Google to Invest in Lending Club

A fast-growing marketplace for peer-to-peer loans, Lending Club, has attracted a prominent investor: Google.

Lending Club plans to announce on Thursday that Google led a $125 million deal to buy a stake in the company from existing investors. Foundation Capital, a current shareholder, also participated in the transaction. The latest investment values Lending Club at $1.55 billion, nearly triple the valuation of the last fund-raising round that closed last summer.

Google has made a number of investments in start-ups both directly and through its venture capital arm, but it has not dabbled much in the banking industry. Google Wallet, a mobile payments system, may be its most prominent financial offering to date.

The technology company will own a stake of less than 7 percent in Lending Club. And the senior Google executive who led the talks over the investment, David Lawee, vice president for corporate development, will sit as an observer on the start-up’s board.

“We’re really excited about partnering with Google,” Renaud Laplanche, Lending Club’s chief executive, said in a telephone interview. “We’re trying to be the good guys of finance and banking, and Google has a reputation of being the good guys of technology.”

Google’s arrival signals another significant partner for Lending Club, ahead of a potential initial public offering that could come as soon as next year.

The company essentially connects investors with people seeking money after screening the credit histories of potential borrowers. The average FICO credit score of a Lending Club borrower is about 706, while the average loan is about $13,076.

Lending Club claims that its operations provide a lower cost for personal loans, with an average annual percentage rate of about 6.78 percent, below a national average of 9.06 percent. And it estimates that most of its investors have made a profit from the loans.

Lending Club, a six-year-old start-up, has emerged as one of the biggest members of the peer-to-peer lending industry. It originated about $780 million in loans last year, and Mr. Laplanche estimated that it was on pace to issue $2 billion this year.

Among its backers are venture capital heavyweights like Kleiner Perkins Caufield & Byers, Norwest Venture Partners and Union Square Ventures. Its directors include John J. Mack, the former chairman of Morgan Stanley, Lawrence H. Summers, the former Treasury secretary, and Mary Meeker, the prominent Internet analyst turned venture captalist.

Despite what Mr. Laplanche said was a steady stream of calls from hedge funds and private equity firms seeking to invest in the company, Lending Club was not looking to raise new equity for fear of diluting existing shareholders.

But Mr. Lawee of Google was initially eager to discuss ways to collaborate, tapping into Lending Club’s online loan market.

“When he reached out, his mind went immediately into all the cool stuff we can do together,” Mr. Laplanche said. “We didn’t talk about valuation or investment amount for many weeks. It was almost like two engineers meeting.”

As Mr. Lawee began making regular phone calls and treks to the company’s headquarters in San Francisco â€" about eight to 10 calls and meetings in all â€" Mr. Laplanche began to consider bringing Google on as a shareholder.

The companies eventually settled on a secondary transaction in which some existing investors would sell less than 20 percent of their holdings to Google and Foundation Capital, realizing investment gains while still staying involved with Lending Club.

At the heart of the discussions, Mr. Laplanche said, was a sense that the financial industry was due for a shake-up. Each company thinks that Lending Club could eventually replace some of the banks’ branch networks with a lower-cost alternative.

“Lending Club is using the Internet to reshape the financial system and profoundly transform the way people think of credit and investment,” Mr. Lawee said in a statement. “We are excited to be a part of it.”

Banks Ease Capital Cost of Loans to Brokers

To attract financial advisers, brokerage firms often offer them loans. They are loans with a difference, however.

The loans are essentially payments to lure the advisers â€" and presumably many of their clients â€" to the firm and keep them there. The loans are typically forgiven over time if the financial adviser, or broker, meets various performance requirements and does not defect to a rival.

There is a cost to this practice. The Securities and Exchange Commission requires brokerage firms to hold a significant amount of capital, one dollar for each dollar lent, to protect against loan losses. Then, if the customer does not make good on the loan, the shareholders of the brokerage firm are protected.

Morgan Stanley, however, houses the roughly $6 billion in loans it has made to its financial advisers outside its broker-dealer unit. Segregating these loans allows the bank to set aside just 8 cents for every dollar lent, a much lower capital cost than its rivals Wells Fargo and Bank of America pay. Wells says it keeps all these loans at its broker-dealer, taking a higher capital charge. Bank of America keeps some at its broker-dealer and some in a unit that allows it to set aside less capital. An arbitration case in Tampa, Fla., has opend a window on the different choices that financial firms make about where to house virtually identical assets and how those decisions can reduce a firm’s capital burden. Such calls â€" rarely disclosed publicly â€" have become more important since the financial crisis as regulators have pushed banks to hold more capital to protect against potential losses.

“This is classic regulatory arbitrage,” said Rebel A. Cole, a professor of finance at DePaul University. “There is clearly an incentive for Morgan Stanley to hold these loans outside their brokerage operations.”

A spokesman for Morgan Stanley, James Wiggins, said the bank held these loans outside its brokerage operation because they were not related to customer activity.

“While carrying the loans in the servicing entity does decrease the amount of capital held in the broker-dealer subsidiary, it does not reduce the amount of capital held against them at the overall company level,” the spokesman said, referring to the 8-cents-on-the-dollar capital charge for loans held at banks’ holding companies. He said that Morgan Stanley had had this structure for years to take a lower capital charge and that Citigroup had the same structure. Morgan Stanley and Citigroup combined their wealth management operations in 2009.

Neither Bank of America nor Wells Fargo Bank would disclose the value of their broker loans. Wall Street executives with knowledge of the loan structures, who were not authorized to speak on the record, suggested that some banks have not moved the loans outside of the broker-dealer because doing so might draw regulatory scrutiny and would require these banks to rewrite thousands of client contracts.

Details about Morgan Stanley’s arrangement emerged in a recent dispute involving a former financial adviser. The broker, James Eastman, 59, filed an arbitration claim against the bank after he left in 2010, arguing defamation of character and wrongful dismissal. He sought to have his loans from the bank forgiven, something Morgan Stanley was unwilling to do.

After working at Citigroup for years, Mr. Eastman became part of Morgan Stanley after the two firms combined their brokerage operations.

He ended up with two loans. The first was made in 2001, when he started at Citigroup, and it was valued at $942,532. It was forgivable over 10 years, and then subsequently extended. In 2009, he received another loan, valued at $214,648, to encourage him to stay through the merger. Mr. Eastman left the company in 2010, owing roughly $400,000 on the two loans, according to his lawyer, Chris Vernon.

Typically a broker gets a loan that covers several years and is required to pay interest on it. The broker repays the loan using earnings from a parallel bonus pool, assuming certain performance targets are met. If they are not, or the broker bolts to another firm, the broker may be required to pay the loan back.

Mr. Vernon says he was concerned that the entity holding Mr. Eastman’s loans was something called Morgan Stanley FA Notes Holdings, and not the brokerage business, Morgan Stanley Smith Barney. He says he did not want a third party coming after his client later, so he argued that Morgan Stanley FA Notes Holdings, not Morgan Stanley Smith Barney, should be a party to the arbitration case. As part of the arbitration, Jeffrey Gelfand, the chief financial officer of Morgan Stanley’s wealth management business, was called to testify.

Under oath, Mr. Gelfand explained that Morgan Stanley had always housed broker loans outside its broker-dealer. The current holding company, he said, was created in 2009, just weeks before the announcement that Morgan Stanley and Citigroup were combining their wealth management operations.

