Stress For Banks As Tests, Loom (WSJ) U.S. banks and the Federal Reserve are battling over a new round of "stress tests" even before the annual exams get going later this fall. The clash centers on the math regulators are using to produce the results. Bankers want more detail on how the calculations are made, and the Fed thus far has resisted disclosing more than it has already. A senior Fed supervision official, Timothy Clark, irked some bankers last month when he said at a private conference they wouldn't get additional information about the methodology, according to people who attended the event in Boston. Wells Fargo Treasurer Paul Ackerman said at the same conference that he still doesn't understand why the Fed's estimates are so different from Wells's. His remarks drew applause from bankers in the audience, said the people who attended. Bonus Round Is Over (NYP) Wall Street traders, among the best paid in financial circles, are facing another meager bonus season this year — at least by Street standards — after a rough 2011 saw bonuses slashed by as much as 30 percent. Although some groups will fare better than others, equity traders could see their prized bonuses shredded again in 2012 — by as much as 35 percent, according to recruiters and others. In addition to lower bonuses, Wall Streeters are likely to see less of the payout in cash and more in stock — with the stock facing longer deferral periods, one recruiter, Michael Karp, co-founder of Options Group, said. Deutsche Bank has already moved from three-year deferral periods to stricter five-year deferrals and it’s expected that other banks will follow suit. IMF Sees ‘Alarmingly High’ Risk of Deeper Global Slump (Bloomberg) The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said today, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a one-in-six chance of growth slipping below 2 percent. Depositors Turn Up Heat On Ailing Spanish Banks (WSJ) Eugenio Nuñez Cobás stormed into a bank branch in this coastal town one morning in August with three dozen fellow customers yelling "Thieves! Thieves! Thieves!" Then they returned to the street and pelted the facade with eggs, forcing the branch to close for the day. Athens Preparing for Anti-Austerity Protests Aimed at Merkel (Bloomberg) Greece’s capital will grind to a halt today for German Chancellor Angela Merkel’s first visit since the financial crisis began, with 7,000 officers deployed around Athens to prevent violence at planned protests. Authorities have declared entire sections of downtown off- limits, notably Prime Minister Antonis Samaras’s office, where the two leaders, will meet and the German embassy. Merkel is due to arrive at 1:30 p.m., around the same time as three separate protest marches gather in front of Parliament. Can Marissa Mayer Really Have It All? (NYM) When faced with a difficult decision, Mayer likes to create a spreadsheet. She went to Stanford as an undergrad, switching from pre-med to an esoteric major called “symbolic systems,” which is a mixture of philosophy, brain science, and artificial intelligence (anybody anywhere can do pre-med, she thought), and then continued on, getting an advanced degree in computer science. She entered the job market in the spring of 1999, at the height of the dot-com boom, and got more than a dozen offers—from several dot-coms, including Google (she interviewed with Page and Sergey Brin at a Ping-Pong table), and one from McKinsey & Co. “I like to do matrices,” she told NPR. “One option per line, different facets for each column. Salary, location, happiness index, failure index, and all that.” That spring, her matrix pointed her toward Google. “To my credit, I actually gave Google a hundred times more likely chance of succeeding than any of the other start-ups [from which she got offers], because I gave them a 2 percent chance of success. I gave all the other start-ups a .02 percent chance of success.” A Beacon For DC, By Ben Bernanke (WSJ) People decry the absence of leadership in Washington these days. My response: Look no further than the home-team dugout at Nationals Park. Under Manager Davey Johnson's confident, laid-back leadership, the Washington Nationals, defying all preseason conventional wisdom, have claimed the 2012 championship of the National League Eastern Division and the best regular-season record in Major League Baseball...Davey, who earned a degree in mathematics from Trinity University, is the epitome of the head-and-heart consensus. He was an early proponent of the use of statistical analysis in baseball