Behind the Scenes, Lawmakers Lobby to Change the Volcker Rule

As regulators put the finishing touches on new rules for Wall Street, they remain entangled in a partisan fight over the overhaul.

In public letters and closed-door meetings, more than 100 lawmakers have lobbied the Federal Reserve and other authorities over the Volcker Rule, records show. The rule, intended to restrict banks from placing risky trades and investing with hedge funds, has drawn an outcry from Republicans who want to mute its effect and some Democrats who want to strengthen it.

The wrangling has been on display at public hearings and in letters posted on regulatory Web sites. Still, some lawmakers have applied pressure behind the scenes.

Internal government documents provide a glimpse of one such lobbying effort last year, when an aide to Senator Scott Brown, Republican of Massachusetts, appealed to the Treasury Department and the Federal Reserve.

The documents show a back-and-forth between the Fed's top lawyer and Mr. Brown's staff. â €œI have a very urgent request,” Nathaniel Hoopes, Mr. Brown's aide, wrote in an April 2011 e-mail. Seeking to fine-tune an exemption, he argued that a broad range of bank customers should be allowed to invest with hedge funds under the Volcker Rule. “My boss has been hearing it from constituents,” he added, referring to the rule's impact on Massachusetts-based financial firms.

In a first draft of the rule released last fall, regulators agreed with that broad definition.

In response to Mr. Hoopes's e-mail, the Fed's general counsel, Scott G. Alvarez, acknowledged that “there are many difficult issues raised by the Volcker Rule.” In another e-mail, Mr. Alvarez encouraged Mr. Brown's office to publicly voice its concerns, according to interviews with government officials and the documents. The Fed initially released the documents to a Democratic aide who obtained them through a public records inquiry.

In a statement, the Fed said that it routinely â €œseeks comment from the public and all interested parties on our rule-makings and carefully evaluates and weighs each comment.”

The Fed, like all regulators, provides feedback to lawmakers and has held several meetings with advocacy groups that support the Volcker Rule, including Americans for Financial Reform.

Still, the e-mails - while not improper or unusual - show that such discussions are not always public. The exchange with Mr. Hoopes came months before regulators opened a public comment period or even publicly released a draft version of the Volcker Rule.

The e-mails also indicate how, even after passing the Dodd-Frank Act, some lawmakers are still tinkering with its machinery.

Mr. Hoopes, who previously worked for an arm of Lehman Brothers, also pressed his case with the Treasury Department. In an e-mail to a Treasury official, he said, “This should be very simple and straightforward and I think the Fed is over-complicating it.”(The Bos ton Globe first reported about the e-mail this summer.)

Mr. Brown, one of three Republicans to vote for Dodd-Frank, is in a tight re-election fight with Elizabeth Warren, a Democrat. She made her name in Washington as a fierce critic of Wall Street and supporter of changes like the Volcker Rule.

The partisan haggling over the rule affects a number of regulators. But much of the pressure has centered on the Fed, where some lawyers have questioned whether the rule is too burdensome for Wall Street, according to government officials briefed on the matter. Officials spoke on the condition of anonymity because the rule-writing process is private.

“The Volcker Rule regulations have unfortunately been long delayed, obviously in my mind because the agencies are having difficulties reaching agreement,” said Michael Bradfield, the former general counsel at the Fed. “The well-known skepticism of some in the Fed about the workability of the Volcker Rule has undou btedly contributed to this situation.”

Few rules present a greater challenge - or have provoked more political squabbling - than this one. Named for Paul A. Volcker, a former Fed chairman who campaigned for the rule, it aims to curb the sort of risk-taking that led to government bailouts in the financial crisis. The rule would largely prevent banks from making bets with their own money, a practice known as proprietary trading. It would also limit how banks invest in hedge funds.

But a draft proposal, released last fall, granted several broad exemptions to the proprietary trading ban. Regulators recently entered a final stage of rule-writing after a group of lawyers from the Fed and other agencies ironed out concerns over several exemptions, according to people briefed on the matter. While regulators initially hoped to complete the rule by September, the people said, they now expect a final version around the November election.

Several Democrats, echoing t he antibank animus of the election season, have pushed the Fed to narrow the Volcker Rule exemptions.

Some regulators have stepped up their focus on the rule, too.

Bart Chilton, a Democratic member of the Commodity Futures Trading Commission, which is helping to write the overhaul, said in a letter to the Fed last week that certain exemptions would “significantly undercut the fundamental purposes of the rule.”

Republican lawmakers counter that Dodd-Frank could jeopardize an already anemic economic recovery.

Mr. Brown, whose donors include major mutual funds like Fidelity, has been particularly vocal.

He supported the Volcker Rule after chipping away at one of its core tenets. During the debate on Capitol Hill, Mr. Brown championed an exemption that allowed banks to invest up to a 3 percent stake in hedge funds. Banks can also offer hedge fund investments to outside investors like pension funds.

Now, Mr. Brown is fighting over the detai ls of the exemption. While Democrats want to restrict access to customers who already have an account with the bank, Mr. Brown wants to expand the definition of “qualified investors.”

A spokeswoman for Mr. Brown said he was “proud to cast the deciding vote” for Dodd-Frank and that he worked “to protect Massachusetts jobs.”

