The List That Big Banks Don\'t Wish to Be On

The world's too-big-to-fail list is out, and nearly a third of the banks on it are from the United States.

After the 2008 financial crisis, the Financial Stability Board, a body that coordinates international bank regulations, decided it would be a good idea to subject the world's largest banks to tougher rules. The thinking was that, since large-size banks posed a risk to the financial system, they needed to operate with higher loss buffers, or capital, than other lenders. It was also hoped that the tougher regulations would act as an incentive to stop them growing further.

On Thursday, the Financial Stability Board released this year's list of “systemically important” banks. Of the 28 firms on the list, eight are from the United States: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo.

The list has its own hierarchy, with the banks split into four buckets. In the top buc ket are Citigroup and JPMorgan, along with Deutsche Bank and HSBC. The capital surcharge for being this group is bigger than for others on the list. For some, the question is whether the amount is big enough.

Once new international bank regulations are fully in place by 2019, nearly all banks will have to hold capital that is at least 7 percent of their assets. But the systemically important banks will have to have even more capital. Citigroup and JPMorgan will have to hold additional capital that is equivalent to 2.5 percent of their risk-adjusted assets, taking them to an overall requirement of 9.5 percent.

Even though JPMorgan and Citigroup have several years to get to 9.5 percent, they say they are already reasonably close. In the third quarter, Citigroup estimated that it was already at 8.6 percent and JPMorgan said its estimate was 8.4 percent.

But these are just estimates. The banks have yet to fully comply with rules that change outcomes in unexpect ed ways. For instance, in 2013, these banks' Wall Street operations have to adopt substantially stricter regulations that could weigh on capital estimates.

One problem with the stability board's capital requirements is that they use something called risk weighted assets. That means that assets are measured in a way that tries to take into account their differing risk levels. This has the effect of reducing the asset total for the purposes of calculating the capital ratio. In other words, if no risk-weighting were used, the capital ratios would look a lot lower for several banks.

In addition, the stability board's list may do little to answer the concerns of some analysts who feel the capital surcharges are too small. For instance, on Thursday, the Federal Reserve Bank of Cleveland issued a paper on bank capital that is based on a conference earlier this year.

One participant at the conference, Martin Hellwig, from the University of Bonn, called for capital equivalent to 20 percent of assets. Mr. Hellwig argued that much higher capital has “large social benefits” and “low social costs.”

Restoration Hardware Prices I.P.O. at $24

In a storm-disrupted week that caused a two-day shutdown of the stock market, Restoration Hardware Holdings has managed to pull off a long-awaited initial public offering.

Shares of the specialty home furnishings retailer were priced at $24 - the high end of the range that was set last week - raising $124 million in the offering.

Shares of Restoration Hardware are set to start trading on the New York Stock Exchange on Friday under the ticker symbol RH.

Restoration Hardware. which is based in Corte Madera, Calif., was taken private in a 2008 buyout by the private equity firms Catterton Partners and Tower Three Partners and its top executive at the time, Gary Friedman, for about $175 million.

Bank of America-Merrill Lynch and Goldman Sachs are leading the underwriting of the offering. Comanaging the offering are Baird, William Blair, Piper Jaffray and Stifel Nicolaus Weisel.

How Barclays Allegedly Took Losses to Make Bigger Gains

Just a few months after the Libor scandal, Barclays is fending off another set of trading abuse allegations. This time the regulator pointing the finger is the Federal Energy Regulatory Commission, which oversees the electricity, natural gas and oil markets.

In an order filed on Wednesday against Barclays, the commission says some of the bank's energy traders manipulated electricity prices from the end of 2006 to the end of 2008. In a regulatory order, the commission is demanding Barclays pay a $435 million penalty and disgorge an additional $35 million.

Barclays said in a statement that it strongly disagrees with the commission's allegations, saying its “trading was legitimate and aboveboard.” The bank added that it intends to “vigorously defend this matter.”

What's intriguing about the commission's order is its construction of the alleged manipulation. The order suggests that the fragmented markets for electricity are vulnerable to wily trading schemes.

The commission lays out how it thinks the alleged manipulation worked. It says Barclays put on trades that were designed to skew the prices for electricity in what the industry calls the “physical” market. Those allegedly skewed prices then affected the value of other bets on electricity prices, in the so-called “financial” market.

The Barclays traders, the commission says, were prepared to take losses in the physical market to move the prices of electricity there.

The physical bets were, “not intended to get the best price on those transactions and was not in response to supply and demand fundamentals in the market,” the commission wrote in its order.

Those allegedly manipulated prices lifted the value of the financial bets Barclays had placed, according to the commission. It also argues that the gains in the financial bets were greater than the losses on the physical trades, effectively leaving Barclays with an overall profit du ring the period when the manipulation is alleged to have occurred. The commission calculates that the physical trades resulted in a loss of $4 million over the period, against gains of $35 million on the financial contracts.

To support its case, the commission cited excerpts from several messages between trades. One was from a trader called Daniel Brin. Though written in truncated, mistake-strewn fashion, the commission thinks one of Mr. Brin's messages outlines the alleged manipulation. The commission's order states, “For example, Brin indicated that he was ‘doing pays[ical] so i [sic] am trying to drive price in fin[ancial] direction.' ”

Mr. Brin left Barclays at the end of 2010, according to his LinkedIn page. He now works for an energy consulting firm called ZGlobal. Calls to his office were not returned.

