Rebutting the Contention That Small Is Better for Banks

Richard E. Farley is a partner in the leveraged finance group of the law firm Paul Hastings and is writing “The Crisis Not Wasted - The Creation of Modern Financial Regulation During F.D.R.’s First Five Hundred Days,” a book on the creation of modern financial regulation during President Franklin Roosevelt’s first term of office.

The Dallas Federal Reserve Bank president, Richard W. Fisher, has again reignited the debate about what to do about “too big to fail” banks.

Five years after the financial crisis, it seems that the issue of bank concentration has never been resolved. In several recent speeches as well as a recent opinion article in The Wall Street Journal, Mr. Fisher expressed the view that it may be time to break up big institutions because “their privileged status places them above the rule of law.” He further argues that the Dodd-Frank financial overhaul that was supposed to help fix the problem didn’t.

Mr. Fisher has made many arguments in favor of limiting the size of banks. The first is that a larger size “emboldens a sense of immunity from the law.”

He acknowledges that he has borrowed this thought from the recent Senate testimony of Attorney General Eric H. Holder Jr., who claimed that when banks are too big to fail, “it is difficult to prosecute them” adding that criminal charges against a large institution could hurt the economy.

However, I challenge Mr. Holder (or Mr. Fisher) to pick up the business section of any major newspaper in any given week without reading about a government proceeding against a big bank. All these inquiries and actions have yet to dent economic growth or market performance, as witnessed by the new records that the major indexes seem to be setting daily.

Regardless of this, Mr. Fisher and Harvey Rosenblum, the executive vice president of the Dallas Federal Reserve, have proposed scrapping Dodd Frank in its entirety and replacing it with their three-prong plan to make all banks “a size that is too small to save.”

First, Mr. Fisher and Mr. Rosenblum suggest rolling back deposit insurance and access to the Federal Reserve discount window to only traditional banks and excluding nonbank affiliates of bank holding companies or parent companies of banks. Here, they are pushing against an open door: deposit insurance has never applied to anything other than deposits located at traditional banks (nonbank affiliates cannot even offer deposits backed by the Federal Deposit Insurance Corporation). The Federal Reserve already limits access to its discount window to “depository institutions” - insured banks, mutual savings banks, credit unions and savings associations.

Another step calls for having all customers, creditors and counterparties of all nonbank affiliates and parent holding companies “sign a simple, legally binding, unambiguous disclosure acknowledging and accepting that there is no government guarantee - ever - backstopping their investment.”

This part seems to be a red herring at best. There is not, nor has there ever been, a “legally binding” government guarantee of investments in banks. That is why bank bailouts are morally offensive to many - because there was no consideration given by recipients of the government largesse. A signed acknowledgment would never prohibit another bank bailout if future policy makers saw fit to undertake one.

The final argument presented is one that cannot so easily be dismissed: that megabanks can raise capital more cheaply than smaller banks because of an implicit belief they will receive some government assistance if they risk insolvency. This is undoubtedly true, and is actually quantifiable.

But is the answer to this unfair subsidy breaking up the banks Another possible remedy would be to require additional capital reserves or enact a surcharge to finance future bailouts if assets exceed a certain level. This approach would “even the playing field,” if that is the concern.

The size of the banks in the financial system is hardly the real issue. In relation to the economy it supports, the United States banking system is relatively small compared with those of other developed countries. As a percentage of G.D.P., total banking assets in the United States were about 117 percent in 2011 â€" less than in France (421 percent), Britain, (373 percent), Germany (332 percent) and even Canada (138 percent).

Second, the American banking system is less concentrated than the banking systems of most developed countries. By total assets, the five largest American banks held a smaller portion of G.D.P. in 2011 than in most other developed nations. The five big banks hold about 56 percent, compared with 309 percent in Britain and 116 percent in Germany. The United States banking industry is about as concentrated as Turkey’s (55 percent).

And let’s not forget the most important statistic in this debate: historically, small banks in the United States pose the highest risk of failure. During the Great Depression, more than 9,000 banks failed, nearly all of them small.

Because they were too small to save, panic led to the meltdown of the financial system, resulting in a nationwide bank shutdown and subsequent systemwide Federal Reserve bailout to enable the banks to reopen. Through this historical prism, banks that are “too big to fail” look to be a better example, and it is perhaps why the rest of the developed world doesn’t share our “big is bad” obsession.

U.S. Said to Look Into Microsoft Bribery Allegations

SEATTLE â€" Federal authorities are examining Microsoft’s involvement with companies and individuals that allegedly paid bribes to overseas government officials in exchange for business, according to a person briefed on the inquiry.

The United States Department of Justice and the Securities and Exchange Commission have both opened preliminary investigations into the bribery allegations involving Microsoft in China, Italy and Romania, according to the person, who declined to be named because the software company considers the inquiry a confidential legal matter.

Microsoft’s practices in those countries are being looked at for potential violations of the Foreign Corrupt Practices Act, a federal law that prohibits American companies from making illegal payments to government officials and others overseas to further their business interests.

In a blog post Tuesday afternoon, John Frank, vice president and deputy general counsel of Microsoft, said the company could not comment about continuing inquiries. Mr. Frank said it was not uncommon for such government reviews to find that allegations were without merit.

“We take all allegations brought to our attention seriously and we cooperate fully in any government inquiries,” Mr. Frank said in the blog post. “Like other large companies with operations around the world we sometimes receive allegations about potential misconduct by employees or business partners and we investigate them fully regardless of the source. We also invest heavily in proactive training, monitoring and audits to ensure our business operations around the world meet the highest legal and ethical standards.”

The Wall Street Journal first reported news of the investigations on its Web site on Tuesday.

Michael Passman, a spokesman for the Justice Department, said the department had a policy of not confirming or denying the existence of investigations. A spokesman for the S.E.C. could not be reached immediately for comment.

The allegations in China were first shared with United States officials last year by an unnamed whistle-blower, who had worked with Microsoft in the country, according to the person briefed on the inquiry. The whistle-blower said that a Microsoft official in China directed the whistle-blower to pay bribes to government officials to win business deals, this person said. After this incident, the whistle-blower had a business conflict with Microsoft, the person added.

In 2010, Microsoft itself conducted an internal investigation of the allegations, with the help of an outside law firm, that found no evidence of improper behavior, this person said.

The federal agencies are also looking at Microsoft’s relationship with outsiders in Romania and Italy, including software resellers and consultants, who are said to have bribed government officials to secure contracts for government business, this person said.

Edward Wyatt contributed reporting from Washington and Ben Protess from New York.

Malone’s Minority Report

John C. Malone has slipped through the door again. The American cable magnate is buying 27 percent of Charter Communications from three buyout firms for $2.6 billion. He’s no garden-variety minority owner, though. Even heavyweights like Rupert Murdoch and Barry Diller can attest to Mr. Malone’s cunning use of smaller stakes. Charter investors should keep their guards up.

On its face, the deal seems sensible enough. Mr. Malone, a pioneer of the U.S. cable television industry, is returning to his roots. He sold most of his cable-related empire to AT&T for $48 billion back in 1998, and since then has been more focused on overseas cable assets - including a $20 billion proposed acquisition of Virgin Media of Britain in February - and on media and internet investments. The know-how of Mr. Malone and his crew could help Charter, which emerged from bankruptcy in 2009, to capitalize on the growth in broadband.

