In Unusual Move, the Delaware Supreme Court Rebukes a Judge

As the chief judge of the Delaware Court of Chancery - the country's most influential court overseeing business cases - Leo E. Strine Jr. has been called an activist. He has also been called an iconoclast, a genius and a humorist.

But this week, Delaware's highest court called him out of bounds.

The Delaware Supreme Court issued a stinging rebuke of Judge Strine on Wednesday, criticizing him for what it said was an improper digression in an opinion. Judge Strine's decision related to a contractual dispute but went off on an 11-page tangent about an obscure issue related to limited liability companies.

“The court's excursus on this issue strayed beyond the proper purview and function of a judicial opinion,” the Supreme Court wrote, adding, “We remind Delaware judges that the obligation to write judicial opinions on the issues presented is not a license to use those opinions as a platform from which to propagate their individual world views on issues not presented.”

Famous among lawyers for his colorful opinions and courtroom meanderings - which are frequently laced with cultural references, both high and low - Judge Strine has supporters and detractors in the securities class-action bar. The Delaware Court of Chancery exerts a powerful influence on United States business because many large companies are incorporated in Delaware and litigate cases there.

Several lawyers, none of whom would be quoted by name because they all practice before him, said it was only a matter of time before someone sought to rein him in. “I'm only surprised it took this long,” said a corporate litigator from New York who has argued cases in Judge Strine's courtroom.

The Supreme Court advised Judge Strine that if he wished to “ruminate on what the proper direction of Delaware law should be, there are appropriate platforms, such as law review articles, the classroom, continuing legal education presentations and keynote speeches.”

Stephen Gillers, a professor of legal and judicial ethics at New York University School of Law, said that the court's admonition was highly unusual.

“You rarely see this type of ruling because judges understand that a judicial opinion has a distinct and narrow function and is not supposed to be a platform for your public agenda or your broader views on the law,” he said.

Reached by e-mail, Judge Strine, whose official title is chancellor of the Delaware Court of Chancery, declined to comment.

The ruling came during a week when Judge Strine's unique judicial stylings were on prominent display. During a hearing in a lawsuit between the fashion designer Tory Burch and her former husband, Christopher Burch, he described the dispute as a “drunken WASP fest.” At the center of the case is whether Mr. Burch, in starting his own retail stores, C. Wonder, borrowed too heavily from Ms. Burch's successful chain.

During the hearing, Judg e Strine addressed scheduling issues in the case, and said, “I didn't see any reason to burden anyone's Hanukkah, New Year's, Christmas, Kwanzaa, Festivus with this preppy clothing dispute.”

He went on to consider why he gets assigned all the preppy clothing cases, noting that he had recently heard a dispute involving J. Crew. That led to a critique of a certain line of rain boots.

“What's a duck shoe?” he asked. “You see all these freaks wearing this really ugly - I like L. L. Bean, but those duck shoes are ugly. I mean, there's no way around it.”

He then said he was puzzled by his son's recent purchase of a pair of Topsiders. “I'm like, what is this?” Judge Strine asked. “I mean, you know, how do you actually want to wear these things?”

As the hearing continued, Judge Strine suggested that there might be nothing unique about the clothing lines of Mr. Burch and Ms. Burch, who divorced in 2007. He stumped one of the lawyers in the case by quizzing him on Ralph Lauren's original surname, which is Lifschitz.

After his lengthy sidebar on preppy attire, Judge Strine said he was deep in “an autumnal Cheever phase,” referring to the novelist and short story writer. He then encouraged the lawyers to read Cheever's works, go see the Broadway revival of “Who's Afraid of Virginia Woolf?” and watch “Mad Men.”

“We'll be all geared up and in the mood for this sort of drunken WASP fest,” Judge Strine said, and then proceeded to ask about the litigants' religion. “Are the Burches WASPs?” he asked.

Robert Isen, the chief legal officer at Tory Burch, hesitated before responding, “Tory Burch is Jewish and Chris is not Jewish.”

The answer did not entirely satisfy Judge Strine. “But not Jewish doesn't make you a WASP, because it could make you an equally excluded faith like Catholic, right?” he asked. “I mean, that's not a WASP. You know, a WASP is a WASP.”

Mr . Gillers of N.Y.U. Law said that discussing religion in such a manner was conduct unbecoming of a judge. Even if it is done lightheartedly, he said, it could compromise the public's confidence in the impartiality and integrity of the judiciary.

“Asking about religion, in my mind, is way off base,” Mr. Gillers said. “It's certainly not legally relevant, and a judge certainly wouldn't do that with race or sexual orientation.”

Judge Strine began his career in the early 1990s as a lawyer in the Wilmington, Del., office of the law firm Skadden, Arps, Slate, Meagher & Flom. He then joined the staff of the Delaware governor Thomas R. Carper, who is now a senator. Judge Strine, who is 48, was named to the Court of Chancery at 34. Many of his opinions are considered among the most influential rulings in corporate law.

A lawyer based in Wilmington, Del., who described himself as a supporter of Judge Strine, said that behind this week's Supreme Court ruling w as a simmering tension between Myron Steele, the chief justice of the Delaware Supreme Court, and Judge Strine. That conflict appears to have its roots in a disagreement over an arcane subject: the default fiduciary duties of a limited liability company.

This lawyer said that he found Judge Strine's rapier wit and off-topic asides to be a breath of fresh air in a judiciary that too often can be painfully dull.

“He's a brilliant dude,” he said. “It's just Leo being Leo.”

Precision Castparts to Buy Titanium Metals for $2.9 Billion

Precision Castparts agreed late on Friday to buy the Titanium Metals Corporation, a industrial parts maker whose majority owner is the Texas billionaire Harold Simmons, for about $2.9 billion in cash.

Under the terms of the deal, Precision will pay $16.50 a share, a nearly 43 percent premium to Titanium Metals' Friday closing price.

The transaction will yield a big payday for Mr. Simmons, the veteran investor and prolific political donor who owns 45 percent of Titanium Metals, commonly known as Timet.

The deal is the biggest takeover by Precision since at least 1995, according to Standard & Poor's Capital IQ. Precision has been a highly acquisitive buyer, having announced 27 deals over the past decade.

By buying the 62-year-old Timet, Precision is buying a business partner and a major producer of titanium parts for jet engines and factory equipment.

Last year, Timet earned $114 million, atop nearly $1.1 billion in revenue.

“This transa ction is truly a needle mover, a deal that offers PCC and our customers a wide range of opportunities going forward,” Mark Donegan, Precision's chairman and chief executive, said in a statement. “We've worked with Timet for many years and are quite familiar with their operations, so we expect integration to move ahead quickly once the merger is completed.”

The agreement allows for a “go-shop” period of 45 days, during which Timet can search for a better offer.

Timet was advised by Morgan Stanley and the law firm Weil, Gotshal & Manges.

Citigroup Awards $6.65 Million to Pandit

The board of Citigroup has awarded $6.65 million to Vikram Pandit after unexpectedly ousting the chief executive last month.

Mr. Pandit will receive the money as part of an “incentive” package for his work during 2012. He will also continue to collect his deferred cash and stock awards from the previous year, a package that it currently valued at more than $8.8 million.

In a surprise move, Mr. Pandit resigned October, a departure that was orchestrated for months by the bank's board. The board's powerful chairman, Michael E. O'Neill, maneuvered behind the scenes to curry support with other directors and replace Mr. Pandit. As part of the shake-up, the board also forced out John Havens, the chief operating officer. Michael L. Corbat was named as the new chief executive.

Since Mr. Pandit and Mr. Haven abruptly left the company, they will forfeit the remainder of their retention packages, which were outlined last year. For Mr. Pandit, that amounts to roug hly $24 million in lost compensation, according to a person with knowledge of the matter who could not speak publicly.

