Bracing for the Next Political Standoff

One fiscal showdown drew to a close this week, as the president signed a bill to raise taxes on the wealthiest Americans. But the sense of relief among businesses was tempered by the anticipation of political battles to come. Next month, Congress is set to negotiate over raising the debt ceiling.

“We're in for another round of brinkmanship and uncertainty,” said Mark Zandi, the chief economist at Moody's Analytics. “I don't think the economy can really find its footing and jump to a higher level of growth until we get to the other side of this.” President Obama has vowed to stay out of the debt ceiling debate, but his position “sets the stage for a nail-biting standoff that economists warn could lead to a damaging financial default and doubt from investors about the ability of the country to pay its obligations,” The New York Times writes. The ratings agency Moody's issued a warning on Wednesday, saying a “lack of further deficit reduction measures could affect the rating negatively,” and that the “need to raise the debt limit may affect the outcome of future budget negotiations.”

The deal reached this week preserved tax breaks for a range of industries, The New York Times reports. “A bevy of tax breaks and credits that had been scheduled to expire at the end of 2012 will be extended for another year, costing taxpayers $46.1 billion over the next decade, according to Congress's Joint Committee on Taxation.”

Some companies moved to avoid coming changes in tax policy. Goldman Sachs, for instance, distributed $65 million in stock to 10 senior executives in December instead of January. “That move helped them avoid the higher tax rates that will now be imposed on income of $400,000 or more. The chief executive of Goldman, Lloyd C. Blankfein, was among the most prominent corporate executives who backed higher taxes as part of a broader deficit-reduction package.”

 

WHEN A BANK IS A ‘BLACK BOX'  |  Sophisticated investor s increasingly are wary of big banks, Frank Partnoy and Jesse Eisinger write in the cover story of The Atlantic. Some say that bank disclosures leave out or obscure crucial information, a view that has become more widespread since the financial crisis. “Several financial executives told us that they see the large banks as ‘complete black boxes,' and have no interest in investing in their stocks. A chief executive of one of the nation's largest financial institutions told us that he regularly hears from investors that the banks are ‘uninvestable,' a Wall Street neologism for ‘untouchable.'”

The list of skeptics includes some prominent Wall Street names. Paul Singer of Elliott Management recently wrote to his partners, “There is no major financial institution today whose financial statements provide a meanin gful clue” about its risks, according to The Atlantic. William A. Ackman of Pershing Square Capital Management told the magazine about his troubled bet on Citigroup. Mr. Ackman bought a stake of almost $1 billion in the bank in 2010 but sold it last spring at a loss approaching $400 million. “For the first seven years of Pershing Square, I believed that an investor couldn't invest in a giant bank. Then I felt I could invest in a bank, and I did - and I lost a lot of money doing it.”

 

AL JAZEERA TO BUY CURRENT TV  | 

The pan-Arab news giant Al Jazeera is gaining a larger foothold in the United States with a deal to take over Current TV, the low-rated cable channel founded by Al Gore and his business partners. The price was not disclosed, “but people with direct knowledge of the deal pegged it a t around $500 million, indicating a $100 million payout for Mr. Gore, who owned 20 percent of Current,” Brian Stelter reports for The New York Times Media Decoder blog.

Al Jazeera, which is viewed with some skepticism in this country, plans to shut down Current and start an English-language channel that will be available in more than 40 million homes. The acquisition is a “coming of age moment” for the news operation, which is financed by the government of Qatar, Mr. Stelter writes. “Mr. Gore and his partners were eager to complete the deal by Dec. 31, lest it be subject to higher tax rates that took effect on Jan. 1, according to several people who insisted on anonymity because they were not authorized to speak publicly. But the deal was not signed until Wednesday.”

 

< p>ON THE AGENDA  |  Peter Orszag, vice chairman of global banking at Citigroup, is on CNBC at 7 a.m. Jeffrey Gundlach of DoubleLine Capital is on CNBC at 11:45 a.m. The Federal Reserve's policy-making committee releases minutes from its recent meeting at 2 p.m.

 

AVIS'S BET ON CAR SHARING  |  The deal by the Avis Budget Group to buy Zipcar for about $500 million “represents a new direction in a fiercely competitive car rental market, and an about-face for Ronald L. Nelson, the company's chairman and chief executive, who had resisted entering the car-sharing segment,” Andrew Martin reports in DealBook. Mr. Nelson said on Wednesday, “I've been somewhat dismissive of car sharing i n the past.” But he said he had realized that car sharing could complement Avis's traditional rental car business and give the company access to younger customers. Zipcar, which has been “more successful as a collectivist concept than as a profit-making venture,” should realize savings from the deal while tapping Avis's fleet to meet demand on weekends, Mr. Martin writes.

