Financial Windfalls for Wall St. Executives Taking Government Jobs

People usually say they go into government to perform public service. If they came from Wall Street, however, their former employers often provide another service.

Banks, including JPMorgan Chase, Goldman Sachs and Morgan Stanley, all have provisions that allow acceleration of payments owed to senior executives if they take government jobs, a new study finds.

Such a benefit was highlighted recently during the confirmation hearing for Jacob J. Lew as Treasury secretary. His previous employer, Citigroup, had guaranteed him preferential financial treatment if he were to leave to take a job in the government. When Mr. Lew left Citigroup he held stock that he could not immediately cash worth as much as $500,000, according to a government filing.

“These companies seem to be giving a special deal to executives who become government officials,” says the study, to be released Thursday by the Project on Government Oversight. “In exchange, the companies may end up with friends in high places who understand their business, sympathize with it, and can craft policies in its favor.”

The study looked at the compensation policies of several financial institutions.

The accelerated vesting of Mr. Lew’s shares is part of a larger debate on Wall Street and in Washington, where people frequently move back and forth, creating concern that government officials may favor their old colleagues on Wall Street.

The debate has heated up recently as top officials from the Securities and Exchange Commission leave for new jobs, possibly on Wall Street, while the White House has nominated Mary Jo White, a lawyer who has represented Wall Street firms, to run the S.E.C.

Some Wall Street insiders contend that time spent on Wall Street does not compromise someone like Mr. Lew or Ms. White, saying that the experience sharpens their instincts and helps them understand how business actually works.

Firms that have contracts that provide for special treatment for employees who decide to go into government typically say it is intended to encourage public service, not to curry favor. The firms also note that employees on Wall Street and elsewhere are often required by law to sell their shares to avoid potential conflicts of interest and are limited in the amount of contact they can have with their former employer. The issue is simply more pronounced on Wall Street because executives are often paid in shares that vest over several years, rather than just cash.

One person who has gone from Wall Street to government, who asked not to be named because of a policy at his workplace prohibiting employees from speaking to the media, said he sold his stock at a depressed price for a job that paid millions of dollars less than what he was earning.

“I went into government because I believe in public service, not to help Wall Street,” he said.

Mr. Lew worked at Citigroup from 2006 to 2008. Under the terms of Mr. Lew’s contract with Citi, he kept certain bonus compensation if he left for a “high-level position with the United States government or regulatory body,” but not for a private sector competitor, said people with direct knowledge of the contract.

A Citigroup spokeswoman said it “routinely accommodates individuals who wish to leave the firm to pursue a position in government or nonprofit sector.”

Other Wall Street firms have compensation plans with language similar to Mr. Lew’s. They do not provide for a bonus for government service, but rather allow for special treatment of compensation that has already been granted but not paid out.

On Wall Street, employees are often paid in the form of shares that they cannot cash for years. These contracts allow the employees to cash the shares early. If they were leaving for a rival firm, however, they would most likely forfeit that compensation.

In recent years, dozens of people have left finance to work for government.

Thomas R. Nides, for example, left Morgan Stanley in 2010 to join the Obama administration as deputy secretary of state for management and resources. He sold shares of Morgan Stanley at the time, disclosing to the government that the firm allowed him to cash out his shares ahead of schedule.

Mr. Nides, who received at least $5 million because of a stock acceleration, recently left government to return to Morgan Stanley as vice chairman. A Morgan Stanley spokesman declined to comment on the issue.

At Goldman, at least one of its compensation plans allows for a lump sum cash payment for certain stock grants that have been awarded but have not yet vested, according to a regulatory filing.

At least one of its former executives, Robert D. Hormats, received special financial treatment on some of his holdings, according to a government filing. Mr. Hormats, under secretary of state for economic growth, energy and the environment, wrote to the government upon taking that position that “Goldman Sachs will accelerate and pay out my restricted stock units, pursuant to written company policy.”

Those payments are allowed. In 1990, the Supreme Court ruled that Boeing was within its rights to make lump sum severance payments to several employees when they quit Boeing to take senior military posts.

The Project on Government Oversight says the rules governing executive sales of stock were tightened in 2004, as a response to the collapse of the energy company Enron. In the weeks before filing for bankruptcy, Enron had paid out millions of dollars in accelerated payments to senior executives. Now it is much harder for companies to speed up stock payments, but there is a government service exemption that allows for some leeway.

Costly Bank Payday Loans Criticized in Report

Some of the nation’s largest banks continue to offer payday loans, pitched as advances on direct-deposit paychecks, despite growing regulatory scrutiny and mounting criticism about the short-term, high-cost loans.

The findings, outlined in a report by the Center for Responsible Lending to be released on Thursday, provide the latest glimpse into the methods that banks are aggressively using to earn new revenue.

According to bank analysts, banks are looking to recoup the billions in lost income from a spate of regulations restricting fees on debit and credit cards.

Across the nation, roughly six banks, including Wells Fargo and U.S. Bank, make the loans.

The loans can prove expensive, the report shows, typically costing $10 for every $100 borrowed. They are often used by low-income customers, said the center, a nonprofit group that studies consumer lending issues.

At first glance, the loans do not seem like a typical payday loan offered by storefront lenders. Instead, banks typically allow a customer to borrow the money against a checking account. When a loan payment is due, the bank automatically withdraws the cash â€" the amount of the loan plus the origination fee.

The banks have been charging interest rates that average 225 to 300 percent, according to the report. Problems arise when there is not enough money in the account to cover the payment and the total is withdrawn regardless of whether there is sufficient cash in the account.

For consumers, this can lead to a cascade of overdraft charges and fees for insufficient funds, according to the report.

Customers who opt for a payday loan are about two times as likely to be hit with an overdraft fee, according to the report.

Those fees can be particularly devastating for customers with limited incomes, the report said. According to researchers at the center, roughly 25 percent of all customers who take out bank payday loans are Social Security recipients. One customer cited in the report paid $162 in interest and $57 in overdraft fees after taking out a loan.

Banks, however, say that they are catering to consumer demand.

“It’s a service that we believe is an important option for our customers and is designed as an emergency option,” said Richele J. Messick, a spokeswoman for Wells Fargo. She added that the bank was “very upfront and transparent with customers that this is an expensive form of credit and is not intended to solve long-term financial needs.”

U.S. Bank could not be reached for comment.

The peril for older consumers is heightened because of recent changes in the way that government benefits are distributed, the report says. Starting this month, government benefits, including Social Security payments, have been deposited directly into checking or savings accounts.

Social Security recipients who take out a payday loan, the report states, could find their benefits eroded when those dollars are used to satisfy overdraft and other fees associated with the payday loans.

Regulators have issued warnings about abusive payday loan practices.

Last May, the Federal Deposit Insurance Corporation said the agency was “deeply concerned” about payday lending.

The Office of the Comptroller of the Currency, which oversees the nation’s largest banks, said in June 2011 that the loans raised “operational and credit risks and supervisory concerns.”

The Consumer Financial Protection Bureau, a new federal agency, said it was examining whether banks ran afoul of consumer protection laws in the marketing of these products. So far, though, the products are widely available.

Costly Bank Payday Loans Criticized in Report

Some of the nation’s largest banks continue to offer payday loans, pitched as advances on direct-deposit paychecks, despite growing regulatory scrutiny and mounting criticism about the short-term, high-cost loans.

The findings, outlined in a report by the Center for Responsible Lending to be released on Thursday, provide the latest glimpse into the methods that banks are aggressively using to earn new revenue.

According to bank analysts, banks are looking to recoup the billions in lost income from a spate of regulations restricting fees on debit and credit cards.

Across the nation, roughly six banks, including Wells Fargo and U.S. Bank, make the loans.

