Casting Dual Roles, at Treasury and the Fed

For the last couple of months, there has been a parlor game on Wall Street and in Washington about who will become the next Treasury secretary. After all, Timothy F. Geithner has made it clear he plans to be out of that office at the end of the year whether President Obama is re-elected or not.

But there is another wrinkle in the parlor game calculus: Ben Bernanke, the Federal Reserve chairman, is likely to need a successor, too. If Mitt Romney wins the presidency, he has already pledged he will replace Mr. Bernanke, whose term as chairman ends in January 2014, in just over 15 months. However, Mr. Bernanke has told close friends that even if Mr. Obama wins, he probably will not stand for re-election.

That would be a one-two punch, with two of the most important jobs in the nation up for grabs. And over the last couple of years, especially at the depth of the financial crisis, the relationship between the two people in those roles has been increasingly important . They are the equivalent of roles in a buddy movie.

Lots of names are regularly bandied about for both positions. But they are not always thought about in tandem. So here is a field guide to handicapping the next Treasury secretary and Federal Reserve chairman:

The top Democratic name that pops up when discussing the Treasury position is usually Erskine Bowles, the former White House chief of staff under President Bill Clinton who reinvented himself with his Simpson-Bowles bipartisan plan to reduce the deficit. The business community, on both sides, appear to love the plan and say they love him.

About a year ago, when Mr. Geithner first told the president that he wanted to step down - before the president persuaded him to stick around for another year - Mr. Bowles was at, or near, the top of the list, according to people involved in the process. That may have changed, however: Mr. Bowles has privately criticized the president to business leaders as he has sought to gain support for his plan.

Some of that criticism has made its way back to the president, these people said, so it is unclear how strongly Mr. Obama would support him.

Another, perhaps more intriguing idea has made the rounds: Mr. Bowles as a Romney appointee. Several supporters of Mr. Romney have pitched him and his team on the idea. An appointment of Mr. Bowles under Mr. Romney would be a quick and clever way to show that he wants to reach across the aisle and find bipartisan ways to comprise.

Among the names on Wall Street that are thrown around, virtually none has a real shot, if for no other reason than, well, they work on Wall Street. Jamie Dimon, chief executive of JPMorgan Chase, once considered a contender, is off the list. He recently told Vanity Fair, “I intend to be here for many more years,” adding, “and I will not run for office.”

Laurence Fink, chief executive of BlackRock, the asset management juggernaut, has been a b ig supporter of the president and has told friends he would love the job, but people close to the administration say it is unlikely he would get it, given his title and his firm's previous relationship as an adviser to the Treasury.

The same most likely can be said of Roger Altman, chairman of Evercore Partners and a former deputy Treasury secretary, who is well liked by the administration but may be unable to shed the “investment banker” baggage.

And then there is Kenneth Chenault, the chief executive of American Express. Consider him a dark horse candidate, but perhaps the only person connected to the world of finance who would have a shot. His name was put on a list last summer when Mr. Geithner was considering leaving, people briefed on the list said. Given his history - an African-American who made his way up the ranks at American Express starting in 1981 - he could be the perfect mix of finance background and market experience, but one step removed from Wall Street banker.

The chances of an executive from what people in Washington call a “real company” - as in, not a financial business - also do not appear good. The one name that is buzzed about most, Sheryl Sandberg, chief operating officer of Facebook, is likely to be off the table after Facebook's problematic I.P.O.

Here's a wild card: Dan Doctoroff, chief executive of Bloomberg L.P. and a former deputy mayor of New York under Mayor Michael Bloomberg. He is hardly campaigning for the job, but his name was put on an internal list at the Treasury Department last summer, these people said, though it is unclear whether he would want the position.

So who is most likely to get the job under President Obama? Drum roll, please. Jacob Lew.

Huh? If you're a business person, you might be asking, Mr. Lew who? That is probably the biggest knock against him, which gives everyone else on the list a chance. Mr. Lew is Mr. Obama's chief of staff, which makes him very confirmable. A former lawyer and career technocrat, he does not have much of a business background - he was briefly chief operating officer of Citigroup's Alternative Investments unit, between the Clinton and Obama administrations - but the president is very comfortable with him, and that can go a long way.

Now, on to the role of Federal Reserve chairman under President Obama.

It is slim pickings. At the top of the list is Lawrence Summers, Treasury secretary under President Clinton and director of the National Economic Council for President Obama. He's a serious economist who knows his numbers and has a worldview that is similar to the president's. He would be expected to continue the loose money policy of Mr. Bernanke.

But one of the knocks against Mr. Summers is that he has a reputation for not playing well with others. He has had his own run-ins with the president. And if you consider the Treasury secretary and Federal Reserve chairman as a tag team, you would have to be confident that whomever you pick for Treasury secretary would get along well with Mr. Summers.

There are a couple of other names in the Democratic economist world, but virtually all of them would be long shots: Janet L. Yellen, the vice chairwoman of the Federal Reserve. She would be the first woman to run the Federal Reserve and could provide some continuity. Alan Krueger, an economist who was briefly an assistant secretary of the Treasury for economic policy under President Obama, is less of a classic choice, but is considered highly by the president.

If you want to be really daring, let's add one more name to the list, perhaps the perfect candidate from the president's perspective: Mr. Geithner. He would have had a year to recover from his current position and may have tired of the speaking circuit. Given his former role as the president of the Federal Reserve Bank of New York during the financial crisis, he would bring steadiness t o the job with Mr. Bernanke's departure, and a level of comfort for the president.

Now, if Mr. Romney wins the presidency, the chessboard for possible appointments for Treasury secretary and Federal Reserve chairman becomes a little more crowded.

Glenn Hubbard, who headed the Council of Economic Advisers under President George W. Bush and is a top adviser to Mr. Romney, is often mentioned as a top candidate for the Federal Reserve job - and the Treasury secretary job. It is likely that he would get one of the two.

So the question is, who gets the other? If Mr. Hubbard takes the Treasury secretary job, the other candidates for Federal Reserve chairman are N. Gregory Mankiw, who also headed the Council of Economic Advisers, and John B. Taylor, a Stanford economist, though he is considered more of a long shot.

If Mr. Hubbard gets the Federal Reserve job, however, the Treasury role becomes wide open.

Robert B. Zoellick, former president of the World Bank, is said to be among the names in the hopper for the Treasury secretary job. (He was previously a managing director at Goldman Sachs, but his role at the World Bank may have cleansed him of his Wall Street association and Mr. Romney is less concerned about ties to finance given his own background.)

Also on the list is Rob Portman, the senator from Ohio, who has become very close to Mr. Romney and knows a spreadsheet: he was director of the Office of Management and Budget under President Bush. Whether Mr. Romney would be willing to give up Mr. Portman's seat in the Senate is a question mark.

Finally, there is Mike Leavitt, the former governor of Utah, who is a close confidant and adviser to Mr. Romney. He is likely to get a big role in Mr. Romney's cabinet.

Oddly enough, given Wall Street's support for Mr. Romney, there are very few bankers or other business people on his short lists.

Whoever gets these two roles, let's hope this buddy movie isn' t too much of a thriller.

Cerberus Said to Seek Financing for Supervalu Buyout Bid

Cerberus Capital Management‘s next shopping spree may end with a bid for Supervalu, the embattled supermarket operator.

The leveraged buyout firm has been lining up at least $4 billion in financing to support a potential bid, a person briefed on the matter told DealBook on Monday. This person cautioned that work on the possible offer was continuing and may not lead to a formalized bid.

Shares in Supervalu jumped nearly 45 percent after Debtwire, an trade publication, reported on Cerberus's fundraising efforts. That values the supermarket company at about $677 million.

Supervalu has struggled under enormous obligations, which included $6 billion in long-term debt as of Sept. 8. It reported a $111 million second-quarter loss last week. The company said then that its sales process was moving along and that it was in “active dialogue” with a number of potential buyers.