Clearwire Investor Demands a Sale of Spectrum

While Sprint Nextel may have designs on Clearwire, a minority investor in the struggling cellphone network operator is calling on the company to remember its smaller shareholders.

Mount Kellett Capital Management, a $7 billion hedge fund that holds a 7.3 percent, sent a letter to Clearwire's board on Thursday asking the company to consider selling off what it called excess wireless spectrum. Such a sale could bring in money that would help stave off default at the network operator.

The issue at hand is that Clearwire already needs about $1 billion to continue building out its network and refitting it for the latest in wireless data technology, Long-Term Evolution. And it already carries $4.2 billion in long-term debt while losing money for at least the past five years.

What Mount Kellett is worried about is what analysts suspect is the most likely end for Clearwire: namely a takeover by Sprint, which has sold a majority stake to the deeper-pocketed SoftBa nk of Japan. Sprint's chief executive, Daniel Hesse, has said that the deal will give his company the resources to take part in the mergers activity he has long believed is necessary.

Instead, Clearwire should run an auction of what the hedge fund called its spare spectrum, which could fetch higher prices from any number of wireless companies looking to build out their own networks. Those could include AT&T, which agreed in August to buy NextWave Wireless for $600 million to gain its spectrum; a revitalized T-Mobile USA, which plans to merge with MetroPCS; or Dish Network, which has dreams of offering cellphone service.

Any of those would be a better alternative than selling out to Sprint in a distressed state and at a bargain-basement price.

“Holding on to excess spectrum and letting that value accrue to Sprint, so that Sprint can purchase the company's excess spectrum cheaply would be an egregious violation of stockholder interests,” Jonathan Fiorello , Mount Kellett's chief operating officer, wrote in the letter.

In its letter, however, Mount Kellett acknowledges that it faces a pretty big hurdle: Sprint, which is already is a business partner to Clearwire; owns more than 50 percent of the company; and has picked 7 of the 13 board seats.

So the investment firm has called on the wireless service provider's directors to remember their duties to all shareholders. Failing to do so might invite more serious action, Mr. Fiorello wrote.

Should the board fail to take the necessary steps and find itself needing to capitulate to a distressed sale, we will have no choice but to consider whether the board has the best interest of the Company and ALL of its stockholders in mind or only those of its controlling stockholder. In that event, we will consider all available options to prevent or redress the destruction of stockholder value.

A Clearwire spokeswoman wasn't immediately availa ble for comment.

The Bruce-Bharara Bromance

Preet Bharara, the United States attorney in Manhattan, had already had a pretty good week as he and his family traveled to Hartford last Thursday for a Bruce Springsteen show.

The day before, he sued Bank of America, seeking $1 billion in a mortgage-related case. And Rajat K. Gupta, the most prominent defendant in his sweeping crackdown on insider trading, received a two-year prison sentence.

But at the concert, things got even better for Mr. Bharara, who has made no secret of his fierce devotion to Bruce.

Before ripping into “Death to My Hometown,” a rollicking Celtic-inspired anthem, Mr. Springsteen shouted, “This is for Preet Bharara!” (Here is a YouTube clip; Mr. Springsteen name checks Mr. Bharara at about 22 seconds in.)

The song's lyrics, which are about the effect of the economic crisis, apply to Mr. Bharara's line of work. As much as anyone else, the prosecutor, who was featured on the cover of Time magazine earlier this year with the headline ”This Man Is Busting Wall Street,” has become the public face of the government's efforts to prosecute white-collar crime.

Sounding angry, Mr. Springsteen sings:

Send the robber barons straight to hell.
The greedy thieves who came around
And ate the flesh of everything they found.

The rest of the stanza, though, hits on a criticism of Mr. Bharara and his Justice Department colleagues:

Whose crimes have gone unpunished now,
Who walk the streets as free men now.

Critics have faulted the Obama administration for not prosecuting the banking and mortgage-industry executives. Mr. Bharara and others have countered that much of the behavior was unethical and irresponsible, but not necessarily criminal. And they also point out that they have brought thousands of mortgage-fraud cases, including civil actions against some of the country's biggest banks.

So was M r. Springsteen's dedication meant as praise or criticism? It is unclear, but presuming that Mr. Springsteen knew that Mr. Bharara was at the show, it is unlikely he would have criticized him. (Mr. Springsteen's has a famously fraught relationship with Chris Christie, the Republican governor of New Jersey and a well-known Springsteen fanatic. At concerts, Mr. Springsteen has refused to acknowledge the governor, according to this article in The Atlantic.)

A spokeswoman for Mr. Springsteen declined to comment on whether the singer knew that Mr. Bharara was at the show.

The prosecutor did give a brief interview to a reporter at The Daily News who attended the Hartford concert. He said that when Bruce gave him a shout-out, “All I could think was, my son for the first time thought his dad was really cool.”

Mr. Bharara, 44, grew up in Springsteen country. Born in India, Mr. Bharara came to the United States with his parents as an infant. He was raised in Eato ntown, N.J., in Monmouth County, just a short drive from Mr. Springsteen's hometown of Freehold, N.J. Earlier this year in an appearance on “The Charlie Rose Show,” Mr. Bharara was asked about his passion for Mr. Springsteen.

“If I could cite to Jon Stewart who I think expressed it best what is great about Bruce Springsteen - I`ll never forget what he said somewhere after coming back from the Springsteen concert he said to his studio audience. He said, ‘Do you like joy? If you like joy, you should go see a Springsteen concert,'” Mr. Bharara said. “And I think separate and apart from all those other things you are talking about and the way he talks about America and the way he talks about people and the way he talks about justice, there is a lot of joy.”