“Having them away from the broker-dealer just allows us to minimize the regulatory capital associated with them and operate the broker-dealer more efficiently,” he explained to the three arbiters hearing his claim.

He said Morgan Stanley financed its broker-dealer “well in excess of the minimum capital requirement,” so leaving the loans there might not necessarily affect how much capital the bank’s broker-dealer has, but it “reduces the requirement if that was important at any point in time.”

The arbitration was bittersweet for Mr. Eastman. While he received a lesson in Wall Street capital decisions, the arbitration panel denied Mr. Eastman’s claims in March and ordered him to pay back roughly $200,000 of the $400,000 he owed the bank. As well, the panel granted his motion to dismiss Morgan Stanley Smith Barney as a party on his two loans.

Mr. Vernon has now filed a claim in Florida court for lawyers’ fees.

A Mortgage Agency Pick Is Likely to Cause Conflict

President Obama’s overhaul of the mortgage market has been a long time coming.

But he took a significant step forward on Wednesday, announcing his intention to nominate a new director for an agency that plays a crucial role in the housing market.

The president tapped Representative Melvin L. Watt, a Democrat of North Carolina, to become the new director of the Federal Housing Finance Agency. Mr. Watt has advocated for strong measures to provide relief to struggling homeowners, including reducing how much borrowers owe on their mortgages.

“Mel understands as well as anybody what caused the housing crisis,” President Obama said on Wednesday. “He knows what it’s going to take to help responsible homeowners fully recover.”

Still, Mr. Watt’s nomination will most likely inflame long-running political battles over how much the government should do to make mortgages available and support homeowners. Most immediately, Republican senators opposed to Mr. Watt’s housing stances might try to hold up his confirmation.

“I could not be more disappointed in this nomination,” Senator Bob Corker, Republican of Tennessee and a member of the Senate Banking Committee, said in a statement.

As director of the housing agency, Mr. Watt would oversee Fannie Mae and Freddie Mac, the two taxpayer-owned mortgage finance giants that have provided enormous support to the housing market since the financial crisis of 2008. They guaranteed two-thirds of all the mortgages made last year.

The Obama administration wants to reduce government involvement but has made almost no big moves in that direction. Some critics question its resolve to scale back the role of Fannie and Freddie, which received one of the biggest bailouts of the financial crisis. They say Mr. Watt’s nomination looks like tactical maneuvering, designed in part to placate progressives in Congress who say the president has done too little to help homeowners.

“It seems like a political move when a substantive one is needed,” said Phillip L. Swagel, a professor at the University of Maryland School of Public Policy. Mark Zandi, an economist at Moody’s Analytics who has focused on housing, was also a candidate to lead the housing agency. Mr. Zandi, “seemed to be a perfect nominee,” said Mr. Swagel, who was an assistant secretary for economic policy under Treasury Secretary Henry M. Paulson Jr.

Consumer advocates are upset that Mr. Obama did not long ago remove Edward DeMarco, the current head of the Federal Housing Finance Agency. He effectively stopped Fannie and Freddie from cutting loan balances for stressed homeowners. Last year, Mr. DeMarco argued that such a program “would not make a meaningful improvement in reducing foreclosures in a cost-effective way for taxpayers.”

Reducing mortgage balances could be the issue that draws the most scrutiny for Mr. Watt during the confirmation process.

Given the level of controversy around this policy, some mortgage market analysts questioned on Wednesday why the White House had nominated someone who has identified so closely with it.

But Gene B. Sperling, an assistant to the president on economic policy, said the administration stood behind Mr. Watt’s support for cutting mortgage balances. “That’s our position, and we’re not going to disqualify someone for agreeing with us,” he said.

In an interview, Mr. Watt said that, as director of the agency, he would be obliged to take into account the risk of losses to taxpayers from writing down mortgages.

“My role would be to look at this from all sides, from the homeowner’s perspective and the taxpayer’s perspective,” he said. “There are a lot of things I might have to approach differently as a director of this agency.”

Those in favor of cutting mortgages received some support on Wednesday. The nonpartisan Congressional Budget Office released a study showing that reducing the amounts borrowers owe could actually save taxpayers money by reducing the chance underwater homeowners would default and end up in foreclosure, thus causing losses to Fannie and Freddie, which own or guarantee more than half of all residential mortgages. But other analyses suggest that the approach is not a silver bullet. About one-third of borrowers who had their mortgage balances reduced by more than 20 percent went back into default within two years, according to a study by Fitch Ratings.

Despite the mortgage relief questions, Mr. Watt may still gain support in the Senate for his nomination. He is well known in Congress and sits on the powerful House Financial Services Committee. Some Republicans may vote for him.

“Having served with Mel, I know of his commitment to sustainable federal housing programs and am confident he will work hard to protect taxpayers from future exposure to Fannie Mae and Freddie Mac,” Senator Richard Burr, Republican of North Carolina, said in a statement.

While Mr. Watt is known for promoting lending to low-income and minority borrowers, he is not considered unfriendly to banks. Financial firms and insurers are among his biggest donors, in no small part because Charlotte, part of which is in Mr. Watt’s district, is a banking center.

Still, many members of Congress and analysts are eager to reduce the government’s role in housing, and feel Mr. Watt may not push hard enough to curtail the activities of Fannie and Freddie.

“It’s coming up on five years and nothing has happened,” said Edward Pinto, a resident fellow at the American Enterprise Institute.

But Mr. Watt says he’s firmly behind the administration’s plans to have the government largely withdraw from the housing market.

“I’ve indicated in committee that I am committed to finding a new model, and that model includes winding down Fannie and Freddie,” he said. As director of the housing agency, “I’d be ideally situated to facilitate that.”

Should Mr. Watt fail to win Senate confirmation, the White House could name him as a recess appointment.

A Mortgage Agency Pick Is Likely to Cause Conflict

President Obama’s overhaul of the mortgage market has been a long time coming.

But he took a significant step forward on Wednesday, announcing his intention to nominate a new director for an agency that plays a crucial role in the housing market.

The president tapped Representative Melvin L. Watt, a Democrat of North Carolina, to become the new director of the Federal Housing Finance Agency. Mr. Watt has advocated for strong measures to provide relief to struggling homeowners, including reducing how much borrowers owe on their mortgages.

“Mel understands as well as anybody what caused the housing crisis,” President Obama said on Wednesday. “He knows what it’s going to take to help responsible homeowners fully recover.”

Still, Mr. Watt’s nomination will most likely inflame long-running political battles over how much the government should do to make mortgages available and support homeowners. Most immediately, Republican senators opposed to Mr. Watt’s housing stances might try to hold up his confirmation.

“I could not be more disappointed in this nomination,” Senator Bob Corker, Republican of Tennessee and a member of the Senate Banking Committee, said in a statement.

As director of the housing agency, Mr. Watt would oversee Fannie Mae and Freddie Mac, the two taxpayer-owned mortgage finance giants that have provided enormous support to the housing market since the financial crisis of 2008. They guaranteed two-thirds of all the mortgages made last year.

The Obama administration wants to reduce government involvement but has made almost no big moves in that direction. Some critics question its resolve to scale back the role of Fannie and Freddie, which received one of the biggest bailouts of the financial crisis. They say Mr. Watt’s nomination looks like tactical maneuvering, designed in part to placate progressives in Congress who say the president has done too little to help homeowners.