The loans can prove expensive, the report shows, typically costing $10 for every $100 borrowed. They are often used by low-income customers, said the center, a nonprofit group that studies consumer lending issues.

At first glance, the loans do not seem like a typical payday loan offered by storefront lenders. Instead, banks typically allow a customer to borrow the money against a checking account. When a loan payment is due, the bank automatically withdraws the cash â€" the amount of the loan plus the origination fee.

The banks have been charging interest rates that average 225 to 300 percent, according to the report. Problems arise when there is not enough money in the account to cover the payment and the total is withdrawn regardless of whether there is sufficient cash in the account.

For consumers, this can lead to a cascade of overdraft charges and fees for insufficient funds, according to the report.

Customers who opt for a payday loan are about two times as likely to be hit with an overdraft fee, according to the report.

Those fees can be particularly devastating for customers with limited incomes, the report said. According to researchers at the center, roughly 25 percent of all customers who take out bank payday loans are Social Security recipients. One customer cited in the report paid $162 in interest and $57 in overdraft fees after taking out a loan.

Banks, however, say that they are catering to consumer demand.

“It’s a service that we believe is an important option for our customers and is designed as an emergency option,” said Richele J. Messick, a spokeswoman for Wells Fargo. She added that the bank was “very upfront and transparent with customers that this is an expensive form of credit and is not intended to solve long-term financial needs.”

U.S. Bank could not be reached for comment.

The peril for older consumers is heightened because of recent changes in the way that government benefits are distributed, the report says. Starting this month, government benefits, including Social Security payments, have been deposited directly into checking or savings accounts.

Social Security recipients who take out a payday loan, the report states, could find their benefits eroded when those dollars are used to satisfy overdraft and other fees associated with the payday loans.

Regulators have issued warnings about abusive payday loan practices.

Last May, the Federal Deposit Insurance Corporation said the agency was “deeply concerned” about payday lending.

The Office of the Comptroller of the Currency, which oversees the nation’s largest banks, said in June 2011 that the loans raised “operational and credit risks and supervisory concerns.”

The Consumer Financial Protection Bureau, a new federal agency, said it was examining whether banks ran afoul of consumer protection laws in the marketing of these products. So far, though, the products are widely available.

Financial Windfalls for Wall St. Executives Taking Government Jobs

People usually say they go into government to perform public service. If they came from Wall Street, however, their former employers often provide another service.

Banks, including JPMorgan Chase, Goldman Sachs and Morgan Stanley, all have provisions that allow acceleration of payments owed to senior executives if they take government jobs, a new study finds.

Such a benefit was highlighted recently during the confirmation hearing for Jacob J. Lew as Treasury secretary. His previous employer, Citigroup, had guaranteed him preferential financial treatment if he were to leave to take a job in the government. When Mr. Lew left Citigroup he held stock that he could not immediately cash worth as much as $500,000, according to a government filing.

“These companies seem to be giving a special deal to executives who become government officials,” says the study, to be released Thursday by the Project on Government Oversight. “In exchange, the companies may end up with friends in high places who understand their business, sympathize with it, and can craft policies in its favor.”

The study looked at the compensation policies of several financial institutions.

The accelerated vesting of Mr. Lew’s shares is part of a larger debate on Wall Street and in Washington, where people frequently move back and forth, creating concern that government officials may favor their old colleagues on Wall Street.

The debate has heated up recently as top officials from the Securities and Exchange Commission leave for new jobs, possibly on Wall Street, while the White House has nominated Mary Jo White, a lawyer who has represented Wall Street firms, to run the S.E.C.

Some Wall Street insiders contend that time spent on Wall Street does not compromise someone like Mr. Lew or Ms. White, saying that the experience sharpens their instincts and helps them understand how business actually works.

Firms that have contracts that provide for special treatment for employees who decide to go into government typically say it is intended to encourage public service, not to curry favor. The firms also note that employees on Wall Street and elsewhere are often required by law to sell their shares to avoid potential conflicts of interest and are limited in the amount of contact they can have with their former employer. The issue is simply more pronounced on Wall Street because executives are often paid in shares that vest over several years, rather than just cash.

One person who has gone from Wall Street to government, who asked not to be named because of a policy at his workplace prohibiting employees from speaking to the media, said he sold his stock at a depressed price for a job that paid millions of dollars less than what he was earning.

“I went into government because I believe in public service, not to help Wall Street,” he said.

Mr. Lew worked at Citigroup from 2006 to 2008. Under the terms of Mr. Lew’s contract with Citi, he kept certain bonus compensation if he left for a “high-level position with the United States government or regulatory body,” but not for a private sector competitor, said people with direct knowledge of the contract.

A Citigroup spokeswoman said it “routinely accommodates individuals who wish to leave the firm to pursue a position in government or nonprofit sector.”

Other Wall Street firms have compensation plans with language similar to Mr. Lew’s. They do not provide for a bonus for government service, but rather allow for special treatment of compensation that has already been granted but not paid out.

On Wall Street, employees are often paid in the form of shares that they cannot cash for years. These contracts allow the employees to cash the shares early. If they were leaving for a rival firm, however, they would most likely forfeit that compensation.

In recent years, dozens of people have left finance to work for government.

Thomas R. Nides, for example, left Morgan Stanley in 2010 to join the Obama administration as deputy secretary of state for management and resources. He sold shares of Morgan Stanley at the time, disclosing to the government that the firm allowed him to cash out his shares ahead of schedule.

Mr. Nides, who received at least $5 million because of a stock acceleration, recently left government to return to Morgan Stanley as vice chairman. A Morgan Stanley spokesman declined to comment on the issue.

At Goldman, at least one of its compensation plans allows for a lump sum cash payment for certain stock grants that have been awarded but have not yet vested, according to a regulatory filing.

At least one of its former executives, Robert D. Hormats, received special financial treatment on some of his holdings, according to a government filing. Mr. Hormats, under secretary of state for economic growth, energy and the environment, wrote to the government upon taking that position that “Goldman Sachs will accelerate and pay out my restricted stock units, pursuant to written company policy.”

Those payments are allowed. In 1990, the Supreme Court ruled that Boeing was within its rights to make lump sum severance payments to several employees when they quit Boeing to take senior military posts.

The Project on Government Oversight says the rules governing executive sales of stock were tightened in 2004, as a response to the collapse of the energy company Enron. In the weeks before filing for bankruptcy, Enron had paid out millions of dollars in accelerated payments to senior executives. Now it is much harder for companies to speed up stock payments, but there is a government service exemption that allows for some leeway.

Cyprus Shows How Not to Do a Bailout

Cyprus can’t really be about Cyprus, can it After all, the banking sector in that country pales in comparison to things like the London Whale trade and the amount of capital the big banks have to raise to meet Basel III.

Some will say it is about depositor insurance. Fair enough.

But by now I’d think investors would be smart enough to know that when you start chasing yield in small countries with outsize banking sectors, bad things will happen. And deposit insurance is only as good as the sovereign standing behind the insurance.

Cyprus does show that, for all the faults with the financial crisis rescues in the United States, the European Union still finds ways to show us how poorly a bailout can be handled. Why exactly did we restrict the Fed’s powers under 13(3)

Cyprus also shows that even an allegedly “safe” bankruptcy system can be too big and quite dangerous. After all, the banks in Cyprus were noted for their reliance on deposits rather than other forms of dodgy short-term finance like repo and conduits and what not.

Cyprus also shows the difficulty of imposing rigor on an ex post basis. I get the desire to impose the cost of the bailout on the outsiders with allegedly shady connections to quasi-democratic countries. But it seems a bit late in the day to suddenly become concerned about money laundering and tax evasion. Nobody noticed this before March 2013

The really big issue with Cyprus, that is so often lost in the articles about bank runs and Russian bad guys, is what Cyprus means for the euro zone and the E.U. generally.

