JPMorgan Chase, which is close to striking a $13 billion settlement over mortgage practices, has been portrayed by some on Wall Street as a victim of government zealotry. The bank’s defenders say JPMorgan is paying for the sins of two firms it bought in the financial crisis, Bear Stearns and Washington Mutual. “But as details emerge, Wall Street’s fears of a largely punitive settlement may not add up,†Peter Eavis and Ben Protess report in DealBook.
The money will flow to different parties, with the largest sum, more than $6 billion, serving as compensation for investors like pension funds that experienced losses from mortgage securities sold by JPMorgan, Bear Stearns and Washington Mutual, people briefed on the talks said. Another $4 billion is relief for struggling homeowners in cities like Detroit, serving as penance for the bank’s general mortgage practices without stemming from any particular mortgage securities or institution, according to one of the people briefed on the talks.
“The remaining $2 billion to $3 billion will represent the only fine in the case, according to the people briefed on the talks,†Mr. Eavis and Mr. Protess write. “That fine, from federal prosecutors in Sacramento, involves a civil investigation into mortgage securities that JPMorgan itself sold in the run-up to the financial crisis. Despite the concerns that JPMorgan was being unfairly taken to task for the practices of Bear Stearns and Washington Mutual, investigations into the two firms are not expected to lead to any fines. Justice Department lawyers, one person said, decided against allocating fines to those firms because doing so might appear punitive.â€
WASHINGTON STALEMATE EXPECTED TO DENT WALL STREET PROFIT  | “Thomas P. DiNapoli, the comptroller for New York State, warned in a report on Tuesday that political gridlock in Washington could put pressure on Wall Street earnings in the second half of the year,†Alexandra Stevenson reports in DealBook.
“Strong Wall Street earnings have been a boon to the state’s finances, and the industry looked poised to match 2012 earnings earlier this year, bringing in $10.1 billion in the first half of 2013,†Ms. Stevenson writes. “But while 2012 turned out to be the third-most lucrative year on record for Wall Street - and for the state, which collected $3.8 billion in taxes from the industry - the second part of this year could turn out to be disappointing.â€
ON THE AGENDA Â |Â After the government shutdown delayed its release, the jobs report for September is out at 8:30 a.m. Data on construction spending in August is out at 10 a.m. McGraw Hill Financial, Delta Air Lines and DuPont report earnings before the market opens. Warren E. Buffett is on Bloomberg TV at 9 a.m.
J.C. PENNEY CAPITULATES TO MACY’S  | J.C. Penney had fought for its ability to sell branded Martha Stewart housewares since its former chief executive, Ron Johnson â€" who was supported by the hedge fund manager William A. Ackman â€" courted Ms. Stewart despite her agreement with a big rival, Macy’s. But on Monday, days before a judge was expected to rule in the long-running legal dispute, Martha Stewart Living Omnimedia and Penney scaled back the merchandising agreement at the center of the battle, Hilary Stout reports in The New York Times.
Under the revised agreement, Penney will not sell kitchen, bed and bath products designed by Martha Stewart that were sold under the label “JCP Everyday,†but it will continue to market other Martha Stewart merchandise, Ms. Stout reports. In addition, it will return 11 million common shares that it acquired in the initial agreement, and it will give up its two seats on the Martha Stewart board.
