Week in Review: High-Value Domestic Dispute

Millionaires clash over socialite’s child support claims. | Businesses take a wary approach to disclosures using social media. | Market delay in Chicago points again to technology. | Down payment rules are at heart of mortgage debate. | Hazy future for S.E.C.’s thriving whistle-blower effort. | Regulators to restrict payday lending. | Fed still owes Congress a blueprint on its emergency lending. | Co-directors for S.E.C. signal shift. | And Andrew Ross Sorkin says that in a tax fight, Amazon handed the baton to eBay.

A look back on our reporting of the past week’s highs and lows in finance.

Billionaire Investor Soros Buys a 7.9% Stake in J.C. Penney | The stake is passive, meaning George Soros will not try to exert influence on the embattled retailer. DealBook »

Deal Professor: A Flawed Bidding Process Leaves Dell at a Loss | Steven M. Davidoff says that the use of the go-shop process left shareholders with a hollow choice after the Blackstone Group withdrew from bidding. DealBook »

Businesses Take a Wary Approach To Disclosures Using Social Media | About a dozen companies are taking advantage of the S.E.C.’s new rules that allow the use of social media to disclose financial information, though others are still skeptical. DealBook »

Market Delay in Chicago Points Again to Technology | The incident at the Chicago Board Options Exchange was the latest to highlight the vulnerability of markets to technology. DealBook »

Barclays and Credit Suisse Post Healthy Earnings in Investment Banking | A strong performance comes despite a push by European politicians to limit firms’ exposure to financial risks and to promote lending to local economies. DealBook »

Boutique Vintners Turn to Private Equity for Help | Bacchus Capital Management, co-founded by Sam Bronfman II, is providing financing and expertise to small winemakers. DealBook »

Millionaires Clash Over Socialite’s Child Support Claims | A Wall Street financier claims that his former lover’s current partner aided her in hiding her true wealth before a Hong Kong court proceeding. DealBook »

New York Seeks to Press Trial of A.I.G.’s Ex-Chief | The office of the attorney general said it would drop claims of cash damages to help expedite a trial that would put the former chief of A.I.G. on the stand. DealBook »

Down Payment Rules Are at Heart of Mortgage Debate | Many lawmakers, lenders and consumer advocates are now cautioning against rules that would require many borrowers to make large down payments. DealBook »

Capital One Settles Accusations It Understated Loan Losses | Federal regulators accused the bank and two of its executives of understating millions of dollars in auto loan losses suffered during the financial crisis. DealBook »

Hazy Future for S.E.C.’s Thriving Whistle-Blower Effort | The whistle-blower office is at a crossroads as some Wall Street firms make it legally difficult for employees to talk to it and lawyers criticize it for slow responses. DealBook »

Regulators to Restrict Payday Lending | Federal authorities are expected to set tighter rules on banks offering high-cost, short-term loans that can mire borrowers in debt. DealBook »

MF Global Trustee Sues Firm’s 3 Top Executives | A bankruptcy trustee has sued Jon S. Corzine and other former MF Global executives, claiming they were “grossly negligent” in the lead-up to the brokerage firm’s collapse. DealBook »

Co-Directors for S.E.C. Signal Shift | Mary Jo White, the new chairwoman of the agency, is putting together her team, including one of her longtime lieutenants. DealBook »

Fed Still Owes Congress a Blueprint on Its Emergency Lending | Dodd-Frank, passed in 2010, required the Fed to develop policies and procedures to safeguard taxpayers when making emergency loans “as soon as is practicable.” DealBook »

DealBook Column: In Tax Fight, Amazon Hands Baton to eBay | Andrew Ross Sorkin says that eBay has taken up the fight against forcing Internet retailers to collect state sales tax wherever they ship, just as the issue is moving through Washington in earnest. DealBook »

S.&P. Seeks Dismissal of U.S. Civil Suit Over Rating of Mortgage Debt | Standard & Poor’s says the government is overreaching in its prosecution. DealBook »

Ralph Lauren Corp. Agrees to Pay Fine in Bribery Case | Federal officials praised the clothing retailer for its assistance in the investigation, which was begun after the company discovered the misconduct of a subsidiary in Argentina and reported it. DealBook »

New Leader Expected for S.E.C. Enforcement Unit | Mary Jo White, the new chairwoman of the agency, is putting together her team, including one of her longtime lieutenants. DealBook »

.nytVideo, .nytVideo video, .youtubeVideo, .youtubeVideo iframe { background: none repeat scroll 0 0 #000000; } .youtubeVideo { position: relative; } .youtubeVideo, .youtubeVideo .thumb { height: 0; padding-bottom: 56.25%; } .youtubeVideo iframe { height: 100%; left: 0; position: absolute; top: 0; width: 100%; z-index: 1; } .youtubeVideo .playButton { border-radius: 10px 10px 10px 10px; height: 46px; left: 50%; margin: -23px 0 0 -35px; position: absolute; top: 50%; width: 70px; z-index: 2; background-image: -webkit-linear-gradient(90deg, #6e0610, #ff0000); /* Safari 5.1+, Mobile Safari, Chrome 10+ */ background-image: -moz-linear-gradient(90deg, #6e0610, #ff0000); /* Firefox 3.6+ */ background-image: -ms-linear-gradient(90deg, #6e0610, #ff0000); /* IE 10+ */ background-image: -o-linear-gradient(90deg, #6e0610, #ff0000); /* Opera 11.10+ */ } .youtubeVideo .thumb { overflow: hidden; width: 100%; } .youtubeVideo .thumb img { height: auto; width: 100%; } .youtubeVideo:hover .thumb { cursor: pointer; } .youtubeVideo:hover .playButton { } .youtubeVideo .playButton .arrow { border-bottom: 10px solid transparent; border-left: 20px solid #FFFFFF; border-top: 10px solid transparent; height: 0; left: 28px; position: absolute; top: 13px; width: 0; } .clearfix:after { clear: both; content: "."; display: block; height: 0; visibility: hidden; }

Wrong’s What I Do Best | R.I.P. George Jones. Your fans always admired you even if your wives didn’t. YouTube »

Galleon Group Co-Founder Surfaces on Horseback

.nytVideo, .nytVideo video, .youtubeVideo, .youtubeVideo iframe { background: none repeat scroll 0 0 #000000; } .youtubeVideo { position: relative; } .youtubeVideo, .youtubeVideo .thumb { height: 0; padding-bottom: 56.25%; } .youtubeVideo iframe { height: 100%; left: 0; position: absolute; top: 0; width: 100%; z-index: 1; } .youtubeVideo .playButton { border-radius: 10px 10px 10px 10px; height: 46px; left: 50%; margin: -23px 0 0 -35px; position: absolute; top: 50%; width: 70px; z-index: 2; background-image: -webkit-linear-gradient(90deg, #6e0610, #ff0000); /* Safari 5.1+, Mobile Safari, Chrome 10+ */ background-image: -moz-linear-gradient(90deg, #6e0610, #ff0000); /* Firefox 3.6+ */ background-image: -ms-linear-gradient(90deg, #6e0610, #ff0000); /* IE 10+ */ background-image: -o-linear-gradient(90deg, #6e0610, #ff0000); /* Opera 11.10+ */ } .youtubeVideo .thumb { overflow: hidden; width: 100%; } .youtubeVideo .thumb img { height: auto; width: 100%; } .youtubeVideo:hover .thumb { cursor: pointer; } .youtubeVideo:hover .playButton { } .youtubeVideo .playButton .arrow { border-bottom: 10px solid transparent; border-left: 20px solid #FFFFFF; border-top: 10px solid transparent; height: 0; left: 28px; position: absolute; top: 13px; width: 0; } .clearfix:after { clear: both; content: "."; display: block; height: 0; visibility: hidden; }

It is question asked by nearly everyone following the insider-trading investigation into the Galleon Group hedge fund: What ever happened to Gary Rosenbach?

Mr. Rosenbach was the co-founder and longtime No. 2 to Raj Rajaratnam at Galleon, which collapsed in 2009 after prosecutors charged Mr. Rajaratnam with orchestrating a sweeping insider-trading conspiracy. A jury convicted him almost exactly two years ago, and he’s serving an 11-year prison term. About two dozen others, including several former Galleon traders, are also serving prison time.

