Investors cautiously pulled back from the markets as a flurry of political moves in Washington on Monday evening failed to end a budget standoff, setting up the first government shutdown in nearly two decades, The New York Times reports. Stock markets around the world fell on Monday, though the declines were relatively modest in the United States while negotiations in Congress remained stalled, Nathaniel Popper writes in DealBook. Markets in Europe were higher on Tuesday, while stock index futures in the United States pointed to a higher opening Tuesday morning in New York.
Many on Wall Street think the direct effect of a shutdown will be relatively minimal from the stock market’s perspective. About 800,000 federal workers are to be furloughed and more than a million others will be asked to work without pay, as roughly two-thirds of the government â€" the so-called essential functions â€" will continue operating. But some economists have said the shutdown would most likely have a broader effect on market psychology if it lasted for more than a few days, Mr. Popper writes.
“You have an economy that has already shown some hesitation,†said Diane Swonk, the chief economist at Mesirow Financial. “That’s the last thing we need right now.â€
President Obama is scheduled to meet on Wednesday with members of the Financial Services Forum, including the chiefs of banks like JPMorgan Chase and Goldman Sachs, who are in Washington for an annual meeting. The group is expected to discuss a range of financial issues.
FINANCIAL WATCHDOG TO DEPART AGENCY  | David Meister, who is waging legal battles against some of the biggest names in finance, is poised to step down from his role as head of the Commodity Futures Trading Commission’s enforcement unit, a move that may put the future of those cases in question, DealBook’s Ben Protess reports. The commission announced his departure early on Tuesday, capping Mr. Meister’s effort to embolden an agency once dismissed as “the watchdog that didn’t bark.â€
“Over a nearly three-year stretch, Mr. Meister helped write new rules to expand the enforcement unit’s authority, overhauled the unit’s management ranks and filed a record number of actions against the financial industry. An investigation into the banking industry’s manipulation of benchmark interest rates â€" a crackdown on banks like UBS and Barclays â€" defined his tenure,†Mr. Protess writes. Still, his exit â€" and the exit of Gary Gensler, the agency’s chairman, whose term expires in December â€" comes at an awkward time.
One of the most prominent cases is an investigation into whether JPMorgan Chase traders in London built a position so big that they manipulated the market for financial contracts known as derivatives. That comes as the Justice Department and other regulators are trying to negotiate a settlement with JPMorgan over allegations of mortgage abuses â€" a case that, to many on Wall Street, seems unfair, DealBook’s Peter Eavis writes. “But JPMorgan may not be the martyr some think it is.â€
In the Justice Department’s effort over mortgages, a person inside the bank is providing valuable assistance to the government, according to The Wall Street Journal, citing unidentified people familiar with the matter. “The cooperating person has provided information â€" including e-mails â€" suggesting the bank vastly overstated the quality of mortgages that were being bundled into securities and sold to investors before the financial crisis, the people said.â€
DOUBTS RAISED ON THE VALUE OF CONSULTANTS TO PENSIONS  | “At a time when individual investors are increasingly demanding transparency in performance track records, the biggest slice of the investment world â€" pension funds â€" has conspicuously turned a blind eye to demanding track records from their most influential advisers, investment consultants,†Andrew Ross Sorkin writes in the DealBook column. “A new study by professors at the University of Oxford is causing a stir in the staid pension investment industry, highlighting the subpar performance of most consultants and, more important, the lack of disclosure that would allow the public to even know about it.â€
ON THE AGENDA  | It is the first day of a government shutdown. Walgreen is scheduled to report earnings before the market opens. Empire State Realty Trust, owner of the Empire State Building, is expected to price its I.P.O. on Tuesday evening. Pierre Cailleteau, managing director for sovereign ratings at Moody’s, is on Bloomberg TV at 11:15 a.m.