Private equity firms are no strangers to the supermarket business, drawn by the real estate underneath the network of stores. Cerberus and Supervalu, along with CVS, partnered to buy the Albertson's chain in 2006 for $17.4 billion.

And Cerberus came of age by making investments in distressed companies like Chrysler.

Standard & Poor\'s Warns of Possible Volcker Rule Downgrades

Standard & Poor's released an analysis on Monday contending that Goldman Sachs and Morgan Stanley, more more than any other Wall Street giant, could suffer under the so-called Volcker Rule.

The rating agency warned that an especially stringent version of the yet-finished rule might prompt S.&P. to downgrade the ratings of certain big banks.

“A stricter rule could hurt these institutions' business positions and have a broader impact across several other firms,” S.&.P. analysts wrote. The analysts predicted a “one-in-three chance” that Goldman and Morgan would undergo a downgrade.

Named for Paul A. Volcker, a former chairman of the Federal Reserve who championed the it, the rule aims to rein in the level of risk-taking that prompted government bailouts in the financial crisis. The rule, a centerpiece of the Dodd-Frank Act's financial regulatory overhaul, would prohibit banks from making most bets with their own money, a once lucrative practice know n as proprietary trading.

Goldman might seem like a curious target. It moved two years ago to spin off or unwind its proprietary trading desks. But Goldman and Morgan, S.&P. said, derive a lopsided amount of revenue from trading compared with their rivals.

Still, S.&P. acknowledged that the threat stretches beyond Wall Street to banks like PNC, U.S. Bancorp, and Wells Fargo. The rating agency said the rule could collectively deprive the nation's eight largest banks up to $10 billion in annual earnings, up from earlier estimates of $4 billion.

The true fallout lurking in the rule is something of a mystery. S.&P. can only estimate the toll, until regulators put the finishing touch on the Volcker Rule.

Regulators recently entered a final stage of rule-writing after officials from the Fed and other agencies settled their differences over certain exemptions to the rule, according to people briefed on the matter. Regulators initially hoped to finalize the r ule by September, the people said, but they now expect wrap up their effort after the November election.

A point of contention among regulators is where to draw the line on proprietary trading. While regulators will ban standalone proprietary trading outfits at big banks, such activity can seep into other trading desks under the guise of helping clients.

Calling the rule “complex, controversial and contentious,” S.&P. called on regulators to clarify an earlier proposal.

“The Volcker Rule is perhaps the most complex and controversial part of the Dodd-Frank Act, and we believe the potential outcomes could vary widely, depending on the final rule,” S.&P. wrote.

In London, Nimble Start-Ups Offer Alternatives to Stodgy Banks

LONDON - When Hiroki Takeuchi joined McKinsey & Company in 2008, he had a front-row seat to the upheaval in finance.

After the collapse of Lehman Brothers, Mr. Takeuchi, a 26-year-old Oxford graduate, worked with some of the world's biggest banks trying to figure out how to adjust to new regulations and a changed market. Then he quit.

For Mr. Takeuchi, memories of friends building successful start-ups at college outweighed the lucrative rewards offered by the blue-chip consulting firm. He joined forces with two McKinsey consultants, feverishly writing code out of his parents' house on a minimal budget to create his own technology start-up.

The result was GoCardless, a London-based company that allows small businesses to set up monthly payments to suppliers at a fraction of the cost that banks charge. The business has secured $1.5 million in seed capital from a number of well-known investors, including the American early-stage venture capital firm Y Combi nator.

“The whole idea of bank payments is broken,” said Mr. Takeuchi at the start-up's office in a dilapidated building on the outskirts of London's financial district. “There's an opportunity here, and we're looking to grab it.”

London's fast-growing start-up scene is trying to disrupt the financial status quo. As consumers' trust in banks deteriorates because of a series of recent scandals, young companies are pressing their newcomer advantage. Firms are offering services like low-cost foreign currency exchange and new ways for small business to borrow cash.

Backed by venture capital firms like Index Ventures, the financial start-ups are taking on entrenched incumbents by using technology to pare back costs and improve the customer experience. Local authorities do not directly regulate many of the firms, but the young companies often use traditional banks and other financial firms for their back-office functions, like processing payments, which a re monitored by British regulators.

“Start-ups are taking advantage of London's position as a global financial center,” said Adam Valkin, a partner at the European venture capital firm Accel Partners. “They are innovating in ways that banks just can't do.”

The growth of finance entrepreneurs comes as London's start-up community continues to flourish. Many parts of East London have transformed into a mini version of Silicon Valley, with the likes of Google opening shared office space to support fledgling companies. Finance, technology and fashion start-ups have been able to tap into the large talent pool of young, multilingual professionals eager to work for the firms.

Many companies are following the lead of Wonga.com, an online lender founded in 2006 that has sought to fill a void left by banks by offering short-term, high-interest loans to consumers and small businesses. The company has been criticized for charging high interest rates to vulnerabl e consumers. The typical annual percentage rate on the company's loans is more than 4,000 percent, though Wonga.com says it only offers lending for a maximum of 30 days.

To cut down on costs, the start-up relies on publicly available online data to determine whether an applicant is creditworthy. Loans can take as little as 15 minutes to arrange, and the company has branched out from consumer lending into the small-business market as individuals look for alternatives to banks.

The tactics are paying off. Last year, the online lender reported a 269 percent rise in its net profit, to £45.8 million, or $73 million, after its loans increased fourfold compared with the previous year. Now, Wonga is now contemplating a multibillion-dollar initial public offering on Nasdaq, profiting from lending to consumers that are perceived as too risky for banks.

For many workers in London's financial services sector, successes like Wonga have turned the idea of starting a business into an increasingly attractive option. With investment banking activities on the wane, job prospects in the industry have remained poor since the beginning of the financial crisis, and the financial sector here is expected to lose 25,000 jobs this year.

Anil Stocker has seen the layoffs up close.

Mr. Stocker, a 28-year-old Cambridge graduate, left Lehman Brothers a few months before it collapsed in 2008. A year later, he resigned from the American investment bank Cogent Partners to co-found MarketInvoice with two friends who worked at JPMorgan Chase and Goldman Sachs.

The start-up helps small businesses gain access to capital by selling their supplier invoices to investors at a discount.

“The finance industry will have to completely change, and we are just at the beginning,” Mr. Stocker said.

MarketInvoice wants to exploit an underserved market in the banking sector. As firms have pulled back on lending, small business have been denied credit because they are deemed too much of a financial risk.

To help these companies access cash, Mr. Stocker and his partners began an online marketplace where small businesses can auction their long-term supply contracts to money managers for the highest price. Many of these invoices can take up to 90 days to pay out, so companies are willing to sell them at a discount to get hold of short-term capital.

Starting the business has not been easy. It took MarketInvoice's founders - who were still working for banks - almost a year to devise the business plan, and a further six months to raise $1.4 million from investors. The start-up auctioned its first supplier contract for £40,000, or $64,000, in early 2011, but only hit the £1 million mark nine months later.

“No one wanted to be the first company to use our system,” Mr. Stocker said. “At the beginning, you live or die by your reputation.”

London's finance start-ups also are attracting entrepreneurs with a technology background.

Taavet Hinrikus, a 31-year-old Estonian who was Skype's first employee, dreamed up his business while still working for the Internet calling service. In 2006, the company moved him to London from Tallinn, Estonia, where he rose to become Skype's director of strategy. But Mr. Hinrikus grew frustrated after losing 5 percent of his salary to bank charges every time he moved money from Estonia to Britain.

After meeting fellow compatriots in London who wanted to transfer cash back Estonia, Mr. Hinrikus created a system in which individuals could move money to each other's accounts. By agreeing to swap currencies at a set rate, Mr. Hinrikus said he saved thousands of dollars in bank fees.

