Jacob J. Lew, the new Treasury secretary, was asked pointed questions during his confirmation hearing about a deal with his former employer, Citigroup, that guaranteed him preferential financial treatment if he left for government service. But according to a new study, such arrangements are not so unusual on Wall Street, DealBook’s Susanne Craig reports.
Banks like JPMorgan Chase, Goldman Sachs and Morgan Stanley all have provisions allowing acceleration of payments to senior executives if they take government jobs, said the study, to be released on Thursday by the Project on Government Oversight. In Mr. Lew’s case, he left Citigroup with stock that he could not immediately cash worth as much as $500,000. “These companies seem to be giving a special deal to executives who become government officials,†the study said. “In exchange, the companies may end up with friends in high places who understand their business, sympathize with it, and can craft policies in its favor.â€
Firms that have such contracts typically say they are intended to encourage public service, not to curry favor. In addition, government workers are often required by law to sell shares in their former employer. A Citigroup spokeswoman said the bank “routinely accommodates individuals who wish to leave the firm to pursue a position in government or nonprofit sector.†Still, Ms. Craig noted, “the accelerated vesting of Mr. Lew’s shares is part of a larger debate on Wall Street and in Washington, where people frequently move back and forth.â€
PRESSURE RISES IN CYPRUS  | Cyprus is scrambling to find ways to finance its bailout, after a controversial levy on bank deposits was rejected by lawmakers. The government proposed nationalizing pension funds from state-run companies and conducting an emergency bond sale, while the finance minister was in Moscow trying to secure additional aid from Russia. “But even the revised plan contains a bank tax that, while much smaller than originally proposed, might still not be palatable to Parliament,†The New York Times writes. “At the same time, the Cypriot government decided to keep banks closed through the end of the week in an effort to prevent a run on Cyprus’s financial institutions.â€
The situation is an example of how not to conduct a bailout, Stephen J. Lubben writes in the In Debt column. It also shows how a supposedly “safe†system “can be too big and quite dangerous. After all, the banks in Cyprus were noted for their reliance on deposits rather than other forms of dodgy short-term finance like repo and conduits and what not.â€
What options does the country have at this point “There are broadly three: sell its soul to Russia, default and possibly quit the euro, or patch together a new deal with the euro zone,†Hugo Dixon of Reuters Breakingviews writes. “They are all bad, but the last one is the least bad, for both Cyprus and the rest of Europe.â€
THE RETURN OF SYNTHETIC C.D.O.’S  | They were at the heart of the credit crisis more than four years ago, but so-called synthetic collateralized debt obligations appear to be making a comeback. Citigroup “is among banks that have sold as much as $1 billion of synthetic collateralized debt obligations this year, following $2 billion in all of 2012, according to estimates from the New York-based lender,†Bloomberg News reports. The investments, which are derived from credit-default swaps, are attractive because they offer investors a higher yield than run-of-the-mill corporate credit, especially as demand for junk bonds grows.
EINHORN IN THE SPOTLIGHT  | David Einhorn is on the cover of Bloomberg Businessweek on Friday. In an article titled “The Einhorn Effect,†Nick Summers looks at the Mr. Einhorn’s recent tangle with Apple. “Privately, some of Einhorn’s peers in the hedge fund ecosystem say they’re confused by his lawsuit â€" not its parsing of corporate governance rules, but the way it undercuts his virtuous reputation,†the story says.
ON THE AGENDA  | After a rise in demand that took builders by surprise, data on existing home sales for February is out at 10 a.m. ConAgra Foods reports earnings before the market opens. Robert Wolf of 32 Advisors is on CNBC at 7:15 a.m. Mark Shafir, Citigroup’s global co-head of mergers and acquisitions, is on CNBC at 7:40 a.m. Ivanka Trump is on Bloomberg TV at 11:45 a.m.