But Mr. Rosenbach was never charged with any wrongdoing. He resigned from Galleon in 2009, just months before prosecutors arrested Mr. Rajaratnam, citing family health reasons. He briefly made news in early 2011 with reports that he was starting his own firm, but it never materialized and he all but disappeared from Wall Street.

Mr. Rosenbach has finally surfaced, in Texas, as an accomplished amateur “cutter,” a sport in which horseback riders separate one calf from the cattle herd. Earlier this month, in Fort Worth, he won the National Cutting Horse Association Super Stakes Derby Amateur Championship aboard his horse Scooters Daisy Dukes.

After the competition, Mr. Rosenbach was interviewed in a video featured on YouTube. According to the clip, Mr. Rosenbach, a New York native and graduate of Queens College, owns the Rose Valley Ranch in Weatherford, Tex., which is about an hour east of Dallas and is known as the “cutting horse capital of the world.”

The amateur competition earlier this month earned Mr. Rosenbach, who made tens of millions of dollars on Wall Street, about $5,138 in prize money. “You won a little more than $5,000,” the reporter said. “This win, for you, means what?”

“You know I don’t want to sound terrible, it wasn’t about the money, it’s about the buckle, it’s about the saddle, it’s about the exciting feeling, the adrenaline rush of when you finish and you put your hand down and you’re done cutting,” said Mr. Rosenbach, wearing a cowboy hat.

Cutting seems to appeal to former hard-charging Wall Street traders. About a decade ago, Jon Winkelried, a former Goldman co-president, became a gentleman rancher and learned to be a topflight cutter, according to a Fortune magazine article.

Mr. Rosenbach’s name surfaced several times in the Galleon investigation. During the trial of Rajat K. Gupta, the former Goldman Sachs director convicted of leaking boardroom secrets to Mr. Rajaratnam, a former low-level Galleon trader testified that Mr. Rajaratnam had ordered him and Mr. Rosenbach to buy a big block of Goldman shares, just hours before the bank announced a big investment from Warren E. Buffett.

A Wrinkle in the Workplace

LONDON â€" There was a time not long ago when the image of pajamas evoked ideas like innovation, creativity, even freedom. Unshackled from the grind of the everyday workplace, employees or entrepreneurs could use a loose-fitting approach to unleash productivity.

But for London’s financial district, the pajama theme is a messier, grumpier vibe intruding into the workplace.

Falling earnings, lower bonuses, job cuts and more regulation have hurt morale at banks and other financial institutions, leading some employees to behave at work as if they were still at home wearing pajamas, said Sonia Inniss, a business coach who is advising senior executives.

“Things usually displayed in a private place are taken to the workplace, and it can happen at all levels,” Ms. Inniss said in an interview. While frustration was kept quiet before, it now sometimes results in inappropriate behavior at work, like encouraging colleagues to show dissent, she said.

Because of the financial crisis, the general thought is, “I’ve given them my all but who still cares about me?” said Ms. Inniss, who has been helping executives of Britain’s biggest companies to make decisions for the last 25 years.

Many bankers would like to quit and either set up their own financial firm, like an advisory boutique or investment company, or leave the banking industry. “The sense of being stuck is really affecting people,” Ms. Inniss said. “They are thinking, ‘Oh no, I’ve got another 20 years of this.’”

But few leave because banking still pays better than many other industries. At Barclays, for example, investment bankers received an average bonus of about $84,000 for last year. That is more than double the average annual pay for full-time employees in Britain, according to the Office for National Statistics.

Ms. Inniss, who attended business school and worked in a merchant bank before co-founding Consultants at Work, said the financial crisis left many top executives wondering how they can retain talent and keep staff motivated when many parts of the business are not growing and the firm just cut jobs. “That’s very painful,” Ms. Inniss said.

Increasing the long-term incentive plan for employees is not the right answer, Ms. Inniss said. “That’s a blunt instrument” because another employer can also offer money, she said. “Retaining talent successfully involves getting to know the motivation of individuals more precisely than is commonplace.”

“Executives tell me, ‘I want to have better debate with my staff and understand what’s going on further down in the organization,’ ” Ms. Inniss said.

Her advice: “You can only be a leader if you have followers and you can only have followers if you make yourself available. Ask yourself what are people not telling you and don’t wait to hear what is going on inside your business from others who are outside. Go and find a nonthreatening way to ask.”

That could keep the pajama attitude at home.

Nomura’s Profit Gains Closely Tied to Japan’s Economic Success

Nomura has spent most of the past five years trying to break out of Japan. So it’s ironic that the investment bank’s best full-year results since 2007 were propelled by a revival at home. As with Japan’s economic renaissance, however, investors’ hopes are running ahead of reality.

In a quarter when Japan’s Topix stock market index jumped 35 percent, the country’s biggest brokerage firm was always going to clean up financially. Revenue in Nomura’s retail division in the first three months of 2013 was 50 percent higher than in the same period of 2012 as investors snapped up stocks and mutual funds. Pretax profit almost tripled.

Nomura’s wholesale bank, too, was helped by the domestic side. Revenue from Japan more than doubled from the same period of last year, and accounted for almost half the division’s total income. In other parts of the world, business in the Americas held up best. Europe and the rest of Asia - the areas Nomura hoped to beef up when it snapped up parts of Lehman Brothers in 2008 - were the laggards.

Capital is a bright spot. Nomura’s core Tier 1 capital ratio at the end of March was 11.7 percent. Fully applying new Basel III capital rules reduces that to 10 percent - still better than several larger rivals. Nomura’s problem is generating a return on that capital. The bank’s full-year return on equity was an unimpressive 4.9 percent, which implies it is still destroying value.

Earnings should improve again in the coming year as Nomura gets the benefits of its $1 billion cost-cutting program without the associated severance costs. Even so, it faces several potential risks. The most immediate worry is that the policies of its prime minister, Shinzo Abe, fail to deliver the hoped-for Japanese economic revival, or that his administration proves as short-lived as those of his many predecessors. Meanwhile, Nomura’s fixed income revenues depend on central bank money-printing continuing to pump up the bond markets.

Nomura shares, which have more than doubled in value since Abe was elected in mid-December, now trade at roughly 1.3 times the bank’s book value. That leaves precious little room for disappointment.

Peter Thal Larsen is Asia editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Nomura’s Profit Gains Closely Tied to Japan’s Economic Success

Nomura has spent most of the past five years trying to break out of Japan. So it’s ironic that the investment bank’s best full-year results since 2007 were propelled by a revival at home. As with Japan’s economic renaissance, however, investors’ hopes are running ahead of reality.

In a quarter when Japan’s Topix stock market index jumped 35 percent, the country’s biggest brokerage firm was always going to clean up financially. Revenue in Nomura’s retail division in the first three months of 2013 was 50 percent higher than in the same period of 2012 as investors snapped up stocks and mutual funds. Pretax profit almost tripled.

Nomura’s wholesale bank, too, was helped by the domestic side. Revenue from Japan more than doubled from the same period of last year, and accounted for almost half the division’s total income. In other parts of the world, business in the Americas held up best. Europe and the rest of Asia - the areas Nomura hoped to beef up when it snapped up parts of Lehman Brothers in 2008 - were the laggards.

Capital is a bright spot. Nomura’s core Tier 1 capital ratio at the end of March was 11.7 percent. Fully applying new Basel III capital rules reduces that to 10 percent - still better than several larger rivals. Nomura’s problem is generating a return on that capital. The bank’s full-year return on equity was an unimpressive 4.9 percent, which implies it is still destroying value.

Earnings should improve again in the coming year as Nomura gets the benefits of its $1 billion cost-cutting program without the associated severance costs. Even so, it faces several potential risks. The most immediate worry is that the policies of its prime minister, Shinzo Abe, fail to deliver the hoped-for Japanese economic revival, or that his administration proves as short-lived as those of his many predecessors. Meanwhile, Nomura’s fixed income revenues depend on central bank money-printing continuing to pump up the bond markets.

Nomura shares, which have more than doubled in value since Abe was elected in mid-December, now trade at roughly 1.3 times the bank’s book value. That leaves precious little room for disappointment.

Peter Thal Larsen is Asia editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Nomura’s Profit Gains Closely Tied to Japan’s Economic Success

Nomura has spent most of the past five years trying to break out of Japan. So it’s ironic that the investment bank’s best full-year results since 2007 were propelled by a revival at home. As with Japan’s economic renaissance, however, investors’ hopes are running ahead of reality.

