Morning Agenda: Service Members Trapped in Cycle of Debt

SERVICE MEMBERS VULNERABLE TO PAYDAY LOANS  |  Congress tried in 2006 to shield military members from payday loans, which come with double-digit interest rates and can plunge customers into debt. But nearly seven years after the Military Lending Act went into effect, government authorities say the law has gaps that threaten to leave hundreds of thousands of service members across the country vulnerable to potentially predatory loans, Jessica Silver-Greenberg and Peter Eavis report in DealBook. Authorities say the law has not kept pace with high-interest lenders that focus on servicemen and women, both online and near bases.

Interviews with military charities in five states and more than two dozen service members â€" many of whom declined to be named for fear that disclosing their identity would cost them their security clearances â€" indicate that the problem is spreading. In one example, the law failed to help Petty Officer First Class Vernaye Kelly, who winces when roughly $350 is automatically deducted from her Navy paycheck twice a month to cover loans with annual interest rates of nearly 40 percent. The short-term loans not covered under the law’s interest rate cap of 36 percent include loans for more than $2,000, loans that last for more than 91 days and auto-title loans with terms longer than 181 days.

“Somebody has to start caring,” said Ms. Kelly, who took out another payday loan with double-digit interest rates when her car broke down in 2005 and a couple more loans this summer to cover her existing payments. “I’m worried about the sailors who are coming up behind me.”

SAC OPERATIONS CHIEF DEPARTS  |  In 2007, before federal authorities began listening to traders’ phone calls, the hedge fund SAC Capital Advisors was in expansion mode, and a young executive named Sol Kumin played an important role. But on Thursday, Mr. Kumin, the chief operating officer, announced that he was leaving SAC, underscoring the firm’s transformation from a powerful hedge fund to a symbol for corporate crime, DealBook’s Peter Lattman reports. SAC pleaded guilty to a decade-long insider trading scheme earlier this month.

Steven A. Cohen, the owner of SAC, explained in a memo to staff that because the firm was morphing into a “family office” that manages just his and his employees’ money, “we will not need the same degree of business development activity or investor relations as before.” Mr. Kumin “has been responsible for transforming our business development and investor relations functions and has helped create our global strategy and footprint,” Mr. Cohen wrote.

The insider trading trial on Thursday of a former senior employee of SAC Capital Advisors, Michael S. Steinberg, offered a glimpse inside the wildly successful hedge fund as the first two witnesses took the stand, Alexandra Stevenson reports in DealBook. Daniel Berkowitz, SAC’s chief financial officer told the jury that portfolio managers were encouraged to come up with good ideas and were rewarded special “Cohen tag bonuses” for ideas that translated into windfall gains.

ON THE AGENDA  |  Shares of the fashion retailer Vince are expected to start trading on the New York Stock Exchange under the ticker symbol VNCE. Foot Locker reports earnings before the market opens. The hedge fund manager William A. Ackman is on Bloomberg TV at 10 a.m. Mr. Ackman is expected to redouble his criticism of the nutritional supplements company Herbalife today at the Robin Hood Investments Conference in New York.

SENATE CHANGE CLEARS THE WAY FOR PRESIDENTIAL NOMINEES  |  The strong-arm move by Senate Democrats on Thursday to limit filibusters lowers a hurdle for executive nominees, including Janet L. Yellen, President Obama’s choice to lead the Federal Reserve. The Senate Banking Committee sent Ms. Yellen’s nomination to the full Senate on Thursday morning by an unusually small margin â€" but thanks to the procedural change that came hours later, Ms. Yellen does not need Republican support, Binyamin Appelbaum and Jonathan Weisman report in The New York Times. Her confirmation to a four-year term is virtually assured.

In addition, Democrats are expected to move forward on the nomination of Representative Melvin L. Watt, Democrat of North Carolina, to lead the agency that oversees Fannie Mae and Freddie Mac, The Wall Street Journal writes. Mr. Watt is seen as a proponent of relief for underwater homeowners through principal reductions.

And yet, the partisan fever is hardly gone in Washington. “The rule change lowered to a simple 51-vote majority the threshold to clear procedural hurdles on the way to the confirmation of judges and executive nominees. But it did nothing to streamline the gantlet that presidential nominees run,” Mr. Weisman reports in The Times.

Mergers & Acquisitions »

Suitors of Time Warner Cable Arrange Financing for Bid  |  The Wall Street Journal reports: “Charter Communications Inc. is nearing an agreement with banks to borrow money for a bid for Time Warner Cable Inc., according to people familiar with the situation â€" a sign that the scrappy cable operator’s effort to engineer a combination of the two companies may be moving into high gear.”
WALL STREET JOURNAL

Novartis Plans $5 Billion Stock Buyback  |  The Swiss drug maker Novartis plans to buy back $5 billion worth of shares, as it continues to carry out a review of its operations.
REUTERS

Deutsche Telekom to Sell Stake in Scout 24, an Online Ad Company  |  Deutsche Telekom said that it would sell a 70 percent stake to Hellman & Friedman for 1.5 billion euros, or about $2 billion, in cash.
DealBook »