Surely, Cyprus has to be high on the list of countries that maybe should not have been let into the euro. But if they can leave, what about Greece, and Spain, and …

And this is not only about the distressed countries. Once one country can leave, any other country can consider it too, whenever they have a beef with the E.U. What if the Netherlands or Finland decide they don’t want to be bit actors in Germany’s dramas any more What if Britain … well, that one’s easy.

With Freddie Mac Suit, Banks Face Billions More in Libor Claims

The fallout from the manipulation of the London interbank offered rate, or Libor, has already cost banks $2.5 billion in penalties, not to mention loss of reputation.

But that sum pales in comparison to payouts that will come from private lawsuits. Any finding of liability could be compounded because of the potential for any award to be tripled under the antitrust laws.

The latest salvo comes from the mortgage finance company Freddie Mac, which has filed a lawsuit in the Federal District Court in Alexandria, Va. It asserts that the company was harmed by collusive activity among the banks that lowered the benchmark interest rate. And where Freddie Mac goes, Fannie Mae, its larger sibling, usually follows, so we can expect it to file a suit seeking damages from Libor manipulation.

Lawsuits by Freddie and Fannie would not come as a shock to anyone. A memorandum released by the inspector general of the Federal Housing Finance Agency, the overseer of the two mortgage-finance giants, recommend pursuing claims against the banks for what it estimated to be more than $3 billion in damages from the Libor manipulation.

The three regulatory settlements to date - with Barclays, UBS and the Royal Bank of Scotland â€" provide much of the evidence Freddie Mac relies on in its complaint. Among the documents now public is a litany of e-mails demonstrating just how the banks worked to lower their Libor submissions to benefit their trading positions and make themselves appear stronger during the height of the financial crisis.

Normally, one would not expect that collusion would result in lower, rather than higher, prices. But in the world of finance, lower interest rates can be just as lucrative as higher ones, because it is all a matter of which side of the transactions one is on.

In its complaint, Freddie Mac points out two ways that the artificially lower rates cost it money. First, the company hedged is mortgage positions by buying swaps on the fixed-rate mortgages it held so that it received floating-rate payments. When Libor was pushed down by the banks, Freddie Mac received lower payments from the swaps.

The company also bought the swaps from a number of banks that participated in setting Libor. That has led the firm to include claims for breach of contract, as Freddie asserts that any manipulation violated the terms of the agreements to receive payments.

In addition, Freddie Mac held a large portfolio of mortgage-backed securities with floating interest rates. The lower the rate, the less it received in interest. Homeowners may have benefited from the manipulation in Libor by paying less interest on their mortgages, but Freddie Mac received less income on these financial instruments.

Banks involved with the scandal also face legal action from other plaintiffs. A raft of class-action lawsuits have been filed by a number of parties, including states and local governments that issued bonds and bought interest rate swaps. The cases have been consolidated in the Federal District Court in Manhattan for pretrial proceedings.

The banks have sought to dismiss the claims, arguing that the various plaintiffs cannot show that they were directly harmed by any antitrust violation, if one even occurred. In a brief filed in the case, the banks assert that if merely having economic exposure to the dollar-based Libor, or USD Libor, is enough to be part of suit, then “there is no limit to potential plaintiffs, because anyone, with respect to any transaction, might choose to reference USD Libor.”

Unlike some class-action plaintiffs, Freddie Mac looks to be in a stronger position to survive a motion to dismiss on these grounds. The company dealt directly with many of the banks accused of manipulating Libor by arranging for swaps, including Barclays, UBS and the Royal Bank of Scotland, all of which admitted to violations. The success of its trading in mortgage securities and hedging its risk was usually tied into Libor, the most important benchmark rate for mortgages.

Freddie Mac has taken an even more aggressive position in its lawsuit by naming the British Bankers Association as a defendant. The association was responsible for collecting the data from banks and then issuing the Libor benchmark, marketing it as a valuable tool for setting interest rates across a number of currencies.

It is not clear whether the claim against the association can survive a preliminary motion to dismiss, however. Freddie Mac claims that the organization was aware of the manipulation by the banks but did nothing to stop it. But the fact that one is aware of misconduct by others, and even that their services are being used, is usually not enough to show participation in a conspiracy.

There is also the issue of whether a United States court has jurisdiction over the British Bankers Association. While the banks have global operations and extensive dealings with the United States, the banking association operates primarily in London, and there may not be sufficient contacts with the United States to allow it to be brought into the case. Of course, that will be decided at an early stage when the association does its best to get out of the case.

For the banks, Freddie Mac is the type of plaintiff that can be expected put up a tough fight because, now that it is controlled by the federal government, the real beneficiaries of its lawsuit are taxpayers. Add to that the prospect of a similar claim by Fannie Mae, and the banks involved in Libor manipulation will be dealing with this issue for quite a while.

Freddie Mac v Bank of America LIBOR Complaint March 2013

Libor-Based Antitrust Class Action Dismissal Brief by DealBook

Barclays Bankers Cash in on Past Bonuses

LONDON â€" It pays to be a Barclays banker.

Despite the bank’s weak profit and legal woes, top executives at Barclays have been richly rewarded in the years since the financial crisis.

In the latest example, the British bank disclosed on Wednesday that its investment banking head, Rich Ricci, had cashed in $26 million of deferred shares. He was awarded the shares â€" some 5.7 million â€" as part of his bonus between 2009 and 2011.

The current chief executive Antony P. Jenkins, who took over last year in the wake of the rate-rigging scandal â€" received 5.6 million pounds of stock, cashing in 2.9 million pounds to pay the tax liability. Chris Lucas, the finance chief, got 1.2 million pounds worth of stock and collected 640,000 pounds of it.

The payouts come at a difficult time for Barclays. While the stock was awarded before 2012, the compensation may still give additional fodder for critics, who have complained about the industry’s outsize pay packages.

Barclays, in particular, has been under scrutiny in recent years. Early last, shareholders criticized the company for awarding its then chief executive, Robert Diamond, $10 million in 2011, despite flagging profits.

The rate-rigging scandal and other legal woes have only intensified the pay controversy.

Mr. Ricci’s name surfaced in relation to the rate manipulation inquiry. Mr. Lucas is one of four current and former Barclays executives who have been ensnared by a separate investigation into the bank’s capital-raising efforts during the financial crisis.

In recent months, Barclays has moved to overhaul its pay practices. It has also clawed back pay in response to the rate-rigging case.

Mr. Jenkins in February said he would forgo his bonus for last year following the recent missteps. The h bank said earlier this month that 428 of its staff members still earned more than $1.5 million in 2012 and that five bankers earned more than $7.5 million each last year, down from 17 in 2011.

On Wednesday, Barclays reiterated that its remuneration policy has now been revised “and all future incentive awards, short and long-term, will be based on the new principles that have been set out.”

All the Plan B’s for Cyprus Look Dreadful

The Cypriots have an expression, “eninboro allo.” It means: I cannot take any more of it.

There was jubilation last night outside the small Mediterranean island’s parliament when every single member of parliament either voted against a plan to tax depositors or abstained. The message was that people of Cyprus had had enough and weren’t going to let the big bullies, led by Germany, boss them around.

The plan to tax insured deposits was a dreadful mistake â€" I have described it as legalized bank robbery. But the deposit tax was part of an unpalatable but available 10 billion euro bailout, agreed with the euro zone. That plan A is now at risk. As Cypriots contemplate possible plan B’s, their jubilation may start to fade: all of them are also dreadful.