decision-making, and it is clear in his tactical management of games that he is very conversant with sabermetric principles. He well understands, for instance, how to use statistics in determining lineups and pitcher-hitter matchups. At the same time, Davey is also really good at identifying and nurturing talent. Most strikingly, he has shown himself willing to sacrifice short-term tactical advantage for the long-term benefit of bolstering the confidence of a player in whom he sees great potential. He lets players play through slumps and gives pitchers who have gotten behind a chance to dig themselves out. His reasoning: Giving a promising player the opportunity the prove himself will often do more for the team in the long run than making an ostensibly better tactical decision in the short run—even if it costs the team a game or two. McKinsey casts gloomy eye on world banking (Reuters) Banks worldwide remain scarred by the 2007-2009 financial crisis and are years away from developing new business models that will produce sustainable profits, according to a new study. Despite progress in meeting regulators' requirements to build capital, revenue growth is slow, costs are rising and new competitors exploiting digital technologies are emerging, McKinsey & Co said in a report released on Monday evening. Obama's Next Fed Chief: Who Gets The Job If Obama Wins Second Term? (WaPo) The top contenders are: Ben Bernanke, Larry Summers, Janet Yellen, Roger Ferguson, Bill Dudley, Tim Geithner, and Don Kohn. Man Dies After Live Roach-Eating Contest In Florida (AP) The winner of a roach-eating contest in South Florida died shortly after downing dozens of the live bugs as well as worms, authorities said Monday. About 30 contestants ate the insects during Friday night's contest at Ben Siegel Reptile Store in Deerfield Beach about 40 miles north of Miami. The grand prize was a python. Edward Archbold, 32, of West Palm Beach became ill shortly after the contest ended and collapsed in front of the store, according to a Broward Sheriff's Office statement released Monday. He was taken to the hospital where he was pronounced dead. Authorities were waiting for results of an autopsy to determine a cause of death...None of the other contestants became ill, the sheriff's office said. There was no updated phone number listed for Archbold in West Palm Beach. "We feel terribly awful," said store owner Ben Siegel, who added that Archbold did not appear to be sick before the contest. "He looked like he just wanted to show off and was very nice," Siegel said, adding that Archbold was "the life of the party."

Obama Said Close to Choosing Lew for Treasury Secretary (Bloomberg) President Barack Obama may choose White House Chief of Staff Jack Lew to replace Treasury Secretary Timothy F. Geithner as soon as this week, according to two people familiar with the matter. The selection of Lew would trigger a White House shuffle for Obama’s second term as he replaces his chief of staff and moves senior aides into new roles, said the people, who requested anonymity to discuss personnel matters. While Obama hasn’t made a final decision to pick Lew, the president’s staff has been instructed to prepare for his nomination, said one of the people. Rescued by a Bailout, AIG May Sue Its Savior (NYT) The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal's high interest rates and the funneling of billions to the insurer's Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for "public use, without just compensation." Greenberg: 'Cadre' Hurt AIG (NYP) Maurice “Hank” Greenberg, former chief executive officer of American International Group, says in a soon-to-be-published book that the company was almost destroyed by overzealous overseers. The insurer was “ultimately taken over and run aground by a cadre of auditors, lawyers, outside directors, and government officials,” according to an excerpt of “The AIG Story” on Amazon.com’s website. JPMorgan’s Staley Quits to Join BlueMountain Hedge Fund (Bloomberg) ames E. Staley, the JPMorgan Chase executive who was once seen as a possible candidate to become chief executive officer, quit to join BlueMountain Capital Management LLC, a $12 billion hedge fund with close ties to the New York bank. Staley, who was at JPMorgan for more than 34 years, most recently as chairman of the corporate and investment bank, will become a managing partner and purchase a stake in BlueMountain, the New York-based firm said today in a statement. Proceeds from the stake sale will be invested in new infrastructure, technology