Mr. Pandit led the bank through a turbulent chapter in its history. After taking over in 2007, he navigated the bank from near collapse during the financial crisis when the had to secure a $45 billion lifeline from the federal government. The bank's health was so dire that Mr. Pandit opted to take a token $1 annual salary.

During his time as chief executive, Mr. Pandit received $56.4 million in total direct compensation, according to the research firm Equilar. In addition, Mr. Pandit got a hefty payout of $165 million when Citigroup purchased Old Lane Partners, the hedge fund he co-founded.

AT&T\'s Biggest Problems Aren\'t Emboldened Rivals, Chief Says

With two potential mergers that could strengthen long-lagging competitors - AT&T is under pressure to respond.

Earlier this week, the telecom giant set aside $14 billion to overhaul its networks, including an upgrade to the latest cellphone data standard.

But the company's chief, Randall Stephenson, contends that a newly emboldened Sprint Nextel, which recently struck a major deal with SoftBank, didn't prompt the move. Rather, it was motivated by AT&T's failed $39 billion takeover of T-Mobile USA.

He faces other worries, too. Mr. Stephenson argued that the uncertainty over the expiration of the Bush-era tax cuts and the potential reduction in government spending that could stem from automatic budget cuts set for year-end - was a bigger threat to his business and his customers.

As for the changing industry landscape, Mr. Stephenson seems less concerned. Even with the SoftBank deal, Sprint, he contends, is largely playing catch up.

When SoftBank announced its plans to buy nearly three-quarters of Sprint earlier this fall, the Japanese company's founder, Masayoshi Son, promoted his history of taking on big incumbents in an industry, and winning. SoftBank entered the Japanese cellphone service market in 2006, and in that time snatched up enormous market share through marketing expertise and exclusive rights to popular devices like the iPhone. Now Mr. Son is hoping to use Sprint as a vehicle to do the same thing in the United States, taking on AT&T and Verizon.

But Mr. Stephenson said in an interview earlier this week that he did not think much had changed in the American market so far. “It doesn't feel much different to me,” he said.

He argued that the $8 billion in cash that SoftBank will pour into Sprint was necessary to help keep the third-place service provider in the game. But with Sprint further behind in building out a Long Term Evolution data network, the company significantly trails its large r competitors.

Mr. Stephenson pointed to his own company's plans as a sign of how expensive it is to keep up in the American cellphone race. The latest $14 billion investment comes on top of billions more that AT&T has already committed to spending on its network.

The plan was born of the collapse of the T-Mobile deal late last year, he said. Buying the smaller rival - which now plans to merge with another service provider, MetroPCS - was meant to give AT&T much-needed spectrum to upgrade to LTE.

With that transaction's death, AT&T was forced to consider how it would acquire more spectrum, as well as how it would spend the enormous amount of cash on its books and deal with nonessential operations like a yellow pages business.

Mr. Stephenson said that he pulled aside one of his top operating executives and tasked him with finding an answer. What emerged was the $14 billion plan, an ambitious effort that includes bolstering AT&T's wired broadband offeri ngs and putting its services into new areas like cars.

Earlier this year, AT&T also sold control of its yellow pages business to Cerberus Capital Management for about $950 million.

The wired Internet assets nearly ended up on the auction block as well, Mr. Stephenson said. But after having had preliminary conversations with a number of potential buyers, the company opted instead to double-down on those operations.

AT&T's moves should help expand its reach, including by bringing LTE service to potentially 300 million people. The company may also turn to smaller acquisitions, what Mr. Stephenson called “tuck-in” transactions that fall far short of the expansiveness of the T-Mobile deal.

“Scaled industry consolidations appear to be more difficult,” he said. “Tuck-in acquisitions are doable.”

(While he claimed to have moved on from the T-Mobile fracas, Mr. Stephenson betrayed some irritation with the government regulators that blocked th e deal. “Our antitrust system is dysfunctional,” he said, pointing to the dual roles played by the Justice Department and the Federal Communications Commission.)

Possible transactions, according to analysts and industry executives, include some sort of partnership with Dish Network, which has an abundance of spectrum, and Leap Wireless.

But of greater concern for now, Mr. Stephenson said, is resolving the potential tax increases that could arrive early next year. Despite his clashes with antitrust regulators, the AT&T chief offered some positive sentiments about a second Obama term.

“Maybe in the short run, this will be better for the fiscal cliff,” he said, referring to the package of tax increases and budget cuts set for year-end, given that a newly re-elected president may have more negotiating leverage with Congress.

Action is imperative, he argued, especially since AT&T's customers had already pulled back spending and investments in May a nd June because of the uncertainty over the fiscal situation.

“If you give businesses a line of sight,” he said, “you will see this economy go.”

Week in Review: On Wall Street, a New Tone With Old Tactics

WEEK IN VERSE Mitt Romney told Parade that he enjoys The Killers. Now he can listen to them perform “Mr. Brightside.”

A look back on our reporting of the past week's highs and lows in finance.

After sharing a group hug on Wednesday morning, financiers have moved on to appraising the ramifications of four more years with a president that they have vilified.

With the balance of power unchanged, major changes in financial regulation are unlikely.

New faces won't necessarily mean new tactics. At the Financial Services Roundtable, Steve Bartlett's Dallas twang will be replaced by the Tim Pawlenty's southern Minnesotan drawl. But the strategy of attacking parts of Dodd-Frank, rather that its entirety, is expected to remain.

“A central goal, lobbyists say, is to tame unfinished rules that rein in derivatives trading,” Ben Protess and Jessica Silver-Greenberg reported. “Wall Street, in particula r, is preparing a lobbying frenzy over plans to apply derivatives rules to American banks trading overseas.”

Other efforts by banking lobbyists that will play out over President Obama's second term include:

• Lawsuits by business trade groups against parts of Dodd-Frank, including the Volcker Rule.
• Attempts to influence the selection of more Wall Street-friendly regulators, including the Treasury Department, the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

It may take several years to reveal the impact of these efforts to roll back financial regulation and even an apparrent victory could have unforeseen consequences. Wall Street, for example, has been able sway Mr. Obama's selection of regulators in the past. His first choice to lead the Consumer Financial Protection Bureau was pushed back by Republicans and is now the senator-elect from Massachusetts.

Priceline to Buy Kayak S oftware in $1.8 Billion Cash-Stock Deal | “The acquisition, the largest in Priceline's history, could provide a new source of revenue for the company,” William Alden reported. DealBook '

In Combination of Services, Stifel Financial to Buy KBW for $575 Million | The deal gives Stifel a foothold in the lucrative business of advising financial institutions. Peter Lattman and Michael J. de la Merced report that it signals what many think could be the beginning of a period of consolidation in the financial services industry. DealBook '

Nike Is Said to Be Near Deal to Sell Cole Haan | The athletic shoe and apparel giant is negotiating with Apax Partners on a $500 million deal. Mr. Lattman reports that the company is looking to streamline its product offerings. DealBook '

Société Générale Profit Plunged in Third Quarter | The big French bank said its bottom line was hurt by one-time charges that included a cost of 389 million euros for revaluing its own de bt, David Jolly reported. DealBook '

Profit at Big French Bank Doubles to Hit $1.7 Billion | BNP Paribas noted that results were flattered by comparison to the year-earlier period, when a sovereign debt crisis in Greece, Mr. Jolly reported. DealBook '

Big Bet Sours, Imperiling Small Firm | Rochdale, a small brokerage firm in Connecticut, is barely hanging on after one of its traders placed a billion-dollar bet on Apple stock that did not pay off, Susanne Craig and Mr. Lattman reported. DealBook '

Deal Maker for Morgan Is Eased Out | Behind the move was a desire to squeeze more money out of the bank's sales and trading business, which has suffered as the bank has pulled back on taking risk, Mr. de la Merced and Ms. Craig reported. DealBook '

Mr. Kelleher's power within the bank will be rivaled only by Greg Fleming, who oversees the wealth and asset management units, and James Gorman, the chief executive.