“We had to find our own way to avoid the charges,” he said.

With his business partner, Kristo Kaarmann, a former management consultant, Mr. Hinrikus built a Web site that connects people looking to exchange British pounds with euros. Their start-up, called TransferWise, acts as an intermediary for the money transfers and has expanded into other European currencies.

Not everything has gone to plan. The start-up had to wait 18 months to receive its license to operate from British regulators.

Yet in its first 12 months, Mr. Hinrikus said TransferWise has helped people to exchange around $10 million of foreign currencies that has avoided costly bank charges. The start-up also has raised $1.3 million in seed capital from investors, including PayPal's co-founder Max Levchin.

“Banks aren't doing a good job at innovating for consumers,” said Robert Dighero, a partner in the London-based venture capital firm Passion Capital. “Start-ups are nibbling away at some of their most profitable businesses.”

An Insider Trading Case That Puts 2 Defendants at Odds

The insider trading charges against Anthony Chiasson, a co-founder of Level Global Investors, and Todd Newman, a portfolio manager at Diamondback Capital Management, has put the two defendants at odds and may end up with one implicating the other as part of a defense strategy.

The government has accused the two men of receiving inside information through a “circle of friends” who exchanged information about technology companies. Mr. Chiasson is charged with reaping the largest profits for his hedge fund - about $57 million - by shorting Dell shares before a negative earnings announcement in August 2008. Mr. Newman is also accused of trading in Dell at the same time, but in much smaller amounts.

The information was passed around among a group of analysts who have pleaded guilty and agreed to cooperate in the case. Unlike other recent insider trading cases, however, the government does not have wiretaps or other consensual recordings to show how the tips m ade their way to Mr. Chiasson and Mr. Newman. Thus, the case will ride on whether analysts who worked for the two defendants are believable witnesses for the prosecution.

One quirk in the case is that there is no direct connection between Mr. Chiasson and Mr. Newman, although they are charged with being members of the same conspiracy. They worked at different firms, and the information reached them by different paths. Neither has much incentive to cooperate by putting up a united front.

For the case against Mr. Chiasson, the indictment accuses him of receiving the inside information from Spyridon Adondakis, an analyst at Level Global who pleaded guilty to passing inside information.

According to recent filings in the case, one way Mr. Chiasson's lawyers plan to attack Mr. Adondakis's credibility is by showing that he rarely shared confidential information with Mr. Chiasson. To that end, the defense plans to introduce nearly 1,000 e-mails sent by the ana lysts containing corporate information in which Mr. Chiasson was rarely listed as a recipient on the chain of messages.

Defense lawyers are likely to argue that Mr. Adondakis is someone who is an admitted criminal who never shared inside information with his boss. It was only after being caught did he offer up a prominent hedge fund manager in the hope of getting a significant reduction in his sentence.

The problem for Mr. Newman is that a few hundred of those e-mails included him as a recipient. Many were sent by an analyst at Diamondback who has also pleaded guilty to being Mr. Newman's source of inside information.

To the extent the e-mails show Mr. Adondakis and others engaged in wrongdoing, they implicate Mr. Newman in the same criminal conduct. He could suffer some rather significant collateral damage if Mr. Chiasson argues that the e-mails are evidence of violations of the federal securities laws by Mr. Adondakis and his cohorts. The e-mails might h urt Mr. Newman's case, but that is of little concern to Mr. Chiasson because it has become a situation of “every man for himself.”

To avoid this problem, Mr. Newman has asked a United States District Court judge, Richard J. Sullivan, to sever his case so that he is tried separately from Mr. Chiasson, or to bar his co-defendant from using the e-mails as part of his defense. Mr. Newman argues that the e-mails would not be admitted as evidence if he had a separate trial, and that they are potentially prejudicial to his case if the jury misuses them despite any instruction the judge might give to consider them only with regard to the charges against Mr. Chiasson.

Mr. Chiasson naturally opposes the proposal to preclude his lawyers from introducing the e-mails because they can support his position that Mr. Adondakis did not tip him by keeping secret any inside information he received.

Federal prosecutors have told the court they are sitting this one out by n ot taking a position in support of either defendant.

This is not the first time the defendants sought separate trials. In the summer, they asked Judge Sullivan to sever their cases because they were not part of a single conspiracy as alleged in the indictment but instead there were multiple agreements, sometimes called “hub and spoke” conspiracies. If they were not part of the same agreement, then it would be improper to try them together.

Judge Sullivan denied their motions without explanation, although the likely reason is that there is enough overlap in the evidence that a jury could find a single conspiracy and therefore it would be more efficient to conduct a joint trial.

With the trial scheduled to begin on Oct. 29, this latest motion presents a significant challenge. At this late date, ordering separate trials could mean substantial inconvenience for the government because prosecutors will have to reorganize their case to concentrate on only o ne defendant after preparing for a joint trial.

The court would face the prospect of two trials about the same basic set of facts, with some of the cooperating witnesses testifying twice about the same inside information. Any inconsistencies in their testimony will be fodder for cross-examination in the second case, potentially giving the defendant who is tried later an unfair advantage.

Keeping the defendants together for trial, however, means Judge Sullivan will have to figure out whether to admit the e-mail evidence that goes to the heart of Mr. Chiasson's defense that he did not trade on inside information, or to keep it out to prevent the evidence from harming Mr. Newman's case. If he does not grant Mr. Newman's severance motion and the defendants are convicted, then one will have a significant issue to argue in an appeal.

US v Newman Opposition to Severance

US v Newman and Chiasson Indictment

Graphics: Sales by BP and Ranking the Top Oil Companies

BILLION-DOLLAR SALES BY BP BP began a series of divestitures in 2010 to pay for its oil spill in the Gulf of Mexico. Despite paying out at least $38 billion for the spill, the British energy giant remains committed to high-risk exploration in deepwater fields. From Australia to Texas, the company has been selling older, smaller assets considered to be low-growth potential.

On Monday, BP agreed to sell its TNK-BP, a joint venture in Russia, for $55 billion to Rosneft, a state-owned energy company. That sale brought the value of BP's divestments since the spill to more than $95 billion.

The United States filed the first criminal charges in the spill case in April. If the disaster is found to be the result of gross negligence, the fines for BP would rise substantially.

Assets in Venezuela and Vietnam

DATE	ASSETS	ACQUIROR	VALUE (in billions)
* Remaining 50 stake. ** 50 percent stake. Source: Thomson Reuters
Oct. 22, 2012	TNK-BP *	Rosneft	$28.0
Oct. 22, 2012	TNK-BP **	Rosneft	26.5
Sept. 10, 2012	Oil fields in Gulf of Mexico	Plains Exploration & Production	5.5
July 20, 2010	Assets in Canada	Apache	3.3
July 20, 2010	Assets in U.S. and Egypt	Apache	3.1
Oct. 8, 2012	Refinery in Texas City, Texas	Marathon Petroleum	2.5
Aug. 13, 2012	Refinery in Carson, Calif.	Tesoro	2.5
May 1, 2012	Woodside in Australia	Mitsui	2.5
Oct. 18, 2010	TNK-BP	1.8
Aug. 3, 2010	Assets in Colombia	Investor group	1.8
Dec. 1, 2011	Gas unit in Canada	Plains Midstream	1.7
Feb. 27, 2012	Assets in Kansas	Lin Energy	1.2
June 25, 2012	Property in Wyoming	Lin Energy	1.0

TOP PUBLICLY TRADED OIL COMPANIES If Rosneft buys out both BP and the handful of Russian billionaires who control the other half of TNK-BP, Rosneft will become one of the world's largest publicly traded oil companies by market capitalization.

