Wall Street’s biggest banks have for years hired the children of senior Chinese government officials in the hopes that they can open doors and secure deals, David Barboza reports in The New York Times. The hirings, while not well publicized, were no secret. But they are gaining new attention after a Securities and Exchange Commission investigation has raised the question of whether such practices crossed a line at JPMorgan Chase.
The focus of the investigation “has prompted a scramble among the Hong Kong rivals of the New York bank to assess the potential risks of their own hirings,†Mr. Barboza writes. Bankers and lawyers said in interviews that the practice of hiring the children of government officials was so widespread that banks competed to hire the most politically connected recent college graduates. JPMorgan, for its part, has not been accused of wrongdoing and has said it is cooperating with the inquiry.
“For international banks, if you don’t have any of them, it’s difficult for you to get into the circle,†said Jeffrey Sun, a lawyer at Orrick, Herrington & Sutcliffe who is based in Shanghai. “You need intelligence. You need access to information. And this is one way to get that. Even though it’s an ‘inconvenient fact’ for most Chinese like me, that’s real life.â€
STOCK OPTIONS ERROR AT GOLDMAN Â |Â A programming error at Goldman Sachs on Tuesday sent errant orders of stock options into the market, the latest technological glitch to strike Wall Street in recent years, Bloomberg News reports.
An internal system that helps Goldman buy options “inadvertently produced orders with inaccurate price limits and sent them to exchanges, said a person familiar with the situation, who asked not to be named because the information is private,†Bloomberg News writes. “The size of the losses depends on which trades are canceled, the person said. Some have already been voided, data compiled by Bloomberg show.†The error comes about a year after a computer problem at the Knight Capital Group produced a blizzard of erroneous orders to buy stocks and caused steep losses.
BARNES & NOBLE FOUNDER DROPS BID FOR BOOKSTORES  | Leonard S. Riggio, the founder and chairman of Barnes & Noble, has shelved a bid to buy the company’s bookstores, amid uncertainty over the retailer’s future, DealBook’s Michael J. de la Merced reports. The disclosure on Tuesday came as Barnes & Noble reported a loss that more than doubled from the period a year earlier. The company’s stock tumbled more than 12 percent.
After announcing his intention to bid for the company’s 675 stores in February, “Mr. Riggio struggled with whether to follow through on his proposal, according to a person briefed on the matter,†Mr. de la Merced reports. “Mr. Riggio never made a formal offer to the board, and in recent weeks became leery of both the shareholder lawsuits that might arise from any bid and the distraction it might become to the company.â€
ON THE AGENDA Â |Â Staples, Target and Lowes report earnings before the market opens. Hewlett-Packard reports results this evening. Data on sales of existing homes in July is out at 10 a.m. The Federal Reserve releases minutes of the recent meeting of its policy making committee at 2 p.m. Hugh E. McGee III, chief executive of Barclays for the Americas, is on CNBC at 4 p.m.
ACKMAN FACES HIS INVESTORS  | Despite suffering hundreds of millions of dollars in losses, the hedge fund manager William A. Ackman continues to bet the government will shut down Herbalife, the nutritional supplements company he has called an illegal pyramid scheme. “We are not at liberty to disclose the nature of those developments, but we believe that the probability of timely aggressive regulatory intervention has increased materially,†Mr. Ackman wrote in a quarterly letter to investors, according to The New York Post.