There has been little joy this week in Monmouth County, much of which runs along the coast and was among the hardest hit by Hurricane Sandy. At a concert in Rochester on Wednesday, Mr. Springsteen ex pressed deep sadness over the damage wrought by the storm. “We're a band that you can't separate from the Jersey Shore,” he said. “A glorified bar band at your service.”

On Friday, Mr. Springsteen will headline a telethon to aid victims of the hurricane. As for Mr. Bharara, he has been without power at his home in Westchester County and at the United States attorney's office in Lower Manhattan, which has been closed all week.

In an e-mailed statement, Mr. Bharara expressed sympathy for the storm's victims.

“In the wake of such devastation, it's heartening to see people come together to, as Bruce would say, take care of our own,” Mr. Bharara said. “That's what good people always do.”

How to Keep Electronics Going With No Power

November 1, 2012, 2:42 pm

@pogue What creative solutions &/or gadgets are you using to get through the new issues #Sandy has left for you?

- Tucker Carlson (@Tucker_Carlson) October 31, 2012

The Hurricane Sandy storm damage here in my Connecticut town was fairly extensive - beautiful old trees are down everywhere, 85 percent of our homes are without power, and officials are saying it will take at least 10 days to restore electricity - but at least our homes are standing. I've seen the photos of New York and New Jersey; in our way, we were lucky.

Still, on Twitter, a number of people have sugge sted that it might be interesting to hear how a tech columnist muddles through a 10-day stretch without electricity and Internet (not to mention heat or hot water).

The short answer is: Pretty much like the other seven million people whose electricity blew out with the storm. You manage.

Internet. Our town has made the public library and town hall available for charging gadgets. The library also offers free Wi-Fi, although I have yet to be able to get online there; the place is mobbed and the network is hopelessly overloaded.

For Internet, therefore, I've been using my phone's tethering feature. My laptop can get online using my phone as a glorified Internet antenna, a service for which I pay Verizon $20 extra a month. And for which I'm very, very grateful right about now.

It's a little flaky, I'll admit. It often starts out with superspeed (says “LTE” on the menu bar); then, after five minutes, it drops down to “3G”; and after 10 minutes, it drops down to the little “o,” meaning an excruciating 1984-era, dial-up speed. If I shut down the phone and restart it, the speed comes back.

Power. The problem with using the phone as Internet, of course, is keeping it charged.

Longtime readers may recall that, two years ago, vicious windstorms knocked out our power for six days during a frigid March. When I blogged about it, many commenters expressed shock that I, Mr. Tech, did not own a generator.

Well, trust me, after that experience, I went and bought one - the Homelite HG5000 (it was about $600 at Home Depot). It's a big, heavy, deafening, stinky, apparently dangerous contraption. (“Using a generator indoors or in your garage WILL KILL YOU IN MINUTES,” says a metal plaque on the top.)

You pour in gasoline, start it up like a lawnmower, and plug in up to six gadgets. It's horribly designed. Just to turn it on, you have to unplug everything, turn on the fuel valve, pull out the choke loo p, turn on the master switch, yank the starter, wait a few seconds, push the choke loop back in, and re-plug your appliances. And all of this seems to be explained in 4-point type on page 41,922 of the Owner's Warnings Book; electron microscope sold separately.

But I run it for a few hours a day, in hopes of saving the food in the fridge and keeping laptops and phones charged.

As it happens, though, I have two charging devices on hand that are a good deal less stinky. One is the nPower PEG, “the world's first kinetic energy charger for hand-held devices.” It looks like a plastic piston, about a foot long. Inside is a weight, an inductive coil and a battery. As you walk, your movements charge up the battery; from there, you can charge a USB gadget like a phone or iPad.

The company cautions that you need a lot of motion to do any real charging. You'd have to walk for 26 minutes to make a 1-minute call on the 3G cellular network. Think three-week wildernes s treks, not your daily walk to work.

Still, I had a brilliant idea: I'd hang this thing from a tree during the overnight violence of the hurricane. Surely 12 hours of crazy swinging and bouncing would generate a little juice.

Unfortunately, the first step when you open the box is to charge the battery fully from a USB jack - and my power had already gone out at that point. I still did the tree-hanging thing, but it didn't charge at all. I'll give it a fairer test once the power comes back on.

I had better luck with the Revolve XeMini solar charger for USB gadgets ($65). It's about the size of two decks of cards, and it's exactly what it sounds like: a solar-chargeable backup battery with two USB jacks for recharging your gadgets. (You can also plug it straight into a power outlet or car dashboard to charge its battery.) The company says that one charge will give a smartphone about 6.5 hours of talk time.

All I know is that when our power went out, we were able to charge two phones simultaneously. The phones' batteries were about 20 percent full and the XeMini powered them both back up to half in a couple of hours. The company points out that the XeMini is billed as a “light-assisted power,” not “solar charger,” because something this small can't manage more than a topping off, a trickle charge. But I was glad to have it.

Showers. Our local Y usually opens its doors to the public during natural disasters like this one, but this time, it's in 20 feet of water and is closed indefinitely. I learned that my son's best friend's house still has hot water, so yes, I've had a shower.