In his lobbying, Mr. Hoopes first appealed to the Treasury Department, but then took his concerns to the Fed. A “narrow definition,” Mr. Hoopes warned in an April 2011 e-mail to the Fed, “was not intended for this purpose” and would shift money to unregulated pockets of the market.

In reply, Mr. Alvarez of the Fed suggested that Mr. Brown file a public comment letter. “Others have been commenting on various ways we should interpret the statute, and we would consider very carefully any comment from you as well,” Mr. Alvarez wrote.

What happened next is unclear. While Mr. Hoopes had a brief phone call with the Fed, people briefed on the matter said, no one can recall specifics or whether Volcker was even discussed.

Mr. Hoopes soon filed a comment letter and thanked Mr. Alvarez “for all the quick responses to my questions, etc.” It is unclear to what questions Mr. Hoopes was referring.

In Calls for Market Reform, Multiple Voices

The call for market reform, once confined to the industry fringes, is growing louder.

A number of events in Washington this week put the spotlight on high-frequency trading, the proliferation of new exchanges and other concerns about the structure of the market. At a Senate hearing on Thursday and a few industry conferences this week, executives at stock exchanges and trading firms laid out potential changes that could prevent disruptions like the technology glitch led to $440 billion of losses at the trading firm Knight Capital in early August.

“If we had a blank canvas and we were able to redraw our market structure, it would never look like the model we use today,” Chris Concannon, an executive at the high-speed trading firm Virtu Financial, said in front of the Senate subcommittee on securities, insurance and investment.

The executives, in some cases, said the market had grown too complex and too fast to be safe.

Maureen O'Hara, a professor at Cornell University, said at a conference Wednesday that technological advances had made it cheaper for ordinary investors to buy and sell stocks. But she noted that this progress created problems that industry participants had only started to recognize, like the increased the instability of the market.

“It's easy for people to say the markets are great, but it's hard to quibble with the fact that no one wants to be there,” Ms. O'Hara, who is the chairman of the board of the market technology firm ITG, said at the conference, which was held at Georgetown University.

Such issues will be addressed at a roundtable hosted by the Securities and Exchange Commission on Oct. 2, where the market's recent problems will be discussed. Ahead of that, industry players are calling for a wide array of often conflicting changes to the market.

Andy Brooks, the head of stock trading at T. Rowe Price, said at the Senate hearing that regulators should take immediate step s to slow down the market and eliminate rules that allow high-speed trading firms to operate. Larry Tabb, the head of the market research firm TabbGroup, disagreed with most of Mr. Brooks' ideas but gave six suggestions for changes that could make the markets operate more smoothly, including an effort to slow down the creation of new exchanges and other trading venues.

“I think we have gone too far,” Mr. Tabb said. “We clearly have too many places to trade.”

Joe Mecane, the head of market structure issues at NYSE-Euronext, said at the Georgetown conference that the problems were too complex to be handled in a piecemeal fashion. He said that what was truly needed was a broader rethinking of the way the nation's markets were set up.

“A more holistic review of market structure is warranted,” Mr. Mecane said.

Senator Jack Reed, a Rhode Island Democrat who called the hearing, said that the topic required more attention, potentially in further hearings.

“We have recognized benefits from the increased liquidity but now we have to step back and see, at what cost, and how do we make improvements, not just keep pressing along,” Mr. Reed said.

Cheap Loans Could Spell Long-Term Headaches

The debt issued today is the stuff of tomorrow's bankruptcy cases.

That's something that all the corporations rushing to take advantage of low rates should take into consideration, but probably won't.

After all, interest payments on corporate debt are tax deductible and with interest rates this low, locking in that cost of capital for 30 years seems like a no-brainer.

For many companies, it is. After all, modern (that is, post-World War II) finance theory tells us so.

Since the 1950s, beginning with the economists Franco Modigliani and Merton Miller, it has been basic knowledge that using a very high degree of leverage in the capital structure is a good idea, especially if you can divert investors away from thinking too much about bankruptcy costs. With interest rates this low â€" the yield on 30-year single A debt is below 5 percent â€" investors seem to be discounting the likelihood of a future bankruptcy.

But if this is the low point f or interest rates for a good long while, 30 years from now could be interesting. The “wall of maturities” that will hit then could provide for some happy times for the bankruptcy lawyers of the future.

Cold comfort for those with little to do today. And perhaps something for me to write about before retirement.

The question is whether the managers of today care about that. In a world where so much executive compensation is stock based, it may be that it is finally true that managers do maximize shareholder value.

Whether that is the same thing as maximizing corporate value is a whole other question.

Stephen J. Lubben holds the Harvey Washington Wiley chair in corporate governance and business ethics at the Seton Hall University School of Law and is an expert on bankruptcy.

Business Day Live: Pension Funds at Center of Labor Crisis

At the center of labor disputes, a fight for the future of pensions. | The travel industry finds new ways to tack on fees to your trip.

Pawlenty to Become Wall Street Lobbyist

Tim Pawlenty was hoping to spend plenty of time in the White House next year. Now, rather than living there, the onetime presidential contender will visit regularly as a top Wall Street lobbyist.

Mr. Pawlenty, the former Republican governor of Minnesota, was named chief executive of the Financial Services Roundtable on Thursday. He will replace Steve Bartlett, also a former Republican lawmaker, who will retire from the Wall Street lobbying group later this year.

