbank, 48, expects that the U.S. and much of the rest of the world will slide into a recession, and he’s setting up for that event with a big wager that global stocks will fall. Most of his peers are still betting that stocks, especially those in the U.S., are more likely to rise than decline. “You have a great contrarian outcome here that will be obvious in hindsight, just like subprime was,” Burbank said in an interview last month. “I have a lot of conviction about something that others don’t seem to see clearly.”

In Facebook, Options Traders Shift to Post-Earnings Bets (WSJ)
While June and July bets have been most active since Facebook options began trading last Tuesday—accounting for more than half of the total options outstanding—contracts expiring in August and September have been picking up steam. Downside options that expire after the company's first public earnings report—expected at the end of July, though no date has been set—were the most actively traded Monday. The most popular positions included bets Facebook would fall below $25 a share over the next two to three months.

Real life Garfield eats his way to 40-pound frame (NYDN)
A tubby tabby named Garfield was dropped off at the North Shore Animal League last week tipping the scales at nearly 40 pounds, and now the no-kill shelter is hoping to turn him into the biggest loser. “He needs to lose at least 20 pounds,” shelter spokeswoman Devera Lynn said. “He’s so big, he’s like a dog. He actually has his own room.” Garfield meanders slowly in smaller spaces. He’s being moved to a foster home Tuesday in hopes that a next of kin claims the orange-and-white kitty. But if that doesn’t happen, the North Shore Animal League has received several applications from folks willing to give him a permanent home. Lynn said they’ll work with an owner to put the cat on a healthier track. “He’s actually outgoing for a cat,” Lynn said. “Once he loses that weight, he’s going to be a rock star.”

Related

Opening Bell: 02.05.13

Barclays CEO Vows To Improve Bank's Ethics (WSJ) Chief Executive Antony Jenkins said Tuesday he is "shredding" the legacy of the bank's self-serving culture by improving its ethics and moving beyond the misconduct issues that have cost it billions of pounds. Mr. Jenkins told a U.K. parliamentary group that his efforts so far include changing the way employee bonuses are calculated and abolishing commissions on financial-product sales. He said the changes would take time to produce results, but that ultimately he wants to eliminate a culture that at times has been "too short-term focused, too aggressive and on occasions, too self-serving." "Our resolve and intent behind this is absolute," Mr. Jenkins said. McGraw-Hill, S&P Sued by U.S. Over Mortgage-Bond Ratings (Bloomberg) The U.S. Justice Department filed a complaint Monday in federal court in Los Angeles, accusing McGraw-Hill and S&P of mail fraud, wire fraud and financial institutions fraud. Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the U.S. seeks civil penalties that can be as high as $1.1 million for each violation. Earlier today, the company’s shares tumbled the most in 25 years when it said it expected the lawsuit, the first federal case against a ratings firm for grades related to the credit crisis. “It’s a new use of this statute,” Claire Hill, a law professor at the University of Minnesota who has written about the ratings firms, said in a phone interview today from Minneapolis. “This is not a line to my knowledge that has been taken before.” Dell Nears $25 Billion Deal To Go Private (WSJ) Late Monday, Mr. Dell was in talks with Microsoft Corp and private-equity firm Silver Lake Partners to offer shareholders between $13.50 and $13.75 a share, said people familiar with the matter, about a 25% premium to Dell's stock price in January before the possibility of a deal became public. The buyout, if approved by shareholders, would be the largest such deal since the financial crisis. It also would be an admission by Mr. Dell that he wasn't able to pull off the changes needed to improve his company's revenue and profit under Wall Street's glare. The buyout would give Mr. Dell the largest stake in the company, ensuring that the 47-year-old is the one who gets to oversee any changes. Gross: Beware 'Credit Supernova' Looming Ahead (CNBC) The head of the Pacific Investment Management bond giant has issued an ominous forecast in which he worries that the global central bank-induced credit bubble "is running out of energy and time." As a result, investors will have to get used to an atmosphere of diminishing returns and portfolios that will hold more hard assets like commodities and fewer less-tangible financial assets like stocks. "Our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic," Gross said in his February newsletter. Obama to Meet With CEOs of Goldman, Yahoo, Other Firms (Reuters) President Barack Obama will meet with chief executives from 12 companies including Goldman Sachs Group's Lloyd Blankfein and Yahoo's Marissa Mayer on Tuesday to discuss immigration and deficit reduction, according to a White House official. "The president will continue his engagement with outside leaders on a number of issues, including immigration reform and how it fits into his broader economic agenda, and his efforts to achieve balanced deficit reduction," the official said Monday. Other chief executives include Arne Sorenson of Marriott International, Jeff Smisek of United Continental Holdings, and Klaus Kleinfeld of Alcoa. A Billion-Dollar Club And Not So Exclusive (NYT) an unprecedented number of high technology start-ups, easily 25 and possibly exceeding 40, are valued at $1 billion or more. Many employees are quietly getting rich, or at least building a big cushion against a crash, as they sell shares to outside investors. Airbnb, Pinterest, SurveyMonkey and Spotify are among the better-known privately held companies that have reached $1 billion. But many more with less familiar names, including Box, Violin Memory and Zscaler, are selling services to other companies. “A year from now that might be 100,” said Jim Goetz, a partner at Sequoia Capital, a venture capital business. Sequoia counts a dozen such companies in its portfolio. It is part of what he calls “a permanent change” in the way people are building their companies and financers are pushing up values. The owners of these companies say the valuations make them giddy, but also create unease. Once $1 billion was a milestone, now it is also a millstone. Bigger expectations must be managed and greater uncertainty looms. Donald Trump to sue Bill Maher after bet feud (Politico) Donald Trump filed a lawsuit Monday in California against liberal comic Bill Maher, suing him for $5 million after Trump says Maher did not follow through on a $5 million public bet he made on “The Tonight Show.” “I don’t know whether this case will be won or lost, but I felt a major obligation to bring it on behalf of the charities,” Trump said in a public statement first obtained by POLITICO. Last month, Maher said on NBC to Jay Leno that he would pay $5 million to Trump’s charity of choice if he provided a birth certificate proving that he’s not “spawn of his mother having sex with orangutan.” It was similar to an offer Trump made to President Barack Obama during the presidential campaign season, in which Trump wanted Obama to release his college records. Trump’s statement continued: “Bill Maher made an unconditional offer while offer while on The Jay Leno Show and I, without hesitation, accepted his offer and provided him with the appropriate documentation. Money-Market Funds Best By Excess Cash (WSJ) Money-market funds have a high-quality problem: investors are entrusting them with too much cash. The flood of money is prompting the funds, which buy short-term, top-rated debt, to seek higher returns in investments that until recently were seen as too risky, including French bank debt. Investors plowed $149 billion into U.S.-based money-market funds between the start of November and Jan. 30, bringing total assets under management to $2.695 trillion, close to the most since mid-2011, according to the Investment Company Institute. Knight Capital Group to Cut Workforce by 5 Percent (Reuters) Knight Capital, which recently agreed to be bought for $1.4 billion by Getco, will lay off 5 percent of its global workforce as part of efforts to restructure the automated trading firm, according to a regulatory filing released on Monday. FTC Corrects Language On Herbalife (NYP) The Federal Trade Commission yesterday corrected an earlier statement regarding a “law enforcement investigation” into Herbalife. In response to a Freedom of Information Act request by The Post, the FTC said some complaints against the company were withheld because the information was “obtained through a law enforcement investigation.” The agency said yesterday that the language in its letter accompanying the FOIA request was incorrect and it should have said that the exemption from disclosure was related to “foreign sources.” FTC spokesman Frank Dorman defined “foreign sources” as government entities, including law enforcement agencies, and the exemption relates to information-sharing between the FTC and these foreign government agencies. The FTC said that it “may not disclose any material reflecting a consumer complaint obtained from a foreign source if that foreign source has requested confidential information.” The agency said it could not confirm, or deny, an investigation into the nutritional supplements company. Hedge Fund Mogul, Swiss Villagers Clash Over Ski Slopes (Bloomberg) Since hotelier Tobias Zurbriggen can remember, the business of running Saas-Fee has been a local affair. Now, the Swiss ski resort neighboring the Matterhorn is feeling the heat from a New York-based financier. Edmond Offermann, a nuclear scientist turned millionaire working for hedge fund Renaissance Technologies LLC, invested 15 million Swiss francs ($16.4 million) in 2010 to revive Saas- Fee’s struggling ski-lift company. “It’s like a hobby, which completely got out of control,” Offermann, 53, said in an interview from Long Island, New York. He wants to shake things up by managing hotels and the ski-lift operator in one company controlled by a single chief executive. JPMorgan Joins Rental Rush For Wealthy Clients (Bloomberg) The firm’s unit that caters to individuals and families with more than $5 million, put client money in a partnership that bought more than 5,000 single family homes to rent in Florida, Arizona, Nevada and California, said David Lyon, a managing director and investment specialist at J.P. Morgan Private Bank. Investors can expect returns of as much as 8 percent annually from rental incomeas well as part of the profits when the homes are sold, he said. Man Allegedly Tries To Walk Out Of Costco With 24 Quarts Of Oil — Strapped To His Body (CBS) Jorge Sanchez, 35, was spotted about 4:30 p.m. trying to leave a Burbank Costco without paying for the oil. Store employees gave chase and officials said they lost Sanchez after he jumped a fence at the west side of the Costco parking lot. Burbank Police Sgt. Darin Ryburn told CBS2/KCAL9 reporter Andrea Fujii that nine of the 24 quarts were recovered during the foot chase. Authorities said Sanchez walked into the Costco and went straight to the oil aisle. He allegedly grabbed a couple of cases and emptied them. Said Ryburn, “He proceeded to hide the quarts of oil in his pants, socks, and in his shirt.” Sanchez was later apprehended near Beachwood Drive and Monterey Avenue, about eight blocks from the store. Officials said he was arrested on suspicion of burglary charges. Margo Martin was a witness to the apprehension. “All of a sudden, I hear ‘Get down on the ground’ and there is this man laying in our driveway.” Witnesses thought the man was running funny and weren’t sure why. Witness Manuel Atlas said, “He looked kind of heavy and out of shape.” Police said Sanchez was also running funny because he still had 15 quarts of oil strapped to him. Police said he used a bungee cord to strap the bottles down.

