Nominee for S.E.C. Tries to Allay Skepticism

Mary Jo White’s path to the Securities and Exchange Commission has reached a crucial juncture: the Congressional charm campaign.

Lawmakers are scrutinizing Ms. White ahead of her Senate confirmation hearing, raising questions about the former prosecutor’s lack of regulatory experience and the challenge of policing Wall Street firms she recently defended in private practice. But Ms. White is seeking to quell concerns about potential conflicts of interest.

She recently scheduled meetings with Senate Banking Committee members, who must clear her nomination, and answered a 20-page boilerplat questionnaire detailing her qualifications, according to a copy provided to The New York Times. The document sheds new light on her list of Wall Street clients, including little-known work performed for HSBC’s former chief executive. It also describes her ties to New York Democratic causes and laurels earned both as a defense lawyer and federal prosecutor.

The questionnaire, created by the banking committee, focused significant attention on her movement through the revolving door between government service and private practice, a concern that has loomed since President Obama nominated Ms. White in January.

“As a government official, I believe I have an established track record and the reputation of being tough, but fair,” she said in the document.

Ms. White also offered a previously undisclosed concession, vowing “as far a! s can be foreseen,” never to return to Debevoise & Plimpton, where she had built a lucrative legal practice. To avert potential conflicts stemming from her work on behalf of Wall Street giants, Ms. White had already agreed to recuse herself for one year from most matters that involve former clients.

While Ms. White’s nomination is expected to sail through the committee before receiving full Senate approval, four Congressional officials who spoke anonymously warned that some Democrats have lingering reservations.

The Democrats note that her husband, John W. White, is co-chairman of the corporate governance practice at Cravath, Swaine & Moore, where he represents many of the companies that the S.E.C. regulates. They also question whether Ms. White’s recusals, even if well-intentioned, could cripple her ability to run the agency.

In a meeting on Tuesday with Senator Sherrod Brown, Democrat of Ohio, Ms. White did little to alleviate the fears.

“Senator Brown respects Ms. White’ credentials and experience, but is concerned with Washington’s long-held bias toward Wall Street,” his spokeswoman, Meghan Dubyak, said in a statement. “He pushed Ms. White,” to explain “whether her previous employment or her spouse’s current employment could cause her to recuse herself from key business facing the S.E.C.”

Ms. White’s supporters counter that, before the White House announced the appointment, the Office of Government Ethics vetted her disclosures. The nonpartisan officials concluded that, despite her recusals, Ms. White could effectively run the agency.

Her supporters also trumpet her long tenure as a tenacious prosecutor. During stints as a federal prosecutor in Brooklyn and as the first woman United States attorney in Manhattan, she helped oversee the prosecution of the crime figure John Gotti and directed the case against those responsible for the 1993 World Trade Center bombing. The cases won her praise from several lawmakers.

Ms. White still has! time to ! win over remaining skeptics. Her confirmation hearing is not expected until the week of March 11, Congressional officials briefed on the matter said.

Until then, Ms. White is blitzing through the halls of Congress, a routine practice for nominees. She began her charm offensive at the top of the banking committee’s roster, visiting this month with the Democratic chairman, Senator Tim Johnson, of South Dakota. A Congressional official briefed on the matter said Ms. White performed well at the gathering, and no major issues arose.

In the next round of meetings, she will face off with a more liberal arm of the committee known to scrutinize nominees. After meeting Mr. Brown, Ms. White is scheduled to see Senator Jeff Merkley, Democrat of Oregon. She also will meet Elizabeth Warren, the Massachusetts Democrat who is an outspoken critic of Wall Street, Ms. Warren’s office confirmed on Tuesday.

Even if Ms. White fails to satisfy lawmakers’ concerns, the meetings are an important step in clearing the way for her appointment.

“Senators will have a chance to size Mary Jo up, and I believe will come away with a great sense of comfort that she’s a candidate of true quality,” said Harvey Pitt, who passed through the confirmation process in 2001 to lead the S.E.C.

He noted that addition! al disclo! sures could bolster her candidacy. “I do think she will need to provide a level of comfort to the committee that she is aware of the issue, has a definitive plan for navigating through the potential conflict issues, and will be completely open about when she has a potential recusal issue, and how she has handled it,” he said.

Ms. White, a political independent, assured lawmakers in her questionnaire that she was “completely independent of political or personal influences.” She did disclose, however, $13,000 in campaign donations to Democratic candidates. She also served on the campaign committee of a Democrat who had run for New York attorney general.

Her ties to Debevoise â€" and its clients â€" are more significant; she represented JPMorgan Chase, UBS and Michael Geoghegan, the former head of HSBC.

Ms. White, 65, said thi month said that she would retire from Debevoise after taking over the S.E.C. and would forgo the firm’s typical retirement perks: office space and a free BlackBerry. She also will sever financial ties to the firm during her term at the S.E.C., taking an upfront lump-sum retirement payment rather than collecting a monthly installment of $42,500.

Her husband has also offered concessions. He agreed to convert his partnership at Cravath, Swaine & Moore from equity to nonequity status and promised not to “communicate directly” with the S.E.C. about rule-making. Ms. White will not participate in a matter with a direct effect on his compensation.

In line with a standard move for federal appointees, Ms. White further agreed to recuse herself for one year from voting on enforcement cases involving Debevoise clients. There are limitations to the ! policy, t! hough, in case it is “in the public interest” and a “reasonable” person would not object.

Some lawmakers dismiss questions about her potential conflicts, but still question her mastery of regulatory minutiae. While Ms. White is a skilled litigator, she lacks experience in financial rule-writing, unlike a predecessor, Mary Schapiro, a lifelong regulator who ran the S.E.C. for nearly four years.

In her questionnaire, Ms. White highlighted her role as a director of the Nasdaq exchange and other experiences that she said gave her “a firm grounding” in securities laws.

She also, inadvertently, drew a connection to Ms. Schapiro. Like Ms. Schapiro, Ms. White is an animal lover, currently serving as a board member of the American Society for the Prevention of Cruelty to Animals.

She agreed to step downfrom the board once she is sworn in at the S.E.C.

In Wall Street Tax, a Simple Idea With Unintended Consequences

Some say that a financial transaction tax is a cost-free way to kill many a bird with one stone â€" raising revenue, preventing financial crashes and making markets safer. But advocates of this neat idea conveniently ignore the century of less-than-successful experience with this tax, including New York State’s own failed attempt.

The idea behind a financial transaction tax, which is a tax on individual market trades, has a smart pedigree. John Maynard Keynes suggested it, and James Tobin, a Nobel laureate in economics, was its most famous modern advocate. Tobin, who died in 2002, wanted to “throw some sand in the wheels” of the markets, and his idea, endorsed by Joseph Stiglitz and Lawrence H. Summers among others, is based on an increasingly held belief that markets are far from efficient. Imposing a transaction tax on each individual trade would eliminate wasteful trading and reduce market volatility, ending short-term speculation and mispricing of assets.

This net benefit is paired with a simple budget argument. The Robin Hood Tax campaign in Britain, for example, has used the slogan “Not complicated. Just brilliant” to support a 0.05 percent tax on transactions as an effective way to ease the budget without harming markets. Let’s face it, the banks are an easy target after the financial crisis.

