JPMorgan Pay Fueled Risk Amid London Whale Loss: Report (Bloomberg) JPMorgan, the biggest U.S. bank by assets, compensated chief investment office traders in a way that encouraged risk-taking before the unit amassed losses exceeding $6.2 billion, a Senate committee said. Pay that rewarded “effective risk management” would have suggested the synthetic credit portfolio functioned as a hedge, the Senate Permanent Subcommittee on Investigations said yesterday in a report on the New York-based bank’s so-called London Whale loss. Instead, compensation practices suggest the bets “functioned more as a proprietary-trading operation.” JPMorgan Report Piles Pressure on Dimon in Too-Big Debate (Bloomberg) Dimon misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet, according to a 301-page report by the Senate Permanent Subcommittee on Investigations. The bank “mischaracterized high-risk trading as hedging,” and withheld key information from its primary regulator, sometimes at Dimon’s behest, investigators found. Managers manipulated risk models and pressured traders to overvalue their positions in an effort to hide growing losses. Ina Drew Says Subordinates’ Deception at JPMorgan Let Her Down (Bloomberg) Ina Drew, who was forced to leave JPMorgan Chase amid a record trading loss last year, said she relied on other executives to manage a complex book of credit derivatives and didn’t learn of their “deceptive conduct” until after she left the company. “I was, and remain, deeply disappointed and saddened to learn of such conduct and the extent to which the London team let me, and the company, down,” Drew said in testimony prepared for delivery in the Senate today. Credit Suisse Banker Extradited To US (NYP) Former Credit Suisse banker Kareem Serageldin, the highest-ranking Wall Street executive to be charged for crimes tied to the mortgage meltdown, is coming home to face the music, The Post has learned. The 39-tear old Yale graduate was indicted by a Manhattan federal grand jury in February 2012 — along with two Credit Suisse colleagues — for allegedly covering up losses in a $3.5 billion toxic mortgage portfolio as the real estate market was collapsing in 2007. The UK’s Home Secretary Theresa May, who is responsible for Great Britain’s immigration and citizenship, signed off last week on the extradition of Serageldin, a person with knowledge of the case told The Post. Goldman Sachs, JP Morgan Hit (WSJ) The Federal Reserve Thursday dealt a blow to J.P. Morgan Chase and Goldman Sachs, citing weaknesses in their "stress test" capital planning that could hamper their funneling more dividends and share buybacks to investors. The central bank also denied capital plans submitted by BB&T Corp. and Ally Financial Inc. But the Fed at the same time cleared 14 other banks to boost payouts to shareholders, including Citigroup Inc. and Bank of America Corp., both of which in past years had capital requests rejected by the central bank. The Fed also approved a reduced repurchase plan from American Express Co., in the only instance of a bank winning approval for a plan resubmitted to the regulator under a new stress-test wrinkle this year. Mila Kunis Rotates From Cash to Stocks (CNBC) The star of films such as Ted, Friends With Benefits and the TV series That 70s Show told CNBC in London: "I've just started investing in stocks, which is new for me." "I'm an advocate of like put things in the bank, put it in a CD (a certificate of deposit), be safe. And I've been pushed kind of forward to take chances and then learning a little bit about the stock market and companies," she said. Abe Says Japan Will Join Trade Talks (WSJ) Japanese Prime Minister Shinzo Abe announced Friday that his country will take a seat at the negotiation table of the U.S.-led Trans-Pacific Partnership free trade negotiations, a move that may pit him against powerful farm lobbies ahead of upper house elections this summer. "This is our last chance to join the TPP and take part in the rule-making," Mr. Abe told reporters Friday at a news conference to mark his decision to join the talks. "For Japan to remain inward-looking means we are giving up on the possibility of growth." Stifel Agrees to Acquire Fixed-Income Group From Knight (Bloomberg) Knight’s European institutional fixed-income sales and trading team is also part of the deal, which includes about 100 people, Stifel said today in a statement, without disclosing terms. The group covers high-yield and investment-grade corporate bonds, asset-backed and mortgage-backed securities, emerging markets and fixed-income research. No 'Irrational Exuberance' in Stocks Now: Greenspan (CNBC) Greenspan said in a "Squawk Box" interview that stocks by historical standards are "significantly undervalued" even considering the recent moves higher. He added that the payroll tax increase didn't dent spending because of rising asset prices. Could Hungary Be Thrown Out of the EU? (CNBC) Hungary's increasingly aggressive moves against media, judiciary and central bank independence will