Opening Bell: 10.31.12

Questions Cloud Market Reopening (WSJ) The New York Stock Exchange said Tuesday that it plans to open as usual at 9:30 a.m. and that its trading floor and headquarters in lower Manhattan were "fully operational" despite widespread blackouts and flooding in that part of the city. The Nasdaq Stock Market and other exchanges will open as well. Bond markets will follow suit. While investors and industry officials breathed a sigh of relief, critics argued that the storm exposed how ill-prepared exchanges and their Wall Street customers are for such an event. Regulators on Tuesday said they plan to probe whether more needs to be done to get exchanges and the trading community ready for such disasters. After Hurricane, Wall Street Back To Work (Dealbook) On Tuesday, the scene around Wall Street was desolate. While the New York Exchange’s building appeared to be unscathed, many other offices in the vicinity were flooded. After an underground parking garage two blocks from the exchange was inundated with water, several cars floated to street level. Two Citigroup buildings were without power. The bank told employees in a memo on Tuesday that one of the buildings, 111 Wall Street, sustained “severe flooding and will be out of commission for several weeks.” Some JPMorgan Chase employees outside New York City were working in central New Jersey. At the bank’s main trading floor in Midtown Manhattan, employees, many in jeans, shirts and rain boots, booked hotels for the night and discussed strategy. The bank, which sustained minimal damages at a building downtown, expected to resume normal operations in Midtown. Credit Suisse also planned to open for business on Wednesday, with its main offices by Madison Square Park running on backup power. In downtown New York, Goldman Sachs was one of the few buildings with power. The firm has a generator in the event of outages, allowing its trading floors to continue to run. On Tuesday, televisions sets and lights inside the building were on, although few employees were there...In a memo to staff, Goldman announced its headquarters would be open on Wednesday. The firm also booked hotels in various locations to make sure employees could get to work. Deutsche Bank Rides Debt-Market Wave (WSJ) Deutsche Bank reported a surge in investment-banking revenues in the third quarter as a rebound in client activity fueled the best quarter ever for its fixed-income division. Deutsche Bank, Europe's largest lender by assets, reported group revenues of €8.7 billion ($11.5 billion), up 19% from the third quarter last year. The result was better than analysts expected, but the bank's legal problems and restructuring efforts nearly flattened net income. At €747 million, the total was up 3% from €725 million a year earlier. The bank's revenue increase was driven in part by bond-buying initiatives announced by the U.S. Federal Reserve and the European Central Bank in recent months. The moves have fueled a resurgence in client activity, including in fixed-income trading—an area where UBS AG and other competitors have announced significant cut backs, allowing Deutsche Bank to gain market share. UBS Moves Quickly On Job Cuts, Revamp (WSJ) Scores of traders at UBS were locked out of the Swiss bank's London offices Tuesday as the institution moved quickly to implement the first of thousands of job cuts in a strategic restructuring. The revamp effectively brings an end to UBS's attempts over the past two decades to build a world-class investment bank, which brought the institution to the brink of collapse in 2008 when it incurred more than $50 billion in losses from the fixed-income business that it is now exiting. Instead, UBS's strategy will center on its private bank, the world's second-largest in assets after Bank of America and a mainstay of the group's earnings. UBS confirmed Tuesday that it will cut risk-weighted assets by around 100 billion Swiss francs ($107 billion) by the end of 2017, eliminate about 10,000 jobs across the bank and reorganize its investment bank to deliver more products and services to ultra-wealthy clients at the private bank. The bank also said Tuesday that charges related to the moves, which come in response to a tougher regulatory and economic climate, helped push it into the red in the third quarter. UBS Chief Executive Sergio Ermotti said that London would bear the brunt of the cuts as the bank attempts to exit almost completely from fixed-income activities and move back to its wealth-management roots. Storm Cripples US East Coast, Death and Damage Toll Climb (CNBC) The U.S. death toll climbed to 50, according to The Associated Press, with many of the victims killed by falling trees. Damage estimates reached into the tens of billions, while the storm disrupted campaigning and early voting ahead of the November 6 presidential election. More than 8.2 million households were without power in 17 states as far west as Michigan. Nearly 2 million of those were in New York, where large swaths of lower Manhattan lost electricity and entire streets ended up under water. New York Subway System Faces Weeks to Recover From Storm (Bloomberg) If you laid the New York City subway system in a line, it would stretch from New York to Detroit. Now imagine inspecting every inch of that track. That’s the job ahead for Metropolitan Transit Administration officials, who must examine 600 miles of track and the electrical systems with it before they can fully reopen the largest U.S. transit system, which took a direct hit by Hurricane Sandy. Seven subway tunnels under New York’s East River flooded, MTA officials said. Pumping them out could take days, and a 2011 state study said it could take three weeks after hurricane- driven flooding to get back to 90 percent of normal operations. That study forecast damages of $50 billion to $55 billion to transportation infrastructure including the subways. How CEOs Improvised In The Wake Of Sandy (WSJ) When the approach of Hurricane Sandy left Lands' End Chief Executive Edgar Huber stranded on a business trip, he retreated to an impromptu backup headquarters—in his mother-in-law's apartment complex...Foot Locker CEO Ken Hicks disregarded the shutdown of his New York headquarters on Monday and worked at his office until 3 p.m. Then he picked up the work again six blocks away at his home in Manhattan's Murray Hill neighborhood. When the power went out, he put on iTunes, lit a lantern and did paperwork for another 2½ hours. "You can be reasonably self-sufficient with a cellphone and a lantern," the CEO says. Celebrities React To Northeast Hurricane (NYDN) “WHY is everyone in SUCH a panic about hurricane (i’m calling Sally)...?” Lindsay Lohan tweeted Sunday night. “Stop projecting negativity! Think positive and pray for peace.” A Year Later, All Eyes Still On 'Edie' (WSJ) Who broke the law by raiding customer accounts at MF Global Holdings? Investigators seem no closer to the answer than they were when the New York brokerage firm filed for bankruptcy exactly a year ago Wednesday, owing thousands of farmers and ranchers, hedge funds and other investors an estimated $1.6 billion. Their money was supposed to be stashed safely at MF Global, but company officials used much of it for margin calls and other obligations. The last, best hope for a breakthrough in the probe is Edith O'Brien, the former assistant treasurer at MF Global. Working in the company's Chicago office, she was the go-to person for emergency money transfers as MF Global flailed for its life. MBA's Rethink Wall Street (WSJ) Many of the nation's top M.B.A. programs, including Harvard Business School and Stanford Graduate School of Business, reported declines in the share of students who took jobs in finance this year. And even those that posted some gains, such as University of Pennsylvania's Wharton School, are still well below their prefinancial crisis levels...A Wall Street gig "isn't as prestigious as it used to be" because the future—promotion opportunities, salary gains, even basic job security— is so unclear, says Mark Brostoff, associate dean and director of the career center at the Olin Business School at Washington University in St. Louis. Though the share of Olin students going into finance increased to 22% of job seekers this year from 15% in 2011, many of those gains came at boutique and regional Midwestern financial firms rather than on Wall Street. One factor affecting student demand: Banks expect young staffers to pick up the slack left by masses of laid-off midlevel employees, without necessarily offering more generous pay packages in return for the long hours. At Harvard Business School, for example, students heading into investment banking—7% of job seekers who accepted jobs, down from 10% in 2011—reported median salaries and signing bonuses were flat with last year, at $100,000 and $40,000, respectively, while other guaranteed compensation fell to $8,750 from $40,000. Disney $4 Billion ‘Star Wars’ Deal Spotlights Content Bet (Bloomberg) Walt Disney agreed to buy George Lucas’s Lucasfilm Ltd. for $4.05 billion, pressing Chief Executive Officer Robert Iger’s $15 billion bet on creative franchises by adding “Star Wars” and “Indiana Jones.” Lucas, 68, the sole owner, will get half in cash and the rest in stock, making him a major investor in the film, theme park and TV company, according to a statement yesterday from Burbank, California-based Disney. The first of a new trilogy of “Star Wars” films will be released in 2015, Disney said. France Can’t Compete With Rest of Europe: WTO Chief (CNBC) France is uncompetitive not only versus China, but against the rest of Europe, according to Pascal Lamy, director general of the World Trade Organization. “The competitiveness of France on foreign markets has been damaged for the last 10 years. This is nowhere more obvious than in Europe, where France has lost market share for the last 10 years,” said Lamy in an exclusive interview with CNBC in Paris. Cop Tasers 10 Year-Old For Refusing To Clean His Car (CN) A New Mexico policeman Tasered a 10-year-old child on a playground because the boy refused to clean his patrol car, the boy claims in court. Guardian ad litem Rachel Higgins sued the New Mexico Department of Public Safety and Motor Transportation Police Officer Chris Webb on behalf of the child, in Santa Fe County Court. Higgins claims Webb used his Taser on the boy, R.D., during a May 4 "career day" visit to Tularosa New Mexico Intermediate School. "Defendant Webb asked the boy, R.D., in a group of boys, who would like to clean his patrol unit," the complaint states. "A number of boys said that they would. R.D., joking, said that he did not want to clean the patrol unit. "Defendant Webb responded by pointing his Taser at R.D. and saying, 'Let me show you what happens to people who do not listen to the police.'" Webb then shot "two barbs into R.D.'s chest," the complaint states. "Both barbs penetrated the boy's shirt, causing the device to deliver 50,000 volts into the boy's body.