Lloyds Sells German Insurance Unit for $403 Million  | The Lloyds Banking Group, which is partially owned by the British government, sold Heidelberger Leben, its German life insurance business, to a joint venture of the private equity firm Cinven and Hannover Re, Reuters reports. REUTERS
Former Chesapeake Chief Starts a New Energy Company  | Aubrey K. McClendon, who retired this year as chief executive of Chesapeake Energy, “has lined up about $1.2 billion in equity and debt financing for deals in Ohio, much of it coming from two energy-focused private equity firms, according to people close to the matter,†The Wall Street Journal reports. WALL STREET JOURNAL
America Movil Lines Up Financing for KPN Bid  | But the offer by the Latin American telecommunications giant América Móvil “may be too late to influence the sale of KPN’s German unit in October,†Reuters reports. REUTERS
Glencore Xstrata Takes Write-Down After Merger  | The mining giant Glencore Xstrata reported sharply lower results on Tuesday after it wrote down $7.7 billion on the value of assets it acquired as part of the merger that created the company. DealBook »
Mining Giants Adjust to Austere Times  | Results for Glencore Xstrata and BHP Billiton showed both companies girding themselves for a long, slow period for the industry, Kevin Allison of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS
JPMorgan Said to Identify 2 Candidates for Board  | JPMorgan Chase “is close to naming two new directors with finance and risk management expertise to its board,†Reuters reports, citing an unidentified person close to the matter. REUTERS
JPMorgan Said to Hire Law Firm in Asia Inquiry  | JPMorgan Chase has hired Paul, Weiss, Rifkind, Wharton & Garrison to conduct an internal investigation into its hiring practices in Hong Kong, The Financial Times reports. FINANCIAL TIMES
Currency Volatility Is Unnerving Investors  | The experiences in many emerging markets are the flip side of the economic situation in the United States, where the economic data has recently been improving. DealBook »
Bank of America Intern in London Dies  | The death of a 21-year-old intern at Bank of America Merrill Lynch shocks bank employees in London’s financial district. DealBook »
Louis Gerstner III, Son of Ex-I.B.M. Chief, Dies at 41  | Louis V. Gerstner III, the son of the former chief executive of International Business Machines, served as president of the Gerstner Family Foundation. DealBook »
Carlyle Hires G.E. Executive for Power Investment Team  | The Carlyle Group has hired Matthew J. O’Connor from General Electric as a new co-head of its power investments group, the latest move to expand its energy practice. DealBook »
Perry Capital Is Said to Take Position in Herbalife  | The hedge fund Perry Capital, with a stake in Herbalife of less than 5 percent, is the latest hedge fund to take the opposite side of William A. Ackman’s bet that the company is a pyramid scheme, CNBC reports. CNBC
NYSE Euronext Is Said to Choose Banks for I.P.O. of Euronext  | NYSE Euronext, which is being acquired by the IntercontinentalExchange Group, has chosen JPMorgan Chase and Société Générale to manage the initial public offering of its European equity business, Bloomberg News reports, citing four unidentified people with knowledge of the matter. BLOOMBERG NEWS
Facebook Seeks to Lower Barriers to Internet Access  | “On Wednesday, Facebook plans to announce an effort aimed at drastically cutting the cost of delivering basic Internet services on mobile phones, particularly in developing countries, where Facebook and other tech companies need to find new users,†Vindu Goel writes in The New York Times. NEW YORK TIMES
New York State Comptroller to Promote Investments in Silicon Alley  | As New York City continues to publicize the rise of Silicon Alley start-ups, the state comptroller’s office is doing its part for the cause. DealBook »
Birst, a Data Analysis Provider, Raises $38 Million in New Round  | Birst, a start-up that draws on cloud computing to power its data analysis services, said on Tuesday that it had collected $38 million in a new round of financing. DealBook »
How to Put Banking Rules Into Practice  | “In addition to urging regulators to hurry up,†the editorial board of The New York Times writes, President Obama “has to use his bully pulpit both to support regulators (and rules) who might anger Wall Street and tell Congressional Democrats who would derail strong rules to back off.†NEW YORK TIMES
Judge Approves $730 Million Citigroup Settlement  | A federal judge approved Citigroup’s agreement to pay bondholders $730 million over claims that the bank hid its exposure to toxic mortgage assets, Reuters reports. REUTERS
Before Detroit’s Bankruptcy Proceeds, a Question of Eligibility  | The bankruptcy clause of the Constitution should triumph over state laws as Detroit seeks to prove that it is eligible to file for Chapter 9, Stephen J. Lubben writes in the In Debt column. DealBook »
A Period of Turnover at the S.E.C.  | Longtime employees of the Securities and Exchange Commission “say they can’t remember another time when so many high-ranking officials have come and gone. But the exits seem to be having little or no noticeable impact on the agency’s work, according to insiders,†The Wall Street Journal writes. WALL STREET JOURNAL