“It seems like a political move when a substantive one is needed,” said Phillip L. Swagel, a professor at the University of Maryland School of Public Policy. Mark Zandi, an economist at Moody’s Analytics who has focused on housing, was also a candidate to lead the housing agency. Mr. Zandi, “seemed to be a perfect nominee,” said Mr. Swagel, who was an assistant secretary for economic policy under Treasury Secretary Henry M. Paulson Jr.

Consumer advocates are upset that Mr. Obama did not long ago remove Edward DeMarco, the current head of the Federal Housing Finance Agency. He effectively stopped Fannie and Freddie from cutting loan balances for stressed homeowners. Last year, Mr. DeMarco argued that such a program “would not make a meaningful improvement in reducing foreclosures in a cost-effective way for taxpayers.”

Reducing mortgage balances could be the issue that draws the most scrutiny for Mr. Watt during the confirmation process.

Given the level of controversy around this policy, some mortgage market analysts questioned on Wednesday why the White House had nominated someone who has identified so closely with it.

But Gene B. Sperling, an assistant to the president on economic policy, said the administration stood behind Mr. Watt’s support for cutting mortgage balances. “That’s our position, and we’re not going to disqualify someone for agreeing with us,” he said.

In an interview, Mr. Watt said that, as director of the agency, he would be obliged to take into account the risk of losses to taxpayers from writing down mortgages.

“My role would be to look at this from all sides, from the homeowner’s perspective and the taxpayer’s perspective,” he said. “There are a lot of things I might have to approach differently as a director of this agency.”

Those in favor of cutting mortgages received some support on Wednesday. The nonpartisan Congressional Budget Office released a study showing that reducing the amounts borrowers owe could actually save taxpayers money by reducing the chance underwater homeowners would default and end up in foreclosure, thus causing losses to Fannie and Freddie, which own or guarantee more than half of all residential mortgages. But other analyses suggest that the approach is not a silver bullet. About one-third of borrowers who had their mortgage balances reduced by more than 20 percent went back into default within two years, according to a study by Fitch Ratings.

Despite the mortgage relief questions, Mr. Watt may still gain support in the Senate for his nomination. He is well known in Congress and sits on the powerful House Financial Services Committee. Some Republicans may vote for him.

“Having served with Mel, I know of his commitment to sustainable federal housing programs and am confident he will work hard to protect taxpayers from future exposure to Fannie Mae and Freddie Mac,” Senator Richard Burr, Republican of North Carolina, said in a statement.

While Mr. Watt is known for promoting lending to low-income and minority borrowers, he is not considered unfriendly to banks. Financial firms and insurers are among his biggest donors, in no small part because Charlotte, part of which is in Mr. Watt’s district, is a banking center.

Still, many members of Congress and analysts are eager to reduce the government’s role in housing, and feel Mr. Watt may not push hard enough to curtail the activities of Fannie and Freddie.

“It’s coming up on five years and nothing has happened,” said Edward Pinto, a resident fellow at the American Enterprise Institute.

But Mr. Watt says he’s firmly behind the administration’s plans to have the government largely withdraw from the housing market.

“I’ve indicated in committee that I am committed to finding a new model, and that model includes winding down Fannie and Freddie,” he said. As director of the housing agency, “I’d be ideally situated to facilitate that.”

Should Mr. Watt fail to win Senate confirmation, the White House could name him as a recess appointment.

A Mortgage Agency Pick Is Likely to Cause Conflict

President Obama’s overhaul of the mortgage market has been a long time coming.

But he took a significant step forward on Wednesday, announcing his intention to nominate a new director for an agency that plays a crucial role in the housing market.

The president tapped Representative Melvin L. Watt, a Democrat of North Carolina, to become the new director of the Federal Housing Finance Agency. Mr. Watt has advocated for strong measures to provide relief to struggling homeowners, including reducing how much borrowers owe on their mortgages.

“Mel understands as well as anybody what caused the housing crisis,” President Obama said on Wednesday. “He knows what it’s going to take to help responsible homeowners fully recover.”

Still, Mr. Watt’s nomination will most likely inflame long-running political battles over how much the government should do to make mortgages available and support homeowners. Most immediately, Republican senators opposed to Mr. Watt’s housing stances might try to hold up his confirmation.

“I could not be more disappointed in this nomination,” Senator Bob Corker, Republican of Tennessee and a member of the Senate Banking Committee, said in a statement.

As director of the housing agency, Mr. Watt would oversee Fannie Mae and Freddie Mac, the two taxpayer-owned mortgage finance giants that have provided enormous support to the housing market since the financial crisis of 2008. They guaranteed two-thirds of all the mortgages made last year.

The Obama administration wants to reduce government involvement but has made almost no big moves in that direction. Some critics question its resolve to scale back the role of Fannie and Freddie, which received one of the biggest bailouts of the financial crisis. They say Mr. Watt’s nomination looks like tactical maneuvering, designed in part to placate progressives in Congress who say the president has done too little to help homeowners.

“It seems like a political move when a substantive one is needed,” said Phillip L. Swagel, a professor at the University of Maryland School of Public Policy. Mark Zandi, an economist at Moody’s Analytics who has focused on housing, was also a candidate to lead the housing agency. Mr. Zandi, “seemed to be a perfect nominee,” said Mr. Swagel, who was an assistant secretary for economic policy under Treasury Secretary Henry M. Paulson Jr.

Consumer advocates are upset that Mr. Obama did not long ago remove Edward DeMarco, the current head of the Federal Housing Finance Agency. He effectively stopped Fannie and Freddie from cutting loan balances for stressed homeowners. Last year, Mr. DeMarco argued that such a program “would not make a meaningful improvement in reducing foreclosures in a cost-effective way for taxpayers.”

Reducing mortgage balances could be the issue that draws the most scrutiny for Mr. Watt during the confirmation process.

Given the level of controversy around this policy, some mortgage market analysts questioned on Wednesday why the White House had nominated someone who has identified so closely with it.

But Gene B. Sperling, an assistant to the president on economic policy, said the administration stood behind Mr. Watt’s support for cutting mortgage balances. “That’s our position, and we’re not going to disqualify someone for agreeing with us,” he said.

In an interview, Mr. Watt said that, as director of the agency, he would be obliged to take into account the risk of losses to taxpayers from writing down mortgages.

“My role would be to look at this from all sides, from the homeowner’s perspective and the taxpayer’s perspective,” he said. “There are a lot of things I might have to approach differently as a director of this agency.”

Those in favor of cutting mortgages received some support on Wednesday. The nonpartisan Congressional Budget Office released a study showing that reducing the amounts borrowers owe could actually save taxpayers money by reducing the chance underwater homeowners would default and end up in foreclosure, thus causing losses to Fannie and Freddie, which own or guarantee more than half of all residential mortgages. But other analyses suggest that the approach is not a silver bullet. About one-third of borrowers who had their mortgage balances reduced by more than 20 percent went back into default within two years, according to a study by Fitch Ratings.

Despite the mortgage relief questions, Mr. Watt may still gain support in the Senate for his nomination. He is well known in Congress and sits on the powerful House Financial Services Committee. Some Republicans may vote for him.

“Having served with Mel, I know of his commitment to sustainable federal housing programs and am confident he will work hard to protect taxpayers from future exposure to Fannie Mae and Freddie Mac,” Senator Richard Burr, Republican of North Carolina, said in a statement.