Opening Bell: 01.09.13

UBS Says Cleaning Up Its Act After Libor 'Shocker' (Reuters) UBS has yet to fully purge itself of a global interest rate scandal that has cost the Swiss bank its reputation and put it at risk of a wave of costly civil suits, its investment banking chief said on Wednesday. The once-venerable institution was fined a record $1.5 billion last month for manipulating Libor interest rates, the latest in a string of scandals including a $2.3 billion rogue trading loss and a damaging tax avoidance row with the United States. "We are very focused on recovering the honor and standing the organisation had in the past," Andrea Orcel told Britain's Parliamentary Commission on Banking Standards, set up in the aftermath of the Libor scandal. "I am convinced that we have made a lot of progress. I am also convinced that we still need to do more." [...] Committee member Justin Welby, the incoming Archbishop of Canterbury, asked Orcel if he was the right man to turn UBS around. "I feel I have a high level of integrity," the banker said. Orcel said that UBS was working at simplifying the investment banking business to make it less risky and prone to scandal. The committee, a cross-party panel of lawmakers headed by Conservative MP Andrew Tyrie, is switching its focus to standards and culture after spending most of the past three months assessing structural reform. Tyrie on Wednesday described the Libor rigging as "a shocker of enormous proportions". Button-Down Central Bank Bets It All (WSJ) Switzerland, for decades a paragon of safety in finance, is engaged in a high-risk strategy to protect its export-driven economy, literally betting the bank in a fight to contain the prices of Swiss products sold abroad. The nation's central bank is printing and selling as many Swiss francs as needed to keep its currency from climbing against the euro, wagering an amount approaching Switzerland's total national output, and, in the process, turning from button-down conservative to the globe's biggest risk-taker. JPMorgan Overhaul Widens (WSJ) The shift of Mr. Maclin and the departure of Mr. Staley, who once was seen as a top candidate to succeed James Dimon as chief executive, are the latest steps in a drastic reshaping of J.P. Morgan's executive suite. Many of the new leaders—a group that includes corporate and investment-bank co-heads Mike Cavanagh and Daniel Pinto, co-chief operating officer Matthew Zames and Chief Financial Officer Marianne Lake—are in their 40s. Mr. Cavanagh and Mr. Zames, who were asked last May to unwind a series of botched bets placed by a trader in the bank's Chief Investment Office known as the "London whale," are viewed as front runners for the top job, said people close to the bank. Ackman Braces for Legal Battle Over Herbalife (FBN) If filed, the lawsuit could involve alleged “tortuous interference,” implying Ackman intentionally damaged Herbalife’s business relationships, people close to Ackman said. On Tuesday, a large Herbalife distributor said he was leaving the company and called on other distributors to join him amid the controversy. In a sign of the importance of its distribution channels, Herbalife says in regulatory filings its relationship with and ability to influence distributors are items that can “materially” affect its financial condition. As of late Tuesday, people with knowledge of the matter said no decision on timing or even if a lawsuit will actually be filed had been made. The company has told FOX Business it is weighing legal action against Ackman. Ackman declined to comment on the matter. Herbalife has hired famed attorney David Boies to launch possible litigation against Ackman as well as the investment bank Moelis & Co., as its financial adviser. Goldman Will Report Fund Values Each Day (WSJ) In a reversal of industry practice, Goldman Sachs Group will begin disclosing the values of its money-market mutual funds daily rather than monthly, according to people familiar with the company's plans. Some of the changes will take effect as early as Wednesday...According to people familiar with Goldman's thinking, the company is beefing up its disclosures to satisfy investors' calls for greater transparency on fluctuations in the price of their investments. Brazil prostitutes to learn English ahead of World Cup (AP) Prostitutes in one of Brazil's biggest cities are beginning to sign up for free English classes ahead of this year's Confederations Cup and the 2014 World Cup. The president of the Association of Prostitutes of the city of Belo Horizonte says by telephone that 20 have already signed up for the courses and she expects at least 300 of the group's 4,000 members to follow suit. The association is organizing the classes and seeking volunteer teachers. Prostitution is legal in Brazil. Belo Horizonte will host six World Cup matches and Vieira said Tuesday "it will be important for the girls will be able to use English to let their clients know what they are charging and learn about what turns them on." AIG Cites Duty to Weigh Suing U.S. as Lawmaker Criticism Mounts (Bloomberg, related) American International Group said it has a duty to weigh joining a suit by former Chief Executive Officer Maurice “Hank” Greenberg that claims the insurer’s 2008 U.S. bailout was unconstitutional. “The board of directors has fiduciary and legal obligations to the company and its shareholders to consider the demand served on us,” CEO Robert Benmosche said yesterday in a statement. The board is scheduled to meet today to hear arguments from representatives of Greenberg and the U.S. Lawmakers including Senators Elizabeth Warren and Robert Menendez and Representative Peter Welch said New York-based AIG shouldn’t join the suit. “Taxpayers are still furious that they rescued a company whose own conduct brought it down,” Welch said in a letter to AIG Chairman Steve Miller. “Don’t rub salt in the wounds with yet another reckless decision.” Vow of New Light For 'Dark' Trades (WSJ) Richard Ketchum, chief executive of the Financial Industry Regulatory Authority, said in an interview Tuesday that the regulator is expanding its oversight of the dark-trading venues, with an eye on whether orders placed in public exchanges are "trying to move prices or encourage sellers that may advance their trading in the dark market." The regulator also is boosting its surveillance of high-speed trading and is increasingly looking at rapid-fire trading across exchanges, he said. "You're going to see more [focus] in those areas in 2013," Mr. Ketchum said. Goldman, Morgan Stanley to Settle on Foreclosures (Reuters) Goldman Sachs and Morgan Stanley are among a group of banks expected to agree as soon as this week to a $1.5 billion settlement with federal regulators over botched foreclosure claims, two sources familiar with the matter said on Tuesday. The accord would come on the heels of a separate $8.5 billion settlement announced on Monday with 10 bigger mortgage servicers, including Bank of America, Citigroup, JPMorgan Chase, Wells Fargo...Goldman and Morgan Stanley's respective roles in the settlement stems from mortgage-servicing businesses that the two investment banks purchased in the run-up to the subprime mortgage crisis, and have since sold. Goldman had owned Litton Loan Servicing and Morgan Stanley owned Saxon Capital. Taco Bell responds to teen's request for a custom Speedo (LI) The week before Christmas, 15-year-old Ryan Klarner posted on Taco Bell’s Facebook page, introducing himself with a rundown of his swimming and diving achievements before making an offbeat request. “[I]s there any way you guys could make me a customized Speedo that says think outside the buns on the back of it? If you did, that would mean the world to me,” the Illinois teen asked...Klarner said he first came up with the idea a couple of years earlier and decided last month to go ahead and ask, even though he never had asked a company on Facebook for anything before. “I did not expect it to blow up as much as it has. I didn’t really expect to get the Speedo out of it, either,” he said. But last Wednesday, the social media team at Taco Bell wrote back. “What size do you wear? And what’s your address?” “He really wanted something and he went after it,” Tressie Lieberman, director of digital and social engagement, said. When we think people are really extraordinary...then we want to reward them.”