It seems to be a win for everyone.

Unfortunately, the reality has been much different.

Let’s start with New Yo! rk State, which has had such a tax since 1905. Over the next eight decades, the tax was revised up and down nine times, including a large increase in the middle of the Great Depression. In 1966, Mayor John V. Lindsay of New York City ended up raising the tax by 25 percent. It led to an immediate reaction as the New York Stock Exchange threatened to jump across the Hudson River to New Jersey.

In the 1970s, the tax bean to be phased out. New York State still collects the tax â€" some $14.5 billion annually â€" but since 1981, the state has simply returned it to traders instead of keeping it. In other words, the tax is collected and immediately given back, something that can happen only in the strange world of taxes. (Other financial transaction taxes include a federal version, which was put in effect in 1914 to help pay for World War I and eliminated in 1966, and taxes in Massachusetts and Pennsylvania that were also done away with in the 1950s.)

A study of New York State’s tax over those eight decades by Anna Pomeranets and Daniel G. Weaver found that it increased the cost of capital for investors and reduced trading volume. Most important, they found the tax actually increased trading volatility by as much as 10 percent.

Increasing volatility is exactly what advocates of the tax don’t want. They want volatility reduced to prevent market disruptions, but the decline in traders in the markets mean! fewer bu! yers and sellers and more price jumps. This finding of increased volatility is in general accord with nine other major papers to study this issue, including studies of the tax in 23 countries, among them Britain, Sweden and Japan. Only one of these papers found that a financial transaction tax reduced volatility.

The New York State tax experience raises a bigger issue â€" that of traders just going elsewhere. This problem was mirrored in Sweden.

In 1984, Sweden adopted a financial transaction tax. Some 30 percent to 50 percent of the country’s trading volume then shifted to Britain. The lower amount of trading meant that not only did the tax yield less money than predicted but that the country lost more in capital gains taxes than the financial transaction tax raised. The tax was abolished in 1991.

The Swedish and New York State examples show that not only will traders leave to trade elsewhere; the money that people think this tax will reap will not appear, as that trading migrates and vlume declines. Japan decided to eliminate its financial transaction tax in 1999 for this reason.

And even if the trading does not shift to other places, financial people are adept at avoiding it. In Britain, for example, where the financial transaction tax has fluctuated from half a percent to 2 percent, the tax has raised significantly less revenue than one might expect, about £3 billion a year. The reason is that investors who trade regularly in Britain use options to avoid the tax, which applies only to trading in stock. The result may be that the tax pushes investors into more risky securities in their efforts to avoid it.

And the reduced volume does not just reduce the amount of revenue collected. It may impose the largest costs on people who cannot afford or avoid the tax. The money management firm BlackRock has calculated that if the! financia! l transaction tax were set at 0.1 percent per trade, an investor putting $10,000 in its global equity fund would lose more than $2,300 in expected returns over a 10-year period. This amount would rise to $15,000 if the money were invested in a more actively managed European fund.

This means not only less in retirement funds, but fewer jobs. Although disputed, one study in 2004 by the Partnership for the City of New York found that if New York State started keeping a tax of 0.25 cents per share traded, it would lose 23,000 to 33,000 jobs for every 10 percent drop in volume and more than $3 billion in lost revenue and economic value, probably more than offsetting the amount it collected.

This is not to say that a financial transaction tax by itself is such a terrible idea. My point is that we already have lots of experience with this kind of tax, and it argues for caution. If you think a financial transaction tax will reduce volatility, then you have to account for the fact that taxes in the past ave shown the opposite. And if the tax is not imposed globally, it will force migrations of trading to less regulated places and in more byzantine forms, possibly making the world markets less safe.

As for seeking revenue gains to solve budget problems, if the tax is too small, it will have no effect. But the larger it is â€" and the Robin Hood Foundation’s proposal is in the large sphere â€" the more markets will be affected. It is for these reasons that Canada has rejected such a tax.

Now, we are about to get a real-life case study. France has adopted a 0.2 percent financial transaction tax involving securities of a company with a market capitalization of more than 1 billion euros. The full effects of France’s tax are not yet known, but a preliminary study by Credit Suisse, according to The Economist, found that stocks not sub! ject to a! tax rose 19 percent by volume, but those affected by the tax declined 16 percent. And the net effect of the tax appears to have shifted trading to smaller stocks not subject to it, distorting the allocation of capital, which is another problem with the tax. And the European Union has proposed a tax for 11 of its member countries, giving us a possible second test.

Instead of rushing into the adoption of a financial transaction tax, it may behoove us to watch and see whether these new taxes in Europe work. And even if the United States plunges ahead, history tells us that any tax should be carefully structured and considered before being put into effect. For there are likely to be many unintended consequences. There’s a reason that economists say there is no free lunch.

Tribune Said to Hire Bankers to Sell Newspapers

The Tribune Company has hired investment bankers to pursue a sale of its top newspapers, including The Chicago Tribune and The Los Angeles Times, a person briefed on the matter told DealBook on Tuesday.

The media company, which emerged from bankruptcy late last year, has hired JPMorgan Chase and Evercore Partners to run the process, this person said.

Tribune’s move comes as little surprise. Speculation has been swirling around the media industry for some time that a number of potential suitors had emergedfor the company’s holdings, a lot that may include the News Corporation.

Peter Liguori, Tribune’s recently appointed chief executive, told The Los Angeles Times last month that he had not ruled out a sale of the company’s newspaper brands but added that he isn’t “going into this job with a fire-sale sign.”

News of the bankers’ hirings was reported earlier by CNBC.

Wall Street Pay Rises - for Those Who Still Have a Job

It’s nice work - if you can get it.

Wall Street has cut thousands of jobs over the past year or so. On Tuesday, JPMorgan Chase, one of the country’s biggest banks, announced that it was eliminating 4,000 more jobs through layoffs and attrition, adding its name to a string of large banks that continue to cut jobs to reduce expenses.

The good news For the employees who remain, pay is up, according to a report released Tuesday by the New York State comptroller.

This may seem surprising given the outcry over high compensation during the financial crisis. In recent years, however, faced with greater regulation, a slow economic recovery and the loss of once big moneymaking businesses like selling products tied to mortgages, the banks have tried instead to cut people rather than pay, which they argue is needed in order to retain talnt that might otherwise leave for better paying jobs at hedge funds or elsewhere.

The average cash bonus for people employed in New York City in the financial industry rose by roughly 9 percent, to $121,900, in 2012 and cash bonuses in total are forecast to increase by roughly 8 percent to $20 billion this year, said Thomas P. DiNapoli, the comptroller.

In recent years some firms have deferred cash payments to employees, and Mr. DiNapoli said part of the increase in the 2012 numbers was cash promised in recent years was actually paid out in 2012. He said that it was “tough” to break out what percentage of the total are deferrals but he believed that it was still a small part of the total.

All told, the average pay package for securities industry employees in New York was $362,900 in 2011, the last! year for which data is available, almost unchanged from 2010.

