Morning Agenda: Fed Catches Wall St. by Surprise

CONFUSION AND RELIEF AFTER FED’S SURPRISE MOVE  |  The Federal Reserve stunned Wall Street on Wednesday by announcing that it would postpone any retreat from its monetary stimulus program for at least a month and possibly until next year. Stocks jumped and the 10-year Treasury yield fell after the 2 p.m. statement from the central bank, which flew in the face of the widespread expectation that the Fed would start to withdraw its economic stimulus this month.

Many on Wall Street were left wondering how they got it so wrong, Nathaniel Popper reports in DealBook. Several pointed an accusing finger at the communication strategy of Ben S. Bernanke, the Fed chairman, but Mr. Bernanke appeared to put some blame on Wall Street. “The Fed and the market have not been on the same page, and that’s very apparent in what happened at 2:01 p.m.,” said Michael Hanson, senior United States economist at Bank of America.

Mr. Bernanke emphasized on Wednesday that economic conditions were improving, but he said the Fed still feared a turn for the worse, Binyamin Appelbaum reports in The New York Times. The central bank undermined its own efforts when it said in June that it planned to begin a retreat by the end of the year, causing investors to demand higher interest rates on financial products â€" a trend that the Fed said Wednesday was potentially harmful.

“We have been overoptimistic,” Mr. Bernanke said at a news conference Wednesday. The Fed, he said, is “avoiding a tightening until we can be comfortable that the economy is in fact growing the way that we want it to be growing.”

JPMORGAN TO PAY MORE THAN $900 MILLION IN FINES  |  JPMorgan Chase is expected to pay more than $900 million in fines to government authorities in Washington and London and make a rare admission of wrongdoing on Thursday, settling a range of investigations over a $6 billion trading blunder last year, Jessica Silver-Greenberg and Ben Protess report in DealBook. The bank is expected to settle with the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve and the Financial Conduct Authority in London, doling out roughly $300 million to the comptroller’s office, and about $200 million to each of the other agencies.

The Commodity Futures Trading Commission is still negotiating with the bank, according to people briefed on the matter, and the agency is expected to levy additional fines against JPMorgan later this year. The F.B.I. and federal prosecutors in Manhattan are also continuing an investigation.

GOLDMAN’S CHIEF ON SAC CAPITAL  |  After being indicted on insider trading charges, the hedge fund SAC Capital Advisors has survived in part because Wall Street banks have continued to trade with it and finance its operations. On Wednesday, Andrew Ross Sorkin interviewed Goldman Sachs’s chief executive, Lloyd C. Blankfein, and asked him about the decision to keep SAC as a client.

“Well, they’ve been indicted, they haven’t been convicted,” Mr. Blankfein said. He said that if Goldman and other banks had withdrawn their support, it would have destroyed the firm. “The government wouldn’t want us to withdraw,” he said, “because if everybody withdrew liquidity you would vaporize a firm.”

ON THE AGENDA  |  Data on existing home sales in August is released at 10 a.m. Microsoft holds a meeting with financial analysts. Rite Aid and ConAgra report earnings before the market opens. Jimmy Dunne, Sandler O’Neill’s senior managing principal, is on CNBC at 7 a.m.

S.E.C. PROPOSES GREATER DISCLOSURE ON PAY  |  “The gap in pay between chief executives and rank-and-file employees has been growing steadily, and now regulators want companies to tell investors just how wide it is,” DealBook’s Alexandra Stevenson writes. The Securities and Exchange Commission proposed a rule on Wednesday that would require publicly traded companies to disclose the ratio of top executive compensation to the median compensation of their employees. Three of the five members of the S.E.C. voted in favor of the proposal.

The response from the five commissioners of the S.E.C. reflects the divisive nature of the issue. One commissioner, Daniel M. Gallagher, called the proposal a “rotten mandate” while another, Luis A. Aguilar, emphasized it as a significant step toward “enhanced accountability.”

Mergers & Acquisitions »

JPMorgan Is Expected to Lead an I.P.O. for Chrysler  |  CNBC’s Kate Kelly reports: “Notwithstanding doubts about whether the Chrysler Group would go forward with a promised public float, the company is late in the stages of preparing its offering documents, said a person familiar with the offer, and JPMorgan Chase is expected to underwrite the I.P.O.”
CNBC

Activision Deal Hits a Snag  |  The Delaware Chancery Court issued a preliminary injunction that temporarily halted the closing of Vivendi’s $8.2 billion deal to sell most of its stake in Activision Blizzard back to the company, Activision said on Wednesday.
REUTERS

BlackBerry Prepares to Cut Jobs  |  The struggling smartphone maker BlackBerry plans to cut up to 40 percent of its employees by the end of the year, The Wall Street Journal reports, citing unidentified people familiar with the matter.
WALL STREET JOURNAL