Opening Bell: 10.19.12

Schapiro SEC Reign Nears End With Rescue Mission Not Done (Bloomberg) Admirers and critics agree Schapiro rescued the agency from the threat of extinction when she was appointed by President Barack Obama four years ago. Still, she hasn’t fulfilled her mission -- to overcome the SEC’s image as a failed watchdog by punishing those who steered the financial system toward disaster and by proving regulators can head off future breakdowns. “It was harder than I thought it was going to be,” Schapiro, 57, said during an interview in her office that looks out on the Capitol dome. “You have this nice little box of things you want to do all tied up with a bow, and you walk in the door and it’s very hard to keep at least one eye on that agenda while you’re dealing with the flash crashes and the new legislation and the whole range of things that happened,” she said. Morgan Stanley CEO Hints Of Commodity Arm Sale (Reuters) Morgan Stanley has an obligation to explore "different structures" for its commodities trading business because new regulations are limiting the unit's activities, Chief Executive James Gorman said on Thursday. The CEO's comments were the first time Morgan Stanley has publicly hinted at a possible sale of its multibillion-dollar oil and metals trading arm, which has been reported in the media for months. Morgan Stanley has been in discussions with OPEC member Qatar for more than a year over the sale of at least a majority stake in its energy-focused trading business, according to bankers. Speaking on a conference call with analysts after the firm reported better-than-expected quarterly results on Thursday, Gorman said changes under the U.S.' Dodd-Frank financial reform law restrict the kind of trading the firm can do in commodities. Europe Agrees On Banking Supervisor (WSJ) European leaders early Friday agreed to have a new supervisor for euro-zone banks up and running next year, a step that will pave the way for the bloc's bailout fund to pump capital directly into banks throughout the single-currency area. John Paulson Doubles Down On Housing (WSJ) Hedge-fund manager John Paulson famously made nearly $4 billion in 2007 correctly betting that the housing bubble, fueled by the subprime mortgage market, would pop. Then the billionaire investor somewhat reversed course, arguing that the housing cycle had hit a low point. "If you don't own a home, buy one," he said in a 2010 speech at the University Club in New York. "If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home." So far, that bet has been a loser: The Wall Street tycoon lost about $3 billion personally in 2011, according to people close to the hedge-fund manager, speculating that the economy would recover faster than it did. But through the downturn Mr. Paulson—whose net worth is estimated to be around $11 billion, according to people familiar with his situation—continued his real estate spending spree. Over the last eight years, he has spent more than $145 million on six properties, including two estates in Southampton, N.Y., two properties near Aspen, Colo., and two residences in Manhattan, where he is based, according to public records. (He later sold one of the Southampton properties, for $10 million in 2009, a year after buying a larger estate nearby). In June, Mr. Paulson snapped up a 90-acre Aspen ranch and an adjoining property from Prince Bandar bin Sultan for a total of $49 million, according to public records, one of the highest prices ever paid for property in the area. Ben Stein: Taxes Are Too Low (Mediaite) Author and economist Ben Stein joined Fox & Friends on Thursday where he stunned the hosts after he called for raising the tax rates on people making more than $2 million per year. He said that he did not think that the United States simply had a spending problem, and cited the early post-war period as an example of a time when you could have high tax rates and high growth. “I hate to say this on Fox – I hope I’ll be allowed to leave here alive – but I don’t think there is any way we can cut spending enough to make a meaningful difference,” said Stein. “We’re going to have to raise taxes on very, very rich people. People with incomes of, say, $2, $3, $4 million a year and up. And then slowly, slowly, slowly move it down. $250,000 a year, that’s not a rich person.” Stein said that the government has a spending problem, but they also have a “too low taxes problem.” “With all due respect to Fox, who I love like brothers and sisters, taxes are too low,” said Stein. “That sounds like Bowles-Simpson,” said Gretchen Carlson. “It is Bowles-Simpson,” Stein replied. Should've Left That At Home, Teacher Is Told On Jury Duty (NYT) Damian Esteban was qualified to teach students at a specialized New York City high school, and had just been deemed reasonable enough to judge a man’s fate in a murder trial. But passing through the metal detectors at a Manhattan courthouse may have been too tough a test. Mr. Esteban, 33, was arrested on Wednesday as he returned from a break in a trial in State Supreme Court in Manhattan, David Bookstaver, a spokesman for the state Office of Court Administration, said. As Mr. Esteban, a teacher at the Williamsburg School of Architecture and Design in Brooklyn, passed through a metal detector at the courthouse, it beeped. A court officer, Laura Cannon, found the culprit to be a cigarette box in Mr. Esteban’s pocket. Upon opening the cigarette box, Ms. Cannon reported that she found a much bigger problem: 18 small bags of heroin. A Daunting To-Do List For Citigroup's New CEO (BusinessWeek) Citigroup’s largest problem may be internal. The company, analyst Richard Bove says, “is a political swamp. It’s a snake pit.” Cleansing the culture must be a priority, says Mike Mayo, an analyst at Crédit Agricole Securities. “So whether it’s the inappropriate pay for subpar performance; the lack of adequate disclosure, such as returns by business line; the failure to properly oversee the many different businesses; or the poor tone set at the top of the firm for corporate governance, they all add up to the need to improve the culture,” Mayo says. Cooling The Pits: ICE Yelling Ends (WSJ) Augustine Lauria knew his 37-year career as a floor trader was over when he got a memo from IntercontinentalExchange in late July announcing the closing of the exchange operator's last trading pits. Friday will be the last chance the 61-year-old trader will get to put on his navy-blue and yellow trading jacket and badge. It will be the final day of rough-and-tumble "open-outcry" commodities trading on the ICE-owned pits in lower Manhattan where options on cotton, coffee, cocoa, sugar and orange juice are bought and sold. "What can I do? I can count fast and yell loud," says Mr. Lauria, who boards the Staten Island Ferry before sunrise to get to work in time for the 8:10 a.m. bell. Amanda Larrivee Speaks Out about Incident at Samuel’s (ABC) Amanda Larrivee and her brother Robert Larrivee were arrested at Samuels Sports Bar Sunday for allegedly stealing TV’s from the bathroom. Now, the woman involved is speaking out about what happened that night and the “immature” remark made by her brother. The legal case against Amanda has been dropped, but a comment made by her brother is getting all the attention. He told police that the two were in the bathroom having sex. Amanda says that was not the case. “The comment was taken out of context and it’s not what it looks like,” said Larrivee...“I just want to come out and really let people know that it’s not what it looked like. It’s humiliating and the comment having sexual relations with my brother was an impulse, immature comment made by him that is not the truth,” said Larrivee. Amanda says Robert wasn’t trying to steal the TV’s, but was upset over seeing his ex-girlfriend. “He had an outburst at the time you know it turned into you know touching the TV on the wall, turned into an ugly scene,” said Larrivee. “He took the televisions down. He had no intention of stealing. He’s not walking out with two televisions,” said Attorney Jack St. Clair.

Opening Bell: 10.11.12