Heat. This is becoming the biggest inconvenience. Last night it was in the low 40s, and it's supposed to get colder. We walk around in parkas and sleep under a mound of blankets. The schools have been closed all week, of course, so I'm trying to keep my kids occupied with games, DVDs on the laptop and day trips.

Tonight, I' m taking them for a weekend trip to Boston, where a dear friend has offered to supply a guest room and electricity, heat and hot water. We're thrilled. Sometimes, the technologies a columnist and his family crave most are 100 years old.

I'm curious, what worked for you?

At American Express, Warnings About the \'Fiscal Cliff\'

2:14 p.m. | Updated

After the widespread (and highly visible) damage caused by Hurricane Sandy this week, worries about the fiscal cliff may not be at the forefront of most people's minds.

The economic calamity is a lot less visual (though The Wall Street Journal did come up with this this clever video), and the destructive force seems somehow in the faraway future.

But companies are already warning investors about the harsh effects of the fiscal cliff. American Express's 10-Q, which was filed Wednesday, included a new dire warning about the rapidly approaching year-end deadline.

“The company expects that it will take some time for the U.S. economy to get back onto a steady, upward growth track,” the filing said. “Moreover, in the absence of legislative action, there continues to be growing concerns about the potential impact of the ‘fiscal cliff' arising from scheduled federal spending cuts and tax increases set for the end of 2012.”

The statement goes into more detail than what the firm's chief financial officer, Daniel T. Henry, said during the quarterly earnings call two weeks ago. Then, an analyst for Telsey Advisory Group asked if there might be a larger impact, specifically in terms of the company's spending on marketing.

“If things were to be better, we know exactly what we'd do. And if things were to be worse, we know exactly what we're going to do. So we will monitor this closely,” Mr. Henry said, according to a transcript of the call. Marina Hoffmann Norville, a spokeswoman for the company, declined to comment beyond what was in the S.E.C. filing.

American Express isn't the only large company to mention the fiscal cliff in filings with the Securities and Exchange Commission. But others have been more nuanced or noncommittal on the effects. In its third-quarter earnings release Thursday, the payroll processing company Automatic Data P rocessing noted that “there is concern in the U.S. surrounding the fiscal cliff.” In its third-quarter earnings release Wednesday, Visa, the giant credit card company, included the “so-called fiscal cliff” in a list of economic factors that might impact the company.

Also on Thursday, the former Minnesota Gov. Tim Pawlenty, who just took over as president and chief executive of the Financial Services Roundtable, issued its own warning in a letter sent to President Obama and Congress.

“We urge Congress and the administration to deal with the fiscal cliff in a two-pronged approach: First, bridge over the fiscal cliff as soon as possible to minimize negative economic consequences. Second, address the federal budget deficit in a comprehensive and bipartisan manner in early 2013 to put the U.S. on a path for sustained growth,” Mr. Pawlenty wrote.

But if the Dec. 31 deadline moves closer without any indication of resolution, companies are likely to ste p up their disclosures in S.E.C. filings.

Michelle Leder is the editor of footnoted.com, a Web site that takes a closer look at companies' regulatory filings.

Netflix Says It Is Open to Icahn\'s \'Perspective\'

Netflix isn't giving Carl C. Icahn the cold shoulder - at least not yet.

On Thursday, Netflix responded to Mr. Icahn's announcement that he had built up a roughly 10 percent stake in the company. It seems that Netflix is reserving judgement on the billionaire investor's interest.

“We have many shareholders, now including Mr. Icahn, and we're always open to their perspective on how to build on our success,” Jonathan Friedland, a Netflix spokesman, said in an e-mail.

Netflix's stock was essentially flat on Thursday, down about 0.3 percent in midafternoon trading, at $7. The stock price shot upward Wednesday afternoon after Mr. Icahn's stake was disclosed.

While Mr. Icahn's precise intentions for the media company aren't clear, it appears that he's pushing for a sale. That would be straight out of the investor's playbook, as Steven M. Davidoff writes in the Deal Professor column. Netflix could theoretically adopt a poison pill defense to prevent Mr . Icahn from coordinating with other shareholders, Mr. Davidoff says.

What Next for Netflix?

It was a bombshell announcement when Carl C. Icahn disclosed late on Wednesday that he had taken a 9.98 percent stake in Netflix. The question now is what happens next.

Mr. Icahn is a master of activist investing. Since 1994, he has conducted 106 campaigns at 88 companies, according to the data provider Factset SharkRepellent. His modus operandi is to make an investment, then agitate for change or a quick sale. If that does not work, he will nominate a slate of directors to the board to do the same.

And when Mr. Icahn loses, he does not go away, instead returning to run successive election campaigns as he has done with investments in Lionsgate and Oshkosh. Of late, Mr. Icahn has put a twist on this game plan by actually stepping up and buying his target companies, as in the case of CVR Resources.

The Netflix investment may follow this pattern.

As an initial matter, Netflix does have defenses against Mr. Icahn. It has a staggered board, which means t hat only three of its directors will be up for election at the next annual meeting; it would take two full years to acquire a majority of the board. Netflix has typically held its meeting in June, and nominations for opposing directors will not even be accepted until Feb. 5, 2013.

So, Netflix can fend off a complete takeover of its board. But this is probably not a big deal for Mr. Icahn, since he usually only nominates a minority of directors to avoid taking full control and the legal issues it raises. Instead, he puts a minority of directors on the board to agitate for change and to put public pressure on the majority to sell or restructure the company. It often works.