While Mr. Watt is known for promoting lending to low-income and minority borrowers, he is not considered unfriendly to banks. Financial firms and insurers are among his biggest donors, in no small part because Charlotte, part of which is in Mr. Watt’s district, is a banking center.

Still, many members of Congress and analysts are eager to reduce the government’s role in housing, and feel Mr. Watt may not push hard enough to curtail the activities of Fannie and Freddie.

“It’s coming up on five years and nothing has happened,” said Edward Pinto, a resident fellow at the American Enterprise Institute.

But Mr. Watt says he’s firmly behind the administration’s plans to have the government largely withdraw from the housing market.

“I’ve indicated in committee that I am committed to finding a new model, and that model includes winding down Fannie and Freddie,” he said. As director of the housing agency, “I’d be ideally situated to facilitate that.”

Should Mr. Watt fail to win Senate confirmation, the White House could name him as a recess appointment.

ING’s U.S. Unit Prices Its Market Debut Below Expectations

The American arm of the ING Group, the Dutch financial services firm, priced its initial public offering at $19.50 a share, below its expected range of $21 to $24.

Still, the transaction raised about $1.27 billion after slightly increasing the number of shares sold, to 65.2 million. It is the second-biggest market debut in the United States this year, surpassed only by the $2.2 billion I.P.O. of Zoetis, the former animal health division of Pfizer, according to data from Renaissance Capital.

Over all, the I.P.O. values the business â€" soon to be rebranded Voya Financial â€" at about $5 billion.

ING took its American arm public as the company continues to slim itself down per the terms of a 2008 bailout by the Dutch government. Last year, the lender sold its United States online banking arm, ING Direct USA, to Capital One Financial for $9 billion.

ING U.S., which sells life insurance and annuities products, earned $611.2 million last year on $9.6 billion in total revenue, according to its latest amended prospectus. The company has about 13 million customers and is based in New York City.

It is expected to begin trading on the New York Stock Exchange on Thursday under the ticker symbol “VOYA.”

The offering was led by Morgan Stanley, Goldman Sachs and Citigroup.

Goldman Names New Head of Special Situations Group

Goldman Sachs has named a new head of its global special situations group, the elite division that invests in and lends to companies.

Julian Salisbury is to become head of the division, replacing Jason Brown, who is retiring from the Wall Street firm, Goldman said Wednesday in internal memos obtained by DealBook.

Mr. Salisbury, who has run the European special situations group from London, is moving to New York for the new role.

Mr. Brown, a 13-year veteran of Goldman, became the head of the group in 2011, succeeding Richard Ruzika. He joined Goldman’s specialized credit trading group in London in 1999, before moving to the Asian special situations group the following year. He became head of that group in 2007.

“Jason’s leadership has been instrumental in the design and execution of a realigned investment approach” in the special situations group, said the memorandum from Isabelle Ealet and Pablo J. Salame, co-heads of Goldman’s securities division.

“Under his oversight the business has operated as a cohesive global unit with a consistent and disciplined investing approach,” the note continued. “In addition to his substantial commercial contributions, Jason has also been influential in developing and mentoring our people.”

Before leading the European special situations group, Mr. Salisbury worked in Moscow, expanding the group’s business, according to the internal communication. He helped found the European group in 2003, and joined Goldman in 1998.

Mr. Brown, who once worked at Bear Stearns, was named a partner of Goldman in 2006. Mr. Salisbury became partner in 2008.

French Efforts to Block Stake Sale of Start-Up to Yahoo Is Criticized

The government of President François Hollande has expressed its objections to plans by Yahoo to buy a controlling stake in the video-sharing site DailyMotion, which is owned by France Télécom, in an effort to keep one of the country’s most successful technology start-ups out of foreign hands.

The move has probably scuttled any hope of an agreement, according to two people briefed on the situation, who spoke Wednesday on condition of anonymity.

The government’s intervention has alarmed entrepreneurs in France, who say it sends a bad message to foreign investors, especially at a time when the country is seeking their money to help jump-start its economy.

“I’m sure France will be downgraded in foreign investors’ eyes because they will think it is too complicated,” said Frédéric Montagnon, co-founder of OverBlog, a blogging platform.

DailyMotion, which was created in 2005 by private investors in a Paris apartment, was effectively selected to be a French national champion in 2009, when the country’s strategic investment fund pumped 7.5 million euros into the company. Later, DailyMotion was taken over by Orange, a subsidiary of France Télécom, a former state-owned monopoly in which the French government wields considerable influence because it still holds a 27 percent stake.

Stéphane Richard, the chief executive of France Télécom, has said on several occasions that he was interested in finding a partner, preferably an American technology company, to help DailyMotion expand internationally.

DailyMotion has an audience of more than 110 million unique visitors a month, making it the 12th largest online video site in the world, according to comScore, a research firm. But it has struggled to compete with the giants of the business, including YouTube, which is owned by Google, for advertising revenue.

Yahoo has also been trying to expand its video presence under the leadership of Marissa Mayer, the chief executive it hired away from Google last year. A few months ago, Yahoo began talks with France Télécom on a deal under which it would have taken control of DailyMotion, according to people briefed on the negotiations. Yahoo was apparently interested in buying at least a 75 percent stake, in a deal that would have valued DailyMotion at more than 200 million euros, these people said.

The French government apparently favored an arrangement under which France Télécom would have retained control. Word of its objections leaked to the French news media last week.

Late Wednesday, Arnaud Montebourg, France’s minister for industrial renewal, acknowledged that the negotiations had broken down, saying he “regrets that the talks were unable to achieve an agreement satisfactory to all the parties involved.” While neither Yahoo nor France Télécom has publicly disclosed that they were conducting talks, Mr. Montebourg showed no such reluctance.

“The minister has expressed his desire that a partnership between Yahoo and Orange should be built on an equal base, mutually beneficial to both companies,” his office said in a statement.

One person close to Mr. Montebourg, speaking on condition of anonymity, said he thought there was still a possibility that the talks could be revived. But another person briefed on the situation said that Yahoo had walked away and was unlikely to come back. Yahoo declined to comment.

The move to block a takeover by Yahoo comes even as France has been stepping up its efforts to attract foreign investment â€" much needed, analysts say, to pull the country out of a slump in which gross domestic product declined by 0.3 percent in the fourth quarter of last year.

Under the tag line “Say oui to France,” government agencies have been running advertisements in American newspapers promoting French “innovation clusters,” tax credits for research and entrepreneurial spirit.

According to the Organization for Economic Cooperation and Development, France received $62 billion of foreign direct investment in 2012, placing it fifth in the world and second in Europe, after Britain.

French entrepreneurs appear to have prevailed in a campaign to encourage the government to modify plans for a sharp increase in the capital gains tax, which they say would have stifled start-up activity. But they add that the government’s pitch to foreigners looks strikingly at odds with the message sent to would-be investors like Yahoo.

“France Télécom has been a fair partner for DailyMotion, but this company needs to find an appropriate host,” said Jean-David Chamboredon, president of ISAI, a fund that invests in French start-ups. “Montebourg is sending a bad and wrong signal to international investors.”

