Apollo\'s 2nd-Quarter Profit Falls 84%

Apollo Global Management said Thursday that its profit tumbled by 84 percent in the second quarter, as its core private equity business grappled with difficult markets.

The investment firm said it earned $18.7 million for the quarter, down from $117.5 million in the same time a year ago.

That amounts to about 5 cents a share, still far better than the loss of 17 cents that analysts surveyed by Bloomberg had expected.

The profit was reported as economic net income after taxes, a measurement used by private equity firms that includes unrealized gains from investments. Using generally accepted accounting principles, the firm lost $41 million in the quarter, down from $51 million in the year-ago period.

Apollo attributed its weaker results to lower income from its mainstay private equity funds, compared with the year-ago period, when it sold Hughes Communications, the satellite Internet company. Its investments also showed slower growth, a problem that has affected some of its rivals, like the Blackstone Group.

But the firm said that its assets under management also grew 46 percent in the quarter, to $105 billion. Behind the increase was new capital that the firm had raised and acquisitions of other fund managers.

“We reported solid financial results for the second quarter despite a challenging global market environment,” Leon D. Black, the firm's chairman and chief executive, said in a statement. “Our results again demonstrated the growth inherent in Apollo's business model as we actively raised and deployed capital around the world, and our diversified investment platform continued to generate cash distributions for our shareholders.”

Apollo's private equity business reported a 50 percent drop in economic net income for the quarter, to $55.8 million. While it reported lower unrealized gains, the division closed on its acquisition of the El Paso Corporation's exploration and production assets, a $7.1 billion deal that is one of the biggest leveraged buyouts since the financial crisis.

Other parts of Apollo's businesses also struggled with the market turmoil. Its capital markets unit reported an economic net loss of $14.4 million for the quarter, swinging from a gain of $10.5 million during the year-ago period.

Its real estate division reported a 76 percent drop in economic net income, to $600,000.

This post has been revised to reflect the following correction:

Correction: August 2, 2012

An earlier version of this article misstated the percentage decline in second-quarter earnings compared with the quarter a year ago. It was a drop of 84 percent, not 66 percent.

Where Is David Pogue\'s Phone?

On Monday night, I was taking the Amtrak train home from a NOVA shoot in Philadelphia - exhausted, but happy to have power and Wi-Fi for my laptop.

As the train was about to pull into Bridgeport, Conn., my stop, I checked my pockets - and my iPhone was gone. I was baffled; I hadn't even stirred from my seat except to get something from the café car, and I was sure to take my phone with me for that mission. Maybe I was pickpocketed. Maybe I'd set it down to pay for the food. I don't know.

But now my phone was missing. The Amtrak conductor held the train for about two minutes and helped me search around my seat - nowhere. She dialed it from her own phone, too - no ringing sound, and nobody answered. As the train pulled away, I used the Apple app, Find My iPhone, on my laptop to see where the phone was. It said that the phone was “offline.” In other words, somebody had my phone - it wasn't lying under a seat somewhere - and had turn ed it off.

Anyway, I spent three days going through the five stages of phone loss - denial, anger, bargaining, depression and kicking myself. Then, suddenly Thursday, Find My iPhone sent me an e-mail, saying that the phone was back online and had been located. It was in Seat Pleasant, Md., which my Twitter followers informed me is a rough neighborhood. The app created a map so I could see the house where my phone was supposedly sitting.

Now what? I contacted the Prince George's County police department. And I posted the map of the house to my 1.4 million Twitter followers, who have never let me down.

To my astonishment, the “find Pogue's phone” quest went instantly viral. Gizmodo.com investigated the area and posted street photos of the house. Local twitterites contacted the Prince George's County police department themselves. All manner of Web sites picked up the quest. “The @Pogue Stolen iPhone Saga is the future of entertainment. Day off is being s pent glued to @Gizmodo reading updates,” tweeted one person.

Every now and then the phone would seem to move - from the driveway into the house, for example. Had somebody come home and rescued it from a parked car? Or was this just the general imprecision of GPS, giving me a different reading?

By the end of the day, local police were actually at the house, with me on the phone. Find My iPhone has a great feature: From the iCloud.com Web site, you can make the phone ping, very loudly, for two minutes, even if its ringer is switched off. Over and over and over, I pinged the phone, so that the officer might hear it as he toured the house. My heart was in my throat; it was a cat-and-mouse game of GPS versus Bad Guy. I just kept hitting Refesh on the Find My iPhone screen, over and over again, in case the phone moved again.

Over an hour he spent searching. The backyard. The next-door house. The driveway. He never heard it, and he never found the phone. Near th e end of his search, the phone went offline again. Either its battery died, orsomebody got smart and shut it down so I couldn't track it anymore.

I'm not worried about the data. The phone is password protected, and of course the app lets me remotely wipe it clean of any data at any time. I'm just bummed to lose a very expensive phone.

I've sent a Find My iPhone message to the screen, displaying my temporary phone number and offering a reward. I'll monitor my phone records, in case the thief or whoever buys it makes a call. And I'll watch my Photo Stream, in case someone takes a photo. Maybe I'll get lucky.

In the meantime, I'll never know why such a diligent search, with the phone pinging away in the house where Find My iPhone said it was, never unearthed it. Just one life's great tech mysteries, I guess.

But I'm incredibly grateful to Gizmodo, the Prince George's County police, and my Twitter followers for joining me on the quest! If there's any more news, I'll be sure to let you know.

Apple Airplay and the Window of Obsolescence

Anytime there's a new operating system, there's somebody who complains. Usually, the new OS “breaks” some older piece of software. Or maybe your printer won't work after the upgrade. Something.

Last week in my New York Times column, I reviewed Apple's new Mountain Lion operating system. It doesn't break much of anything, because it's basically a dressed-up Lion.

But there is an outcry, all right. It's about AirPlay.