Wall Street jobs are harder to get than they were just a few years ago, but for those who can get their foot in the door finance remains the best paying sector in New York City, Mr. DiNapoli told reporters during a confernce call

“Profits and bonuses rebounded in 2012, but the industry is still restructuring. Despite its smaller size, the securities industry is still a very important part of the New York City and New York state economies,” he said.

The current economic recovery, he said, is being driven by industries other than Wall Street, which he said has regained only 30 percent of the jobs lost during the downturn. The securities industry in New York City lost 28,300 jobs during the financial crisis and has added only 8,500 since, a net loss of 19,800 jobs. New York City financial industry employment totaled 169,700 at the end of 2012.

Before the start of the financial crisis, business and personal income tax colections from Wall Street related activities accounted for up to 20 percent of New York State tax revenues. In 2012, that contribution fell to just 14 percent.

“Wall Street is still in transition, but it is very slowly adjusting to changes in its economic and regulatory environment,” he said.

Private Equity Eyes European Bank Assets

BERLIN - Private equity is circling Europe’s banks.

Faced with bloated balance sheets and efforts to cut back on lending, the Continent’s largest financial institutions offer enticing opportunities for leading firms like Apollo Global Management and Kohlberg Kravis Roberts.

For some the chance to pick up loan portfolios, particularly from nationalized firms like Royal Bank of Scotland, at a hefty discount is tantalizing. Other are enticed by the ability to provide financing for cash-strapped companies that can’t get credit from traditional lenders.

There’s just one catch: European banks aren’t playing ball.

More than $1 trillion of cheap, short-term loans from the European Central Bank have given banks extra breathing room, allowing them to hold on to some troubled assets like defaulting real estate loans. Local politicians also have strong-armed industry giants to offer lending to companies in a bid to jumpstart growth across Europe.

The limited deal flow, particulrly for so-called distressed assets like consumer lending portfolios, contrasts with the high hopes that many private equity firms initially had about picking up assets on the cheap.

“The ratio of hype to substance about banks deleveraging their balance sheets has been exceptionally high,” Nathaniel M. Zilkha, the global co-head of special situations investing at K.K.R., told a packed conference room at the Super Return private equity conference in Berlin on Tuesday. “Sitting outside the offices of Royal Bank of Scotland waiting for the flood of assets is a difficult strategy.”

Still, some deals are getting done. Banks are pulling back from international markets where they have small operations, and European governments that bailed out local lenders are forcing asset sales to wind down bad investments.

Last year, Apollo Global Management, for example, picked up consumer lending businesses in Ireland and Spain from Bank of America, as the American bank pulled back from the st! ruggling European economies. K.K.R. also pocketed an Australian loan portfolio from Lloyds Banking Group of Britain, which is 42 percent owned by local taxpayers after being bailed out during the financial crisis.

“Some banks have to sell,” said David Abrams, the head of European nonperforming loan investments at Apollo. Others “want to sell to get out of non-core markets.”

Private equity firms, though, are still waiting for the long-awaited fire sale by European banks.

Mr. Abrams of Apollo said the combined balance sheet of the Continent’s financial institutions is still more than $60 trillion compared to around $12 trillion for United States banks.

With limited economic growth projected for the foreseeable future in Europe, private equity firms are still hoping that banks will be forced to increase their asset sales, especially ahead of new capital requirements that will make it more costly to hold on to delinquent loans.

Firms also are looking to muscle in on Europan banks’ monopoly in the lending market.

Since the downturn, many institutions have pulled back from financing companies and buyouts as they look to reduce their exposure to risk. They also are changing their business models from holding large debt portfolios on their balance sheets to reducing the size of the financing and looking to shed the investments to other investors.

“Banks are massively changing their commitments” to new lending, said Robin Doumar, managing partner at Park Square Capital, one of the private equity firms looking to fill the funding void.

The strategy for private equity includes offering debt financing for buyouts, as well as complex funding options like so-called mezzanine loans.

While banks are expected to remain important lenders for European deals, analysts expect private equity lenders to increasingly take a larger share of the business.

“Banks are not out of business, they are just doing it in a smaller way,” said Blair Jacobson, ! a managin! g director in the private debt group of Ares Management, a firm that offers funding options to companies. “The market opportunity for what we are doing is immense.”

Private Equity Eyes European Bank Assets

BERLIN - Private equity is circling Europe’s banks.

Faced with bloated balance sheets and efforts to cut back on lending, the Continent’s largest financial institutions offer enticing opportunities for leading firms like Apollo Global Management and Kohlberg Kravis Roberts.

For some the chance to pick up loan portfolios, particularly from nationalized firms like Royal Bank of Scotland, at a hefty discount is tantalizing. Other are enticed by the ability to provide financing for cash-strapped companies that can’t get credit from traditional lenders.

There’s just one catch: European banks aren’t playing ball.

More than $1 trillion of cheap, short-term loans from the European Central Bank have given banks extra breathing room, allowing them to hold on to some troubled assets like defaulting real estate loans. Local politicians also have strong-armed industry giants to offer lending to companies in a bid to jumpstart growth across Europe.

The limited deal flow, particulrly for so-called distressed assets like consumer lending portfolios, contrasts with the high hopes that many private equity firms initially had about picking up assets on the cheap.

“The ratio of hype to substance about banks deleveraging their balance sheets has been exceptionally high,” Nathaniel M. Zilkha, the global co-head of special situations investing at K.K.R., told a packed conference room at the Super Return private equity conference in Berlin on Tuesday. “Sitting outside the offices of Royal Bank of Scotland waiting for the flood of assets is a difficult strategy.”

Still, some deals are getting done. Banks are pulling back from international markets where they have small operations, and European governments that bailed out local lenders are forcing asset sales to wind down bad investments.

Last year, Apollo Global Management, for example, picked up consumer lending businesses in Ireland and Spain from Bank of America, as the American bank pulled back from the st! ruggling European economies. K.K.R. also pocketed an Australian loan portfolio from Lloyds Banking Group of Britain, which is 42 percent owned by local taxpayers after being bailed out during the financial crisis.

“Some banks have to sell,” said David Abrams, the head of European nonperforming loan investments at Apollo. Others “want to sell to get out of non-core markets.”

Private equity firms, though, are still waiting for the long-awaited fire sale by European banks.

Mr. Abrams of Apollo said the combined balance sheet of the Continent’s financial institutions is still more than $60 trillion compared to around $12 trillion for United States banks.

With limited economic growth projected for the foreseeable future in Europe, private equity firms are still hoping that banks will be forced to increase their asset sales, especially ahead of new capital requirements that will make it more costly to hold on to delinquent loans.

Firms also are looking to muscle in on Europan banks’ monopoly in the lending market.

Since the downturn, many institutions have pulled back from financing companies and buyouts as they look to reduce their exposure to risk. They also are changing their business models from holding large debt portfolios on their balance sheets to reducing the size of the financing and looking to shed the investments to other investors.

“Banks are massively changing their commitments” to new lending, said Robin Doumar, managing partner at Park Square Capital, one of the private equity firms looking to fill the funding void.

The strategy for private equity includes offering debt financing for buyouts, as well as complex funding options like so-called mezzanine loans.

While banks are expected to remain important lenders for European deals, analysts expect private equity lenders to increasingly take a larger share of the business.