It is not the first time that France has moved to assert national sovereignty over the digital economy, a push that seems to have gained momentum under the current government. Mr. Hollande has called for
legislation to bring social networks into line with French laws against hate speech, following a spate of anti-Semitic posts on Twitter. He also brokered a settlement in which Google will help finance French news publishers’ efforts to develop their Web operations, and is pushing for foreign Internet companies to pay higher taxes in France.

Mr. Montagnon, of OverBlog, said the move to scuttle a takeover of DailyMotion showed that the administration did not “get” the Internet, where national borders can be surmounted with the click of a mouse.

“It’s a great thing when a company like Yahoo shows an interest in a French company,” Mr. Montagnon said. “I’m not sure DailyMotion should be considered a strategic asset for this country.”

In Brown-Vitter Bill, a Banking Overhaul With Possible Teeth

The biggest banks have done an excellent job of delaying and undermining the Dodd-Frank financial overhaul law and staving off criminal investigations into wrongdoing.

Maybe, just maybe, they’ve been too successful.

Senators Sherrod Brown, Democrat from Ohio, and David Vitter, Republican from Louisiana, introduced a bill last week that calls for two things: making the giant banks much safer and tying regulators’ hands to prevent them from using taxpayer money to save a failing financial institution.

If the bankers who blew up the financial world had been held accountable, the popular fury that fuels this bill would have dissipated by now. And if Dodd-Frank were fully in place today, instead of being bogged down in the courts and in the halls of Washington regulatory offices, there would be no political momentum behind such an effort.

Now, we will see whether the bill is simply a barbaric yawp of anger at the big banks or something with actual force. It probably won’t get passed, but its underlying premise cannot be dislodged from the Washington conversation.

The Brown-Vitter bill calls for the banks with more than $500 billion in assets â€" I’m looking at you JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley â€" to have capital reserves of 15 percent. That’s a much higher standard than exists today, especially because the current requirements have weak definitions of capital and total asset size.

The banks have rounded up a bunch of critics, led by the likes of the law firm Davis Polk & Wardwell and the lobbying firm Hamilton Place Strategies, the volume of their lamentations likely in direct proportion to the hourly rate they bill their clients. They invoke terrifying, talismanic statements: The bill is a “punishment” to big banks. It is simplistic, impossible, will render American banks “uncompetitive,” lead to financial crises and probably cause tooth decay.

This naïve bill would force the giant banks to raise too much capital and would hurt the economy as the companies were forced to shrink or break up. Standard & Poor’s is one of the observers warning of a financial crisis. And who better to know than the people who brought us the last one?

Goldman Sachs and S.&P. estimate the big banks might be forced to raise $1 trillion or more. That’s a lot, so much that the leviathans’ agents cry out that they couldn’t sell that much stock. But they don’t have to raise it all at once. And they can retain their earnings and stop paying dividends in addition to selling shares.

In putting that argument forward, they don’t realize they make Senators Brown and Vitter’s case for them. If investors are so terrified of the big banks that they won’t buy their stock, that’s a terrific problem. Most of the big banks trade below their net worth, an indication that investors don’t trust them. Brown-Vitter might actually help banks by restoring that trust.

The Brown-Vitter bill serves as a good time to remind defenders of big banks what bank “capital” is. As Professors Anat Admati and Martin Hellwig have pointed out in their indispensable book “The Bankers’ New Clothes,” capital is not a rainy-day fund. It’s not stored away in a vault somewhere, never to be touched. Capital â€" the rest of us know it as “equity,” like the down payment on a house â€" is simply money that absorbs losses. The more money a bank raises from shareholders, the more profit it keeps on hand, the less it has to borrow and the more solid it is. The bank can still lend that money. And if JPMorgan Chase doesn’t lend to some small business, perhaps a regional or community bank will.

There might be some trade-offs to higher capital requirements, but we know there are costs to lower ones: financial crises. Some try to argue that the banks faced a liquidity crisis in 2008, what we call a run on the bank. Yes, that was true in the autumn of 2008. But the crisis didn’t start then. It started in the late summer of 2007. If the banks had been more solidly capitalized, there would have been fewer panicked investors.

Banks desire as little capital as they can get away with. It’s easier to make higher returns on equity with greater debt. Often management is paid in stock. But society as a whole doesn’t benefit from banks that are running with too much leverage. They collapse.

So, it is better to have higher equity capital. But Brown-Vitter doesn’t go far enough. The bill’s definition of equity could be tighter. It still contains bookkeeping entries called intangible assets and deferred tax assets, which don’t absorb losses.

But, gratifyingly, Brown-Vitter does tighten up the definition of assets. Capital is the numerator and assets are the denominator. Both need to be made as solid and trustworthy â€" and resistant to manipulation by banks or regulatory capture â€" as they can be. When calculating assets, Brown-Vitter tightens up rules on things like how the banks measure their exposure to derivatives.

Oh, the critics shout, this is just a backdoor way of making banks smaller. The bill’s authors fail to understand that diversity of exposure saves gargantuan banks, they say. This requires a slap to the side of the head and a one-word rebuttal: Citigroup. Citi blew up because of its exposure to collateralized debt obligations. That exposure was dismissed and misunderstood by the top ranks because it was seemingly small as a portion of the bank’s balance sheet. It was wonderfully diversified into all kinds of investments, which didn’t help at all. Sure, small banks are less diverse. But when they collapse, the problem is more manageable.

Brown-Vitter inhibits regulators from using risk-weighting of assets, where banks and regulators determine which kinds of investments are safe and require little capital behind them. Davis Polk declared that getting rid of risk-weighting is “too blunt,” somehow immune to the absurd spectacle of lawyers opining on proper risk management.

In fact, risk-weighting has a storied history of blunder. Residential mortgages and sovereign debt, like that of, say, Greece, were once viewed as carrying little risk. Risk-weighting encourages banks to crowd into assets thought to be safe, in that way making them unsafe. It lulls them, and regulators, into a false sense of confidence. Perhaps throwing out risk-weighting might lead lots of banks to buy stuff that is known to carry risk. It’s far better to have them piling into investments that are known to be risky and count those purchases with a clearer, less manipulated number. Then, regulators need to pay attention, which, call me crazy, is their job.

Brown-Vitter also ties regulators’ hands on whether they can pour taxpayer money into failing banks. Here, it’s less plausible. Dodd-Frank has given regulators resolution authority, which gives them the power to unwind failing institutions and impose losses on the shareholders and creditors. Brown-Vitter tries to eliminate what Dodd-Frank skeptics see as too much regulatory flexibility.

It’s a noble idea. But the problem, as Paul A. Volcker has pointed out, is that if JPMorgan Chase is truly failing, it’s almost a certainty that Citi and Bank of America are going down, too. And taxpayers would then have to step in in some fashion.

So, taxpayers are implicitly on the hook for the financial sector, even with Brown-Vitter.

That’s why we need the biggest banks to have truly clear and understandable balance sheet fortresses.

T-Mobile Completes Deal for MetroPCS

T-Mobile US to Ring NYSE Opening Bell as Trading Begins Today Under Ticker “TMUS”

BONN, Germany & BELLEVUE, Wash.--(BUSINESS WIRE)--May. 1, 2013-- Deutsche Telekom AG (XETRA: DTE; “Deutsche Telekom”) and T-Mobile US, Inc. today announced the completion of the combination of T-Mobile USA, Inc. and MetroPCS Communications, Inc., uniting two wireless innovators with one common vision: to bring wireless consumers exciting new choices while delivering an exceptional experience. The combined company, T-Mobile US, Inc., will begin trading on the New York Stock Exchange today under the ticker “TMUS.”