In a quarter when Japan’s Topix stock market index jumped 35 percent, the country’s biggest brokerage firm was always going to clean up financially. Revenue in Nomura’s retail division in the first three months of 2013 was 50 percent higher than in the same period of 2012 as investors snapped up stocks and mutual funds. Pretax profit almost tripled.

Nomura’s wholesale bank, too, was helped by the domestic side. Revenue from Japan more than doubled from the same period of last year, and accounted for almost half the division’s total income. In other parts of the world, business in the Americas held up best. Europe and the rest of Asia - the areas Nomura hoped to beef up when it snapped up parts of Lehman Brothers in 2008 - were the laggards.

Capital is a bright spot. Nomura’s core Tier 1 capital ratio at the end of March was 11.7 percent. Fully applying new Basel III capital rules reduces that to 10 percent - still better than several larger rivals. Nomura’s problem is generating a return on that capital. The bank’s full-year return on equity was an unimpressive 4.9 percent, which implies it is still destroying value.

Earnings should improve again in the coming year as Nomura gets the benefits of its $1 billion cost-cutting program without the associated severance costs. Even so, it faces several potential risks. The most immediate worry is that the policies of its prime minister, Shinzo Abe, fail to deliver the hoped-for Japanese economic revival, or that his administration proves as short-lived as those of his many predecessors. Meanwhile, Nomura’s fixed income revenues depend on central bank money-printing continuing to pump up the bond markets.

Nomura shares, which have more than doubled in value since Abe was elected in mid-December, now trade at roughly 1.3 times the bank’s book value. That leaves precious little room for disappointment.

Peter Thal Larsen is Asia editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Should Smaller Banks Really Have Less Capital Protections?

Richard E. Farley is a partner in the leveraged finance group of the law firm of Paul Hastings. He is writing a book titled “The Crisis Not Wasted - The Creation of Modern Financial Regulation During F.D.R.’s First Five Hundred Days.”

Since the financial crisis in 2008, lawmakers have been promising an end to the “too big to fail” system of large banks. The latest move comes from Senators Sherrod Brown and David Vitter, whose proposal has the politically tinged title Terminating Bailouts for Taxpayer Fairness Act.

But nowhere in the proposal, however, is there a single comma that would end “too big to fail.” What the two senators are offering is an unprecedented attempt to unfairly advantage smaller “regional banks” and disadvantage bigger “megabanks.”

The pretext underlying the Brown-Vitter proposal is that smaller regional banks are less risky than the large institutions. Historically, however, just the opposite has been true. It was the smaller banks that failed in huge numbers during the Great Depression. And despite the urban legend of ruined Wall Street bankers jumping from windows, the New York banks had much more diversified loan and investment portfolios than the more rural, farm-loan-heavy smaller community banks and, frankly, the New York banks were more professionally managed.

During the savings and loan crisis of the late 1980s and early 1990s, it was again small banks - unchecked by national regulators - that caused the morass. The latest Brown-Vitter bill may again put us squarely in the same situation.

In many ways, the history of bank regulation in the United States has been a competition between the interests of the regional banks and those of large banks. The Glass-Steagall Act nearly failed in 1933 because big banks did not want to subsidize riskier small banks in a deposit insurance program. Senator Carter Glass, Democrat of Virginia, was ready to scuttle it because he thought insuring small banks might bankrupt the system. A compromise was reached allowing national banks to open branches everywhere that state banks could.

The crux of the proposed bill would require big banks to maintain a minimum common equity capital ratio of 15 percent of total assets, while only requiring 8 percent for regional banks. It would also exempt regional banks from all of the capital requirements of Basel III, the new regime of bank capital standards developed by banking regulators worldwide.

While the bill would also exempt big banks from Basel III, this would be of little significance as nearly all of the megabanks will voluntarily comply with the rules to maintain credibility within the international financial community.

The senators’ news release trotted out support from the usual “too big to fail” critics. But inexplicably, in their own release, Sheila C. Bair, a former chairwoman of the Federal Deposit Insurance Corporation and inexhaustible critic of big banks, did not support this aspect of the bill. She is quoted as saying that Basel III “was meant as a floor, not a ceiling, and proposals to strengthen bank capital requirements should build on that accord.”

The senators, however, dismiss Basel III as “too complex” - a system that would require a large bank “to conduct more than 200 million calculations in order to determine their regulatory capital under the Basel II framework, which Basel III builds upon.”

We learned in 2008 and again recently in the Cyprus collapse that world financial markets are deeply interconnected. While Basel III is far from perfect and will unquestionably need to be modified and updated over time and with experience, it is our best hope for a desperately needed uniformity of capital regulation standards. It would be foolhardy to scrap this.

Mr. Vitter and Mr. Brown acknowledge that their bill would set the capital bar for regional banks even lower than current market practices, including by lowering leverage capital ratios to 8 percent from 10 percent of assets. Yet this would increase, rather than decrease, the risk of bank failures.

The bill also contains a number of other benefits for community banks. It would expand the definition of “rural” lenders that could offer balloon mortgages; reduce some impediments for small banks and thrifts to raise capital or pay dividends; create an independent bank examiner ombudsman that institutions could appeal to if they felt they had been treated unfairly by their examiner; and adopt privacy notice simplification legislation.

There are certainly policy considerations that might justify favoring smaller banks over larger ones. Historically, these have included keeping capital in local hands, favoring agrarian lending to industrial lending and avoiding concentration of power in urban elites.

Prohibition against branch banking by national banks for most of American history is an example of a law in furtherance of these policies. Those laws have for the most part been scrapped because they fostered inefficient uses of capital and, in many cases, bad management. But at least they were honest about what they were trying to do.

Senator Brown, Democrat of Ohio, and Senator Vitter, Republican of Louisiana, have promoted the bipartisan nature of their proposal. But in the end, the bill attempts to mask favoritism of regional banks over larger banks in “no more bailouts” rhetoric, when nothing in the proposal would prevent the future bailout of a single bank. The only thing this effort may accomplish is creating an uptick in contributions to the senators’ re-election campaigns from regional banking interests.

Poker Case Led to Lasry’s Withdrawal

The Manhattan billionaire President Obama wanted to appoint ambassador to France turned down the prestigious position over ties to an alleged Russian mob-run poker ring that was laundered through a Carlyle hotel art gallery, sources told The Post.

Marc Lasry, who runs the $12 billion investment firm Avenue Capital in Midtown, withdrew on Tuesday because of his close friendship with Illya Trincher, 27, who was busted last week with 30 others, including Trincher’s pro-poker-playing father, Vadim, and brother Eugene.

The feds last week accused Illya Trincher of running the New York arm of the $100 million betting and money-laundering racket with world-renowned Manhattan art dealer Hillel “Helly” Nahmad.

Robert Miller

HIGH STAKES: Investor Marc Lasry, outside his Upper East Side mansion yesterday, was President Obama’s pick for French ambassador, but is said to have declined over a pal’s alleged role as head of a poker ring with art dealer Helly Nahmad.

Dan Brinzac

.

Getty Images

President Obama

Helly Nahmad

“Marc Lasry is a big-time gambler, in golf and poker,” a source told The Post. “He’s a ‘master of the universe’ type, and he was friends with the kid Trincher.”

Lasry, 53, turned down the post only days after the White House asked the FBI to probe whether he was tied to anyone involved in the criminal enterprise, sources said.

His name surfaced in FBI tapes probing the matter as a person who likes to play in exclusive high-stakes poker games, sources said.

Because ambassadorships require Senate approval â€" normally a pro-forma step â€" Lasry faced the prospect of being grilled about the ring.

“It’s not that he committed a crime, but it opens a can of worms,” a source said.

In mid-March, Bill Clinton, a close friend of Lasry, said at a fund-raiser that Lasry was Obama’s pick for the ambassadorship. Once a big Clinton donor, Lasry was one of the few Wall Street honchos to stick by the Democrats in 2012, raising nearly $1 million for Obama’s re-election ampaign.

The hedge-fund king and other high-rollers can wager up to $2 million in the poker games, which were held in apartments worth $20 million or more, sources said.

The ring took bets “from celebrities, professional poker players and very wealthy individuals working in the financial industry,” the criminal complaint says.