Founder Securities of China May Sell Stake in Credit Suisse Venture  |  Founder Securities said in a regulatory filing that its planned merger with China Minzu Securities could create a conflict of interest with its joint venture with Credit Suisse, Reuters reports.
REUTERS

INVESTMENT BANKING »

JPMorgan’s Legal Woes Are Said to Weigh on Pay  |  JPMorgan Chase “plans to keep overall compensation per employee roughly flat this year from last year, lagging gains at rivals, as the bank’s massive legal settlements weigh on its results, two sources familiar with the matter said,” Reuters reports.
REUTERS

Wall Street Regulator Goes After Risky Brokers  |  The Wall Street Journal reports: “Under pressure from Washington to crack down on rogue stockbrokers, the Financial Industry Regulatory Authority is highlighting a fast-track program it began earlier this year to go after what it calls ‘high-risk brokers.’”
WALL STREET JOURNAL

UBS Aims to Attract Wealthy Clients in Africa  |  The moves by UBS in Nigeria and Angola come as its rival Credit Suisse pulls back from some African markets, Bloomberg News reports.
BLOOMBERG NEWS

Awaiting a Judge’s Ruling on an $8.5 Billion Settlement  |  Reuters writes: “A decision on whether to approve Bank of America Corp.’s proposed $8.5 billion settlement with investors in mortgage securities is now in the hands of a New York State judge, after a nine-week court proceeding ended on Thursday.”
REUTERS

PRIVATE EQUITY »

Party City Is Said to Plan I.P.O. Next Year  |  Reuters reports: “Party City Holdings Inc., the largest U.S. party goods retailer acquired just over a year ago by buyout firm Thomas H. Lee Partners LP for $2.69 billion, is preparing for an initial public offering, according to people familiar with the matter.”
REUTERS

Blackstone’s Version of Peak Oil  |  The Blackstone Group showed an uncanny knack for timing in the $6 billion sale of GeoSouthern Energy to Devon Energy, Christopher Swann of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

HEDGE FUNDS »

Micron Shares Rise After Praise From Einhorn  |  David Einhorn, in disclosing that his firm, Greenlight Capital, owned a stake in Micron Technology, described the company as one of the survivors of the market for memory chips.
DealBook »

Ackman’s Washington Strategy  |  William A. Ackman, a hedge fund manager who is in the red in his bet against Herbalife, told The Washington Post that if he didn’t think regulatory authorities would take action against the company, “we would’ve given up a long time ago.” He continued: “We’ve got an unbelievable amount of resources on this.”
WASHINGTON POST

Loeb Reveals Stake in SoftBank of Japan  |  Daniel S. Loeb said at an investor conference that his firm held a stake of at least $1 billion in SoftBank, the Japanese telecommunications giant.
REUTERS

I.P.O./OFFERINGS »

Vince Prices Above Its I.P.O. Range as Fashion Stays Hot With Investors  |  The fashion retailer priced its stock sale at $20 a share, a dollar above its expected range. At that price, investors valued the clothing store chain at $726 million.
DealBook »

Treasury Seeks an Exit From G.M. by Year End  |  The government will finally sever ties to the bailed-out automaker. Barring a sudden jump in General Motors’ stock price, the government is on track to lose about $10 billion on its investment.
DealBook »

VENTURE CAPITAL »

A $4 Billion Valuation for Spotify  |  The Financial Times reports: “Spotify has raised about $250 million in new financing from an early backer of Netflix, in a deal valuing the Swedish digital music service at more than $4 billion.”
FINANCIAL TIMES

An Uptick in the Hiring of Women in Tech  |  “There are signs that tech companies are hiring more women, but women still appear to make up far less than half of all new hires in the industry,” the Bits blog writes.
NEW YORK TIMES BITS

LEGAL/REGULATORY »

Banks Cry Foul as a Trading Tactic Is Foiled  |  “What country are you in? Where is your business located? In what country did your trade take place? Those were once questions whose answers were so obvious that no one asked them. Now they are questions that can drive financial regulators and tax collectors to distraction,” Floyd Norris writes in the High & Low Finance column in The New York Times.
NEW YORK TIMES

Former Chairman of British Bank Is Arrested in Drug Case  |  Paul Flowers, the former chairman of the Co-operative Bank, was arrested by British police after a video was published apparently showing him arranging to buy drugs, Reuters reports.
REUTERS

Tax Proposal for an Economy No Longer Rooted in Manufacturing  |  Under current law, the value of assets like machinery or livestock can be written off for tax purposes, Victor Fleischer writes in the Standard Deduction column. But what about assets like patents or salaries and training for employees?
DealBook »

The Latest Banking Scandal  |  “As financial investigations go, it literally can’t get any bigger than this: The world’s biggest banks are now being investigated for rigging the world’s biggest market,” the editorial board of The New York Times writes.
NEW YORK TIMES

Jury Tells Samsung to Pay $290 Million to Apple  |  The New York Times reports: “A jury on Thursday said that Samsung Electronics would have to pay Apple $290 million more in damages for violating patents, putting an end to one chapter in the long-running patent struggle between the two tech companies.”
NEW YORK TIMES