“Banks are not out of business, they are just doing it in a smaller way,” said Blair Jacobson, ! a managin! g director in the private debt group of Ares Management, a firm that offers funding options to companies. “The market opportunity for what we are doing is immense.”

Executive Pay Votes May Be Harming Shareholders

Manan Shah is a partner in the employee benefits and executive compensation practice at Jones Day in New York.

The new “say on pay” rules enacted as part of the Dodd-Frank Act were put in place to try to make executive compensation more accountable and transparent to investors. However, as we enter this year’s proxy season, it appears as though corporate advisers rather than corporate shareholders are reaping the benefits of the new rules.

It has been a full two years since the “say on pay” rules went into effect. But according to a recent report by the Semler Brossy Consulting Group, a vast majority of companies are not facing any challenges to their pay packages. Of the 2,215 companies in the Russell 3000 index that were surveyed in 2012, only 2.6 percent had a vote that failed on “say on pay” while more than 91 percent had a vote pass with at least 70 percent shareholder approval./p>

Despite this overwhelming shareholder support, corporations are going to increasingly greater lengths to ensure they pass the vote and avoid the negative consequences of a failure.

If a “say on pay” vote fails, the resulting fallout of negative media attention and frivolous shareholder litigation can cause significant damage to a company’s image and even its share price. Therefore, companies are facing extreme pressure to use significant financial resources and manpower to guarantee passage of the vote.

An even more alarming consequence is that mandatory “say on pay” votes may be forcing boards and compensation committees to substitute their knowledge of the company for the perceived wisdom of proxy advisers’ guidelines. Even among companies facing little risk of opposition, boards are acting cautiously to ensure proxy guideline support of pay packages. The result is that companies feel increasing pressure to make executive compensation changes to appease proxy advisers ! regardless of whether those changes are really in the best long-term interests of the company.

The problem is even worse for companies facing shareholder opposition to its pay policies. These corporations tend to incur even greater costs to proxy advisers, compensation consultants, lawyers and other advisers â€" and even more costs should the vote fail. This is likely to cause financial damage to the company through wasted assets and potential reputational harm, which could far outweigh the costs of the perceived “excessive” executive pay.

It is also unclear if the compensation changes recommended by proxy advisers are in the best interests of shareholders. A July 2012 working paper by the Rock Center for Corporate Governance found that revisions made by companies to their compensation programs in an attempt to conform to guidelines issued by proxy advisory firms actually produced a net cost to shareholders. As a result, thepaper concluded, proxy adviser policies and influence had induced the companies to make compensation decisions that actually decreased shareholder value.

In light of this, every institutional shareholder investing in companies subject to mandatory “say on pay” votes should be asking themselves whether the perceived benefits of the mandatory “say on pay” voting system truly outweigh the costs of efforts to ensure vote passage, which are incurred by both institutional shareholders and the companies in which they’ve invested If not, are we as institutional investors breaching duties to our own stakeholders as a result of the “say on pay” voting process

As asset managers, institutional shareholders have duties to ensure that their stakeholders’ assets are properly protected. Since it is difficult to perform an in-depth independent analysis on the thousands of shareholder issues up for vote, many such investors rely heavily on the recommendations of shareholder advisory fir! ms like I! nstitutional Shareholder Services and Glass, Lewis & Company.

These proxy advisers are for-profit firms that do not have the same vested interest in the financial success of the company as its shareholders. These firms make money by selling a product in the most cost-effective manner possible. With respect to executive compensation, this often means a “one size fits all” report that is not tailored to a company’s industry, location or other competitive factors.

Institutional shareholders debating whether to vote for or against a company’s “say on pay” proposal, therefore, cannot rely solely on the proxy adviser’s report. Rather, they should carefully consider whether the potential benefits of that vote clearly outweigh the negative implications that are likely to result.

At the very least, this should involve a careful review of the board’s recommendations on the shareholder proposals; after all, by investing in the company, they have already placed their faith in the compay’s board.

If concerns persist, institutional shareholders should hold discussions with the company’s board and executives before making a decision that could cause monetary and reputational harm.

The end result of mandatory “say on pay” rules cannot be a system that serves to potentially harm companies and their shareholders, while wasting manpower and needlessly funneling crucial resources to shareholder advisory firms and the myriad other advisers.

As proxy season kicks off, institutional shareholders should evaluate who really benefits from the “say on pay” rules: Is it the companies and their shareholders Or is it really the shareholder advisory firms The answer is crucial in determining whether to vote against a pay proposal.

Mr. Shah’s views do not necessarily reflect those of Jones Day or any of the law firm’s clients.

Nides Rejoins Morgan Stanley From State Dept.

A former top Morgan Stanley official is coming back to the firm, after a two-year stint at the State Department under Hillary Rodham Clinton.

Morgan Stanley announced on Tuesday that Thomas R. Nides, who served as its chief operating officer until early 2011, woulf return as a vice chairman. In that role, he will have wide-ranging responsibilities covering clients and external and government affairs.

Mr. Nides will report to James P. Gorman, Morgan Stanley’s chairman and chief executive, and will work with the heads of Morgan Stanley’s core securities and wealth management businesses, Colm Kelleher and Gregory Fleming.

“We are excited to have Tm rejoin the management team, this time focusing on the firm’s clients,” Mr. Gorman said in a statement. “His deep experience over the past 25 years in government and financial services uniquely qualifies him to deliver the full capabilities of Morgan Stanley to our current and prospective clients globally.

The homecoming will be Mr. Nides’ first stop from Washington, where he served as deputy secretary of state for management and resources, focused on internal operations for the agency.

He had previously worked at Morgan Stanley for five years, joining when his boss at Credit Suisse, John J. Mack, returned to lead the firm. Mr. Nides served as one of Mr. ! Mack’s top lieutenants and helped to steer the investment bank through the financial crisis.

And earlier in Mr. Nides’ career, he worked as the chief executive of Burson-Marsteller, the public relations firm.

But politics had been the starting point of his career: He has been chief of staff for Senator Joseph I. Lieberman during the 2000 presidential campaign, aide to former House speaker Thomas Foley and chief of staff for Mickey Kantor, the former United States trade representative.

Nides Rejoins Morgan Stanley From State Dept.

A former top Morgan Stanley official is coming back to the firm, after a two-year stint at the State Department under Hillary Rodham Clinton.

Morgan Stanley announced on Tuesday that Thomas R. Nides, who served as its chief operating officer until early 2011, woulf return as a vice chairman. In that role, he will have wide-ranging responsibilities covering clients and external and government affairs.

Mr. Nides will report to James P. Gorman, Morgan Stanley’s chairman and chief executive, and will work with the heads of Morgan Stanley’s core securities and wealth management businesses, Colm Kelleher and Gregory Fleming.

“We are excited to have Tm rejoin the management team, this time focusing on the firm’s clients,” Mr. Gorman said in a statement. “His deep experience over the past 25 years in government and financial services uniquely qualifies him to deliver the full capabilities of Morgan Stanley to our current and prospective clients globally.

The homecoming will be Mr. Nides’ first stop from Washington, where he served as deputy secretary of state for management and resources, focused on internal operations for the agency.