“AirPlay does not seem to work on any of Apple's computers much older than one year,” wrote one unhappy reader. “Please have a look at the sea of negative comments mentioning this on Apple's pertinent upgrade download page. The negatives are a resounding thumbs down on this upgrade.”

Well, I'm not sure on that last point - three million people downloaded Mountain Lion in the first four days, a faster adoption than for any other Mac OS in history, and the users have given it a cumulative 4.5 out of 5 stars on the Mac App Store. But the grumbling is real.

AirPlay is a fairly amazing feature. As I described it, “AirPlay mirroring requires an Apple TV ($100), but lets you perform a real miracle: With one click, you can send whatever is on your Mac's screen - sound and picture - to your TV. Wirelessly. … You can send photo slide shows to the big screen. Or present lessons to a class. Or play online videos, including services like Hulu that aren't available on the Apple TV alone.”

Only one problem: AirPlay requires a recent Mac - 2011 or newer. The reason, Apple says, is that AirPlay requires Intel's QuickSync video compression hardware, which only the latest chips include.

Now there are, fortunately, alternatives for older Macs (and older Mac OS X versions). You can read about one of them here. But that software is more complicated, and the video can be choppy.

So there we are: a new OS feature that requires certain hardware, and the Mac faithf ul are not pleased. Not pleased at all.

“So what we have here is decision by Apple to not support a key feature for the majority of their users, for seemingly the sole reason of pushing hardware upgrades,” wrote one reader. “Both of my Macs are under a year old … but I have to wonder, what upcoming features will I lose out on in 18 months' time? That isn't a way to treat faithful fans (or any installed base), and makes the transition from Jobs to Cook look ominous to say the least.”

“10.8 is Apple's most offensive slap at customer loyalty ever,” wrote another.

I appreciate that these readers are unhappy. But it's not AirPlay that's the problem. It's not even Apple that's the problem. (New software features that require certain hardware isn't anything new. When Windows Vista came out, Media Center didn't work unless you had a TV tuner card. The handwriting recognition in Windows works only on PCs' touch screens. And so on.)

No, it's the way the entire computer industry works.

When you look at it one way, the tech industry is about constant innovation, steady progress. Of course some things will become obsolete. Of course there will be new features that your older computer can't exploit.

But if you look at it another way, the whole thing is a scam to make us keep buying new stuff over and over again. A new phone every two years. A new computer every four. Bad for our wallets, bad for the environment.

In AirPlay's case, that window of “obsolescence,” if we're calling it that, was supershort - one year. If you bought your Mac only two years ago, you can't use AirPlay.

What should Apple have done, then? It had this great technology, finished and ready to ship. How could it have avoided this “slap at customer loyalty”? Should it have sat on AirPlay and not released it, to avoid that perception? If so, how long? Three years? Four years?

Or is the problem not with the tech com panies, but with ourselves? Should we just accept that this is how the game is played? That when you buy a new computer, you should buy it for what it does now, and learn not to resent the fact that, inevitably, there will be better, faster, cheaper computers in the future?

It's hard to imagine either of those approaches becoming satisfying, either to the industry players or their customers. So until there's a resolution to this stalemate, the status quo will prevail: upgrade/grumble, upgrade/grumble. On this one, friends, there's no solution in sight.

For Wall Street, Real Pain When the Fed Fails to Act

Looks like the central bankers just destroyed Wall Street's 2012 bonus season.

Both the Federal Reserve and the European Central Bank this week decided to hold off on any big new initiatives to stimulate markets and the sluggish economies of the United States and Europe. The lack of action may now have a direct and painful impact on the chief source of revenue at investment banks on both sides of the Atlantic. Since the 2008 financial crisis, banks' bond trading profits have soared when the Fed and the E.C.B. have announced, and then executed, radical moves to revive economic conditions. As that stimulus wanes, that trading income drops off.

The link between Fed stimulus and Wall Street earnings became apparent soon after the financial crisis of 2008. Faced with very jittery markets and an economy that was not responding well to meeker modes of stimulus, the Fed bought $1.25 trillion of mortgage-backed bonds, mostly in 2009. In that year, Wall Street bond tra ding operations, which provide the bulk of profits at such firms, produced some of their strongest results ever. The five biggest trading banks in America together reported $78 billion of bond trading revenue in 2009, the year of “quantitative easing,” the term used for the Fed's bond buying spree. Goldman Sachs' fixed-income division reported revenue of $21.9 billion in 2009, up from $9.3 billion in 2008. But in 2010, as the Fed magic wore off, Goldman Sachs' fixed income revenue fell to $13.7 billion.

Big trading banks are particularly well positioned to profit when central banks act aggressively. The firms help make markets in bonds and derivatives. When the banks' clients see the Fed take bold steps, they feel encouraged, and come off the sidelines to buy more bonds. This increases the amount of business that flows through Wall Street, but it also lifts the prices of the bonds the banks hold, creating profits for the traders. The banks also deliberately increas e the size of their bond holdings when they are convinced central bank actions will lift markets.

Since 2009, the Fed has carried out two additional, but lesser, monetary initiatives. The next time central bank stimulus appeared to have a strong impact on trading profits was in the first quarter of this year. To help European banks fund themselves, the European Central Bank provided cheap, emergency credit to the Continent's lenders, first in December 2011 and then in February of this year. Investor sentiment rebounded, bonds rallied, and, on cue, fixed income traders were soon racking up big profits.

Deutsche Bank's fixed-income revenue was $3.4 billion in the first quarter of 2012, up 225 percent from the fourth quarter's $1 billion. Société Générale's jumped 150 percent over the same period. In the United States, Morgan Stanley did particularly well in the first quarter. But soon the markets decided the E.C.B. had not done enough. Bonds sagged, and banks' fixed-income revenue flagged. Morgan Stanley's second quarter fixed income revenue was down 70 percent from the first quarter, while Société Générale's halved.

Still, the central banks may yet act with force this year. Both the Fed and the E.C.B. made it clear this week that more forceful initiatives could happen later if economic and market stresses worsen. Many on Wall Street will be hanging on those assurances.