be discussed by European Union heads of states on Friday, raising the possibility that Hungary could be thrown out of the EU. The European Union is concerned Hungary may be flouting EU rules on human rights, after its parliament voted this week to amend its constitution to allow legislation to bypass approval from the constitutional court. Hungary had defied calls from the European Commission to delay the vote. The Taco That Built 15,000 Jobs (ABC) It may take a village to raise a child. But all it takes to raise employment is a taco. That seems to be the situation at Taco Bell, anyway, which added 15,000 employees last year, company chief executive Greg Creed told the Daily Beast, largely on one new product. Creed attributes the success to Doritos Locos Tacos, which the company rolled out in March, 2012 and was the “biggest launch in Taco Bell history,” he told the Beast. Throughout 2012, the 170-calorie taco, whose shell is made from a nacho cheese Doritos in a collaboration with Frito-Lay, 375 million were gobbled up, which averages out to about one million per day. But why stop there? On March 7, it launched Cool Ranch Dorito Locos Tacos. The slogan? “Collect All Two.” “We believe we can add 2,000 new restaurants in the next 10 years, because what we have is proprietary and exclusive. Nobody else can make a Cool Ranch Doritos Taco. And that’s just in the U.S.,” Creed told the Beast. Creed was traveling today and unavailable to talk to ABC News, a spokesman said.

Merkel’s First Greek Crisis Visit Seen Sending Signal to Critics (Bloomberg) German Chancellor Angela Merkel will travel to Athens for the first time since Europe’s financial crisis broke out there three years ago, a sign she’s seeking to silence the debate on pushing Greece out of the euro. Merkel’s visit to the Greek capital Oct. 9 to meet with Prime Minister Antonis Samaras underscores the shift in her stance since she held out the prospect last year of Greece exiting the 17-nation currency region. “The meeting could mark the turning point to the Greek crisis,” said Constantinos Zouzoulas, an analyst at Axia Ventures Group, a brokerage in Athens. “This is a very significant development for Greece ahead of crucial decisions by the euro zone for the country.” Spain Finance Minister’s ‘No Bailout’ Remark Sparks Laughter (CNBC) “Spain doesn’t need a bailout at all,” finance minister Luis de Guindos said, straight faced and somber, as mirth spread throughout the audience (even de Guindos’ assistant interpreter couldn’t mask a smile). US Probes Credit Suisse Over Mortgages (Reuters) U.S. federal and state authorities are investigating Credit Suisse over mortgage-backed securities packaged and sold by the bank, people familiar with the probe said on Thursday. The Justice Department and the New York Attorney General are among those probing Credit Suisse's actions, according to the sources, who spoke on condition of anonymity. New Shuffle At JPMorgan (WSJ) Barry Zubrow, a trusted lieutenant of J.P. Morgan Chase Chief Executive James Dimon, is expected to give up his job as regulatory affairs chief in what would be the latest reshuffling to follow a multibillion-dollar trading blunder. The change is expected before year-end, said people close to the bank. It is possible the 59-year-old executive will remain with the company in an advisory role, these people added. More executive shifts also are possible. The chairman of the corporate and investment banking unit, Jes Staley, was recently in the running to become chief executive of British banking giant Barclays PLC, according to people close to Mr. Staley, but didn't get the job. He gave up day-to-day oversight of J.P. Morgan's investment bank in a July reorganization. J.P. Morgan declined to comment about Mr. Staley, and he couldn't be reached. Investors Back Away From 'Junk' Bonds (WSJ) The massive "junk"-bond boom is raising alarm bells among some large money managers, who warn the market is showing signs of overheating. So much money has flooded into the junk-bond market from yield-hungry investors that weaker and weaker companies are able to sell bonds, they say. Credit ratings of many borrowers are lower and debt levels are higher, making defaults more likely. And with yields near record lows, they add, investors aren't being compensated for that risk. India’s NSE Says 59 Erroneous Orders Caused Stock Plunge (Bloomberg) “India has joined the big league with this trading disaster,” A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte., which manages about $400 million, said by phone from Singapore. “It’s very surprising so many erroneous orders went through. Exchanges and regulators must be one step ahead as systems and technologies upgrade.” Halloween Horror Story: Case Of The Missing Pumpkin Lattes (WSJ) For Asher Anidjar, the arrival of fall isn't marked by turning leaves or a chilly breeze, but a steaming seasonal drink. Recently, though, when he headed to his local Starbucks for a Pumpkin Spice Latte, he left with a bitter taste in his mouth. They