He had previously worked at Morgan Stanley for five years, joining when his boss at Credit Suisse, John J. Mack, returned to lead the firm. Mr. Nides served as one of Mr. ! Mack’s top lieutenants and helped to steer the investment bank through the financial crisis.

And earlier in Mr. Nides’ career, he worked as the chief executive of Burson-Marsteller, the public relations firm.

But politics had been the starting point of his career: He has been chief of staff for Senator Joseph I. Lieberman during the 2000 presidential campaign, aide to former House speaker Thomas Foley and chief of staff for Mickey Kantor, the former United States trade representative.

Why Einhorn’s Win May Be Apple’s Gain

Greenlight Capital and David Einhorn’s victory against Apple in Federal District Court in Manhattan is a small one, serving only to highlight the bizarreness of the entire fight. The odd thing is that the result is actually more of a win for Apple than Mr. Einhorn, and the outcome will probably have a bigger effect on other companies.

To understand the importance of the case, it is necessary to go through what happened in the courtroom.

Apple had proposed to amend its certificate of incorporation to make what it claimed to be two shareholder friendly amendments. The biggest amendment was no doubt to clear the way for a majority vote requirement for Apple’s directors. But a second amendment proposed to eliminate the ability of directors to issue preferred stock.

The second proposal was quite unusual, as few companies had ever take this step. Given this - and Apple’s less-than-friendly shareholder governance - it was hard not to see why Mr. Einhorn made a move. In the course of this battle, Mr. Einhorn called on Apple to issue what he called iPref’s, tens of billions of dollars’ worth of preferred shares that he claimed would unlock Apple’s huge cash hoard. (I wrote more about this proposal and this battle a few weeks ago.

Had the proposal gone to a vote at the shareholder meeting on Wednesday, Mr. Einhorn would likely have lost and the charter would have been amended. So he took a different tactic. He sued.

In the complaint, Greenlight Capital claimed that Apple’s proposal violated the unbundling rules of the Securities and Exchange Commission, which require that a shareholder ballot must “identify clearly and impartially each separate matter intended to be acted upon, whether or not related.” The rules also dictate that a “person solicited is afforded an opportunity to specify by boxes a choice between approval or disapproval of, or abstention with respect to each separate matter referred to therein as intended to be acted upon.” They are known as the unbundling rules because they effectively require that shareholders be allowed to separately express their views to the board without being coerced into voting for issues they would not support.

If you are not up to speed on these rules, you are not alone. There have only been a few court cases on the issue, and very little S.E.C. guidace on what constitutes bundling.

The only major guidance is an S.E.C. release from 2004 about bundling in votes on mergers. In that release, the S.E.C. indicated that bundling would occur where approval on a merger was grouped with approval of a material change to a company’s certificate of incorporation.

From this S.E.C. guidance, bundling appears to refer to two substantive matters lumped together.

On that basis, Mr. Einhorn’s complaint is not frivolous. Apple had combined a number of proposals as one - and even described them as separate in its proxy.

But the flip side of this argument was the one made by Apple itself - that this was merely an amendment to a certificate, which had the effect of enacting several changes to the charter. And Apple had the side of practice, if not precedent. Companies amend! their ce! rtificates all the time, changing numerous terms in one vote.

While the judge struggled with the lack of precedent on the issue, he ultimately ruled for Mr. Einhorn. In doing so, he relied on a treatise that cited unwritten S.E.C. guidance from before 1999. The treatise stated that aggregating separate charter amendments - if material - would constitute bundling. The judge stated:

Given the language and purpose of the rules, it is plain to the Court that Proposal No. 2 impermissibly bundles “separate matters” for shareholder consideration. Even ignoring the mere formulation of Proposal No. 2 as four distinct changes, which “alone suggests the[ir] separability,” the present bundling of items forces shareholders, including Greenlight and Gralnick, to “approve or disapprove a package of items and thus approve [or disapprove] matters they [would] not if presented independently.”

The judge’s decision, at first blush, appears to be a reasonable interpretatin of the rule.

But remember that the S.E.C. has only specifically come out against two separate items bundled together - a charter amendment and a merger. When you amend your charter, you are really only doing one thing with the ancillary effect of making changes to a company’s governance. And companies have amended their charters thousands of times.

In essence, the court is saying companies will have to change how they amend their certificates. Every term will now need to be broken out separately.

But corporate governance is not so neat.

When you look harder, the judge’s ruling goes quite far, maybe farther than the unbundling rules intended. A charter amendment is not about two different substantive acts. It is rather an individual charter vote that includes two or more proposals. There is a difference.

Nonetheless, perhaps the Apple case can be isolated as a problem of how it drafted the proposal. The company did describe the proposal as encompassing separate item! s, making! Mr. Einhorn’s case much stronger.

But the bottom line is that, given how this disrupts the ability of a company to amend its charter, the S.E.C. will probably have to clarify things. If a company now decides to completely rewrite its charter, will every term now have to be broken out for a separate vote What a hassle.

Ultimately, though, other than this headache for other companies, Mr. Einhorn’s win does not change a thing in the fight with Apple. Apple still has its cash hoard of roughly $140 billion, and Mr. Einhorn still wants the company to take more novel steps to monetize it.

If Apple had won this round, then shareholders would probably have approved Apple’s proposal, meaning that the board could no longer just unilaterally issue preferred shares. Instead, Apple shareholders would have had to vote on the matter, making it harder for Mr. Einhorn to get the proposal through.

As it stands now, the decision on whether to adopt Mr. Einhorn’s iPref’s proposal will remain ith Apple’s board, which does not seem keen to do so. And remember, Apple’s chief executive, Timothy D. Cook, called the proposal “silly.”

Regardless of what happened in court, the cash issue remains. But now, the company does not have to implement shareholder friendly amendments in the form of majority voting for directors or requiring that shareholders must approve the issuance preferred stock. Apple had previously resisted such efforts, and probably only put the majority director proposal forward as cover for the preferred share proposal.

So Apple really is getting what it wants - which is to not have to add majority voting for directors. And instead of being labeled bad for shareholder governance, the company can blame Mr. Einhorn.

If you are shaking your head at this point, so am I. But that is w! hat it’! s like in the age of celebrity hedge funds.

These battles may often lack substance, but there is a lot of flash and distraction, sort of like the Kardashians. One wishes Apple could be allowed to go back to doing what it does best - making money by making things - instead of being caught up in Wall Street’s machinations.

A Warning on Abuses of Shareholder Power

The effort by the hedge fund manager David Einhorn to press Apple to return some of its huge cash hoard to shareholders did not sit well with Martin Lipton, one of the nation’s top corporate lawyers. In a scathing memorandum to clients, Mr. Lipton wrote: “The activist-hedge-fund attack on Apple â€" in which one of the most successful, long-term-visionary companies of all time is being told by a money manager that Apple is doing things all wrong and should focus on short-term return of cash â€" is a clarion call for effective action to deal with the misuse of shareholder power.”