The structure is what’s potentially worrisome, especially if history is any guide. Most recently, Sirius XM discovered just how a partnership with Mr. Malone can evolve. He bailed out the satellite radio company in 2009, a highly profitable rescue operation that led to creeping control and ultimately to majority ownership for him earlier this year, without his ever having to pay a premium.

Mr. Malone’s creative maneuvers have outwitted other clever tacticians, too. He parlayed his voting stake in News Corp, and the leverage it gave him over Mr. Murdoch, into what turned out to be a lucrative exchange for DirecTV. And after a long relationship with Mr. Diller got prickly, Malone used a stake in his partner’s IAC/InterActiveCorp to try and seize control, eventually forcing a messy unwinding and carving up of the assets.

Though Charter boss Tom Rutledge welcomed Mr. Malone to the table, he also tried to give the house an edge. Liberty Media, Malone’s holding company, can’t increase its stake in Charter above 35 percent until January 2016 and after that is capped at just under 40 percent. Mr. Rutledge may hope that despite Malone’s four board seats at Charter, one of which he will fill personally, the ownership restrictions will keep his new investor under control.

Smart money attuned to Mr. Malone’s dealings should assume he’s already thinking about ways around them.

Jeffrey Goldfarb is an assistant editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

JPMorgan Chase Inquiry Reveals Status Quo After Financial Crisis

People have learned their lesson.

We’ve been told that so many times since the near-death experiences of the financial crisis. Bankers and regulators have flipped roles: Now it’s the bankers who are cautious and their overseers who are aggressive.

Details of JPMorgan Chase’s multibillion-dollar trading loss â€" brought to light by a riveting and devastating report from the Senate Permanent Subcommittee on Investigations â€" demonstrate what a sham that is. Bankers aren’t acting cautious and chastened. Risk managers aren’t in the ascendance on Wall Street. Regulators remain their duped and docile selves.

What we now know about the incident is that, as the cliché has it, the cover-up was worse than the crime. The losses out of the London office weren’t enough to take down the bank. But as they were building, JPMorgan traders fiddled with risk measures and valuations. The bank’s risk managers defended the traders and pooh-poohed the flashing red signals. The bank gave incorrect information to its regulator. Top executives then made misleading statements to shareholders and the public. All the while, the regulator served its typical role of house pet.

As JPMorgan got into trouble, traders and the responsible executives treated the valuation of trading positions, made up of derivatives, as a puppet made to do what they wanted. The traders pulled on this calculation or that to change the way they were valuing the position to reduce the losses.

Ina Drew, the head of the bank’s chief investment office, referring to how the positions were calculated, asked an underling if he could “start getting a little bit of that mark back.” She then asked if he could “tweak at whatever it is I’m trying to show.” She might believe it is exculpatory that she prefaced the comment by saying to do it “if appropriate” and that the tweak should come with “demonstrable data,” but any idiot working for her would know exactly what she meant: Create some rationale to manipulate the valuations to make things look better than they really are.

Timeline: JPMorgan Trading Loss

This discussion did not make it into the bank’s internal report on the incident from January. Imagine that.

Yes, Ms. Drew was ousted. But her actions show that what financial executives do postcrisis when faced with trouble is no different than what they did precrisis. In testimony on Friday, in a quiet voice, she deflected blame up to Mr. Dimon and down to her traders, claiming she was kept in the dark.

The Senate report makes it clear that JPMorgan misled shareholders and the public, particularly on its April 13, 2012 conference call.

That call, which makes up a particularly damning portion of the Senate report, featured a haughty Jamie Dimon famously dismissing the problem as a “tempest in a teapot.”

Of course, it was no such squall. On the call, the chief financial officer at the time, Douglas L. Braunstein, made a number of what appear to be misleading statements about the trades. Mr. Braunstein said the trading decisions were made on a very long-term basis, when in fact the traders were shuffling positions almost daily in order to make profits and then to disastrously “defend” their positions from further losses. Mr. Braunstein reassured investors and analysts on the call that the trades were vetted by the firm’s top risk managers, when they were not (though top officials, including Mr. Dimon, knew about repeated risk-measure breaches).

This means “there was risk oversight” for the office that made the trades, and the trading “positions needed to comply with limits,” a JPMorgan spokesman, Joseph Evangelisti, said. “We were not aware at the time of all the deficiencies in the risk organization” of the trading group.

On the conference call, Mr. Braunstein also said that the trades were “fully transparent to the regulators,” but, in fact, watchdogs didn’t receive any regular reporting of the positions and only received specific information just days before the call.

“What Doug said was accurate,” Mr. Evangelisti said. “No one in senior management at that time believed there was a larger problem in the context of the firm’s size and scale.”

In JPMorgan’s internal report, the call receives scant attention. In testimony before Senator Carl Levin, the Michigan Democrat who heads the Senate subcommittee, Mr. Braunstein fell back on the explanation that he was saying what he believed at the time.

Mr. Braunstein wasn’t available for comment, according to the bank.

Maybe regulators will think it notable that the chief financial officer of JPMorgan misled shareholders in his first extensive comments about the trading losses. Don’t hold your breath.

I don’t even expect much to come out of the evidence that the bank misled regulators. The bank stopped giving its regulator, the Office of the Comptroller of the Currency, important information. At one point, the bank told the agency that it was reducing the size of its positions when it was actually increasing it, according to the Senate report.

Despite JPMorgan’s smoke screens, the regulators deserve the public humiliation they have received. They were alerted to risk-measure breaches that should have warned them of problems. By April 30, 2012, just weeks after the trading debacle came to light and before any serious investigation, the Office of the Comptroller of the Currency declared the matter closed, according to internal minutes from a meeting. (At Friday’s hearing, officials from the agency disputed that it was, in fact, closed.)

So, yeah, people have learned their lessons, the real lessons of the financial crisis. JPMorgan repeated the same misdeeds that other banks successfully pulled off at the height of the financial crisis: mismarking portfolios of assets and misleading the public. This was condoned by regulators. Regulators and prosecutors have been averting their eyes for years from rotted bank assets and rotted bank morals; why would JPMorgan expect any different reaction in this case

Mr. Dimon and JPMorgan executives have all publicly donned hair shirts to demonstrate their contrition. Mr. Dimon and Mr. Braunstein even took pay cuts, going from earning many millions to some fewer millions.

JPMorgan argues that Mr. Dimon and Mr. Braunstein told regulators and the public only what they believed at the time. Mr. Dimon and Mr. Braunstein made mistakes, but they quickly worked to clean them up, fire those responsible and change their ways. The losses were small relative to the size of the bank and, if anything, demonstrate the strength of JPMorgan’s diversified business. After all, the bank made record earnings last year.

But I suspect that if you dosed JPMorgan executives with Pentothal, they would reveal they believed all of this attention was a media creation and political showboating â€" still a “tempest in a teapot.”