“The combination of T-Mobile and MetroPCS creates an even stronger disruptive force in the U.S. wireless market,” said John Legere, President & Chief Executive Officer of T-Mobile US, Inc. “Together, as America’s Un-carrier, we’ll continue our legacy of marketplace innovation by tearing up the old playbook and rewriting the rules of wireless to benefit consumers.”

As previously announced, the Board of Directors of the combined company will have 11 members, including two directors of MetroPCS who will continue with the combined company. Tim Höttges, currently Deputy Chief Executive Officer and Chief Financial Officer of Deutsche Telekom, will serve as Chairman of the Board.

“By uniting T-Mobile and MetroPCS, we have created a dynamic new player in the wireless industry that has the right strategy and management team in place to compete successfully in today’s marketplace,” said Mr. Höttges. “We look forward to realizing the tremendous potential of the new T-Mobile.”

A few facts about America’s Un-carrier:

• 2012 combined entity results would have reflected $24.8 billion of revenue, $6.4 billion of adjusted EBITDA1, $3.7 billion of capital expenditures (excluding spectrum purchases)2, and $2.7 billion of free cash flow3.
• Approximately 43 million subscribers as of March 31, 2013, two exceptionally strong brands, and 70,000 customer touch points.
• A wider choice of outstanding wireless devices, including iPhone, offered through simple, affordable rate plans for unlimited talk, text, and Web - with no restrictive annual service contracts required.
• The combined company's total PoP coverage is 301 million, of which 283 million are covered by owned network. 228 million are currently served with 4G and 200 million are expected to be covered with 4G LTE by the end of 2013.
• An enhanced spectrum position that will provide greater network coverage and deeper 4G LTE coverage in key markets across the country. Combining the two companies’ spectrum provides a path to at least 20+20 MHz of 4G LTE in approximately 90% of the top 25 metro areas in 2014 and beyond.
• Target five-year (2012 - 2017) compounded annual growth rates in the range of 3% - 5% for revenues, 7% - 10% for EBITDA, and 15% - 20% for free cash flow.
• Projected cost synergies of $6 - $7 billion (net present value4), with additional potential upside from the focused geographic expansion of the MetroPCS brand.

Under the terms of the business combination agreement, MetroPCS effected a 1 for 2 reverse stock split, made a cash payment of $1.5 billion to its stockholders (approximately $4.05 per share prior to the reverse stock split), and acquired all of T-Mobile’s capital stock from Deutsche Telekom in exchange for approximately 74% of MetroPCS’ common stock on a pro forma basis.

The combined company is headquartered in Bellevue, Washington and maintains a significant presence in Richardson, Texas. The combined company will be led by President & Chief Executive Officer, John Legere, with former MetroPCS Vice Chairman and Chief Financial Officer, J. Braxton Carter, serving as CFO. As previously announced, the combined company will operate T-Mobile and MetroPCS as separate brands, led by Jim Alling and Thomas Keys, respectively, migrating to a common network infrastructure and with common support functions.

To mark the successful completion of the transaction, Mr. Legere and several customer-facing employees will ring the Opening Bell of the NYSE today, May 1, 2013.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures (Unaudited)

Information regarding the 2012 combined revenues, adjusted EBITDA, capital expenditures (excluding spectrum purchases), and free cash flow for the combined company is presented for informational purposes only. These combined company measures represent the sum of these financial measures for each company in 2012. They are not intended to represent or be indicative of the results of operations or financial position of the combined company had the business combination been consummated on January 1, 2012, and should not be taken as representative of the future results of operations or financial position of the combined company. This press release includes non-GAAP financial measures. The non-GAAP financial measures should be considered as a complement to, but not as a substitute for, financial information determined in accordance with GAAP.

1 The following tables illustrate the historical 2012 calculations of Adjusted EBITDA for T-Mobile USA, Inc. and MetroPCS Communications, Inc. and reconcile Adjusted EBITDA for each company to each company’s net (loss) income, which T-Mobile considers to be the most directly comparable GAAP financial measure to Adjusted EBITDA.

2 Capital Expenditures (excluding spectrum purchases) represent the sum of each company’s capital expenditures (excluding spectrum purchases) for 2012.

3 Free Cash Flow represents Adjusted EBITDA for each company (as calculated above) less Capital Expenditures (excluding spectrum purchases) for each company.

4 NPV is calculated with a 9% discount rate and 38% tax rate.

Â

Â

Â

Â

T-Mobile USA, Inc.

MetroPCS Communications, Inc.

Dollars in Millions

Â

Year ended December 31, 2012

Dollars in Millions

Â

Year ended       December 31, 2012     Â

Calculation of Adjusted EBITDA:

Calculation of Adjusted EBITDA:

Â

Â

Â

Â

Net loss

$

(7,336)

Net income

$

394

Adjustments:

Adjustments:

Interest expense to affiliates

661

Depreciation and amortization

641

Interest income

(77)

Loss (gain) on disposal of assets

9

Other (income) expense, net

5

Stock-based compensation expense

38

Income tax expense (benefit)

350

Interest expense

275

Depreciation and amortization

3,187

Interest income

(2)

Impairment charges

8,134

Other (income) expense, net

(5)

Restructuring costs

85

Gain on settlement

(53)

Other, net

Â

(123)

Provision for income taxes

Â

Â

Â

Â

Â

213

Adjusted EBITDA

$

4,886

Adjusted EBITDA

$

Â

Â

Â

Â

1,512

Â

Â

Â

Other, net for the year ended December 31, 2012 represents a net gain on an AWS spectrum license purchase and exchange, transaction-related costs incurred for the terminated AT&T acquisition of T-Mobile, and transaction- related costs incurred from the proposed business combination with MetroPCS Communications. Other, net transactions may not agree in total to the other, net classification in the Consolidated Statements of Operations and Comprehensive Income (Loss) due to certain routine operating activities, such as insignificant routine spectrum license exchanges that would be expected to reoccur, and are therefore not excluded from Adjusted EBITDA.

Â

About T-Mobile US, Inc.

As America’s Un-carrier, T-Mobile US, Inc. (NYSE: “TMUS”) is redefining the way consumers and businesses buy wireless services through leading product and service innovation. The company’s advanced nationwide 4G and 4G LTE network delivers outstanding wireless experiences for customers who are unwilling to compromise on quality and value. Based in Bellevue, Wash., T-Mobile US, Inc. operates its flagship brands, T-Mobile and MetroPCS. It currently serves approximately 43 million wireless subscribers and provides products and services through 70,000 points of distribution. For more information, please visit: http://www.T-Mobile.com