and people, the firm said. “I’m very excited to be joining BlueMountain at a time when sea changes in the financial industry combined with the firm’s unique strengths open up enormous possibilities to deliver value to clients,” Staley, 56, said in the statement. HSBC N.J. Client Admits Conspiracy in Offshore Tax Case (Bloomberg) A New Jersey client of HSBC Holdings pleaded guilty to charges that he hid as much as $4.7 million through Swiss and Indian accounts not declared to the U.S. Internal Revenue Service. Sanjay Sethi, 52, who owns SanVision Technology Inc., conspired with HSBC bankers in New York, London and Geneva to hide assets from the IRS, he admitted yesterday in federal court in Newark, New Jersey. Sethi will pay a $2.37 million penalty for failing to file reports required for foreign accounts. “Sethi and his co-conspirators used nominee and shell companies formed in tax-haven jurisdictions and elsewhere to conceal the defendant’s ownership and control of assets and income from the IRS,” according to his charging document. Bill Ackman Says Just Getting Started Exposing Herbalife (Bloomberg) “We’re prepared to spend whatever it costs and do whatever is required to make sure that the world understands the facts about this company,” he said in a telephone interview. “We can’t imagine how the SEC or the Federal Trade Commission or any other relevant regulator will ignore what we have said.” Ackman said he would make all his information available to U.S. regulators. Chinese Tech Titans Eye Brazil (WSJ) The Chinese like emerging markets because, for a change, they don't have to start way behind established American companies. By moving into Brazil aggressively, Chinese PC maker Lenovo Group and Internet-search company Baidu hope to gain an edge over companies like Hewlett-Packard and Google In addition, some U.S. companies that are leaders at home and in Europe have a smaller footprint here because of Brazil's long history of protectionism and red tape and its high cost of labor, particularly compared with Asia. Oregon brewer Daniel Keeton creates nutritional, non-alcoholic brew for his dog (NYDN) Oregon man Daniel Keeton enjoys serving beer to customers at the brewery he works for, so why shouldn't he serve up some healthy brew for the dog he cares about? The dog brew is non-alcoholic of course, but it is a big hit with Keeton's canine Lola Jane. And now Keeton's special brew is available to anyone who wants it. After years of planning, Keeton launched his company Dawg Grog over the summer. Keeton, who works at Boneyard Brewery in Bend, says Dawg Grog is good for the dogs, and they can't seem to get enough of it. "Bend is a dog-loving community and a beer-loving community," Keeton told the Daily News on Monday. "I wanted to marry those two together in some way." Keeton spent years refining the ingredients to his special brew, which includes low-sodium vegetable broth, water and spent grain from Boneyard Brewery. "After a couple of years of trying recipes I came up with one that I am really happy with, and one that my dog is really happy with," he said. Secret Goldman Team Sidesteps Volcker After Blankfein Vow (Bloomberg) MSI wagers about $1 billion of the New York-based firm’s own funds on the stocks and bonds of companies, including a mortgage servicer and a cement producer, according to interviews with more than 20 people who worked for and with the group, some as recently as last year. The unit, headed by two 1999 Princeton University classmates, has no clients, the people said...The team of about a dozen people, based at the firm’s Manhattan headquarters, is headed by Daniel Oneglia and Geoff Adamson. Oneglia was treasurer of the Princeton eating club Tiger Inn, where his nicknames included “the Don” and “the Weasel,” according to the university’s website. Adamson was coxswain for men’s heavyweight varsity crew. A Boston Globe photo shows teammates flinging him into a Massachusetts lake after a victory. Carlyle Bags $4 Billion Profit From China Insurance Exit (Reuters) Private equity firm Carlyle Group sold its remaining stake in China's No.3 insurer CPIC in a deal valued at $793 million, exiting the business with its largest dollar profit on an investment. After several stake sales in the past two years, Carlyle will finish with a total profit of more than $4 billion, five times the $800 million it invested in CPIC between 2005 and 2007 for a 17 percent stake, Thomson Reuters calculations show. By private equity standards, where making two times cash paid and a few hundred million