Presidential Policy vs. Fed Policy on Jobs

Mitt Romney said Thursday night that, if elected president, he would create millions of jobs. On Friday morning, the Federal Reserve chairman, Ben S. Bernanke, said that the Fed’s policies may have helped create millions of jobs since the financial crisis.

So who actually has the most power to create jobs today — the president, or the Fed chairman? The answer to that question tells us whether we now live in the age of democracy, or the age of the central bank.

In an important speech at Jackson Hole, Wyo., on Friday, Mr. Bernanke explained why he thought the Fed’s unorthodox policies had worked.

Usually after an economic shock, the Fed just cuts its key interest rates to revive the economy. But after 2008, it did far more. To help credit flow in the economy, it has also purchased $2.75 trillion of bonds, in effect printing money to do most of that buying.

The jobs impact from these may have been substantial, Mr. Bernanke said. The first two round s of bond buying may have increased private sector employment by two million jobs, according to a study he cited.

Sounds impressive. But it’s nothing next to the 12 million jobs Mr. Romney said that he could create with a plan that includes skills training, school choice, trade agreements and lower taxes for business. “What America needs is jobs,” he said. “Lots of jobs.”

Mr. Bernanke, in contrast, didn’t sound at all confident about the near-term ability of politicians to generate economic growth, and as a result, jobs. The big disagreements in Congress over the budget constitute a daunting economic headwind, he said.

But Mr. Bernanke doesn’t have to wait for democratic machinations to play themselves out. He said Friday that the Fed was ready to do more to support the economy and sustain job growth.

The important point is that he doesn’t have to contend with matters like legislation and Congressional votes. Not only can he act more or less at will, he also has the freedom to act with unbelievable force.

It’s something he did in the depths of the financial crisis. Almost single-handedly, Mr. Bernanke was able to get an additional $1 trillion pumped into the economy, something a politician can only dream of. This is how David Wessel describes it in his book, “In Fed We Trust”:

The Fed, it was increasingly clear, could and would act when the political system was frozen. Even in the face of strong political resistance to more taxpayer money to rebuild the banking system, Bernanke demonstrated that the Fed was neither paralyzed nor out of ammunition: he pressed the F.O.M.C., the committee of Fed governors and regional Fed bank presidents, to increase the cap on Fed purchases of mortgage-backed securities from $500 billion to $1.25 trillion and, for the first time in the Great Panic, to okay the purchase of $300 billion of longer-term Treasury debt securities.

In other words, if the study he cited Friday is correct, Mr. Bernanke himself was deeply instrumental in creating over a million jobs.

Something similar is now going on in Europe. The European Central Bank, under its president, Mario Draghi, has recently taken a more aggressive stance in its efforts to bring down the borrowing costs of nations like Spain and Italy. It has had a lot of success, perhaps more success than politicians’ policies to do the same.

Mr. Bernanke and Mr. Draghi are no doubt uncomfortable about the power they now have in relation to politicians. And they probably cannot wait for the day when they can go back to tinkering with monetary policy at the margins. The danger, however, is that the economy becomes dependent on the huge central bank stimulus. The longer it remains, the more the power of the Fed increases, perhaps at the expense of democratically elected politicians.

For 100 years, the main cohesive force in most Western countries was the government people voted for. That cohesive force now has a rival – the central bank.

Week in Review: Tracking the Deal Makers Outside of Tampa

Barclays is moving to restore its reputation by overhauling its culture. We explained the trouble with closed-end mutual funds that invest in start-ups and provided analysis of a deal that helped one of the nation’s bigger regional banks catch up in capital.

A look back on our reporting of last week’s highs and lows in finance.

Carlyle to Buy DuPont Unit for $4.9 Billion | The private equity firm agreed to buy the maker of automotive paints as its drumbeat of acquisitions continues, Evelyn M. Rusli reported. But “the business, which has about 35 plants worldwide, is heavily exposed to the weak European economy.” DealBook ‘

Maker of Air-Conditioners in Japan Is Said to Buy Rival | Daikin Industries agreed to buy Goodman Global from Hellman & Friedman for about $3.7 billion, Michael J. de la Merced reported. The private equity firm began shopping Goodman around early last year. DealBook ‘

News Analysis: Deal Helps a Bank Catch Up in Capital | Pet er Eavis explains that Buffalo-based M&T Bank‘s $3.7 billion acquisition of Hudson City, a struggling mortgage lender, shows a bank well below regional peers in important capital ratios. DealBook ‘