But given that Netflix is not even expecting these nominations until February and that the meeting will not occur until June or July, Mr. Icahn may be hoping he can cash out his investment before a proxy contest is necessary.

Mr. Icahn mentioned in his filing that “Netflix may hold signif icant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the Internet, mobile, and traditional industry.”

This is talk of a sale - probably Mr. Icahn's first choice and what he will push for over the next few months.

Once a shareholder exceeds the 5 percent ownership threshold, the position must be disclosed within 10 business days to the Securities and Exchange Commission. During that time period, Mr. Icahn acquired shares to just below the 10 percent threshold.

Netflix does not have a takeover defense plan, or poison pill, so he could have acquired even more shares. He probably did not because of the short swing profit rules under Section 16 of the Exchange Act. The rules, which are intended to prevent insider trading, stipulate that once a shareholder exceeds the 10 percent level the shareholder must disgorge profits made from the sale and purchase of sec urities in any six-month period. By staying under this threshold, Mr. Icahn keeps the flexibility to sell this stake quickly without penalty.

By the way, expect Netflix to quickly adopt a poison pill - but not to keep Mr. Icahn from buying more shares. Rather, any takeover defense plan adopted by Netflix would probably contain expansive provisions intended to prevent Mr. Icahn from coordinating actions with other shareholders or otherwise risk being seen as acting together and activating the poison pill.

Thus far, all of this is standard operating procedure for Mr. Icahn.

Where it may be different, though, is with the people who run Netflix and its quite volatile stock price.

Reed Hastings, the chief executive of Netflix, has previously stated he believes a C.E.O. should run the company without board interference. That is at odds with the view of those who believe companies should be run, or at least heavily supervised, by boards.

Not only does Mr. Hastings have a strong view of the chief executive's role, he is Silicon Valley royalty. Of late, however, his crown has been tarnished by the large misstep he made in trying to split Netflix's mail and Internet businesses. Mr. Hastings has also just departed the Microsoft board.

Even before Mr. Icahn arrived on the scene, Mr. Hastings was probably feeling besieged. It will be interesting to see how he reacts to Mr. Icahn's investment, but the prospect of a headstrong chief executive resisting Mr. Icahn's entreaties is nothing new.

What may be different is that Netflix really is a growth stock. Mr. Icahn often invests in biotechnology or in companies with long track records that have had operational or business problems. Netflix is a company with a lot of potential, and its stock price has reflected that in its volatility. It is not really a troubled company, though it may need better management.

Because Netflix is a growth story, its board is likely to say the company's share price is unduly low to justify a sale. The shares were trading at about $70 before Mr. Icahn's announcement, less than a quarter of the $300-a-share high in 2011.

But the company's shareholdings are about to turn over as arbitrageurs race in to acquire Netflix stock in anticipation of a sale. Hedge funds already had a big stake in Netflix; one fund, Blue Ridge Capital, held a 4.5 percent position as of June 30, according to public filings. Mr. Icahn is counting on these funds to come to his aid. And insiders, including Mr. Hastings, hold just 6.76 percent of the company, according to Factset SharkRepellent.

What we could be seeing is a replay of the Air Products bid for Airgas, where a board just says no to what it believes to be an undervalued sale, even if a bidder does emerge and even if its shareholders want a sale to happen. And, as in the Netflix situation, there is a chief executive and founder who firmly believes in the company an d probably wants anything but a sale.

Mr. Icahn realizes this and is likely hoping for a quick sale to sidestep such a battle. He may still start a proxy contest, and I would not be surprised if that happened. But he could also adopt a softer tactic like a withhold-the-vote campaign. Netflix does not have a policy requiring directors to resign if they do not receive a majority of shareholder votes, but such a campaign would still put pressure on the board. Again, this would be standard practice for Mr. Icahn.

Ultimately, the question will come down to whether a number can be assigned to Netflix's value at this moment, particularly since it has such rich opportunities and only very recent glory days.

Given the uncertainty, and the board's ability to just say no for years, Mr. Icahn may well run his usual campaign, but it may not go as quickly as he hopes.

Deutsche Bank Names New Chief of North American Unit

LONDON - Jacques Brand was appointed chief executive of Deutsche Bank's North American operations on Thursday.

Mr. Brand, 52, also will join the German bank's group executive committee, according to a statement from the firm. He previously was global head of investment banking coverage and advisory in Deutsche Bank's corporate banking and securities unit.

Mr. Brand replaces Seth Waugh, who will now join the bank's Americas advisory board.

The European firm also said on Thursday that Bill Woodley, 46, would become Deutsche Bank's deputy chief executive of North America.

RedPrairie to Buy JDA Software for $1.9 Billion

RedPrairie agreed on Thursday to buy the JDA Software Group for $1.9 billion in cash, combining two providers of software to help companies manage their supply chains.

Under the terms of the deal, RedPrairie will pay $45 a share through a tender offer. That represents a 33 percent premium to JDA's price on Oct. 26, the day before reports began circulating that the company was looking to sell itself. It's also 16 percent higher than JDA's all-time-high stock price.

RedPrairie is owned by New Mountain Capital, which purchased the enterprise software maker in 2010. The private equity firm is contributing cash to help finance the deal, and Credit Suisse is also providing debt financing.

The combined company will be led by JDA's chief executive, Hamish Brewer, who will also become a director. The rest of the board will be comprised of RedPrairie's current directors, including Tim Pawlenty, the former governor of Minnesota, and Michael Mayoras, RedPrairie's chi ef executive.

