For the S.E.C., an Important Trial

The government's campaign to punish Wall Street over risky investments sold before the financial crisis is culminating next week with the trial of Fabrice P. Tourre, a former midlevel employee at Goldman Sachs, in a rare case against an individual. For Goldman, a victory in court would be only belated consolation. But for the Securities and Exchange Commission, dogged by its failure to thwart the crisis, the trial is a defining moment that follows one courtroom disappointment after another, DealBook's Ben Protess and Susanne Craig write.

“Their reputation for trying cases hangs in the balance,” said Thomas A. Sporkin, who was a senior S.E.C. enforcement official until last year when he departed for the law firm Buckley Sandler. “This is their opportunity to show Wall Street that they can prevail against an individual at trial.”

The S.E.C. took steps to bolster its case against Mr. Tourre after a jury cleared a midlevel Citigroup employee in a mortgage-bond trial. The agency talked to a private jury consultant, people briefed on the matter said, though it is unclear whether the agency hired the firm. In addition, the head of the agency's trial team is leading the Goldman case himself, a surprising move. On Tuesday, the two sides were in court sparring over what the jury should - and should not - hear.

STIFFER PROPOSAL ON BANK CAPITAL  |  The Federal Deposit Insurance Corporation on Tuesday proposed stricter banking rules that, in a departure from a byzantine approach, aim for simplicity, DealBook's Peter Eavis writes. Focusing on capital, the financial cushion banks have to hold to absorb potential losses, the latest regulations raise that crucial requirement for the largest banks.

“This will increase the overall financial stability of the system,” said Thomas M. Hoenig, vice chairman of the F.D.I.C. “This is an advantage to the banks over the long run, and to the economy. I am confident of that.” But the latest push could meet fierce resistance. As outlined, the new capital requirements could be costly for the largest banks, which have 60 days to comment on the rules, Mr. Eavis says.

LIBOR'S NEW MASTER  | 
The parent company of the New York Stock Exchange won a contract on Tuesday to administer and improve the benchmark interest rate known as Libor, long run by the British Bankers' Association, handing the administration of a British institution to an American company. “The move is a symbolic blow to a British financial industry that has been rocked by scandals and forced to look to the outside for leadership,” Nathaniel Popper writes in DealBook. “The job of fixing Libor will not be an easy one. The benchmark is supposed to represent the rate at which banks lend money to each other on an unsecured basis. This is difficult given that banks have generally been unwilling to make unsecured loans to each other since the financial crisis.”

ON THE AGENDA  |  The Securities and Exchange Commission holds an open meeting at 10 a.m. to consider new rules about fund advertising that stem from the JOBS Act. Minutes from the recent meeting of the Federal Reserve's policy-making committee are released at 2 p.m. Yum Brands reports earnings after the market closes. Eliot Spitzer is on CNBC at 8:30 a.m. Laurence D. Fink of BlackRock is on Bloomberg TV at 10 a.m. John Legere, chief executive of T-Mobile USA, is on CNBC at 4:20 p.m. and on Bloomberg TV at 6 p.m.

EUROPEAN BANK PLAN, BUT GERMANY IS SKEPTICAL  |  “European Union officials are expected on Wednesday to unveil a detailed plan for dealing with failing banks, which will include centralized decision making and an emergency fund,” James Kanter writes in The New York Times. “But Germany's skepticism about giving authority to a group overseen by the European Commission, as well as other concerns, could bog the proposal down in months of rancorous negotiations.”

“On Wednesday, Michel Barnier, the commissioner overseeing financial services, is expected to call for consolidating decisions under a group supported by around 300 staff members and creating a pool of money funded by mandatory levies on banks. The system, which was described ahead of the formal announcement, would rely on the European Central Bank to signal when a financial institution in the euro area was facing severe difficulties.”