Best Buy Will Open Books for Founder | The two parties agreed that Richard Schulze “would have to wait until January to make a second offer if the board rejected his first formal proposal,” Mr. de la Merced reported. DealBook ‘

Hertz and Dollar Thrifty Announce a Merger Deal | “Both companies now believe that, with a concrete plan to sell Advantage, the [$2.3 billion] deal will be blessed by the Federal Trade Commission,” Mr. de la Merced reported. DealBook ‘

Barclays Picks One of Its Own as Chief | “The selection signals a return to the British banking roots of Barclays, as it aims to bolster its credibility,” Ben Protess reported. DealBook ‘

By selecting Antony Jenkins, Barclays seemed to steal a line from the comedy series “Mo nty Python”: “And now for something completely different.”

In a Contrast, Yelp Shares Jump After a Lockup Period | It appears that the social media company’s early investors decided to stick with their holdings, Ms. Rusli reported. The stock got an added boost from short-sellers. When the stock rose, they had to cover their positions. DealBook ‘

Tapping the Market for Start-Ups, a Fund Falters | Closed-end mutual funds are feeling the Facebook blues. “When the public offering of the social network flopped, [GSV Capital Corporation] fell hard, and it still has not recovered,” Randall Smith reported. DealBook ‘

Max Wolff, who tracks pre-I.P.O. stocks at GreenCrest Capital Management, said GSV sometimes bought “popular names to please investors.”

“This is such a sentiment-sensitive space, the stocks don’t trade on fundamentals,” Mr. Wolff said, adding, “If there’s a loss of faith, they fall without a net.”

Far From Wall St. and Silicon Valley, a Focus on Family Ties | The billionaire hedge fund manager David Einhorn is backing a venture capital firm in Milwaukee run by his brother and their father, William Alden reported. DealBook ‘

“This isn’t Silicon Valley, where you’re almost encouraged to fail a couple times, and your next opportunity is in walking distance,” said Daniel Einhorn.

Citigroup Settles Lawsuit Over Subprime Securities | The bank agreed to pay $590 million to settle a class-action lawsuit brought by shareholders contending that they had been misled about the bank’s exposure on the eve of the financial crisis, Jessica Silver-Greenberg reported. DealBook ‘

S.E.C. Proposes Allowing Hedge Funds to Advertise | “Critics fear that loosening restrictions could also leave some investors open to fraud if unscrupulous money managers are allowed to appeal to the least sophisticated among them,” Azam Ahmed reported. DealBook ‘

Reprieve for New York Fed in House Inquiry of Libor | Congress has eased demands that the agency turn over thousands of documents, steering clear of e-mails from bankers and granting the regulator an additional month to comply, Mr. Protess reported. DealBook ‘

Deal Professor: Humanitarian Effort in Congo Puts Wall St. Regulator in Unintended Role | Stephen M. Davidoff says that the problems with the Securities and Exchange Commission‘s rules covering conflict minerals could be manifold. DealBook ‘

Not surprisingly, having your capital markets regulator engage in foreign policy may not be the best solution to ending a war.

Pepper Hamilton to Acquire Louis Freeh’s Firms | The deal “highlights the growing business of investigations into possible wrongdoing at companies and other institutions, an increasingly lucrative area for law firms,” Peter Lattman reported. DealBook ‘

American Airlines Parent to Open Books to U.S. Airways

FORT WORTH, Texas and TEMPE, Ariz., Aug. 31, 2012 /PRNewswire/ — AMR Corporation (“AMR”), the parent company of American Airlines®, and US Airways Group, Inc. (NYSE: LCC) today announced that they have entered into a non-disclosure agreement (“NDA”), under which the companies have agreed to exchange certain confidential information and, in close collaboration with AMR’s Unsecured Creditors Committee, to work in good faith to evaluate a potential combination. 

The companies do not expect to provide any further announcements regarding the status of any such discussions unless and until the parties have entered into a transaction or discussions between the parties have been terminated. Furthermore, AMR and US Airways have each agreed while they are evaluating a potential combination that they and their representatives will not engage in discussions with other parties concerning a potential combination of AMR and US Airways. The companies noted that there can be no assurance that a transaction will result from these discussions.

SOURCE AMR Corporation

Can Square Remain Hip?

It’s not exactly a hip question right now. But what exactly is Square?