Candidates Debate Rise of China; China Debates Reform

Monday night's presidential debate will include a 10-minute segment on “the rise of China and tomorrow's world.” Expect harsh word from Mitt Romney about trade practices, the value of the renminbi , Chinese financing of the deficit and the need to increase military spending to strengthen the “pivot to Asia.”

Mr. Romney may be right to complain about China's structural trade barriers and intellectual property violations. The question is whether he is willing to undermine the World Trade Organization, through which the United States has won several victories against China, upend the global trading order and drive up prices for many of the goods Americans consume.

A TRADE WAR BETWEEN THE UNITED STATES AND CHINA would also arguably harm many of the allies with whom the United States is working to execute the “pivot to Asia.” Those countries may take China's side in a trade war, as two scholars from the Peterson Institute for Institutional Economics rec ently warned:

U.S. leaders would do well to note that for probably the first time since the second world war the dollar bloc in east Asia has been displaced. In its wake a currency bloc based on China's renminbi is emerging… Chinese shenanigans in relation to politics and security have repelled these countries into America's embrace, reflected most vividly in the latter's pivot-to-Asia strategy. The old saying is that politics trumps in the short run but economics wins in the long run.

Both tickets have ties to China. President Obama's half-brother has been a long-time resident of China, M. Romney's Chinese financial interests are well documented, and Paul D. Ryan's brother is a Cargill executive in Shanghai.

President Obama has pursued a China policy that is broadly consistent with those followed by both Republican and Democratic administrations, and supported by most of the United States business community, for the last 30 year s. If elected, Mr. Romney is unlikely to change that policy.

In his 2007 book “The China Fantasy” (Viking), James Mann criticized the argument that trade and engagement would bring liberalization and eventual democracy to China. Mr. Mann foresaw a situation in which China “becomes fully integrated into the world's economy, yet it remains also entirely undemocratic.”

That may be the crucial challenge for the United States from the rise of China, and one that America's elite has helped create over the last several decades. The United States has much less leverage against China than most Americans think, and the best way for America to respond to China's rise is not to lash out but to get our own house in order.

CHINA'S PRESUMPTIVE NEXT PRESIDENT, Xi Jinping, may wish his economy were the juggernaut many Americans think it is. He will inherit an economy in desperate need of reform and rebalancing. As discussed in an earlier China Insider, Mr. Xi and his advisers are aware of China's challenges.

China's growth rate in the third quarter slowed, as expected, to 7.4 percent. Other economic data came in ahead of estimates, leading to contradictory conclusions from financial analysts.

Goldman Sachs Asset Management's chairman, Jim O'Neill, has raved about the skill of Chinese policymakers and believes China's may have engineered a “soft landing.”

Other analysts were not so impressed and questioned whether China might have overstated its growth:

The growth rebound is too good to be true,” said Li Wei, an economist at Standard Chartered in Shanghai. “Maybe the political agenda has played a role. If you are going to hold a board meeting of course you want to report a decent number. It's understandable.

It looks premature to conclude that China's economy has avoided a hard landing, but the bearish sentiment toward China may be shifting as we approach the 18th Party Congress. Expectations that Mr. Xi will move quickly to project confidence and commitment to reform are increasing.

Reuters has learned that Mr. Xi is seeking an ambitious economic reform agenda and canvassing advisers nationwide for ideas. The New York Times reported on Monday that Mr. Xi might be working on a reform agenda that goes beyond economics. And Chinese state media has recently run a series of articles calling for continued reform. That said, any political reform will not be toward liberal, Western democracy, and we should avoid the trap of looking for “China's Gorbachev”.

Hu Jintao was thought to be a reformer too, although 10 years ago there was not the sense of impending crisis among the elite that there is today. The obstacles to deepening reform are significant, substantive changes will take time, and Mr. Xi and his administration may well fail, but there is at least a little more hope for change in Beijing than I have sensed in a long time.

Calling for the coming crash of China may be popular, but predicting the coming muddle-through is probably more accurate.

Cnooc\'s Deal for Nexen Still a Possibility

OTTAWA â€" On Friday, the government of Canada used foreign investment laws to reject a $5.17 billion takeover of Progress Energy Resources by Petronas, the Malaysian state owned energy company.

That decision led to speculation on the outcome of a $15 billion bid for Nexen, another Canadian energy company, by China National Offshore Oil Corporation, the Chinese state-run oil producer known as Cnooc (pronounced SEE-nook).

The Progress deal was the third foreign takeover turned down by the current Conservative government using a law that previously was mainly known for rubber-stamping acquisitions. All three rejected deals - the others involved a potash mining company and an aerospace company - came as surprise given the anti-regulation bent of the government and Stephen Harper, the prime minister.

The review system was introduced by another Conservative government in 1985 to replace a much stronger law introduced during a wave of Canadian nationalism in t he 1970s. Instead of requiring specific commitments in areas like job commitments, technology and Canadian management to get approval, the law requires only that a takeover provide a “net benefit” for Canada.

But there is no clear definition of net benefit in the law. Instead, it is defined on a case-by-case basis with the prime minister as the final judge. Calls from the investment community recently led the Conservatives to start developing clearer, public guidelines. Now, that process may also have led to the rejection of the Progress deal.

Although Canada's foreign investment review process is both secretive and ultimately political, it appears that impatience by Petronas, rather than the merits of its bid, led to the rejection on Friday. And the rejection is not the last word in this case.

Both The Globe and Mail and The National Post, citing unnamed sources, said that the government initially promised Petronas a decision by last Friday. But, accor ding to the newspaper reports, the government asked Petronas last week if it could delay its decision until December so that it would follow the release of its new, broad foreign takeover guidelines.

Petronas, the reports said, was already frustrated by the process and any further delay would complicate deadlines under its agreement with Progress. So it turned down the government's extension request. The rejection followed.

Following the deal was rejected, however, the government indicated that the process was not over. And on Monday, Petronas and Progress said in a statement that they would continue to work with the government in a bid to get their deal approved.

Politics aside, the Nexen deal with Cnooc faces different hurdles than the Petronas offer.

Although Nexen's assets are mainly outside of Canada, the company is a significant investor in Alberta's oil sands. It owns 65 percent of one sands project, with Cnooc as its minority partner, and has positions in two other oil sands projects.

Some have expressed concern about a Chinese state-owned company gaining control of Nexen's Canadian assets, which also include natural gas and shale gas properties.

Although Mr. Harper, the prime minister, does not usually tolerate any criticism from members of his party, opponents of the Nexen deal include some Conservative members of Parliament. Rob Anders, a Conservative legislator who wants conditions to be placed on Cnooc, described China last month as being “a non-benevolent actor and a strategic adversary.”

But under Mr. Harper, and several prime ministers before him, individual members of Parliament, even from his own party, hold little sway.

After American politics stalled plans to deliver more oil sands production to the United States through the Keystone XL pipeline, Mr. Harper has focused on China as Canada's next great energy market and courted Chinese investment in the sector. That, analyst s say, is likely to guide his thinking about Cnooc and Nexen more than anything that happens with Petronas.

Farrallon\'s Founder to Leave by Year End

Another big hedge fund is preparing for life beyond its founder, as Farallon Capital announced on Monday that its senior managing member, Thomas F. Steyer, would leave the firm at year end.

Andrew J. M. Spokes, who serves as co-managing partner alongside Mr. Steyer, will formally assume control of the investment firm at that time.

When he leaves, Mr. Steyer will be the latest hedge fund magnate to make an effort at transforming his firm into a durable institution. Among the most prominent individuals who have already made the transition is Bruce Kovner of Caxton Associates, who left the firm last year in the hands of Andrew Law. And D.E. Shaw's David Shaw has passed on management responsibilities to a committee.

The jury remains out on whether such moves will work. Shumway Capital's eponymous founder, Chris Shumway, announced his intentions to leave his firm in November of 2010, putting it in the hands of a trusted lieutenant. But antsy investors began d emanding their money back, forcing Mr. Shumway to recommit himself to the hedge fund - and eventually leading to the returning of all investor money.