 

Mergers & Acquisitions '

Bumi Approaches a Deal to Split With Bakries  |  Bumi, “the Indonesian coal producer at the center of an ownership dispute, is close to completing a deal valued at more than $500 million to sever its ties with co-founders the Bakrie Group after relations soured,” Bloomberg News reports. BLOOMBERG NEWS

Kroger Buys Rival Grocer Harris Teeter, Citing Potential for Growth  |  Kroger, the nation's second-largest retailer, announced on Tuesday that it would buy Harris Teeter, an upscale grocer known for fresh foods and produce, in a deal valued at $2.5 billion. DealBook '

Investors Like Even Ho-Hum Mergers  |  The value of savings from combining Kroger and Harris Teeter equals about half the premium being paid. Yet investors added about $500 million to Kroger's market value, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Health Management Said to Attract Prospective Buyers  |  Reuters reports: “Health Management Associates Inc. has attracted interest from Community Health Systems Inc. and other rivals about buying the $4 billion hospital operator, three people familiar with the matter said on Tuesday.” REUTERS

Barnes & Noble's Fork in the Road  |  With the departure of the chief executive, William Lynch, Barnes & Noble is left “without a clear path forward, reviving fears among publishers, authors and agents - who are deeply dependent on a viable Barnes & Noble - about its future,” The New York Times writes. NEW YORK TIMES

Shell's Choice for C.E.O. Surprises Investors  |  Royal Dutch Shell named Ben van Beurden to succeed Peter Voser as chief executive on Jan. 1, passing over some better-known candidates, The New York Times writes. NEW YORK TIMES

BlackBerry Chief Says Release of Phones in U.S. Was Flawed  | 
NEW YORK TIMES

INVESTMENT BANKING '

JPMorgan Review Said to Find Errors in Debt-Collection Suits  |  An internal review at JPMorgan Chase showed that “errors occurred as the bank sued its credit-card users for the delinquent amounts,” The Wall Street Journal reports. “The bank studied roughly 1,000 lawsuits and found mistakes in 9 percent of the cases, said people familiar with the review.” WALL STREET JOURNAL

A.I.G. and GE Capital Deemed ‘Systemically Important'  |  After the American International Group and GE Capital chose not to appeal the designation, the companies will now be subject to greater oversight. BLOOMBERG NEWS

With Assets Rising, UBS Reaches a Milestone  |  UBS is once again the largest private bank in the world, according to the wealth management consultant Scorpio Partnership, Reuters reports. REUTERS

Fannie Mae Said to Be Selling $1 Billion of Mortgage Bonds  |  Fannie Mae plans to sell home mortgage bonds without government backing, according to Bloomberg News. BLOOMBERG NEWS

Investors Continue to Withdraw Money From Municipal Bond Funds  | 
WALL STREET JOURNAL

PRIVATE EQUITY '

K.K.R. Raises $6 Billion Asian Fund  |  The private equity group's second regional fund ranks as the largest such fund to date and will seek to capitalize on rising demand among Asian consumers. DealBook '

HEDGE FUNDS '

A Label for Activist Investors That No Longer Fits  |  Studies have shown that “short-term” hedge funds can actually create long-term value for a company, Steven M. Davidoff writes in the Deal Professor column. Deal Professor '

F.B.I. Nominee Nods to Former Employer, Bridgewater  |  James B. Comey, President Obama's nominee for F.B.I. director, said he would “carry those values” from the hedge fund Bridgewater Associates, including transparency, and “try and spread them as far as I can within” the F.B.I., HedgeFund Intelligence reports. HEDGEFUND INTELLIGENCE

A Rough Month for Hedge Funds  | 
ABSOLUTE RETURN

I.P.O./OFFERINGS '

A Rush to Go Public in Japan  |  Even as I.P.O.'s slow down elsewhere in Asia, Japanese companies are coming to market in large numbers, spurred by the policies of Prime Minister Shinzo Abe that have fueled gains in the stock market, The Wall Street Journal writes. WALL STREET JOURNAL

VENTURE CAPITAL '