Excitement is building around the payments company, which is led by Jack Dorsey, Twitter’s co-founder. It’s close to raising $200 million of new capital, and Starbucks said in early August that it was going to use Square’s technology.

Disappointed by Facebook and Groupon, technology industry watchers at least have hope for Square. It’s easy to see how nifty card readers and other innovations can make payments much easier for small businesses and their customers. Meanwhile, the Starbucks deal raises the prospect that other large retailers may partner with Square.

But it may too early to anoint Square as the firm that will lead us into a cashless society. The main issue with Square is that it’s not yet clear what it wants to be.

Yes, on the surface, it’s a company that provides payments to hardware and software to merchants. But it may struggle to achieve burgeoning profits from t he payments fees paid by merchants, according to an analysis of the economics of those payments.

Square is almost certainly working to develop a much bigger revenue source. The success of that will likely determine the success or failure of Square.

As innovative as Square is, it cannot easily get around the established fixed costs charged by the payments industry, which comprises processing companies, banks and firms like Visa and MasterCard.

Square charges merchants 2.75 percent of the amount transacted when a card is swiped, or $275 a month. That’s at the low end of the fee scale. But it may also be too low for Square to a profit on payments below $10, which are a big part of Square’s business.

Nebo Djurdjevic, chief executive of Cardis International, shows why. He simply calculates the money Square would take in with a 2.75 percent fee on a transaction and then compares that with the money it would have to pay out in fees to credit card companies a nd processors. (As a note, Cardis has its own product aims to cut the costs of smaller credit card payments.)

On a $5 transaction, Square would get 2.75 percent of $5, or 14 cents. But, citing public fee data, Mr. Djurdjevic calculates that, with a premium Visa card, Square would have to pay out 27 cents in fees. The theoretical loss to Square would therefore be 13 cents. The loss may be lower on other types of cards, according to Mr. Djurdjevic, who nevertheless thinks the Starbucks deal is a positive development for Square.

Square declined to comment on Mr. Djurdjevic’s numbers and their significance for Square’s business model.

The challenging economics won’t be a surprise to Square watchers. Enthusiasts may argue — correctly — that Square will make money on each payment that is over $10. And if Square gets picked up by larger retailers, larger payments may make up a large share of its business. Square may even have software that allows it to reduce slightly the amount it has to pay to card operators.

So what will the big, alternative revenue source be? Recent investors in Square must see one, given that the company now has an estimated valuation of $3.25 billion.

The company probably wants to take all the payment data and use it to help merchants with their marketing. Square might, say, take a cut of any business generated from that marketing. In other words, it may aim to be a more sophisticated version of Groupon. Square’s fans may say that, with a wealth of payments data, the company can do better than Groupon.

The more merchants that use Square’s payments system, the more data it will have. And with its low fees, Square may well draw in large numbers of merchants.

But as Mr. Djurdjevic’s numbers show, those low fees can also generate losses. And it’s not like other companies are standing still. For instance, PayPal and Discover recently announced that PayPal customers will next year be able to use the service in stores, not just online.

In all, it’s too early to tell whether Square is leading us, or itself, into a cashless future.

The Life and Death of Delaware’s Arbitration Experiment

The federal court decision on Thursday to strike down the use of the Delaware Chancery Court for private arbitration is likely to be the end of an interesting experiment.

In 2009, the Delaware legislature amended its laws to permit the Delaware Chancery Court to arbitrate private disputes confidentially without public access. The idea was to enhance the Delaware courts’ prestige and extend its ability to adjudicate the nation’s most complex business disputes.

Delaware judges and its courts are already renowned for their expertise in these matters. And with these provisions, the courts arbitrate not only commercial and corporate matters but also intellectual property disputes, adding some technology expertise.

There was a lot of excitement at the time about these provisions.

The Delaware Supreme Court and Chancery Court judges highlighted the provisions publicly, and there was talk that this was a game-changer. Companies would flock to Delaware to t ake advantage of this expertise through private arbitration.

Francis G.X. Pileggi, a partner Eckert Seamans and operator of the Delaware Corporate and Commercial Litigation blog, told The Wilmington News Journal at the time that the “Chancery Court is already known far and wide for its ability to adjudicate cases quickly. This is the natural evolution of that existing benefit.” Mr. Pileggi lauded the secrecy of these proceedings, stating that a “lot of people do business together and may not want to air their dirty linen in public, so to speak.”