Mr. Lipton, one of the founding partners of Wachtell, Lipton, Rosen & Katz, “has a point worth considering,” Andrew Ross Sorkin writes in the DealBook column. The lawyer contends that long-term shareholders of public companies are being hurt “by a gaggle of activist hege funds” in search of short-term profit. Increasingly, it appears that “shareholder democracy” can, in some cases, lead to “a perverse game in which so-called activist investors take to the media to pump or dump stocks in hopes of creating a fleeting rise or fall in a company’s stock price,” Mr. Sorkin writes. “The battle over Apple is just one minor example. Carl Icahn’s investment in Herbalife, betting against William Ackman’s accusation that the company is a ‘pyramid scheme,’ is another.”

The question is whether activists are focused on a company’s long-term prospects. Leo E. Strine Jr., the chief judge of the Delaware Court of Chancery, is skeptical. “Many activist investors hold their stock for a very short period of time and may have the potential to reap profits based on short-term trading strategies that arbitrage corporate policies,” he wrote in an essay for the American Bar Association. At the same time, Mr. Sorkin notes, “not all activist inv! estors are created equal and not all of their investments should be considered in the same way.”

S.E.C. NOMINEE TO FACE THE SENATE IN MARCH  |  Mary Jo White, President Obama’s nominee to lead the Securities and Exchange Commission, is set to testify in March at a confirmation hearing before the Senate Banking Committee, a crucial step on her path to becoming a regulator, DealBook’s Ben Protess reports. Though there is no firm date, lawmakers have tentatively scheduled her to appear the week of March 11, three Congressional officials briefed on the matter said on Monday.

Ms. White’s nomination is not expected to face major complications, and the timetable laid out on Monday gives her additional weeks to prepare, Mr. Protess writes. “Over the last couple o weeks, she has received multiple briefings from agency staff members about new securities rules and the structure of the stock market, an official said. The briefings will in part prepare her for the confirmation hearing, which is expected to cover a broad scope of topics.” Some Democrats will ask whether Ms. White, a former prosecutor who had banking clients in private practice, is too cozy with Wall Street, a person briefed on the matter said.

At the hearing, Ms. White will probably appear alongside Richard Cordray, who was reappointed in January as director of the Consumer Financial Protection Bureau, one official said.

LEW BUILDS SUPPORT IN WASHINGTON  |  President Obama’s choice for the next Treasury secretary, Jacob J. Lew, in recent weeks “has sought to show he has enough Wall Street experience to handle turbulent financial markets, but not enough to prevent him from reining in the! powerful! banking industry,” The New York Times reports. Though he is expected to win initial approval from the Senate Finance Committee on Tuesday, Mr. Lew, White House chief of staff and a former budget director, who also spent time at Citigroup, has fielded pointed questions about his time in the private sector. “To shore up his support, Mr. Lew has met privately in recent weeks with 41 senators and responded to 738 questions for the record. On Tuesday, he is scheduled to head to Capitol Hill for another meeting.”

Questions from lawmakers have centered on the terms of Mr. Lew’s contract with Citigroup, which allowed him to keep certain bonus compensation if he left for a “high level position with the United States government or regulatory body” but not a private sector competitor, according to several people with direct knowledge of the contract. Lawmakers have also focused on Mr. Lw’s money-losing investment in a fund based in the Cayman Islands.

JPMORGAN INVESTOR DAY  |  Starting at 8:30 a.m. on Tuesday, executives of JPMorgan Chase face shareholders in the first investor day since the “London whale” losses last year. The tone is expected to be upbeat. According to The Financial Times, the executives plan to “announce a jump in international revenues and increased cross-selling between the commercial and investment banks,” and they will “describe how global corporate bankers - who focus on multinational clients - have tripled to 300 since 2009.”

ON THE AGENDA  |  The chairman of the Federal Deposit Insurance Corporation, Martin J. Gruenberg, announc! es the ag! ency’s report on last year’s bank earnings at 10 a.m. Ben S. Bernanke, the Federal Reserve chairman, gives a report on monetary policy to the Senate Banking Committee at 10 a.m. Christy Romero, the special inspector general for the Troubled Asset Relief Program, appears at a 10 a.m. hearing of a House Oversight and Government Reform subcommittee, focusing on executive compensation at taxpayer-financed companies. Staff members of the Commodity Futures Trading Commission and the International Organization of Securities Commissioners hold a public meeting at 1 p.m.to discuss a report on ways to overhaul benchmark interest rates. Home Depot reports earnings before the market opens. The S.&P./Case-Shiller housing price index for December and the fourth quarter is out at 9 a.m. Wilbur Ross is on CNBC at 7 p.m.

BANKS VULNERABLE IN DISPUTE OVER ARGENTINE DEBT  |  A federal appeals court on Wednesday will hear the case between the government of Argentina and a group of investors in its debt. Those investors, including the hedge fund tycoon Paul E. Singer, sued Argentina seeking payment on bonds that defaulted in 2001, and have already won a favorable opinion at the United States Court of Appeals for the Second Circuit. “But the issue that the appeals court is still undecided about is perhaps the most important,” DealBook’s Peter Eavis writes! . “! It involves devising a method to pressure Argentina to pay up on the disputed bonds. And that has left the investors who hold a majority of Argentina’s foreign debt vulnerable, as well as the banks that process the payments to those investors.”

Mergers & Acquisitions Â'

What’s Behind the Challenge to the Beer Deal  |  According to the Justice Department’s view of the deal, Anheuser-Busch InBev wants to buy the rest of Grupo Modelo “not because it thinks the company makes great beer, or because it covets Corona’s 7 percent U.S. market share, but because owning Corona would allow AB InBev to raise prices across all of its brands,” Adam Davidson writes in The New York Times Magazine. NEW YORK TIMES MAGAZINE

For Time Inc. and Meredith, the Challenge Is Integration  |  Employees of Time Inc. and the Meredith Corporation “have been wondering how executives will take on the harder task of merging two very different corporate cultures,” The New York Times writes. NEW YORK TIMES

H.P. Board Moves to Toughen Oversight  |  The board of Hewlett-Packard “is investigating the company’s flawed $11 billion acquisition of software firm Autonomy Corp., and has set up an informal committee to provide strategic advice to Chief Executive Meg ! Whitman,â! € The Wall Street Journal reports. WALL STREET JOURNAL

Cnooc’s Deal for Nexen Closes  | 
REUTERS

Carestream Health Said to Be on the Block  |  The medical technology company Carestream Health, which was acquired by the private equity firm Onex in 2007, could sell for as much as $3.5 billion, according to Reuters. REUTERS

What Barnes & Noble’s Retail Arm Might Be Worth  |  Now that Barnes & Noble’s chairman has said he plans to bid for the retailer’s physical stores, how much will he pay According to some analysts, maybe not all that much. DEALBOOK

German Bourse Said to Have Held Talks With CME  |  Underscoring the pressure on exchanges, the CME Group contacted Deutsche Börse ” twice in recent months to gauge interest in potential deals, a person familiar with the matter said,” according to The Wall Street Journal. The discussions did not turn into formal merger talks, the newspape! r says. WALL STREET JOURNAL

Buyout Offer Will Likely Not End Elan’s Deal Ambitions  |  Royalty Pharma’s $6.6 billion buyout offer is too small to tempt Elan’s management away from its own acquisition ambitions, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

INVESTMENT BANKING Â'