Flipkart, an Indian E-Commerce Site, Raises $200 Million  |  Flipkart raised the money from its existing investors, including Tiger Gobal and Accel Partners, The Economic Times reports. ECONOMIC TIMES

Satellite Antenna Company Raises $50 Million  |  Kymeta raised the financing round from investors including Bill Gates and Lux Capital, VentureBeat reports. VENTUREBEAT

Path Expands Use of Stickers, With Eye on Revenue  | 
CNET

LEGAL/REGULATORY '

Cyprus Currency Controls Stoke Worries About Euro System  |  “Tangled in restrictions imposed in March as part of a bailout for the country's ailing banks, a euro in Cyprus is no longer the same as one in France, Germany or Greece,” The New York Times writes. NEW YORK TIMES

U.S. Vows to Battle Abusive Debt Collectors  |  Federal regulators are cracking down on some of the nation's biggest banks and other lenders, accusing them of aggressive practices like hounding debtors with repeated phone calls. DealBook '

Lawyers in SAC Case Question Coverage of News Media  |  Lawyers for Michael S. Steinberg, a former portfolio manager at SAC Capital Advisors accused of insider trading, said coverage of the case had been extensive and biased, which they said raised the question of whether Mr. Steinberg could get a fair trial. DealBook '

The Unseen Costs of Cutting Law School Faculty  |  Cutting untenured faculty positions is shortsighted and encroaches on academic freedom, Victor Fleischer writes in the Standard Deduction column. DealBook '

Tribune to Split Newspapers and TV

The Tribune Company announced on Wednesday that it would spin off its newspapers and broadcasting properties into separate companies.

Evercore to Start a Private Capital Advisory Business

Evercore Partners, an investment banking advisory firm, said on Wednesday that it was starting a private capital advisory business and had hired two UBS bankers to lead it.

The new business will focus on secondary transactions for private funds.

Nigel Dawn, formerly global co-head of the private funds group at UBS, will run the business globally. Nicolas Lanel, formerly global co-head of UBS's secondary markets advisory group, will lead the European operations.

The new business is expected to start up in the second half of the year. It will be majority owned by Evercore, with Mr. Dawn and Mr. Lanel and other executives holding a minority stake.

Ralph L. Schlosstein, chief executive of Evercore, said in a statement that the new business “fits perfectly into the Evercore model of providing independent advisory services to our clients based on our ideas, our intellectual capital and our relationships.”

“We believe this business leverages the relationship network and market presence of our firm.” he said.

The Sun Valley Conference Rolls Around, With Deals in the Air

SUN VALLEY, Idaho â€" “Well, folks, we talked to dispatch, and we have to go to Boise,” said the pilot of the Alaska Airlines flight on Tuesday afternoon.

The reason? About 12 planes were ahead in the queue for the tiny airport in Sun Valley, Idaho. About eight of them were private jets.

“There's apparently a business conference,” the pilot said.

It was a sign that Allen & Company's annual media and technology conference here was kicking into high gear.

For about three decades, many of the biggest movers in the media and technology worlds have gathered here to schmooze, to hear from special guest speakers and, on occasion, to put together potentially big transactions.

Long regarded as the birthplace of prominent mergers, the conference will play host to a number of industry giants who have made moves toward deals. Among them are Rupert Murdoch of the News Corporation, who recently cleaved his media empire in two and may be on the hunt for newspaper acquisitions; John C. Malone, the L iberty Media chairman and onetime cable tycoon who is weighing a potential takeover pursuit of Time Warner Cable (whose chief executive, Glenn A. Britt, is also on the guest list); and Michael White of DirecTV and Peter Chernin of Chernin Entertainment, who are both said to have bid for the online video service Hulu.