“Not true,” Mr. Evangelisti, the JPMorgan spokesman, said. “We acknowledged from the outset that we made significant mistakes, and we have repeatedly apologized for them. We do not blame the media or regulators for these issues. This was our fault totally. All we can do now is fix the problems and learn from them.”

As has happened so often in the wake of the financial crisis, we are left with the spectacle of bankers â€" here the well-compensated Mr. Dimon and Mr. Braunstein â€" insisting that they were clueless and incompetent, which would shield them from any allegations of intent to defraud.

As for many longtime officials at the Office of the Comptroller of the Currency, they may well think that this was merely a nuanced mistake that calls for nothing more than careful suggestions of remedies that don’t harm the bank too much. The new head of the agency, Thomas J. Curry, has begun to clean house and re-energize the place, but the overhaul that is needed looks too big for one person.

So let’s take a moment to celebrate a handful of American heroes, Mr. Levin and the staff members at the Senate Permanent Subcommittee on Investigations. Because of them, this corruption has come to light. Friday’s hearing served to emphasize how lonely Mr. Levin’s efforts are. Senator John McCain, Republican of Arizona and the new ranking minority member on the committee, did a yeoman’s job of asking a few questions. Senator Ron Johnson, Republican of Wisconsin, made a few incoherent statements using the au courant phrase “too big to fail,” then scuttled out of the hearing. None of the other senators, Democrats and Republicans alike, bothered to showup.

The 78-year-old Mr. Levin, peering over those glasses that seem surgically attached to the tip of his nose, soldiered on.

But let’s imagine what would happen if this report does what the senator hopes and puts pressure on the regulators to finalize a simplified and loophole-free Volcker Rule, which would prohibit banks from making bets for their own profit using taxpayer-backed money. Why should we have the slightest confidence that big banks could be persuaded to follow it And why should we feel reassured that, if they didn’t, regulators could or would enforce it

We shouldn’t. And we don’t.

Debevoise & Plimpton’s Trusts and Estates Group Finds a New Home

Last December, the trusts and estates lawyers at Debevoise & Plimpton received shocking news. The law firm’s leadership said it had decided to eliminate its trusts and estates practice, and instructed the lawyers in the group to look for a new home.

It did not take too long for them to find one. On Monday, Loeb & Loeb, a law firm with one of the country’s leading trusts and estates practices, announced that it had hired the seven-lawyer group, which is led by a Debevoise partner, Jonathan J. Rikoon.

Mr. Rikoon’s forced departure from Debevoise highlights a growing trend at a number of the nation’s largest law firms. As big corporate law firms have become increasingly focused on bottom-line profits, they have built up lucrative areas like commercial litigation and mergers-and-acquisitions and jettisoned less profitable groups. At many firms, trusts and estates work â€" once thought to be core to a full-service law firm â€" has become a drag on profitability. Individual clients also bristle at paying the skyrocketing billable rates that now exceed more than $1,000 an hour.

Debevoise was the latest large firm to discontinue its trusts and estates practice. Others that have gotten out of the business of drafting wills and trusts are Weil, Gotshal & Manges, Paul Hastings and WilmerHale.

“I’m very grateful to Debevoise and it has been a great place to work,” said Mr. Rikoon, 57, who joined the firm in 1995. “But large firms have been de-emphasizing trusts and estates for many years, and Debevoise had evolved to the point where it didn’t make sense for them to support the practice anymore.”

In Loeb & Loeb, Mr. Rikoon and his team have landed at a firm that views trusts and estates a core practice. There are other corporate law firms that have also embraced the work, including Schulte Roth & Zabel; Katten Muchin Rosenman; and McDermott Will & Emery. These firms view the advising of wealthy families as a business opportunity that has synergies with other areas, like advising on the sale of family-owned businesses or handling estate-related litigation.

Joining Mr. Rikoon as a Loeb & Loeb partner is Cristine M. Sapers, of counsel at Debevoise. They will be bringing their entire team to Loeb & Loeb, which includes a senior counsel and four junior lawyers. (Two retired Debevoise trusts and estates partners, Theodore A. Kurz and Barbara Paul Robinson, will remain at Debevoise. Though they will not bring in new matters, they will continue to serve in a fiduciary role for their legacy clients.)

Mr. Rikoon said he expects many of his clients to follow him to Loeb & Loeb, which he will join on April 15 â€" already a rather important day in the life of a trusts and estate lawyer.

“We could have started on the Ides of March but that was too soon and it could have been April 1st but everyone would have thought that was a joke,” said Mr. Rikoon. “It also could have been May 1st, but that’s international workers’ solidarity day and that didn’t seem appropriate. So we settled on tax day, which was easy to remember.”

In the meantime, Mr. Rikoon continues his work on behalf of Debevoise clients. On Monday, he said he was preparing a memo for a client on estate planning for carried interest, or the profits made by private equity and hedge fund managers. He was also drafting a prenuptial agreement for a client.

Mr. Rikoon will also know his way around 345 Park Avenue, the building that houses Loeb & Loeb’s New York office. Before joining Debevoise, Mr. Rikoon worked as a young lawyer at Paul Weiss Rifkind Wharton & Garrison, which at the time was located at 345 Park. After Paul Weiss, he worked briefly at Mudge Rose Guthrie Alexander & Ferdon, but left for Debevoise only 10 months later when Mudge Rose dissolved.

“I have no hard feelings toward Debevoise, which handled this situation as well as can be expected,” Mr. Rikoon said. “But it has certainly been disruptive, and will hopefully be the last career change I’ll ever have.”

Judge Approves Sale of Rights to Hostess Brands, Including Twinkies

A federal bankruptcy judge on Tuesday approved the sales of several major Hostess Brands’ product lines, including Twinkies, fetching about $800 million for all the various pieces of the bankrupt baking company and clearing the way for its eventual wind-down.

Chief among the deals that was cleared was the $410 million sale of Hostess’s snack cake brands, including Twinkies and Ho Hos, to Apollo Global Management and Metropoulos & Company. That transaction could lead to the return of the cream-filled treats to store shelves as soon as this summer.

Also approved were the sales of most of Hostess’s bread brands, including Wonder Bread, to Flowers Foods for about $360 million. Grupo Bimbo of Mexico won control of the Beefsteak bread line for $31.9 million after beating Flowers in an auction.

No rival bidders emerged for the snack cakes or the other bread products.

Approval of the sales, by Robert Drain of the Southern District of New York, was swift, before moving onto more prosaic matters like the review of fee payments to Hostess advisers.

Hostess is also set to sell off its Drakes line of snack cakes to McKee Foods in a $27.5 million bid.

Judge Approves Sale of Rights to Hostess Brands, Including Twinkies

A federal bankruptcy judge on Tuesday approved the sales of several major Hostess Brands’ product lines, including Twinkies, fetching about $800 million for all the various pieces of the bankrupt baking company and clearing the way for its eventual wind-down.

Chief among the deals that was cleared was the $410 million sale of Hostess’s snack cake brands, including Twinkies and Ho Hos, to Apollo Global Management and Metropoulos & Company. That transaction could lead to the return of the cream-filled treats to store shelves as soon as this summer.