Fed Governor: Put Cap On Big Financial Firms (WSJ) In a Philadelphia speech, Fed governor Daniel Tarullo recommended curbing banks' growth by putting a limit on their nondeposit liabilities, which are sources of funding for operations that go beyond consumer deposits. The idea takes direct aim at the biggest U.S. banks, including J.P. Morgan, Bank of America, Goldman Sachs, and Citigroup, all of which rely heavily on such funding. Firms outside of this tier make much greater use of regular deposits. With Tapes, Authorities Build Criminal Case Over JPMorgan Loss (Dealbook) Federal authorities are using taped phone conversations to build criminal cases related to the multibillion-dollar trading loss at JPMorgan Chase, focusing on calls in which employees openly discussed how to value the troubled bets in a favorable way. Investigators are looking into the actions of four people who previously worked for the team based in London responsible for the $6 billion loss, according to officials briefed on the case. The Federal Bureau of Investigation could make some arrests in the next several months, said one person who spoke on the condition of anonymity because the inquiry was ongoing. The phone recordings, which were turned over to authorities by JPMorgan, have helped focus the investigation, the officials said. Authorities are poring over thousands of conversations, in English and French. They are also relying on notes that employees took during staff meetings, instant messages circulated among traders and e-mails sent within the group. Cyber Slips Boost Facebook's Ad Clicks (NYP) Facebook is suffering from fat-finger syndrome. That’s the opinion of one influential Wall Street analyst — bolstered by a growing body of research — who believes that some of the company’s recently touted mobile ad performance can be chalked up to accidental or fraudulent clicks. “Fat fingers” — when people click on an ad as they’re trying to click on something else — is an issue across the mobile Web as users try to navigate smaller screens, according to BTIG analyst Richard Greenfield. “People don’t have trouble with a mouse or touch pads,” Greenfield said yesterday. “But on mobile, when you’re gliding through on a touch screen, everything is touchable, and a lot of mistakes are happening.” JPMorgan CFO To Exit Post (WSJ) JPMorgan's chief financial officer is expected to step down over the next two quarters and is likely to move into a different job at the bank, people close to the company say. Douglas Braunstein, 51 years old, has been finance chief at the largest U.S. bank, by assets, since 2010. Before that, the longtime deal maker ran J.P. Morgan's investment-banking operations in North and South America and was heavily involved in the bank's acquisitions of securities firm Bear Stearns Cos. and the failed banking operations of Washington Mutual. Mr. Braunstein's status was diminished as part of an executive shake-up in July. Since then, he has reported to Matt Zames, 41, the company's co-chief operating officer, rather than Chairman and Chief Executive James Dimon. It isn't clear where Mr. Braunstein will decide to go within the bank, but the possibilities include J.P. Morgan's recently combined corporate and investment bank, these people said. He is expected to make his decision over the next quarter or two. Spain Lowers Rating On S&P (WSJ) The ratings company warned Wednesday that Spain's creditworthiness might continue to deteriorate as Madrid struggles to close a yawning budget gap, and said the Spanish government's "hesitation" to request a bailout from the European Union is "potentially raising the downside risks to Spain's rating." Brazil Cuts Rate for Tenth Straight Time to Bolster Recovery (Reuters) Brazil cut its benchmark interest rate for the tenth straight time to 7.25 percent on Wednesday, injecting extra stimulus into a languid recovery threatened by a worsening global economy. TSA screener accused of intentionally slapping flier's testicles (DJ) "A bulky young TSA agent came over to pat me down," Steven DeForest told the Huffington Post. "He told me to turn around. He was using his command voice, barking orders. I told him that I wasn't comfortable turning away from my luggage, which had already been screened, and wanted to keep it in my sight." According to deForest, the screener knelt down to begin the pat-down procedure before making a shocking move. "As he raised his hands he was looking at me. Then he gave a quick flick and smacked me in one of my testicles," deForest said. The episode left deForest in a state of "humiliation, rage, and frustration," according to the report. DeForest believes the agent slapped his gentials as punishment for refusing to enter the backscatter x-ray machine. "I was deliberately assaulted by someone who knew that he could get away with it," he stated. While the motives of the TSA screener cannot be confirmed, other agents have already admitted to performing invasive pat downs in order to force air travelers to choose the body scanners instead. JPMorgan's Dimon hits back at government over Bear Stearns suit (Bloomberg) During a wide-ranging hour-long discussion that went from the "fiscal cliff" to the impact of regulations, Dimon bristled when a member of the audience asked him if he now regretted participating with the government to rescue Bear Stearns in light of the lawsuit. "We didn't participate with the Federal Reserve, OK?" he said. "Let's get this one exactly right. We were asked to do it. We did it at great risk to ourselves ... Would I have done Bear Stearns again knowing what I know today? It's real close." Dimon went on to recount how he warned a senior regulator at the time of the deal to "please take into consideration when you want to come after us down the road for something that Bear Stearns did, that JPMorgan was asked to do this by the federal government." He added that JPMorgan, which will report its third-quarter earnings on Friday, will come out fine in the end. But if he is ever put in a similar position again, he said he "wouldn't do it." "I'm a big boy. I'll survive," he said. "But I think the government should think twice before they punish business every single time things go wrong." Australians World’s Wealthiest on Housing, Credit Suisse Says (Bloomberg) Australians have the world’s highest median worth and the Asia-Pacific topped Europe as the largest wealth-holding region, according to Credit Suisse. Australians have a median wealth per adult of $193,653, the Credit Suisse global wealth report showed, the highest of 216 countries surveyed. With plentiful land, sparse population, natural resources and high home prices, Australia’s proportion of individuals with wealth above $100,000 is the most of any country and eight times the world average, the report said. USADA says Lance Armstrong's Postal Service cycling team 'ran the most sophisticated, professionalized and successful doping program that sport has ever seen' (NYDN) The report describes an underground network of support staff -- smugglers, dope doctors, drug runners -- who kept Armstrong's illicit program in business. “The evidence is overwhelming that Lance Armstrong did not just use performance-enhancing drugs, he supplied them to his teammates,” USADA says of the embattled cyclist and cancer survivor. “He did not merely go alone to Dr. Michele Ferrari for doping advice, he expected that others would follow,” the report continued, referring to the physician who was banned by USADA for his role in cycling’s steroid scandal. Eleven former Armstrong teammates provided testimony against Armstrong, including respected veteran cyclist George Hincapie, whom Armstrong has described as his "best bro" in the peloton and competed with Armstrong during each of his Tour de France victories. “It was not enough that his teammates give maximum effort on the bike, he also required that they adhere to the doping program outlined for them or be replaced. He was not just part of the doping culture of his team, he enforced it and re-enforced it. Armstrong’s use of drugs was extensive, and the doping program on his team, designed in large part to benefit Armstrong, was massive and pervasive.”