is considered a success, the CPIC exit is an historic deal for Carlyle. London Quantitative Hedge Funds Report Second Year of Losses (Bloomberg) The performance of the funds belies their popularity with investors, who’ve poured $108.2 billion into the pools since the end of 2008, according to Fairfield, Iowa-based BarclayHedge Ltd. While quants made money during the financial crisis when other hedge funds didn’t, they’ve since stumbled as market sentiment swung from optimism to pessimism following political announcements in Washington and Brussels, breaking up the trends they try to follow. That may force investors to withdraw money. Japan Executives Warn Yen May Get Too Weak (WSJ) The executives, who gathered at an annual New Year's reception held by Japan's three biggest corporate lobbies, praised Prime Minister Shinzo Abe's new government for its proposals to boost the economy and tame the strong yen, which erodes exporters' profits and makes it harder to sell Japan-made goods overseas. But they also cautioned that if the economy stays weak, or if the government doesn't take steps to get its bloated finances under control, investors could lose confidence in Japan and flee, sending the yen into free fall. KFC diner stumbles upon strange brain-like organ in his meal (TS) Disgusted Ibrahim Langoo was tucking into a Gladiator box meal when he spotted what he thought was a “wrinkled brain” inside a piece of chicken. KFC have apologised and, after having the photographs analysed, reckon the unsightly organ may in fact be a kidney. The 19-year-old took a photograph of the three-inch stomach-churning discovery on his mobile phone and complained to staff. Apologetic bosses at the fast-food chain – known for its Finger Lickin’ Good slogan – have now offered him vouchers for even more KFC meals.

Wall Street Is Leaderless In Fight Over Rules As Dimon Star Fades (Bloomberg) “What you’re seeing in the financial-services industry is a lack of any kind of credible statesmen,” said Rakesh Khurana, a management professor at Harvard Business School in Boston. Dimon’s diminished ability to defend the industry publicly “basically leaves a vacuum,” he said. That means the industry is without an advocate to resist the most vigorous onslaught of regulations since Congress separated investment and commercial banking with the Glass- Steagall Act in 1933. Buffett's Move Raises A Red Flag (WSJ) The Omaha, Neb., company recently terminated credit-default swaps insuring $8.25 billion of municipal debt. The termination, disclosed in a quarterly filing with regulators this month, ended five years early a bullish bet that Mr. Buffett made before the financial crisis that more than a dozen U.S. states would keep paying their bills on time, according to a person familiar with the transaction. Thiel Sells Large Facebook Stake (WSJ) In a filing Monday, Mr. Thiel disclosed that he sold 20.1 million Facebook shares, and distributed another 2.2 million shares to investors, as part of a selling plan known as a 10b5-1 plan that he agreed to in May. The sales leave him with about 5.6 million shares. Mr. Thiel sold the most recent tranche of Facebook stock for an average of $19.73 a share late last week, netting him about $395.8 million. Had he sold the 20.1 million shares at the time of the IPO—when the stock price was $38—it would have been valued at $762 million. Secret Libor Committee Clings To Anonymity After Rigging Scandal (Bloomberg) Every two months, representatives from the world’s largest banks meet at an undisclosed location to review the London interbank offered rate. Who sits on the British Bankers’ Association’s Foreign Exchange and Money Markets Committee, the body that governs the benchmark for more than $300 trillion of securities worldwide, is a secret. No minutes are published. The BBA won’t identify any members, saying it wants to protect them from being lobbied, and declined to make the chairman available for interview. Man wielding sword in Dairy Queen dies after being shot by employee (LVJR via Eater) A masked man wielding a sword tried to rob a central valley Dairy Queen on Sunday afternoon but was shot and killed by an employee, Las Vegas police said. Homicide Lt. Ray Steiber said that although rare, robbery attempts with swords have occurred in the Las Vegas Valley. "I've seen it before," Steiber said. "It's a deadly weapon in the right hands, and preliminarily, it appears he was using it as a deadly weapon." A second police official, Lt. Les Lane, described the sword as "full size" and more than "3 