The arbitrations would also generate substantial revenue as Delaware would charge $6,000 a day for the service with a $12,000 filing fee.

It didn’t turn out that way.

The Delaware Chancery Court adopted the provisions in January 2010. Since that time there have only been six arbitrations, five of them lasting only a day and generating about $60,000.

One likely reason for the spare usage: the Del aware Coalition for Open Government.

In October 2011, the coalition sued, challenging the secrecy of these proceedings. The core claim was that these proceedings violated the First Amendment’s requirement that the public have qualified access to civil and criminal trials.

The federal court’s decision was succinct and, at 26 pages, much shorter than the Delaware Chancery Court’s own opinions, which typically can run far longer. Essentially, the federal court found that the arbitration proceedings were effectively a civil trial, with no difference in judges, place or proceeding except the secrecy and the arbitral nature. And since this was effectively a civil trial, it was required to be open.

The federal court opinion flows from its decision to effectively treat these cases as civil trials. Once the court made that conclusion, the Delaware arbitration ruling was history because there is clear precedent that civil trials cannot be secret under the First A mendment.

But there are counterarguments as to why this proceeding is constitutional. Judges do participate in mediation and there are some quasi-arbitration like acts they participate in. More relevantly, these were private disputes that were likely to be subject to arbitration anyway. The use of Delaware judges really made no difference and in fact might have produced a better outcome for all involved.

Other events may have influenced views on the appropriateness of Delaware judges as arbitrators. The most prominent of the six arbitration proceedings so far, involved an effort by Skyworks Solutions to escape its $262.5 million deal to buy Advanced Analogic Technologies. In that deal, Skyworks invoked the material adverse change clause in the companies’ merger agreement.

This was not a truly private dispute as the rights of shareholders in both companies were implicated. Shareholders had to wait weeks to find out the eventual determination.

As B rian Quinn at the M&A Law Prof Blog wrote at the time, “The problem with trying to follow a dispute like this from the outside is that nothing is public unless the parties want it to be. So, we end up getting bits and drabs of information here and there. It becomes very difficult for an observer, or the market, to get any idea what the issues are. Welcome to the world of private arbitration.”

The parties settled two days into the arbitration proceedings and shareholders still don’t know what the exact claims were or assess their validity.

Then there was the Carlyle Group’s effort to adopt a provision requiring all of its shareholders to litigate all state fiduciary duty and federal securities law disputes in Wilmington, Del. It made people even more queasy about arbitration.

Having companies litigate private disputes may have been tolerable, but the Delaware arbitration provisions had the potential to lock shareholders out of many claims as companies s hifted these claims to arbitration in order to keep them confidential and stop shareholder class action lawsuits.

Given the events in Skyworks and Carlyle, some commentators became quite uneasy with the potential scope of Delaware’s arbitration provision. Though, in fairness it still had a mass of support in the Delaware bar because it had judges do something that would be arbitrated anyway.

In this light, the court’s ruling on Thursday makes logical sense, at least to me.

It’s one thing for a dispute by two companies over a joint venture in a foreign country to arbitrate the dispute. And it makes sense for Delaware judges to be picked for this task. But when it is a dispute that directly implicates third parties like shareholders, the arbitration provision may go a bit too far.

In some ways the arbitration provisions may be a victim of Delaware’s success. The court’s five Chancery Court judges are really the best in the country at adjudicating cor porate law disputes involving shareholders. The reason is not only their competence but their experience in deciding these matters.

So, it is no surprise that to the extent companies want to extend arbitration to previously public domains, these provisions would come into play. The likely reasons they have not been used more often are the pending litigation and the fear that companies have of their validity. But had the provisions really been confined to purely private disputes without affecting shareholders, they might have been more defensible in the federal court.

The Delaware Chancery Court, through noted a law professor, Lawrence A. Hamermesh, who is assisting in representing the court in this matter, stated on Thursday that it would appeal the decision. I am no constitutional law expert, but if the Third Circuit Court of Appeals views these matters through the same lens that the federal court did, the appeal will not go far. If so, it will end Delaware’s i nteresting experiment.

Nomura’s Failed Global Ambitions

With Nomura announcing $1 billion in cost cuts on Friday, the Japanese firm formally and concretely revealed a retreat from the global financial player role it once sought.

Much of the shrinking will take place in Nomura’s wholesale operations, a spokesman told Bloomberg News. That’s precisely the area where the firm’s former chief executive, Kenichi Watanabe, had hoped to grow one of Japan’s most prominent securities firms.