Bonuses on Wall S t. Expected to Edge Up | The increase in year-end incentives will come on top of one of the worst years for bank pay in recent memory, Ms. Craig reported. DealBook '

Jury Is Told Ex-UBS Trader Was Made a Scapegoat for Bank's Woes | During closing arguments in the eight-week court case, the defense attorney, said that the allegations against Kweku M. Adoboli represented a “character assassination” that failed to highlight the role of UBS' management in condoning his trading activity, Mark Scott reported. DealBook '

• Ex-UBS Trader Accused of ‘Playing God' With Bank's Money | The lead prosecutor said that Mr. Adoboli had “arrogantly” sidestepped the firm's rules and carried out risky trading activity from 2008 to 2011. DealBook '

Britain Opens Inquiry on HSBC Accounts in a Tax Haven | The British tax authorities said that they were looking into a list of HSBC clients with bank accounts in the tax haven of Jersey, Julia Werdigier reported. DealBook '

• HSBC May Face Charges in a Laundering Inquiry | The British bank acknowledged that its exposure to an industrywide investigation had swelled as it disclosed that it could face criminal charges in the United States, Mr. Scott and Ms. Silver-Greenberg reported. DealBook '

News Analysis: Obama Faces Tough Choice on Housing in 2nd Term | Peter Eavis writes that “the best person to fundamentally change how housing works may be a president who won't be running for office again.” DealBook '

“I think Obama is absolutely committed to reducing the government's role,” said Thomas Lawler, a former chief economist at Fannie Mae and founder of Lawler Economic and Housing Consulting, an industry analysis firm. “But no one's yet found a format to do that.”

• On Wall Street, Time to Mend Fences With Obama | Few industries have made such a one-sided bet as Wall Street did in opposing President Obama and supp orting his Republican rival, Ms. Craig and Nicholas Confessore reported. DealBook '
• On Wall Street, Suddenly Making Nice With Obama After Backing Romney | Lobbyists are likely to soften their approach, even as Wall Street pushes to temper rules and influence the makeup of crucial Congressional committees and regulatory agencies, Ben Protess and Jessica Silver-Greenberg reported. DealBook '
• Deal Professor: Wall St. Offers a Second Career for Former Politicians | Steven M. Davidoff says that Wall Street likes former politicians for lots of reasons. DealBook '
• DealBook Column: The Election Won't Solve All Puzzles | Andrew Ross Sorkin says that the economy and markets are likely to face more uncertainty, not less, over the coming year. DealBook '

France and Belgium Provide Dexia Bailout | The two governments said that they would inject an additional 5.5 billion euros, in an acknowledgment that Dexia's finances had continued to deteriorate sinc e the bank was first rescued in the 2008 financial crisis, Mr. Jolly reported. DealBook '

Regulator Faces Another Lawsuit Over Dodd-Frank

The Obama administration's new rules for Wall Street suffered another setback this week as the financial industry leveled a lawsuit challenging a crucial piece of the regulatory overhaul.

The CME Group, the giant Chicago exchange, sued its regulator late Thursday over a new rule that aims to shed light on the murky derivatives trading industry. The regulator, the Commodity Futures Trading Commission, drafted the rule in January under the legal clampdown known as the Dodd-Frank Act.

The case is part of the financial industry's broader legal assault on Dodd-Frank. As regulators hash out the final details of some 400 rules, Wall Street has shifted the fight from backroom lobbying to the courtroom. The trading commission has already been sued twice over Dodd-Frank rules, and Wall Street plans to turn up the heat on the Obama administration next year with a bevy of other legal challenges.

Until now, the cases have come from groups that represent the nation's b iggest banks and mutual funds that were battered by Dodd-Frank. CME Group is an unlikely foe, having reaped significant new business from Dodd-Frank's decision to push once-unregulated trades onto public exchanges.

But the exchanges are grateful for the new business only up to a point. When the rules expose the CME to heightened requirements, the firm has been known to push back.

The lawsuit, which was filed on Thursday, takes aim at a rule that requires CME Group and other financial firms to report a battery of data about the trades they process. Under the rules, CME Group must turn over public and private information to outside data warehouses. The so-called swap data repositories, named after the type of derivative contract that is tied to the value of commodities and other assets, will in turn release the information to federal regulators like the trading commission, which can use the information to monitor the market.

In the lawsuit filed in United Sta tes District Court for the District of Columbia, CME complained that the trading commission overstepped its authority under the law. While Dodd-Frank requires CME to release the public data, the law does not explicitly force it to turn over the private information to the data warehouses, the suit argues.

The rules, CME said, “would impose costly, cumbersome, and duplicative requirements.”

The lawsuit also painted the data warehouses as gratuitous middlemen, noting that CME already releases some data directly to the trading commission. The new process is “wholly redundant, and does not justify the costs incurred in doing so,” CME said in the complaint.

The lawsuit, however, did not fully detail the motives behind CME Group's lawsuit.

The exchange in June applied to become a data warehouse itself, but the trading commission held up the bid, a person briefed on the matter said. The application hit a stumbling block, the person said, over how CME Group would release the public data feed. The trading commission ordered that exchanges release a steady stream of swaps data in real-time, rather than in brief posts on their Web sites, a requirement that some exchanges have balked at. The exchanges, the person said, hope to sell the data to private clients.

The legal action on Thursday gives CME Group an important bargaining chip as the trading commission mulls the firm's application. The trading commission could choose to fight the case, or simply approve the CME Group's application.

An agency spokesman did not have an immediate comment. A CME Group spokeswoman declined to comment.

The financial industry has had a significant measure of success suing its regulators.

A federal appeals court last summer struck down the Securities and Exchange Commission's proxy access rule, a Dodd-Frank policy that would have empowered shareholders to oust company directors. The court has tossed out S.E.C. rules six times in seven years.

The trading commission is another favorite target. The CME Group case is the third Dodd-Frank lawsuit filed against the agency. A federal judge in Washington struck down the commission's so-called position limits rule, sending it back to the agency for “further proceedings.”

Despite a Regulatory Black Mark, Trader Landed at Morgan Stanley

On Wall Street, a black mark on your regulatory files can be a significant employment hurdle, making it difficult to work at a major bank again.

That wasn't the case with Matthew Marshall Taylor.

In December 2007, Goldman Sachs parted ways with Mr. Taylor, a trader. The bank then reported his departure to the Financial Industry Regulatory Authority, a Wall Street regulator.

In that filing, Goldman said that Mr. Taylor was let go for “alleged conduct related to inappropriately large proprietary futures positions in a firm trading account.” The filing would have been accessible to any firm looking to hire Mr. Taylor.

Despite the stain on his record, Mr. Taylor, a few months later, landed at Goldman rival Morgan Stanley, where he had previously worked. Mr. Taylor left Morgan Stanley in August, according to regulatory filings.

Now, the situation looks even more curious.

On Thursday, the U.S. Commodity Futures Trading Commission filed a n enforcement action against Mr. Taylor, accusing him of concealing a $8.3 billion trading position at Goldman that resulted in $119 million of losses. The agency alleges that Mr. Taylor entered fabricated trades and then “obstructed his employer's discovery of his scheme by, among other things, providing false, misleading or deceptive information and reports.”

A Goldman spokesman said Mr. Taylor initially provided false explanations for his trading and then admitted the conduct. The spokesman said Mr. Taylor “promptly removed from his job and terminated soon thereafter. Since these events, which had no impact on customer funds, we have further enhanced our controls.”