Also approved were the sales of most of Hostess’s bread brands, including Wonder Bread, to Flowers Foods for about $360 million. Grupo Bimbo of Mexico won control of the Beefsteak bread line for $31.9 million after beating Flowers in an auction.

No rival bidders emerged for the snack cakes or the other bread products.

Approval of the sales, by Robert Drain of the Southern District of New York, was swift, before moving onto more prosaic matters like the review of fee payments to Hostess advisers.

Hostess is also set to sell off its Drakes line of snack cakes to McKee Foods in a $27.5 million bid.

In Charter, Malone Returns to His Roots

John C. Malone is returning to his roots.

On Tuesday, Mr. Malone, the billionaire chairman of Liberty Media, agreed to pay $2.6 billion for a 27 percent stake in Charter Communications.

It is a homecoming of sorts for Mr. Malone. As chief executive of Tele-Communications, he built that cable company into the largest player in the United States. In 1998, he agreed to sell the company, TCI, to AT&T for about $32 billion

Since then, he has focused on the media sector, with holdings in Discovery Communications, Starz and Sirius XM Radio. Mr. Malone has also sought to expand his empire abroad. In February, Liberty Global agreed to buy Virgin Media of Britain for about $16 billion.

As The New York Times wrote in 1997, “a day without a deal is like a day without sunshine” to Mr. Malone. Here is a look at some of his memorable moves.

June 1998: Sale to AT&T | Mr. Malone agreed to sell TCI to AT&T for about $32 billion. Underpinning the deal was a sense at the time that companies like AT&T needed to “become leaders in the new markets of the information age” or be “relegated to also-ran status,” The New York Times wrote.

June 2004: Spinoff of international business | Mr. Malone spun off his international businesses into a separate company called Liberty Media International, which became Liberty Global after a merger the following year with UnitedGlobalCom.

July 2005: Discovery Communications spinoff | Liberty Media completed a spinoff to shareholders of its 50 percent stake in the cable channel group Discovery Communications. The deal was part of Mr. Malone’s effort to reorganize Liberty.

November 2009: Unitymedia | In its first German acquisition, Liberty Global agreed to buy the cable network Unitymedia for $3 billion from investors including BC Partners and Apollo Global Management. Years earlier, in 2001, Liberty had made a play for German cable assets that was blocked by regulators.

December 2010: Split from Barry Diller | Mr. Malone parted ways with his fellow media mogul Mr. Diller, as Liberty Media exchanged its voting stake in Mr. Diller’s IAC/InterActiveCorp for cash and two business units. Mr. Diller said his relationship with Mr. Malone had at times been a “wild ride.” That was a bit of understatement.

August 2011: Barnes & Noble stake | After offering to buy 70 percent of Barnes & Noble, Liberty Media ended up buying preferred shares that were convertible to a 16.6 percent stake, worth $204 million. The deal came with a hefty dividend and two board seats.

June 2012: OneLink | In partnership with Searchlight Capital Partners, Liberty Global took over OneLink Communications of Puerto Rico in a deal implying an enterprise value of about $585 million for the cable company.

August 2012: Starz Entertainment spinoff | Liberty Media announced that it would spin off the premium cable business Starz as a publicly traded company. The deal was completed the following January, leaving Starz with about $1.5 billion of debt.

January 2013: Shares of Sirius XM | Continuing a long-running effort to take control of Sirius XM Radio, Liberty Media bought enough shares to bring its ownership of the satellite radio broadcaster above 50 percent. Liberty had received government approval to take control of Sirius earlier that month.

February 2013: Virgin Media | Liberty Global struck a deal to buy Virgin Media for about $16 billion, giving it access to the British cable market. The takeover pits Mr. Malone against Rupert Murdoch, his longtime rival.

Dismissing concerns, Panel Advances White’s S.E.C. Nomination

Mary Jo White cleared an important hurdle on her path to becoming a top Wall Street regulator, as a panel of lawmakers on Tuesday overwhelmingly backed her nomination.

Dismissing concerns about Ms. White’s close ties to Wall Street, the Senate Banking Committee cast a 21-1 vote in her favor, sending the nomination to the full Senate. The committee’s broad bipartisan support for Ms. White, President Obama’s pick to lead the Securities and Exchange Commission, suggests that she is poised to sail through the Senate in the days ahead.

In contrast, the committee offered muted support for another financial regulator, Richard Cordray, who is in line to lead the Obama administration’s new consumer protection watchdog. Mr. Cordray eked out a 12-10 party-line vote on Tuesday.

And even Ms. White faces some remaining skeptics. While every Republican on the committee supported her nomination, a lone Democrat balked. Senator Sherrod Brown, an Ohio Democrat who opposed Ms. White, continued to sound alarms about her turns through the revolving door connecting government and private practice. He noted that Ms. White, a former federal prosecutor who spent the last decade representing big banks like JPMorgan Chase and UBS, could carry conflicts of interest.

“I don’t question Mary Jo White’s integrity or skill as an attorney,” Mr. Brown said in a statement. “But I do question Washington’s long-held bias towards Wall Street and its inability to find watchdogs outside of the very industry that they are meant to police.”

To avert potential conflicts, Ms. White agreed to recuse herself for one year from most matters involving former clients, though such steps present a potential hindrance to her authority. Ms. White also vowed “as far as can be foreseen” never to return to Debevoise & Plimpton, the firm where she built a lucrative legal practice.

Mr. Brown on Tuesday added that Ms. White “will have plenty of opportunities to prove me wrong. I hope she will.”

The otherwise lopsided vote in favor of Ms. White came as little surprise. At a confirmation hearing last week, she received a friendly reception during two hours of testimony. Even one of the committee’s Republicans, Tom Coburn of Oklahoma, declared his intention to support Ms. White.

On Tuesday, the committee’s ranking Republican, Senator Mike Crapo of Idaho, touted Ms. White’s experience, saying “I fully support her nomination.”

Republicans took a harsher view on Mr. Cordray, nominated to become director of the Consumer Financial Protection Bureau. In January, when the White House named Ms. White to the S.E.C. spot, it reappointed Mr. Cordray to a position he has held for the last year under a temporary recess appointment. The Senate last year declined to confirm him in the face of Republican concerns about the new agency - concerns that persisted on Tuesday.

While Republicans have expressed support for Mr. Cordray, they stand in stark opposition to what they see as his unchecked authority over the bureau. They have vowed to oppose his nomination, or any appointment to run the bureau, unless the White House turns it into a bipartisan panel.

Mr. Crapo explained that his opposition to Mr. Cordray reflected a “broader debate over the structural” setup of the bureau. “Where is the transparency Where is the accountability”

The banking committee’s vote leaves Mr. Cordray’s next step unclear and his agency in limbo. The White House could strike a deal with Republicans, but they have little incentive to do so. For now, Democrats are portraying the Republican opposition as an affront to consumers, leaving conservatives in a politically sensitive position.

Yet Democrats could seek to avert a broader assault on the bureau. Corporate groups are challenging his recess appointment in the courts, an attack that could jeopardize a number of rules that the agency has already enacted.

While Ms. White faces far fewer obstacles to her nomination, significant challenges await her at the S.E.C. The agency, for example, is under Congressional pressure to complete new rules for Wall Street and take aim at financial fraud.