Some observers, including my colleague Anatole Kaletsky, believe that Germany will now blink. With an election looming there in the autumn, that seems most unlikely. Berlin has said it is unwilling to back any loan bigger than 10 billion euros, already a non-trivial 60 percent of Cyprus’ gross domestic product. The problem is that Nicosia needs 17 billion euros to recapitalize its banks and cover the government’s own expenses, leaving a 7 billion euro hole.

Berlin is right to refuse to lend more. Even with 10 billion euros, Cyprus’ debt will rise to around 130 percent of G.D.P. At 17 billion euros it would shoot up to around 160 percent of G.D.P. Under the original plan, debt was supposed to fall to 100 percent by 2020. But after the events of recent days, confidence will be so crushed and the island’s offshore finance business model so broken that this forecast now looks pie in the sky.

So what are Cyprus’ options There are broadly three: sell its soul to Russia; default and possibly quit the euro; or patch together a new deal with the euro zone. They are all bad, but the last one is the least bad, for both Cyprus and the rest of Europe.

Cyprus’ finance minister is in Russia today. Moscow is furious because many of its citizens, who have channeled money to Cyprus, would pay the deposit tax. It may seem odd that the Kremlin is so keen to protect citizens who make use of an off-shore financial center. Many are trying to reduce Russian tax payments and some may be money launderers. But that shows where President Vladimir Putin’s priorities lie.

Russia has non-financial interests in Cyprus. The island has potentially rich offshore gas deposits and its position in the eastern Mediterranean has long been strategic. It was colonized by Christian crusaders, the Ottomans and then Britain, which still has two military bases there. Could Moscow, whose only naval base on the Mediterranean is in strife-ridden Syria, somehow wangle some military advantage out of this crisis

Some in Cyprus won’t care. They’ll say it is better to be colonized by Russia, which at least is also predominantly Orthodox in its Christianity, than to be Germany’s whipping boy. But such a pact would amount to turning its back on modernity.

The second main option for Nicosia is to default - or more precisely for its big banks to go bust. If Cyprus can’t get a bailout from the euro zone, it won’t be able to recapitalize its banks. The European Central Bank has said it is willing to supply them with liquidity, but only under its rules. That is far from offering an open spigot.

The country’s second largest bank, Laiki, already seems to have run out of suitable collateral to receive even emergency loans. At some point, the government is going to have to re-open the banks. If it doesn’t then have a deal, everybody will rush to take their money out. The whole financial system will collapse.

It is hard to see this scenario ending with anything other than the imposition of capital controls and Cyprus quitting the euro. Some sort of equilibrium would eventually be established, but depositors would lose much more than plan A’s 6.75 to 9.9 percent. The country might also be forced out of the European Union. That would massively weaken its strategic position vis-a-vis Turkey, which has occupied around a third of the island since 1974.

The remaining option is to recut the deal with the euro zone. The good news is that Cyprus’ partners are not fixated on a deposit tax, especially hitting those with less than 100,000 euros. The bad news is that there is still a 5.8 billion euro hole to fill. That’s about a third of G.D.P.

Nicosia may be able to scrabble around for some alternative ways of finding cash. One unattractive idea is to raid pension funds. Another is to find some way of cashing in on the potential future value of the offshore gas deposits. Yet another is to get the Cypriot church to chip in; its archbishop has offered to help. Maybe there is also a way of fast-tracking privatizations. Conceivably the state itself could default on its debts â€" although that wouldn’t help a lot since half of them are held by the country’s banks.

That said, a combination of such measures, plus a smaller tax focused only on the uninsured depositors, might do the trick. It won’t be easy to sell this politically in Cyprus. But every day that the banks stay shut, the people may begin to appreciate the advantages of doing a deal with the euro zone.

“Eninboro allo” may then be replaced by “ne boro” â€" “yes I can”.

Hugo Dixon is co-founder of Breakingviews and editor-at-large at Reuters News. For more independent commentary and analysis, visit breakingviews.com.

From Morgan Stanley, Investing in Women on Corporate Boards

The lack of women on corporate boards has been a hot topic of conversation in financial circles recently, especially after a debate in Europe last year over imposing quotas.

Now, Wall Street is offering a free-market approach to the issue.

Morgan Stanley’s wealth management division is starting a new portfolio that seeks to invest in companies that have demonstrated a commitment to including women on their corporate boards. The strategy, known as the parity portfolio, is currently being marketed to investors and is scheduled to get going on April 1.

In a report last summer, Credit Suisse’s research institute found that over a six-year period, companies with “at least some” women on their boards did better, in terms of share price, than those with none.

“It just seemed to make sense, given I’m a feminist and an investment adviser,” said Eve Ellis, a financial adviser with the Matterhorn Group at Morgan Stanley Wealth Management, who is running the strategy with Nikolay Djibankov of the Matterhorn Group. “I’m frustrated by the fact that there are so few women on boards.”

The strategy seeks to encourage companies to think deeply about the gender makeup of their boards. Only companies with at least three women on their boards will be included in the portfolio.The strategy, being marketed to individuals and institutions, requires a $250,000 minimum investment.

The portfolio is avoiding tobacco, firearms and oil companies and is overweight in consumer discretionary and health care companies, according to Ms. Ellis. All of the companies in the portfolio are based in the United States.

In addition to the Credit Suisse report, Ms. Ellis cited research from McKinsey & Company and the nonprofit organization Catalyst to support the investment thesis.

A proposal in Europe to require companies to have 40 percent of their board members be women generated considerable controversy last year. After the plan was revised, the European Commission approved a proposal in November aimed at making the requirement into law.

Still, the research on the matter is not conclusive, Steven M. Davidoff, DealBook’s Deal Professor, wrote in September.

“That men and women are different may be true,” Mr. Davidoff wrote, “but this still doesn’t mean that the more women there are, the better the company’s profits.”

With JPMorgan Settlement, MF Global Clients Move Closer to Payout

MF Global customers moved one step closer to recouping their missing money late on Tuesday when JPMorgan Chase released its claim to more than $500 million belonging to the bankrupt brokerage firm.

The settlement deal, struck between JPMorgan and the trustee overseeing the return of customer money, puts to rest more than a year of tough negotiations. JPMorgan was reluctant to part with the money, arguing in part that it was owed tens of millions of dollars as a creditor of MF Global.

But the settlement deal, which includes a $100 million cash payout to the trustee and a promise from JPMorgan not to clawback $417 million it doled out last year, paves the way for MF Global’s customers to recover nearly all the money that disappeared when the brokerage firm imploded. That goal, surprisingly within reach, is a stunning turnaround from MF Global’s bankruptcy filing in October 2011, when $1.6 billion vanished from the firm.

“This is a significant milestone in returning assets to former customers,” James W. Giddens, the trustee, said in a statement.

In a sign that Mr. Giddens is moving closer to making MF Global’s customers whole, he asked a bankruptcy court judge on Tuesday to approve $300 million in cash payouts. The request comes on the heels of a payout in January that brought most American customers to 93 percent of their original investment, up from 80 percent. The new request, if approved by Judge Martin Glenn of the United States Bankruptcy Court in Manhattan, will again bump up customers by “several percentage points,” according to Mr. Giddens.

Foreign customers are not as well-positioned, though they too could receive additional money from the JPMorgan settlement.

The accord closes a bitter chapter in the MF Global debacle.

MF Global customers have long questioned whether JPMorgan was playing hardball, echoing accusations the bank faced in the aftermath of the Lehman Brothers bankruptcy. The customers complained that JPMorgan was slow to settle with Mr. Giddens, and even now they wonder whether the bank should have returned more.

Mr. Giddens noted, however, that the deal was an “economically sound agreement ending what would have been a costly, protracted, and uncertain legal battle.” Without the agreement, he said, fresh payouts to customers could have stalled “for at least two or three years.”

