Opening Bell: 10.02.13

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More Pain Looms For Banks (WSJ)
New troubles are piling up for U.S. banks as they prepare to release third-quarter results amid warnings of weak trading revenue, a sharp decline in mortgage-refinancing activity and rising legal costs. Analysts are scrambling to ratchet down earnings estimates ahead of the reports. J.P. Morgan Chase and Wells Fargo are slated to post results on Oct. 11, with Citigroup, Bank of America, Morgan Stanley, and Goldman Sachs due to weigh in the following week. Poor results could prompt additional job cuts and worsen the already downcast mood on Wall Street, bankers and recruiters said. "I haven't seen morale this bad since the Titanic," said Richard Stein, a senior recruiter at Caldwell Partners who specializes in financial services.

Shutdown Bars Statue of Liberty Testing Monk’s Serenity (Bloomberg)
As a Buddhist monk, Ashon Nyanuttara suppresses anger and frustration. Even so, he said he was disappointed on arriving in New York’s Battery Park yesterday only to learn that Statue of Liberty tours were canceled. “This is no good for public, especially tourists,” said Nyanuttara, 30, who is visiting from Myanmar, or Burma. “This is an American symbol. The government should keep it open.” The closures upended tourists’ plans and forced about 800,000 federal workers to take unpaid time off until the impasse is resolved. The partial shutdown will cost the nation at least $300 million a day in lost output, according to IHS analysts.

Behind Standoff, A Broken Process In Need Of A Broker (WSJ)
The weeks of public wrangling between House Republicans and Senate Democrats that led to a government shutdown Tuesday lacked one element typical of previous showdowns: actual negotiations. Unlike in earlier standoffs, the two sides haven't engaged in tense, closed-door talks, nor has an unexpected savior swooped in to jump-start stalled conversations, as Vice President Joe Biden and Senate Republican Leader Mitch McConnell did late last year. Instead, the debate has unfolded in a volley of partisan bills. On Tuesday, there were few signs the posturing would end, with no formal talks scheduled and no obvious indications of who, if anybody, might step forward to bridge the differences.

Mark Cuban Charms Insider Trading Jurors (NYP)
One juror seated at the federal court skirmish called the 55-year-old businessman a “nice guy,” a second said she was “impressed” at how he stood up for his beliefs, while a third said he was “leaning” towards Cuban’s version of events based on what he already knew about the case.

Bartiromo Cited In Divorce (NYP)
Maria Bartiromo could be called as a witness in the nasty divorce of ex-Citigroup honcho Todd S. Thomson, who famously offered the Money Honey a ride on his corporate private jet, sparking rumors of an affair. Thomson — who was Citigroup CFO for five years CEO of Citigroup’s Global Wealth Management Division until he took CNBC doyenne Bartiromo to a 2007 event in Asia on Citi’s jet and then was fired — is in the middle of a bitter divorce with his wife of 25 years, ­Melissa, with whom he has three children. The Wall Street Journal reported at the time that Thomson, now founder and CEO of Manhattan-based private equity firm Headwaters Capital, bumped execs from the return flight so he might fly back alone with Bartiromo, bankrolled Citi functions and TV shows that featured her, and named the glamorous TV anchor to a board he created inside his alma mater, Wharton business school. Thomson insisted in 2007 that his relationship with Bartiromo, who is married to Jonathan Steinberg, was “appropriate.” But Page Six can now exclusively reveal that a Connecticut court has granted his wife Melissa permission to depose Bartiromo, 46, stating that “certain facts which are in issue, or which directly assist in proving the Plaintiff’s [Melissa’s] case, are within the knowledge or power of [Bartiromo].” Papers filed in Stamford, Conn., by Melissa’s lawyers claim that in April this year, Todd admitted to her “a base, immoral and disreputable act he had committed, and the sight of the Defendant [Todd] now disgusts and traumatizes the Plaintiff.” It is not believed this “act” refers to Bartiromo.

Jaguars mascot loses bet, gets pelted with 40 paintballs (WTSP)
Given the winless Jacksonville Jaguars' standing as the unquestioned worst team in the NFL, it stands to reason that mascot Jaxson DeVille should refrain from betting on his team. And yet, for some reason, the Jaguars' mascot agreed to a wager with the Indianapolis Colts' mascot that the loser of Sunday's game would stand 10 yards in front of a paintball gun and be pelted with the number of paintballs equal to the total points scored. Since the Jaguars lost 37-3, Jaxson DeVille was forced to withstand 40 paintballs - and withstand 40 paintballs he did.