Opening Bell: 01.14.13

Goldman May Delay UK Bonuses Until Top Tax Rate Falls (Reuters) Goldman Sachs is considering delaying bonus payments in the U.K. until after April 6, when the top rate of income tax in the country will drop to 45 percent, from 50 percent, a person familiar with the bank's operations said on Sunday. The strategy relates to bonuses that were deferred from 2009, 2010 and 2011, the person said. The Financial Times reported the news earlier today. JPMorgan Said to Weigh Disclosing Whale Report Faulting Dimon (Bloomberg) JPMorgan's board will consider releasing an internal report this week that faults Chief Executive Officer Jamie Dimon’s oversight of a division that lost more than $6.2 billion on botched trades, said two people with direct knowledge of the matter. The final report, which builds on a preliminary analysis released in July, is critical of senior managers including Dimon, 56, former Chief Financial Officer Doug Braunstein, 51, and ex-Chief Investment Officer Ina Drew, 56, for inadequately supervising traders in a U.K. unit that amassed an illiquid position in credit derivatives last year, the people said. The report, which isn’t complete, will be presented to the board when it meets tomorrow. The directors will then vote on whether to disclose it when the bank announces fourth-quarter results the following day, said the people, who asked not to be named because the report isn’t yet public. Morgan Stanley to trim Dubai staff amid global cuts (Reuters) "The Dubai cuts are part of the bank's global plan. Obviously, the bank is trying to focus on growth opportunities in the region and there has been little growth on the equities side barring Saudi," one of the sources said, speaking on condition of anonymity as the matter has not been made public. Morgan Stanley's equities business will now focus on Saudi Arabia, the source said, adding that planned cuts at other divisions in the Middle East were minimal. Hedge-Fund Leverage Rises to Most Since 2004 in New Year (Bloomberg) The rising use of borrowed money shows that everyone from the biggest firms to individuals is willing to take more risks after missing the rewards of the bull market that began in 2009. While leverage means bigger losses should stocks decline, investors are betting that record earnings and valuations 9.8 percent below the six-decade average will help push the Standard & Poor’s 500 Index toward the record it set in October 2007. “The first step of increasing risk is just going long, the second part of that is levering up in order to go longer,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a Jan. 8 telephone interview. “Leverage increasing in the hedge-fund area suggests they’re now getting on board.” Goldman: Insurer Knew Paulson Was 'Shorting' (WSJ) Goldman Sachs on Friday fired back at a bond insurer suing it over a soured mortgage-linked deal, arguing in a court filing that ACA Financial Guaranty Corp. "cherry-picked" evidence to bolster its case. ACA in 2011 filed suit against Goldman in New York State Court, alleging Goldman misled it about a 2007 mortgage deal. ACA alleges that Goldman told it that one of Goldman's hedge-fund clients, Paulson & Co., was betting on the deal, when in fact Paulson was betting against it, according to an amended complaint the insurer is seeking to file. Had ACA known Paulson's true position, it never would have insured the deal, according to the amended complaint. Goldman countered in the Friday filing that ACA insured the deal knowing Paulson was betting against residential mortgage-backed securities at the time. ACA analyzed and chose the investments in the deal and should have been alerted by various "red flags" that Paulson wasn't betting on the investment, according to the filing. Primate found to be addicted to porn (NYDN) Gina, a resident of the Seville Zoo in Spain, chose to solely watch adult entertainment channels when a television and remote control was placed in her enclosure. Primatologist Pablo Herreros, writing in Spanish newspaper El Mundo, claimed he made the discovery some years ago on a tour of the nation's chimpanzee enclosures. During his research trip he conducted surveys on the behavior of the animals. Herreros wrote, “What I could never imagine were the surprises prepared for me by a female of this species called Gina who inhabited Seville Zoo.” To enliven Gina's nights, officials apparently decided to install a television, protected behind glass, and gave her a remote control so she could change the channels herself. And enliven herself she did. “The surprise was when they found that within a few days, Gina was not only using the remote control perfectly well, but that she also used to choose the porn channel for entertainment, as many of us would have done, ” Herreros wrote. “Although a small study estimated that porn films are only watched for about 12 minutes on average, the truth is that human and non-human primates possess an intense sexual life.” AIG Sues New York Fed... To Secure Right To Sue Bank Of America (Reuters) American International Group Inc has filed a lawsuit against a vehicle created by the Federal Reserve Bank of New York to help bail out the insurer, in a bid to preserve its right to sue Bank of America Corp and other issuers of mortgage debt that went sour. The complaint filed in the New York State Supreme Court in Manhattan seeks a declaration that AIG has not transferred billions of dollars of "litigation claims" to Maiden Lane II, including many related to the insurer's $10 billion lawsuit against Bank of America. UK court approves ex-Credit Suisse trader's extradition to U.S. (Reuters) A British court on Monday approved the extradition of a former Credit Suisse trader to the United States, where he is wanted over a $540-million fraud dating back to the subprime mortgage crisis. The case of Kareem Serageldin will now be sent to Home Secretary Theresa May, the interior minister, who under British law has the final say over extraditions to the United States. She is expected to give the green light for the transfer to take place. Serageldin, 39, the Swiss bank's former global head of structured credit, is accused of artificially inflating the prices of mortgage-backed bonds between August 2007 and February 2008, when their real value was plummeting. Equities Bear Brunt of Wall Street Job Cuts on Volume (Bloomberg) Employees on stocks desks fell by 8.5 percent globally in the first nine months of last year, according to a survey by Coalition Ltd., an industry analytics firm. That compares with a 6.6 percent drop in fixed-income workers and a 5.8 percent decrease for origination and advisory functions, the data show. Banks Find Promise Unfulfilled in China Forays (WSJ) Global firms sold about US$44 billion worth of shares in Asian financial institutions in 2012 to institutional investors or other strategic buyers, up from US$32.7 billion in 2011, according to data provider Dealogic. The retreat is gathering pace as a host of new regulations, including the so-called Basel III capital rules, make holding minority stakes in financial institutions more expensive. Thousands Participate In Annual No Pants Subway Ride (CBS) Organizers arranged that starting at 3 p.m., people got on trains at six different stops across the city, took off their pants and put them into their backpack. Participants then acted as if everything was completely normal as they rode on to Union Square. Participants are asked to don typical winter wear such as coats, hats and gloves and act as if they don’t know other pantsless riders, according to organizers. The group said it was just all in good fun. “People are willing to give basically their Sunday afternoon to take off their pants; to do something silly and fun, and you know, a good time,” one participant said. “It makes you feel invincible; superior, because nobody else has any idea what’s going on,” another said. There were no-pants subway rides in dozens of cities in 17 countries Sunday. In New York City, participants were happy it was rather warm. In prior years, the cold has bummed them out.