Much like another international bank, Barclays of Britain, Nomura had hoped to use the remains of Lehman Brothers as the underpinning for a transformation from regional player to worldwide heavyweight. The Japanese firm, already a big player in its home market, bought Lehman’s international businesses and its 8,000 staffers after the American brokerage filed for bankruptcy in September 2008.

Nomura turned to a Lehman veteran, Jasjit Bhattal, a former Lehman executive known as Jesse, to essentially take charge of the wholesale division . And a longtime colleague, Glenn Schiffman, was appointed as the firm’s head of investment banking for the Americas.

Other Lehman holdovers were also given top positions within the newly prominent division.

The transformation wasn’t necessarily easy, as hard-charging Lehman veterans ran into the more traditionally conservative ways of Nomura. The wholesale operations quickly started to fray. Christian Meissner, a high-ranking Lehman executive who helped broker the takeover of the bankrupt firm’s international division, decamped in 2010 to Bank of America Merrill Lynch.

Unlike Barclays, the Japanese firm found international growth a difficult task. Despite the addition of a well-established international banking operation, Nomura stayed mostly flat in various investment banking league tables.

It hasn’t risen higher than 10th in Thomson Reuters‘ ranking of deal advisers since 2002 or ninth in global equity capital markets issues. For global debt offe rings, the firm rose no higher than 14th since the Lehman deal, after having once reached 13th, in 2002.

Mr. Bhattal retired from Nomura in January after less than a year in the position. By that point, the firm had already reported a $591 million loss for the three months ended Sept. 30, its first quarterly loss in over two years.

Soon afterward, Mr. Schiffman departed, resurfacing at the Raine Group, a boutique investment bank.

The final blow for Nomura’s dreams of global expansion may well have been the resignation of Mr. Watanabe last month, after having been engulfed by an insider-trading scandal. Some critics laid the blame for the mess – in which employees tipped off favored clients ahead of securities offerings – on the Lehman transaction, though the firm had been embroiled by criminal acts in the 1990s.

Mr. Watanabe’s successor, Koji Nagai, has spent most of his career focused on Nomura’s domestic operations. While Mr. Nagai plans to continue building some international businesses like mergers advisory, according to Bloomberg, he has made clear what his strategy is.

“I want to make a new business strategy from the past,” he said at a press conference last month, adding that he wants to bring Nomura’s footprint “to an appropriate size.”

Morning Take-Out


Barclays Taps an Insider to Repair Its ReputationBarclays Taps an Insider to Repair Its Reputation  |  Barclays, which has been tarnished by scandal, appointed a new chief executive on Thursday, as the British bank looks to restore its reputation and overhaul its culture.

By selecting Antony Jenkins, Barclays seemed to steal a line from the comedy series “Monty Python”: “And now for something completely different.”

Mr. Jenkins, 51, an Oxford-educated Briton with a soft-spoken demeanor, started his career 30 years ago as a cashier at a local Barclays branch. Over the last three years, he has overseen the sleepy consumer retail and banking business at Barcl ays.

In short, he has little in common with his predecessor, Robert E. Diamond. Mr. Diamond, an American-born investment banker, brought a hard-charging ethos to the bank, transforming it into a top player on Wall Street. But the culture of risk-taking also proved problematic. In July, Mr. Diamond resigned amid revelations that Barclays manipulated key interest rates for its own benefit.
DealBook ‘

Romney Campaign Puts a Focus on Bain  |  Mitt Romney’s record at Bain Capital continues to be a focus – some might say the focus – of both his supporters and detractors.

Just hours before Mr. Romney’s speech Thursday night at the Republican National Convention, his campaign started a Web site – – devoted almost entirely on his years at the investment firm Bain Capital. “Governor Romney’s work at Bain Capital was about fixing companies that were broken and giving new companies a shot at success,” reads the Web site’s home page.

The site features nine one- to two-minute videos, each highlighting a successful Bain deal. Two videos focus on the office-supplies retailer Staples, one of Mr. Romney’s most successful investments during his tenure at Bain. Both show Mr. Romney roaming the aisles at a Staples store wearing that a blue dress shirt with a contrasting white collar, a de rigueur uniform of 1980s Wall Street.
DealBook ‘


All Eyes on Bernanke  |  The Wall Street Journal’s Jon Hilsenrath previews the speech on Friday by Ben Bernanke in Jackson Hole. Mr. Hilsenrath writes of the Fed chairman: “Long after his term as chairman e nds in 17 months, will he be remembered as the Fed chief who did too little to combat high unemployment or the one who did too much and unleashed inflation and financial instability with the actions he took? Critics make both arguments.”