START-UPS IN PURGATORY  | They’re called “zombies†in Silicon Valley, start-ups that have enough capital to keep going but are not growing fast enough to raise more money to offer an exit to their investors. “Stuck in neutral, these ‘zombies’ are racing through their options, turning to restructuring firms to fix cash-management issues, using new services to pursue quick sales or teaming up with other young companies in trouble,†The Wall Street Journal writes. “Venture capitalists say the numbers of such firms are growing and some investors are targeting them with new services.â€
H.P. Shareholders Register Their Frustration  | Shareholders of Hewlett-Packard re-elected the company’s board members, but by far narrower margins than last year, Reuters reports. REUTERS
A ‘Martin Lipton 2.0’  | Corporate boards need a new defender updated for the modern era, Reynolds Holding of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS
Pinterest Buys a Recommendations Start-Up  | Pinterest said it had acquired Livestar, with plans to shut down the start-up’s services, AllThingsD reports. Terms were not disclosed. ALLTHINGSD
American Realty Capital Offers to Buy Cole Credit for $5.7 Billion  | American Realty Capital Properties has offered to buy Cole Credit Property Trust III for $5.7 billion, and in a letter it urged Cole Credit’s board to call off the proposed acquisition of its adviser, Cole Holdings. DealBook »
Oracle Results Fall Short of Expectations  |Â
ASSOCIATED PRESS
For R.B.S. Branches, Narrower Field of Bidders  |Â
BLOOMBERG NEWS
Bonus Caps in Europe Are Set to Take Effect  | Lawmakers in Europe “kept bonus restrictions unchanged, as they sealed a deal yesterday overhauling bank capital and liquidity rules,†Bloomberg News reports. BLOOMBERG NEWS
Costly Bank Payday Loans Criticized in Report  | In a new report, the Center for Responsible Lending is condemning payday loans issued by big banks. DealBook »
Barclays Bankers Cash In on Past Bonuses  | The British bank disclosed on Wednesday that its investment banking head, Rich Ricci, had cashed in $26 million of deferred shares. DealBook »
From Morgan Stanley, Investing in Women on Corporate Boards  | A team within Morgan Stanley’s wealth management division is starting a new portfolio that seeks to invest in companies that have demonstrated a commitment to including women on their boards. DealBook »
Circling Dell, Blackstone Said to Mull Candidates to Lead It  | The Blackstone Group, which is said to be considering a bid for Dell, is interested in Mark V. Hurd, a former Hewlett-Packard chief executive, as a possible successor for Dell’s chief executive, Fortune reports, without citing sources. FORTUNE
For Dell Founder, a Delicate Dance  |Â
WALL STREET JOURNAL
Macquarie to Ramp Up Private Equity Investments in U.S. Â |Â
FINANCIAL NEWS
In the Face of Legal Troubles, SAC’s Performance Is Strong  | SAC Capital Advisors has gained about 4 percent this year, better than the average for the industry, Reuters reports. REUTERS
J.C. Penney Says Turnaround May Take More Time  | “It may take longer than expected or planned to recover from our negative sales trends and operating results, and actual results may be materially less than planned,†J.C. Penney said in its annual report. REUTERS
A Sly Reference to an Alibaba I.P.O. Â |Â Jack Ma, the founder of Alibaba Group Holding, made a joke about an I.P.O. for the company, a subject of longstanding speculation. WALL STREET JOURNAL
A Guide to the Moleskine I.P.O. Â |Â
QUARTZ
Chinese Solar Panel Maker Collapses  | “The main subsidiary of Suntech Power, one of the world’s largest makers of solar panels, collapsed into bankruptcy in a remarkable reversal for what had been part of a huge Chinese government effort to dominate renewable energy industries,†The New York Times writes. NEW YORK TIMES
Requiring Companies to Disclose Political Spending  | Thomas P. DiNapoli, the New York State comptroller, and Bill de Blasio, the New York City public advocate, write in an opinion essay in The New York Times that the new leader of the Securities and Exchange Commission should push for a rule requiring publicly held companies to disclose political contributions. NEW YORK TIMES
With Freddie Mac Suit, Banks Face Billions More in Libor Claims  | Unlike other plaintiffs, Freddie Mac looks to have a strong case because it dealt directly with many of the banks accused of manipulating the London interbank offered rate, Peter J. Henning writes in the White Collar Watch column. DealBook »
With JPMorgan Settlement, MF Global Clients Move Closer to Payout  | MF Global customers moved a step closer to recouping their missing money when JPMorgan Chase released its claim to more than $500 million belonging to the bankrupt brokerage firm. DealBook »
Bernanke on Big Banks  | “Too-big-to-fail is not solved and gone,†Ben S. Bernanke said at a news conference on Wednesday. “It’s still here.†HUFFINGTON POST
Fed Plans to Keep Going With Stimulus  | “Employment has been increasing at a healthy clip for the last few months, but the Federal Reserve is not ready to relax just yet,†The New York Times writes. NEW YORK TIMES
U.K. Offers Additional Support for Economy  | The New York Times reports: “The British government was forced on Wednesday to seek new ways to revive the sputtering economy after acknowledging for the second time in three months that it would take longer than expected to meet its debt-reduction target.†NEW YORK TIMES
2 Former Detroit Pension Officials Indicted on Corruption Charges  |Â
REUTERS