AN OCCUPY WALL STREET DEBIT CARD  | To commemorate the second anniversary of the Occupy Wall Street movement in September, a surprising undertaking began with little fanfare: creating a prepaid Occupy debit card, Colin Moynihan reports in The New York Times. “The idea, led by a group that includes a Cornell law professor, a former director of Deutsche Bank and a former British diplomat, is meant to serve people who do not have bank accounts, but it also aims to make Occupy a recognized financial services brand.â€
Mergers Holding Steady  | For the first nine months of the year, Goldman Sachs claimed the top spot among financial advisers, having worked on 285 deals worldwide worth nearly $517 billion. DealBook »
Cooper Tire Shareholders Approve Sale to Indian Tire Maker  | The shareholder approval was a big step forward for the $2.5 billion sale of Cooper Tire and Rubber to Apollo Tyres of India, but the deal still faces hurdles. REUTERS
How the Deal for Rue21 Could Fall Apart  | A report of weak sales by the retailer rue21 has spooked potential investors in a private equity deal to buy the company. The question now is whether the three banks on the deal want to risk their reputations by trying to kill it, Steven M. Davidoff writes in the Deal Professor column. DealBook »
Frontier Airlines to Be Acquired by Investment Firm  | “The man who turned Spirit Airlines Inc. into one of the industry’s stingiest but most profitable carriers agreed in principle to buy Denver-based Frontier Airlines, a transaction that likely signals the expansion of the ultralow-cost sector of the U.S. airline industry, according to a person familiar with the deal,†The Wall Street Journal reports. WALL STREET JOURNAL
Nielsen Completes Acquisition of Arbitron  | Nielsen Holdings said on Monday that its $1.26 billion acquisition of the radio ratings company Arbitron would allow it to monitor eight hours a day of the public’s media consumption across television, radio and a range of electronic devices. NEW YORK TIMES
Former Trader Looks at the Changes in Goldman  | “What Happened to Goldman Sachs†examines the bank’s evolution from an elite private partnership to a vast public corporation - and the effects of that transformation on its culture. DealBook »
Berkshire Hathaway to Receive $2 Billion of Goldman Stock  | Berkshire is getting Goldman Sachs stock worth nearly $2.15 billion through warrants it acquired as part of a deal in 2008, Reuters reports. REUTERS
Barclays Names Top Aerospace Banker  | Barclays has announced that Jay Caldwell will join the bank as global head of its aerospace and defense team. DealBook »
Freddie Mac Names Ally Executive as Finance Chief  | Freddie Mac said on Monday it had chosen James Mackey, a top executive at Ally Financial, to be its chief financial officer, succeeding Ross Kari. REUTERS
Mutual Fund Billionaire Gives $250 Million to Yale  | Charles B. Johnson, the retired chairman of the money management company Franklin Resources, has pledged $250 million to Yale. DealBook »
Bank Fees Rise for 15th Straight Year  |Â
USA TODAY
Apollo’s Energy I.P.O. Gives New Life to Quick Flips  | Apollo Global Management is showing that private equity can still dig into its old bag of tricks, Christopher Swann of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS
Active Network in $1.05 Billion Buyout  | Active Network, which provides online tools and data management for events, has agreed to be acquired by the private equity firm Vista Equity Partners in a deal valued at $1.05 billion. DealBook »
Perry Capital Cuts Stake in J.C. Penney  | The hedge fund began to cut its stake on Friday, coinciding with J.C. Penney’s disclosure of a planned sale of as much as 96.6 million new common shares. DealBook »
Container Store Aims to Raise $200 Million in I.P.O. Â |Â The Container Store Group, a 35-year-old retail chain based in Texas, filed for an initial public offering, saying it planned to use the proceeds to pay a dividend to holders of its senior preferred stock and to repay debt. REUTERS
Cybersecurity Firm Cigital Raises $50 Million  | Cigital, which helps enterprise customers maintain software applications to protect against cyber threats, announced on Tuesday that it raised $50 million from LLR Partners, to support its expansion and growth. CIGITAL
Payments Start-Up Leaf Raises $20 Million  | Leaf, a competitor to Square and other payments companies, attracted $20 million from Heartland Payment Systems, a big payments processing company, AllThingsD reports. ALLTHINGSD
Despite Cries of Unfair Treatment, JPMorgan Is No Victim  | Some banking experts say they believe the government is picking on JPMorgan Chase, but the bank may not be the martyr some think it is. News Analysis »
No Limit on Strikes for JPMorgan Chase  | Simply paying money to get rid of investigations raises questions about whether JPMorgan Chase should be viewed as a recidivist, and if so how the law should treat the bank, Peter J. Henning writes in the White Collar Watch column. DealBook »
Wells Fargo Settles With Freddie Mac Over Loans  | Wells Fargo agreed to pay $780 million in cash to Freddie Mac to resolve repurchase liabilities on home loans sold to the mortgage finance giant before 2009, Reuters reports. REUTERS
For Sweden’s Banks, Fast Growth Isn’t Seen as the Goal  | “The dream scenario would be that the economy grows a little bit faster than the bank sector,†Peter Norman, Sweden’s financial markets minister, told Bloomberg News. BLOOMBERG NEWS
Former Morgan Stanley Broker Pleads Guilty in Insider Case  | A former financial adviser with Morgan Stanley admitted to tipping off a childhood friend to Gilead Sciences’ plan in 2011 to buy Pharmasset, before the takeover was announced. REUTERS
