The Fallout From JPMorgan\'s Loss

FALLOUT FROM JPMORGAN LOSS  |  Federal authorities are developing criminal cases related to the multibillion-dollar trading loss at JPMorgan Chase, and arrests could come in the next several months, report DealBook's Ben Protess and Azam Ahmed. As part of their effort, investigators are poring over thousands of recorded phone calls; in some, employees discussed “how to value the troubled bets in a favorable way.”

The investigation focuses on four people who worked in the bank's chief investment office in London, including Bruno Iksil, the trader known as the London whale, and Achilles Macris, an executive in that unit. DealBook writes: “Authorities are examining how some traders in the chief investment office influenced market prices as their bets began to sour. Investigators are also looking into whether records were falsified to hide the problems from executives in New York.”

Jamie Dimon, the chief executive, called the money-losing trades a “stupid error” during a talk at the Council on Foreign Relations on Wednesday. He also addressed the acquisition of Bear Stearns in 2008, estimating JPMorgan ultimately lost “$5 billion to $10 billion” on the deal. Calling the deal a “favor” to the government, Mr. Dimon said he might not do it again, “knowing what I know today.”

JPMorgan's chief financial officer, Douglas Braunstein, is expected to step down by the end of the year, in the latest management change since the trading loss, reports Jessica Silver-Greenberg for DealBook. Mr. Braunstein, whose reputation suffered after the trades went bad, is expected to remain at the bank after giving up his post, Ms. Silver-Greenberg reports.

A judge in Oklahoma this week found that JPMorgan was “grossly negligent and reckless” in handling a client's trust account , ordering the company to pay $18 million, DealBook's Susanne Craig reports. The judge said the bank breached its fiduciary duties to the trust of Carolyn S. Burford, an oil heiress who died in 1996.

PRIVATE EQUITY'S CLUBBY WAYS  |  The buyout industry may not be as fiercely competitive as it seems. Newly released e-mails in a civil lawsuit that dates back to the private equity boom times depict “a secret pact between the firms that divided up the big deals among themselves and artificially - and illegally - kept their prices low,” write Peter Lattman and Eric Lichtblau in DealBook. For instance, K.K.R. asked competitors to “step down” during the bidding for the hospital chain HCA in 2006, according to an e-mail written by Daniel Akerson, then a partner at Carlyle and now the chief executive of General Motors. At that time, the suggestion that these firms might be c olluding was enough to send the business “into a panic,” Andrew Ross Sorkin wrote in 2006.

Proving the case could be difficult. Fortune's Dan Primack notes that “it's tough to argue conspiracy against so many firms on such a large number of deals, particularly when the record is clear that many of the defendants competed against each other on some of those very transactions.”

HOW BIG IS TOO BIG?  |  Congress should consider setting a specific limit on the size of financial institutions, Daniel K. Tarullo, a Federal Reserve Board governor, said in a speech on Wednesday. Mr. Tarullo argued that there would be merit in “adopting a simpler policy instrument, rather than relying on indirect, incomplete policy measures such as administrative calculation of potentially complex financial stability footprints.”

ON T HE AGENDA  | 
Realogy is set to start trading today after pricing its I.P.O. at $27 a share, the top of the expected range. Workday, the human resources software company, is expected to price its offering this evening. Safeway reports earnings before the market opens. Maurice R. “Hank” Greenberg, the former A.I.G. chairman, is on Bloomberg TV at 8:14 a.m. Sean Egan, the president of Egan-Jones Ratings Company, is on CNBC at 10 a.m. Donald J. Trump is on CNBC at 4:10 p.m. Larry Summers is appearing on Bloomberg TV at 4:30 p.m. And Jeff Weiner, the chief executive of LinkedIn, is on Bloomberg TV at 6 p.m. Vice President Joseph R. Biden Jr. faces off with Representative Paul D. Ryan tonight in the vice-presidential debate.

GOLDMAN AND THE MUPPETS  | 
Greg Smith's book , “Why I Left Goldman Sachs,” doesn't come out until later this month, but his former employer is already preparing a response. Goldman “has told its board of directors that an internal investigation found little substance to allegations” made by Mr. Smith, The Financial Times reports. Mr. Smith, who took Goldman to task for its profit-driven ways, also worried about his own pay; he was said to have asked to make more than $1 million, prompting one manager to say he “needs to tone it down.”

As for his claim that Goldman employees referred derisively to clients as “muppets,” The Financial Times says Goldman found about 4,000 mentions of “muppet” in e-mails, but 99 percent were in reference to last year's movie.

JULIAN ROBERTSON'S ADVICE  | 
“I would really rather see young people go into engineering or stem cells,” said Mr. Robertson, the founder of T iger Management, at a gala for the New York Stem Cell Foundation. “There are too many people managing money now.”