By Tuesday evening, many had arrived, attending a dinner hosted by Allen & Company's Herb Allen. Spotted so far:

• Mark Zuckerberg of Facebook, shaking hands and chatting with Eric Schmidt and Nikesh Arora of Google
• Brian Chesky of Airbnb, the home-sharing giant, and Ben Silbermann of Pinterest, the fast-growing social network
• Dick Costolo, the chief executive of Twitter, and his wife, Lorin
• Marc Pincus of Zynga, not long after he gave up the chief executive role at the game company
• John Donohoe of eBay, getting a bourbon at the Sun Valley Inn
• James Murdoch, walking back to the inn
• Max Levchin, the serial entrepreneur and a Yahoo director, and his wife, Nellie
• Sebastian Thrun, the founder of the Google X Lab and now chief executive of Udacity, an online education provider
• Harvey Weinstein
• Wesley R. Edens of Fortress Investment
• Daniel L. Doctoroff of Bloomberg L.P.
• Brian C. Rogers of T. Rowe Price

DealBook is on hand at the conference to gather tips, gossip and possibly be tossed into the duck pond by an irate mogul. I'll be posting both here and to my Twitter feed. Stay tuned.

Icahn\'s Latest Gamble at Dell: Appraisal Rights

With the vote on a proposed $24.4 billion sale of Dell Inc. just over a week away, the deal's primary opponent is trying a new tactic.

The activist investor Carl C. Icahn urged fellow Dell shareholders on Wednesday to start preparing appraisal rights for their shares. It's a somewhat uncommon move that could yield a higher payout than the $13.65-a-share that Michael S. Dell and the investment firm Silver Lake are offering.

That is, if the gambit is successful.

The call for investors to exercise their appraisal rights is in some ways a surprising shift for Mr. Icahn, who has pushed shareholders to reject the takeover bid. He and another big investor, Southeastern Asset Management, have called for replacing Dell's board with their own slate of directors, who would then push the company into buying back 1.1 billion shares at $14 each.

Despite winning the support of influential proxy advisers like Institutional Shareholder Services, advisers to the buyers and to a special committee of Dell's board are still concerned that they may lose the July 18 vote on the deal. While Mr. Icahn may have lost some negotiating leverage with the I.S.S. report, those people believe that the activist may still succeed in stirring up enough opposition with the promise of his buyback proposal.

Wednesday's announcement appears to signal that Mr. Icahn may be backing away from that plan.

Essentially, shareholders would need to vote against the leveraged buyout and then ask Delaware's court of chancery to “appraise” the true value of their shares. (The New York Times's Gretchen Morgenson previously wrote about appraisal rights in the Dell matter, and how some shareholders have been preparing to use them.)

Mr. Icahn cleverly points out that there is a 60-day period in which shareholders can demand appraisal rights, and then withdraw the request and accept the $13.65-a-share offer. “To add a new twist to an old saying, ‘you can have your cake and eat it too,'” he said in a statement.

Mr. Icahn is still urging shareholders to vote against the deal. But he is also betting that even if they win, Mr. Dell and Silver Lake will move to settle with dissident shareholders, paying them off to avoid years of potentially contentious court battles. In short, he's looking for a price bump.

He notes that the buyers are on the hook for a $750 million breakup fee if they can't close the deal under certain conditions, and questions whether the duo's lenders will seek to back away if shareholders seek appraisal rights en masse.

There is obviously an element of chance here, since the Delaware court may award just the $13.65 a share, or even less. Mr. Icahn clearly states in his news release that “those who seek appraisal may get lucky.”

And if Mr. Dell's bid fails, appraisal rights don't come into play at all.

But for an investor who has thrown nearly every possible hurdle he can to halt the deal - or at least to force a higher payout - appraisal rights may pay off after all.

Royal Mail Employees to Get Free Shares in I.P.O.

LONDON â€" The British government said on Wednesday that it planned to sell a majority stake in Royal Mail, the country's postal service, and would give some shares free to workers.

The government said an initial public offering, which would be the biggest privatization in the country since the railroads 20 years ago, would proceed in London before the end of March 2014. As part of the sale, which has been considered for years, the government plans to give 10 percent of the shares to Royal Mail employees in Britain free on the condition that they hold them for three years.