While JPMorgan had already returned $1 billion belonging to customers and $417 million in the firm’s proprietary funds, it attached a lien to the latter payment. Under the deal with Mr. Giddens, it released the lien on Tuesday.

“We are pleased to have reached this settlement, which will help restore funds to MF Global’s customers,” a JPMorgan spokeswoman said in an e-mail. “The agreement resolves all outstanding matters” between the bank and the MF Global “estate, its customers and creditors.”

JPMorgan was an obvious target for Mr. Giddens. It was at the center of MF Global’s downfall, lending to the firm and clearing its trades.

The bank was also a major recipient of customer money during MF Global’s chaotic final moments. When MF Global posted extra collateral to back its trades, aiming to reassure JPMorgan about its precarious position, some of the funds most likely belonged to customers.

Federal authorities have also scrutinized a $175 million transfer MF Global made from customer accounts to JPMorgan the day before the brokerage collapsed. The transfer, which was authorized by the firm’s Chicago office, was made to patch an overdraft in a London account.

While JPMorgan questioned the origin of the funds, seeking written assurances that the transfer was legitimate, MF Global balked. JPMorgan seized the money anyway, though the bank has said that it received oral assurances.

“As we have said before,” the JPMorgan spokeswoman said, the bank “worked to assist our client in a responsible manner under very challenging circumstances.”

James L. Koutoulas, a Chicago hedge fund manager who became a voice for thousands of customers whose money disappeared, might disagree. After he appeared on CNBC in 2011 to criticize JPMorgan, the bank closed his account and froze his credit card.

The bank has declined to discuss Mr. Koutoulas.

JPMorgan’s New Policy on Payday Lenders

JPMorgan Chase is moving to protect customers whose accounts are tapped by Internet-based payday lenders, planning to give those customers more power to stop withdrawals and close their accounts, Jessica Silver-Greenberg reports in DealBook. Under the changes, to be announced on Wednesday, JPMorgan is also limiting the fees it charges customers when the withdrawals trigger penalties.

The new approach comes as JPMorgan and its big rivals face scrutiny from regulators for enabling the online lenders, whose high-interest loans skirt state laws. After Ms. Silver-Greenberg wrote about the matter in The New York Times, Jamie Dimon, JPMorgan’s chief executive, said the practice was “terrible” and vowed to change it. The bank’s new policies will go into effect by the end of May. Bank of America and Wells Fargo said their policies on payday loans remained unchanged.

Ms. Silver-Greenberg writes: “It is possible that other lenders could institute changes, especially because rivals have followed JPMorgan’s lead in recent years. In 2009, for example, after JPMorgan capped overdraft fees at three a day, Wells Fargo also changed its policies to reduce the number of daily penalties charged.”

MALONE’S RETURN TO CABLE  |  John C. Malone, who made his fortune building TCI into a cable giant, is moving to re-enter the cable business after largely leaving it behind more than a decade ago, DealBook’s Michael J. de la Merced writes. Mr. Malone’s Liberty Media agreed on Tuesday to buy a 27.3 percent stake in the cable service provider Charter Communications for $2.6 billion, a move that also represents the latest big acquisition for a man versed in the art of deal-making. The agreement also helps Apollo Global Management, Oaktree Capital Management and Crestview Partners â€" the investment firms that helped Charter exit bankruptcy in 2009 â€" cash out.

Mr. Malone, whose ruthless style earned him the sobriquet “Darth Vader,” largely stayed away from the cable industry after selling TCI to AT&T in 1999 for about $32 billion. Focusing on his collection of media properties known as Liberty, he made a series of deals, including a spinoff of his stake in Discovery Communications and complex agreements with Rupert Murdoch’s News Corporation and Barry Diller’s IAC/InterActiveCorp. As The New York Times wrote in 1997, “a day without a deal is like a day without sunshine” to Mr. Malone.

U.S. SAID TO EXAMINE MICROSOFT BRIBERY ALLEGATIONS  |  The Justice Department and the Securities and Exchange Commission have opened preliminary inquires into Microsoft’s business dealings in China, Italy and Romania, Nick Wingfield reports in The New York Times. The authorities are looking into Microsoft’s involvement with companies and individuals accused of paying bribes to overseas government officials in exchange for business, a person briefed on the inquiry said. The question is whether Microsoft’s practices ran afoul of the Foreign Corrupt Practices Act. “Microsoft joins a list of about 100 other companies under investigation at present related to violations of the Foreign Corrupt Practices Act, according to Mike Koehler, a professor at the Southern Illinois University School of Law,” Mr. Wingfield writes. “ines in these corruption cases can run into the tens of millions of dollars.”

ON THE AGENDA  |  Hewlett-Packard holds its annual meeting in Mountain View, Calif., at 5 p.m. Oracle reports earnings after the market closes. The Federal Reserve’s policy making committee releases a statement at 2 p.m., followed by a news conference by Ben S. Bernanke at 2:30 p.m. Muhtar A. Kent, chief executive of Coca-Cola, is on Bloomberg TV at 8:30 a.m. Howard Schultz, chief of Starbucks, is on CNBC at 4:30 p.m.

RARE STAMPS ON THE BLOCK  |  Bill Gross, a founder of the mutual fund giant Pimco, is auctioning off a collection of assets not typically associated with the prominent bond fund manager. Mr. Gross, for the first time, is offering some items from his collection of rare United States stamps in a public auction on April 9 in New York, “conservatively estimated to bring $1.5 million to $2 million,” according to Reuters. The proceeds of the sale will go to Doctors Without Borders and the Millennium Villages Project at Columbia University’s Earth Institute. “This is the first time Mr. Gross has ever offered stamps from his famous U.S. collection which is the finest, most valuable collection of U.S. stamps and postal history owned by a private individual,” said Charles Shreve, a professional philatelist who will help conduct the auction.

Mergers & Acquisitions »

Yahoo Said to Have Dailymotion in Its Sights  |  Yahoo is in talks to buy up to 75 percent of Dailymotion, the video site owned by France Télécom, “in what would be Yahoo chief executive Marissa Mayer’s first major acquisition,” The Wall Street Journal reports. WALL STREET JOURNAL

Brazilian Billionaire Confirms Talks to Sell Stake in Energy Firm  |  Eike Batista confirmed on Tuesday that he was negotiating to sell part of his stake in MPX, his natural gas and electricity generation company, which has over $3 billion in debt. DealBook »

Judge Approves Sale of Rights to Hostess Brands, Including Twinkies  |  A bankruptcy judge has approved the sales of several major Hostess Brands product lines, including Twinkies, fetching about $800 million for the bankrupt baker. DealBook »

BBC to Sell Lonely Planet to American Billionaire  |  The British Broadcasting Corporation is taking a loss on the sale of its Lonely Planet guidebooks division to NC2 Media, a company controlled by the Kentucky businessman Brad M. Kelley, The New York Times reports. NEW YORK TIMES

Deutsche Telekom’s Chief to Become Chairman of MetroPCS  |  The incoming chief executive of Deutsche Telekom, the parent company of T-Mobile USA, is set to become chairman of the board of MetroPCS after its merger with T-Mobile USA, Reuters reports. REUTERS

Prelude to an AmerisourceBergen Deal  |  As part of a broader distribution deal, Walgreen and Alliance Boots will have the right to purchase a 7 percent stake in AmerisourceBergen on the open market, plus an additional 16 percent through warrants. DealBook »

INVESTMENT BANKING »

Deutsche Bank Cuts 2012 Profit  |  Deutsche Bank set aside an additional $780 million to cover legal problems and sharply reduced its net profit for 2012 to $376 million. DealBook »

Goldman Sachs Twins Leave for Wellness Company  |  Peter and Paul Scialla, who rose to become partners at Goldman Sachs, have left the Wall Street firm “to focus full-time on Delos Living, a wellness company they started in their spare time,” New York magazine’s Kevin Roose reports. NEW YORK