Ross B. Intelisano, Mr. Taylor's lawyer, said his client is disappointed in the trading commissions decision to file a complaint. “He strenuously denies all of the allegations,” said Mr. Intelisano. “Matt never intentionally entered ‘fabricated trades' to conceal any trading activit y and Goldman never alleged he did so at the time of his termination or thereafter. Matt, himself, brought the trading losses to the attention of senior managers at Goldman on the day they occurred.”

Morgan Stanley declined to comment.

Live Video: Obama to Address Debt Ceiling

Debt Ceiling Complicates a Tax Shift

WASHINGTON - Come January, should Congress fail to act, the United States will face more than immense tax increases and spending cuts. It will also run out of room to finance its large running deficits.

Harry Reid, Senate majority leader, warned Republicans not to risk the country's credit rating by not raising the debt ceiling.

Eric Cantor, House majority leader, said resolving the fiscal cliff and debt ceiling hinged on “real entitlement reform.”

The Treasury Department expects the country to hit its debt ceiling, a legal limit on the amount the government is allowed to borrow, close to the end of the year. That would give Congress only a matter of weeks to raise the ceiling, now about $16.4 trillion, before sending financial markets into a panic.

Congressional leaders have made clear that the debt ceiling will be part of the intense negotiations over the so-called fiscal cliff, with many members unwilling to raise the ceiling without a broader deal. That has raised financial analysts' worries of a financial market panic over the ceiling in addition to the slow bleed of the tax increases and spending cuts.

Congressional action is required to raise the debt limit. The Treasury can jostle payments for a few months. But expenses will eventually overwhelm revenue, putting the administration in the position of choosing which bills to pay. It might stop paying soldiers, for instance, or sending Social Security payments.

In 2011, Congressional Republicans would not raise the debt ceiling without a broader agreement to cut the country's deficit and set it on a better fiscal path. The impasse over finding spending cuts and tax increases to do that led to the creation of the spending cuts on Jan. 1, the same time the Bush-era tax cuts were set to expire.

The threat that the country might not pay all its bills caused a slump in financial markets and led in August 2011 to the first downgrade of the nation's credit rating. It left broader economic scars, too. Many economists contend it hurt economic growth and jobs.

A July report by the Government Accountability Office found that the delay in raising the debt limit increased the country's borrowing costs by about $1.3 billion in the 2011 fiscal year. “However, this does not account for the multiyear effects on increased costs for Treasury securities that will remain outstanding after fiscal year 2011,” the report noted, adding that the debt-limit fight diverted Treasury's time and resources from other priorities.

This year, Congress will have time to negotiate a broader debt deal before needing to raise the ceiling, even if negotiations spill into January. But the ceiling will be a card in the complex political game that the White House, Senate Democrats and Congressional Republicans are playing.

Much as Democrats see President Obama's veto threat over an extension of the Bush-era tax cuts for the highest earners as leverage over Republicans, some Republicans see the need to raise the debt ceiling as leverage over the White House, Republican aides said.

Even if the stakes do not get that high, both parties view lifting the debt ceiling as part of the fiscal-cliff negotiations, and they do not expect Congress to raise it outside of a broader deal.

“Resolving the issues surrounding the fiscal cliff, especially the replacement of the sequester, and the next debt limit increase (likely necessary in February) will require that the president get serious about real entitlement reform,” Representative Eric Cantor of Virginia, the House majority leader, said in a letter to conservatives this week, as printed on The Hill Web site.

That has Democrats warning Republicans not to risk the country's credit rating and broader financial stability again.

“They tried it before: ‘We're going to shut down the government. We're not going to raise the debt limit,' ” Senator Harry Reid of Nevada, the majority leader, told reporters this week. “They want to go through that again? Fine, but we're not going to be held subject to something that was done as a matter of fact in all previous administrations.”

Economists have warned that the political posturing over the debt ceiling has enormously dangerous economic consequences - even more so than last year, given the threat of huge tax increases and spending cuts hitting households at the same time.

On Wall Street, analysts have tended to use terms like “apocalypse” and “global catastrophe” to describe what might happen should Congress not lift the ceiling.

This week, Fitch, the credit rating agency, threatened a downgrade to the nation's credit rating if Congress cannot find a timely resolution.

“Failure to reach even a temporary arrangement to prevent the full range of tax increases and spending cuts implied by the fiscal cliff and a repeat of the August 2011 debt ceiling episode would mean that the general election had not resolved the political gridlock in Washington and likely result in a sovereign rating downgrade by Fitch,” analysts at the agency said in a statement on Wednesday.

HSBC analysts this week warned clients of “echoes of 2011” in the uncertainty and market volatility the ceiling might cause.

And economists at the International Monetary Fund cautioned that the unstable situation in the United States might have international ripple effects.

“For now, a lack of political agreement keeps uncertainty about the fiscal road map unresolved,” the fund said in a global risk assessment. “Although bond yields remain low, when contentious political decisions - such as raising the debt ceiling - have come due in the past, uncertainty about the outcome led to unfavorable market reactions.”

But other analysts said they would be surprised if the debate over the ceiling became the debacle it did last year. Many Congressional aides said neither side had any interest in causing market panic for political gain.

“Markets are now starting to become the disciplinarians,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. “C.E.O.'s are finally stepping up to the plate and saying, ‘Excuse me, we can't do this.' And that puts political donations and jobs on the line.”

A version of this article appeared in print on November 9, 2012, on page B1 of the New York edition with the headline: Debt Ceiling Complicates A Tax Shift.

Jury Is Told Ex-UBS Trader Was Made a Scapegoat for Bank\'s Woes

LONDON â€" Kweku M. Adoboli, a former UBS trader in London, was made a scapegoat for major problems at the Swiss bank, a jury was told on Friday.

Mr. Adoboli, 32, is accused of causing a multibillion-dollar trading loss at the Swiss financial giant, and the prosecution has portrayed him as an “arrogant” investment banker who sidestepped the rules whenever it suited him.

During his closing arguments on Friday, Charles Sherrard, Mr. Adoboli's lawyer, said the allegations represented a “character assassination” that failed to highlight the role of UBS' management in condoning his trading activity.

Despite several scandals at the Swiss bank, including a $780 million settlement in 2009 to settle tax evasion charges in the United States, Mr. Sherrard said UBS's management had singled out his client to be held accountable for the firm's previous wrongdoings.

“He has had to bare the brunt about what has been going on at UBS,” Mr. Sherrard told t he jury in London on Friday. “He has been blamed for redundancies, the share price fall and reputational damage.”

Mr. Sherrard added that UBS' actions were representative of a banking industry that was driven solely to make money and that put pressure on traders to make massive profits.

“Senior management are never to blame,” Mr. Sherrard added.

UBS is not a defendant in the case, and is not permitted to comment on criminal cases, according to British law.

Mr. Adoboli is charged with six counts of fraud and false accounting in connection with a $2.3 billion loss at the Swiss bank. If convicted, he could face more than 10 years in prison. He has pleaded not guilty to the charges.

During almost five hours of closing arguments on Friday, the defense rebutted accusations that Mr. Adoboli acted alone to create false trades and hide losses between 2008 and 2011.

Mr. Sherrard told the jury that several layers of UBS's management knew abou t the former trader's activities, but did not stop him because he was earning profits for the Swiss bank.

Mr. Adoboli joined UBS in 2003 and rose quickly to work on the Delta One desk, a plain-vanilla version of derivatives trading. Traders in the unit create investments that track specific financial assets, like a basket of company stocks.