Ms. White, who as the first female United States attorney in Manhattan carried out an aggressive crackdown on terrorism and organized crime, vowed to strike a hard line with Wall Street.

“If confirmed, it will be a high priority throughout my tenure to further strengthen the enforcement function of the S.E.C.,” she said at her confirmation hearing last week. “It must be fair, but it also must be bold and unrelenting,”

Prelude to an AmerisourceBergen Deal

Agreement Includes 10-Year Brand and Generic Distribution Contract with Walgreens and Access to Generics Sourced Through Walgreens Boots Alliance Development GmbH Joint Venture

VALLEY FORGE, Pa.--(BUSINESS WIRE)--Mar. 19, 2013-- AmerisourceBergen (NYSE: ABC) today announced that it is entering into a strategic, long-term relationship with Walgreen Co. and Alliance Boots GmbH, which will streamline the distribution of pharmaceuticals to Walgreens’ stores and leverage global supply chain efficiencies while improving patient access to affordable pharmaceuticals to increase the efficiency of the healthcare system. AmerisourceBergen’s new expanded relationship with Walgreens and Alliance Boots includes: a ten-year comprehensive primary pharmaceutical distribution contract with Walgreens; access to generic drugs and related pharmaceutical products through the Walgreens Boots Alliance Development joint venture; and opportunities to accelerate the Company’s efforts to grow its specialty and manufacturer services businesses domestically and internationally. In furtherance of this new partnership, Walgreens and Alliance Boots together have been granted rights to purchase an equity position in AmerisourceBergen, which is described in greater detail below.

The new agreements are expected to be meaningfully accretive to AmerisourceBergen’s earnings and strengthen its confidence in delivering solid and sustainable long-term EPS growth. AmerisourceBergen has serviced Walgreens’ specialty business for several years, and in our fiscal 2014, the new relationship is expected to contribute an incremental $28 billion in revenues and approximately 20 cents in earnings per share, excluding the amortization of certain expenses related to the transaction, and certain non-recurring costs, and net of certain start up expenses.

“AmerisourceBergen is very excited to be joining in this unique global relationship with two of the undisputed leaders in healthcare,” said Steven H. Collis, President and Chief Executive Officer of AmerisourceBergen. “As we all recognize the imperatives of health reform not only here in the U.S. but also globally, we have entered into a unique opportunity to unlock value in the pharmaceutical supply chain by collaborating to leverage all of our proven strengths. This new relationship will significantly strengthen and grow our core business and increase our ability to deliver innovative solutions to our customers, and long-term benefits to all of our stakeholders. Importantly, these agreements not only expand our U.S. business, but also provide opportunities to meaningfully grow our specialty and manufacturer services businesses internationally."

“Today’s announcement marks another step forward in establishing an unprecedented and efficient global pharmacy-led, health and wellbeing network, and achieving our vision of becoming the first choice in health and daily living for everyone in America and beyond,” said Gregory Wasson, President and Chief Executive Officer of Walgreens. “We are excited to be expanding our existing relationship with AmerisourceBergen to a ten-year strategic long-term contract, representing another transformational step in the pharmaceutical supply chain. We believe this relationship will create a wide range of opportunities and innovations in the rapidly changing U.S. and global healthcare environment that we expect will benefit all of our stakeholders.”

“This agreement with AmerisourceBergen, which we consider to be the best-positioned pharmaceutical wholesaler in North America, is a promising development for Walgreens and Alliance Boots following the formation of our strategic partnership last year,” said Stefano Pessina, Executive Chairman of Alliance Boots. “We strongly believe that our new partnership with AmerisourceBergen will deliver long-term shareholder value by creating an unmatched network of companies that is well positioned to anticipate increasing market needs and expectations across the world. Together we will bring tailored solutions to business partners, including manufacturers and pharmacists, as well as to patients and consumers.”

Branded and Generic Pharmaceutical Distribution Contract

The ten-year comprehensive primary pharmaceutical supply agreement includes the distribution of brand, generic, and specialty pharmaceuticals to Walgreens’ retail stores, mail order and specialty pharmacies. The distribution contract is effective September 1, 2013, and initially will include branded pharmaceutical products that Walgreens has historically sourced from distributors and suppliers. Over time, beginning in calendar year 2014, AmerisourceBergen will increasingly assume the distribution of the generic products that Walgreens has historically self-distributed. The increased volume will utilize unused capacity in AmerisourceBergen’s distribution network, leverage prior investments in our new enterprise resource planning system, and will help continue to drive improvements in operational efficiency and productivity in the years ahead.

Global Supply Chain Opportunities

AmerisourceBergen’s access to the recently established Walgreens Boots Alliance Development enables the Company to access generics and related pharmaceutical products utilizing a global platform that is designed to make it easier for manufacturers to bring products to market, improve access to pharmaceuticals for healthcare providers worldwide, and yields compelling new offerings to community pharmacies and others. In addition, we expect to share global distribution best practices with Walgreens and Alliance Boots, and to seek additional avenues for collaboration on new projects and services for the benefit of all of our stakeholders.

Opportunities to Expand Specialty and Manufacturer Services Businesses

In addition to the pharmaceutical supply contracts, AmerisourceBergen has agreed to collaboratively share best practices and to cooperatively work with Walgreens and Alliance Boots to provide manufacturers with integrated solutions for global clinical trial logistics and innovative global third party logistics services by leveraging World Courier’s position as a global leader in premium logistics. In addition, Alliance Boots’ growing specialty activities with European biotech manufacturers and AmerisourceBergen’s pharmaceutical product commercialization and patient support services offer manufacturers unique opportunities to expand patient access to biotech products in Europe and beyond.

Equity Position

As part of the value creation inherent in these agreements and to align interests and strengthen the long-term relationship, Walgreens and Alliance Boots together have been granted the right to purchase a minority equity position in AmerisourceBergen, beginning with the right to purchase up to 7 percent of the fully diluted equity of AmerisourceBergen in the open market. In addition, AmerisourceBergen has granted to Walgreens and Alliance Boots equity warrants exercisable for 16 percent in the aggregate of the fully diluted equity of AmerisourceBergen. The first tranche of warrants, representing 8 percent of the fully diluted equity of AmerisourceBergen, has a strike price of $51.50 and will be exercisable for a six-month period beginning in March 2016. The second tranche of warrants, also representing 8 percent of the fully diluted equity of AmerisourceBergen, has a strike price of $52.50 and will be exercisable for a six-month period beginning in March 2017. The warrants will be allocated equally among Walgreens and Alliance Boots. Walgreens and Alliance Boots have agreed to customary transfer restrictions on their equity stake, and have also agreed not to acquire additional equity of AmerisourceBergen under the terms of a standstill agreement, subject to the terms and conditions of such agreement, including certain pre-emption rights and permitted exceptions.

Walgreens will have the ability to appoint one director to AmerisourceBergen’s board upon Walgreens and Alliance Boots together acquiring a 5 percent equity stake, and a second director upon exercise in full of the first warrants. These new board seats will add to the Company’s current nine-member board.