“This transaction generates tremendous value for JDA shareholders, offering them a meaningful premium for their shares,” Mr. Brewer said in a statement. “This is a strong combination of two leading companies with highly complementary product suites.”

New Mountain, which manages some $9 billion, bought RedPrairie as part of a focus on business software. And in JDA, it is acquiring a specialist in supply chain logistics.

RedPrairie was advised by Greenhill & Company, Credit Suisse and the law firm Fried, Frank, Harris, Shriver & Jacobson.

JDA was advised by JPMorgan Chase and the law firm DLA Piper, while its board was counseled by Cravath, Swaine & Moore.

The Latest Headache at Barclays

THE LATEST HEADACHE AT BARCLAYS  |  The legal battles just won't go away at the British bank Barclays. Just months after reaching a settlement in a case that involved rigging a key benchmark interest rate, the bank now faces accusations that it manipulated California energy markets. Federal regulators are seeking $469.9 million in penalties from the bank, and $18 million from four former traders.

Regulators, relying on e-mail evidence, claim that four traders at Barclays manipulated energy prices to profit on swap contracts. One trader said a particular strategy was “fun,” while another said he was “trying to drive price” in his swap bet, according to messages cited by Reuters. Barclays, which has 30 days to officially respond to the regulators, said it disagreed with the claims and that its “trading was legitimate and in compliance with applicable law .” The bank disclosed on Wednesday that it also faced an investigation into its capital-raising efforts during the financial crisis.

Another British bank, the Lloyds Banking Group, is also dealing with legal woes. Lloyds said on Thursday that it had set aside an additional $1.6 billion for clients who were sold payment protection insurance inappropriately. That provision helped push the bank to a net loss in the third quarter.

 

JPMORGAN TAKES ACTION OVER LOSS  |  JPMorgan Chase is going after the boss of the trader known as the London Whale. The bank is suing Javier Martin-Artajo, a former executive who supervised Bruno Iksil, the trader who built up the position that resulted in a $6.2 billion loss. While the details of the claims were not disclosed, an internal investigation conducted by JPMorgan found that some traders in Mr. Martin-Artajo's division might have imp roperly valued their positions. “Some phone recordings suggest that Mr. Martin-Artajo encouraged Mr. Iksil to value troubled positions favorably, according to people with knowledge of the investigation,” Jessica Silver-Greenberg writes in The New York Times.

 

HAUNTED BY MF GLOBAL  |  A year after MF Global collapsed, federal authorities “have all but cleared” executives of the brokerage firm of criminal wrongdoing, DealBook's Ben Protess reports. “The government has yet to usher in a wider overhaul of futures trading rules, save for certain piecemeal policy changes. And the profit-making exchanges that rely on brokerage firms for business still police the futures industry, presenting potential conflicts of interest.” The debacle may be fading from Wall Street's memory, but it has left customers shaken. “The general tenor is fear,” said James L. Koutoulas, chief executive of a hedge fund client of MF Global and the leader of a group of customers trying to get their money back. With customers still owed millions of dollars, Mr. Protess writes, some traders are simply sitting on the sidelines.

 

ON THE AGENDA  |  Restoration Hardware is expected to price its I.P.O. on Thursday evening and is looking to raise as much as $123.9 million. ExxonMobil reports earnings before the opening bell, while A.I.G. and Starbucks announce results after the market closes. The ADP employment report comes out at 8:30 a.m., and the ISM manufacturing survey for October and construction spending for September are both out at 10 a.m. Get ready for a politically significant unemployment report on Friday. Mary Meeker of Kleiner Perkins Caufield & Byers is on CNBC at 7:40 a.m. on Thursday. Robert H. Benmosche, the chief executive of A.I.G., is on CNBC at 4:30 p.m . The Women's Alternative Investment Summit, which features speakers from private equity, venture capital and other industries, is scheduled to start Thursday at the Pierre hotel in New York.

 

A MOSTLY SMOOTH TRADING DAY  |  Sometimes no news is good news. The major American exchanges had a largely uneventful day of trading on Wednesday after being shut down for two days because of Hurricane Sandy. “But getting to the relative calm of Wednesday's open took significant work,” DealBook's Michael J. de la Merced writes. There was one notable hitch. The Knight Capital Group, which had a disastrous trading debacle in August, “suffered a power disruption at its headquarters in Jersey City on Wednesday and told clients to route their orders elsewhere.”

 

 

 

Mergers & Acquisitions '

Netflix Shares Surge as Icahn Takes Stake  |  Carl C. Icahn announced on Wednesday that his hedge fund, Icahn Capital, had acquired a stake of about 10 percent in Netflix. DealBook '

 

Micron Moves Closer to Taking Over Elpida  |  A Tokyo court approved the agreement by Micron Technology to acquire the chip maker Elpida, Reuters reports. REUTERS

 

Glencore Said to Offer to End Zinc Deal  |  Glencore offered to end an agreement with Nyrstar as a concession to help it secure approval for its takeover of Xstrata, Reuters reports, citing an unidentified person familiar with the matter. REUTERS

 

Potash Confirms Deal Talks with Israel Chemicals  |  The Potash Corporation of Saskatchewan confirmed on Wednesday that it had approached the government of Israel about increasing its stake in Israel Chemicals, another fertilizer maker. DealBook '

 

INVESTMENT BANKING '

Wells Fargo Builds Up Investment Bank  |  The bank is expanding in a business where rivals are cutting back, Reuters writes. REUTERS