Bristol-Myers Executive Accused of Insider Trading

Bristol-Myers Squibb announced in June a deal to buy Amylin Pharmaceuticals for $7 billion. But before the deal was public, a Bristol-Myers executive used his insider position to make a profit, federal prosecutors say.

The executive, Robert Ramnarine, has been charged with insider trading, according to documents filed in the United States District Court in New Jersey. He faces three counts of securities fraud, accused of trading call options of companies involved in potential deals with his employer.

Mr. Ramnarine, who lives in East Brunswick, N.J., was arrested on Thursday morning, according to a spokesman for Paul J. Fishman, the United States attorney in Newark.

The charges center on personal trades he made in the call options of three companies that Bristol-Myers was acquiring: ZymoGenetics, Pharmasset and Amylin, the criminal complaint said. All together, Mr. Ramnarine made more than $300,000 on the illegal trades, according to the complaint.

The trades, which took place between 2010 and 2012, followed a pattern, according to the complaint. Mr. Ramnarine, an assistant director of capital markets at Bristol-Myers, would buy call options through personal brokerage accounts. After the deals were announced, he would sell those positions, the complaint says.

He apparently had some apprehensions. According to the complaint, Mr. Ramnarine did Internet searches last year for the terms “can stock option be traced to purchase inside trading,” and “insider trading options trace illegal [sic].” The court document also says the viewed an article on the blog Zero Hedge about insider trading in options of Ann Taylor.

The Securities and Exchange Commission also filed a complaint against Mr. Ramnarine.

“Ramnarine tried to educate himself about how the SEC investigates insider trading so he could avoid detection, but apparently he ignored countless successful SEC enforcement actions against similarly i ll-motivated individuals who paid a heavy price for their illegal trading,” said Daniel M. Hawke, the chief of the S.E.C. Enforcement Division's market abuse unit.

The agency is seeking a court order to freeze the executive's brokerage account assets.

Mr. Ramnarine's lawyer could not be immediately identified.

The charges come amid a broader crackdown by the federal government on insider trading. Investigators have been focusing on tips passed to hedge fund traders. The United States attorney's office in Manhattan has won a number of convictions, including that of Rajat K.Gupta, the retired head of the consulting firm McKinsey & Company, and Raj Rajaratnam, the former head of the hedge fund Galleon Group.

United States v. Robert Ramnarine

Securities and Exchange Commission v. Robert Ramnarine

Where Is Bourne? Not in an Electronic Version.

So, my 15-year-old son was heading off to summer camp. “Dad, I need some books!” he said, waggling his iPod Touch.

He loves twisty plots. He loves action. He loves intellectual challenge. I knew just the thing: “The Bourne Identity.”

I pulled up Amazon.com to buy the Kindle edition. “And once you're done with it, we can watch the movie together,” I told him as I searched.

Hm. That's weird. There's no electronic edition of “The Bourne Identity” on Amazon. Nor any of its sequels.

Barnes & Noble? Apple iBooks? Kobo? Sony? Nope. Nobody sells it.

I felt like I was in a Monty Python skit. “Hello? Would anyone like some money? Anyone? I've got money here-no?”

I eventually learned that Robert Ludlum's estate can't agree on a royalty rate with its publisher.

Dudes: It's 2012. You're among the last big-name holdouts on the face of the earth. You're worried about the royalty rate? How about worry ing about the thousands of dollars a month you've been leaving on the table by not offering the books to the public who's willing to buy it?

Eventually, I did what I'm sure thousands of frustrated Ludlum fans wind up doing: I downloaded the book from a BitTorrent site.

I know this is wrong. I sure wish I could have paid for it. So I sent the publisher a check for $9.99 for the e-book.

Business Day Live: Runaway Trades Spread Turmoil

Examining the fallout of an electronic trading debacle. | What the Fed's inaction means for the economy. | A look at Chick-fil-A, as a business. | Keeping fit while traveling.

Apollo\'s 2nd-Quarter Profit Falls 66%

Apollo Global Management said on Thursday that its second-quarter profit tumbled by 66 percent in the second quarter, as its core private equity business grappled with difficult markets.

The investment firm said that it earned $18.7 million for the quarter, down from $117.5 million in the same time a year ago.

That amounts to about 5 cents a share, still far better than the loss of 17 cents analysts surveyed by Bloomberg had expected.

The profit was reported as economic net income after taxes, a measurement used by private equity firms that includes unrealized gains from investments. Using generally accepted accounting principles, the firm lost $41 million in the quarter, down from $51 million in the year-ago period.

Apollo attributed its weaker results to lower income from its mainstay private equity funds, compared to the year-ago period, when it sold Hughes Communications. Its investments also showed slower growth, a a problem that has affected some of its rivals, like the Blackstone Group.

But the firm said that its assets under management also grew 46 percent during the quarter, to $105 billion. Behind the increase was new capital that the firm had raised and acquisitions of other fund managemers.

“We reported solid financial results for the second quarter despite a challenging global market environment,” Leon D. Black, the firm's chairman and chief executive, said in a statement. “Our results again demonstrated the growth inherent in Apollo's business model as we actively raised and deployed capital around the world, and our diversified investment platform continued to generate cash distributions for our shareholders.”

Apollo's private equity business reported a 50 percent drop in economic net income for the quarter, to $55.8 million. While it reported lower unrealized gains, the division closed on its acquisition of El Paso's exploration and production assets, a $7.1 billion deal that is one of the biggest leveraged buyouts since the financial crisis.

Other parts of Apollo's businesses struggled with the market turmoil as well. Its capital markets unit reported an economic net loss of $14.4 million for the quarter, swinging from a gain of $10.5 million during the year-ago period.

And its real estate division reported a 76 percent drop in economic net income, to $600,000.

Knight Capital Says Trading Mishap Cost It $440 Million

$10 million a minute.