Rebutting the Contention That Small Is Better for Banks  |  In relation to the economy it supports, the United States banking system is relatively small compared with those of other developed countries, so breaking up banks doesn’t seem justified, writes Richard E. Farley, a partner at the law firm Paul Hastings. DealBook »

Spanish Banks to Pull the Plug on Moribund Real Estate Developers  | 
BLOOMBERG NEWS

HSBC Fires Staff From Insurance Venture in China  | 
BLOOMBERG NEWS

PRIVATE EQUITY »

Buyout Firms Join Bidding for Life Technologies  |  K.K.R. and Hellman & Friedman have formed a group to bid for Life Technologies, and Roche Holding is also entering the fray, according to Reuters, which cites unidentified people familiar with the matter. REUTERS

HEDGE FUNDS »

A Combative Investor Takes a Gentler Approach  |  The style of Christopher Hohn of the London-based hedge fund Children’s Investment Fund was once called “poison” by a corporate chief. But now, “the 46-year-old professes to be a changed man,” The Wall Street Journal writes. WALL STREET JOURNAL

Farallon, Hedge Fund Firm, Raises Real Estate Fund  | 
REUTERS

I.P.O./OFFERINGS »

Former Political Candidate Charged In Facebook Fraud  |  Reuters reports: “A former Oregon gubernatorial candidate was arrested on Tuesday for his alleged role in defrauding investors who had hoped to buy shares of Facebook Inc before its initial public offering in May 2012, federal authorities said.” REUTERS

VENTURE CAPITAL »

Inventors of BlackBerry Turn to Quantum Technologies  |  Mike Lazaridis and Doug Fregin, the inventors of the BlackBerry, are teaming up on a $100 million fund to support “quantum science technologies capable of spearheading the next wave of computing,” Reuters reports. REUTERS

News Syndication Company Raises $15 Million  |  NewsCred, which places licensed news from prominent outlets onto its clients’ Web sites, announced a $15 million financing round led by Mayfield Fund. PAIDCONTENT

LEGAL/REGULATORY »

Freddie Mac Sues Banks Over Libor Loss  |  Freddie Mac is suing more than a dozen banks and the British Bankers Association, claiming that rate manipulation caused it to get lower payments on Libor-linked products, The Financial Times reports. FINANCIAL TIMES

JPMorgan Reaches Settlement With MF Global Trustee  |  The settlement would return about $546 million to customers of the collapsed brokerage firm. WALL STREET JOURNAL

Cyprus Lawmakers Reject Bailout Deal  |  The New York Times reports: “Lawmakers rejected a 10 billion euro bailout package on Tuesday, sending the president back to the drawing board to devise a new plan that might still enable the country to receive a financial lifeline while avoiding a default that could reignite the euro crisis.” NEW YORK TIMES

Senate Panel Advances White’s S.E.C. Nomination  |  Mary Jo White has cleared an important hurdle on her path to becoming a top Wall Street regulator, as the Senate Banking Committee cast a 21-1 vote in her favor. DealBook »

S.E.C. Said to Examine Fund Fees  |  The Wall Street Journal reports: “The Securities and Exchange Commission is closely scrutinizing the fees and expenses, including travel and entertainment, that hedge funds and private-equity firms charge to their investors.” WALL STREET JOURNAL

Lesson Learned After Financial Crisis: Nothing Much Has Changed  |  The investigation into JPMorgan Chase’s multibillion-dollar trading loss shows that bankers are not acting cautiously and regulators remain docile, Jesse Eisinger writes in his column, The Trade. DealBook »

Debevoise & Plimpton’s Trusts and Estates Group Finds a New Home  |  Loeb & Loeb has hired the group of trusts and estates lawyers from Debevoise & Plimpton, which had decided last year to eliminate the practice. DealBook »

Turnaround Expert at Japan Airlines to Retire  |  Kazuo Inamori, honorary chairman of Japan Airlines, recalled helping the airline rise up from “this abyss called bankruptcy.” His resignation takes effect on April 1, The Wall Street Journal reports. WALL STREET JOURNAL

American Realty Capital Offers to Buy Cole Credit for $5.7 Billion

American Realty Capital Properties said on Wednesday that it had offered to buy Cole Credit Property Trust III for $5.7 billion, in a deal that would create one of the biggest publicly traded real estate investment trusts.

On March 19, American Realty wrote to the board of Cole Credit Property, saying it would pay $12 a share in cash and stock. In the letter, American Realty urged Cole Credit Property to call off the proposed acquisition of its adviser, Cole Holdings. American Realty said its offer would “provide a higher level of consideration delivered sooner and with greater certainty.”

American Realty indicated it had reached out to Cole Credit Property before the announcement of the deal with Cole Holdings, but had yet to receive a response.

The merger of American Realty and Cole Credit Property would create a real estate giant with 1,706 properties and over 400 tenants. Cole Credit Property Trust III invests in properties like pharmacies, home improvement stores and restaurants.

American Realty expects the deal to result in about $30 million in annual cost savings. The company also said it planned to increase its dividend to 93 cents a share once the transaction closed, which compared with Cole Credit’s current dividend of 65 cents a share.

Deal Makers Prepare for a Feast of Activity This Year, Survey Finds

As deal makers prepare to head down to New Orleans for one of the biggest merger conferences of the year, many will do so with a spring in their step.

The vast majority of bankers and lawyers surveyed by the Brunswick Group, a public relations firm, believe 2013 will mean more deals than last year.

So strong is the optimism among those advisers that nearly all - 97 percent, to be exact - expect that to be true in North America. About 82 percent believe more mergers will be struck worldwide this year than in 2012.

That is the highest show of confidence in the deal-making spirits in the six-year history of Brunswick’s survey, and it suggests that the machers at the Corporate Law Institute, hosted by Tulane University, will be ready to hoist a hurricane glass to their good fortunes.

It was only four years ago that one speaker, Tim Ingrassia of Goldman Sachs, lamented having to write off the period between mid-2007 and 2009. Now, it appears, deal makers are salivating over busier times putting together strategic mergers and leveraged buyouts.

What is behind the higher hopes for the coming year It is largely a function of more confident chief executives and boards, according to the survey, with improving economic conditions and the continued abundance of cheap financing the next most-cited reasons.

The availability of low-cost debt also led 69 percent of North American advisers to say that more deals will be paid for entirely with cash, the fourth year in a row for the survey.

About 89 percent of respondents based in North America think that bigger leveraged buyouts - perhaps along the lines of Dell Inc.’s $24.4 billion sale - will be on the rise in 2013.

About 71 percent of advisers based in North America surveyed believe that the deals will be done within the continent, as opposed to transborder takeovers. About percent of correspondents believe that foreign bidders for North American assets will come from Asia than anywhere else, continuing a yearlong trend.

Latin America has become more of a hotbed of activity as well, with 11 percent of those surveyed believing the region to produce the most acquisitive companies. That is nearly triple the 4 percent of respondents who believed the same thing last year.

The busiest sector is expected to be consumer goods and retail, according to 31 percent of respondents, followed by technology and then energy.

For more on what deal mavens are thinking, DealBook will be on hand for all the bons temps at the Tulane conference.

Deutsche Bank Cuts 2012 Profit and Sets Aside More Cash for Legal Woes

FRANKFURT â€" Deutsche Bank on Wednesday revised its 2012 profit sharply downward as it set aside more money to cover the potential cost of legal proceedings, in what appeared to be a response to the sums other banks have paid to settle accusations they colluded to rig benchmark interest rates.

Deutsche Bank, Germany’s largest lender, set aside an additional 600 million euros ($775 million) to cover legal problems and reduced its pretax profit for 2012 by the same amount. As a result, net profit for the year was 291 million euros, about 400 million euros less than the bank reported on Jan. 31.