New York To Sue Wells Fargo Over Mortgage Settlement (NYT)
Fielding complaints from borrowers struggling to save their homes, New York's top prosecutor is preparing a lawsuit against Wells Fargo, accusing the bank, the nation's largest home lender, of flouting the terms of a multibillion-dollar settlement aimed at stanching foreclosure abuses. The lawsuit, which is expected to be filed as early as Wednesday, accuses Wells Fargo of violating the guidelines of a broad agreement reached last year between five of the nation's largest banks and 49 state attorneys general.

Shutdown may idle non-federal workers next week (CNBC)
The federal government shutdown is already affecting contractors and threatens to dampen private-sector employment, at least in the near-term, industry officials say. Twenty-nine percent of contractors say a shutdown would cause them to delay planned hiring, and 58% said it would have a negative effect on their businesses, according to a survey of 925 contractors this week by the National Association of Government Contractors.

European Central Bank Holds Steady on Rates (NYT)
The European Central Bank left its benchmark interest rate unchanged at a record low Wednesday, but it was likely to be keeping a wary eye on political turmoil in the United States.

Alex Rodriguez tells panel he was duped into taking steroids (NYDN)
According to a source with knowledge of Rodriguez’s ongoing arbitration hearings, the embattled Yankee and his lawyers have presented a case based partly on the idea that Rodriguez believed the substances he procured from the Biogenesis anti-aging clinic were innocent legal supplements.

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IMF Says Recovery Remains Fragile (WSJ) "An uneasy calm remains," IMF chief economist Olivier Blanchard said. "One has the feeling that any moment, things could well get very bad again." Worst Yet to Come as Crisis Rescue Cash Ebbs, Deutsche Bank Says (Bloomberg) The worst may be yet to come in the global financial crisis as the central bank spending that kept defaults low runs out, according to Deutsche Bank AG. Credit-default swap prices imply that four or more European nations may suffer so-called credit events such as having to restructure their debt, strategists led by Jim Reid and Nick Burns said in a note. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments including Spain and Italy jumped 26 percent in the past month as the region’s crisis flared up. “If these implied defaults come vaguely close to being realised then the next five years of corporate and financial defaults could easily be worse than the last five relatively calm years,” the analysts in London said. “Much may eventually depend on how much money-printing can be tolerated as we are very close to being maxed out fiscally.” BNY Mellon Profit Falls as Record-Low Rates Cut Returns (Bloomberg) Net income fell to $619 million, or 52 cents a share, from $625 million or 50 cents, a year earlier, BNY Mellon said today in a statement. Analysts (BK) had expected the New York-based company to report a profit of 51 cents a share, according to the average of 15 estimates in a Bloomberg survey. Flat BlackRock Profit Tops Forecasts (WSJ) BlackRock reported a profit of $572 million, or $3.14 a share, compared with a year-earlier profit of $568 million, or $2.89 a share. Stripping out one-time items, per-share earnings rose to $3.16 from $2.96 a year ago. Revenue slipped 1.4% to $2.25 billion. Analysts expected earnings of $3.04 a share on $2.23 billion in revenue, according to a poll conducted by Thomson Reuters. Paulson Goes Short on German Bunds (FT) Paulson told investors in a call on Monday that he was betting against the creditworthiness of Germany, regarded in markets as among the safest sovereign borrowers, because he saw the problems affecting the euro zone deteriorating severely, said a person familiar with his strategy. Guy With Spreadsheet of Match.com ‘Prospects’ Says He Was Just Trying to Be Organized (Jezebel, earlier) "I work with spreadsheets a lot," he said. "It's a great additional tool. I work long days, go to the gym, go out on a couple of midweek dates or what not, get home late...how am I going to remember them? I'm not. So I made the spreadsheets. My comments aren't malicious or mean. This was an honest attempt to stay organized." He said he sent the spreadsheet to his date because "she works with spreadsheets a lot too" and she "seemed like a very sweet girl." Italy Puts Back Balanced Budget Goal by a Year (Reuters) Italy will delay by a year its plan to balance the budget in 2013 due to a weakening economic outlook, according to a draft document due to be approved by the cabinet of Prime Minister Mario Monti on Wednesday. The draft Economic and Financial document (DEF), which has been obtained by Reuters, raises the budget deficit forecasts for 2012-2014 and slashes this year's economic growth outlook. Bank of America Faces Bad Home-Equity Loans: Mortgages (Bloomberg) Bank of America, whose home- equity mortgage portfolio exceeds its stock market value, probably will say about $2 billion of junior loans are bad assets tomorrow even as some borrowers are still paying on time. That’s what Barclays Capital estimates the bank will report in its first-quarter results, following decisions by JPMorgan Chase, Wells Fargo and Citigroup to reclassify $4.1 billion of junior liens as nonperforming. In Facebook Deal For Instagram, Board Was Little Involved (WSJ) On the morning of Sunday, April 8, Facebook Inc.'s youthful chief executive, Mark Zuckerberg, alerted his board of directors that he intended to buy Instagram, the hot photo-sharing service. It was the first the board heard of what, later that day, would become Facebook's largest acquisition ever, according to several people familiar with the matter. Mr. Zuckerberg and his counterpart at Instagram, Kevin Systrom, had already been talking over the deal for three days, these people said. Negotiating mostly on his own, Mr. Zuckerberg had fielded Mr. Systrom's opening number, $2 billion, and whittled it down over several meetings at Mr. Zuckerberg's $7 million five-bedroom home in Palo Alto. Later that Sunday, the two 20-somethings would agree on a sale valued at $1 billion.