were out of the special sauce that gives the treat its distinctive autumnal flavor. "I just left, depressed," said Mr. Anidjar, a 26-year-old commercial real-estate analyst who lives in Manhattan. The drink crops up on the Starbucks menu annually for a limited time, and this year there has been an unusual run on the pumpkin batch. Thanks in part to a frothy dose of buzz brewed up by the Seattle-based coffee giant before the beverage's Sept. 4 debut, the craze has drained supplies at stores across the country. Baristas are hitting the street, searching for stashes of the flavored sauce at other stores. Customers denied their fix—which costs about $4 for a small cup, or "tall" in Starbucks speak—are tweeting about their dismay. "My world almost ended this morning when the local Starbucks told me they were out of Pumpkin Spice Latte," tweeted Jason Sizemore, 38 years old, of Lexington, Ky. Fed Seeks To Clarify Plans (WSJ) Since August 2011, the Fed has been saying it will keep short-term interest rates near zero until a particular date. Right now that date is mid-2015. The hope has been that these assurances would help hold down longer-term interest rates, as well as short-term ones, and thus boost spending and investment. But the Fed isn't happy with this approach. While central-bank officials believe the assurances have helped hold down long-term interest rates, they find the fixed date to be confusing, and they are looking at a new approach. The idea under consideration is to keep offering assurances of low rates, but tie those assurances to what is happening in the economy rather than a point on the calendar. Dave And Buster's IPO Plan A Bust (Bloomberg) Dave & Buster’s Entertainment, operator of 59 company-owned dining and gaming stores, withdrew its plans for a US initial public offering, citing market conditions. The company had sought to raise as much as $107.7 million. Black Swans In The Red Until Turmoil Hits (NYP) The Apocalypse has not arrived — but that hasn’t stopped some of the country’s wealthiest investors from betting on it. The investors, mostly pensions funds, hedge funds of funds and deep-pocketed individuals that were burned during the financial meltdown in 2008, are jumping into these so-called Black Swan investments that carry promised returns of up to 1,000 percent — if another financial Armageddon strikes. The Cassandras of the hedge-fund world that are offering these funds — also called tail risk funds and often with a geographic focus — would suffer terribly in the absence of disaster...The hot sector has attracted such well-known names as Saba Capital’s Boaz Weinstein, Hayman Capital’s Kyle Bass, Corriente Advisors’ Mark Hart, and Universa’s Mark Spitznagel...When markets are buoyant, of course the funds lose money. Through August, Saba Tail Hedge was down 16 percent, Pine River Tail Hedge had fallen 23 percent and Corriente Europe Divergence is down 24 percent, according to investors. Bass’s Japan short fund, which he launched two years ago, is down more than 60 percent since inception. By design, it will lose all of its investors’ money in three years if Japanese bonds don’t go into a tailspin. Bridezilla’s demanding email to potential bridesmaids: If you can’t commit, ‘you’re going to the wrong wedding’ (NYDN) One woman’s over-the-top email of demands to potential bridesmaids has gone viral since it was posted on Gawker.com. “You all have a big roll [sic] in this wedding, so before we continue I’m going to be setting some ground rules and it’s very important you read and think everything through before you accept this honor to be a bridesmaid,” the unnamed bride-to-be begins. If recipients don’t answer emails when outside the country, can’t attend every wedding-related event, or don’t have the cash for several flights and a bridesmaid’s dress, they might not make the cut. “If money is tight and you can’t afford to contribute to the bachelorette party or won’t be able to afford a dress, then [I] don’t have time to deal with that, I’m sorry,” the woman wrote. Of course, she’ll aim for what’s affordable, but, “If you think it’s going to be a $25 Forever 21 dress then you’re going to the wrong wedding.” The lucky bridesmaids must also be available — at any moment — between February and August. “If you don’t think you’ll be able to attend one party but can make the rest of them, I’m sorry, but I’ll have to take you out as a bridesmaid and put you as a guest,” the woman wrote. And please, don’t ignore phone calls. “I don’t have time to wait around for responses, everyone has their phone on them,” she wrote. “It shouldn’t take you more than a day to get back to me. Really think about everything I've said. This is really going to be the most epic wedding ever so I hope you girls can share this special day with us!"

Tidjane Thiam is your new Credit Suisse CEO; Hedge fund starts "litigation-finance" unit; People are nervous about Goldman vis-à-vis stress tests; "Bosses who love themselves"; "Foodie Banit" knocks over Hooters truck; AND MORE.