“I'm excited about this new challenge,” Mr. Pawlenty said in a statement. “Few industries have more impact on the entire economy â€" and on the lives of average Americans â€" than financial services.”

His appointment comes at a crucial moment for Wall Street, which is battling a regulatory overhaul in the wake of the financial crisis. Under the Dodd-Frank act, regulators are writing more than 300 new rules for banks and other financial firms.

The deep-pocketed roundtable, which repre sents 100 of the nation's largest financial institutions, is looked to as a source of influence on the law. The group also helped spearhead several past deregulation efforts, including the repeal of some Glass-Steagall restrictions on banks owning insurance companies.

Since the 2008 crisis prompted government bailouts of Wall Street, the roundtable has focused on fixing the industry's image problem. Mr. Bartlett, a former congressman and onetime mayor of Dallas known for his affable style and trademark ostrich leather cowboy boots, also became one of Wall Street's go-to lobbyists in the Dodd-Frank fight.

“Our members have weathered the financial crisis and, now, Tim can help take us to the next level,” Mr. Bartlett said in a statement. “His efforts to bridge political and policy divides will serve to enhance the reputation of the financial services industry with customers and policy makers.”

With Mr. Pawlenty taking over, he will step down as natio nal co-chair of Mitt Romney's presidential campaign. Mr. Pawlenty, whose name was mentioned on the short list of potential running mates for Mr. Romney, was likely to secure a post in a Republican administration.

But he has sworn off politics, at least for now. “I am grateful to have had the opportunity to serve,” he said, “but I am now moving on and committed to focusing fully on this new opportunity.”

A Strategy of Tattletales at the I.R.S.

No one likes a tattletale. But tax whistle-blowers sure are getting compensated for the animosity they evoke.

Bradley Birkenfeld, a former UBS banker, was awarded $104 million for bringing information to the Internal Revenue Service about tax evasion strategies at the Swiss bank. The New York attorney general's investigation into private equity management fee conversions appears to have originated from a whistle-blower claim. Dean Zerbe, a former legislative aide on tax issues, now works at the National Whistleblowers Center, which has claims outstanding on $25 billion of tax underpayments.

Are whistle-blowers the new I.R.S. business model?

Enforcement of tax laws requires finding a fair and effective way to overcome the information asymmetry between taxpayers and the I.R.S. The government starts off at a disadvantage. While the I.R.S. has broad powers to demand information from taxpayers, it doesn't always know what to look for. Furthermore, because of p rivacy laws, private individuals, academics, reporters and public interest organizations cannot effectively serve as watchdogs.

Relying on whistle-blowers is one approach. The ramped-up I.R.S. program is still new. Building on the success of the False Claims Act at rooting out fraudulent Medicare billing practices and similar scams, Congress in 2006 increased the awards to whistle-blowers. They can now receive up to 30 percent of the taxes collected.

Private enforcement of federal tax law could be extended even further. Under current law, whistle-blowers bring documents to the I.R.S., which then decides if it wants to proceed. Law professor Dennis Ventry has proposed allowing qui tam actions, where private individuals could bring lawsuits to collect taxes on behalf of the government even in cases where the I.R.S. declines to move forward. (“Qui tam” is short for “qui tam pro domino rege quam pro se ipse in hac parte sequitur,” or “he who sues in this ma tter for the king as well as for himself.”)

Private lawsuits are an important part of the enforcement landscape in securities law, health care and federal contracting. Why not tax? “If sunlight is the best antiseptic,” writes Mr. Ventry, “the looming possibility of qui tam actions could alter risk assessments of reporting positions by taxpayers and their advisers and thereby improve tax compliance.”

In my view, whistle-blowers or qui tam actions will remain a small part of the overall tax enforcement strategy. Relying on whistle-blowers means providing bounties to insiders willing to turn against their clients or employers. The strategy relies on bad blood - a crumbling business partnership, office politics, a divorce or some other source of conflict - to bring information to the government's attention. In many cases, the I.R.S. will have to team up with someone with unclean hands or a hidden agenda. Moreover, whistle-blowers will target black-and-white cases of tax fraud, while many aggressive tax planning techniques reside in the gray.

Meanwhile, changes in corporate governance and accounting have ushered in a quiet revolution in corporate tax compliance. It's hardly the stuff of headlines, but the changes have proven effective in changing the mind-set of corporate executives.

Back in the 1990s, many large corporations used illegal tax shelters. These transactions have largely disappeared, thanks to changes in financial reporting.

The Sarbanes Oxley legislation requires external auditors to assess the quality of a company's internal controls, including tax compliance. Schedule M-3 requires better reconciliation between book income and tax income. The Financial Accounting Standards Board has revised FIN 48, which forces a more accurate reserve for tax benefits the company thinks may not materialize. And new Schedule UTP requires companies to describe these uncertain tax positions, providing a road map o f the soft spots in a tax return.

By involving more parties in tax planning and compliance, and disclosing more information to the I.R.S., tax fraud has become more difficult, risky and costly.

“The days of hiding the ball are gone,” says law professor Bret Wells, “and the best tax practice will be for the taxpayer to expect that all information about a tax position that is taken on a tax return will be available for inspection and reviewed by the I.R.S.”

Aggressive tax planning still exists, but rarely is it the sort of blatant tax evasion that relies on secrecy. The transparency approach works because it allows the I.R.S. to align its interest with shareholders, who also like transparency and accurate financial statements.