feet." Swiss Bankers Fume Over Privacy (WSJ) Since this spring, Swiss banks have provided U.S. officials with the names of thousands of their employees, as they seek to fend off any criminal prosecution over allegations that they helped Americans evade taxes. The handover, which initially didn't attract much attention in Switzerland, has become a major controversy over employees' personal privacy, undermining morale at Credit Suisse Group and the private-banking unit of HSBC Holdings, among others. Many of the employees whose names were sent to Washington aren't suspected of having helped Americans evade taxes. In addition, many were never told that their names were being turned over; in other cases, they were told but not allowed to review the documents sent that contained their names. UBS Seeing Moat Of Secrecy Run Dry Vows Results (Bloomberg) Chief Investment Officer Alexander Friedman, 41, aims to build an investment management business that’s “better than any other” for the $1.58 trillion of assets that wealthy clients entrusted UBS, he said in an interview at the bank’s headquarters in Zurich. Investment performance is “a deep moat -- that’s a sustainable moat if you build it right,” he said. Deustche Bank Warns Of Australian Recession (WSJ) FYI. Soros Takes A Piece Of Manchester United (AP) Soros disclosed in a regulatory filing on Monday that he owns 7.85 percent of Manchester United's Class A shares. The filing with the U.S. Securities and Exchange Commission was made by Soros' hedge fund, Soros Fund Management LLC. Scientists dispel 'Miserable Monday' myth (BBC) We may say we hate Mondays, but research suggests Tuesdays, Wednesdays and Thursdays are equally loathed. US investigators who looked at a poll of 340,000 people found moods were no worse on Mondays than other working days, bar Friday.

Bond Trading Revives Banks (WSJ) Gains in the financial firms' fixed-income businesses, which can account for as much as half of revenue, are putting companies including Goldman Sachs Group Inc., Morgan Stanley and the J.P. Morgan unit of J.P. Morgan Chase & Co. on track to report their strongest numbers since the first quarter of 2011, said bankers and analysts. Trade Fight Flares on China Minerals (WSJ) The Obama administration Tuesday intends to escalate its trade offensive against China, a move heavy with political overtones, by pressing the World Trade Organization to force the export giant to ease its stranglehold on rare-earth minerals critical to high-tech manufacturing. The announcement, which will be made by President Barack Obama, marks a new front in the administration's election-year effort to turn up the heat on China, amid competition from the president's potential Republican rivals on the matter. It could also pressure China to respond to the WTO on an issue that is of high importance to a range of manufacturers. The U.S., joined by the European Union and Japan, plans to ask the WTO, the international arbiter of trade practices, to open talks with China over its restrictions on exporting the rare-earth minerals, administration officials said. New York City Tops Global Competitiveness, Economist Report Says (Bloomberg) New York City ranks first among 120 cities across the globe in attracting capital, businesses and tourists, according to an Economist Intelligence Unit report commissioned by Citigroup. London was the second most-competitive city, followed by Singapore, with Paris and Hong Kong tied for fourth place, according to the report, which was released today. Among U.S. cities, Washington, Chicago and Boston made the top 10. The report cited New York’s diverse economy, driven by media, arts, fashion, technology and finance. In 2010, New York was second only to California’s Silicon Valley as a source of venture capital in the U.S., according to the report. Ex-Lehman exec arrested again (Stamford Advocate) Bradley H. Jack, a former investment banking chief at Lehman Brothers and an owner of the most expensive residential property in Fairfield, has been charged for the second time in less than a year with forging a prescription for a controlled substance. Jack, 53, of North Avenue, was charged Friday by Westport police with second-degree forgery in connection with an incident last November when he is said to have forged the date of a prescription for a controlled substance at a CVS pharmacy that was made out to him by a Fairfield doctor. Euro-Zone Ministers Press Spain for a Deal on Deficits (WSJ) Euro-zone finance ministers on Monday pressed a budget plan on Spain—regarded as a key