Why I Am Leaving Goldman Sachs (NYT) It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact. Stress Tests Buoy US Banks (WSJ) Stock prices reacted positively amid a spate of other upbeat economic news, including a robust retail-sales report and optimistic comments by Fed officials on the overall state of the U.S. economy. The Dow Jones Industrial Average ended the day up 1.7%, its highest close since December 2007. Asian markets opened trading on Wednesday higher, with Tokyo up 1.9%. The Fed's stress tests were designed to see whether banks would have enough capital on hand to keep lending even if another deep economic slump or financial crisis were to strike. It's the third round of stress tests: The first took place in 2009, in the immediate aftermath of the financial crisis. At that time, banks fared much more poorly. JPMorgan Dividend Surprises Investors, Irks Fed (Bloomberg) The bank’s disclosure prompted other lenders, including Wells Fargo & Co. (WFC), U.S. Bancorp and PNC Financial Services Group Inc. (PNC), to accelerate the disclosure of their dividend plans. It also irritated some staff at the Fed, which had planned to release the test results ahead of the industry, said one person familiar with the central bank’s operations who declined to be identified because the discussions were private. Pandit Repeats Moynihan’s Misstep as Citigroup Request Backfires (Bloomberg) Citigroup was the biggest U.S. lender yesterday to fail the regulator’s exam of capital levels in a hypothetical economic downturn because of the New York-based firm’s plan to boost dividends or stock repurchases. Bank of America, which had its payout request rejected last year, passed the 2012 test after Moynihan decided to keep his company’s dividend at 1 cent. “Pandit misread the situation badly, you just don’t ask for something if you don’t know you can get it,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management LLC, which oversees $540 million including Bank of America shares. “Moynihan was chastened by what happened last year, he absolutely wasn’t going to take any chances of getting rebuffed again.” Stress Tests Results Can't Be Trusted, Says Strategist (CNBC) "I think a lot of banks are still overstating assets and they haven't recognized problem loans, to the extent that they should have done and it's very difficult to trust numbers," Peter Elston, Asia Strategist at Aberdeen Asset Management told CNBC on Wednesday. Merkel Says Europe Is ‘Good Way’ Up Mountain, Not Over Yet (Bloomberg) “We’ve come a good way along the mountain path, but we’re not completely over the mountain,” Merkel told reporters in Rome late yesterday after talks with Italian Prime Minister Mario Monti. “I suspect that in the next few years there will continue to be new mountains -- there won’t be a celebratory event in which we say we’re over the mountain and now we can sit among the trees and say that we’ve done it.” Eurogroup Approves Second Greek Bailout (WSJ) The euro-zone countries Wednesday finally signed off on Greece's second bailout program, ending a protracted and dramatic negotiating process that started last July. The hope is that the €130 billion ($170.1 billion) package—funded mostly by euro-zone countries and the International Monetary Fund—will be enough to keep Greece funded until 2014-2015. But talk of a third Greek bailout has already started with the ink still wet on the second one, especially following a report by European Union experts highlighting the risks to structural-reform implementation and predicting "at best stagnation" for 2013. Greece has been in a recession for five consecutive years. Ex-Lehman Executive Jack’s $35 Million Estate Faces Tax Auction (BW) The $35 million estate of Bradley H. Jack, the former Lehman Brothers Holdings Inc. (LEHMQ) managing director who was arrested twice for allegedly forging drug prescriptions, may be sold at a municipal auction after he failed to pay property taxes since July. Jack owes $271,923 on his 20-acre (8-hectare), waterfront compound in Fairfield, Connecticut, according to town tax collector Stanley Gorzelany. It’s the town’s biggest overdue tax bill on a residence. A Public Exit From Goldman Sachs Hits at a Wounded Wall Street (NYT) To be sure, longtime bankers say it is not like short-term greed was absent in the past. It has been around since traders gathered under a buttonwood tree and founded the New York Stock Exchange in 1792. But the astounding size of Wall Street’s biggest firms — and the fortunes to be made — have altered the calculus. “I think there was plenty of skullduggery going on,” said Jerome Kohlberg Jr., who worked at Bear Stearns for 21 years before leaving to found Kohlberg Kravis Roberts in 1976 with Henry R. Kravis and George R. Roberts. Still, the trend has accelerated in recent years, according to Mr. Kohlberg. “When I first started on Wall Street, it was a small group and everyone knew everyone else,” he said. “If you stepped out of line, people would not do business with you.”