He is accused of creating false trades to hide his trading losses, which he concealed from colleagues, according to the prosecution. To hide his trades, Mr. Adoboli created separate accounts, which he called his “umbrella,” to handle the profits and losses from his unauthorized activities.

The defense said Mr. Adoboli's activities were well-known in the bank, and that his supervisors condoned his actions because they proved to be so profitable.

Mr. Adoboli's team earned an $8.8 million profit in 2010, Mr. Sherrard told the jury on Friday. That figure rose to $52 million for the just second quarter in 2011. In o ne day, the former UBS trader's unit posted a $6 million profit, the jury was told.

“The next level of supervisors knew much of what he was doing,” Mr. Sherrard said. “For almost three years, everyone basked in his glory.”

While Mr. Sherrard acknowledged that his client had lied to UBS officials before coming clean in September, 2011, he said Mr. Adoboli had been buying time to recoup his losses. The former trader also initially said he was solely to blame to protect his colleagues, the jury was told. Later, Mr. Adoboli said others at UBS had been aware of his actions.

The defense also responded to accusations that Mr. Adoboli acted alone. Mr. Sherrard told the jury that members of his client's team used the so-called umbrella to cover their trading activity.

The prosecutors are “trying to desperately portray this man as a rogue trader,” the jury was told on Friday. “The minute you see that the whole desk was working as a team,” the pr osecution's case falls apart, Mr. Sherrard added.

The defense countered claims that Mr. Adoboli had gambled with UBS's money to gain promotion and financial rewards for himself. Mr. Sherrard read excerpts from the former trader's UBS evaluations, which portrayed him as hard-working, humble and a teamplayer.

The defense said these glowing reviews during the period when Mr. Adoboli was carrying out his trading activity debunked accusations that he was only driven by profit.

“The notion is absurd,” Mr. Sherrard said.

Regulators Postpone Some Basel Rules

Global regulators said Friday they are postponing a significant part of the financial regulatory overhaul after banks said they wouldn't be ready for the new rules.

The regulators proposed the rules in June, as part of an international effort to harmonize the global financial system. Smaller banks immediately objected to the proposals, saying they would be too costly and might deter them from making loans.

Some of the rules were supposed to take effect at the beginning of next year, but regulators have decided a delay makes sense. The rules stem from internationally agreed standards adopted by a body called the Basel Committee on Banking Supervision.

“In light of the volume of comments received and the wide range of views expressed during the comment period, the agencies do not expect that any of the proposed rules would become effective on January 1, 2013,” said a statement from the Federal Reserve, the Office of the Comptroller of the Currency and t he Federal Deposit Insurance Corporation.

Regulators may have initially been caught off guard the level of opposition to the Basel rules among smaller banks. Last month, an industry group called the Independent Community Bankers of America said that, “nearly 15,000 community bankers and their allies” had signed a petition against the rules. In particular, the community banks don't like Basel measures that would make banks hold bigger loss buffers, or capital, against mortgages.

In recent months, regulators have expressed sympathy for the concerns of smaller banks. In a speech Friday, Federal Reserve governor Elizabeth A. Duke suggested that smaller banks should have separate rules for mortgages.

The Basel rules demand more capital for mortgages with features that might make them less likely to get repaid. Community bank mortgages to individuals have some of those features. Even so, Ms. Duke noted that community banks had losses on such mortgages in the financial crisis that were far below those on subprime loans.

“I am convinced that the best course for policymakers would be to abandon efforts for a one-size-fits-all approach to mortgage lending,” she said.

But regulators face a real headache in deciding which banks should be subject to which mortgage rules. Too many exemptions could prompt smaller banks into making too many risky loans. While smaller banks may not have had huge problems with mortgages to individuals, many such firms collapsed under the weight of losses on loans made to borrowers who bought land and business properties.

Ms. Duke appeared to acknowledge the risks in her speech. “Crafting regulations to address the real problems that occurred in subprime lending without creating punitive burdens on community banks may prove to be quite difficult,” she said.

Notably, the delay announced Friday does not apply to the Basel rules on Wall Street trading operations that regulators f inalized in June.

In addition, most large banks already have enough capital to meet the Basel capital requirements that come into effect on January 1. However, they haven't amassed all the capital that they will ultimately need by the end of the Basel phase-in period, which extends till the end of 2018.

Some advocates of stronger regulation said they hoped Friday's delay wouldn't lead to exemptions for large banks.

“There are few things more important in financial reform than increasing capital at large banks,” said Dennis Kelleher, president of Better Markets, a group that has pressed for a tough financial system overhaul.

TimesCast: Engineering a Transit Miracle

Subways return more quickly than expected. | What becomes of the Treasury Department if Timothy F. Geithner leaves. | Zara finds success turning out cheap clothes with high-end style.

A Run on Groupon\'s Shares as Growth Slows Again

When it went public to much fanfare last year, Groupon‘s main message to investors was its astronomical growth.

Now that the daily deals company is posting much more earthbound results, it appears that investors want out.

Shares of Groupon tumbled 28 percent by midday on Friday, to an all-time low of $2.82, after the company posted yet another set of disappointing quarterly results. While it narrowed its loss to about $3 million, the online coupon pioneer missed its own forecasts.

Investors were largely willing to forgive Groupon's litany of missteps in the run-up to its I.P.O., from its backtracking from a highly controversial profit metric to the disclosure of material weakness in its financial controls and a concomitant restatement of earnings.

That good will appears to have evaporated: The company is now worth just $1.8 billion, nearly a tenth of the $16.5 billion in market value it attained in its initial public offering roughly a year ago.

The stocks of the Internet darlings that have gone public since the beginning of last year - including Facebook and Zynga - have lost much of their I.P.O. valuations, as investor euphoria over massive growth rates dissipated in the wake of real earnings results. The only standout is LinkedIn, the social network for professionals that has seen its shares rise more than 57 percent so far this year.

Groupon stands out for the depths of its fall. The company took to the markets on the strength of its daily deals, what it called a new category of commerce that promised both explosive growth rates and a wealth of consumer data that allowed it to get subscribers to buy again and again.

That premise hasn't been borne out lately, however. The company reported $568.6 million in revenue for the quarter ended Sept. 30, below the low end of its own forecasted range of $580 million to $620 million.

And operating cash flow contracted 35 percent, to $42.1 million.

The quarter did bring some good news. Its $25.4 million in operating income fell in the middle of the forecasted range. Its pro forma profit amounted to 3 cents a share, meeting analyst estimates.

The company's subscriber rolls rose again, to 200 million. And the number of its active customers - those who actually purchased a deal during the last year - rose 37 percent, to 39.5 million.

To offset the slowing daily deals business, Groupon has turned to other services, including selling products directly to consumer. In a statement, the company's chief executive, Andrew Mason, promoted the strength of the business as a promising avenue to rejuvenate its fortunes.

But it hasn't been enough so far to maintain its once-stellar growth rate. Gross billings, which account for the money the company receives before payouts to merchant partners, rose just 5 percent in the quarter, to $1.22 billion.

And its gross billings per active customer fell 21 percent fr om the year-ago period, to $149,000.

Groupon still has a financial cushion: It held $1.2 billion worth of cash and equivalents, with no long-term debt.

In its earnings release, the company forecasted that its fourth-quarter revenues would come in between $625 million and $675 million, promising a growth rate of up to 37 percent.

If the company misses that range again, there's no telling how much worse the run on its stock will be.

A Need for Clearer Disclosure Rules after Cyberattacks

Craig A. Newman and Daniel L. Stein are litigation partners with Richards Kibbe & Orbe, the New York-based law firm. Mr. Newman also serves as chief executive of the Freedom2Connect Foundation, a nonprofit group focused on promoting Internet freedom through the use of technology. Mr. Stein is a former federal prosecutor.