 

 

 

Mergers & Acquisitions '

CVC Capital to Buy Cerved for $1.49 Billion  |  CVC Capital Partners has agreed to buy the Italian credit data and business intelligence company Cerved from two rival private equity firms, Bain Capital and Clessidra. DealBook '

 

Krolls' K2 Firm Buys a Corporate Watchdog  |  K2 Intelligence has acquired Thacher Associates, a leading player in the niche business of overseeing real estate development projects on behalf of governments and developers to ferret out corruption. DealBook '

 

Gap to Buy Intermix, a Luxury Fashion Retailer  |  Gap is moving into the luxury market with a $130 million deal, The Wall Street Journal reports. WALL STREET JOURNAL

 

Analyst Sees Possible Bank Unit Sales  |  What could banks be shopping this year? Mike Mayo, an analyst with CLSA, says Bank of America's brokerage business, JPMorgan Chase's asset-management unit and Citigroup's Latin American operations are good candidates to be sold to bolster their banks' stock prices, Bloomberg News reports. DealBook '

 

INVESTMENT BANKING '

Deferring Six Figures on Wall Street for Te acher's Salary  |  Teach for America, the nonprofit organization that recruits high-achieving college graduates to teach in some of the nation's poorest schools for two years, has garnered renewed interest among would-be finance professionals. DealBook '

 

Buffett's $2.5 Billion Deal in Renewable Energy  |  Warren E. Buffett's MidAmerican Energy Holdings has agreed to spend up to $2.5 billion on a solar photovoltaic operation in California, The Financial Times reports. FINANCIAL TIMES

 

Mortgage Bonds Are Popu lar, But Some See Risks  |  Demand for bonds backed by commercial mortgages has sent prices soaring, but “some investors remain worried that defaults on these loans remain at historically high rates,” The Wall Street Journal reports. WALL STREET JOURNAL

 

PRIVATE EQUITY '

Ghostwriting for a Private Equity Titan  |  In the latest issue of Vanity Fair, Rich Cohen writes about the experience of being a ghostwriter for Theodore Forstmann's autobiography. Tensions arose. “Instead of it being me and Teddy in the world, it was going to be me and Teddy in my mind and he did not like it,” Mr. Cohen says. VANITY FAIR

 

HEDGE FUNDS '

Former Citigroup Proprietary Trader to Start Hedge Fund  |  Joel Salomon, who left Citigroup a year ago, plans to start SaLaurMor Capital, named for his two daughters, and hopes to attract $700 million, Bloomberg News reports. BLOOMBERG NEWS

 

Greenlight Capital's Difficult Month  |  David Einhorn's hedge fund, Greenlight Capital, was down 2.7 percent in December, bringing his per formance for the year to a 7.1 percent gain, according to Institutional Investor's Alpha. INSTITUTIONAL INVESTOR ALPHA

 

Omega's Cooperman Expresses Optimism About Stocks  | 
CNBC

 

I.P.O./OFFERINGS '

Divining Twitter's I.P.O. Plans  |  The research firm Greencrest Capital predicts that Twitter may go public in 2014, Forbes reports. FORBES

 

More Changes for Facebook's Mobile Platform  | 
NEW YORK TIMES

 

Macau Casino Operator Said to Plan $800 Million I.P.O.  |  Macau Legend Development is looking to raise up to $800 million in a Hong Kong I.P.O. that may come as soon as the second quarter, according to Bloomberg News. BLOOMBERG NEWS

 

VENTURE CAPITAL '

Tumblr's Moment in the Spotlight  |  The chief executive of Tumblr, David Karp, is featured on the cover of Forbes, for a story that says: “This is Tumblr's make-or-break year, where it needs to prove three things: That it can continue the growth. That it can actually make money. And that David Karp, the creative genius and quintessential minimalist, is the right guy to lead Tumblr to glory.” FORBES

 

Should an Entrepreneur Give Up Control?  |  The New York Times offers a case study of Jacqui Rosshandler, the entrepreneur behind Eatwhatever, who had the option of taking a n investment that meant losing control of her company. NEW YORK TIMES

 

LEGAL/REGULATORY '

Paulson & Company Named in Revised C.D.O. Lawsuit  |  The hedge fund Paulson & Company was named as a defendant in a proposed revised lawsuit brought by the bond insurer ACA Financial Guaranty Corporation over a complex collateralized debt obligation, Bloomberg News reports. DealBook '

 

Are the Basel Rules for Banks Too C omplex?  |  Bloomberg News reports: “While higher capital requirements, curbs on banks trading with their own money and other rules have reduced risk, they have magnified the complexity of supervision, according to two dozen regulators, bankers and analysts.” BLOOMBERG NEWS

 

Google Said to Be Poised to Resolve Antitrust Inquiry  |  Google “will resolve a 20-month antitrust probe by U.S. regulators today with a voluntary agreement and a consent decree on the company's alleged misuse of patents, three people familiar with the matter said,” Bloomberg News reports. BLOOMBERG NEWS