“It was a complete surrender,†Theodore M. Grossman of the Jones Day law firm, the lead counsel for Macy’s in the case, said after the agreement was announced. “Total victory.â€
A New Nokia Tablet Before Microsoft Deal Closes  | “Microsoft does not yet own Nokia’s devices business. If it did, it is questionable whether the Surface 2 and Lumia 2520 would both exist, because they are similar in a number of ways,†Nick Wingfield writes on the Bits blog. NEW YORK TIMES BITS
Reckitt Benckiser Considers Options for Pharmaceuticals Unit  | The British consumer goods company Reckitt Benckiser said it was reviewing its pharmaceuticals unit, “effectively putting up for sale its prescription medicine for heroin addiction, which faces cheap, copycat competition,†Reuters reports. REUTERS
Washington Post Staff Bids Farewell to Grahams  | An emotional send-off reception on Monday night for the Graham family wrapped up a major transition for The Washington Post, which was sold this summer to Jeffrey P. Bezos, the founder of Amazon. NEW YORK TIMES
Hong Kong Tycoon Still Has Options for Supermarket Chain  | ParknShop might be more palatable if the tycoon Li Ka-shing can bundle it up with more attractive assets from his holding company, Hutchison Whampoa, Una Galani of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS
Longtime Goldman Executive Is Departing  | J. Michael Evans, the firm’s global head of growth markets, who had been viewed as a possible successor to Goldman’s chief executive, Lloyd C. Blankfein, plans to retire. DealBook »
With New Subscribers, Netflix Hits Milestone  | “Some of the euphoria today feels like 2003,†the chief executive of Netflix, Reed Hastings, and the chief financial officer, David B. Wells, wrote as they reported results that were greeted enthusiastically on Wall Street. In 2003, Netflix’s stock price quintupled before sliding back to single-digit levels. NEW YORK TIMES
Amazon.com Remains Investor Favorite, Despite Lack of Profit  | “No one is asserting that Amazon is a flat-out bubble, but there is an increasingly noisy debate about when it will â€" or even whether it can â€" deliver the sort of bottom-line profits that investors normally demand from a company expected to post $75 billion in revenue this year,†David Streitfeld writes in The New York Times. NEW YORK TIMES
Banks Look to Sell Loan Tied to Rue21 Deal  | Bank of America Merrill, Goldman Sachs and JPMorgan Chase are trying to sell a $250 million bridge loan that partially financed the buyout of the retailer rue21 by Apax Partners, Reuters reports, citing unidentified people. REUTERS
Blackstone Opens Singapore Office  | The Blackstone Group, seeking more investments in Southeast Asia, opened an office in Singapore, its second office with treasury functions after New York, Bloomberg News reports. BLOOMBERG NEWS
Harvard Names Head of Private Equity Investments  | Harvard Management Company, which manages the university’s endowment, tapped Lane MacDonald to oversee its private equity investments. Most recently, Mr. MacDonald was managing director of the management company’s public markets platform. REUTERS
Losses Deepen for Paulson Gold Fund  | John A. Paulson’s PFR Gold Fund fell 16 percent on September, bringing its decline for the year to 62 percent, Bloomberg News reports, citing a report to investors. BLOOMBERG NEWS
Highbridge Said to Plan Hedge Fund in Asia  | Highbridge Capital Management, a unit of JPMorgan Chase, is looking to raise about $250 million for a hedge fund focused on Asia, Bloomberg News reports. BLOOMBERG NEWS
For Star Athlete I.P.O., a Stumble on the Field  | Arian Foster had one of his worst outings in the N.F.L. on Sunday. For a start-up that announced an I.P.O. tied to his earnings, it was not an auspicious beginning. DealBook »
U.S. Exchanges Set to Compete for Alibaba I.P.O.  | The New York Stock Exchange and the Nasdaq both said they would accept a structure in which Alibaba’s founders and top executives would nominate a majority of board members. DealBook »
Madame Tussaud’s and an Energy Company Seek to Go Public  | The private equity owners of Madame Tussaud’s and a clean energy business backed by the financier Guy Hands are seeking to cash out of their investments. DealBook »
Where Silicon Valley Gets Financial Officers  | At least 20 executives have become chief financial officers in Silicon Valley after training in the finance department of eBay, The Wall Street Journal reports. WALL STREET JOURNAL
Pritzker Group Invests in Facilities Services Firm  | The venture capital arm of the Pritzker Group announced on Tuesday that it had invested $45 million in SMS Assist, a cloud-based facilities maintenance company in Chicago, bringing its total investment in the company to $62 million. SMS ASSIST
Smaller Law Firms Get a Bigger Piece of Corporate Work  | “Companies that once regularly hired the pricey titans of the legal business are sending more work to smaller, cheaper firms â€" and not just for routine jobs,†The Wall Street Journal reports. WALL STREET JOURNAL
22 Under Investigation in Libor Case in Britain  | The individuals were notified last week by Britain’s Serious Fraud Office that they were being investigated. DealBook »
Former JPMorgan Banker in London Sues Regulator  | The Financial Times reports: “Achilles Macris, a former top JPMorgan Chase banker, filed a claim on Monday against the U.K.’s Financial Conduct Authority alleging he was unfairly identified and criticised in settlement papers involving the ‘London Whale’ trading debacle.†FINANCIAL TIMES
Potential Silver Lining for S.E.C. in the Cuban Case  | The agency lost its battle with Mark Cuban, the owner of the Dallas Mavericks, but preserved its ability to pursue cases that do not fit the usual model of corporate insider trading, Peter J. Henning writes in the White Collar Watch column. DealBook »
Summers Said to Decline Bank of Israel Job  | Lawrence H. Summers, who had been President Obama’s first choice to lead the Federal Reserve, “rejected an approach about taking charge of Israel’s central bank,†Bloomberg News reports, citing an unidentified person with knowledge of the process. BLOOMBERG NEWS
