Opening Bell: 10.26.12

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Citi Chairman Is Said to Have Planned Chief’s Exit Over Months (NYT)
Vikram Pandit’s last day at Citigroup swung from celebratory to devastating in a matter of minutes. Having fielded congratulatory e-mails about the earnings report in the morning that suggested the bank was finally on more solid ground, Mr. Pandit strode into the office of the chairman at day’s end on Oct. 15 for what he considered just another of their frequent meetings on his calendar. Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his. The abrupt encounter, described by three people briefed on the conversation, included a terse comment by the chairman, Michael E. O’Neill: “The board has lost confidence in you.” A stunned Mr. Pandit chose to resign immediately. Even though Mr. Pandit and the board have publicly characterized his exit as his decision, interviews with people close to the board describe how the chairman maneuvered behind the scenes for months ahead of that day to force Mr. Pandit out and replace him with Michael L. Corbat, the board’s chosen successor. Once he became chairman this year, Mr. O’Neill, 66, meticulously built a case for the chief executive’s ouster, they say, first meeting privately with less-satisfied board members and then drawing in others until Mr. Pandit had virtually no allies left.

9 More Banks Subpoenaed Over Libor (WSJ)
The subpoenas, which were issued in August and September but haven't been previously reported, bring the total number of subpoenas in the case to 16. The banks involved in the probe include most members of the panel that helps set the dollar London interbank offered rate. The investigation by the state prosecutors is part of a global probe, in which more than a dozen federal and other regulators across three continents are looking into allegations that several banks rigged Libor. The nine banks that received subpoenas in August and September were: Bank of America, Bank of Tokyo Mitsubishi UFJ, Credit Suisse, Lloyds Banking Group, Rabobank Groep NV, Royal Bank of Canada, Société Générale, Norinchukin Bank and West LB AG, according to the person familiar with the investigation.

CEO Dead Pool (Bronte Capital)
The job is to pick CEOs of large companies (more points for larger companies) who will in the next 18 months either be sacked or forced to resign in disgrace. Extra points if the CEO had a fine reputation or if the company was very large. Double-points if you can predict the thing that causes the disgrace. [People who play this game get very interested in which CEOs are having affairs whilst espousing moral-conservative values...] This game is a way of telling which hedge-fund managers really know the companies and management they are invested in. For us it is work - but it has a nice non-monetary way of keeping score. It is highly equalizing between the lowly analyst and the big-name manager. (Some managers excuse their lack of specificity by complaining that there are just too many candidates...) This is a formal invite for suggestions/entries.

Credit Suisse Seeks To Run Exchange (WSJ)
Daniel Mathisson, Credit Suisse's U.S. stock-trading chief, has held preliminary talks with federal securities regulators and policy consultants, according to people involved in the discussions. Mr. Mathisson and other bank executives confirmed the talks. The Swiss bank's plan centers on a trading platform called Light Pool, started last year. Light Pool is small, handling just a fraction of 1% of average U.S. daily stock-trading volume.

Hedge Fund Boxers Bloodied Amid Bikini Models in Hong Kong (Bloomberg)
“It was just so quick,” said Danielle “Steely” Midalia after defeating Andrea “Glynn- sanity” Glynn in the only women’s bout at last night’s sixth annual Hedge Fund Fight Nite in Hong Kong. “You have no time to think, you just have to rely on your training and what your corner men tell you,” the creative manager at The Cat Street Gallery said, red-faced and covered with sweat just minutes after the bout that had bloodied her and her rival’s noses. “In some ways it was easier than training -- as they say, train hard, fight easy.” The pair, 12 other pugilists, and 600 guests were greeted by bikini-clad models and black-tie waiters bearing trays of beer and wine at the Indian Recreation Club in Happy Valley. Festivities opened when four women in hooded boxing robes stepped into the ring, stripped off to reveal red bikini tops and hot pants, and began a choreographed dance routine under multicolored strobe lights.

Lawyer Denounces Wiretaps In Appeal Of Galleon Case (Dealbook)
A lawyer for the former hedge fund manager Raj Rajaratnam asked a panel of federal appeals court judges on Thursday to set aside his conviction, arguing that the government had used deceptive methods to obtain permission to wiretap his cellphone. The lawyer, Patricia A. Millett, told the judges that the government’s application to a federal judge seeking authorization to secretly record Mr. Rajaratnam’s conversations had been riddled with problems. “You had cascading errors, paragraph after paragraph after paragraph,” she said, arguing before the United States Court of Appeals for the Second Circuit in Manhattan.

A tale of money, sex and power: The Ellen Pao and Buddy Fletcher affair (Fortune)
Amid this embarrassing turn of events for Fletcher, Pao dropped a bombshell that would introduce even more scrutiny into their family life. On May 10, three weeks after the judge ordered her husband to liquidate one of his funds, Pao filed her jaw-dropping lawsuit against Kleiner, which became public 12 days later. Salacious tidbits in Pao's complaint included her acknowledgment that she had "succumbed" to Ajit Nazre's sexual advances "on two or three occasions" and that Pao had knowledge of "another female junior partner" who had been harassed by Nazre. She also claimed that Book of Longing, given to her by Randy Komisar, a senior Kleiner partner, contained "many sexual drawings and poems with strong sexual content." In its response to Pao's allegations, Kleiner said she had "twisted facts and events" to make a harmless gift seem menacing.

Hang Up the Phone, Swaps Traders (WSJ)
Swaps trading is one the last bastions of Wall Street where brokers arrange deals over the phone. That clubby way of doing business could go the way of the rest of Wall Street, where trading takes place on computers, under a roughly 500-page draft set of rules designed to push the market away from the opaque world of over-the-counter, phone-based trading, into more transparent electronic venues. Swaps trading is one the last bastions of Wall Street where brokers arrange deals over the phone. That clubby way of doing business could go the way of the rest of Wall Street, where trading takes place on computers, under a roughly 500-page draft set of rules designed to push the market away from the opaque world of over-the-counter, phone-based trading, into more transparent electronic venues.

Court Returns Stolen Cash To Bank Robbers (ON)
An Austrian court has ordered a bank robber be given back £51,000 that he stole 19 years ago. Bank manager Otto Neuman stole £150,000 in cash as well as gold bars and gold coins from his own branch in 1993. After getting into financial difficulties, he recruited two accomplices to stage a fake robbery at the Erste Bank in Vienna's Doebling district. By the time police caught up with them, only £51,000 and the gold could be recovered. The rest of the money had gone. The gold went to the insurance company which had already paid the bank for its loss but the cash has been sitting at the Austrian Justice Ministry ever since. Neuman's lawyer, Herbert Eichenseder, confirmed he been recently been contacted by court officials and asked to help return the stolen money to his client. The bank felt it had no claim on the money because it had been compensated in full by its insurance company. And the insurers said they didn't want it as they had not lost out either. They stolen gold had increased in value so much that it covered all of the money paid to the bank. Mr Eichenseder said: "I really didn't believe what the court were telling me but I checked it and it was correct.

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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. 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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. 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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.”

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