Sears Is Dropped From S&P 500  |  Sears Holdings, which has been a member of the Standard & Poor’s 500-stock index for more than 50 years, is getting kicked out, amid concerns about the number of shares held by public investors and an upcoming rights issue, The Wall Street Journal reports.

Fallen Tycoon in Ireland Faces a Reckoning  |  Sean Quinn, a former billionaire who has became an emblem of Ireland’s economic collapse, faces an investigatio n into his assets and must turn over information by Friday, The New York Times reports. He has been waging what he calls a “public relations war.”

Mergers & Acquisitions ‘

Tata Motors Puts Jaguar Land Rover Back on Its Feet  |  It’s a success story that has stunned analysts: After buying Jaguar Land Rover from Ford Motor for $2.3 billion in June 2008, the Indian auto company Tata Motors is racking up sales and preparing to release a new roadster, The New York Times reports.

Qatar Fund Voices Opposition to Terms of Xstrata Takeover  |  In its second public statement since Glencore announced plans to acquire Xstrata, Qatar Holding said it had “determined that it will not support the proposed merger,” but added that it “continues to support the principle of a combination.”

Activist Fund Challenges Xstrata’s Board  |  Knight Vinke, an Xstrata shareholder, said it would consider pushing for changes in the mining company’s board if the proposed takeover by Glencore fails, Reuters reports.

Antitrust Group Raises Concerns Over Universal-EMI Deal  |  The American Antitrust Institute, a group that has been profiled by DealBook, urged regulators to stop Universal Music’s plan to acquire EMI’s recorded music unit, saying the tie-up would give Universal too much power, Reuters reports.

Bankers Vie for a Piece of AIA Deal  |  A.I.G. will be free next week to sell a $7.6 billion stake in its former unit AIA, in what could be one of Asia’s biggest deals of the year, Reuters reports.

Guggenheim Closes In on Dick Clark Productions  |  The Los Angeles Times reports: “Fresh from spending over $2 billion to become majority owner of the Los Angeles Dodgers, Guggenheim Partners now appears to be the leading candidate to land Dick Clark Productions – for a price tag of close to $400 million, people close to the situation said.”


JPMorgan Sai d to Weigh Reducing Business With Brokerages  |  The Wall Street Journal reports that JPMorgan “is reviewing its dealings with dozens of brokerages that use the bank to settle trades, according to people familiar with the bank.” The review, which began more than six months ago, gained increased urgency in the aftermath of Knight Capital’s trading debacle.

Struggling Gleacher & Co. Explores a SaleStruggling Gleacher & Co. Explores a Sale  |  Gleacher & Company, the struggling investment bank started by the longtime Wall Street deal maker Eric Gleacher, said that it was exploring strategic alternatives, including selling itself and raising money from outside investors.
DealBook ‘

Nomura Targets $1 Billion in Cuts  |  Nomura has outlined a plan to cut from businesses that include investment banking and equities, shedding jobs mainly at units outside Japan, Bloomberg News reports, citing two unidentified people with knowledge of the matter.

How Deals Are Done in Italy  |  A secret meeting in May with a top Italian deal maker has been held up as “proof that Italian capitalism remains underpinned by a system of cronyism that the government of Prime Minister Mario Monti blames for smothering the nation’s economy,” The Wall Street Journal reports.

< p>Credit Suisse Hires Head of Canada Metals and Mining Unit  |  Credit Suisse has hired Matthew Hind as the head of its Canada metals and mining business in its investment banking department, the firm announced in an internal memorandum reviewed by DealBook.
DealBook ‘

Morgan Stanley Officials in Russia to Depart  |  The chairman of Morgan Stanley’s Russian operations, Rair Simonyan, who worked on the I.P.O. of Rosneft, and the regional president, are leaving the company, Reuters reports.


A Credit Crunch That Never Materialized  |  In a market commentary note, the Carlyle Group writ es that a large volume of maturing speculative-grade credit has not produced a “financial doomsday,” adding that “common assumptions about refinancing risk may be misplaced.”

Carlyle Secures $700 Million From Insiders for Fund  |  Carlyle Group executives committed their own money to a fund that is aiming to raise $10 billion, Bloomberg News reports.