Credit Suisse Chief Takes Sharp Pay Cut (WSJ) Mr. Dougan's compensation more than halved to 5.8 million Swiss francs ($6.3 million) from 12.8 million francs a year earlier. Like all of Credit Suisse's top managers, he didn't get a cash bonus. While Mr. Dougan's base salary remained unchanged, his bonus, awarded in the form of deferred stocks, fell 69% to reflect the sharp drop in profits last year and the 41% drop in Credit Suisse's share price in 2011. SEC Probes Rapid Trading (WSJ) Federal securities regulators are examining whether some sophisticated, rapid-fire trading firms have used their close links to computerized stock exchanges to gain an unfair advantage over other investors, people familiar with the matter say. The wide-ranging probe, being handled by the enforcement staff of the Securities and Exchange Commission, is focusing on the computer-driven trading platforms of exchanges, including BATS Global Markets Inc., the people said. Fed’s Bullard Sees Price Threat From G-7 Delaying Tighter Policy (Bloomberg) U.S. monetary policy may be at a “turning point” and the Fed’s first interest-rate increase since the global financial crisis could come as soon as late 2013, Bullard said in a speech earlier today. That view contrasts with a debate among Fed policy makers on whether more stimulus is needed even after the U.S. economy accelerated and the unemployment rate fell. Bales Had Troubled Broker Career Before Allegations (Bloomberg) Robert Bales, the U.S. soldier suspected of shooting Afghan civilians, started selling community-bank stocks in 1996 as a 23-year-old driving a Chevy Cavalier. That may have been the peak of his financial career. Before Bales enlisted in the Army in 2001 after the Sept. 11 terrorist attacks, he worked at five firms in five years. After he left the industry, he was hit with a $1.5 million settlement for his role in swindling a couple out of more than $600,000 from their retirement account. “He wanted to be an investment adviser, and he had a plan as to how he was going to accomplish that,” said Robert K. Cargin, who hired Bales in September 2000 at Quantum Securities Corp. in Westerville, Ohio. “It just didn’t work out.” BofA Tests An Option To Foreclosure (WSJ) Borrowers would agree to a what is known as a "deed-in-lieu" of foreclosure, where they essentially sign over ownership of the property to the lender. This is less costly to the bank and also does less damage to a borrower's credit than a foreclosure. In exchange, former owners would be offered one-year leases with options to renew the leases in each of the following two years at rents that the bank determines are at or below the current market price. Borrowers would have to demonstrate an ability to pay the market rent. ‘Linsanity’ pot nipped in bud (NYP) The Knicks’ new superstar point guard’s legal eagles threw cease-and-desist orders at three California medical-marijuana dispensaries that were offering customers “Linsanity” weed...Two of the dispensaries discontinued the names and the other simply rebranded its grass “Insanity.” Skowron plans to appeal court’s ruling on $10.2M (NYP) Joseph “Chip” Skowron, the former FrontPoint fund manager now jailed for insider trading, plans to fight a judge’s ruling that he pay $10.2 million to his former employer, Morgan Stanley. Skowron’s attorney intends to appeal the ruling handed down Tuesday by Manhattan federal judge Denise Cote, Skowron’s spokesman, Montieth Illingworth, said. Illingworth also blasted Morgan Stanley’s plans to pursue another $33 million, which Cote denied in her decision. The bank, which owned FrontPoint when the scandal hit and clients fled, wanted a total of $45 million in victim’s compensation. UBS Sees ‘Earlier’ Fed Move; Barclays Sees Rates on Hold (Bloomberg) “We regard the trend toward higher yields as a healthy development,” Andrew Cates in Singapore and Larry Hatheway and Christine Li in London wrote in a UBS report yesterday. “It reflects a healing process in the U.S. economy and recognition that the Fed will be able to normalize monetary policy earlier than many envisage.” Investors should buy two-year Treasuries, Ajay Rajadhyaksha and Dean Maki, New York-based analysts at Barclays, wrote in a report yesterday. “We consider the recent rise in Fed hike expectations premature,” they wrote Obama To Tap Kim For World Bank Post (AP) President Barack Obama will nominate Dartmouth College President Jim Yong Kim to head the World Bank, a surprise pick for the international financial institution's top job, senior administration officials said.

Stress tests; The next Silicon Valley; Why you should lease a Rolls-Royce ; Emu on the loose; AND MORE.