Farallon is hoping not to repeat that incident. In a letter to investors reviewed by DealBook, Mr. Steyer wrote that he has been steadily handing Mr. Spokes more responsibility over the last five years.

“The announcement is the natural next step, is accepted internally and won't change our mode of operation,” he wrote. “The playbook won't change when I leave.”

And Mr. Steyer made clear that his separation would be final. He will have no official role or responsibilities at the firm, and his partners will buy out his share of the hedge fund's profits.

Mr. Steyer, who once worked in risk arbitrage at Goldman Sachs in Manhattan, founded the hedge fund in California in 1986, with help from the partners of the private equity firm Hellman & Friedman. Farallon has more than $19 billion in assets under management, according to AR magazine.

Halcon in $1.45 Billion Energy Acquisition

HOUSTON, TEXAS, Oct. 22, 2012 (GLOBE NEWSWIRE) -- Halcón Resources Corporation (NYSE: HK) ("Halcón" or the "Company") today announced that it has entered into a privately negotiated definitive agreement with Petro-Hunt, L.L.C. and an affiliated entity, to acquire producing and undeveloped oil and gas assets in the Williston Basin ("Williston Basin Assets") for an aggregate purchase price of approximately $1.45 billion, consisting of $700 million in cash and $750 million in equity.

The Williston Basin Assets are comprised of approximately 81,000 net acres (~95% operated) prospective for the Bakken and Three Forks formations primarily located in Williams, Mountrail, McKenzie and Dunn Counties, North Dakota.  Current average net production from these assets is in excess of 10,500 barrels of oil equivalent per day (Boe/d) and total proved reserves, as estimated by third party reserve engineers, are approximately 42.4 million barrels of oil equivalent (MMBoe), 88% oil, with an internally estimated resource potential of greater than 100 MMBoe.  Currently there are five operated drilling rigs running on the properties. 

On a pro forma basis for this transaction, the Company has over 135,000 net acres in the Williston Basin and company-wide current average net production is approximately 26,500 Boe/d.

Additionally, Halcón has entered into an agreement pursuant to which Canada Pension Plan Investment Board ("CPPIB") has agreed to purchase $300 million of the Company's common stock at $7.16 per share, subject to customary closing conditions and the successful closing of the acquisition of the Williston Basin Assets. 

Halcón has secured financing commitments from Wells Fargo, J.P. Morgan, Goldman Sachs and Barclays pursuant to which the borrowing base under the Company's senior secured revolving credit facility will be increased to $850 million and such banks have agreed to provide a $500 million bridge loan commitment.

Floyd C. Wilson, Halcón's Chairman and Chief Executive Officer, stated, "This acquisition is immediately accretive on all measures and is consistent with our strategy of building an oil company with a multi-year drilling inventory in several liquids-rich basins.  The assets we are acquiring are located in what is arguably the most attractive oil producing basin in the lower 48, on a risk adjusted basis.  This transaction improves our leverage profile and will effectively increase our estimated proved reserves on a pro forma basis by over 58% to approximately 115 million barrels of oil equivalent, 79% of which is liquids."

Bruce W. Hunt, President of Petro-Hunt, L.L.C., commented, "We are pleased to become a significant Halcón shareholder through this transaction.  The track record of Halcón's management team speaks for itself and we are confident they will do a great job of developing these solid assets.  Petro-Hunt has a long history of operating oil and gas properties in the Williston Basin.  We will continue to operate production of approximately 24,000 Boe/d and develop our 600,000 plus acres of oil and gas leasehold in the Williston Basin with the full attention of our existing staff."

R. Scott Lawrence, CPPIB's Vice-President, Head of Relationship Investments, remarked, "CPPIB's investment aligns with our strategy to provide strategic, long-term capital to well-positioned companies like Halcón and work with management to help create value now and in the future."

The $750 million equity consideration will initially be issued as preferred stock that will automatically convert into common stock at $7.45 per share following an increase in Halcón's authorized common shares to accommodate conversion and obtaining certain regulatory approvals. 

Terms and Conditions

The Company's board of directors has unanimously approved the transaction, which is subject to customary closing conditions, including approval of listing of the Halcón common stock to be issued in the transaction on the New York Stock Exchange and regulatory clearance.  The effective date of the transaction is June 1, 2012, and Halcón anticipates completing the transaction in December 2012.

Mitchell Energy Advisors acted as financial advisor to Halcón.

Tudor, Pickering, Holt & Co. acted as financial advisor to CPPIB.

Investor Conference Call

Halcón will host a conference call on October 22, 2012 to discuss the proposed transaction at 9:00 a.m. EDT (8:00 a.m. CDT).  Investors may participate in the conference call via telephone by dialing (877) 810-3368 for domestic callers or (914) 495-8561 for international callers, in both cases using conference ID 43905963, and asking for the Halcón call a few minutes prior to the start time.  An accompanying slide presentation and a link to the live audio webcast will be available on Halcón's website at http://www.halconresources.com on the day of the presentation.

About Halcón Resources

Halcón Resources Corporation is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities and Exchange Act of 1934 as amended. Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects", "believes", "intends", "anticipates", "plans", "estimates", "potential", "possible", or "probable" or statements that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved. The forward-looking statements include statements about future operations, estimates of reserve and production volumes and the anticipated timing for closing the proposed transaction. Forward-looking statements are based on current expectations and assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with expectations is subject to a number of risks and uncertainties, including but not limited to: the possibility that Halcón may be unable to satisfy the conditions to closing; that the acquisition may involve unexpected costs; the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather such as hurricanes and other natural disasters); uncertainties as to the availability and cost of financing; fluctuations in oil and gas prices; inability to timely integrate and realize expected value from acquisitions; inability of management to execute its plans to meet its goals; shortages of drilling equipment, oil field personnel and services; unavailability of gathering systems, pipelines and processing facilities; and the possibility that government policies may change or governmental approvals may be delayed or withheld.  Halcón's annual report on Form 10-K for the year ended December 31, 2011, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K, and other Securities and Exchange Commission filings discuss some of the important risk factors identified that may affect the business, results of operations, and financial condition. Halcón undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Scott M. Zuehlke  VP, Investor Relations  Halcon Resources  (832) 538-0314

BP Strikes a Deal in Russia

BP REACHES DEAL WITH ROSNEFT  |  BP announced on Monday that it had reached a deal with Rosneft, the Russian state oil company, to sell its 50 percent stake in the Russian joint venture TNK-BP. Under the agreement, BP would receive Rosneft shares and $17.1 billion in cash, and would ultimately hold a 19.75 percent stake in Rosneft. BP said it expected to gain two seats on Rosneft's board.

 

GREG SMITH SPEAKS  |  The time has come for Greg Smith to promote his book, “Why I Left Goldman Sachs: A Wall Street Story,” which goes on sale on Monday. The debate over the book has focused on its author as much as on the firm he writes about. Much hinges on the “believability” of Mr. Smith's story, writes DealBook's Susanne Craig, who says the book “does lay bare at least one man's view of how the firm's culture went haywire over the last decade.” Goldman itself is mounting a public challenge to Mr. Smith, telling its employees that his “perspective was limited.”

But Mr. Smith sees his book as “constructive,” he said on “60 Minutes” on Sunday. “There are a lot of people who acknowledge things internally,” he said. “But no one is willing to say it publicly. And my view was the only way you force people to change the system is by saying something publicly.” He also responded to insinuations that personal setbacks at work were a factor in his decision to criticize the firm, telling New York magazine: “Would I have liked to have been promoted? Absolutely. But was I in line to get promoted at age 33? Probably not.” (His media tour even included a Ping-Pong match arranged by Fortune.)