The bank, based in Frankfurt, is among those suspected of manipulating the London interbank offered rate, or Libor, which is used to set the rates on trillions of dollars of variable rate mortgages and other loans.

In February, Royal Bank of Scotland agreed to pay American and British regulators $612 million to settle claims stemming from its role in manipulating rates. Last year, the Swiss bank UBS agreed to a $1.5 billion settlement and Barclays agreed to pay $450 million. The banks are also likely to face civil suits from people who paid more interest than they should have because of Libor manipulation.

In addition, Deutsche Bank faces numerous lawsuits related to its sales of mortgages and mortgage-related derivatives in the United States before the financial crisis. In a statement, the bank also cited those suits as a reason for setting aside more money.

In total, the bank has now set aside 2.4 billion euros to cover possible judgments and other litigation costs.

Deutsche Bank was one of the few large German banks to avoid taking a direct government bailout during the financial crisis, and it is the only German bank able to compete in the same league as large American and British investment banks.

But Deutsche Bank continues to struggle with a daunting array of legal proceedings and official inquiries related to its behavior during the boom years. The bank’s co-chief executives, Anshu Jain and Jürgen Fitschen, have cut back on bonuses and taken other steps they say will discourage excessive risk-taking and unethical or illegal behavior in the future.

The bank said it would still pay a dividend of 75 euro cents a share, as announced in January.

Brazilian Billionaire Confirms Talks to Sell Stake in Energy Firm

SÃO PAULO, Brazil â€" The Brazilian billionaire Eike Batista confirmed Tuesday that he was negotiating to sell part of his stake in MPX, his natural gas and electricity generation company that has over $3 billion in debt and several generation projects running behind schedule.

Mr. Batista is in negotiations “about the potential sale of a certain number of MPX shares that belong to him” but “at the moment, no document of any kind has been signed,” according to the filing with the Comissão de Valores Mobiliários, Brazil’s securities and exchange commission.

Brazilian newspapers reported last Friday that the German utility E.On would purchase 27 percent of MPX’s shares â€" half of Mr. Batista’s stake â€" for 1.8 billion reais ($910 million). E.On had previously bought a 10 percent stake in MPX for $456 million in 2012. According to the newspaper O Estado de São Paulo, an equity issuance would follow in order to reduce E.On’s participation to below 35 percent.

Mr. Batista is one of Brazil’s most public and colorful billionaires, who has vowed to become the richest man in the world. He has built a small empire of companies that all end in the letter X, which he says represents the multiplication of wealth that shareholders can expect.

But several of his ventures have failed to meet expectations and have seen debt levels rise faster than profits. Since March 2012, his five “X” firms have lost 54 billion reais ($27.3 billion) in market value on the São Paulo stock exchange.

In the 2013 Forbes list of the richest people in the world, Mr. Batista fell to 100th place, from the seventh place he had had the year before. Forbes estimated that his net worth fell by $19.4 billion to $10.6 billion.

EBX Group, Mr. Batista’s holding company for his five firms, signed a strategic cooperation agreement on March 6 with the Brazilian investment bank BTG Pactual, which reportedly is closely involved in the negotiations over MPX.

Rumors in the Brazilian financial press are that Mr. Batista’s troubled petroleum company OGX may be next on the block, with BTG Pactual once again involved in the deal-making.

JPMorgan Chase Is Reining In Payday Lenders

JPMorgan Chase will make changes to protect consumers who have borrowed money from a rising power on the Internet â€" payday lenders offering short-term loans with interest rates that can exceed 500 percent.

JPMorgan, the nation’s largest bank by assets, will give customers whose bank accounts are tapped by the online payday lenders more power to halt withdrawals and close their accounts.

Under changes to be unveiled on Wednesday, JPMorgan will also limit the fees it charges customers when the withdrawals set off penalties for returned payments or insufficient funds.

The policy shift is playing out as the nation’s biggest lenders face heightened scrutiny from federal and state regulators for enabling online payday lenders to thwart state law. With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or foreign locales like Belize, Malta and the West Indies to more nimbly dodge statewide caps on interest rates.

Bank of America and Wells Fargo said that their policies on payday loans remained unchanged.

At an investor meeting in February, Jamie Dimon, JPMorgan Chase’s chief executive, called the practice, which was the subject of an article in The New York Times last month, “terrible.” He vowed to change it.

While JPMorgan Chase never directly made the loans, the bank, along with other major banks, is a critical link for the payday lenders. The banks allow the lenders to automatically withdraw payments from borrowers’ bank accounts, even in states like New York where the loans are illegal. The withdrawals often continue unabated, even after customers plead with the banks to stop the payments, according to interviews with consumer lawyers, banking regulators and lawmakers.

The changes at JPMorgan, which will go into effect by the end of May, will keep bank customers from racking up hundreds of dollars in fees, generated when the payday lenders repeatedly try to debit borrowers’ accounts. Still, the changes will not prevent the payday lenders from extending high-cost credit to people living in the states where the loans are banned.

It is possible that other lenders could institute changes, especially because rivals have followed JPMorgan’s lead in recent years. In 2009, for example, after JPMorgan capped overdraft fees at three a day, Wells Fargo also changed its policies to reduce the number of daily penalties charged.

The changes come as state and federal officials are zeroing in on how the banks enable online payday lenders to bypass state laws that ban the loans. By allowing the payday lenders to easily access customers’ accounts, the authorities say the banks frustrate government efforts to protect borrowers from the loans, which some authorities have decried as predatory.

Both the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are scrutinizing how the banks enable the lenders to dodge restrictions, according to several people with direct knowledge of the matter. In New York, where JPMorgan has its headquarters, Benjamin M. Lawsky, the state’s top banking regulator, is investigating the bank’s role in enabling lenders to break state law, which caps interest rates on loans at 25 percent.

Facing restrictions across the country, payday lenders have migrated online and offshore. There is scant data about how many lenders have moved online, but as of 2011, the volume of online payday loans was $13 billion, up more than 120 percent from $5.8 billion in 2006, according to John Hecht, an analyst with the investment bank Stephens Inc.

By 2016, Mr. Hecht expects Internet loans to dominate the payday lending landscape, making up about 60 percent of the total payday loans extended.

JPMorgan said that the bank will charge only one returned item fee per lender in a 30-day period when customers do not have enough money in their accounts to cover the withdrawals.

That shift is likely to help borrowers like Ivy Brodsky, 37, who was charged $1,523 in fees â€" a combination of insufficient funds, service fees and overdraft fees â€" in a single month after six Internet payday lenders tried to withdraw money from her account 55 times.

Another change at JPMorgan is intended to address the difficulty that payday loan customers face when they try to pay off their loans in full. Unless a customer contacts the online lender three days before the next withdrawal, the lender just rolls the loan over automatically, withdrawing solely the interest owed.

Even borrowers who contact lenders days ahead of time can find themselves lost in a dizzying Internet maze, according to consumer lawyers. Requests are not honored, callers reach voice recordings and the withdrawals continue, the lawyers say.

For borrowers, frustrated and harried, the banks are often the last hope to halt the debits. Although under federal law customers have the right to stop withdrawals, some borrowers say their banks do not honor their requests.

Polly Larimer, who lives in Richmond, Va., said she begged Bank of America last year to stop payday lenders from eroding what little money she had in her account. Ms. Larimer said that the bank did not honor her request for five months. In that time period, she was charged more than $1,300 in penalty fees, according to bank statements reviewed by The Times. Bank of America declined to comment.

To combat such problems, JPMorgan said the bank will provide training to their employees so that stop-payment requests are honored.