Among the defendants is a Russian national, still at large, who also is accused of trying to fix the 2002 Winter Olympics skating competition.

Others arrested included “Poker Princess” Molly Bloom, who has organized poker games for celebs including Leonardo DiCaprio and Tobey Maguire.

Nahmad, himself a high-stakes gambler, allegedly helped launder “tens of millions of dollars” from the bookmaking ring through his Carlyle hotel gallery.

Nahmad controlled his family’s $3 billion art collection.

Lasry has been known to play in informal games with other wealthy investors, including Boaz Weinstein, founder of hedge fund Saba ! Capital Management, and David Bonderman, head of private-equity giant TPG Capital.

“I have a rule. Never play cards with Marc for money,” Bonderman told the trade publication Institutional Investor in 2007.

The publication reported that Lasry often hosts winner-take-all card games in his Upper East Side mansion, where the stakes can get as high as $20,000 per hand.

Last year, Lasry spoke on Bloomberg TV of his love for poker.

“Poker is math, so I enjoy playing it because I think there’s a lot of math involved,” he said. “And it’s fun. It’s fun to play with others.”

The White House had no immediate comment on the Lasry gambling allegations.

Lasry said “no comment” when asked about the gambling yesterday as he rushed into his home on East 74th Street.

A spokesman for Avenue Capital said, “Marc withdrew because it was becoming difficult to receive a waiver of the ‘key man’ provision from Avenue Capital’s investors, and he would have hadto divest himself of his Avenue Capital business holdings.”

Lasry told Avenue Capital investors on Tuesday that he was staying put at the hedge fund, which invests in distressed debt.

In a letter, the Moroccan-born financier cited “recent speculations regarding the possibility that I might be asked to serve as the next US ambassador to France.

“I am very grateful to have been considered, but I would like to put the speculation to rest and let you know that I will be remaining at Avenue,” he wrote.

Lasry’s withdrawal raised eyebrows because he was known to badly want the ambassadorship. Before he withdrew, Lasry was planning to move his family to France and turn over management of Avenue to others.

In March, Avenue appointed its first chief investment officer since Lasry founded the firm with his sister, Sonia Gardner, in 1995.

A source close to Clinton said, “Lasry loves playing cards. He played in a celebrity poker tournament for Clinton’s foundat! ion.

“I can’t believe that Obama admits in a book that he snorted cocaine and yet Marc Lasry can’t be named ambassador to France because he played cards.”

Additional reporting by Geoff Earle, Bruce Golding and Lia Eustachewich

dan.mangan@nypost.com

Lazard’s Profit Falls 17% in First Quarter

The fickleness of the mergers market can take its toll on deal makers, as Lazard reported on Friday.

The investment bank said that its adjusted profit slid 17 percent from the same time a year ago, to $37 million, as fewer of its advisory assignments closed during the period. Total revenue fell 17 percent as well, to $422.1 million.

Lazard’s profit amounts to 28 cents a share, missing the average analyst estimate of 32 cents a share, according to Standard & Poor’s Capital IQ.

Using generally accepted accounting principles, the firm’s net income fell 40 percent, to $15 million.

Operating revenue for the bank’s core strategic advisory arm fell 39 percent, to $168 million. Unusually, both of Lazard’s main advisory businesses â€" deals and restructurings â€" were down. The two are meant to be counters to each other, one waxing as the other wanes, as the economy does.

Some of the firm’s rivals, like Evercore Partners and Greenhill & Company, reported strong growth in their main advisory businesses. But Lazard executives simply attributed the weak earnings to the lumpy nature of the deals business, where quarters of plenty can be followed by months of paucity.

“It was a soft quarter, reflective of the choppiness of the M.&A. market,” Kenneth Jacobs, the chief executive of the firm, said in a telephone interview.

Mr. Jacobs added that some of the first quarter’s problems may arise from a number of deal closings being moved up to the previous quarter, to avoid potential changes in the tax code. The fourth quarter proved strong for Lazard, whose earnings per share in the period were nearly double analyst estimates.

But he argued that the conditions for an improved deal market were present. The economic outlook in both the United States and many emerging markets continues to look positive over all, and Europe appears to have stabilized for the moment.

Moreover, the firm announced a number of high-profile mandates in the quarter, including Berkshire Hathaway and 3G Capital’s $23 billion deal for H. J. Heinz and the $9.8 billion sale of D.E. Master Blenders 1753, the former European coffee arm of Sara Lee.

“I think we’re just in one of those choppy periods,” Mr. Jacobs said. “The market’s generally better than it’s been.”

One bright spot was asset management, whose operating revenues rose 14 percent to $240 million. The business reported a rise in both assets under management and fees, largely owing to growing markets improving the value of the firm’s holdings.

Expenses tied to compensation fell slightly in the period, to 60 percent, though Mr. Jacobs cautioned against reading too much into any one quarter. Adjusted noncompensation costs fell 5 percent, to $100 million. Both have been a focus of investors like Nelson Peltz, who have urged greater discipline.

The firm booked a $26 million charge tied to cost-saving measures that it had already announced. The campaign is expected to be completed by the end of this quarter, with its full effects becoming apparent next year.

Commerzbank Loses Appeal on Paying $68 Million in Banker Bonuses

LONDON - Commerzbank must pay a group of bankers a combined 52 million euros ($68 million) in bonuses after the German bank failed on Friday in its appeal to overturn a previous legal ruling in London.

Last year, a British court said 104 investment bankers in London were entitled to the bonuses, plus interest, which had been promised to them by Dresdner Bank in 2008.

Commerzbank, which was bailed out by local taxpayers during the financial crisis, bought Dresdner and the Dresdner Kleinwort investment banking unit in January 2009, but only paid 10 percent of the promised bonus pool.

The German bank had claimed it would not have to pay the full bonuses for 2008 because of the deterioration of the firm’s finances.

A British judge, however, disagreed and ordered Commerzbank to honor its contractual obligations.

“This is not just a victory for my clients,” Clive Zietman, a lawyer at the law firm Stewarts Law who represented 83 former Dresdner Kleinwort bankers, said in a statement on Friday. “It is a triumph for common sense.”

Millionaires Duke It Out Over Child Support

MILLIONAIRES DUKE IT OUT OVER CHILD SUPPORT  |  The financier Warren G. Lichtenstein, head of the hedge fund Steel Partners, is accustomed to courtroom battles. But this one has a different flavor. Mr. Lichtenstein, who has a 5-year-old child with his former lover Annabelle Bond, a British socialite, is accusing Ms. Bond’s current boyfriend, Andrew Cader, a former Goldman Sachs executive and part-owner of the Tampa Bay Rays baseball team, of conspiring with her to hide her financial condition in order to secure more than $50,000 a month in child support payments, DealBook’s Peter Lattman reports.

According to the lawsuit filed in Federal District Court in Manhattan, Ms. Bond deviously obtained the outsize child support from a Hong Kong court to “improve upon her already extraordinary life of luxury, privilege and modest fame.” That Ms. Bond â€" an accomplished mountaineer who has climbed Mount Everest, and who is the daughter of Sir John R.H. Bond, the former chairman of the global banking giant HSBC â€" lives a life of privilege is not in dispute. But Mr. Lichtenstein claims that in order to help Ms. Bond hide her economic condition, Mr. Cader disguised as loans millions of dollars in cash gifts he had given her.

“The case was brought to prevent an injustice and reflects Warren’s deep concern for the welfare of his child,” said Stanley Arkin, the lawyer for Mr. Lichtenstein. Mr. Cader and Ms. Bond did not respond to multiple requests for comment.

SOROS BUYS INTO J.C. PENNEY  | 
J. C. Penney doesn’t have many fans on Wall Street. But a big one emerged on Thursday: George Soros. Mr. Soros, the hedge fund billionaire, disclosed a 7.9 percent stake in Penney, with 17.4 million shares, according to a securities filing. The stake is passive, meaning Mr. Soros will not try to exert influence on the embattled retailer. Penney’s shares rose nearly 7 percent in after-hours trading. The stock, which has taken a beating this year, ended regular trading up 5 cents at $15.24, before the stake was disclosed.

Mr. Soros, 82, is at least the second prominent hedge fund manager to take a shine to Penney, whose chief executive, Ron Johnson, was pushed out two weeks ago after 17 months on the job. William A. Ackman, the head of Pershing Square Capital Management, has a 17.8 percent stake. Penney’s shares fell more than 50 percent during the tenure of Mr. Johnson, a former Apple executive Mr. Ackman supported.