Of course, these changes to tax reporting don't apply to individuals, partnerships and small businesses - a significant source of tax evasion. In these areas, whistle-blowers will play a bigger role.

For further rea ding on tax whistle-blowers, see Dennis J. Ventry Jr., “Whistleblowers and Qui Tam for Tax,” 61 Tax Lawyer 357 (2007).

For further reading on schedule UTP, see Bret Wells, “New Schedule UTP: Uncertain Tax Positions in the Age of Transparency,” 63 Baylor Law Review 392 (2011).

Victor Fleischer is a professor at the University of Colorado Law School, where he teaches partnership tax, tax policy and deals. His research focuses on how tax affects the structuring of venture capital, private equity, and corporate transactions.

Trulia Jumps 30% in Debut

Trulia, the real estate information site, rose 30 percent in its debut to open at roughly $22, defying the recent lackluster performance of newly public stocks.

It's a solid debut for the San Francisco-based start-up, which priced its offering at $17 per share late Wednesday, above its expected range of $14 to $16 per share. The company, which trades under the symbol “TRLA” on the New York Stock Exchange, raised $102 million in its initial public offering.

As the housing market begins to show signs of life, investors are warming up to companies like Trulia that focus on real estate. Trulia's I.P.O. follows last year's debut of rival Zillow, which wowed Wall Street with a 79 percent pop on the first day pop. Earlier this month, Zillow successfully pursued a second stock offering, raising $172 million, more than in its I.P.O.

Zillow fell about 1 percent on Thursday morning to $45 per share. However, its shares remains 125 percent above their offering price.

Despite rising enthusiasm for Trulia and Zillow, some analysts have questioned whether their financial results merit such lofty valuations. Trulia, which helps consumers find information on real estate listings and home loans, has yet to record a profit. The company's revenue nearly doubled in 2011 to $38.5 million, but its loss widened to $6.2 million. In its prospectus, the company also warned that it expects to make significant, future investments to expand its business, which could hamper future profitability.

Peugeot in Talks to Sell Logistics Business

PARIS - PSA Peugeot Citroën said Thursday that it was negotiating to sell its Gefco logistics business to J.S.C. Russian Railways as the French automaker struggles to stay afloat in a faltering European car market.

PSA Peugeot Citroën, the second-largest automaker in Europe after Volkswagen, said it had entered exclusive negotiations to sell 75 percent of Gefco for 800 million euros, or about $1 billion. Gefco would also pay Peugeot a special dividend of 100 million euros.

The carmaker, in part, is under pressure in its home market. European new passenger car registrations is down by 7.1 percent this year, and - with the euro zone in recession and uncertainty about the existence of the currency itself - analysts are not predicting a near-term turnaround.

Fitch Ratings cut its rating on PSA Peugeot Citroën on Wednesday, saying that it expected the company to burn cash through 2014 and that it was concerned about the carmaker's ability to compete in the market for small and medium-size cars. The credit rating agency noted that it was unlikely that “the ongoing fierce competition and substantial price pressure” will abate in the near term.

PSA Peugeot Citroën said the deal, which is contingent on regulatory approval, would help Gefco to grow in China, India Latin America, as well as in Eastern and Central Europe, particularly Russia.

Earlier this year, Gefco signed an exclusive long-term logistics contract with PSA Peugeot Citroën's automotive division. In late June, it reached a similar deal with General Motors Europe, under which it is to supply G.M.'s factories in Poland, Spain, Britain, Germany and Russia and annually ship 1.2 million finished vehicles across the world.

Gefco, a global industrial logistics company, had 2011 sales of 3.8 billion euros. It ships 28 million tons of freight and 4 million cars annually, with PSA Peugeot Citroën contributing 62 percent of its revenue. JSC Russian Railw ays, known as RZD, is the owner of Russia's rail track and infrastructure.

Valuing What Anschutz Entertainment Might Be Worth

News this week that the Anschutz Entertainment Group is being put up for sale was a surprise in the sports and entertainment segment.

But what exactly would any prospective buyer be getting for what will likely be a multibillion-dollar purchase?

Anschutz Entertainment is one of the biggest and most prominent parts - but still only a part - of billionaire Philip F. Anschutz's business empire, a panoply of businesses that has included oil and gas drilling, movie theaters and railroads.

But it is Anschutz Entertainment, a formidable collection of entertainment venues, sports teams and live event promotions that was formed in 1999, that has recently defined Mr. Anschutz's public image.

That combination of real estate, entertainment and event promotion, people close to the company and to potential bidders say, is what has so many would-be buyers salivating. They describe the model as a “virtuous circle” that draws in income from rents, ticket sales, sponsorships and many other sources.

It is also what makes valuing the company so daunting, since there are virtually no publicly traded peers that perfectly match up. Live Nation Entertainment, for instance, is the biggest seller of concert tickets in the country - but it doesn't own sports teams.

While the division has taken on global aspirations, nowhere are its goals so visibly defined as in downtown Los Angeles; an article in The New Yorker from January described Mr. Anschutz was headlined “The Man Who Owns L.A.”

There, the company operates the LA Live complex that houses the Staples Center; owns the Kings hockey team and a stake in the Los Angeles Lakers; and sells tickets through its AEG Live subsidiary.