test of ambitious new rules for the currency bloc—that would allow the government some leeway on its budget deficit for this year but would keep a tough deficit target for 2013. The plan would mean Spain would still have to embark on a bruising austerity program over the next two years that would cut nearly 6% of gross domestic product off its deficit. The program would be particularly challenging given Spain's contracting economy and 23% unemployment rate, Europe's highest. Ministers said after the meeting that Spain had agreed to consider the proposal. Greek Students Fight Stray Dogs and Despair Amid College Cuts (Bloomberg) Higher education in Greece, as in much of Europe, has been battered by the recession and austerity measures. Budget cuts of 23 percent since 2009 mean buildings aren’t heated in the winter, schools have slashed faculty salaries and newly hired professors can wait more than a year to be appointed. Students say it’s hard to be hopeful with youth unemployment surpassing 50 percent and protesters seizing university buildings. “People are pessimistic and sad,” said Konstantinos Markou, a 19-year-old law student, speaking in a lobby at the University of Athens, where dogs fought nearby and students say drug dealers and users congregate. “The sadness is all around the air.” Entire Arena Football team cut during pregame meal at Olive Garden (YS) The owner of the Pittsburgh Power fired all 24 members of his team during a pregame meal at an Orlando-area Olive Garden. With AFL players set to strike before the 2012 season opener, owner Matt Shaner reacted first, cutting his entire team hours before kickoff of a game against the Orlando Predators. "Mid-statement, all the players got up and left," former Power center Beau Elliott told the Pittsburgh Tribune-Review. "Every player got up and left while he was still talking. There were 15 to 20 angry, large individuals." Tainted Libor Guessing Games Face Replacement by Verified Trades (Bloomberg) The London interbank offered rate, the benchmark for $360 trillion of securities, may not survive allegations of being corrupted unless it’s based on transactions among banks rather than guesswork about the cost of money. “The methodology used to formulate Libor is totally unsuitable for the modern world,” said Daniel Sheard, chief investment officer of asset manager GAM U.K. Ltd., which manages about $60 billion. “The British Bankers’ Association needs to come out on the front foot and say ‘this is a system that was appropriate 20 years ago but is no longer appropriate and we are going to change it.’” SEC set to file charges over private trading (FT) The Securities and Exchange Commission is close to filing civil charges tied to the trading of private stocks against at least three executives, making it the first case since regulators began reviewing secondary markets more than a year ago. The fresh scrutiny comes as Congress weighs laws to loosen restrictions on private trading, allowing private groups to have more shareholders and market their stock to a wider range of investors, to make it easier for start-up companies to raise capital and create jobs. It also comes just months ahead of an expected initial public offering for Facebook, which has been the most heavily traded private stock. Ruth Madoff Moves To Greenwich (Greenwich Time) While some Old Greenwich residents said they did not like the idea of Madoff taking up residence in the neighborhood, others shrugged off the news that Madoff was living in town. Neil Lucey, a semi-retired investment banker who has lived in Old Greenwich for 15 years, said he had "no adverse reaction" to hearing Madoff had moved in. Researchers say long-lost Leonardo may have been found (Reuters) Art researchers and scientists said on Monday that a high-tech project using tiny video probes has uncovered evidence that a fresco by Renaissance master Leonardo da Vinci lost for five centuries may still exist behind a wall of Florence's city hall...Researchers used tiny, medical-style endoscopic probes and other high-tech tools inserted through existing cracks in the outer wall holding the Vasari fresco and took samples of substances. "We found traces of pigments that appear to be those known to have been used exclusively by Leonardo," said Maurizio Seracini, an engineer and expert in art diagnostics who has been on the trail of the "Lost Leonardo" for three decades. "These data are very encouraging," he said, adding that one black pigment found was believed to be of the same type used by Leonardo on the Mona Lisa.