It was not immediately clear what had prompted Mr. Soros’s interest in the retailer. But if Myron E. Ullman III, the company’s new chief executive, wants to visit two of his largest shareholders, he won’t have far to travel. Mr. Soros and Mr. Ackman share an office building in New York.

SIMPLIFYING BANK REGULATION  |  You can think of Senators Sherrod Brown, Democrat of Ohio, and David Vitter, Republican of Louisiana, who introduced a new piece of bank legislation on Wednesday, as “punk rockers reacting against the sophisticated progressive rock scene in the 1970s,” DealBook’s Peter Eavis explains. “Sick of an ornate status quo, they have come out swinging with an uncluttered approach that many will find invigorating.”

The bill, intended to toughen and simplify the overhaul of the financial system, does not stipulate a maximum size for banks. And it takes no big steps to force Wall Street out of the Federal Reserve’s safety net. “Even so, the bill will of course face enormous resistance, and not just from the bank lobbyists who seem reflexively to oppose any measure to overhaul their industry,” Mr. Eavis writes. “There are analysts who want to do more to rein in the banks, but who think the senators are naïve, or intellectually lacking, to think that today’s complex financial system can be made safer with their seemingly simple fixes. They have a point.”

ON THE AGENDA  | 
An estimate of gross domestic product in the first quarter is out at 8:30 a.m. Burger King and Chevron report earnings before the market opens. Ralph Schlosstein, chief executive of Evercore Partners, is on CNBC starting at 7 a.m. Kenneth G. Langone, the Home Depot co-founder, is on Bloomberg TV at 10 a.m.

FEEDING TWITTER, SLOWLY  |  Now that the Securities and Exchange Commission has clarified rules on disclosures over social media, some companies are encouraging investors to check out their Facebook and Twitter pages. Still, “uncertainty over what exactly the commission will allow has meant that many companies, and their legal teams, are playing it safe this earnings season,” Michelle Leder and Michael J. de la Merced write in DealBook. “Right now it’s like the Wild West,” said Broc Romanek, editor of TheCorporateCounsel.net, a Web site that focuses on S.E.C. rules and regulations. “The S.E.C.’s guidance is definitely going to need to be further refined.”

Mergers & Acquisitions »

A.D.M. in $3.1 Billion Australian Takeover  |  After its third attempt, Archer Daniels Midland on Friday finally won the support of the board of Australia’s GrainCorp with a sweetened buyout bid that includes cash and an additional dividend payout.
DealBook »

A $30 Billion Disagreement Over Verizon Wireless  |  Any transaction between Verizon Communications and the Vodafone Group would have to resolve the question of how much Verizon Wireless is worth. “The Verizon camp starts at a valuation around $100 billion; for Vodafone, the stake is worth about $130 billion, people familiar with the matter said,” The Wall Street Journal reports.
WALL STREET JOURNAL

Facebook Said to Buy Mobile Start-Up for $85 Million  |  Facebook has agreed to a cash-and-stock deal for Parse, which “helps companies build mobile applications across different operating systems,” The Wall Street Journal reports.
WALL STREET JOURNAL

Yahoo Chairman to Step Down  |  Alfred J. Amoroso, the chairman of Yahoo, plans to leave the board on June 25 at the company’s annual meeting, becoming the eighth director to leave since early last year.
ASSOCIATED PRESS

Yahoo C.E.O. Joins Board of Jawbone  |  Marissa Mayer has officially joined the board of the wireless gadget maker Jawbone, AllThingsD reports.
ALLTHINGSD

INVESTMENT BANKING »

A New Chapter in Tourre’s Fight With the S.E.C.  |  Fabrice Tourre, a former Goldman Sachs employee who has settled into academic life since being sued by the Securities and Exchange Commission, has an important day on Friday, when “U.S. District Judge Katherine Forrest is due to hear arguments on several motions that could alter the course of the three-year proceeding,” The Wall Street Journal writes.
WALL STREET JOURNAL

Market Delay in Chicago Points Again to Technology  |  The Chicago Board Options Exchange opened after a delay of several hours Thursday because of a system failure.
DealBook »

Chief of Unit Overseeing Britain’s Bailout Investments Resigns  |  Jim O’Neil, who as chief of United Kingdom Financial Investments has been in charge of the British government’s stakes in two bailed-out banks, will rejoin Bank of America Merrill Lynch.
DealBook »

Sallie Mae Cancels Bond Deal Amid Weak Demand  | 
WALL STREET JOURNAL

PRIVATE EQUITY »

Boutique Vintners Turn to Private Equity for Help  |  Bacchus Capital Management, co-founded by Sam Bronfman II, is providing financing and expertise to small winemakers.
DealBook »

K.K.R. Earnings Beat Expectations as Fee Profits Rise  |  Kohlberg Kravis Roberts posted after-tax economic net income of $647.7 million for the first quarter, surpassing analysts’ expectations, amid a relatively strong environment for the private equity industry.
DealBook »

In Sale of Carestream Health, 2 Bidders Remain  | 
REUTERS

HEDGE FUNDS »

Prague Looks to Attract Hedge Funds in Need of a New Home  |  Bloomberg News reports: “Prague is joining Frankfurt and London in a race to attract fund managers seeking European Union offices in an industry dominated by Luxembourg.”
BLOOMBERG NEWS

Veteran of Viking Global Prepares to Start New Fund  | 
ABSOLUTE RETURN

I.P.O./OFFERINGS »

Brazil Insurer Prices Biggest I.P.O. of the Year  |  BB Seguridade, the biggest insurance company in Latin America, raised $5.74 billion late Thursday in the largest initial public offering in the world so far this year.
DealBook »

Private Equity Firms Sell Stake in Ziggo for $1.1 Billion  |  Cinven and Warburg Pincus are selling their remaining stakes in the Dutch cable company Ziggo for up to a combined 880 million euros, or $1.1 billion.
DealBook »

Why Alibaba Could Be China’s Next $100 Billion I.P.O.  |  John Foley of Reuters Breakingviews does a back-of-the-envelope exercise in valuing the Hangzhou-based e-commerce giant should it seek to go public.
REUTERS BREAKINGVIEWS

VENTURE CAPITAL »

Path, Social Networking App, Grows in Popularity  |  The company, run by Dave Morin, is adding a million registered users a week since introducing its most version, The Wall Street Journal says.
WALL STREET JOURNAL

LEGAL/REGULATORY »

New York Seeks to Press Trial of A.I.G.’s Ex-Chief  |  The New York attorney general’s office is taking an unusual step to try to help expedite a trial of the American International Group’s former chief, Maurice R. Greenberg.
DealBook »

Harvard Economists Respond to Critics  |  Carmen M. Reinhart and Kenneth S. Rogoff write in an essay in The New York Times: “The politically charged discussion, especially sharp in the past week or so, has falsely equated our finding of a negative association between debt and growth with an unambiguous call for austerity.”
NEW YORK TIMES

Banks Urged to Put Limits on Payday-Style Loans  |  Federal regulators urged some of the nation’s largest banks to restrict payday-style loans tied to customers’ checking accounts.
DealBook »

Fed Insists on Greater Restrictions on Foreign Banks in U.S.  |  “Despite a lot of talk about the need for international cooperation in regulation, it now appears that American regulators intend to ensure that foreign banks operating in the United States have adequate capitalization,” Floyd Norris, a columnist for The New York Times, writes.
NEW YORK TIMES

Google’s Rivals Are Asked to Review Proposed Antitrust Settlement  |  The New York Times reports: “European Union regulators took another step on Thursday toward reaching an antitrust settlement with Google, asking the company’s competitors to review changes proposed by Google to resolve concerns with its Internet search and advertising business.”
NEW YORK TIMES

Millionaires Duke It Out Over Child Support

MILLIONAIRES DUKE IT OUT OVER CHILD SUPPORT  |  The financier Warren G. Lichtenstein, head of the hedge fund Steel Partners, is accustomed to courtroom battles. But this one has a different flavor. Mr. Lichtenstein, who has a 5-year-old child with his former lover Annabelle Bond, a British socialite, is accusing Ms. Bond’s current boyfriend, Andrew Cader, a former Goldman Sachs executive and part-owner of the Tampa Bay Rays baseball team, of conspiring with her to hide her financial condition in order to secure more than $50,000 a month in child support payments, DealBook’s Peter Lattman reports.