Opening Bell: 08.16.12

No Criminal Case Is Likely In Loss At MF Global (NYT) A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives. After 10 months of stitching together evidence on the firm's demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case...In the most telling indication yet that the MF Global investigation is winding down, federal authorities are seeking to interview the former chief of the firm, Jon Corzine, next month, according to the people involved in the case. Authorities hope that Corzine, who is expected to accept the invitation, will shed light on the actions of other employees at MF Global. Standard Chartered's Deal Rankles Regulators (WSJ) Officials at the U.K. Financial Services Authority complained afterward to the New York regulator, which oversees Standard Chartered's U.S. unit, that the sudden move could have damaged the stability of the bank and that the lack of advance notice breached long-standing protocol among bank regulators, these people said. The New York case ended Tuesday when Standard Chartered agreed to pay the regulator $340 million to settle allegations it broke U.S. laws in handling transactions for Iranian customers...The New York office's success in pursuing a case without the help of the U.S. Justice Department and U.S. Treasury Department could embolden other state regulators, while adding to pressure on federal regulators who have been criticized for a perceived failure to confront large banks. "Holding a bank accountable for past misconduct doesn't need to take years of negotiation over the size of the penalty," said Sen. Carl Levin (D., Mich.). "It simply requires a regulator with backbone to act." Knight Puts Fate In Familiar Hands (WSJ) At about 9 p.m. on Aug. 1, Knight Chief Executive Thomas Joyce called Carlos Hernandez to seek emergency funding from J.P. Morgan, the lead bank on a primary credit line, to plug losses from errant trades caused by a software upgrade, according to people familiar with the conversation. Mr. Hernandez, J.P. Morgan's global head of equities, had just returned from business meetings in Mexico. "We've had these issues," the Knight chief, known as T.J., told his longtime acquaintance, the people said. "We're looking for help." J.P. Morgan executives have been on the receiving end of similar pleas for help in some of Wall Street's biggest meltdowns. Jobless Claims In U.S. Little Changed As Market Stable (Bloomberg) Jobless claims climbed by 2,000 to 366,000 in the week ended Aug. 11, Labor Department figures showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg News called for an increase to 365,000. The four-week moving average, a less volatile measure, dropped to 363,750, the fewest since the week ended March 31. Chocolate Losing To Cocaine On Colombia Cocoa Slump (Bloomberg) Cocaine is proving a more resilient commodity than chocolate in Colombia, the largest supplier of the narcotic to the U.S. Prices of cocoa beans, used to make chocolate, have dropped 40 percent this year in Colombia, South America’s third-largest supplier, as the cost of leaves processed into cocaine holds steady, according to data compiled by police and growers. Morgan Stanley Unit Fined Over Trader’s $1.3 Billion Bet (Bloomberg) Morgan Stanley Smith Barney, the brokerage venture of Morgan Stanley and Citigroup, was fined $450,000 after a trader amassed a $1.3 billion bet in 2009, Financial Industry Regulatory Authority records show. The brokerage didn’t have enough controls in place to detect that Jared Weinryt, 31, had breached his $116 million trading limit as he made overnight bets on futures, Finra said this month. The trades led to losses for Morgan Stanley Smith Barney of about $14.9 million, according to Finra. MF Global Trustee to Join Existing Suits Against Executives (WSJ) The move Wednesday by James Giddens could accelerate a morass of lawsuits that seek money from former MF Global executives, directors and other people accused in the suits of failing to protect customer money. As a result of the agreement, Mr. Giddens will give lawyers in those cases access to documents and other evidence gathered in his probe. Facebook Freeing 60% More Shares Seen Weighing On Stock (Bloomberg) Early Facebook investors such as DST Global Ltd., Goldman Sachs, Elevation Partners and Accel Partners get a green light today to start selling part of their holdings, Menlo Park, California-based Facebook has said in filings. That’s after the lifting of restrictions designed to prevent a flood of shares immediately after an IPO. The prospect of more stock sales means Facebook will need to work even harder to convince investors that it deserves a higher valuation, compared with earnings, than all but two of its closest competitors including Google. The shares freed up today make up only 14 percent of the 1.91 billion that will be available for sales in the coming nine months. “Buckle your seatbelts for the next couple of months until they make it through all these shares coming unlocked,” said Tom Forte, an analyst at Telsey Advisory Group in New York.