Ratings Agencies Warn Over Mortgage Bonds  |  The Financial Times reports: â€U.S. banks are marketing mortgage bonds with new features that shield them from having to buy back defective loans, potentially raising risks for investors, two credit rating agencies have warned.” FINANCIAL TIMES

Heinz Deal Tarnishes Wells Fargo, Moody’s Says  |  Wells Fargo’s role in providing financing for the takeover of H.J. Heinz indicates the increased riskiness of the bank as it moves further into investment banking, Moody’s said. BLOOMBERG NEWS

Goldman Sachs Said to Plan Job Cuts  |  Goldman Sachs “will begin a fresh roun! d of job ! cuts as early as this week, sources familiar with the matter said on Monday, with its equities-trading business bracing for bigger cuts than fixed-income trading,” Reuters reports. REUTERS

Blankfein of Goldman Said to Attend Oscars Party  | 
NEW YORK POST

Citigroup’s Orszag to Oversee Financial Strategy Unit  |  Citigroup “named Peter Orszag chairman of its expanded financial strategy and solutions group, while selecting Ajay Khorana and Elinor Hoover to co-lead the unit. Orszag will take the role in addition to his duties as vice chairman of corporate and investmet banking, according to a memo today to the New York-based lender’s employees,” Bloomberg News reports. BLOOMBERG NEWS

PRIVATE EQUITY Â'

Carlyle Said to Seek Sale of Arinc  |  The Carlyle Group has hired JPMorgan Chase and Evercore Partners for a sale of the aerospace company Arinc, which could fetch up to $1.5 billion, Reuters reports, citing three unidentified people familiar with the matter. REUTERS

!

Carlyle Hires Morgan Stanley Executive for Fund of Funds  |  Jacques Chappuis, who runs the fund-of-funds business at Morgan Stanley, is headed to the Carlyle Group to run its Solutions business, Bloomberg News reports. BLOOMBERG NEWS

HEDGE FUNDS Â'

St. Joe Co. Investors Lose Appeal of a Fraud Lawsuit  |  Shareholders sued the company, saying they were blindsided by the assessment of a hedge fund manager. DealBook Â'

Assets Fall at JAT Capital Management  |  After a loss of 19.6 percent in its flagship fund, JAT Capital Management has shrunk to $1.3 billion from $2.4 billion a year ago, Absolute Return reports, citing unidentified people close to the firm. ABSOLUTE RETURN

I.P.O./OFFERINGS Â'

Singapore Investment Trust Prices $1.3 Billion I.P.O.  |  The Mapletree Greater China Commercial Trust priced at the top of its expected range, for the largest I.P.O. in Singapore in two years, The Wall Street Journal reports. WALL STREET JOURNAL

VENTURE CAPITAL Â'

In Prison, an Incubator for Aspiring Entrepreneurs  |  Inmates of California’s San Quentin prison recently presented proposals for start-ups as part of a program modeled on Silicon Valley incubators, Reuters writes. REUTERS

Pynchon Takes On Silicon Alley  |  A new novel by Thomas Pynchon, to be released in September, takes place in “the lull between the collapse of the dot-com boom and the terrible events of September 11,” according to its publisher. DealBook Â'

LEGAL/REGULATORY Â'

Gupta Ordered to Reimburse Goldman Sachs $6.2 Million  |  A federal judge on Monday ordered Rajat K. Gupta, a former Goldman Sachs director, to reimburse the bank for some legal expenses connected to his insider trading case. DealBook Â'

The Challenge of Sentencing White-Collar Defendants  |  A recent appeals court decision reflects an underlying tension in the sentencing white-collar criminals who present no real threat of physical harm to society and conti! nue to le! ad productive lives after committing a crime, Peter J. Henning writes in the White Collar Watch column. DealBook Â'

Italian Election Produces Little Clarity  |  “Italian voters delivered a rousing anti-austerity message and a strong rebuke to the existing political order in national elections on Monday, plunging the country into political paralysis after results failed to produce a clear winner,” The New York Times writes. NEW YORK TIMES

Incoming Head of Bank of England Says Banks Should Embrace Regulation  |  “Bankers need to see themselves as custodians of their instituions, improving them before passing them along to their successors,” Mark Carney, the governor of the Bank of Canada, who is scheduled to become head of the Bank of England, said in a speech in Ontario. BLOOMBERG NEWS

Banks Face Private Lawsuits in Rate-Rigging Scandal  |  Barclays, the Royal Bank of Scotland, UBS and other banks that are dealing with regulators over accusations of rate-rigging are facing “more than 30 lawsuits filed by borrowers, lenders and other plaintiffs who claim they were cheated by the same financial institutions,” The Wall Street Journal reports. WALL STREET JOURNAL

Liquidation Authority and the Bankruptcy Clause  |  The litigation challenging the orderly liquidation authority under the Dodd-Frank Act proceeds from the faulty notion that Chapter 11 bankruptcy provides a one-size-fits-all solution, Stephen J. Lubben writes in his column, In Debt. DealBook Â'

After the First 100 Days of Xi Jinping  |  Three important political meetings will occur in the next two weeks, with pollution problems likely to be on the agenda of at least one of them, Bill Bishop writes in the China Insider column. DealBook Â'

Private Equity Players See Signs of Excess in Buyout Market

BERLIN - The buyout market is showing signs of the excesses that led to the financial crisis, leading private equity managers say.

Speaking at an annual private equity conference in Berlin, Howard S. Marks, chairman of Oaktree Capital Management, said investors continued to pay high prices for companies and were tapping into growing amounts of cheap credit to finance takeovers.

“We are seeing some elements of precrisis behavior,” Mr. Marks said on Tuesday at the SuperReturn International 2013 conference. “We are seeing people engaging in bullish behavior.”

His comments come after a series of recent multibillion-dollar deals, which have raised expectations that debt-fueled buyouts are back.

Michael S. Dell and Silver Lake struck a $24 billion deal this month to buy Dell, the computer maker. And Warren E. Buffett’s Berkshire Hathaway and the Brazilian firm 3G Capital have agreed to pay $23 billion to acquire H.J. Heinz, the maker of Heinz ketchup.

As fears wane over the European debt crisis and the! American presidential election, access to capital markets has slowly returned, including debt financing for potential deals.

Over the last two years, investors have flooded into the world’s debt markets. The greater demand for bonds and other products has allowed firms to tap into the capital markets, including the so-called high-yield market that has traditionally funded riskier investments.

The growing ability to finance deals has led to increasingly higher price tags on potential deals, according to Leon D. Black, chief executive of the private equity giant Apollo Global Management.

“With easy money, there’s a temptation to pay higher prices,” Mr. Black said on Tuesday “There’s no institutional memory, we know that about Wall Street.”

For Mr. Black, the cost of potential European deals remains higher than investments in the United States despite the lack of economic growth and continuing political risk across the Continent. Cheap short-term funding from the European Central Bank has eased pressure on local banks to sell badly performing investments, while many corporate buyers have been able to raise money in the financial markets to finance their divisions.

There are opportunities, particularly in so-called distressed assets like loan portfolios that banks are looking to shed, though the returns are unlikely to match those of previous eras, he said.