According to the lawsuit filed in Federal District Court in Manhattan, Ms. Bond deviously obtained the outsize child support from a Hong Kong court to “improve upon her already extraordinary life of luxury, privilege and modest fame.” That Ms. Bond â€" an accomplished mountaineer who has climbed Mount Everest, and who is the daughter of Sir John R.H. Bond, the former chairman of the global banking giant HSBC â€" lives a life of privilege is not in dispute. But Mr. Lichtenstein claims that in order to help Ms. Bond hide her economic condition, Mr. Cader disguised as loans millions of dollars in cash gifts he had given her.

“The case was brought to prevent an injustice and reflects Warren’s deep concern for the welfare of his child,” said Stanley Arkin, the lawyer for Mr. Lichtenstein. Mr. Cader and Ms. Bond did not respond to multiple requests for comment.

SOROS BUYS INTO J.C. PENNEY  | 
J. C. Penney doesn’t have many fans on Wall Street. But a big one emerged on Thursday: George Soros. Mr. Soros, the hedge fund billionaire, disclosed a 7.9 percent stake in Penney, with 17.4 million shares, according to a securities filing. The stake is passive, meaning Mr. Soros will not try to exert influence on the embattled retailer. Penney’s shares rose nearly 7 percent in after-hours trading. The stock, which has taken a beating this year, ended regular trading up 5 cents at $15.24, before the stake was disclosed.

Mr. Soros, 82, is at least the second prominent hedge fund manager to take a shine to Penney, whose chief executive, Ron Johnson, was pushed out two weeks ago after 17 months on the job. William A. Ackman, the head of Pershing Square Capital Management, has a 17.8 percent stake. Penney’s shares fell more than 50 percent during the tenure of Mr. Johnson, a former Apple executive Mr. Ackman supported.

It was not immediately clear what had prompted Mr. Soros’s interest in the retailer. But if Myron E. Ullman III, the company’s new chief executive, wants to visit two of his largest shareholders, he won’t have far to travel. Mr. Soros and Mr. Ackman share an office building in New York.

SIMPLIFYING BANK REGULATION  |  You can think of Senators Sherrod Brown, Democrat of Ohio, and David Vitter, Republican of Louisiana, who introduced a new piece of bank legislation on Wednesday, as “punk rockers reacting against the sophisticated progressive rock scene in the 1970s,” DealBook’s Peter Eavis explains. “Sick of an ornate status quo, they have come out swinging with an uncluttered approach that many will find invigorating.”

The bill, intended to toughen and simplify the overhaul of the financial system, does not stipulate a maximum size for banks. And it takes no big steps to force Wall Street out of the Federal Reserve’s safety net. “Even so, the bill will of course face enormous resistance, and not just from the bank lobbyists who seem reflexively to oppose any measure to overhaul their industry,” Mr. Eavis writes. “There are analysts who want to do more to rein in the banks, but who think the senators are naïve, or intellectually lacking, to think that today’s complex financial system can be made safer with their seemingly simple fixes. They have a point.”

ON THE AGENDA  | 
An estimate of gross domestic product in the first quarter is out at 8:30 a.m. Burger King and Chevron report earnings before the market opens. Ralph Schlosstein, chief executive of Evercore Partners, is on CNBC starting at 7 a.m. Kenneth G. Langone, the Home Depot co-founder, is on Bloomberg TV at 10 a.m.

FEEDING TWITTER, SLOWLY  |  Now that the Securities and Exchange Commission has clarified rules on disclosures over social media, some companies are encouraging investors to check out their Facebook and Twitter pages. Still, “uncertainty over what exactly the commission will allow has meant that many companies, and their legal teams, are playing it safe this earnings season,” Michelle Leder and Michael J. de la Merced write in DealBook. “Right now it’s like the Wild West,” said Broc Romanek, editor of TheCorporateCounsel.net, a Web site that focuses on S.E.C. rules and regulations. “The S.E.C.’s guidance is definitely going to need to be further refined.”

Mergers & Acquisitions »

A.D.M. in $3.1 Billion Australian Takeover  |  After its third attempt, Archer Daniels Midland on Friday finally won the support of the board of Australia’s GrainCorp with a sweetened buyout bid that includes cash and an additional dividend payout.
DealBook »

A $30 Billion Disagreement Over Verizon Wireless  |  Any transaction between Verizon Communications and the Vodafone Group would have to resolve the question of how much Verizon Wireless is worth. “The Verizon camp starts at a valuation around $100 billion; for Vodafone, the stake is worth about $130 billion, people familiar with the matter said,” The Wall Street Journal reports.
WALL STREET JOURNAL

Facebook Said to Buy Mobile Start-Up for $85 Million  |  Facebook has agreed to a cash-and-stock deal for Parse, which “helps companies build mobile applications across different operating systems,” The Wall Street Journal reports.
WALL STREET JOURNAL

Yahoo Chairman to Step Down  |  Alfred J. Amoroso, the chairman of Yahoo, plans to leave the board on June 25 at the company’s annual meeting, becoming the eighth director to leave since early last year.
ASSOCIATED PRESS

Yahoo C.E.O. Joins Board of Jawbone  |  Marissa Mayer has officially joined the board of the wireless gadget maker Jawbone, AllThingsD reports.
ALLTHINGSD

INVESTMENT BANKING »

A New Chapter in Tourre’s Fight With the S.E.C.  |  Fabrice Tourre, a former Goldman Sachs employee who has settled into academic life since being sued by the Securities and Exchange Commission, has an important day on Friday, when “U.S. District Judge Katherine Forrest is due to hear arguments on several motions that could alter the course of the three-year proceeding,” The Wall Street Journal writes.
WALL STREET JOURNAL

Market Delay in Chicago Points Again to Technology  |  The Chicago Board Options Exchange opened after a delay of several hours Thursday because of a system failure.
DealBook »

Chief of Unit Overseeing Britain’s Bailout Investments Resigns  |  Jim O’Neil, who as chief of United Kingdom Financial Investments has been in charge of the British government’s stakes in two bailed-out banks, will rejoin Bank of America Merrill Lynch.
DealBook »

Sallie Mae Cancels Bond Deal Amid Weak Demand  | 
WALL STREET JOURNAL

PRIVATE EQUITY »

Boutique Vintners Turn to Private Equity for Help  |  Bacchus Capital Management, co-founded by Sam Bronfman II, is providing financing and expertise to small winemakers.
DealBook »

K.K.R. Earnings Beat Expectations as Fee Profits Rise  |  Kohlberg Kravis Roberts posted after-tax economic net income of $647.7 million for the first quarter, surpassing analysts’ expectations, amid a relatively strong environment for the private equity industry.
DealBook »

In Sale of Carestream Health, 2 Bidders Remain  | 
REUTERS

HEDGE FUNDS »

Prague Looks to Attract Hedge Funds in Need of a New Home  |  Bloomberg News reports: “Prague is joining Frankfurt and London in a race to attract fund managers seeking European Union offices in an industry dominated by Luxembourg.”
BLOOMBERG NEWS

Veteran of Viking Global Prepares to Start New Fund  | 
ABSOLUTE RETURN

I.P.O./OFFERINGS »

Brazil Insurer Prices Biggest I.P.O. of the Year  |  BB Seguridade, the biggest insurance company in Latin America, raised $5.74 billion late Thursday in the largest initial public offering in the world so far this year.
DealBook »

Private Equity Firms Sell Stake in Ziggo for $1.1 Billion  |  Cinven and Warburg Pincus are selling their remaining stakes in the Dutch cable company Ziggo for up to a combined 880 million euros, or $1.1 billion.
DealBook »

Why Alibaba Could Be China’s Next $100 Billion I.P.O.  |  John Foley of Reuters Breakingviews does a back-of-the-envelope exercise in valuing the Hangzhou-based e-commerce giant should it seek to go public.
REUTERS BREAKINGVIEWS

VENTURE CAPITAL »

Path, Social Networking App, Grows in Popularity  |  The company, run by Dave Morin, is adding a million registered users a week since introducing its most version, The Wall Street Journal says.
WALL STREET JOURNAL

LEGAL/REGULATORY »