Still, there are “potential problems with Mr. Smith's approach,” writes James B. Stewart in his column in The New York Time s. The book is short on details to back up the sweeping accusations and “might even bolster Goldman's reputation.” Mr. Stewart spoke to some of the people who apparently were represented in the book - including Teddy Schwarzman, son of Stephen A. Schwarzman of the Blackstone Group - and found inconsistencies with Mr. Smith's version of events. Another former Goldman Sachs employee, Matt Levine, who is now a blogger for Dealbreaker, writes in The Wall Street Journal that much of Mr. Smith's argument “involves rehearsing scandals already litigated in court and the public square - without the benefit of new insights or inside knowledge.”

 

ON THE AGENDA  |  Marissa Mayer holds her first earnings call as Yahoo‘s chief executive on Monday, when the company announces quarterly results after the market closes. Analysts are expecting net income of 24 cents a share, up from th e quarter a year earlier. Caterpillar reports earnings before the opening bell, and Texas Instruments reports Monday evening. Facebook reports its earnings on Tuesday, and The Wall Street Journal's Heard on the Street column writes that there may be cause for optimism. Marc Bodnick, a founder of Silver Lake Partners, is on CNBC at 11 a.m. Robert S. Kapito, president of BlackRock, is on CNBC at 1 p.m. Robert Wolf, a former UBS executive who left the firm to start 32 Advisors, is on CNBC at 7 p.m.

 

ANCESTRY.COM IN $1.6 BILLION BUYOUT  |  A group led by the private equity firm Permira has agreed to buy Ancestry.com, the genealogy Web site, for $32 a share, a 40 percent premium to the company's share price in June when the potential deal was first reported. One of Permira's partners in the deal is Spectrum Equity, a venture capital firm that was one of Ancestry.com's early backers , DealBook says.

 

ARCHER DANIELS OFFERS $2.8 BILLION FOR RIVAL  |  The American agricultural giant Archer Daniels Midland is looking to buy GrainCorp of Australia for $2.76 billion as A.D.M. tries to expand overseas, DealBook reports. The offer is 33 percent above GrainCorp's closing price on Friday.

 

A.I.G.'S BENMOSCHE ON THE BAILOUT  |  Robert H. Benmosche, chief executive of the American International group, sat down with New York magazine for an interview in his villa in Croatia. Talk turned to the Treasury and the Federal Reserve, which bailed out the insurer during the financial crisis. “And do you know,” Mr. Benmosche told the magazine, “neither of them have ever said ‘Thank you'? We have done all the right things. Somebody should say, ‘By golly, those A.I.G. pe ople made a promise and they are living up to a promise!'”

 

 

Mergers & Acquisitions '

Canadian Official Says Energy Deal Still Possible  |  Over the weekend, Canada blocked a $5.2 billion takeover of Progress Energy Resources by Petronas of Malaysia. But the government still might approve the deal, according to the country's finance minister, who said negotiations were continuing, Reuters reports. REUTERS

 

Credit Suisse Said to Put European E.T.F. Unit on the Block  |  Credit Suisse's $17.2 billion exchange-traded fund business in Europe has attracted bids from BlackRock and State Street Global Advisors, Reuters reports, citing unidentified people familiar with the matter. REUTERS

 

Philippine Firm San Miguel Hopes for $5 Billion Deal  |  The San Miguel Corporation of the Philippines, a brewer-turned-conglomerate, is in the running for an unspecified transaction that could be worth $5 billion, the company's president told reporters on Saturday, according to Bloomberg News. DealBook '

 

Xstrata's Chief Sticks Up for Board  |  Mick Davis, the chief executive of Xstrata, told The Financial Times that the mining company's board had “been unfairly disparaged because they have done a good job in difficult circumstances.” FINANCIAL TIMES

 

Deal Gives Lonestar a Listing in Australia  | 
WALL STREET JOURNAL

 

INVESTMENT BANKING '

Citigroup Distances Itself From Hedge Funds  |  In a plan made before Michael L. Corbat replaced Vikram S. Pandit as chief executive, Citigroup is moving a group of internal hedge funds to an entity controlled by bank executives, Bloomberg News reports. The deal could help the bank comply with the Volcker Rule. BLOOMBERG NEWS

 

Will Citigroup Shrink Under Its New C.E.O.?  |  Gretchen Morgenson writes in her column in The New York Times that Michael L. Corbat, Citigroup's new chief executive, “must put this institution on a stronger financial footing, but it would be even better if he downsized it so it is no lo nger too big to succeed.” NEW YORK TIMES

 

Lloyds Bank Said to Weigh Overhaul of Bonuses  |  The British bank is “examining whether to ditch the concept of annual bonuses for senior staff and extend the time frame of longer-term incentives to up to 10 years, according to people briefed on a project to overhaul remuneration,” The Financial Times reports. FINANCIAL TIMES

 

Goldman Sachs's Commercial Bank to Open London Branch  | 
FINANCIAL TIMES

 

Disappointing Earnings Weigh on Stocks  |  Friday's sell-off was the worst in nearly four months, The New York Times reports. NEW YORK TIMES

 

PRIVATE EQUITY '

What's Behind the Rise in Dividends for Private Equity  |  With the I.P.O. market weak, and with bond investors willing to buy risky debt, buyout firms are turning to so-called dividend recapitalizations, The Wall Street Journal writes. WALL STREET JOURNAL

 

British Law Firms Shun Private Equity  |  Reuters reports: “British law firms are unlikely to sell to private equity investors, a survey said on Monday, dealing a blow to the buyout firms that are searching for deals in the sector.” REUTERS

 

HEDGE FUNDS '

Ackman Sticks to a Bet on Hong Kong Dollar  |  Bloomberg News writes: “Hong Kong's determination to maintain its exchange-rate peg to the U.S. dollar has the confidence of currency-forward traders even as it fails to sway hedge fund investor William Ackman.” BLOOMBERG NEWS

 

Busy Market for MF Global Bankruptcy Claims  |  According to SecondMarket, there was a higher trading volume in MF Global bankruptcy claims than in Lehman Brothers claims in September, The Financial Times reports. FINANCIAL TIMES

 

Twilight of the Star Traders  |  The departure of Greg Coffey from Moore Capital may signal a broader trend, The Guardian writes. GUARDIAN < /span>

 

I.P.O./OFFERINGS '

MegaFon Delays Marketing of Proposed I.P.O.  |  One of Russia's largest cellphone companies, MegaFon, has postponed the marketing campaign for an initial public offering that it hopes to complete by the end of the year. DealBook '

 

Facebook Investigation Finds No Wrongdoing  |  Bloomberg News reports that the Securities and Exchange Commission's investigation into Facebook “hasn't found evidence that the company withheld material information from investors, a person familiar with the matter said.” BLOOMBERG NEWS

 

VENTURE CAPITAL '

A $2.5 Billion Valuation for Airbnb?  |  Peter Thiel, the entrepreneur and venture capitalist, is negotiating a roughly $150 million investment in Airbnb, a start-up that enables people to rent out their homes through its online service, The Wall Street Journal reports. WALL STREET JOURNAL

 

A Bank for Tech Entrepreneurs  |  Silicon Valley Bank caters to young technology companies and winemakers, and sometimes uses its venture capital division to invest in its clients, Fortunes writes. FORTUNE

 

LEGAL/REGULATORY '

A Secretary to a Salomon Is Accused of Embezzling  |  The secretary for William R. Salomon, former head of Salomon Brothers, has been accused of stealing nearly $2 million from her 98-year-old boss. DealBook '

 

Germany Dampens Hopes of Direct Aid for Banks  |  If Chancellor Angela Merkel of Germany gets her way, European rescue loans for banks in Ireland and Spain would be carried on those countries' books, The New York Times reports. NEW YORK TIMES

 

Goldman Loses Bid to Dismiss Investor Lawsuit  |  The firm had sought to dismiss a $1.07 billion lawsuit by an Australian hedge fund accusing Goldman Sachs of misrepresenting a risky investment. REUTERS

 

Romer on the Stimulus  |  Christina D. Romer, former chairwoman of President Obama's Council of Economic Advisers, writes in a column in The New York Times: “Though the Recovery Act appears to have had many benefits, it could have been more effective.” NEW YORK TIMES

 

Former Federal Prosecutor to Join Skadden  |  Patrick Fitzgerald, a former United States attorney in Chicago, is joining Skadden, Arps, Slate, Meagher & Flom as a partner, The Wall Street Journal reports. WALL STREET JOURNAL

 

Law Firms Face Increased Resistance on Fees  | 
WALL STREET JOURNAL

 

Former U.S. Attorney Joins Skadden

Patrick J. Fitzgerald, who as the United States attorney in Chicago oversaw the prosecutions of two Illinois governors and a former Bush administration White House aide, I. Lewis Libby Jr., is joining Skadden, Arps, Slate, Meagher & Flom.