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Global Banking Under Siege as Nations Tighten Local Rules (Bloomberg) Regulators want to curtail risks exposed after global banks such as New York-based Citigroup, Edinburgh-based Royal Bank of Scotland and Zurich-based UBS took bailouts in the biggest financial crisis since the Great Depression. Forcing lenders to dedicate capital and liquidity to multiple local subsidiaries, rather than a single parent, may undermine the business logic of a multinational structure. “Being big and spread out all over the world isn’t what it used to be,” said Mayra Rodriguez Valladares, managing principal at New York-based MRV Associates, which trains bank examiners and executives at financial firms. “You’ll see global banks jettison divisions abroad and at home.” Paulson Said to Blame Bet Against Europe for Most of Loss (Bloomberg) John Paulson, manager of $20 billion in hedge funds, told investors that the bulk of his losses this year came on bets that the European sovereign-debt crisis would worsen, according to a person familiar with the matter. Paulson, speaking to clients at his firm’s annual meeting yesterday in New York, said he has reduced those positions following European Central Bank President Mario Draghi’s comments in July that the ECB was committed to preserving the euro, said the person, who asked not to be identified because the meeting was private. Paulson said in a February letter to investors that the euro was “structurally flawed” and would eventually fall apart. In April, the founder of New York-based Paulson & Co. told clients he was wagering against European sovereign bonds and buying credit-default swaps on European debt, or protection against the chance of default. No Payback For Singer This Year (NYP) Paul Singer’s last-ditch attempt to get cash from Argentina this year has failed. A motion by Singer’s hedge fund, Elliott Management, requesting that the South American country put up a security deposit of $250 million by Dec. 10 was denied by a federal appeals court yesterday. “Since we will not have a big payment for ages (if ever), this looks like a huge blow to [Elliott’s] strategy,” said sovereign-debt expert Anna Gelpern. In Tax Fight, G.O.P. Seeks a Position to Fall Back On (NYT) Senator Olympia J. Snowe of Maine, who is retiring, joined a handful of other Republicans on Tuesday suggesting that Congress should pass the middle-class tax cut extensions now, then leave the fight over taxes and spending until later. Americans, she said, "should not even be questioning that we will ultimately raise taxes on low- to middle-income people." Congress could take that off the table "while you're grappling with tax cuts for the wealthy," she said. But any move toward compromise with Democrats on fiscal issues quickly comes under attack from conservatives as a surrender and unsettles the rank-and-file. It is a dynamic that has haunted Speaker John A. Boehner throughout the 112th Congress, as he has repeatedly been caught between the imperative to govern and the need to satisfy the restive right. Mr. Boehner, of Ohio, has drawn fire this week for removing a handful of House Republicans who have defied the leadership from their preferred committee seats, a step he took to enforce party discipline. Fed to launch fresh bond buying to help economy (Reuters) The Federal Reserve is set to announce a fresh round of Treasury bond purchases when it meets next week, avoiding monetary policy tightening to maintain support for the weak U.S. economy amid uncertainty over the looming year-end "fiscal cliff." Many economists think the U.S. central bank will announce monthly bond purchases of $45 billion after its policy gathering on December 11-12, signaling it will continue to pump money into the U.S. economy during 2013 in a bid to bring down unemployment. Merkel Wins Party Reelection, Eyes Third Term (Reuters) Merkel, at the height of her popularity, was returned unopposed as CDU chairwoman with 97.9 percent of votes from delegates who stood and applauded her for nearly eight minutes after she lauded Germany's economic resilience in the euro crisis and promised to fight for jobs and prosperity. McAfee Emerges From Hiding in Guatemala (FT) John McAfee, the antivirus software entrepreneur, has revealed that he has fled to Guatemala from Belize where