Both institutional and private investors would be able to buy shares in the initial offering. Some analysts have said previously that the planned offering could value Royal Mail at about £3 billion ($4.5 billion). The government has yet to decide how much of the company it would sell.

“We will retain flexibility around the size of the stake to be sold,” Vince Cable, the business secretary, said in a statement in Parliament. “This will be influenced by market conditions, investor demand and our objective to ensure overall value for money for the taxpayer.”

Plans to privatize Royal Mail have become more concrete recently when the service's finances improved and pressure to reduce the budget deficit increased. Royal Mail had struggled to compete with other postal services in an increasingly competitive market where many people prefer e-mail to handwritten letters. But a growing online retail market has helped Royal Mail, which delivered more online purchases by post.

Royal Mail said it welcomed the plan and that “private ownership will enable Royal Mail to become more flexible and fleet of foot in the fiercely competitive markets in which we operate.”

Moya Greene, chief executive of the Royal Mail Group, said in a statement that “employees will have a meaningful stake in the company and its future success” and that “the public will have the opportunity to invest in a great British institution.”

Royal Mail's origins date to 1516, when post was carried for Henry VIII and the Tudor court. The service was opened to the public by Charles I in 1635. Royal Mail is now one of the largest employers in Britain, where it has 150,000 staff members.

But there was criticism from the Communications Workers Union, the trade union representing postal workers, which threatened a strike. The union “will continue to fight the sale and without worthwhile and legally binding assurances on terms and conditions, strike action is inevitable,” Dave Ward, the union's deputy general secretary, said on the organization's Web site.

Goldman Sachs and UBS were hired as the lead banks to manage the share sale on the London Stock Exchange. Barclays and Bank of America Merrill Lynch will also work on the sale.

Royal Mail had revenue of £9.3 billion in the fiscal year that ended March 31. Operating profit was £403 million.

State Regulator Opens Inquiry Into Products Sold to Older Investors

The top financial regulator in Massachusetts has subpoenaed 15 brokerage firms as part of a new investigation into the marketing of complicated financial investments to older people.

The Massachusetts secretary of the commonwealth, William F. Galvin, asked the firms - including Merrill Lynch, Morgan Stanley and LPL Financial - about the way they have sold “high-risk, esoteric products” to older citizens.

Several regulators have previously expressed concern about the rising number of opaque products that have been pitched to unsophisticated investors looking for higher returns in an era of low interest rates. Brokers like selling the products because they frequently offer higher commissions than traditional investments like mutual funds.

“These things are accidents waiting to happen when they are sold to inexperienced investors,” Mr. Galvin said on Wednesday.

Mr. Galvin recently collected $11 million in fines from five broker-dealers for selling illiquid real estate investment trusts, or REITs, to investors in his state. Unlike publicly traded REITs, the illiquid products are not easy to sell when a consumer wants to get out of the investment.

In the course of his office's investigation of those REITs, Mr. Galvin said that his staff noticed that many brokers were selling a number of other complex financial products that even they did not understand, with little oversight from their parent companies.

“It's the whole methodology by which these products are sold  - that's the bigger problem,” Mr. Galvin said.

In addition to the REITs, Mr. Galvin's office will be looking into the selling of structured products, oil and gas partnerships and private placement deals  - all of which disclose less public information than public stocks and bonds.

These investments used to be restricted only to sophisticated investors with a net worth of at least $1 million. Now, regulators say that they are being opened up to less wealthy investors, as well as a growing number of wealthy but less l sophisticated investors.

The sales of these products has become more prominent since the financial crisis, because many older Americans are trying to make up for losses they suffered in their retirement portfolios. The low yields on bank accounts and bonds in recent years has also made investors more willing to look at riskier products that promise better returns.