In its most ambitious stroke yet, Anschutz Entertainment has been forging ahead on a football stadium, called Farmers Field, to try to lure in a National Football League franchise.

It is a business model that the company is seeking t o export elsewhere, including to London where the company owns the O2 complex.

The exploration of a sale comes as the demand for sports team franchises is heating up. The Los Angeles Dodgers were sold to Guggenheim Partners in May for more than $2 billion, in an eye-popping sum that nonetheless may be a fraction of what Anschutz Entertainment could fetch at auction. (A person close to one potential bidder provided an initial estimate of the company's value at about $2 billion to $4 billion. Mr. Anschutz and his advisers are likely to believe that amount is far too low.)

Anschutz Entertainment and its bankers at the Blackstone Group, which sold the Dodgers, are likely to argue that an ambitious buyer could use the company's business plan and bring it to yet more regions of the world, from Asia to South America.

Potential buyers who have shown interest include the investment firms Colony Capital and Guggenheim Partners, according to people briefed on the matt er. They also reportedly include Patrick Soon-Shiong, a biotechnology investor who unsuccessfully bid for the Dodgers, according to The Los Angeles Times.

The sales process is likely to take several months, with the goal of concluding early next year, according to a person close to Anschutz Entertainment.

The sales process follows the longstanding playbook of Mr. Anschutz, who has has become one of the country's richest men. This month, Forbes ranked him as the 44th wealthiest American, with an estimated net worth of about $7.6 billion.

He is extraordinarily quiet, having declined interviews for nearly 40 years. What little is known about him personally comes from the occasional loose-lipped confidant, like those quoted in a 2010 article in Forbes:

Those who know or have worked with him say Anschutz is a down-to-earth, hard-driving businessman with a fondness for chomping on little unlit cigars. “He's very shy, a normal fellow, a family person who leads his own life and feels it's none of the public's business,” says Jerry Seslowe, chairman of Resource Holdings, a private investment firm in Manhattan he started with Anschutz and the late billionaire Jay Pritzker. Anschutz, he recalls, “left it up to us to generate the deals, then got involved later.” Adds Robert Starzel, an attorney who served as a top lieutenant for 25 years and is now in private practice: “He values collaboration, likes to get several people's opinions on the same subject. He likes honest debate and listens to people. But he follows his own lead.”

A Kansas native, Mr. Anschutz initially dropped out of law school to help save his father's struggling oil drilling company. That has remained a part of the billionaire's business empire, though how much it contributes remains unknown.

But he has branched out into a number of other ventures as well - many of which have generated enormous windfalls. One of the m ore prominent examples is his foray into railroads, in which he acquired companies like the then-troubled Southern Pacific. He later merged that operator with Union Pacific.

Railroads also gave Mr. Anschutz entrée into the world of telecommunications, as he began building fiber-optic cable along routes and eventually formed Qwest Communications. The telecommunications company's 1997 initial public offering vastly inflated the entrepreneur's wealth - up to perhaps $18 billion by 2000, according to The New Yorker. But some of that paper wealth evaporated after allegations of fraud and insider trading against several top executives. (Mr. Anschutz himself was never accused of insider trading.)

A devout Christian, the billionaire has also taken an interest in producing family-friendly movies through subsidiaries like Walden Media. Those efforts have yielded only a few hits, notably an adaption of “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe” an d the Ray Charles biopic “Ray.”

The director of “Ray,” Taylor Hackford, told The New Yorker about his struggles with his employer's sole limit on artistry:

Hackford said he quit the project twice over Anschutz's profanity prohibition but ultimately was able to use “hip jargon that sounded authentic and profane.” About Anschutz, Hackford said, “Although he was very heavy-handed in this one area, he gave me total autonomy in every other creative facet of the film. Anschutz is a man of his word, a mensch.”

He has also plumbed the world of publishing, counting among his holdings The Washington Examiner, a conservative newspaper; the hyperlocal news network Examiner.com; and The Weekly Standard magazine.

The billionaire is also a major donor to the Republican Party. He and his wife have donated tens of thousands of dollars to G.O.P. candidates and related organizations in 2012 alone, according to OpenSecrets.org.

Yet while Mr. Anschutz appears to enjoy building up businesses, he also appears to have little compunction about selling them when the time - and price - are right. And while he has entertained unsolicited takeover offers for some or all of Anschutz Entertainment in the past, the person close to the company said, the decision was entirely on his own timetable.

“This is how he's operated in the past,” this person said. “He builds companies to get ready to go to the next level, and then sells them to someone who can take them there.”

Banks\' Risky Ways

Banks' Risky Ways  |  A prominent regulator, Thomas M. Hoenig, the Federal Deposit Insurance Corporation board member who formerly ran the Federal Reserve Bank of Kansas City, had a dire prediction for the nation's big banks on Wednesday. He said at the Exchequer Club in Washington, according to Bloomberg News:

“The behavior and practices leading to this crisis will soon reemerge and these highly complex, more vulnerable firms will have an even more devastating effect on the economy.”

Mr. Hoenig has made the argument - one that recently was echoed by the former Citigroup boss Sanford I. Weill - that the government should reinstate a version of the Glass-Steagall Act, which separated commercial banks from investment banks.