Cyber threats against American corporations and financial institutions are growing in frequency and intensity, so much so that Defense Secretary Leon E. Panetta recently invoked the specter of a “cyber-Pearl Harbor.”

By suggesting the possibility â€" even likelihood â€" of such a devastating attack, Mr. Panetta has made it clear that the danger facing our country is unambiguous. Unfortunately, the same cannot be said about the roles and responsibilities of corporations that are victims of cybercrime.

Amid the current wave of attacks, corporations are faced with conflicting, and often irreconcilable, demands â€" creating significa nt concerns for both corporate leaders and investors.

Thanks to the public efforts of Senator John D. Rockefeller and others, corporate America can no longer say that it hasn't been warned. Law enforcement officials, led by Preet Bharara, the United States attorney in Manhattan, have made a full-throated plea for cooperation from victimized corporations.

Yet, companies facing these crimes confront a quandary. To avoid tipping off perpetrators to a continuing investigation, law enforcement officials often rightly encourage â€" or even demand â€" that companies keep confidential the fact that they've been victimized. But executives and corporate boards also have a duty to the public markets and investors to provide prompt information about material risks to their businesses.

After all, a company whose data security is breached could lose critical trade secrets in a matter of seconds. For start-ups, or other companies whose values are largely made up of int ellectual property or other intangible assets, a cyberattack could be devastating. A company's value could disappear with the click of a mouse. If such a company were to not disclose to the public that such an attack had occurred â€" even if the nondisclosure stemmed from the insistence of law enforcement â€" investors in that company will be deprived of material information.

Even if a victimized company discloses an attack, it would be difficult for management to cooperate with law enforcement while facing money managers and investment advisers, who owe it to their clients to ask tough questions of an attacked company. Without getting straight and candid answers to those tough questions, they lose the ability to monitor their investments and, indeed, risk watching their investments lose critical value while law enforcement investigates.

The tension between the demand for discreet cooperation and the obligation to inform investors and the markets has created an untenable and dangerous dilemma for companies. Unfortunately, the S.E.C. has provided little direction to corporate leaders confronting these conflicting demands. Securities laws do not say, one way or another, when an intrusion requires disclosure.

Last fall, the S.E.C. issued “guidance” to companies on when to disclose an incident to investors. But the S.E.C.'s guidance is just that. It is not a rule or regulation, nor is it mandatory. Fundamentally, the S.E.C.'s guidance does not speak to the competing demands placed on a victimized corporation to cooperate with law enforcement.

The solution is not simple. Some have suggested that the S.E.C. should adopt a regulation giving corporations a “pass” from public disclosure obligations if they refer the matter to law enforcement. But such a rule could easily be abused.

When a corporation is faced with an online attack, and the potential legal exposure and the risks to its reputation and stock price, its executives have a powerful incentive not to go public. It could prove irresistible for a victimized corporation to make a half-hearted referral to law enforcement and then use the proposed S.E.C. regulation as a fig leaf to avoid an embarrassing â€" and potentially devastating â€" disclosure.

And, once a disclosure to law enforcement is made, the company is likely to get little information about the status or progress of any investigation. Can a company that reports an attack to law enforcement, and then hears nothing for weeks or months, continue to keep information about the attack from investors? At some point, a company will have to conclude that its duty to investors overrides its responsibility as a good corporate citizen to comply with requests for discretion.

There is no doubt that everyone is working to prevent the “cyber-Pearl Harbor” that Mr. Panetta is predicting. But the absence of clear direction from securities regulators means that, with every new cyberattack, there is an increasing likelihood of devastating fallout for companies, their investors and our financial system. But unlike the attacks themselves, this outcome is not inevitable â€" if the S.E.C. steps forward and brings clarity to the competing demands of cooperation and disclosure.

Diageo Buys Controlling Stake in India\'s Biggest Liquor Company

NEW DELHI â€" Diageo, the world's largest spirits maker, said Friday that it would buy a controlling stake in India's biggest liquor company for $2 billion, a move that gives it a bigger foothold in this fast-growing market.

Acquiring the Indian company, United Spirits, will make it possible for London-based Diageo to meet its goal of getting half of its revenue from emerging markets years ahead of its 2015 target. About 40 percent of sales come from such markets now. United Spirits, which is based in Bangalore, had revenues of 182 billion rupees ($3.3 billion) in the 12 months ending in March, which is about 20 percent of Diageo's sales for the 12 months that ended in June.

Analysts said the deal will give Diageo access to the most extensive liquor operation in India at a time when its citizens are increasingly consuming more alcohol. Many consumers are also choosing higher-priced spirits rather than beer and traditional Indian alcohol made from coconuts and sugar cane. Diageo's Johnnie Walker whiskeys has long been one of the preferred brands of middle-class and wealthy Indians.

“The Indian liquor market is growing at the fastest pace globally in the liquor segment,” said A.K. Prabhakar, a senior vice president of equity research at AnandRathi Financial Services in Mumbai. “A foreign investor in United Spirits will add brand and variety. For the long-term investor it is a great buy.”

For United Spirits' biggest shareholder, the flamboyant millionaire Vijay Mallya, the deal provides a deep-pocketed partner who can invest in the business, which has run up a large debt in recent years, and also provide him with much-needed cash that he can use to repay the other loans that he and his holding company have amassed in recent years to pay for various acquisitions and to start an ill-fated airline.

The acquisition will be structured in two stages: Diageo will first acquire a 27.4 percent stake in United Spirit s in two transactions and later make an open offer to all public shareholders for another 26 percent as required by Indian securities regulations. The agreement comes after several weeks of negotiations and four years after the companies last discussed a deal.

In the first stage of the deal, Diageo will buy shares totaling 19.3 percent of United Spirits from holding companies and trusts owned by Mr. Mallya, his family and his senior management; the remaining shares will come in the form of new stock issued by United Spirits. The companies said Mr. Mallya would remain chairman of United Spirits and his trusts and holding companies would retain nearly 15 percent of the company's shares.

It was unclear on Friday exactly what the deal would mean for Mr. Mallya's aviation business, Kingfisher Airlines, which suspended operations last month after protests by employees who hadn't been paid in months. That dispute was recently settled but the airline still has to convinc e regulators and banks that it is viable before it can fly again. Kapil Kaul, an aviation consultant, estimates that Mr. Mallya and other investors must pump more than $1 billion into Kingfisher to revive it.

Mr. Mallya has said he would not sell the “family silver” to keep the airline afloat but he has also said he plans to present a “rehabilitation” plan to Indian regulators and banks. Kingfisher, which has never made money, has debts totaling about $2.5 billion. (In addition to the airline and United Spirits, Mr. Mallya also controls India's largest beer brewer, a fertilizer company, a cricket team and a Formula One racing team.)

On Friday, in a conference call with reporters, Mr. Mallya refused to say whether he would use proceeds from the sale of United Spirits to revive Kingfisher.

“We have multiple businesses and each business operates independently,” he said. “There is no cross-contamination. There has never been, there never will be.â €

In United Spirits, Diageo will get several popular Indian liquor brands like McDowell's, Bagpiper, Royal Challenge and Antiquity, most of them whiskeys. India is the world's largest market for that spirit but most of it is made from molasses, not grain.

In 2007, United Spirits acquired Whyte and Mackay, a Scottish distiller that makes brands such as Dalmore and Isle of Jura for nearly 600 million pounds ($960 million at current exchange rates). Analysts said Diageo might be forced to sell Whyte and Mackay to win approval for the deal from European competition regulators.

Analysts said the United Spirits deal is an acknowledgement that Diageo made a big mistake by selling an Indian whiskey business, Gilbey's Green Label, during the recession in 2002 to focus on its international brands. Its chief competitor, Pernod Ricard, did not exit India and went on to reap big gains and become the largest international spirits company in the country, said Jeremy Cunn ington, an analyst at Euromonitor International in London.