 

Will the Top Talent Abandon Banking?  |  The best and brightest students are still attracted to the banking industry, but “with every new retrenchment, pe rceptions are changing,” Gillian Tett writes in a column in The Financial Times. FINANCIAL TIMES

 

Credit Suisse Raises $420 Million for Fund Focused on Mexico  | 
BLOOMBERG NEWS

 

Morgan Stanley Hires Financial Advisers From Rivals  |  Two brokers joined Morgan Stanley Wealth Management from Wells Fargo Advisors this month, and one joined from Raymond James, The Wall Street Journal reports. WALL STREET JOURNAL

 

Morgan Stanley Adviser Joins Wedbush Securities  | 
WALL STREET JOURNAL

 

PRIVATE EQUITY '

New Mountain Capital Said to Approach Deal for JDA Software  |  JDA Software could be valued at about $1.9 billion, The Wall Street Journal reports. WALL STREET JOURNAL

 

Chinese Fund Said to Buy Stake in Heathrow Airport  |  A subsidiary of the China Investment Corporation is taking a 10 percent stake in the British airport, according to Chinese state media. REUTERS

 

3 Buyout Firms Said to Vie for Intertrust  |  The Blackstone Group, Cinven and Pamplona Capital Management are “preparing to submit second round bids” for the Intertrust Group, a Dutch company that provides trust and corporate services, Reuter s reports. REUTERS

 

German Broadcaster Said to Choose Bidders for Unit  |  Providence Equity Partners, Nordic Capital and Discovery Communications are advancing to the next round of bidding for the Scandinavian businesses of ProSieben, Bloomberg News reports. BLOOMBERG NEWS

 

HEDGE FUNDS '

Bets on Lehman Brothers Claims Are Expected to Pay Off  |  Hedge funds that have been buying Lehman Brothers bankruptcy claims are now expected to be “paid at least the full amount of their claims, and possibly more,” FINalternatives reports. FINALTERNATIVES

 

Falklands Oil Explorers Att ract Hedge Funds  |  Lansdowne Partners, Odey Asset Management and Blackfish Capital are betting that oil exploration companies operating off the Falklands “will ignore the threats made by Argentina to disrupt the activity,” Reuters reports. REUTERS

 

I.P.O./OFFERINGS '

Facebook Stock Falls After Employees Can Sell  |  The company's stock fell 3.8 percent on Wednesday, the first trading day after a lockup expired. NEW YORK TIMES BITS

 

Global Logistic Looks to Raise $2.6 Billion in Japan Offering  |  Global Logistic Properties is planning to sell shares in its Japanese warehouses, Bloomberg News reports. BLOOMBERG NEWS

 

VENTURE CAPITAL '

New York Start-Ups Share Offices After Storm  |  As large parts of Manhattan are still without power, some entrepreneurs and engineers are “camping out in one another's apartments and offices in an attempt to still get a day's work done,” the Bits blog writes. NEW YORK TIMES BITS

 

Corporations Turn to Venture Capital Investing  |  Google isn't the only big company that is building up its venture capital arm. According to the Boston Consulting Group, venture capital investing “appears well on its way to establishing a firm foothold in the corporate world,” The Wall Street Journal reports. WALL STREET JOURNAL

< p> 

LEGAL/REGULATORY '

Senior Justice Department Lawyer Returns to Jenner & Block  |  Thomas J. Perrelli, a former United States associate attorney general, is rejoining the law firm Jenner & Block, the latest in a string of senior Justice Department lawyers to leave government for private practice. DealBook '

 

After Bailout, Giants Allowed to Dominate the Mortgage Business  |  Wells Fargo and JPMorgan Chase gobbled up small and weak competitors in the mortgage business, and now their biggest threats, Citigroup and Bank of America, are pulling out, Jesse Eisinger writes in his column, The Trade. The Trade '

 

The Winners and Losers Under Romney's Tax Plan  |  Those who enjoy lower rates but do not take a lot of deductions would benefit under the Romney plan, as their tax burden would shift onto heavy users of deductions, writes Victor Fleischer in the Standard Deduction column. DealBook '

 

Short-Selling Rules in Europe Cause Confusion  |  The Financial Times reports: “Late and complex guidance from regulators has left the markets unprepared and confused ahead of today's imposition of the first pan-E.U. rules on short-selling, according to brokers, traders and investors.” FINANCIAL TIMES

 

Chinese Sovereign Wealth Fund to Buy Stake in Heathrow Airport

LONDON â€" China's sovereign wealth fund announced on Thursday that it will buy a 10 percent stake in London's Heathrow airport for $727 million from the Spanish infrastructure company Ferrovial and other investors.

Ferrovial, which currently owns an almost 50 percent stake in the British airport, has been moving to reduce its its debt burden by selling assets like its Heathrow holdings.

In August, Qatar Holding, the sovereign wealth fund of Qatar, agreed to buy a 20 percent stake in the British airport for $1.4 billion. The private equity firm Alinda Capital Partners also acquired a 6 percent holding in the airport for around $440 million last year.

“This sale of a stake in Heathrow Airport Holdings is a further part of Ferrovial's investment diversification strategy,” the Spanish company's chief executive, Íñigo Meirás, said late on Wednesday.

Under the terms of the deal, China Investment Corporation, the country's sovereign wealth fund, wi ll buy a 5.7 percent stake in the holding company that owns Heathrow airport from Ferrovial for £257.4 million ($416 million). C.I.C. also will acquire an additional 4.3 percent holding in Heathrow's parent company, FGP Topco, from other shareholders for £192.6 million.