JPMorgan will also make it much easier for customers to close their bank accounts. Until now, bank customers could not close their checking accounts unless all pending charges have been settled. The bank will now allow customers to close accounts if pending charges are deemed “inappropriate.”

Some of the changes at JPMorgan Chase echo a bill introduced in July by Senator Jeff Merkley, Democrat of Oregon, to further rein in payday lending.

A critical piece of that bill, pending in Congress, would enable borrowers to more easily halt the automatic withdrawals. The bill would also force lenders to abide by laws in the state where the borrower lives, rather than where the lender is.

JPMorgan Chase said it is “working to proactively identify” when lenders misuse automatic withdrawals. When the bank identifies those problems, it said, it will report errant lenders to the National Automated Clearing House Association, which oversees electronic withdrawals.

Brazilian Billionaire Confirms Talks to Sell Stake in Energy Firm

SÃO PAULO, Brazil â€" The Brazilian billionaire Eike Batista confirmed Tuesday that he was negotiating to sell part of his stake in MPX, his natural gas and electricity generation company that has over $3 billion in debt and several generation projects running behind schedule.

Mr. Batista is in negotiations “about the potential sale of a certain number of MPX shares that belong to him” but “at the moment, no document of any kind has been signed,” according to the filing with the Comissão de Valores Mobiliários, Brazil’s securities and exchange commission.

Brazilian newspapers reported last Friday that the German utility E.On would purchase 27 percent of MPX’s shares â€" half of Mr. Batista’s stake â€" for 1.8 billion reais ($910 million). E.On had previously bought a 10 percent stake in MPX for $456 million in 2012. According to the newspaper O Estado de São Paulo, an equity issuance would follow in order to reduce E.On’s participation to below 35 percent.

Mr. Batista is one of Brazil’s most public and colorful billionaires, who has vowed to become the richest man in the world. He has built a small empire of companies that all end in the letter X, which he says represents the multiplication of wealth that shareholders can expect.

But several of his ventures have failed to meet expectations and have seen debt levels rise faster than profits. Since March 2012, his five “X” firms have lost 54 billion reais ($27.3 billion) in market value on the São Paulo stock exchange.

In the 2013 Forbes list of the richest people in the world, Mr. Batista fell to 100th place, from the seventh place he had had the year before. Forbes estimated that his net worth fell by $19.4 billion to $10.6 billion.

EBX Group, Mr. Batista’s holding company for his five firms, signed a strategic cooperation agreement on March 6 with the Brazilian investment bank BTG Pactual, which reportedly is closely involved in the negotiations over MPX.

Rumors in the Brazilian financial press are that Mr. Batista’s troubled petroleum company OGX may be next on the block, with BTG Pactual once again involved in the deal-making.

JPMorgan Chase Is Reining In Payday Lenders

JPMorgan Chase will make changes to protect consumers who have borrowed money from a rising power on the Internet â€" payday lenders offering short-term loans with interest rates that can exceed 500 percent.

JPMorgan, the nation’s largest bank by assets, will give customers whose bank accounts are tapped by the online payday lenders more power to halt withdrawals and close their accounts.

Under changes to be unveiled on Wednesday, JPMorgan will also limit the fees it charges customers when the withdrawals set off penalties for returned payments or insufficient funds.

The policy shift is playing out as the nation’s biggest lenders face heightened scrutiny from federal and state regulators for enabling online payday lenders to thwart state law. With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or foreign locales like Belize, Malta and the West Indies to more nimbly dodge statewide caps on interest rates.

Bank of America and Wells Fargo said that their policies on payday loans remained unchanged.

At an investor meeting in February, Jamie Dimon, JPMorgan Chase’s chief executive, called the practice, which was the subject of an article in The New York Times last month, “terrible.” He vowed to change it.

While JPMorgan Chase never directly made the loans, the bank, along with other major banks, is a critical link for the payday lenders. The banks allow the lenders to automatically withdraw payments from borrowers’ bank accounts, even in states like New York where the loans are illegal. The withdrawals often continue unabated, even after customers plead with the banks to stop the payments, according to interviews with consumer lawyers, banking regulators and lawmakers.

The changes at JPMorgan, which will go into effect by the end of May, will keep bank customers from racking up hundreds of dollars in fees, generated when the payday lenders repeatedly try to debit borrowers’ accounts. Still, the changes will not prevent the payday lenders from extending high-cost credit to people living in the states where the loans are banned.

It is possible that other lenders could institute changes, especially because rivals have followed JPMorgan’s lead in recent years. In 2009, for example, after JPMorgan capped overdraft fees at three a day, Wells Fargo also changed its policies to reduce the number of daily penalties charged.

The changes come as state and federal officials are zeroing in on how the banks enable online payday lenders to bypass state laws that ban the loans. By allowing the payday lenders to easily access customers’ accounts, the authorities say the banks frustrate government efforts to protect borrowers from the loans, which some authorities have decried as predatory.

Both the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are scrutinizing how the banks enable the lenders to dodge restrictions, according to several people with direct knowledge of the matter. In New York, where JPMorgan has its headquarters, Benjamin M. Lawsky, the state’s top banking regulator, is investigating the bank’s role in enabling lenders to break state law, which caps interest rates on loans at 25 percent.

Facing restrictions across the country, payday lenders have migrated online and offshore. There is scant data about how many lenders have moved online, but as of 2011, the volume of online payday loans was $13 billion, up more than 120 percent from $5.8 billion in 2006, according to John Hecht, an analyst with the investment bank Stephens Inc.

By 2016, Mr. Hecht expects Internet loans to dominate the payday lending landscape, making up about 60 percent of the total payday loans extended.

JPMorgan said that the bank will charge only one returned item fee per lender in a 30-day period when customers do not have enough money in their accounts to cover the withdrawals.

That shift is likely to help borrowers like Ivy Brodsky, 37, who was charged $1,523 in fees â€" a combination of insufficient funds, service fees and overdraft fees â€" in a single month after six Internet payday lenders tried to withdraw money from her account 55 times.

Another change at JPMorgan is intended to address the difficulty that payday loan customers face when they try to pay off their loans in full. Unless a customer contacts the online lender three days before the next withdrawal, the lender just rolls the loan over automatically, withdrawing solely the interest owed.

Even borrowers who contact lenders days ahead of time can find themselves lost in a dizzying Internet maze, according to consumer lawyers. Requests are not honored, callers reach voice recordings and the withdrawals continue, the lawyers say.

For borrowers, frustrated and harried, the banks are often the last hope to halt the debits. Although under federal law customers have the right to stop withdrawals, some borrowers say their banks do not honor their requests.

Polly Larimer, who lives in Richmond, Va., said she begged Bank of America last year to stop payday lenders from eroding what little money she had in her account. Ms. Larimer said that the bank did not honor her request for five months. In that time period, she was charged more than $1,300 in penalty fees, according to bank statements reviewed by The Times. Bank of America declined to comment.

To combat such problems, JPMorgan said the bank will provide training to their employees so that stop-payment requests are honored.

JPMorgan will also make it much easier for customers to close their bank accounts. Until now, bank customers could not close their checking accounts unless all pending charges have been settled. The bank will now allow customers to close accounts if pending charges are deemed “inappropriate.”

Some of the changes at JPMorgan Chase echo a bill introduced in July by Senator Jeff Merkley, Democrat of Oregon, to further rein in payday lending.

A critical piece of that bill, pending in Congress, would enable borrowers to more easily halt the automatic withdrawals. The bill would also force lenders to abide by laws in the state where the borrower lives, rather than where the lender is.

JPMorgan Chase said it is “working to proactively identify” when lenders misuse automatic withdrawals. When the bank identifies those problems, it said, it will report errant lenders to the National Automated Clearing House Association, which oversees electronic withdrawals.