A quirk of the tax code isn't helping matters, writes Jesse Eisinger in his column, The Trade. A “tax c ode distortion” encourages banks to gorge on debt, rather than equity. Mr. Eisinger writes:
“More debt not only makes companies more vulnerable to bankruptcy but also makes investors more susceptible to panics, when they withdraw their capital en masse.”

Happy Birthday to Lloyd Blankfein!  |  The Goldman Sachs chief executive turns 58 today.

As Goldman welcomes a new chief financial officer, some analysts are wondering how the company will bolster its stock price. One possible strategy could be to cut back compensation, writes Lauren Tara LaCapra in a blog post on Reuters. Ms. LaCapra cites an unidentified “prominent investor” who says Goldman faces the “Lazard problem,” in which employees expect to be paid a lot and will leave if they are not.

Dealing with regulators shouldn't be a problem for Goldman's new chief financial officer, Harvey M. Schwartz, a ccording to Arthur Levitt, the former Securities and Exchange Commission chairman and current adviser to Goldman Sachs. Mr. Levitt told The Wall Street Journal that Mr. Schwartz's demeanor and sense of humor will “play well in Washington.”

And in case anyone was wondering, Mr. Blankfein is not a socialist, but believes in the fair distribution of wealth, as he noted during a conversation on Wednesday with the chief executive of the Royal Bank of Canada.

Robert Rubin, Tortoise  |  Mr. Rubin, whose career at Goldman Sachs, the Treasury Department and Citigroup has taken him through the upper echelons of finance and government, resembles “an ancient Galapagos tortoise,” as William D. Cohan writes in the Bloomberg Businessweek cover story. “Whatever nastiness politics or the global economy may throw at him, he abides.” But the 74-year-old's record deserves some scrutiny, Mr. Cohan writes. When the economy collapsed, “due in part to bank-friendly policies that Rubin advocated, he made more than $100 million while others lost everything.”

Betting on Housing  |  The real estate search site Trulia raised $102 million on Wednesday, surpassing expectations. As housing goes, so should Trulia. By that measure, the outlook looks decent. On Wednesday, data showed housing starts rising 2.3 percent in August and existing home sales jumping 7.8 percent.

Gaming the Rates  |  Amid a worldwide investigation into rate-rigging, Libor has faced the most scrutiny. But other rates may be similarly vulnerable. Bloomberg News reports on a confidential paper by the International Organization of Securities Commissions, which concludes that the “same lack of oversight that enable d traders to manipulate the London interbank offered rate plagues other benchmarks around the globe.”

According to Bloomberg News, the paper says that fewer than half of benchmark rates surveyed in the United States, Europe and Asia “were based on actual transactions.”

New on Twitter  | 
The Carlyle Group, using the Twitter handle @OneCarlyle, joins its rival Blackstone in telling the world about itself in 140 characters or fewer.

On the Agenda  |  The 1980s deal maker Donald Drapkin, who now runs the hedge fund Casablanca Capital, is on CNBC at 1:30 p.m.. Earnings out on Thursday include the Jefferies Group at 8 a.m., and Oracle after the bell.

In New York on Thursday, the Dow Jones Private Equity Analyst Conference kicks off at the Waldorf Astoria, featuring speakers like William E. Conway Jr. of the Carlyle Group, Richard A. Friedman of Goldman Sachs and Ted Schlein at Kleiner Perkins.

In Washington, the Senate Banking committee holds a hearing on high-frequency trading at 10 a.m. Dave Lauer, who quit his job last year at a high-speed trading firm in Chicago, is set to testify against the industry. The House Financial Services committee has a hearing on the Consumer Financial Protection Bureau at 10 a.m., with the agency's head, Richard Cordray, set to testify. The Senate Finance committee and the House Ways and Means committee have a hearing on the tax treatment of capital gains at 10 a.m.

Sheila Bair's New Book  |  Fortune has an excerpt of “Bull by the Horns: Fighting to Save Main Street From Wall Street and Wall Street From Itself,” the new book by Sheila Bair, who led the Federal Deposit Insu rance Corporation during the financial crisis. In the passage, Ms. Bair describes a meeting where the Treasury secretary at the time, Henry M. Paulson Jr., persuaded bank chiefs to accept the bailout:

“Nine men stood milling around in the room, peremptorily summoned there by Treasury Secretary Henry Paulson. Collectively, they headed financial institutions representing about $9 trillion in assets, or 70% of the U.S. financial system. I would be damned if I would let them see me shaking.”

The Rich Get Richer  |  The past year has been kind to the wealthiest Americans, according to Forbes, which updated its ranking of billionaires on Wednesday. Warren E. Buffett, the country's second-richest man, is worth $46 billion as of September 2012, compared with $39 billion last year. Bill Gates, the richest of the rich, is now worth $66 billion, up from $59 billion last year.

At least one financier didn't fare so well. John A. Paulson, the hedge fund manager who has had a string of money-losing quarters, is now worth $11 billion, down from $15.5 billion last year.

Mitt Romney might have ranked among this elite crew, according to Bloomberg News. The Republican presidential candidate, who is worth a mere $250 million, left the private equity industry before the boom of the early 2000s. Bloomberg News says of Mr. Romney: “Had he stayed at Bain Capital LLC, he'd be worth more than $1 billion, according to the Bloomberg Billionaires Index.”