Regulatory Approvals Required

The equity investment by Walgreens and Alliance Boots is subject to the receipt of customary regulatory approvals.

Revised Guidance for Fiscal 2013

As a result of this new relationship, the Company expects incremental brand revenues of at least $2 billion in September of 2013, and we have increased our guidance for revenue growth to 8 percent to 11 percent for the full fiscal year. The company has revised its expectations for GAAP earnings per share from continuing operations for fiscal 2013 to a range of $2.96 to $3.06, as certain one-time start up operational expenses and transaction costs will more than offset the addition of the new business late in our fiscal fourth quarter. The revised range does not include the impact of a significant one-time LIFO expense due to the inventory build anticipated in relation to the new business, or an intangible amortization expense related to the equity warrants. We expect to have additional information available on the LIFO and amortization expenses, the expected decline in operating margins and other items when we report results for our March fiscal quarter.

The Company had previously expected free cash flow for fiscal 2013 to be in the range of $750 to $850 million, and now expects that range to decrease significantly to $100 to $200 million as we onboard the new business, and incur an additional $40 million in related capital expenses.

Conference Call

The Company will host a conference call today at 7:30 a.m. Eastern Daylight. Participating in the conference call will be: Steven H. Collis, President and Chief Executive Officer of AmerisourceBergen; and Tim G. Guttman, Senior Vice President and Chief Financial Officer of AmerisourceBergen. In addition, Gregory Wasson, President and Chief Executive Officer of Walgreens, and Stefano Pessina, Executive Chairman of Alliance Boots, will be our special guests on the conference call.

To access the live conference call via telephone:
Dial in: The dial-in number for the live call will be (612) 326-1011. No access code is needed.

To access the live webcast:
Go to the Investor Relations page at http://www.amerisourcebergen.com.

A replay of the telephone call and webcast will be available from 10:30 a.m.March 19, 2013 until 11:59 p.m.March 26, 2013. The Webcast replay will be available for 30 days.

To access the telephone replay from within the US, dial 800-475-6701. From outside the US, dial 320-365-3844. The access code for the replay is 286668.

To access the archived webcast, go to the Quarterly Webcasts section on the Investor Relations page at http://www.amerisourcebergen.com.

Additional Information

AmerisourceBergen intends to promptly file with the Securities and Exchange Commission a current report on Form 8-K, which will include the Framework Agreement, Warrants and Shareholders Agreement. You should refer to the Form 8-K when it is available for more detailed information regarding this strategic transaction between AmerisourceBergen, Walgreens, and Alliance Boots and related matters.

About AmerisourceBergen

AmerisourceBergen is one of the world's largest pharmaceutical services companies serving the United States, Canada and selected global markets. Servicing both healthcare providers and pharmaceutical manufacturers in the pharmaceutical supply channel, the Company provides drug distribution and related services designed to reduce costs and improve patient outcomes. AmerisourceBergen's service solutions range from niche premium logistics and pharmaceutical packaging to reimbursement and pharmaceutical consulting services. With over $80 billion in annualized revenue, AmerisourceBergen is headquartered in Valley Forge, PA, and employs approximately 13,000 people. AmerisourceBergen is ranked #29 on the Fortune 500 list. For more information, go to www.amerisourcebergen.com.

AmerisourceBergen’s Cautionary Note Regarding Forward-Looking Statements

Statements in this release that are not historical are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “likely,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “continue,” “sustain,” “synergy”, “on track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” ”possible,” “assume,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. These forward-looking statements are not guarantees of future performance, are based on assumptions that could prove incorrect or could cause actual results to vary materially from those indicated, and are subject to risks and uncertainties, including the failure to obtain the required U.S. and foreign antitrust regulatory approvals for the equity investments by Walgreens and Alliance Boots in AmerisourceBergen, the occurrence of any event, change or other circumstance that could give rise to the termination, cross-termination or modification of any of the transaction documents, including, among others, the distribution agreement or the generics agreement, an impact on AmerisourceBergen’s earnings per share resulting from the exercise of the warrants, the disruption of AmerisourceBergen’s plans and operations as a result of the transaction, the inability to realize anticipated synergies, including synergies resulting from participation in the Walgreens Boots Alliance Development GmbH joint venture,potential operating dis-synergies, disruption resulting from potential vendor, payor and customer reaction to the transaction, the inability to achieve anticipated financial results, unexpected costs, fees, expenses and charges incurred by AmerisourceBergen related to the transaction, the disruption of AmerisourceBergen’s cash flow and ability to return value to its stockholders in accordance with its past practices, risks associated with international business operations, changes in vendor, payer and customer relationships and terms, the reduction of AmerisourceBergen’s operational, strategic or financial flexibility, and other factors described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, each of which is incorporated herein by reference, and in other documents that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, AmerisourceBergen does not undertake, and expressly disclaims, any duty or obligation to publicly update any forward-looking statement after the date of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Source: AmerisourceBergen

AmerisourceBergen
Barbara Brungess, 610-727-7199
bbrungess@amerisourcebergen.com

Liberty to Buy 27% Stake in Charter for $2.6 Billion

Liberty Media agreed on Tuesday to buy a 27.3 percent stake in the cable services provider Charter Communications for $2.6 billion, in the latest deal by the billionaire John C. Malone.

Under the terms of the agreement, Liberty will pay what amounts to $95.50 a share for the stake, which is comprised of 26.9 million shares and 1.1 million warrants. That represents a 6 percent premium to Charter’s closing price on Friday, the last day before reports of the pending investment began to emerge.

The transaction will give Liberty a significant stake in one of the country’s major cable television operators, something that Mr. Malone hasn’t owned in over a decade. Charter reported about 4 million video customers and 3.8 million residential Internet customers as of Dec. 31.

For the Charter investors selling â€" Apollo Global Management, Oaktree Capital Management and Crestview Partners â€" the Liberty investment will allow them to pare back the holdings they gained upon taking control of the cable operator in 2009. The investment firms became the principle owners of Charter as part of a deal to let the company emerge from bankruptcy protection.

As part of the deal, Liberty will name four directors to Charter’s board, including Mr. Malone and his top lieutenant, Gregory Maffei. Liberty also agreed to cap its potential ownership stake in Charter to 35 percent until January of 2016, and 39.99 percent afterward.

The deal, which will be financed with cash on hand and new loans, is expected to close in April or May.

Assessing the Cyprus Bailout

The European plan to take money from bank depositors to help pay for a bailout of Cyprus has set off alarm bells among some analysts and politicians. But the move, far from setting a precedent for other countries, has a lot to do with the particulars of Cyprus, Andrew Ross Sorkin writes in the DealBook column.

The proposal has understandably caused turmoil and anger in that part of the world. “A bailout deal that was supposed to calm a financial crisis in an economically insignificant Mediterranean nation spread it wider,” The New York Times writes. The fear among analysts is that imposing a levy on depositors could create a dangerous precedent and, in a doomsday scenario, prompt depositors to move their money elsewhere.