Mr. Fitzgerald, 51, will work in the firm's Chicago office. Before stepping down at the end of June, he had served as the United States attorney for the Northern District of Illinois since 2001, making him the longest tenured United States attorney for Chicago. He was a career prosecutor, having worked for the Justice Department for 24 years.

Two successive Illinois governors were prosecuted on corruption charges by Mr. Fitzgerald â€" George Ryan and Rod Blagojevich. He was the lead prosecutor in the trial of Mr. Libby, a former chief of staff to Vice President Dick Cheney. A jury convicted Mr. Libby on perjury and obstruction of justice charges.

Skadden, with about 1,800 lawyers, has its headquarters in New York. Mr. F itzgerald is a New York native, having graduated from Regis High School on the Upper East Side before attending Amherst College and Harvard Law School. He worked in the United States attorney's office in Manhattan before moving to the Chicago office in 2001.

The news of Mr. Fitzgerald's move was earlier reported by The Chicago Tribune and The Wall Street Journal.

This post has been revised to reflect the following correction:

Correction: October 22, 2012

An earlier headline of this article referred imprecisely to Patrick J. Fitzgerald. He is a former United States attorney for the Northern District of Illinois, not a current United States attorney or district attorney.

Toyota Industries to Buy Cascade for $759 Million

The Japanese auto parts maker Toyota Industries said on Monday that it planned to buy the Cascade Corporation for $759 million in cash as part of an effort to expand globally.

Under the terms of the deal, Toyota Industries will pay $65 a share through a tender offer - 23 percent higher than Cascade's 60-day volume-weighted average share price.

Shares of Cascade rose nearly 18 percent, to $64.93, in morning trading on Monday.

Toyota Industries - not to be confused with Toyota Motor, the carmaker that was spun off nearly 80 years ago - is the latest Japanese company to pursue growth by looking beyond its home shores. Last week, the Internet services company SoftBank announced that it planned to buy a 70 percent stake in Sprint Nextel for $20 billion.

In Cascade, Toyota Industries will gain a prominent maker of parts for lift trucks and construction vehicles. The American company, based in Fairview, Ore., earned $63 million in the year ended Jan. 31, on revenue of $535.8 million.

“We've long known Cascade as a reliable and world-class supplier to our materials handling business,” Tetsuro Toyoda, the president of Toyota Industries, said in a statement, “and we look forward to better meeting our customers' logistical needs by broadening our lift truck business.”

Cascade will become a subsidiary of Toyota Industries and will continue to be run by its chief executive, Robert C. Warren Jr. Mr. Warren and his family's investment vehicle have pledged to tender their 14 percent stake in the company as part of the deal, which is expected to close by the end of the year.

Toyota Industries was advised by Nomura and the law firm White & Case, while Cascade was advised by Bank of America Merrill Lynch and the law firm Miller Nash.

Business Day Live: Economics of the Foreign Policy Debate

A foreign policy debate through an economic lens. | Microsoft hopes Windows 8 will bolster the PC market. | The Weather Channel seeks reinvention as a multimedia enterprise.

MegaFon Delays Marketing of Proposed I.P.O.

LONDON â€" MegaFon, one of Russia's largest cellphone companies, on Monday postponed the marketing campaign for its initial public offering that it hopes to complete by the end of the year.

In a brief statement, MegaFon, whose majority owner is Russia's richest man, Alisher Usmanov, said it expected to meet with investors to discuss the potential I.P.O. at a “later date,” adding that it would wait until after reporting the company's third quarter results in early November.

The announcement follows a statement earlier this month from the company announcing plans to list in London by the end of the year. The listing could lead to MegaFon selling up to a 20 percent stake in the company.

So far this year, the fragile European economy has made it difficult for companies to tap the public markets as investors remain cautious about the prospect of Continent's economy.

Only a handful of companies, including the Dutch cable operator Ziggo, have been able to raise large sums from investors this year, while a number of other potential new listings, such as the German chemicals company Evonik, have been postponed.

For MegaFon, which is the second-largest operator in Russia based on the number of subscribers, an attempt to raise new capital could prove to be difficult.

Unlike its competitors, which have expanded overseas into former Soviet countries and emerging markets, MegaFon remains narrowly focused on Russia just as the country's economy is beginning to slow.

To forestall a drop in its growth targets, MegaFon is looking to extract more income from each customer, particularly from wireless data services.

“This is the right time for our I.P.O.,” the company's chief executive, Ivan Tavrin, said earlier this month when announcing the company's plans.

Morgan Stanley, Sberbank, Citigroup, Credit Suisse and VTB Capital are advising on the MegaFon's proposed I.P.O.

Is Greg Smith Believable?

Should Goldman Sachs care about Greg Smith's book?

While “Why I Left Goldman Sachs: A Wall Street Story” does not contain any explosive accusations of wrongdoing, it does lay bare at least one man's view of how the firm's culture went haywire over the last decade. The believability of his story could have a long-term effect on the firm and its ability to recruit and retain new talent.

Mr. Smith's book is being released on Monday and was the subject of a segment on “60 Minutes” on Sunday night. On that program, Mr. Smith said Goldman, like other firms, started several years ago to use client information to bet with its own money, sometimes against its own clients. Getting an unsophisticated client, he said, became the “golden prize” because the “quickest way to make money on Wall Street is to take the most sophisticated product and try to sell it to the least sophisticated client.”

Goldman rejects Mr. Smith's claims, saying, “We have take n a look at those claims as they relate to his business and found no evidence whatsoever to support them.”

Mr. Smith had a seat in the trenches as Goldman evolved from an old line investment bank into a trading power house. He was influenced, as most employees everywhere are, by both things he saw during his time there and by events he read about in the news.

“I knew in my heart there was simply something deeply wrong with the way people were behaving, in the way they didn't care about the repercussions, in the way they saw their clients as adversaries,” Mr. Smith wrote in his book. “My human reaction was that it was bad for the future of the firm, a place that I had put lot of heart and soul into.”

On the one hand, Mr. Smith comes across as naïve. Yes, there is gambling going on at the casino. But Goldman has long stood out on Wall Street for its ability to hang onto the partnership culture it had before it went public in 1999. That culture, whi ch Goldman says promotes teamwork, integrity and putting the client first, is at Goldman's core. It helps the bank maintain and attract talent, and Goldman hopes it instills in its employees a type of focus that will allow it to thrive for decades to come.

Corporate culture can make or break a firm. Mr. Smith's book is interesting because while the tone for corporate culture is set at the top, managers like the Goldman Sachs chief executive, Lloyd C. Blankfein, rely on people like Mr. Smith to believe it and live by it.

While the book is at its heart a story about how the firm's culture broke down, it is oddly also a testament to some of the ways in which Goldman's culture still works.