Pension Crisis in Chicago  |  It wasn't a prominent issue in the strike, but Chicago teachers face a looming financial problem, reports The New York Times's Mary Williams Walsh:

“The Chicago Teachers' Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year - muc h more than it has been taking in. That has forced it to sell investments, worth hundreds of millions of dollars a year, to pay retired teachers. Experts say the fund could collapse within a few years unless something is done.”

Mergers & Acquisitions '

BP's Chief Meets With Russian Leaders on Joint Venture  |  The chief executive of BP, Robert W. Dudley, met with President Vladimir V. Putin of Russia in an effort to resolve a long-running business dispute in Russia.
DealBook '

Universal Poised to Win Approval for EMI Deal  |  The expected sign-off by European regulators will require Universal to sell prized assets, The Wall Street Journal reports.
WALL STREET JOURNAL

European Aerospace Companies Reach Out to Investors  |  EADS and BAE have been trying to convince certain groups of nongovernment shareholders of the merits of a merger, Bloomberg News reports, citing unidentified people familiar with the talks.
BLOOMBERG NEWS

Liberty Offers $2.6 Billion for Remainder of Telenet  |  The cable company Liberty Global already owns 50.4 percent of its Belgian rival Telenet, and on Thursday offered to pay about $2.56 billion for the shares it did not own, Reuters reports.
REUTERS

Visteon to Sell Climate Control Unit to Its Joint Venture  | 
REUTERS

Acquisition of Yoplait Bolsters General Mills's Profit  | 
ASSOCIATED PRESS

INVESTMENT BANKING '

Bank of America Speeds Up Plan to Cut Jobs  |  The bank is now planning to shed 16,000 jobs by the end of the year.
WALL STREET JOURNAL

On Wall Street, Layoffs Expected to Approach 100,000  |  The analyst Meredith Whitney took to Bloomberg TV to predict more cutbacks for the financial industry.
BLOOMBERG TELEVISION

Bond Firms to Benefit From Federal Reserve's Move  |  The latest round of quantitative easing is “proving to be manna from heaven” for Pimco, DoubleLine Capital and TCW, Reuters reports.
REUTERS

Lehman Brothers Exits Texas Property Portfolio  | 
BLOOMBERG NEWS

PRIVATE EQUITY '

TPG Left as Sole Bidder for Billabong  |  Bain Capital has dropped out of the contest for the Australian surf wear company, according to The Wall Street Journal.
WALL STREET JOURNAL

China Fund Said to Lead $2 Billion Investment in Alibaba  |  A group of investors led by the China Investment Corpor ation, that country's sovereign wealth fund, paid $2 billion for a 5.6 percent stake in Alibaba Group Holding, the huge e-commerce company, Bloomberg News reports, citing an unidentified person with knowledge of the matter.
BLOOMBERG NEWS

Landmark Partners Said to Plan $2.5 Billion Fund  |  The private equity firm is looking to use the money to buy existing stakes from other funds, Bloomberg News reports.
BLOOMBERG NEWS

CVC's Head for Australia and New Zealand to Depart  | 
WALL STREET JOURNAL

HEDGE FUNDS '

Franklin Resources to Acquire Hedge Fund Firm  |  The mutual fund company Franklin Resources said it would buy a majority stake in K2 Associates, a fund of hedge funds, and gain the right to start buying the rest of the firm beginning in 2016, Reuters reports.
REUTERS

Highbridge Capital's Chief Risk Officer to Step Down  | 
REUTERS

I.P.O./OFFERINGS '

Talanx Said to Be Reviving Its I.P.O.  |  The German insurer is trying again after shelving plans to go public less than two weeks ago, Bloomberg News reports, citing two unidentified people with knowledge of the transaction.
BLOOMBERG NEWS

Nasdaq De fends Plan to Compensate Facebook Investors  | 
WALL STREET JOURNAL

Astro of Malaysia Secures Cornerstone Investors  |  The hedge funds Och-Ziff Capital Management and Standard Pacific Capital are among 16 top investors in the I.P.O. of the Malaysian TV company Astro, according to Reuters.
REUTERS

Google Expected to Overtake Facebook in U.S. Display Ads  | 
REUTERS

VENTURE CAPITAL '

To Help Europe's Economy, Start a Company  |  A new ad campaign in Europe is encouraging young people to become en trepreneurs, as “a lack of entrepreneurial gumption is widely seen as a chief barrier to growth,” The New York Times reports.
NEW YORK TIMES

Corporations Invest More in Start-Ups  |  Venture groups backed by corporations invested $2.1 billion in the second quarter, an increase of 16 percent from the period a year earlier, Reuters reports.
REUTERS

3 Out of 4 Start-Ups Fail, Research Shows  | 
WALL STREET JOURNAL

Jack Dorsey on Square  |  Mr. Dorsey, the entrepreneur behind Twitter and the mobile payments company Square, told The Wall Street Journal: “Every day is an existential threat, questioning the entire business. You wake up and you are completely jazzed about what happens and then you read an article…about a potential competitor or a rumor, and it feels like - wait, what are we going to do?”
WALL STREET JOURNAL

LEGAL/REGULATORY '

Bernanke Discusses ‘Fiscal Cliff' With Lawmakers  | 
REUTERS

Documents Shed Light on Early Concerns About Former Barclays Chief  |  Documents released on Wednesday shed light on concerns about Robert Diamond Jr., the former chief executive of Barclays who stepped down amid the rate-manipulation scandal.
DealBook '

Te ntative Deal on E-Book Prices in Europe  |  Apple and four European publishers agreed to let online retailers like Amazon sell e-books at a discount for two years, in a proposed deal that could end an investigation by the European Commission into price-fixing, The New York Times reports.
NEW YORK TIMES

Jefferies Posts Slight Increase in 3rd-Quarter Profit

The Jefferies Group posted a slight rise in third-quarter profit on Thursday, as the securities firm had gains in its trading and advisory businesses from the same time a year ago.