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the U.S. federal securities laws. Any statements made herein that are not statements of historical fact, including statements about T-Mobile US, Inc.’s competitive position, strategy, growth plans and prospects, the expected impact of its plans and strategies on the wireless industry, expected network modernization and other advancements, expected access to capital, projected growth rates, and projected synergies, are forward-looking statements. Generally, forward-looking statements may be identified by words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “views,” “may,” “will,” “forecast,” and other similar expressions. The forward-looking statements speak only as of the date made, are based on current assumptions and expectations, and involve a number of risks and uncertainties. Important factors that could affect future results and cause those results to differ materially from those expressed in the forward-looking statements include, among others, the following: our ability to compete in the highly competitive U.S. wireless telecommunications industry; adverse conditions in the U.S. and international economies and markets; our ability to successfully integrate the MetroPCS and T-Mobile businesses and realize expected synergies and other benefits from the recent combination; the effects of Deutsche Telekom’s controlling interest in us and its rights as a controlling stockholder and a holder of a substantial amount of our debt securities; our significant capital commitments and the capital expenditures required to effect our business plan; our significant amount of indebtedness and the limitations and obligations imposed by the provisions thereof; our ability to adapt to future changes in technology, enhance existing offerings, and introduce new offerings to address customers’ changing demands; write-offs or changes in our accounting assumptions; the outcome of any pending, threatened or potential litigation; changes in legal and regulatory requirements, including any change or increase in restrictions on our ability to operate our network; our ability to successfully maintain and improve our network, and the possibility of incurring additional costs in doing so; major equipment failures; security breaches related to the network or customer information; severe weather conditions or other force majeure events; disruptions of our key supply relationships; our ability to attract and retain key members of management and train personnel; significant increases in benefit plan costs or lower investment returns on plan assets; our ability to maintain good labor relations; the availability of additional spectrum, our ability to secure additional spectrum, or secure it at acceptable prices, when we need it; and other risks described in MetroPCS’ annual report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on March 1, 2013, and other filings filed with the SEC. You should not place undue reliance on these forward-looking statements. We do not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Source: T-Mobile US, Inc.

T-Mobile US, Inc.
Media Relations, 425-378-4002
mediarelations@t-mobile.com
Investor Relations, 212-424-2959
investor.relations@telekom.com

Credit Suisse Is Said to Name New Leaders in Investment Banking

LONDON - Credit Suisse named new co-heads for its investment banking operations in Europe, the Middle East and Africa on Wednesday following the resignation of Jamie Welch after a year in the job, a person with knowledge of the appointments said.

The Swiss bank named Marisa Drew, co-head of the global markets solution group, and Ewen Stevenson, co-head of the team that advises financial companies on takeovers, to replace Mr. Welch, said the person, who declined to be named because the appointments were not announced publicly.

Mr. Welch, who became head of European investment banking in addition to his job as global head of energy in March last year, is to move to the United States from London to become chief financial officer at Energy Transfer, a Credit Suisse client.

Both Ms. Drew, who joined Credit Suisse in 2003, and Mr. Stevenson, who came to the bank in 1989, will continue to co-head their respective businesses.

Ms. Drew, who holds an M.B.A. from the Wharton School, joined Credit Suisse from Merrill Lynch, where she helped build the European leveraged finance group. At Credit Suisse, she has been in charge of the bank’s financing products and advisory, including debt and equity capital markets, leveraged finance and corporate derivatives. She worked on Liberty Global’s $16 billion purchase of the British cable company Virgin Media earlier this year.

Mr. Stevenson, a graduate of University of Wellington, in New Zealand, has been advising financial institutions as part of Credit Suisse’s investment banking operation for the last 19 years.

Financial News reported the changes earlier on Wednesday.

Berkshire Hathaway to Buy Rest of IMC for $2 Billion

Berkshire Hathaway has agreed to buy the 20 percent of IMC International Metalworking Companies that it does not already own for $2.05 billion, giving it full control of the company.

The deal was announced on Wednesday, just days before Berkshire holds its annual shareholder meeting, where Warren E. Buffett is expected to tell investors that he remains on the hunt for big deals.

It is the second big acquisition by Mr. Buffett’s company this year, following the blockbuster $23 billion takeover of H.J. Heinz by Berkshire and 3G Capital.

By buying the rest of IMC, an Israeli tool maker, from its founding Wertheimer family, Mr. Buffett is completing an acquisition that he began seven years ago. Berkshire’s initial purchase of an 80 percent stake for $5 billion was one of the largest takeovers of an Israeli company in that country’s history.

In a statement, Mr. Buffett pointed to the 64 percent rise in IMC’s valuation over the seven years to the tool maker’s enormous growth.

“Since the time IMC entered our lives, my partner, Charlie Munger, and I have enjoyed Berkshire’s association with the company, the Wertheimer family, and the company’s management team,” Mr. Buffett said in a statement. “We look forward to continuing our stewardship of this unique company founded by the Wertheimer family in Israel 60 years ago and nurtured into a truly global enterprise.”

Berkshire was advised by its usual law firm, Munger, Tolles & Olson. The Wertheimers were counseled by Wachtell, Lipton, Rosen & Katz.

Apple’s Debt Market Foray

It might not seem that Apple, with a $145 billion cash hoard, would need to raise money. But on Tuesday, the company issued $17 billion of bonds, a record amount, paying interest rates that hovered near those on the low-cost debt of the United States Treasury.

The logic behind Apple’s move has to do with the frenzied state of the bond market, which is allowing companies to issue lots of debt at historically low interest rates. But the maneuver “also reflects the unusual challenges of a fabulously successful company with a sinking stock price,” DealBook’s Peter Lattman and Peter Eavis write. After its shares plummeted from a high last fall of more than $700 to under $400 last month, Apple is borrowing money to help finance a $100 billion payout to shareholders, which it plans to distribute by the end of 2015 in the form of increased dividends and stock buybacks. In addition, “taking on debt can actually magnify the returns for shareholders and improve stock performance, financial specialists say.”

Apple is also avoiding a potential big tax hit. “About two-thirds of Apple’s cash â€" about $102 billion â€" sits overseas in lower-tax jurisdictions. If it returned some of that cash to the United States to reward its investors, it could have significant tax consequences for the company.”

The company issued six different securities on Tuesday, ranging from a three-year note yielding 0.45 percent to a 30-year bond that yields 3.85 percent. The largest piece, worth $5.5 billion, is a 10-year yielding 2.4 percent.

BANKS RESIST RULES ON FOREIGN BETS  |  Nearly three years after Congress passed the Dodd-Frank law, the Commodity Futures Trading Commission is facing bitter opposition to a proposal, set to go into effect as early as July, to require overseas offices of American-based banks and other institutions to turn over information on foreign trades that involve United States customers or are guaranteed by a financial institution with American ties. In the eyes of banks, these requirements seem redundant and excessive, The New York Times’s Eric Lipton writes.

But Gary Gensler, leader of the commission, argues that too many bad derivatives bets can be traced to overseas locations, including the big trading loss by JPMorgan Chase last year. “It would be letting down the American public if we said, we are just about to complete the task but now, let’s retreat,” Mr. Gensler said in an interview. “If we don’t do this right, we will blow a hole in the bottom of the boat of reform.” Some of the biggest objections have come from foreign regulators, including officials from Britain, Russia, Japan and Germany, The Times writes.

VENTURE CAPITAL’S DIRTY SECRET  |  Every entrepreneur dreams of riches. But that dream “can be dashed as the venture capitalists make millions in a sale, leaving the founders with nothing,” Steven M. Davidoff writes in the Deal Professor column. “A recent Delaware court case arising from the 2011 sale of Bloodhound Technologies illustrates how this happens.” Mr. Davidoff writes: “Venture capital investments are structured to ensure that the venture capitalists are paid before founders and employees,” a requirement that “can sometimes hit founders and employees in a brutal manner.”