That's about how much the trading mishap that set off turmoil on the stock market on Wednesday morning is already costing the trading firm.

Knight Capital Group announced on Thursday that it lost $440 million when it sold all the stocks it accidentally bought Wednesday morning because a computer glitch.

The losses are threatening the stability of the Jersey City based firm. In its statement, Knight Capital said its capital base, the money it uses to conduct its business, had been ‘severely impacted' by the event and that it was ‘actively pursuing its strategic and financing alternatives.'

In pre-market trading on Thursday morning, shares of the firm are already down 60 percent. That's on top of a 32 percent slide on Wednesday.

The problem on Wednesday led the firm's computers to rapidly buy and sell millions of shares in over a hundred stocks immediately after the markets opened on Wednesday. Those trades pushed t he value of many stocks up, and the company's losses appear to have occured when it had to sell the over valued shares back into the market at a lower price.

The company said the problems happened because of new trading software that had been installed. The event was the latest to draw attention to the potentially destabilizing affect of the computerized trading that has increasingly dominated the nation's stock markets.

Until this week, Knight had been one of the biggest beneficiaries of the evolution of the market, helping clients trade in and out of stocks at high speeds.

Still, the company said that none of its customers had been hurt by the errant trades.

Former Treasury Official to Join Romney Campaign

Posted Aug 1, 2012 9:36pm EDT

Michele Davis, a former top aide to Treasury Secretary Hank Paulson, has told colleagues that she will join the Romney campaign to lead a vigorous effort to defend his career in the private sector, a source told BuzzFeed Wednesday.

Davis is currently a partner at the Brunswick Group in Washington, D.C., a corporate public relations and strategy firm, where she was reportedly the firm's lead - alongside then-Brunswick executive Hilary Rosen - in managing the oil company BP's public relations effort in the wake of a giant Gulf of Mexico oil spill. She served as Assistant Secretary for Public Affairs and Director of Policy Planning at the Department of the Treasury from 2006 through the end of the Bush Administration, and is a veteran of the politics and P.R. of government and finance.

Davis brings experience of navigating the highest levels of government and media, and a reputation as one of the most capable hands at the intersection of finance, government, a nd the press. She was on Capitol Hill for the drafting of the Contract with America, and was a trusted adviser at Treasury: New York Magazine described her in 2008 as Paulson's "right-hand woman." "The Secretary doesn't do anything without talking to Michele," an anonymous insider was quoted as saying. She has also served through one of the most intense and difficult crisis situations of the era: She was at Paulson's right hand during the 2008 financial crisis.

She was portrayed by the actress Cynthia Nixon in the film Too Big to Fail.

But Davis will also bring some very high-profile baggage to Romney's campaign. She arrived at Treasury from Fannie Mae, the giant, government-backed firm that backs a large share of the nations mortgages. She was vice president for regulatory policy at Fannie Mae from 2002 to 2006, and is listed as a registered lobbyist for the troubled and controversial entity - which made a practice of keeping a bipartisan squad of Washington insiders on payroll - in 2004. (Indeed, Mitt Romney attacked rival Newt Gingrich for taking payments from Freddie Mac, Fannie Mae's sibling entity.)

In her role, Davis defended Fannie Mae's independence, despite substantial tax advantages: She was quoted in Newsday that year saying the entity "does not receive a penny of funding from the government" or any subsidy.

She also served at Fannie Mae during a time in which it was found to have doctored its earnings statements to juice executives' bonuses, for which it paid a massive $400 million in penalties.

Davis's own politics appear to roughly reflect Romney's Establishment roots, if not always his outsider imagemaking. She help convince Congress and America of the necessity of the bank bailouts known as TARP, and has spoken warmly of the Obama Administration's embrace of that program.

Indeed, Davis said in a recent speech in Hong Kong, pointed out by a Democratic source that she was pleased that Tim Geithner had been chosen to replace her boss, and that she played an active role in the transition to the Obama Administration.

“I went over there every couple of days and was on the phone every couple of days with every office, with the new people just to try to help with that transition," she said.

A spokeswoman for Romney, Andrea Saul, didn't respond to an inquiry about Davis. Davis didn't respond to an email seeking comment on her move.

ING Mulls Sale of Canada and U.K. Assets

Amsterdam, 2 August 2012

ING continuously evaluates its portfolio of businesses, in line with its stated objective of sharpening its focus. Within this context, ING today announced that it is currently reviewing strategic options for ING Direct Canada and ING Direct UK.
These reviews may or may not lead to transactions, and no decisions have yet been made in this regard. ING is committed to conduct these processes with the utmost diligence in the interests of its stakeholders, including customers, employees and shareholders.

ING Direct is the leading direct bank in Canada, launched in April 1997. Since that date, it has served its customers with excellent service, offering savings, chequing, mutual fund and mortgage products through its call centres, the internet and its ING Direct cafés. At 31 March 2012, ING Direct Canada's over 1100 employees served 1.8 million clients.

ING Direct UK is a leading UK direct banking platform which offers a focused range of saving s and mortgages products to over 1.5 million customers in the UK through secure online and mobile internet channels, supported by two UK-based call centres. At 31 March 2012 ING Direct UK had approximately 750 employees.

Any further announcement on the reviews will be made if and when appropriate. The ING Direct businesses in Australia, Austria, France, Germany, Italy and Spain are not affected by today's announcement.

Press enquiries

Carolien van der Giessen
+31 20 576 6386
Carolien.van.der.Giesen@ing.com

Investor Enquiries

ING Group Investor Relations
+31 20 576 6959
Investor.Relations@ing.com

About ING

ING is a global financial institution of Dutch origin, offering banking, investments, life insurance and retirement services to meet the needs of a broad customer base. Going forward, we will concentrate on our position as an international retail, direct and commercial bank, while creating an optimal base for an independent future for our insurance and investment management operations.