But that does not seem likely to happen, some observers argue. “I would assume that anyone in Spain, Portugal or elsewhere who knows about the taxation of Cypriot depositors also would know that the Cypriot banking system is a very different animal than anywhere else in the euro zone,” Erik Nielsen, chief economist at UniCredit, wrote in a note to clients. Mr. Sorkin writes: “Cyprus is unique. Besides being tiny, its banking system looks different from those in most other countries. Much of the big money deposited in its banks is from foreign investors, including Russians who have long been suspected of money laundering. Those investors had fair warning that Cypriot banks were troubled.”

As for the bailout’s implications for Europe, there may be an upside. The willingness to impose so-called haircuts on depositors “shows that the European Union is still grappling for ways to reduce the region’s debt levels, a process known as de-leveraging,” DealBook’s Peter Eavis writes. “Some experts think Europe’s economy and employment levels won’t grow in earnest until debt is substantially reduced. As a result, they are, with some reservations, optimistic after the moves taken in Cyprus.”

OBSTACLES TO A HIGHER PRICE FOR DELL  |  Shareholders of Dell appear to be expecting a higher bid than the offer of $13.65 a share by the company’s founder, Michael S. Dell, and the private equity firm Silver Lake. But a richer offer may not readily materialize, DealBook’s Michael J. de la Merced writes.

For one thing, the current bidders may not be willing, or able, to pay more than their $24.4 billion offer. “Here’s one way of looking at it: Raising the bid by a dollar a share would cost about $1.8 billion, so getting to the $15-a-share bid that some analysts see as necessary would add about $2.3 billion to the deal’s price. It’s unclear who might bear the cost of providing the additional capital,” Mr. de la Merced says. “Silver Lake is balking at adding more money to the deal, according to people briefed on thinking at the private equity firm.”

The second possibility would be for a competing bid to emerge as part of the so-called go-shop process, which has attracted the likes of Hewlett-Packard, Lenovo and the Blackstone Group. “But it’s unclear whether anything definitive will come from the go-shop process. H.P. and Lenovo are widely seen as taking a free look at their rival’s books,” as was Blackstone. Although none were expected to bid, Bloomberg News reports that Blackstone may change its mind.

WHAT’S NEXT FOR SAC  |  The $616 million penalty that SAC Capital Advisors is paying to resolve insider trading lawsuits does not end the possible legal troubles for the giant hedge fund. The firm’s president told investors on a conference call on Monday that the scrutiny could continue, according to The Wall Street Journal. Friday’s settlements suggested that the Securities and Exchange Commission “concluded that there was enough evidence to go after SAC itself for its involvement” in suspicious trading, DealBook’s Peter J. Henning writes in the White Collar Watch column. “Because the CR Intrinsic settlement deals only with trading in Wyeth and Elan shares in late July 2008, the S.E.C. is free to pursue additional transactions by SC in those companies if there is evidence that it received other inside information.”

“One problem the agency could face in pursuing a case involving earlier trading, however, is that a recent Supreme Court decision limits its ability to obtain penalties for violations that are more than five years old, unless the firm waived the statute of limitations.”

ON THE AGENDA  |  The Frankfurt Finance Summit features speeches by, among others, Jens Weidmann, the president of the Bundesbank; Christine Lagarde, the managing director of the International Monetary Fund; and Anshu Jain, the co-chief executive of Deutsche Bank. A Senate Judiciary subcommittee holds a hearing at 10 a.m. about the effects of a merger between American Airlines and US Airways. A Senate Banking subcommittee has a hearing at 3 p.m. about improving regulation and increasing competition in insurance markets. Adobe Systems reports earnings after the market closes. Richard Branson of Virgin is on CNBC at 8 a.m. Michael O’Leary, chief of Ryanair, is on Bloomberg TV at 9:45 a.m.

WHITE’S BIG DAY  |  The Senate Banking Committee meets in executive session at 10 a.m. to consider the nomination of Mary Jo White to be the next leader of the Securities and Exchange Commission. If confirmed, she would serve through the remainder of the term expiring on June 5, 2014. The committee will also consider the nomination of Richard Cordray to continue as director of the Consumer Financial Protection Bureau for a five-year term. In a hearing last week, Ms. White faced questions about her work representing Wall Street clients, pledging that, as a regulator, “the American public will be my client, and I will work as zealously as is possible on behalf of them.”

Mergers & Acquisitions »

Liberty Media Said to Approach Deal With Cable Operator  |  John Malone’s Liberty Media “is close to an agreement” to buy a 25 percent stake in Charter Communications for about $2.5 billion, according to The Wall Street Journal, which cites unidentified people familiar with the situation. WALL STREET JOURNAL

Cynosure to Buy Palomar, Laser Maker, for $294 Million  | 
REUTERS

Chief of ARM Holdings, British Chip Designer, to Retire  | 
WALL STREET JOURNAL

INVESTMENT BANKING »

BlackRock Said to Plan Almost 300 Layoffs  |  The giant asset manager BlackRock “will lay off nearly 300 of its work force and shift some staff to other locations and areas of its business, according to an internal memo,” Reuters reports. REUTERS

An Expanded Bonus Cap Draws Ire in Europe  |  The news that a cap on banker bonuses might be broadened to apply to certain fund managers did not sit well with those in the industry, The Financial Times says. FINANCIAL TIMES

An Often-Skeptical Analyst Sounds a Positive Note  |  Meredith Whitney told CNBC: “I have not been this constructive, this bullish on the U.S., on equities, in my career.” CNBC

Royal Bank of Canada Hires Co-Heads of U.S. Technology Banking  |  The Royal Bank of Canada has hired Michal Katz and Michael Carter as co-heads of its United States technology investment banking group, and Erik-Jaap Molenaar as a technology deal maker. DealBook »

Photos From a Blankfein Wedding  |  Lloyd C. Blankfein, the chief executive of Goldman Sachs, has gained a daughter-in-law. DealBook has collected some Instagram pictures of the event. DealBook »

PRIVATE EQUITY »

N.F.L. Teams Up With Private Equity Firm  |  The National Football League is working with Providence Equity Partners in a plan to jointly invest about $300 million “in start-ups that work within sports, media and technology,” The Wall Street Journal reports. WALL STREET JOURNAL

Investors Fuel a Boom in Farmland  |  With farmland prices soaring, some farmers are taking an opportunity to sell to investors, pushing prices up higher. “The potential dangers for the economy are nowhere near as serious as the consequences of the housing collapse. But for individual farmers and farming communities, as well as rural farming banks, the repercussions could be severe,” Julie Creswell writes in The New York Times. NEW YORK TIMES

HEDGE FUNDS »

Avenue Capital Promotes a Portfolio Manager  |  Avenue Capital named Richard Furst the new chief investment officer, amid speculation that the hedge fund’s co-founder, Marc Lasry, might become the next ambassador to France, Fortune reports. FORTUNE

Man Group Imposes Limits on Cash Bonuses for Executives  |  The Man Group, the largest publicly traded hedge fund firm in the world, said annual cash bonuses for its top executives would be capped at no more than 250 percent of salary. DealBook »

Activist Investors Come of Age  |  A cottage industry has grown up around activist investors, The Wall Street Journal writes. WALL STREET JOURNAL