ON THE AGENDA  |  Knight Capital, Time Warner and Chesapeake Energy report earnings before the market opens. Facebook and Yelp report results on Wednesday evening. The Federal Reserve releases a decision on interest rates at 2 p.m. The American insurance unit of the Dutch financial services company ING plans to price its initial public offering. Joseph Dear, chief investment officer for Calpers, is on Bloomberg TV at 11:30 a.m.

YAHOO’S DAILYMOTION DEAL FALLS THROUGH  |  It was supposed to be the first big acquisition for Yahoo under its chief executive, Marissa Mayer. But the deal to buy a majority stake in Dailymotion, a French video Web site, ran into trouble after a Yahoo executive met with Arnaud Montebourg, the French industry minister, who said he didn’t like the idea, The Wall Street Journal reports. “I won’t let you sell one of France’s best start-ups,” Mr. Montebourg said, according to the newspaper, which cites people briefed on the meeting. “You don’t know what you’re doing.” Since then, attempts to revive the sale have failed, the newspaper says.

Mergers & Acquisitions »

In Sale of BMC Software, a Bidder Pulls Into the Lead  |  A group made up of Bain Capital and Golden Gate Capital “has emerged as the lead contender to buy BMC Software Inc. for more than $6.5 billion, three people familiar with the matter said on Tuesday,” Reuters reports. REUTERS

SoftBank Chief Is Defiant as Dish Challenges His Bid for Sprint  |  After Dish Network’s bold bid to pre-empt Softbank’s $20 billion offer for 70 percent of Sprint Nextel, SoftBank’s chief executive says his proposal will prevail â€" unmodified. DealBook »

DreamWorks Said to Approach Deal for a YouTube Network  |  DreamWorks Animation “is close to” a deal to acquire AwesomenessTV, which makes YouTube videos geared toward children and teenagers, according to AllThingsD, which cites unidentified people familiar with the proposed transaction. ALLTHINGSD

Gun Maker Sturm Ruger Takes a Look at Freedom Group  |  But the company does not expect to actually bid for the Freedom Group, which is being sold by Cerberus Capital Management. REUTERS

Icahn Increases Stake in Nuance  |  Carl C. Icahn increased his stake in the speech recognition software maker Nuance Communications to 10.72 percent from 9.27 percent. REUTERS

Proxy Advisory Firm Opens Washington Office  |  MacKenzie Partners, a big proxy solicitor firm, announced a new office in Washington. “Over the last few years, there has been a convergence between Wall Street and Washington,” said Dan Burch, the firm’s chairman. NEWS RELEASE

INVESTMENT BANKING »

Deutsche Bank’s Shares Rise as Its Leaders Look Past Financial Crisis  |  Deutsche Bank’s stock rose on Tuesday on expectations that a $3.87 billion share sale would clear the way for higher dividend payments. DealBook »

European Banks Show Signs of Health  |  After years of painful job cuts and moves to make portfolios less risky, several large European banks reported strong quarterly results, helped by cost-cutting and better performance of major units. DEALBOOK

In Europe, an Alternative to Bank Lending  |  European banks remain reluctant to lend. “An emerging, if only partial, solution is channeling some of trillions of euros of European pension and insurance savings into more targeted loan funds, unlisted loans, private placements or even direct business financing,” Reuters writes. REUTERS

Onward, Not Upward, for UBS  |  UBS is delivering on its new strategy, but it will need to post a string of decent quarterly results to truly cheer investors, Dominic Elliott of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Goldman Finds Success in Malaysia  |  With bond deals for government entities, Goldman Sachs has made more than $200 million in Malaysia in the last two years, The Wall Street Journal says. WALL STREET JOURNAL

Investec, a South African Bank, Hires Head of Financial Markets in Australia  |  Rhys Gwyn was a managing director at Goldman Sachs. WALL STREET JOURNAL

PRIVATE EQUITY »

K.K.R. Said to Consider a Role for Petraeus  |  The private equity firm K.K.R. “is in discussions with former Central Intelligence Agency Director David Petraeus about a role at the company, according to a person with knowledge of the talks,” Bloomberg News reports. BLOOMBERG NEWS

HEDGE FUNDS »

Canadian Effort Leaves a Sour Taste  |  At the Milken Institute’s Global Conference in Los Angeles, the activist investor Barry Rosenstein of Jana Partners reflected on his failed proxy fight with the Canadian fertilizer maker Agrium, Absolute Return reports. “Will I think twice about going back to Canada? Yeah, I would,” he said. ABSOLUTE RETURN

Tim Hortons Under Pressure From Investor  |  The Canadian chain Tim Hortons faces pressure from the hedge fund Highfields Capital, which has a 1.5 percent stake and wants the company to borrow money to buy back shares, Reuters reports. REUTERS

Seattle Investor Vows to Continue Pursuit of N.B.A. Team  |  A day after the relocation committee of the National Basketball Association rejected a request by the hedge fund manager Chris Hansen and his partners to move the Sacramento Kings to Seattle, Mr. Hansen said he was “fully committed to seeing this transaction through.” REUTERS

I.P.O./OFFERINGS »

Opponents to Empire State Building I.P.O. Lose Challenge  |  A judge was not convinced that an I.P.O. for the Empire State Building would be illegal. BLOOMBERG NEWS

Taiwan Pay-TV Company Secures Investors for I.P.O.  |  The commitments make up nearly a third of the planned I.P.O. of Asian Pay Television Trust, which is expected to raise $1.1 billion, according to The Wall Street Journal. WALL STREET JOURNAL

VENTURE CAPITAL »

Uber Returns, Legally, to New York  |  After being rebuffed by New York City officials last year, Uber said on Tuesday that its service to hail yellow cabs with a smartphone app had been approved for use in the city. NEW YORK TIMES

Investors Focused on Education Form a Partnership  |  NewSchools Venture Fund, a nonprofit that invests in education groups and businesses, is partnering with the Rethink Education Fund, a new venture capital fund, in a relationship that could lead to millions of dollars in additional financing, The New York Times reports. NEW YORK TIMES

A Tour of Celebrity Tech Investors  |  “Actors, musicians and athletes are often participating in financing rounds alongside traditional investors,” Katie Roof writes for The Street. THE STREET

LEGAL/REGULATORY »

Investor Is Likely Pick to Lead F.C.C.  |  Tom Wheeler, a venture capital investor who was a fund-raiser in President Obama’s presidential campaigns, is expected to be nominated on Wednesday as chairman of the Federal Communications Commission, two administration officials said, according to The New York Times. Some consumer advocacy groups have “said they were troubled by his background investing in and lobbying for cable and wireless companies.” NEW YORK TIMES

In China, Cash Is King  |  “For all China’s modern trappings â€" the new superhighways, high-speed rail networks and soaring skyscrapers â€" analysts say this country still prefers to pay for things the old-fashioned way, with ledgers, bill-counting machines and cold, hard cash,” The New York Times writes. NEW YORK TIMES

Speedy Traders Exploit a Quirk of Commodities Exchange  |  The Wall Street Journal reports: “High-speed traders are using a hidden facet of the Chicago Mercantile Exchange’s computer system to trade on the direction of the futures market before other investors get the same information.” WALL STREET JOURNAL

Google and Its Auditor to Be Questioned in Britain Over Taxes  |  Google and Ernst & Young will be called again to testify before a British parliamentary committee on the company’s tax practices, Reuters reports. REUTERS