Important Legal Information

Certain of the statements contained in this document are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation: (1) changes in general economic conditions, in particular economic conditions in ING's core markets, (2) changes in performance of financial markets, including developing markets, (3) consequences of a potential (partial) break-up of the euro, (4) the implementation of ING's restructuring plan to separate banking and insurance operations, (5) changes in the availability of, and costs associated with, sources of liq uidity such as interbank funding, as well as conditions in the credit markets generally, including changes in borrower and counterparty creditworthiness, (6) the frequency and severity of insured loss events, (7) changes affecting mortality and morbidity levels and trends, (8) changes affecting persistency levels, (9) changes affecting interest rate levels, (10) changes affecting currency exchange rates, (11) changes in investor, customer and policyholder behaviour, (12) changes in general competitive factors, (13) changes in laws and regulations, (14) changes in the policies of governments and/or regulatory authorities, (15) conclusions with regard to purchase accounting assumptions and methodologies, (16) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (17) changes in credit-ratings, (18) ING's ability to achieve projected operational synergies and (19) the other risks and uncertainti es detailed in the risk factors section contained in the most recent annual report of ING Groep N.V.

Any forward-looking statements made by or on behalf of ING speak only as of the date they are made, and, ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities.

Morning Take-Out

TOP STORIES

As Banking Titans Reflect on Their Errors, Few Pay Any Price  |  Like a defecting Syrian colonel or converted climate-change denier, Sanford I. Weill has been heartily welcomed among those on the right side of history, Jesse Eisinger writes in his column, The Trade.

The sheer inappropriateness of the vessel, the breathtaking audacity of the messenger, can oddly confer authority on an idea. If even the creator of Citigroup now believes that the giant banks should be broken up, who could not believe it?

His belated conversion is only the latest from the “corner office to Zuccotti Park” banking crowd. The former merger aficiona do Philip J. Purcell, who headed up the pithily named Morgan Stanley Dean Witter Discover, wrote a recent Wall Street Journal opinion article suggesting that shareholders should break up the banks. Sallie Krawcheck, a former top-ranking Wall Street executive, recently criticized big banks. Two other former top executives, David H. Komansky and John S. Reed, have attacked the current financial system.

These converts tend to have followed a similar path. They participated in the merger frenzy and pushed deregulation when the getting was good. They departed from finance's sweet embrace sometimes involuntarily, ousted in power struggles. And they stayed quiet, or did little, throughout the debates on how to fix the system when the nation was struggling over the Dodd-Frank financial regulatory overhaul.
DealBook '

MF Global Trustees Differ Over Amount Customers Will be Repaid  |  An MF Global trustee damped hopes that customers would recover all of their missing money from the bankrupt brokerage firm, telling lawmakers on Wednesday that a $1.6 billion gap remained.

In testimony before the Senate Agriculture Committee, James W. Giddens predicted that clients could recoup in the “90 percent range” of their cash. Mr. Giddens, the trustee tasked with plugging the gap in customer money, has so far retrieved about 80 percent of the funds.

“We'd very much like to pay every customer 100 percent, however, it will be a time-consuming, difficult and uphill battle,” he told lawmakers. Mr. Giddens also updated lawmakers on his concern about wrongdoing at the top rungs of MF Global.
DealBook '

DEAL NOTES

Goldman Sachs to Invest in New York City Jail Program  |  The city will test “social impact bonds,” allowing Goldman to invest nearly $10 million in a jail program with the promise that the firm would profit if the program successfully reduced recidivism rates, The New York Times reports.
NEW YORK TIMES

Former Treasury Official Headed to Romney Campaign  |  Michele Davis, a former aide to Henry M. Paulson Jr., has told colleagues she plans to join the Romney campaign to mount a public relations defense of the candidate's record at Bain Capital, BuzzFeed reports, citing an unidentified person.
BUZZFEED

Mergers & Acquisitions '

ING Considers Sale of British and Canadian Divisions  |  The Dutch financial services firm ING said it was “reviewing” its online banking units in Britain and Canada in advance of a possible sale, The Associated Press reports.
ASSOCIATED PRESS

Apple's Quiet Deal for AuthenTec  |  When Apple acquired AuthenTec last week, neither company issued a statement or a news release on the deal, which underscores the hard bargaining tactics of the technology giant, the Deal Professor writes.
DealBook '

Coca-Cola Said to Explore Bid for Asian Beverage Business  |  Coca-Cola is considering bidding for the beverage business of Singapore's Fraser & Neave, a move that could pit it against Kirin Holdings, Bloomberg News reports, citing unidentified people with knowledge of the matter.
BLOOMBERG NEWS

J.G. Wentworth Said to Be For Sale  |  The private equity owner of the financial firm J.G. Wentworth is looking to sell it for as much as $1 billion, The New York Post reports, without naming sources.
NEW YORK POST

South Korea Shelves Sale of Woori  |  After failing to drum up interest, South Korea is suspending the sale of its $5.2 billion controlling stake in Woori Finance Holdings, Reuters reports.
REUTERS

Plaza Hotel Sold to Indian Conglomerate  |  Elad Properties, a real estate company that owns New York's Plaza Hotel, said it agreed to sell a controlling stake in the property for $570 million to Sahara India Pariwar, a conglomerate based in Lucknow, India, according to The New York Times India Ink blog. The deal will reduce the minority stake in the hotel owned by Kingdom Holdings of Saudi Arabia.
DealBook '

INVESTMENT BANKING '

Flood of Errant Trades Is a Black Eye for Wall Street  |  An automated stock trading program suddenly flooded the market with millions of trades on Wednesday, spreading turmoil across Wall Street and drawing renewed attention to the fragility and instability of the nation's stock markets. The runaway trading suggests that regulators have not been able to keep up with electronic programs that increasingly dominate the supercharged market and have helped undermine investor confidence in stocks, Nathaniel Popper reports in The New York Time s.
DealBook '

Convenient Myths on Wall Street  |  Simon Johnson writes on the Economix blog that three big banks that recently have been tarnished by scandal, JPMorgan Chase, HSBC and Barclays, “are forced to fall back on perpetuating three myths.”
NEW YORK TIMES ECONOMIX