“It was a strategic mistake that put them in this place,” he said, but added that Diageo had been smart to wait to buy United Spirits until Mr. Mallya was in a relatively weak negotiating position. “They played a good tactical game over the past three years,” Mr. Cunnington said. “They saw U.S.L.'s weak finances and played a waiting game.”

Ivan M. Menezes, the chief operating officer of Diageo, declined to discuss the company's 2002 exit from India during the conference call but said that the country would now become one of its largest markets.

“This will become Diageo's No. 2 market after the United States,” he said. “This has the potential, in the long term, to become our largest market.”

Neha Thirani contributed reporting from Mumbai and Heather Timmons contributed reporting from New Delhi.

Apollo Turns a Profit as Portfolios Rise

Apollo Global Management is the latest firm to prove that the third quarter was a boon to the private equity industry, swinging to a profit from the same time last year as the value of its holdings improved.

Apollo reported a $434 million profit for the three months ended Sept. 30, compared with a $1.2 billion loss in the year-ago period. The figure was reported as economic net income, a metric favored by publicly traded buyout firms because it includes unrealized gains.

The profit amounted to 98 cents a stock unit. That far outstrips the average analyst estimate of 72 cents a share, as calculated by Standard & Poor's Capital IQ.

Revenue moved into positive territory, with the firm reporting $712.4 million for the quarter.

Using generally accepted accounting principles, Apollo earned $83 million for the period.

Private equity firms like the Blackstone Group and the Carlyle Group have also reported gains thanks to the rising value of their port folio companies. Apollo said that its leveraged buyout funds appreciated by 8 percent during the quarter.

Apollo also reported an enormous 69 percent rise in assets under management, to $44.6 billion. The increase was primarily in the value of its debt investments, one of the firm's core businesses.

The firm's real estate division also narrowed its loss for the quarter, to $1.7 million, as its properties rose in value.

“Amid a volatile and uncertain market, Apollo has generated strong returns for our investors by relying on our value-oriented and flexible investing approach across the firm's integrated global platform,” Leon D. Black, Apollo's chairman and chief executive, said in a statement.

Apollo's stock has risen nearly 7 percent over the past 12 months, closing on Thursday at $14.05. That performance trails only the Carlyle Group among the big publicly traded private equity firms.

More Unknowns From Washington

MORE UNKNOWNS FROM WASHINGTON  |  With investors already worried about the possible tax increases and spending cuts known as the fiscal cliff, there's another wild card that will factor into the debates in Washington in the coming months: the debt ceiling. A failure to raise the federal borrowing limit in a timely manner could send “financial markets into a panic,” writes Annie Lowrey in The New York Times.

“Congressional leaders have made clear that the debt ceiling will be part of the intense negotiations over the so-called fiscal cliff, with many members unwilling to raise the ceiling without a broader deal,” Ms. Lowrey says. Congress has some time to negotiate a deal before needing to raise the borrowing limit. But the experience last year showed that such high-stakes negotiations can hurt confidence. “Although bond yiel ds remain low, when contentious political decisions - such as raising the debt ceiling - have come due in the past, uncertainty about the outcome led to unfavorable market reactions,” economists at the International Monetary Fund said in a global risk assessment.

Political dynamics are shifting. For the housing market, that might not be a bad thing. “The best person to fundamentally change how housing works may be a president who won't be running for office again,” who is willing to risk “angering many and creating a political firestorm,” writes DealBook's Peter Eavis. The Obama administration faces a range of questions, like how to reduce the government's role in the market, and how to decide which borrowers get the most subsidies, Mr. Eavis writes. Any overhaul will be fiercely challenged, as “so many people have benefited from the status quo.”

The political wrangling may drag on for some time. The country has entered an “era of political brinkmanship,” in which lawmakers may “tiptoe back from disaster, with delaying mechanisms, before embarking on yet more brinkmanship,” writes Gillian Tett in a column in The Financial Times. Some lawmakers say they are working to strike an agreement in the postelection political atmosphere, reports Jonathan Weisman in The New York Times. And yet, there's “no guarantee that they can reach an agreement after warring for two years.”

KAYAK'S $1.8 BILLION DEAL  |  Kayak Software spent the summer as a public company, and now it is evolving again. The travel company, which had its I.P.O. in July, is being bought by Priceline.com, an older competitor, for $1.8 billion in cash and stock. The price of $40 a share represents a 29 percent premium over Kayak's closing price of $31.04 a share on Thursday. Though the deal surprised some analysts, it could provide Priceline with a new source of revenue and help Kayak expand internationally. “I see Kayak serving as a global entree into the advertising market for Priceline,” said Daniel Kurnos, an analyst at the Benchmark Company.

ON THE AGENDA  |  President Obama is scheduled to make a statement on the economy at 1:05 p.m. Jamie Dimon of JPMorgan Chase is on CNBC at 4 p.m. Sheila Bair, the former chairman of the Federal Deposit Insurance Corporation, is on Bloomberg TV at 5:10 p.m. J.C. Penney, a favorite of the hedge fund manager William A. Ackman, reports earnings before the opening bell. Brookfield Asset Management also reports results before the market opens. The November consumer sentiment index from Thomson Reuters/University of Michigan is released at 9:55 a.m.

GROUPON FALLS SHORT  |  Groupon is still having difficulty making money. The daily deals company reported third-quarter revenue of $568.6 million, compared with $430.2 million in the quarter a year earlier. Analysts surveyed by Thomson Reuters had expected revenue of $590 million. Shares fell as low as $3.21 in after-hours trading, after closing at $3.92 (and compared with an I.P.O. price last year of $20 a share). Europe has posed a particular challenge for Groupon, with the debt crisis hurting demand. The company said it had laid off about 80 employees.

THE REGULATOR-POET  |  Writing rules for Wall Street doesn't afford much opportunity for artistic license. Unless, that is, you're Bart Chilton of the Commodity Futures Trading Commission. The muse was speaking to Mr. Chilton on Thursday, when he fired up two rounds of verbal fireworks in describing the process of putting the Dodd-Frank financial overhaul into effect. There was an airplane metaphor (“We've been waiting around the gate area, eating Cinnabons and watching cable news since July of 2010.”) and a football analogy (“It's taken longer than some of us hoped at the kickoff, but now the goal line is in sight.”)

WHAT ARE DEAL LAWYERS WORTH?  |  A new study suggests that “many of the legal minutiae” involved in mergers and acquisitions “are not worth it,” writes Reynolds Holding in Reuters Breakingviews. That conclusion is based on the finding that stock prices of target companies “remain essentially unchanged when contract details are disclosed.” DealBook's Deal Professor, Steven M. Davidoff, challenged that argument. “It is quite clear that M&A terms matter. Just ask T-Mobile,” he wrote on Twitter. But he added that investors betting on deals perhaps “don't quite appreciate this.”