New York Seeks to Press Trial of A.I.G.’s Ex-Chief  |  The New York attorney general’s office is taking an unusual step to try to help expedite a trial of the American International Group’s former chief, Maurice R. Greenberg.
DealBook »

Harvard Economists Respond to Critics  |  Carmen M. Reinhart and Kenneth S. Rogoff write in an essay in The New York Times: “The politically charged discussion, especially sharp in the past week or so, has falsely equated our finding of a negative association between debt and growth with an unambiguous call for austerity.”
NEW YORK TIMES

Banks Urged to Put Limits on Payday-Style Loans  |  Federal regulators urged some of the nation’s largest banks to restrict payday-style loans tied to customers’ checking accounts.
DealBook »

Fed Insists on Greater Restrictions on Foreign Banks in U.S.  |  “Despite a lot of talk about the need for international cooperation in regulation, it now appears that American regulators intend to ensure that foreign banks operating in the United States have adequate capitalization,” Floyd Norris, a columnist for The New York Times, writes.
NEW YORK TIMES

Google’s Rivals Are Asked to Review Proposed Antitrust Settlement  |  The New York Times reports: “European Union regulators took another step on Thursday toward reaching an antitrust settlement with Google, asking the company’s competitors to review changes proposed by Google to resolve concerns with its Internet search and advertising business.”
NEW YORK TIMES

Millionaires Duke It Out Over Child Support

MILLIONAIRES DUKE IT OUT OVER CHILD SUPPORT  |  The financier Warren G. Lichtenstein, head of the hedge fund Steel Partners, is accustomed to courtroom battles. But this one has a different flavor. Mr. Lichtenstein, who has a 5-year-old child with his former lover Annabelle Bond, a British socialite, is accusing Ms. Bond’s current boyfriend, Andrew Cader, a former Goldman Sachs executive and part-owner of the Tampa Bay Rays baseball team, of conspiring with her to hide her financial condition in order to secure more than $50,000 a month in child support payments, DealBook’s Peter Lattman reports.

According to the lawsuit filed in Federal District Court in Manhattan, Ms. Bond deviously obtained the outsize child support from a Hong Kong court to “improve upon her already extraordinary life of luxury, privilege and modest fame.” That Ms. Bond â€" an accomplished mountaineer who has climbed Mount Everest, and who is the daughter of Sir John R.H. Bond, the former chairman of the global banking giant HSBC â€" lives a life of privilege is not in dispute. But Mr. Lichtenstein claims that in order to help Ms. Bond hide her economic condition, Mr. Cader disguised as loans millions of dollars in cash gifts he had given her.

“The case was brought to prevent an injustice and reflects Warren’s deep concern for the welfare of his child,” said Stanley Arkin, the lawyer for Mr. Lichtenstein. Mr. Cader and Ms. Bond did not respond to multiple requests for comment.

SOROS BUYS INTO J.C. PENNEY  | 
J. C. Penney doesn’t have many fans on Wall Street. But a big one emerged on Thursday: George Soros. Mr. Soros, the hedge fund billionaire, disclosed a 7.9 percent stake in Penney, with 17.4 million shares, according to a securities filing. The stake is passive, meaning Mr. Soros will not try to exert influence on the embattled retailer. Penney’s shares rose nearly 7 percent in after-hours trading. The stock, which has taken a beating this year, ended regular trading up 5 cents at $15.24, before the stake was disclosed.

Mr. Soros, 82, is at least the second prominent hedge fund manager to take a shine to Penney, whose chief executive, Ron Johnson, was pushed out two weeks ago after 17 months on the job. William A. Ackman, the head of Pershing Square Capital Management, has a 17.8 percent stake. Penney’s shares fell more than 50 percent during the tenure of Mr. Johnson, a former Apple executive Mr. Ackman supported.

It was not immediately clear what had prompted Mr. Soros’s interest in the retailer. But if Myron E. Ullman III, the company’s new chief executive, wants to visit two of his largest shareholders, he won’t have far to travel. Mr. Soros and Mr. Ackman share an office building in New York.

SIMPLIFYING BANK REGULATION  |  You can think of Senators Sherrod Brown, Democrat of Ohio, and David Vitter, Republican of Louisiana, who introduced a new piece of bank legislation on Wednesday, as “punk rockers reacting against the sophisticated progressive rock scene in the 1970s,” DealBook’s Peter Eavis explains. “Sick of an ornate status quo, they have come out swinging with an uncluttered approach that many will find invigorating.”

The bill, intended to toughen and simplify the overhaul of the financial system, does not stipulate a maximum size for banks. And it takes no big steps to force Wall Street out of the Federal Reserve’s safety net. “Even so, the bill will of course face enormous resistance, and not just from the bank lobbyists who seem reflexively to oppose any measure to overhaul their industry,” Mr. Eavis writes. “There are analysts who want to do more to rein in the banks, but who think the senators are naïve, or intellectually lacking, to think that today’s complex financial system can be made safer with their seemingly simple fixes. They have a point.”

ON THE AGENDA  | 
An estimate of gross domestic product in the first quarter is out at 8:30 a.m. Burger King and Chevron report earnings before the market opens. Ralph Schlosstein, chief executive of Evercore Partners, is on CNBC starting at 7 a.m. Kenneth G. Langone, the Home Depot co-founder, is on Bloomberg TV at 10 a.m.

FEEDING TWITTER, SLOWLY  |  Now that the Securities and Exchange Commission has clarified rules on disclosures over social media, some companies are encouraging investors to check out their Facebook and Twitter pages. Still, “uncertainty over what exactly the commission will allow has meant that many companies, and their legal teams, are playing it safe this earnings season,” Michelle Leder and Michael J. de la Merced write in DealBook. “Right now it’s like the Wild West,” said Broc Romanek, editor of TheCorporateCounsel.net, a Web site that focuses on S.E.C. rules and regulations. “The S.E.C.’s guidance is definitely going to need to be further refined.”

Mergers & Acquisitions »

A.D.M. in $3.1 Billion Australian Takeover  |  After its third attempt, Archer Daniels Midland on Friday finally won the support of the board of Australia’s GrainCorp with a sweetened buyout bid that includes cash and an additional dividend payout.
DealBook »

A $30 Billion Disagreement Over Verizon Wireless  |  Any transaction between Verizon Communications and the Vodafone Group would have to resolve the question of how much Verizon Wireless is worth. “The Verizon camp starts at a valuation around $100 billion; for Vodafone, the stake is worth about $130 billion, people familiar with the matter said,” The Wall Street Journal reports.
WALL STREET JOURNAL

Facebook Said to Buy Mobile Start-Up for $85 Million  |  Facebook has agreed to a cash-and-stock deal for Parse, which “helps companies build mobile applications across different operating systems,” The Wall Street Journal reports.
WALL STREET JOURNAL

Yahoo Chairman to Step Down  |  Alfred J. Amoroso, the chairman of Yahoo, plans to leave the board on June 25 at the company’s annual meeting, becoming the eighth director to leave since early last year.
ASSOCIATED PRESS

Yahoo C.E.O. Joins Board of Jawbone  |  Marissa Mayer has officially joined the board of the wireless gadget maker Jawbone, AllThingsD reports.
ALLTHINGSD

INVESTMENT BANKING »

A New Chapter in Tourre’s Fight With the S.E.C.  |  Fabrice Tourre, a former Goldman Sachs employee who has settled into academic life since being sued by the Securities and Exchange Commission, has an important day on Friday, when “U.S. District Judge Katherine Forrest is due to hear arguments on several motions that could alter the course of the three-year proceeding,” The Wall Street Journal writes.
WALL STREET JOURNAL

Market Delay in Chicago Points Again to Technology  |  The Chicago Board Options Exchange opened after a delay of several hours Thursday because of a system failure.
DealBook »

Chief of Unit Overseeing Britain’s Bailout Investments Resigns  |  Jim O’Neil, who as chief of United Kingdom Financial Investments has been in charge of the British government’s stakes in two bailed-out banks, will rejoin Bank of America Merrill Lynch.
DealBook »

Sallie Mae Cancels Bond Deal Amid Weak Demand  | 
WALL STREET JOURNAL

PRIVATE EQUITY »

Boutique Vintners Turn to Private Equity for Help  |  Bacchus Capital Management, co-founded by Sam Bronfman II, is providing financing and expertise to small winemakers.
DealBook »