BNP Paribas Profit Falls 13% in Second Quarter  |  Europe's deepening debt crisis curbed trading revenue at the French bank, pushing its net profit down by 13 percent, to $2.27 billion, in the second quarter.
DealBook '

Morgan Stanley's Former Housing Chief Starts Investment Firm  |  Oliver Chang, who formerly ran housing st rategy at Morgan Stanley, has started a firm to acquire distressed homes, with plans to spend up to $1 billion over the next two years, Reuters reports.
REUTERS

Wall Street Firms Reduce Headcount in Japan  |  Nine global securities firms, including Goldman Sachs, reduced their staffs in Japan by 7.3 percent in the fiscal year ended March 31, more than double the previous year's percentage reduction, Bloomberg News reports.
BLOOMBERG NEWS

Credit Suisse Names DeNunzio as Global Chairman of M.&A.  |  Credit Suisse on Wednesday named David DeNunzio, one of its veteran deal makers, as the global chairman of its mergers and acquisitions group. The news follows the departure of Steven Koch to serve as a deputy mayor of Chicago .
DealBook '

BlackRock Expands Management Committee  |  The giant asset manager BlackRock is adding eight executives to its global executive committee, bringing the total to 21, as it looks to stem withdrawals from its funds, Bloomberg News reports.
BLOOMBERG NEWS

Alternatives to Bank Lending Can Be Expensive  |  Small businesses have turned to alternative sources of financing as banks pull back on lending in the aftermath of the financial crisis. But many of these methods are substantially more expensive than traditional bank loans, The New York Times writes.
NEW YORK TIMES

PRIVATE EQUITY '

< span class="title">Bain to Buy Stake in Computer Services Firm for $1 Billion  |  Bain Capital agreed to buy a roughly 30 percent stake in Genpact, which handles technology services for businesses, from General Atlantic and Oak Hill Capital Partners, Bloomberg News reports.
BLOOMBERG NEWS

British Buyout Firm Plans a Brazilian Push  |  Amid a lackluster private equity environment in Europe, 3i is preparing to invest an average of $100 million per year in Brazilian companies, The Wall Street Journal reports.
WALL STREET JOURNAL

3i Announces Plans for Debt Management Business  |  The British private equity firm 3i said it was forming a joint venture with the fund manager WCAS Fraser Su llivan Investment Management to start a debt management business, Reuters reports.
REUTERS

Private Equity P.R. Campaign Focuses on Jobs  |  In its latest installment of a months-long campaign, the industry is highlighting Thoma Bravo, which invested in a Cleveland, Ohio-based software company called Hyland Software in 2007.
DealBook '

HEDGE FUNDS '

Third Point's Flagship Fund Posts a Decline  |  Third Point Offshore, the main fund of Daniel S. Loeb's firm, declined 2.5 percent in the second quarter, Reuters reports, citing a letter to investors.
REUTERS

Conceding Poor Returns, Hedge Fund Shrinks Itself  |  Frustrated by Europe and dried-up markets, Louis M. Bacon says he will give back $2 billion, about one-quarter of the size of his benchmark Moore Global Investment fund.
DealBook '

British Hedge Fund Sues Indian Government  |  The lawsuit by the Children's Investment Fund is the latest salvo in the hedge fund's struggle with the state-backed energy company Coal India, The Financial Times reports.
FINANCIAL TIMES

Hartford Financial Reports a 2nd-Quarter Loss  |  The Hartford Financial Services Group, the insurer whose largest investor is the hedge fund manager John A. Paulson, said it lost $101 million in the second quarter, compared with a profit a year earlier, Bloomberg News reports.
BLOOMBERG NEWS

I.P.O./OFFERINGS '

Facebook Continues to Make Investors Nervous  |  Shares of the social network declined steadily this week, after a disappointing earnings report last Friday, to reach $20.88 on Wednesday, nearly half of what they were worth when the company went public in May, The New York Times reports.
NEW YORK TIMES

After Buying Facebook Shares, Fidelity Funds Head for the Exit  |  The Wall Street Journ al reports: “Twenty-one Fidelity funds sold more than 1.9 million public Facebook shares combined in June, with 16 of them selling more than a quarter of their stakes in the company, according to investment-research firm Morningstar.”
WALL STREET JOURNAL

Groupon Partners With Nokia to Promote Deals  |  Nokia is promoting Groupon offers through the maps on its smartphones, allowing users to buy offers from their phones, Reuters reports.
REUTERS

Yelp's Results Beat Expectations  |  Yelp reported a loss that was lower than expected, as its revenue increased 67 percent in the second quarter, Reuters reports.
REUTERS

VENTURE CAPITAL '

Much-Hyped Chat Service Gets Uncertain Start  |  Airtime, the video-chatting site introduced by the star entrepreneurs Sean Parker and Shawn Fanning in June, “does not appear to be taking off among users,” the Bits blog writes.
NEW YORK TIMES BITS

Start-Ups Turn to Washington for Board Members  |  Some young companies are recruiting Beltway insiders for their expertise in regulations affecting the technology industry, The Wall Street Journal reports.
WALL STREET JOURNAL

Twitter Introduces a Political Feature  |  A feature called the Twitter Political Index monitors political sentiment on Twitter, mining hundreds of millions of tweets for opinions about the 2012 presidential candidates, the Bits blog writes.
NEW YORK TIMES BITS

LEGAL/REGULATORY '

Federal Reserve Defers New Action to Spur Economy  |  The Federal Reserve took no new steps on Wednesday to support the economy, despite saying that growth had slowed. But the central bank did say it was ready to act if job growth did not improve, The New York Times writes.
NEW YORK TIMES

Fed Chairman Considers His Next Move  |  Bloomberg Businessweek writes: “With the global financial crisis over (for now), Bernanke is groping for a second act, like a monetary Bob Dylan who peaked too young.”
BLOO MBERG BUSINESSWEEK