For instance, Goldman is legendary for instilling the idea in traders that it is better to fess up to your mistakes, and the penalty for covering something up will be worse than if you had not spoken up.

This lesson was drilled into Mr. Smith on his few months on the jo b, in the summer of 2000, when he was an intern and witnessed it in action throughout his career. The mantra of one of his first bosses, he says, was “no ambiguity, no error.” One morning he made a mistake on a trade, and came clean as the firm would hope he would.

“We covered the error, traded out of it, and the correct trade was put on. In all that time â€" it seemed like 10 minutes but was probably 1 â€" the market had moved only one tick.” Mr. Smith noted that the error cost Goldman just $80, but the larger point he was making was reporting his error was the right thing, and encouraged by his managers.

Another positive revelation: “Drugs were severely frowned upon at Goldman, even regarded with a certain horror.”

And while Mr. Smith's depiction of a bachelor party for a Goldman trader, replete with a topless woman in a hot tub, will not go down as Goldman's finest moment, there was no obvious abuse of corporate funds at that party, or at an ytime during his time there, at least that he cared to mention.

He even goes out of his way to note that he once saw a partner who ordered a $400 bottle of wine and then paid for it himself because it exceeded the firm's corporate spending guidelines.

At the heart of Mr. Smith's book, though, is what went wrong with Goldman's culture.

The firm's overriding business principle is its clients' interests always come first. He says traders in London frequently refer to clients as “moppets” and that their goal is to land elephant trades, transactions that will net the firm more than $1 million in revenue.

Goldman, he said, “really had become more like a hedge fund, concerned more with helping itself than helping its clients with doing only the business we thought could make us a lot of money and ensure our survival,” he wrote. “Company culture and morale seemed to be bygone values.”

Goldman could not disagree more. “Nothing that Greg s uggested rang true to me,” said the head of human capital management, Edith W. Cooper, last week in an interview with Bloomberg TV.

For years, the essential read for any new Goldman recruit has been a 1999 book, “The Culture of Success” by Lisa Endlich, a positive look at what sets Goldman apart from its rivals. Mr. Smith's book will no doubt be added to the reading list of at least some students thinking about applying to Goldman.

In the last few weeks, Goldman has adopted an uncharacteristically public attack plan, which has included media briefings and on the record interviews. Its effectiveness is critical because it will color the view of future recruits who pick up the book, and whether they believe (or even care) about his concerns.

“I don't see what he suggests are challenges at the firm,” Ms. Cooper said, “and I believe our culture is stronger than it's ever been.”

Permira Said to Buy Ancestry.com for $1.6 Billion

LONDON â€" A consortium led by the European private equity firm Permira has agreed to buy Ancestry.com for around $1.6 billion, according to a person with direct knowledge of the matter.

Under the terms of the deal, Permira and its partners will pay $32 a share for the genealogy Web Site, almost a 10 percent premium to the company's closing share price on Friday, the person added, who spoke on the condition of anonymity because he was not authorized to speak publicly.

The deal for Ancestry.com, which is based in Provo, Utah, is expected to be announced before the markets open in the United States on Monday.

Permira, which will retain majority control, is partnering with Spectrum Equity, a venture capitalist firm that is an early backer of Ancestry.com, and several of the European private equity firm's direct investors. The website's management also will invest in the deal.

The agreement comes three years after Ancestry.com raised $100 million throug h an initial public offering. The Web site, which allows individuals to trace their heritage, has customers in 15 countries worldwide, though the majority of its users are based in the U.S., Canada, Britain and Australia.

The deal would be a welcome reprieve for the genealogy website that has struggled since becoming a publicly-listed company.

After hitting a $45 high in 2011, its stock price has tumbled to around $29 on concerns that consumers are reducing their spending because of the economic crisis.

The company was started in the mid 1990's, and has remained profitable despite concerns about the revenue growth of other internet-related businesses. Last year, Ancestry.com's net profits roughly doubled, to $62.9 million, on revenues of $400 million. It has more than two million subscribers, who pay up to $34.95 a month to use the service.

Discussions about a potential sale have been ongoing since the summer, and other potential suitors have included TPG Capital and Providence Equity Partners.

A spokeswoman for Permira declined to comment. A representative for Ancestry.com was not immediately available for comment.

The news was earlier reported by the Wall Street Journal.

BP Near Deal to Sell Assets to Rosneft

LONDON - BP said on Monday that it was in advanced talks with the Russian state oil company Rosneft about the sale of its 50 percent stake in TNK-BP, the British energy giant's Russian affiliate.

The BP statement, which said no agreement had yet been reached, is the first official announcement from the London-based oil company after several days of speculation that it was close to selling its stake in TNK-BP to Rosneft.

Although the BP board is said to have approved the deal, a person with direct knowledge of the matter said that there were “a few local issues” to iron out in Russia before an announcement could be made. The person spoke on condition of anonymity because the deal is still being negotiated.

The same person said that BP's board, which met in London on Friday, has given Robert W. Dudley, BP's chief executive, authorization to negotiate the final terms for BP's sale of its Russian holdings.

Under an offer proposed on Thursday, Rosnef t would pay up to $28 billion in cash and shares for the TNK-BP holding. The person said that it was likely that BP would gain at least one seat on Rosneft's board.

Although the TNK-BP investment has been marred by fighting between BP and its Russian partners, the operations have been enormously profitable, earning $19 billion in dividends for BP since 2003 as the company helped improve operations at the Russian affiliate through sharing technology and management skills.

Under the terms of the deal, BP would remain in Russia but - initially at least - only as a minority investor in an oil company controlled by the government of Russian President Vladimir V. Putin. Later, BP is hoping to use this new strategic tie with the Kremlin to secure other business in the country.

Mr. Dudley, a Mississippian, took over in the midst of the Gulf of Mexico oil disaster and decided that BP should put its global business on a new footing by selling older, less profitable f ields and concentrating on exploration.

BP has sold assets in countries from Venezuela to Vietnam. It recently agreed to sell its Texas City, Texas refinery for $2.5 billion to Marathon Petroleum. That sale brought the value of divestments agreed to by BP since the beginning of 2010 to more than $35 billion.

The Russian holdings are the largest of the mature businesses that remain a potential candidate for Mr. Dudley's sales.

They are comprised mostly of aging oil fields in Siberia with little potential for new output, according to BP executives. Some analysts, including Thane Gustafson of the consulting firm I.H.S. Cera, however, believe that TNK-BP has the potential for participating in a coming oil production boom in Western Siberia.

Currently, TNK-BP's output counts for about 25 percent of BP's global production, or roughly as much oil as BP pumps in the United States, including Alaska.

For the Russian industry, the buyout of BP's share in T NK-BP takes a large portion of the industry full circle back to state ownership. Rosneft's chief executive, Igor I. Sechin, a former military intelligence officer and close aide to the Russian president is a proponent of greater state ownership in the oil industry.

TNK-BP is the third-largest Russian oil company, after Rosneft and Lukoil. If Rosneft buys out both BP and the handful of Russian billionaires who control the other half of TNK-BP, Rosneft will become the world's largest publicly traded oil company, with production of about 4.5 million barrels a day.

‘‘We have seen this remarkable strengthening of the influence of Rosneft and Sechin personally,'' said John Lough, a former TNK-BP executive who is a Russia specialist at Chatham House, a British research organization.

‘‘At the moment, the way the Russian system works is by achieving a distribution of influence and access to rents'' - or windfall profits - ‘‘to achieve overall equilibrium on which the state is based,'' he said. ‘‘Sechin's apparent strengthening of influence could come at the cost of maintaining that balance. It could upset the apple cart.''

Ex-Trader Explains Why He Quit Goldman

 

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Greg Smith, who publicly resigned in scathing op-ed, says investment bank's unethical culture threatens firm's future. Anderson Cooper reports.

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