“We like opportunities in distressed assets in Europe,” Mr. Black said. “If the M.&A. spigot opens up, you may see buyouts, but with high-teen returns.”

Investors also say they have learned lessons from the financial crisis.

In the boom times, private equity giants like Bain Capital secured multibillion-dollar takeovers by loading companies with debt. Some of these investments ran into trou! ble when ! the financial markets imploded, and prompted some private equity firms to shy away from large deals.

To succeed, investors must redouble their efforts to help companies improve revenue, not look for profit through highly-leveraged deals, according to Mark Nunnelly, managing director at Bain Capital.

“If you’re making investments driven by the capital markets, you take more risks,” Mr. Nunnelly said on Tuesday. “Wall Street tends to have a short memory.”

Private Equity Players See Signs of Excess in Buyout Market

BERLIN - The buyout market is showing signs of the excesses that led to the financial crisis, leading private equity managers say.

Speaking at an annual private equity conference in Berlin, Howard S. Marks, chairman of Oaktree Capital Management, said investors continued to pay high prices for companies and were tapping into growing amounts of cheap credit to finance takeovers.

“We are seeing some elements of precrisis behavior,” Mr. Marks said on Tuesday at the SuperReturn International 2013 conference. “We are seeing people engaging in bullish behavior.”

His comments come after a series of recent multibillion-dollar deals, which have raised expectations that debt-fueled buyouts are back.

Michael S. Dell and Silver Lake struck a $24 billion deal this month to buy Dell, the computer maker. And Warren E. Buffett’s Berkshire Hathaway and the Brazilian firm 3G Capital have agreed to pay $23 billion to acquire H.J. Heinz, the maker of Heinz ketchup.

As fears wane over the European debt crisis and the! American presidential election, access to capital markets has slowly returned, including debt financing for potential deals.

Over the last two years, investors have flooded into the world’s debt markets. The greater demand for bonds and other products has allowed firms to tap into the capital markets, including the so-called high-yield market that has traditionally funded riskier investments.

The growing ability to finance deals has led to increasingly higher price tags on potential deals, according to Leon D. Black, chief executive of the private equity giant Apollo Global Management.

“With easy money, there’s a temptation to pay higher prices,” Mr. Black said on Tuesday “There’s no institutional memory, we know that about Wall Street.”

For Mr. Black, the cost of potential European deals remains higher than investments in the United States despite the lack of economic growth and continuing political risk across the Continent. Cheap short-term funding from the European Central Bank has eased pressure on local banks to sell badly performing investments, while many corporate buyers have been able to raise money in the financial markets to finance their divisions.

There are opportunities, particularly in so-called distressed assets like loan portfolios that banks are looking to shed, though the returns are unlikely to match those of previous eras, he said.

“We like opportunities in distressed assets in Europe,” Mr. Black said. “If the M.&A. spigot opens up, you may see buyouts, but with high-teen returns.”

Investors also say they have learned lessons from the financial crisis.

In the boom times, private equity giants like Bain Capital secured multibillion-dollar takeovers by loading companies with debt. Some of these investments ran into trou! ble when ! the financial markets imploded, and prompted some private equity firms to shy away from large deals.

To succeed, investors must redouble their efforts to help companies improve revenue, not look for profit through highly-leveraged deals, according to Mark Nunnelly, managing director at Bain Capital.

“If you’re making investments driven by the capital markets, you take more risks,” Mr. Nunnelly said on Tuesday. “Wall Street tends to have a short memory.”

Icahn Protege and Real Estate Giant Call for Change at CommonWealth

The activist doesn’t fall far from the tree.

A hedge fund run by a former lieutenant of Carl Icahn, the billionaire investor famous for clashing with management, has teamed up with a major real estate developer to push for change at CommonWealth REIT.

On Tuesday, Keith Meister, the protege of Mr. Icahn, and Jeff Blau, the chief executive of the developer Related Companies, disclosed a 9.8 percent ownership stake in CommonWealth. The investors published a letter that they sent to CommonWealth management, along with a 50-page slide presentation that agitates for change at the Newtown, Massachusetts-based property owner.

Citing poor leadership, a board lacking independence, and historical underperformance, Mr. Meister and Mr. Blau said that if management is unwilling to engage in discussions about how to improve the company, they will take further action. The investors specifically took aim at a stock offering that CommonWealth announced yesterday, ordering them to withdraw it because it s damaging to existing shareholders and a prime example of a bad management decision.

“If the board fails to adequately respond, Corvex and Related are prepared to seek the removal of the board so that it may be replaced with five truly independent trustees,” the investors said.

The investors’ activist stance comes as a slew of high-profile hedge fund managers have gone public with complaints about public company management. In the energy sector, the hedge fund Elliott Management
has pushed for a shake-up at Hess Corporation and the investor TPG-Axon is seeking to oust the top executives and board at SandRidge Energy. David Einhorn, of Greenlight Capital, has attacked Apple for
its management decisions, and William Ackman has publicly declared the nutrition company Herbalife a fraud.

As the longtime righthand man of Mr. Icahn â€" a pioneer of activist investing â€" Mr. Meister fits squarely within this crew of agitators. Since starting Corvex two yeas ago, Mr. Meiste! r has disclosed five different activist stakes, including CommonWealth. Mr. Meister took a seat on the board of the food company Ralcorp and
secured a seat on the board. He agitated for the sale of the company, and last month, ConAgra acquired it for $5 billion. Late last year, the security business ADT appointed Mr. Meister to its board after he took a large position in the company.

Mr. Meister worked at Icahn Enterprises for seven years before December 2010, when he began Corvex. At Icahn, he served on several public company boards, including Motorola Mobility and Federal-Mogul Corporation. Today, Corvex manages about $3 bilion.

Related, a prominent property owner perhaps best known for its development of the 26-acre Hudson Yards site in New York, is not normally in the business of taking activist positions in public companies.

Yet several months ago, Mr. Blau, Related’s new C.E.O., saw CommonWealth as a very undervalued and badly managed business and partnered with Mr. Meister toaccumulate a large position in the company. Related is making the investment out of its fund business that manages money for outside investors.

Commonwealth REIT, which has a market value of about $1.3 billion, owns a portfolio of mostly office properties in the United States and Australia. The company’s shares are trading a roughly 60 percent discount to the assessed value of its real estate holdings.

Investors in the company, including Mr. Meister and Related, blame a corporate structure that allows its president, Adam Portnoy, and another director, Barry Portnoy, to get paid lucrative fees for managing the company’s real estate. That, they say, creates an incentive to issue stock and acquire more real estate assets, which increases the company’s property base along with the management fees.

The investors said that, according to public filings, over the last five years CommonWealth has paid out over $336 million in management fees to a company controlled by the Portnoys, a n! umber rep! resenting more than 20 percent of the company’s market value.

Wall Street analysts appear to agree. In a conference call last year, an analyst at Stifel Nicholas blasted the company in a comment directed at Mr. Portnoy.

“Don’t take this personally and take it constructively please,” said
the Stifel analyst, “But when I talk to investors about CommonWealth,
the investment strategy, the balance sheet, the operations, there’s
just zero investor confidence out there. The term that most people use
is ‘uninvestable.’”