Mergers & Acquisitions '

SoftBank Said to Be in Talks to Buy Sprint Stake  |  The Japanese mobile carrier SoftBank is considering buying a two-thirds stake in Sprint Nextel, a deal estimated to be worth at least $12.8 billion, according to various reports.
REUTERS  |  WALL STREET JOURNAL  |  BLOOMBERG NEWS

A.I.A. to Pay $1.7 Billion for ING's Malaysia Business  |  A.I.A. said the acquisition will catapult it to the No. 1 position in Malaysia's lucrative li fe insurance market. For the Dutch insurer ING, it is the first major deal in its plan to divest its Asian assets.
DealBook '

Bakrie Family Offers to Buy Assets from Bumi  |  The dynastic Bakrie family of Indonesia has proposed a split from the coal mining company Bumi that it helped to create with the British financier Nathaniel Rothschild.
DealBook '

Hedge Funds Expect Glencore-Xstrata Deal to Succeed  |  Hedge fund positions would indicate optimism for the merger, although there are some obstacles that the companies will have to overcome, The Wall Street Journal writes.
WALL STREET JOURNAL

Ex-Central Banker in Canada Supports Cn ooc Deal  |  David Dodge, who left his post at the Bank of Canada in 2008, dismissed arguments against Cnooc's takeover of Nexen, Reuters reports.
REUTERS

Collapse of Aerospace Merger Deals Blow to Army of Advisers  |  For the small battalion of bankers and lawyers advising EADS and BAE Systems, the end of merger talks between the two aerospace giants brings no small amount of anguish over lost fees.
DealBook '

INVESTMENT BANKING '

Cohn Says Goldman Doesn't Need More Deposits  |  The Goldman Sachs president told Bloomberg News: “The reality is that you can only use deposits for specific parts of your business. So our investm ent-banking business is on equal footing with everyone else's banking footing when it comes to financing that business.”
BLOOMBERG NEWS

London Metal Exchange May Add Trading Sessions  |  The exchange is contemplating adding early-morning trading sessions for certain futures contracts, Reuters reports.
REUTERS

JPMorgan Proprietary Trader Attracts New Investors  |  Fahad Roumani of JPMorgan Chase has achieved 14 percent returns this year, “boosting efforts to win new investors and replace money the bank has started to pull from the fund,” Reuters reports.
REUTERS

University of Cambridge Taps Debt Markets  |  Cambridge sold its first bond at a 3.75 percent interest rate, The Wall Street Journal reports.
WALL STREET JOURNAL

PRIVATE EQUITY '

Private Equity Firms Think More About Societal Issues  |  In response to pressure from limited partners, private equity firms are increasingly “writing in environmental, social and governance clauses into their portfolios,” The Wall Street Journal writes.
WALL STREET JOURNAL

Bain and Apollo Said to Circle McGraw-Hill Unit  |  A deal for the education unit of McGraw-Hill Companies could be worth around $3 billion, according to Reuters.
REUTERS

Resource Capital Said to Seek $1.75 Billion for New Fund  | 
BLOOMBERG NEWS

HEDGE FUNDS '

Man Group Buoyed by Deal Speculation  |  The hedge fund's shares rose after a British newspaper said BlackRock was considering it for a potential acquisition.
BLOOMBERG NEWS

Octavian, an Activist Fund, Is Shutting Down  | 
REUTERS

BlueMountain Fund Attracts $1.4 Billion  |  BlueMountain Capital Management, a firm that took the other side of some of JPMorgan Chase's money-losing tr ades in London, raised a fund focusing on credit opportunities, Pensions & Investments reports.
PENSIONS & INVESTMENTS

I.P.O./OFFERINGS '

R.B.S. Raises $1.3 Billion in Listing of Insurance Unit  |  The Royal Bank of Scotland, majority owned by the British government, has raised $1.3 billion through the initial public offering of its insurance unit Direct Line.
DealBook '

MegaFon Looks to Reassure Investors Before I.P.O.  |  A day after revealing that Goldman Sachs would no longer be working on the I.P.O., MegaFon of Russia said corporate governance was “very important,” Bloomberg News reports.
BLOOMBERG NEWS

Indian Hospital Chain Said to Plan to Raise $415.5 Million in I.P.O.  | 
WALL STREET JOURNAL

VENTURE CAPITAL '

A Bain Deal That Was Doomed From the Start  |  Gawker says Bain Capital Ventures, Bain's venture capital affiliate, pitched the media company on doing a deal. Unfortunately for the young venture capitalist making the offer, Gawker's history with Bain Capital is less than amicable.
GAWKER

In Africa, Female Entrepreneurs Drive Growth  |  Entrepreneurs, many of them women, “are harnessing Africa's businesses and brands as the continent enjoys its greatest economic success in g enerations,” The New York Times reports.
NEW YORK TIMES

Start-Up Offers a New Way to Drive  |  Lit Motors is developing an electric motorcycle that “looks as if it came out of the movie ‘Tron,'” The New York Times writes.
NEW YORK TIMES

LEGAL/REGULATORY '

A Primer on Wall Street Reform  |  The new book by Sheila Bair offers “a compelling vision for financial-sector reform,” writes Simon Johnson on the Economix blog. The presidential candidates, he says, should make sure to read it.
NEW YORK TIMES ECONOMIX

Regulators Focus on Banks' Loan Reserves  |  When banks report earnings, regulators will keep a close eye on how much of their profit comes from reducing their reserves against losses, The Wall Street Journal writes.
WALL STREET JOURNAL

How Much Will Clients of Peregrine Financial Get Back?  |  Russell Wasendorf, Peregrine's founder, “believes that people will receive more than what's been reported,” according to his pastor.
WALL STREET JOURNAL

Standard & Poor's Cuts Spain to Lowest Investment Grade  | 
WALL STREET JOURNAL