Opening Bell: 01.07.13

Regulators Give Ground To Banks (WSJ) Global banking regulators watered down a key element of their plan for creating a safer financial system, giving ground to banks that argued the rules were unworkable and financially risky. The Basel Committee on Banking Supervision, a group of the world's top regulators and central bankers, said Sunday that it agreed to relax a rule designed to ensure that big banks are able to weather financial crises without running short of cash. Bowing to two years of intense pressure from the banking industry, the regulators made it easier for banks to meet the rule, known as the "liquidity coverage ratio," and delayed its full implementation until 2019. It is the latest instance of regulators chipping away at their landmark 2010 response to the global financial crisis. The regulators argue that the changes make banking rules much stronger than they were before the crisis. Herbalifers Stay Resolute (WSJ) When hedge-fund manager William Ackman unveiled his 334-slide presentation alleging that Herbalife is a pyramid scheme, it did nothing to shake Joanne Clare. The 38-year-old Staten Island mother of three has been selling the company's weight-loss products and supplements since 2004, when she says they helped her drop from 210 to 160 pounds in four months. She now sells as much as $3,500 a month of Herbalife products to her 30 clients and the two distributors in her "down line." "People have always said it's a pyramid scheme, but it's not," Ms. Clare said, adding that the bulk of her earnings come from sales to clients, not her cut of her recruits' take. Mr. Ackman's declaration that he had bet more than $1 billion against Herbalife caused many investors to flee, sending the stock down 38% in four days in late December. But some of the company's 3.1-million-strong army of distributors were unmoved. Eliot Spitzer Ends His Show On Current TV (NYT) The announcement comes a few days after Al Jazeera said it was acquiring Current TV. Later this year, the Qatar-owned broadcaster plans to turn the channel into an Americanized version of the international news channel Al Jazeera English. Mr. Spitzer said he had a “wonderful time” at Current, but emphasized that his relationship was with Al Gore and Joel Hyatt, Current’s co-founders, not with Al Jazeera. “Moving forward, their mission will be different,” he said — more international newscasts, less liberal talk about the news. Citi's Corbat builds bridges (Reuters) Citigroup Inc's Michael Corbat has been meeting with bank regulators in his first months as CEO, as he looks to bolster relationships and finalize the bank's plan to return capital to shareholders, sources familiar with the matter said. Corbat also expects to name his team of top managers within the next week or so, one of the sources said on Sunday. Corbat is expected to play it safe when Citigroup asks the U.S. Federal Reserve for permission for moves such as buying back shares or increasing dividends, analysts and investors said. His predecessor, Vikram Pandit, lost his job in October in part because the bank's request for returning capital was denied in March. The bank, which is due to submit its plan to the Fed on Monday, has not yet done so, the source said. The third-largest U.S. bank will only seek approval to buy back shares and not raise dividends, the Wall Street Journal reported on Friday. Last year, the bank wanted permission to return more than $8 billion to shareholders over two years, the paper said. For Newly Minted MBAs, A Small Paycheck (WSJ) For graduates with minimal experience—three years or less—median pay was $53,900 in 2012, down 4.6% from 2007-08, according to an analysis conducted for The Wall Street Journal by PayScale.com. Pay fell at 62% of the 186 schools examined. Even for more seasoned grads the trend is similar, says Katie Bardaro, lead economist for PayScale.com. "In general, it seems that M.B.A. pay is either stagnant or falling," she says...It is all a far cry from the late 1980s and early 1990s heyday for M.B.A.s, when some companies would hire 100 or more M.B.A.s. It wasn't uncommon to recruit first, and fill actual jobs later. DOJ pledges to respect Swiss law in tax probe (Reuters) Swiss chief finance diplomat Michael Ambuehl was given a verbal pledge from the U.S. Department of Justice to respect Swiss law when asking for bank client data of potential tax dodgers, a newspaper reported on Sunday. Switzerland is in negotiations with U.S. authorities to find a deal that would end tax probes into at least ten Swiss banks suspected of helping clients dodge taxes, including Credit Suisse and Julius Baer. The Alpine country is trying to preserve what is left of its cherished banking secrecy that suffered a severe blow in 2009 when UBS, the first Swiss bank that came under scrutiny in the U.S., was required to disclose client data. Brazilian prison gaurds catch cat that slipped through the gate with escape tools taped to its body (NYDN) Guards at a Brazilian prison nabbed a white cat that slipped through the gate with a cell phone, drills, small saws and other contraband taped to its body. Alagoas prison spokeswoman Cinthya Moreno says the cat was caught New Year’s Eve at the medium-security prison in the city of Arapiraca. The O Estado de S. Paulo newspaper reported Saturday that all of the prison’s 263 inmates are suspects in the smuggling attempt, though a spokesperson said, “It will be hard to discover who is responsible since the cat does not speak.” Loeb, Cooperman Stand Out in Horrid Year for Hedge Funds (CNBC) Third Point was the clear hedge fund standout in a horrible year for the industry as almost nine out of 10 managers underperformed the S&P 500. Omega Advisors' Leon Cooperman also scored big. Loeb — once better known for his acerbic letters to CEOs — used an activist position in Yahoo and the contrarian buying of Greek bonds to drive the firm's flagship fund to a 21 percent gain in 2012. The firm's more-leveraged Ultra fund posted an even bigger 34 percent return...Cooperman's fund had a net return of 26 percent in 2012. Banks Zero In On Foreclosure Pact (WSJ) Banks were closing in on a $10 billion foreclosure-abuse settlement with regulators that could be announced as soon as Monday, according to people familiar with the talks. The settlement was nearly complete Sunday afternoon, the people said, after the Federal Reserve backed down on a demand for more compensation for consumers and other changes to the pact. Bankers threatened to walk away from the deal if the Fed's demand for an additional $300 million was included, a person briefed on the talks said. Junk Bonds' Fire Is Poised to Fade (WSJ) Junk bonds started 2013 much like they finished 2012—on fire. In just three trading days this year, bonds of low-rated companies delivered returns of almost three-quarters of a percent, even as most other types of bonds lost value. And junk bonds continued to clock new milestones: Average prices soared to their highest since 2004 and average yields, which decline as prices rise, dropped below 6% for the first time ever, according to Barclays. But the rapid march is making fund managers and analysts wary. Prices are now so high—averaging more than 105 cents on the dollar—that there is little room for them to climb much further, some investors say. These are lofty prices for bonds that usually trade below 100 cents, reflecting the higher default risk for such companies. At the very least, returns will pale in comparison with the 15% achieved in 2012, analysts and investors say. NHL, Players Settle Labor Dispute (AP) On the 113th day of a management lockout and five days before the league's deadline for a deal, the bleary-eyed sides held a 6 a.m. news conference to announce there will be a season, after all. NHL Commissioner Gary Bettman and union head Donald Fehr both appeared drained, wearing sweaters and not neckties, when they stood side by side at the hotel and announced labor peace. "We have reached an agreement on the framework of a new collective bargaining agreement, the details of which need to be put to paper," Bettman said. "We've got to dot a lot of Is, cross a lot of Ts. There's still a lot of work to be done, but the basic framework of the deal has been agreed upon." Hostess in Talks to Sell Off Bread Brands (WSJ) Hostess could disclose Flowers, Grupo Bimbo or others as opening bidders in a looming bankruptcy-court auction for the assets as soon as this week, said people familiar with the matter. Hostess, whose bread brands include Wonder Bread, Nature's Pride, Home Pride, Merita and Butternut, is still determining how to split up assets and package them for buyers, one of the people said. Gérard Depardieu gives up French citizenship after bitter tax fight (GM) In a fit of pique, French movie star Gérard Depardieu announced during the weekend that he would give up his citizenship after politicians and the media took him to task for moving to Belgium and avoiding an impending tax hike for the rich. Mr. Depardieu is not France’s first fiscal refugee but his high-profile door-slamming so monopolized public debate that Prime Minister Jean-Marc Ayrault had on Monday to parse whether or not he had insulted the actor. “I did not call Mr. Depardieu a loser, I said that it was loser-like [to move to Belgium to avoid taxes],” Mr. Ayrault told reporters...The “loser” comment seemed to have been the jab that stung Mr. Depardieu the most. “Loser, did you say loser?” the 63-year–old actor began an open letter to Mr. Ayrault that appeared Sunday in Le Journal du dimanche. Mr. Depardieu wrote that he had paid a total of €145-million in income tax in the last four decades and kept 80 people employed. He added that he had been taxed at a marginal rate of 85 per cent this year. “I am giving you back my passport and my social insurance, which I had never used. We no longer have the same fatherland. I am a true European, a citizen of the world.”