he is wanted for questioning in relation to a murder. Posting on his website on Tuesday, the US citizen and multimillionaire said: "I apologize for all of the misdirections over the past few days . . . I am in Guatemala." His emergence closes one chapter in a bizarre chain of events that started last month when police in Belize, where Mr McAfee has lived for the past four years, discovered the dead body of Gregory Faull, the owner of a house close to Mr McAfee's main property on the island of Ambergris Caye. Mr McAfee - who Belize considers "a person of interest" in the murder investigation - fled, going into hiding and insisting on his innocence. He said he ran from the police because he believed that the Belize authorities were out to kill him. In response, Dean Barrow, the prime minister, said: "I don't want to be unkind to the gentleman, but I believe he is extremely paranoid". Mr McAfee revealed his location on Tuesday after a hacker called Simple Nomad disclosed his whereabouts by analyzing a mobile-phone photograph taken of McAfee on Monday that was posted on the internet. In a second blog post late Tuesday titled "the new fight", Mr McAfee said he had asked Telsforo Guerra, a former attorney-general of Guatemala, to help uncover what he claims is deep-rooted corruption in Belize. Separately, he told Reuters that Mr Guerra was trying to help him obtain political asylum in Guatemala, even though Belizean authorities have not charged him. EU Banks To Repay Cheap Loans (WSJ) Nearly a year ago, hundreds of European banks borrowed a total of more than €1 trillion ($1.3 trillion) from the European Central Bank as it scrambled to defuse an escalating crisis. Today, in a sign of the industry's partial healing, some of Europe's biggest banks are preparing to repay those loans. The push to repay the loans, however, has generated concerns that banks are moving prematurely and could be vulnerable if the euro-zone crisis intensifies again. The ECB activated the emergency loan program—known as the long-term refinancing operation, or LTRO—late last year, doling out two batches of inexpensive loans that are good for three years. Banks are permitted to repay them starting next month. Euro Crisis Feeds Corruption as Greece Slides in Rankings (Bloomberg) The European debt crisis has given way to a new wave of corruption as some of the most hard-hit countries in the turmoil have tumbled in an annual graft ranking, watchdog group Transparency International said. Greece, in its fifth year of recession and crippled by rounds of austerity, fell to 94th place from 80th -- ranking it below Colombia and Liberia, according to the group’s Corruption Perceptions Index. Ireland, Austria, Malta and Italy were also among member states in the single currency to slide. Moynihan: No Stress (Bloomberg) Bank of America CEO Brian T. Moynihan said the firm has plenty of capital and he’s confident it will pass the next US stress tests. “The question will be what to ask for and when, because we’re not going to fail this,” Moynihan said yesterday at a New York investor conference sponsored by Goldman Sachs. Moynihan, 53, is renewing efforts to win approval to raise the company’s dividend or repurchase shares after the Federal Reserve blocked an earlier request. Fed Filcher Gets Timeout (NYP) Bo Zhang, a Chinese-citizen computer programmer who worked for a contractor at the New York Fed, was sentenced to six months of home confinement for stealing Treasury Department software. Snake on a plane forces emergency landing (CNN) ...the incident forced the pilot to make an emergency landing in the Egyptian resort town of Al Ghardaqa on the Red Sea, according to The Jordan Times. An Egypt Air official told the paper an investigation revealed that a 48-year-old passenger, who owns a reptile shop in Kuwait, had hidden the Egyptian cobra in a carry-on bag. The passenger was trying to control the snake after it bit his hand and started slithering under the seats. The Egyptian daily al-Masry al-Youm reported that the man refused medical treatment, claiming his wound was only superficial. The plane resumed its flight to Kuwait after local authorities confiscated the snake. Doctors told the passenger he should spend 24 hours in a hospital for observation, but the man refused, the Egyptian Air official said, according to The Jordan Times.