A.I.G. Said to Be Looking to Buy Back Shares From U.S.  |  The bailed-out insurer A.I.G. is looking to reduce the ownership stake held by the United States government by buying back shares, The Wall Street Journal reports, citing unidentified people familiar with the company's thinking.
WALL STREET JOURNAL

British Officials Said to Consider Nationalizing R.B.S.  |  The Financial Times, citing unidentified people close to the bank, reports: “Senior government figures are discussing the possibility of buying out private investors in Royal Bank of Scotland and fully nationalizing it amid mounting frustration at banks' failure to lend to British businesses.”
FINANCIAL TIMES

Former Morgan Stanley Official Sues Over Ouster  |  Clifford Jagodzinski, a former risk officer for Morgan Stanley Smith Barney, said he was unfairly fired after reporting questionable trading that was “obviously designed to bilk investors,” Bloomberg News reports.
BLOOMBERG NEWS

Trustee for Madoff Victims Challenges Settlement  |  Irving H. Picard, the trustee seeking money for victims of Bernard L. Madoff, asked the Federal Bankruptcy Court in Manhattan on Wednesday to block New York State's settlement with a hedge fund manager accused of steering client money to the Ponzi scheme, Reuters reports.
REUTERS

UBS Whistleblower Is Released From Prison  |  Bradley Birkenfeld, a former UBS executive who told United States authorities about efforts by the Swiss bank to help American citizens avoid taxes, served nearly 30 months of a 40-month prison sentence, The Wall Street Journal reports.
WALL STREET JOURNAL

Goldman Sachs to Invest in Jail Program

New York City, embracing an experimental mechanism for financing social services that has excited and worried government reformers around the world, will allow Goldman Sachs to invest nearly $10 million in a jail program, with the pledge that the financial services giant would profit if the program succeeded in significantly reducing recidivism rates.

The city will be the first in the United States to test “social impact bonds,” also called pay-for-success bonds, which are an effort to find new ways to finance initiatives that might save governments money over the long term.

First used in Britain and now being explored in Australia, the bonds are rapidly capturing the imagination of some public officials in the United States: on Wednesday, Massachusetts announced that it was completing negotiations with two nonprofit groups to finance juvenile justice and homelessness programs, with the promise of repayment only if the programs work.

The federal government, Connecticut, New York State and Cuyahoga County, Ohio, among others, are at various stages of considering using the bonds to harness new funds for human-services programs.

In New York City, Mayor plans to announce on Thursday that Goldman Sachs will provide a $9.6 million loan to pay for a new four-year program intended to reduce the rate at which adolescent men incarcerated at Rikers Island reoffend after their release.

The money is not a huge amount for Goldman, which last month reported over $900 million in second-quarter profit, and the investment promises a public-relations benefit for the Wall Street bank. For the city, the money allows the Bloomberg administration to demonstrate, and test, several of its priorities: enlisting private sector help in financing public needs, and tying program money to rigorous outcome evaluations.

The Goldman money will be used to pay MDRC, a social services provider, to design and oversee the program. If the program reduces recidivism by 10 percent, Goldman would be repaid the full $9.6 million; if recidivism drops more, Goldman could make as much as $2.1 million in profit; if recidivism does not drop by at least 10 percent, Goldman would lose as much as $2.4 million.

“This promising financing model has potential to transform the way governments around the country fund social programs, and as first in the nation to launch it, we are anxious to see how this bold road map for innovation works,” Mr. Bloomberg said in a statement.

“Social impact bonds have potential upside for investors,” he added, “but citizens and taxpayers stand to be the biggest beneficiaries.”

In a twist that differentiates New York's plan from other governments' experiments with social impact bonds, Mr. Bloomberg's personal foundation, Bloomberg Philanthropies, will provide a $7.2 million loan guarantee to MDRC.

If the jail program does not succeed, MDRC can use the Bloomberg money to repay Goldman a portion of its loan; if the program does succeed, Goldman will be paid by the city's Department of Correction, and MDRC may use the Bloomberg money for other social impact bonds, said James Anderson, director of the foundation's government innovation program.

Jeffrey B. Liebman, a professor of public policy at Harvard University who has written about social impact bonds, said the New York contract would be widely scrutinized.

“This will get attention as perhaps the most interesting government contract written anywhere in the world this year,” Dr. Liebman said. “People will study the contract terms, and the New York City deal will become a model for other jurisdictions.”

But social impact bonds have also worried some people in the nonprofit and philanthropy field, who say monetary incentives could distort the programs or their evaluations.

“I'm not saying that the market is evil,” said Mark Rosenman, a professor emeritus at Union Institute and University in Cincinnati, “but I am saying when we get into a situation where we are encouraging investment in order to generate private profit as a substitute for government responsibility, we're making a big mistake.”

Goldman approached the city after hearing that New York officials and MDRC were interested in social impact bonds. In an interview, Alicia Glen, the head of Goldman Sachs's Urban Investment Group, said the company was confident that the program would work.

“This is a new approach - no city has ever done something exactly like this before - and we were able to get comfortable with the risks, which other financial institutions may not have been,” Ms. Glen said. “But we are confident that the city will identify enough savings that we'll get a reasonable return on the investment.”

The Goldman money will finance a program called Adolescent Behavioral Learning Experience, or ABLE, as a part of the Bloomberg administration's year-old Young Men's Initiative, which seeks to improve prospects for black and Latino adolescents. The jail program, which will offer counseling and education for an estimated 3,400 incarcerated adolescent men each year, will be run by two nonprofit organizations, Osborne Association and Friends of Island Academy, and overseen by MDRC.

Currently, nearly 50 percent of young men released from Rikers reoffend within a year.

City officials said they hoped the concept of social impact bonds could also be used to finance programs on homelessness, , special education or health care. By using the mechanism to pay for prevention programs that are often too expensive for government to afford, the officials say they believe that they could save taxpayers money over the long term.