Ralph Lauren Reshuffles Leadership  |  The fashion company Ralph Lauren “began its biggest leadership change in more than a decade,” The Wall Street Journal writes.
WALL STREET JOURNAL

INVESTMENT BANKING »

Joseph E. Granville, Market Forecaster, Dies at 90  |  “Mr. Granville, who died on Sept. 7 at 90, was perhaps the most famous of a generation of market seers who made their own fortunes in the less risky venue of the newsletter business, in his case The Granville Market Letter, which he began publishing in 1963,” The New York Times writes.
NEW YORK TIMES

Celebrating the Top Women in Banking, but Noting a Lack  |  American Banker Magazine’s annual ranking of the most powerful women in banking revealed a continued lack of women in top jobs.
DealBook »

Jefferies’ Results Reflect the Hazards of Fixed Income  |  The revenue that the investment bank Jefferies Group generated from trading bonds, currencies and commodities slumped 85 percent in the three months before September, a far bigger drop than its larger rivals across Wall Street are expecting, Antony Currie of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

Wells Fargo Cutting Jobs in Mortgage Business  |  Wells Fargo “is eliminating about 1,800 more jobs in its home-loan production business as rising mortgage rates curtail borrowers’ demand for refinancing,” Bloomberg News reports.
BLOOMBERG NEWS

PRIVATE EQUITY »

Billabong Gets $540 Million Lifeline From Private Equity  |  The Australian surfwear company said Thursday it had agreed to accept the financing offer from Centerbridge Partners and Oaktree Capital to help it pay down debt and restructure its loss-making operations.
DealBook »

Catterton, a Private Equity Firm, Closes Two Funds at $2.1 Billion  |  Catterton Partners, a private equity firm focused on consumer companies, said on Wednesday that it had closed on its latest two funds after having raised $2.1 billion.
DealBook »

HEDGE FUNDS »

Icahn Sounds Off on Corporate Boards  |  “What baffles me is that voting rights really don’t apply to public corporations,” the billionaire investor Carl C. Icahn writes in an essay in The Wall Street Journal. “How did this board-centric system ever come about? Years of lobbying by pro-management groups in state legislatures produced a thicket of laws that protect the impregnability of boards and C.E.O.’s.”

The computer maker Dell â€" the subject of a long fight that Mr. Icahn lost â€" is “just one recent example of a ridiculously dysfunctional system,” the investor writes.
WALL STREET JOURNAL

I.P.O./OFFERINGS »

Chinese Dairy Company Raises $1.3 Billion in I.P.O.  |  Strong demand from investors for shares of China Huishan Dairy gave a boost to Hong Kong’s biggest new share sale since May, raising hopes that the market for I.P.O.’s may be staging a comeback.
DealBook »

A Shouting Match Over a Chinese I.P.O.  |  At a routine meeting of the underwriters of the I.P.O. of China Huishan Dairy, “tempers flared between two bankers from HSBC and Goldman Sachs, said people who were at the meeting and others briefed on the incident,” Reuters reports.
REUTERS

VENTURE CAPITAL »

Gigya Raises $25 Million to Help Companies Gather Data  |  Gigya, which allows companies to gather and manage data about their customers online, plans to announce on Thursday that it raised a $25 million financing round led by Greenspring Associates. That brings the company’s total venture financing raised to $70 million.

“This market that we’re pursuing can support a large, independent, lasting company,” Patrick Salyer, Gigya’s chief executive, said in an interview with DealBook. “We went out to seek this growth round to help us achieve that goal.”
GIGYA

LEGAL/REGULATORY »

Threatening Letters Sent to 140 MF Global Vendors  |  James W. Giddens, the court-appointed trustee liquidating the bankrupt firm, told vendors they had until Friday to defend payment they had received.
DealBook »

In This Downturn, Emerging Markets Have Breathing Room  |  “These are challenging times, but I don’t think they will be the same as in 2008 or 1998,” the operations director of the IGP Group, Indonesia’s dominant manufacturer of car and truck axles, told The New York Times.
NEW YORK TIMES

Former Banker Pleads Guilty in Olympus Case  |  The Associated Press reports: “A former bank vice president pleaded guilty on Wednesday to a fraud charge, admitting he helped former executives of Olympus carry out a fraud involving several hundred million dollars that deceived investors into thinking the company was stronger financially than it was.”
ASSOCIATED PRESS

Promise to Protect Pensions Tests a Red Line in Greece  |  “With a fresh inspection by Greece’s foreign creditors looming next week and labor unions leading a new wave of strikes, the government here has drawn a red line: it will keep pushing economic reforms but vows to impose no more austerity measures on Greeks already battered from three years of tax increases and pension cuts,” The New York Times writes.
NEW YORK TIMES