Uncertain Times for a Company Owned by Apollo  |  Affinion Group Holdings, a company owed by Apollo Global Management, faces the possibility of default, with less than a year to pay back $2.3 billion of debt, and earnings that are expected to decline, Bloomberg News reports.

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British Homebuilding Firm Receives Takeover Offer  |  Redrow is valued at 562 million pounds ($889 million) in a buyout offer by its chairman and three investment funds, Reuters reports.


The Hedge Fund Industry’s Identity Crisis  |  Amid disappointing returns, there is a “profound reshaping of hedge funds and their place in the financial ecosystem,” The Financial Times writes.

Texas Hedge Fund to Shutter  |  WS Capital Management, a $550 million Dallas-based equity hedge fund, is closing its doors, it said in a letter to investors, citing b road economic risks and increasing liquidity and operational demands, AR Magazine reports.

Hedge Funds Turn Against France  |  Reuters reports: “Hedge funds are going against market consensus and betting that ultra-low French government bond yields are unsustainable, believing a sluggish economy and the new government’s policies will eventually force up borrowing costs.”


SAIC Plans Two-Way Split  |  The Science Applications International Corporation said on Thursday that it planned to cleave itself into two publicly traded companies, becoming the latest in a string of corporate breakups.
Dea lBook ‘

Knight Capital Accepts Compensation Offer From Nasdaq  |  Knight Capital said it accepted an increased offer of $62 million from Nasdaq to compensate for problems related to Facebook’s I.P.O., Reuters reports. The plan is being considered by the Securities and Exchange Commission.

An Estimate for Facebook’s Revenue Is Revised Down  |  The research firm EMarketer estimated that Facebook would generate $5.04 billion in sales this year, a downward revision from an earlier prediction of $6.1 billion, Bloomberg News reports.

Workday Aims to Raise $400 Million in I.P.O.  |  The enterprise software company Workday, which was founded by David Duffield, a billionaire who also founded PeopleSoft and sold it to Oracle, filed to go public on Thursday. Workday makes software that helps companies manage their personnel departments.


Twitter to Overhaul Its Advertising  |  Twitter said on Thursday it would allow advertisers to target users based on their specific interests. AllThingsD, citing “someone smart who doesn’t work at Twitter,” reports that new advertising strategies could help Twitter generate $350 million in revenue this year.

TV Guide Goes Mobile  |  A new mobile app from TV Guide draws on research showi ng that about 93 percent of viewers now use streaming video, DVR and on-demand services, The New York Times reports.

Etsy Pushes Its In-House Payments System  |  The online marketplace Etsy, which has logged more than $500 million in sales so far this year, is trying to get more sellers to use its in-house payments system by offering customers gift cards, AllThingsD reports.


German Finance Minister Calls for Limits on Bonuses  |  Wolfgang Schäuble, Germany’s finance minister, writes in an opinion piece in The Financial Times that there is a need for a unified European banking regulator. He says he supports various re gulatory proposals, including: “Immediate cash bonuses for top bank executives should not exceed their fixed pay.”

Spain Said to Consider Financing Bankia Without Assistance  |  Bloomberg News reports: “Spain is considering pumping its own money into Bankia group to re-capitalize the country’s biggest nationalized lender rather than use the emergency portion of a 100 billion-euro ($125 billion) bailout from the European Union, two people with direct knowledge of the matter said.”

Spain’s Leader Says Rescue Fund Is Sufficient  |  Mariano Rajoy, the Spanish prime minister, said on Thursday that Spain had the resources to help its troubled regions, despite an unexpected plea by Valenc ia for more aid, The New York Times reports.

A Third Option for Regulators in the Money Market Fund Fight  |  The Financial Stability Oversight Council can use a part of Dodd-Frank, called Title VIII, to address regulation of the plumbing of the financial system.
DealBook ‘

S.E.C. Expected to Announce Civil Charges for Stanford Officials  |  Former executives associated with the convicted Ponzi schemer R. Allen Stanford are set to be charged with civil securities violations by the Securities and Exchange Commission, The Wall Street Journal reports, citing unidentified people familiar with the commission’s plans.

Conflict Brewing in Bankrupt California City  |  In San Bernardino, Calif., firms that insure municipal bonds may go to court to battle the state’s pension fund over the treatment of payments in bankruptcy, Reuters reports.