“Government is paying for outcomes that the government wants to achieve,” Deputy Mayor Linda I. Gibbs, the program's chief architect, said. “This is designed to provide a template for other initiatives so we can do more.”

New York's program is modeled, in part, after one in Peterborough, a London suburb, that began in September 2010 and is still years from being fully evaluated.

In Massachusetts, Jay Gonzalez, the secretary of administration and finance, is a proponent of social impact bonds. “We've got to change from the idea of, ‘We just pay for stuff and hopefully get the results,' ” Mr. Gonzalez said in an interview. “The beauty of this is if they perform to get the results, then we pay. If they don't, we don't pay.”

Flood of Errant Trades Is a Black Eye for Wall Street

An automated stock trading program suddenly flooded the market with millions of trades Wednesday morning, spreading turmoil across Wall Street and drawing renewed attention to the fragility and instability of the nation's stock markets.

While the broad stock indexes quickly recovered and ended the day slightly down, it was the latest black eye for the financial markets. The runaway trading suggests that regulators have not been able to keep up with electronic programs that increasingly dominate the supercharged market and have helped undermine investor confidence in stocks.

Traders on Wednesday said that a rogue algorithm repeatedly bought and sold millions of shares of companies like RadioShack, Best Buy, Bank of America and American Airlines, sending trading volume surging. While the trading firm involved blamed a “technology issue,” the company and regulators were still trying to understand what went wrong.

The debacle comes after the botched Facebook initial public offering on the Nasdaq exchange in May and the aborted effort in March by another exchange, BATS Global Markets, to bring its own stock public. The episodes, along with the flash crash of 2010 when the market lost trillions of dollars of value in minutes, have stoked suspicions that stocks are safe only for specialists, and sometimes not even for them.

“The machines have taken over, right?” said Patrick Healy, the chief executive of the Issuer Advisory Group, a capital markets consulting firm. “When events like this happen they just reaffirm that these aren't investors, these are traders.”

The errant trades began hitting exchanges almost as soon as the opening bell rang and came from a single New Jersey broker that specializes in computer-driven trading, the . Shares of more than 100 companies, including big names like Alcoa, Citigroup and Ford suddenly spiked up or down. The New York Stock Exchange had most of the mistaken orders, but all of the nation's exchanges executed trades for Knight and all agreed to cancel the trading in six stocks that had especially extreme movements.

One of the six, Wizzard Software, saw twice as many shares traded in the first half-hour as there were during all of Tuesday, artificially catapulting its stock more than 300 percent, according to the data firm Nanex.

The trades placed by Knight may have left the firm with millions of shares of overpriced stocks that quickly lost their value after the chaos ended, but the company did not comment on its potential losses. The firm's own shares ended the day down 32 percent amid concerns about disgruntled customers and lawsuits.

Knight is one of many companies whose fortunes have risen as regulators made a series of changes over the last 15 years that have opened up the markets to new exchanges and trading firms that use computer programs, or algorithms, to execute thousands of trades a second. High-speed firms use the algorithms to make money from small changes in stock prices and now account for more than half of all stock trading.

But the changes have also introduced instability into the system, which was made clear in the flash crash. After that event, the Securities and Exchange Commission set out to add safety valves to the system. But the turbulence on Wednesday reinforced the belief that regulators had not been able to keep up with the growing sophistication and speed of the market they were overseeing.

“You think there is somebody watching the control panel somewhere,” said Larry Tabb, head of the Tabb Group, a market research firm. “We still don't have a firm grasp over our market infrastructure.”

The most important change that the S.E.C. made after the flash crash was to introduce circuit breakers that are supposed to halt trading if a stock's price makes extreme movements. The circuit breakers, though, do not start working until 15 minutes after trading opens, so they could not catch swings that happened in the first minutes of trading Wednesday.

In addition, the circuit breakers are programmed to respond to changes in the price of shares, not changes in the number of shares being traded, so they did not stop much of the unusual trading.

In the end, trading was halted in five stocks: Molycorp, Corelogic, Kronos Worldwide, China Cord Blood and Trinity Industries.

BNP Paribas Profit Falls 13% in Second Quarter

PARIS - Europe's deepening debt crisis curbed trading revenue at the French bank BNP Paribas, pushing its net profit down by 13 percent in the second quarter compared to the same period last year.

Net income in the three months through June 30 fell to 1.85 billion euros, or $2.27 billion, from 2.13 billion euros a year ago, France's largest bank said on Thursday.

Revenue from its advisory and capital markets operations, a mainstay of its business, slumped 33 percent to 1.2 million euros.

“Against a general background of crisis in the capital markets and strong volatility, there was less demand from clients and the businesses were managed cautiously,” the bank said.

At the same time, BNP Paribas said it had also significantly shored up the amount of capital regulators are requiring it and other financial institutions to hold in reserve against a worsening of the crisis.

The bank said it had completed 90 percent of a restructuring plan desi gned to bring in funds to lift its capital cushion to 9 percent by the end of the year to conform with new regulations.

Since the middle of last year, BNP Paribas, like other European banks, has moved to reduce its exposure to the crisis by shedding large amount of sovereign bond holdings from Greece and other troubled countries to help protect its capital levels. The bank took a write-down of 3.2 billion euros on Greek government debt in 2011.

BNP Paribas said its risk-related costs had fallen more than 20 percent in the first six months of 2012 compared to a year ago, to 1.8 million euros. That included a hit of 534 million euros it took in marking down the value of its Greek bond holdings in the second quarter of 2011.

The French bank said it continued lending into economies where it operates despite the difficult economic environment. As consumers reduced spending and stashed more money in their bank accounts, BNP Paribas said its commercial business was marked in particular by a growth trend in deposits across all its networks.

Revenue was stable at 3.96 billion euros compared to the second quarter of 2011, while operating expenses fell 1.2 percent from a year earlier.

In early morning trading in Paris, shares in the French bank rose 1.6 percent.