The firm earned $70.2 million for common shareholders for the quarter, up from $68.3 million during the same time a year ago. Net revenue leaped 39 percent, to $730.6 million.

Compared with the year-ago period, Jefferies' results show marked improvement, with many of its core businesses reporting sizable jumps in revenue. The firm's core debt-trading business reported a more than sevenfold rise in revenue, to $265.7 million, while its equities trading business rose 65 percent, to $210 million. And its advisory operations rose 23 percent, to $133.2 million.

That may herald some good news for other major banks, which are set to report their own results in the coming weeks. Many of Wall Street's biggest houses have been hampered by middling performance in their fixed-income tradin g divisions, which have been hurt by low interest rates and new regulatory requirements.

The picture hasn't completely brightened, however. Jefferies' fixed-income trading division still reported a 9 percent decline from the firm's second quarter. And its capital markets business, which advises companies on offerings of stock and debt, reported declines from both the year-ago period and the second quarter.

Over the last year, Jefferies has survived a few major shocks, notably a steep fall in its stock price last November as investors worried about its holdings of European government debt in the wake of MF Global‘s collapse. Yet the firm climbed back as it demonstrated a relative ease in selling off those bonds.

“Despite a turbulent and often treacherous environment, we have just finished the best nine-month period in our firm's history,” Richard Handler, Jefferies' chairman and chief executive, said in a statement. “Our equity base of $3.7 billion h as never been more robust, and our balance sheet and liquidity have never been stronger.”

Shares in Jefferies fell 1 percent in premarket trading, to $15.50. They have risen nearly 6 percent over the last 12 months.

Liberty Bids $2.5 Billion for Rest of Belgium\'s Telenet

Liberty Global, the media company controlled by John C. Malone, offered on Thursday to buy the roughly half of Belgium's Telenet Group Holding that it did not already own for about $2.5 billion in cash, as it continues its push into Europe.

Under the terms of the proposal, Liberty Global will begin a tender offer of 35 euros a share, about 14 percent higher than Telenet's one-month average volume-weighted closing price.

Shares in Telenet climbed more than 12 percent in afternoon trading on Thursday, to 34.88 euros.

Liberty Global, the international broadband arm of Mr. Malone's media and telecom empire, has been expanding in Europe in recent years largely through acquisitions like the German cable providers Kabel Baden-Wuerttemberg and Unitymedia. And it bought a controlling stake in Telenet in 2007.

Based in Mechelen, Belgium, Telenet has become one of the biggest television and broadband Internet service providers in the country, with 2.2 billion residential cable-TV subscribers and 1.3 billion Internet customers as of Dec. 31. But its profit has fallen over the last two years, down to 16.8 million euros in 2011.

Still, its stock price has leaped 37 percent over the last five years.

“We believe this is the right time for Telenet to become a wholly-owned part of Liberty Global's pan-European platform in its next stage of development, particularly in light of the competitive and regulatory outlook in Belgium,” Mike Fries, Liberty Global's chief executive, said in a statement. “We are proud of the success Telenet has achieved over the years and of the many innovations it has brought to Belgian consumers.”

Liberty is being advised by Morgan Stanley and the law firm Freshfields Bruckhaus Deringer.

Liberty Bids $2.5 Billion for Rest of Belgium\'s Telenet

Liberty Global, the media company controlled by John C. Malone, offered on Thursday to buy the roughly half of Belgium's Telenet Group Holding that it did not already own for about $2.5 billion in cash, as it continues its push into Europe.

Under the terms of the proposal, Liberty Global will begin a tender offer of 35 euros a share, about 14 percent higher than Telenet's one-month average volume-weighted closing price.

Shares in Telenet climbed more than 12 percent in afternoon trading on Thursday, to 34.88 euros.

Liberty Global, the international broadband arm of Mr. Malone's media and telecom empire, has been expanding in Europe in recent years largely through acquisitions like the German cable providers Kabel Baden-Wuerttemberg and Unitymedia. And it bought a controlling stake in Telenet in 2007.

Based in Mechelen, Belgium, Telenet has become one of the biggest television and broadband Internet service providers in the country, with 2.2 billion residential cable-TV subscribers and 1.3 billion Internet customers as of Dec. 31. But its profit has fallen over the last two years, down to 16.8 million euros in 2011.

Still, its stock price has leaped 37 percent over the last five years.

“We believe this is the right time for Telenet to become a wholly-owned part of Liberty Global's pan-European platform in its next stage of development, particularly in light of the competitive and regulatory outlook in Belgium,” Mike Fries, Liberty Global's chief executive, said in a statement. “We are proud of the success Telenet has achieved over the years and of the many innovations it has brought to Belgian consumers.”

Liberty is being advised by Morgan Stanley and the law firm Freshfields Bruckhaus Deringer.