K.K.R. Earnings Beat Expectations as Fee Profits Rise  |  Kohlberg Kravis Roberts posted after-tax economic net income of $647.7 million for the first quarter, surpassing analysts’ expectations, amid a relatively strong environment for the private equity industry.
DealBook »

In Sale of Carestream Health, 2 Bidders Remain  | 
REUTERS

HEDGE FUNDS »

Prague Looks to Attract Hedge Funds in Need of a New Home  |  Bloomberg News reports: “Prague is joining Frankfurt and London in a race to attract fund managers seeking European Union offices in an industry dominated by Luxembourg.”
BLOOMBERG NEWS

Veteran of Viking Global Prepares to Start New Fund  | 
ABSOLUTE RETURN

I.P.O./OFFERINGS »

Brazil Insurer Prices Biggest I.P.O. of the Year  |  BB Seguridade, the biggest insurance company in Latin America, raised $5.74 billion late Thursday in the largest initial public offering in the world so far this year.
DealBook »

Private Equity Firms Sell Stake in Ziggo for $1.1 Billion  |  Cinven and Warburg Pincus are selling their remaining stakes in the Dutch cable company Ziggo for up to a combined 880 million euros, or $1.1 billion.
DealBook »

Why Alibaba Could Be China’s Next $100 Billion I.P.O.  |  John Foley of Reuters Breakingviews does a back-of-the-envelope exercise in valuing the Hangzhou-based e-commerce giant should it seek to go public.
REUTERS BREAKINGVIEWS

VENTURE CAPITAL »

Path, Social Networking App, Grows in Popularity  |  The company, run by Dave Morin, is adding a million registered users a week since introducing its most version, The Wall Street Journal says.
WALL STREET JOURNAL

LEGAL/REGULATORY »

New York Seeks to Press Trial of A.I.G.’s Ex-Chief  |  The New York attorney general’s office is taking an unusual step to try to help expedite a trial of the American International Group’s former chief, Maurice R. Greenberg.
DealBook »

Harvard Economists Respond to Critics  |  Carmen M. Reinhart and Kenneth S. Rogoff write in an essay in The New York Times: “The politically charged discussion, especially sharp in the past week or so, has falsely equated our finding of a negative association between debt and growth with an unambiguous call for austerity.”
NEW YORK TIMES

Banks Urged to Put Limits on Payday-Style Loans  |  Federal regulators urged some of the nation’s largest banks to restrict payday-style loans tied to customers’ checking accounts.
DealBook »

Fed Insists on Greater Restrictions on Foreign Banks in U.S.  |  “Despite a lot of talk about the need for international cooperation in regulation, it now appears that American regulators intend to ensure that foreign banks operating in the United States have adequate capitalization,” Floyd Norris, a columnist for The New York Times, writes.
NEW YORK TIMES

Google’s Rivals Are Asked to Review Proposed Antitrust Settlement  |  The New York Times reports: “European Union regulators took another step on Thursday toward reaching an antitrust settlement with Google, asking the company’s competitors to review changes proposed by Google to resolve concerns with its Internet search and advertising business.”
NEW YORK TIMES

The Seductive Simplicity of a New Banking Bill

We all want to live in a world where we can stop worrying about the banks. Would a tough new piece of legislation, introduced in the Senate on Wednesday, get us there?

Senators Sherrod Brown, Democrat of Ohio, and David Vitter, Republican of Louisiana, have two aims in writing their bank bill. They say they not only want to toughen the overhaul of the financial system, but also to simplify it.

Think of the senators as punk rockers reacting against the sophisticated progressive-rock scene of the 1970s. Sick of an ornate status quo, they have come out swinging with an uncluttered approach that many will find invigorating.

Before looking at what the bill would do, it’s interesting to note what it wouldn’t. The legislation doesn’t stipulate a maximum size for banks. And, strangely, it takes no big steps to force Wall Street operations out of the safety net that the Federal Reserve provides to banks in times of crisis.

Even so, the bill will of course face enormous resistance, and not just from the bank lobbyists who seem reflexively to oppose any measure to overhaul their industry. There are analysts who want to do more to rein in the banks, but who think the senators are naïve, or intellectually lacking, to think that today’s complex financial system can be made safer with their seemingly simple fixes.

They have a point.

The financial system will be safer than it was once the two big postcrisis overhauls are in place. Those are the Dodd-Frank legislation, passed by Congress in 2010, and the internationally agreed-upon banking rules known as Basel III.

These two efforts don’t set out to radically remake banks. They opt for a technocratic, pragmatic approach. Both take steps to make lenders more resilient to losses, and they introduce incentives to make riskier activities less attractive for banks. In an indirect way, they also try to keep banks from getting much bigger than they are today.

There’s one other important element to Basel III and the Dodd-Frank Act: they assume regulators are up to the task of monitoring big banks. That trust has been undermined by recent events. Regulators didn’t grasp the full danger of the gargantuan derivatives trades at JPMorgan Chase that led to big losses last year. Some analysts are questioning whether the Basel III figures put out by European banks reflect the true riskiness of their assets. And, of course, regulators did little to gird the banks ahead of the American housing bust or the European sovereign debt debacle.

And in a major way, the Brown-Vitter bill effectively sidesteps the need for reliable regulators. It simply says that all big banks would have to set up a buffer for potential losses - called capital in the industry - that is equivalent to 15 percent of their total assets.

Take TBTF Finance Corporation, a hypothetical bank that holds $300 billion of mortgages and $300 billion of government bonds. It would have to set aside 15 percent of $600 billion, or $90 billion, as capital under the proposed rule.

Basel III and Dodd-Frank also require certain levels of capital. But their capital calculations are heavily influenced by a practice called risk weighting. This says banks can hold less capital against assets that are perceived to have less chance of showing future losses.

At TBTF Finance, the Basel risk weightings might allow the bank to hold no capital against government bonds, and they might ask for 4 percent, or $12 billion, against the mortgages.

Basel III wouldn’t allow TBTF Finance to get away with just holding 4 percent capital. It could demand as much as 9.5 percent. But that 9.5 percent would be calculated on TBTF Finance’s total risk-weighted assets of $300 billion. That would mean the bank would have to hold $28.5 billion of capital, far less than the $90 billion under Brown-Vitter.

Clearly, under Basel, the banks have an incentive to get their risk-weighted assets down.

A lender with many different types of assets and a big trading operation will be doing thousands of risk-weighting calculations when setting its capital, some of which will involve complex computer models. Critics ask, How can regulators stay on top of everything? In addition, skeptics say that assuming some assets are less risky than others will end in tears, since it’s almost impossible to tell ahead of time where big losses will occur.

The Brown-Vitter bill sweeps all that aside. It would get rid of Basel III, and by insisting on 15 percent capital against all types of assets, it avoids stipulating which bank holdings are riskier than others.

But Brown-Vitter may have its own shortcomings. Granted, risk weightings may never accurately reflect what’s going on in the real world, but the newest proposal may fall into the same trap.

It treats all assets the same, an approach that may prove even more disconnected from reality. It is possible that the United States Treasury could default one day, which would make United States government bonds as risky as mortgages, but is it really right to build that unlikely occurrence into capital rules?

In fact, assuming all assets are equally risky could create perverse incentives, says Mayra Rodríguez Valladares, managing principal at MRV Associates, a firm that consults on Basel issues. Freed from risk weights, banks may be more inclined to make certain types of loans that have historically experienced big losses, like home equity mortgages. “Banks might invest more in high-yielding, high-risk assets,” said Ms. Rodríguez Valladares. “It’s totally inaccurate to lump everything into one category.”

Also, Basel III may end up being significantly stronger than its critics say. For instance, the world’s largest banks will be subject to a special surcharge. Ms. Rodríguez Valladares says there are discussions about whether to calculate this extra capital on total assets, not risk-weighted assets. Go back to TBTF Finance with its $28.5 billion of capital. Adding 2 percent of its total assets, or $12 billion, would take capital up to $40.5 billion.

That’s still less than half of what Brown-Vitter would require. Of course, it may be more closely matched to the risk of TBTF Finance’s assets. But if the risk weights are faulty, and TBTF Finance racks up crippling losses, the lender may burn through all its capital and fail. That could paralyze the financial system, weaken the wider economy and even prompt the government to bail it out.

The beauty of Brown-Vitter is that all that extra capital makes that awful outcome much less likely.