Mergers & Acquisitions '

Bid for Best Buy May Come in December  |  Reuters reports: “An eventual bid for Best Buy Co Inc by founder Richard Schulze could come below his initial proposal of around $8 billion and is now not expected to be made before December, sources familiar with the matter said.”
REUTERS

Will Icahn Go Hostile on Netflix?  |  “The thought has certainly crossed my mind,” Carl C. Icahn said on CNBC. “It certainly is one alternative, but I have to say we haven't made that decision at this point.”
CNBC

Orient-Express Rejects Takeover Bid and Names New Chief  |  Orient-Express Hotels formally rejected an unsolicited takeover bid by an arm of the Tata Group of India, criticizing it as undervalued and ill timed. It also named a new chief executive, John M. Scott, who would replace the company's outgoing leader.
DealBook '

Diageo to Buy Stake in United Spirits  |  The British liquor giant Diageo is buying a stake of as much as 53.4 percent in United Spirits of India for up to $2 billion, The Wall Street Journal reports.
WALL STREET JOURNAL  |  NEW YORK TIMES INDIA INK

Cnooc Says It Expects to Win Approval for Nexen Deal  | 
REUTERS

INVESTMENT BANKING '

Britain Opens Inquiry on HSBC Over Tax Haven  |  The British tax authorities said Friday they were looking into more than 4,000 accounts of HSBC clients with bank accounts in the tax haven of Jersey.
DealBook '

Credit Agricole Reports $3.6 Billion Loss  |  “The French bank Crédit Agricole posted an unexpectedly large third-quarter loss Friday, mainly from costs related to the disposal of its Greek unit,” The New York Times reports.
NEW YORK TIMES

JPMorgan Cleared for $3 Billion Stock Buyback  |  The bank also disclosed in its quarterly filing that it had come to an agreement with the Securities and Exchange Commission to wrap up two investigations into mortgage-backed securities.
DealBook '

Limits on Bonuses in Europe May Weaken  |  Bloomberg News reports: “Banker bonuses would be allowed to be as much as five times fixed pay under compromise European Union proposals that clash with tougher demands from E.U. Parliament lawmakers.”
BLOOMBERG NEWS

Ramifications of a Lower Corporate Tax Rate  |  Lowering the 35 percent corporate tax rate “could prompt large write-downs by Citigroup, A.I.G., Ford and other companies that hold piles of ‘deferred tax assets,'” The Wall Street Journal writes.
WALL STREET JOURNAL

PRIVATE EQUITY '

Bain Capital Thanks Investors for Support During Campaign  |  Few private enterprises faced as much scrutiny during the presidential campaign than Bain Capital, given its ties to Mitt Romney. With election season over, the private equity firm is giving thanks to investors for putting up with that harsh glare.
DealBook '

Rubenstein Expects Congress to Address Carried Interest Tax  |  David Rubenstein, the Carlyle Group co-founder, predicted that Congress would take up the issue of how private equity's carried interest is taxed, Bloomberg News reports.
BLOOMBERG NEWS

HEDGE FUNDS '

Hedge Fund Looks for Opportunities in Greek Assets  |  Dromeus Capital is raising a new fund as it looks to take advantage of a “dramatic sell-off in Greek assets,” The Financial Times reports.
FINANCIAL TIMES

David Einhorn, Mets Fan, on the Yankees  |  “It's O.K. to applaud for the Yankees,” the hedge fund manager said at an event at Cipriani 42nd Street, according to Bloomberg News.
BLOOMBERG NEWS

I.P.O./OFFERINGS '

Carlyle Plans a December I.P.O. for Restaurant Group  |  The Carlyle Group is looking to offload part of its stake in Chimney, a Japanese restaurant operator, through a December I.P.O., “its third attempt to list a J apanese asset this year,” Reuters reports.
REUTERS

VENTURE CAPITAL '

European Venture Capitalists Search for Hidden Gems  |  Some investors are looking in unexpected places “to find tech's Next Big Thing,” writes Bloomberg Businessweek.
BLOOMBERG BUSINESSWEEK

Car Dealers Sue Tesla Motors  |  “A judge in New York will take up a lawsuit against the company about how Tesla sells its cars,” NPR says.
NPR

LEGAL/REGULATORY '

Former Goldman Sachs Trader Accused of Fraud  |  The Commodity Futures Trading Commission accused Matthew Marshall Taylor, a former Goldman trader, of defrauding his then-employer of $118 million and covering up a position worth more than $8 billion, The Financial Times reports.
FINANCIAL TIMES

A Key Defense of the Rating Agencies Is Challenged  |  A ruling by a federal judge in Australia against Standard & Poor's could damage the reputation of the credit rating agency and prompt other lawsuits, writes Floyd Norris in his column in The New York Times.
NEW YORK TIMES

Ex-UBS Trader Accused of ‘Playing God' With Bank's Money  |  During closing arguments in the eight-week court case, the prosecution said that Kweku M. Adoboli, a former UBS trader in London, had “arro gantly” side-stepped the firm's rules and carried out risky trading activity from 2008 to 2011.
DealBook '

Setting the Table for Tax Negotiations  |  The government can address the so-called fiscal cliff through more progressive spending, not higher tax rates, writes Victor Fleischer in the Standard Deduction column.
DealBook '

Former Madoff Employee Pleads Guilty to Fraud  |  Irwin Lipkin, a longtime employee of Bernard L. Madoff's firm, said he falsified records but was not aware of the broader Ponzi scheme.
REUTERS

S.E.C. Computers Said to Be Vulnerable to Cyberattacks  | 
REUTERS

Private Equity Lawyer Heads to Simpson Thacher  |  Derek Baird, global co-head of the private equity group at Allen & Overy, is joining Simpson Thacher & Bartlett as a partner in London, Bloomberg News reports.
BLOOMBERG NEWS

Britain Opens Inquiry on HSBC Over Tax Haven

LONDON - HSBC's legal troubles are growing. The British tax authorities said Friday they were looking into a list of HSBC clients with bank accounts in the tax haven of Jersey.

Her Majesty's Revenue and Customs, Britain's tax authority, is investigating more than 4,000 accounts in Jersey that belong to British clients and whose details it received from a whistle-blower. The list includes a drug dealer and a man convicted of possessing more than 300 weapons at his home in the south of England, The Daily Telegraph reported.

‘‘We have received the data and we are studying it,'' a tax authority spokesman wrote in an e-mailed statement. ‘‘Clamping down on those who try to cheat the system through evading taxes and over-claiming benefits is a top priority for us, and we value the information we receive from the public and business community.''

Jersey, the largest island in the English Channel, is a British dependency with its own tax system.

HSBC, Britain's largest bank, is already part of an investigation into money laundering. The bank earlier this month said it set aside an additional $800 million to cover potential fines from the money-laundering case, bringing the total to $1.5 billion. The bank, which is negotiating a settlement with the American authorities, added that the actual fine could be even bigger.

In addition, HSBC, like other major British banks, has had to set aside cash to reimburse British customers who were sold inappropriate insurance products.
HSBC said Friday in a statement that the bank was ‘‘investigating the reports of an alleged loss of certain client data in Jersey as a matter of urgency.'' HSBC said it had not yet been informed of any investigation but would fully cooperate with the authorities. ‘‘HSBC remains fully committed to adoption of the highest global standards, including the procedures for the acceptance of clients,'' it said.

Prime Minister David Camer on has made the crackdown on tax evaders a priority for a government under pressure to increase revenue and reduce the budget deficit. Following the financial crisis, banks face greater scrutiny from the authorities worldwide about how they conduct their business.
HSBC's management was forced to apologize publicly for the problems that weighed on its earnings and share price as recently as Monday and has already started to change its compliance and oversight functions.

The money-laundering scandal began when the Senate Permanent Subcommittee on Investigations accused HSBC of allowing some of its executives to let illegal behavior go unchecked for nine years, until 2010. In one example, the bank provided financing to Al Rajhi Bank of Saudi Arabia, even though some of the bank's owners were linked to the financing of terrorism, according to the Senate report.

HSBC clients are also on another list that was in the spotlight this month. Kostas Vaxevanis, editor of the investigative magazine Hot Doc, was acquitted last week on charges of breaching privacy laws when he published a list of more than 2,000 Greeks believed to hold accounts at a Geneva branch of HSBC. The list was given to the Greek authorities two years ago by Christine Lagarde, then the French finance minister and now managing director of the International Monetary Fund, to help the government in Athens investigate evasion.