Paulson Seeks Dismissal of Lawsuit Over Mortgage Investment  | 
REUTERS

I.P.O./OFFERINGS »

For MGM, an I.P.O. May Not Be Likely  |  “Knowledgeable sources say the Lion won’t likely launch an I.P.O. any time in the near future. In the meantime, MGM has been exploring other options to help cash out its shareholders,” Variety writes. VARIETY

Electronic Arts Chief Resigns, and Stock Rises  | 
NEW YORK TIMES

VENTURE CAPITAL »

‘Copycat Kings’ Turn to Venture Capital  |  The Samwer brothers of Germany, known for striking it rich by starting “copycat” versions of successful Internet companies, are joining with another entrepreneur to start a $194 million venture fund, Bloomberg Businessweek writes. BLOOMBERG BUSINESSWEEK

The Surfers Versus Khosla  |  The Surfrider Foundation, a coastal protection group, claims in a lawsuit that the owner of a beachfront property near San Francisco has cut off access to Martin’s Beach, reports PE Hub. The article cites “a person familiar with the matter” who says “the owner is Vinod Khosla, a co-founder of Sun Microsystems.” DealBook »

LEGAL/REGULATORY »

Former Calpers Chief Indicted Over Fraud  |  Federico R. Buenrostro and an associate are charged with defrauding Apollo Global Management. DealBook »

Citigroup Agrees to Settle Lawsuit for $730 Million  |  The class-action lawsuit was on behalf of investors in the Citigroup’s debt and preferred stock, who claimed to have been misled by the bank’s disclosures, Reuters reports. REUTERS

For Fannie Mae, a Path to Repaying the Government  |  With the housing market on the mend, Fannie Mae now might be able “to do the once unthinkable: repay as much as $61.5 billion in rescue funds to the U.S. Treasury,” The Wall Street Journal writes. WALL STREET JOURNAL

With New Chinese Leaders in Place, Waiting for an Agenda to Emerge  |  Premier Li Keqiang pledged in his first news conference to fight graft and pollution, but no one expects quick solutions, Bill Bishop writes in the China Insider column. DealBook »

Senate Report on JPMorgan Loss May Provide Fresh Evidence  |  The Senate report and hearing on JPMorgan Chase’s $6 billion trading loss provides a portrait of a bank that went right to the edge of acceptable practices, and may have even stepped over the line, Peter J. Henning writes in the White Collar Watch column. DealBook »

Lawyer for French Rogue Trader Is Found Dead  |  Olivier Metzner, the lawyer who represented Jérôme Kerviel, the former Société Générale trader convicted in 2010 of creating more than $6 billion in losses on unauthorized trades, was found dead in Brittany on Sunday morning, an apparent suicide, The Guardian reports. DealBook »

Carl Levin, the Muckracker

The Senate’s Muckraker

I’ll miss Carl Levin when he leaves the Senate after the next election â€" and you will, too.

Joe Nocera

At 78, Levin has represented Michigan in the United States Senate for 34 years. He has certainly earned the right to retire on his own terms. But as a longtime Democratic member of the Senate Permanent Subcommittee on Investigations â€" and as its chairman since 2007 â€" Levin has done more than anyone to expose the scams, the conflicts, the wrongdoing and the sheer idiocy of the financial industry from the run-up to the financial crisis to the present day. Every time Levin’s subcommittee holds a hearing, it should shame Attorney General Eric “Too Big to Jail” Holder Jr.

The subcommittee’s most recent exposé took place on Friday, when it held a hearing to explore the infamous “London Whale” trades that cost JPMorgan Chase $6 billion last year. Months earlier, the Senate Banking Committee, whose members lean on the big banks for major campaign contributions, held its own inquiry into the disastrous trades. There, JPMorgan’s chief executive, Jamie Dimon, was treated more like a visiting dignitary than a committee witness. Senator Charles Schumer of New York, unctuously describing Dimon as “a financial expert,” asked him to gauge the “danger of this kind of thing happening at other institutions not as well-capitalized as JPMorgan” Pathetic.

Levin and John McCain, the permanent subcommittee’s ranking minority member, didn’t even bother to invite Dimon. “We wanted to speak to the people who had the most information,” Levin told me. Thus, the subcommittee’s witnesses included Ina Drew, who led the division that oversaw the London traders, and Douglas Braunstein, who was the bank’s chief financial officer. The combination of Levin’s tough questions and a 300-page report by the subcommittee’s investigators was brutal. The bank, and Dimon, took a major reputational hit.

For instance, Levin established that JPMorgan knew more about the mounting losses than it let on during the now-notorious conference call in April 2012, when Dimon described the trades as “a tempest in a teapot.” The report included examples of the utter contempt for which the bank held its regulators at the Office of the Comptroller of the Currency. The O.C.C., meanwhile, never understood the risks involved. Indeed, under Levin’s relentless questioning, bank witnesses essentially conceded that their explanation for the losses â€" that the London trades were part of a hedge that had gone wrong â€" was not a particularly truthful statement. What the trades were supposed to be hedging was never adequately explained.

(“Our executives said what they believed to be true based on the facts they had at the time,” said a JPMorgan spokesman in a statement. “In retrospect, the information they had was wrong, and they apologized for this.”)

The JPMorgan hearing was only the latest in the subcommittee’s muckraking efforts. Previous hearings â€" on the mortgage shenanigans at Washington Mutual, the egregious conflicts of the credit-rating agencies, and Goldman Sachs’s efforts to dump its toxic assets on unsuspecting clients â€" were every bit as illuminating, and as devastating. They often exposed behavior that was at least potentionally criminal.

But when I asked Levin about the purpose of the hearings, he did not mention criminal prosecutions, perhaps just as well given our supine Justice Department. “All of our hearings are held with some legislative purpose in mind,” he said. For instance, the Goldman hearing led the authors of the Dodd-Frank financial reform law to include language intended to prevent investment banks from hiding that they were on the opposite side of trades being pushed on their clients.

One goal of Friday’s hearing, Levin told me, was to “stiffen the spine of regulators. Rule-makers are struggling with what to allow in terms of hedging under the Volcker Rule,” he said. (The Volcker Rule is intended to prevent banks from trading for their own accounts.) “This should help them.”

Of course, the O.C.C. has bigger problems than that â€" as the hearing implicitly underscored. It is a classic captured regulator. As American Banker pointed out recently, the Promontory Financial Group, a prominent banking consulting firm founded by Eugene Ludwig, a former comptroller of the currency, recently hired the O.C.C.’s general counsel, Julie Williams. And where did the O.C.C. find its new general counsel, Amy Friend From the Promontory Financial Group!

But I digress.

Toward the end of my interview with Levin, he let slip a tantalizing tidbit. Sometime in the next few months, the permanent subcommittee plans to call the Internal Revenue Service to task for allowing the political super PACs to be classified as tax-exempt 501(c)(4)s. “Tax-exempt 501(c)(4)s are not supposed to be engaged in politics,” he said. “It is against the law to do so.” Then he added, with a certain undeniable relish, “We’re going to go after them.”

Oh, boy!

A version of this op-ed appeared in print on March 19, 2013, on page A27 of the New York edition with the headline: The Senate’s Muckraker.