Mary Meeker\'s State of the USA Inc. Address

Mary Meeker still thinks that the American economy is a business in need of an overhaul.

Ms. Meeker, the former Morgan Stanley star analyst turned venture capitalist at Kleiner Perkins Caufield & Byers, gained attention last year with a report on U.S.A. Inc., looking at the government as a corporation whose budget is sorely out of whack.

And, in an update to the plan presented at an investor conference in San Francisco last week, she argued that the problem has only gotten worse.

Ms. Meeker says that the country's expenses - think entitlements like Medicare, Medicaid and Social Security - outstripped revenue by 56 percent. That compares to a difference, or what she calls net margin, of just 7 percent 15 years ago. And tax breaks exceeded $1 trillion last year, which she argues accounted for 83 percent of the deficit in cash flow.

Ms. Meeker adds a few more points to her latest U.S.A. Inc. presentation as well. She cites a Pew Research Center poll fr om December that showed that 49 percent of adults aged 18 years to 29 years viewed socialism favorably. And she points out that the United States tax code contains 859 times more words than the Constitution.

“It's time for a “re-org” of U.S.A. Inc.,” she writes.

USA Short 102412

Senior Justice Department Lawyer Returns to Jenner & Block

Thomas J. Perrelli, the former No. 3 in the Obama administration's Justice Department, is re-joining the law firm Jenner & Block.

As associate attorney general, Mr. Perrelli was responsible for a number of the department's divisions, including its antitrust and
civil rights units.

Anton R. Valukas, the chairman of Jenner & Block, said that Mr. Perrelli “has developed strong relationships in Washington D.C. and throughout the law enforcement community nationwide, particularly among state attorneys general, and he will be a tremendous asset to clients who face the most significant legal, regulatory and public policy challenges.”

Mr. Perrelli, 46, will be based in Washington and run a new Jenner & Block practice area called Government Controversies and Public Policy
litigation, which is effectively a hybrid of white collar criminal defense and regulatory work. He is returning to Jenner & Block, where he started as an associated in 1992. As a pa rtner at the firm before joining the Obama White House, Mr. Perrelli represented media companies in intellectual property litigation.

Jenner & Block, which is headquartered in Chicago, is known for its litigation practice and has a respected white-collar criminal defense group. Mr. Valukas is the former United States attorney in Chicago and recently authored the examiner's report in the Lehman Brothers bankruptcy case.

The move back to Jenner & Block by Mr. Perrelli makes him the latest in a string of senior Justice Department lawyers to leave government for private practice. Patrick Fitzgerald, the United States attorney in Chicago, departed his post earlier this year and recently announced that he was joining Skadden, Arps, Slate, Meagher & Flom. Last year, Christine Varney, the White House's top antitrust lawyer, became a partner at Cravath, Swaine & Moore.

Mr. Perrelli handled a number of high-profile cases at the Justice Department. He served as a poin t person for the government's settlement with the country's largest banks related to their mortgage foreclosure practices. He negotiated the agreement with BP related to the Gulf of Mexico oil spill that led to a $20 billion trust fund and a claims process for the accident's victims.

This was Mr. Perrelli's second stint at the Justice Department. During the Clinton administration, Mr. Perrelli serving for several years as counsel to Attorney General Janet Reno.

As a law student at Harvard, Mr. Perrelli served as managing editor of the Harvard Law Review. The publication's president that same year was
Barack Obama.

President Obama seems to have a thing for Jenner & Block lawyers. Donald B. Verrilli, Jr., the United States Solicitor General, and Andrew Weissman, the general counsel of the Federal Bureau of Investigation, are both Jenner & Block alumni.

Lloyds Hit by $1.6 Billion Insurance Charge

LONDON â€" Lloyds Banking Group said on Thursday that it had set aside a further £1 billion ($1.6 billion) to compensate clients who were inappropriately sold insurance.

The announcement takes Lloyds' total compensation provisions to more than £5 billion, and pushed the firm into a net loss for the third quarter of the year. The bank is part-owned by the British government after receiving a multibillion-pound bailout during the recent financial crisis.

The majority of Britain's largest banks, including HSBC, Barclays and Royal Bank of Scotland, have been forced to set aside more than a combined £10 billions to compensate clients who were inappropriately sold payment protection insurance, which covered customers if they were laid off or became ill.

On Wednesday, Barclays also announced that it had made a further £700 million provision on top of a previously-announced £1.3 billion combined figure to reimburse affected clients.< /p>

Barclays, which agreed to a $450 million settlement with the authorities in July connected to the Libor rigging scandal, also faces further legal scrutiny. On Wednesday, the U.S. Federal Energy Regulatory Commission recommended a $470 million fine related to past energy trading activities in Barclays' American operations. The bank, which has 30 days to respond to the commission, said it would defend itself against the inquiry.

Lloyds said on Thursday that despite the further £1 billion in insurance provisions, it had posted a net loss of £361 million during the three months through Sept. 30, a slight improvement on the £501 million loss in the same period last year. Without the adjustments, the British bank said its pretax profit in the third quarter doubled, to £840 million.

The bank's core Tier 1 ratio, a measure of a firm's ability to weather financial shocks, also rose slightly over the quarter, to 11.5 percent.

Shares in L loyds increased 3.5 percent in morning trading in London.