Richard G. Ketchum, the chief executive of the Financial Industry Regulatory Authority, the industry regulatory group, said in a recent speech that over the last two years his organization had noticed an uptick in “the sale of complex products and speculative products with low liquidity, to unsuitable customers by financial advisers who often don't fully understand the risks of the products.”

The Massachusetts investigation began on the same day that the Securities and Exchange Commission agreed to lift its ban on public advertisements for some of the same complex investments Mr. Galvin is examining. Mr. Galvin and other state securities regulators have criticized the S.E.C. decision, arguing that even with advertising banned, too many unsophisticated investors have ended up learning about and buying products that are unsuitable for their investment goals.

Mr. Galvin's office emphasized that the investigation was just beginning. He added that being on the list of banks and brokerages receiving subpoenas “is not an indication of wrongdoing at this time.”

China\'s Growth Woes Could Force Government Response

This week, China enters the “sanfu days” of the lunar calendar, similar to what are known in the west as the dog days of summer. Some areas of the country are battling huge floods, and the weather will most likely get worse before it gets better.

The same can be said about China's economy. The June trade data released on Wednesday was a huge disappointment as both imports and exports unexpectedly fell year over year. The decline in monthly exports was the first in a non-holiday month since the financial crisis.

Several economists wrote on Wednesday that the weak trade data could spur Beijing to devalue the renminbi, a move that would be problematic for United States-China relations. The topic is in focus as the fifth meeting of the U.S.-China Strategic and Economic Dialogue opened in Washington on Wednesday.

Economists reacted quite negatively to the trade data, and while several have recently cut their forecasts for economic growth, the new data could spur a new round of downward forecast revisions. A recent Morgan Stanley report included a slide titled “China ‘Super Bear' Scenario,” which discussed the possibility that growth in the nation's gross domestic product could slow to 5.5 percent later in 2013 and 4.5 percent in 2014. In its report, Credit Suisse wrote that “All the Main Drivers of Chinese Growth Are Sharply Diminished.”

The full toll of the liquidity squeeze that hit China in June has yet to flow through the real economy. According to a Bloomberg News survey of economists, that squeeze “is likely to reduce credit growth this year by 750 billion yuan (about $121 billion).”

Sentiment in and about the country seems to be more negative than I have ever seen it.

Bad macroeconomic news can often be positive for the stock market. On Wednesday the Shanghai composite was up the most in three months, apparently on hopes that the poor data would push Beijing to undertake policy actions to stimulate the economy.

A LOOK AHEAD AT NUMBERS

On Monday, the Chinese government will report how its second-quarter G.D.P. growth fared. The government does not appear to be panicking. “Macro controls should keep the economy's performance in a reasonable range, keep the growth rate and employment level from falling under a floor and keep inflation from rising above an upper bound,” Premier Li Keqiang said on Tuesday.

Barclays Capital recently coined the term “Likonomics” to describe the policies of Premier Li. The three pillars, according to Barclays, are “no stimulus, deleveraging and structural reform.”

The Barclays report reflects the hopeful case for what is going on with the Chinese economy. In this version, the new leadership means it when it says, as it has repeatedly, that it is willing to tolerate slower, better-quality growth. And to achieve that better-quality growth, Beijing is engineering a slowdown, including intentionally causing the June interbank pain, as part of an overall plan to quicken long-discussed and much-needed structural reforms. The economist Stephen Roach is another vocal proponent of this view, as he laid out in a recent article for Foreign Policy.

The more bearish case argues that there is no serious plan, that the June liquidity tightness was unexpected, that the credit growth is so out of control that a crash is imminent. Both sides now agree that China faces at least a significant, near-term deceleration of growth.

What matters now is whether the leadership can tolerate the pain that has spread throughout much of the economy, and looks to get much worse, as overcapacity continues, domestic and external demand weaken, and debts come due. One test case may be Rongsheng, the country's largest private shipyard, which has laid off thousands and is lobbying local governments for a bailout. All the talk about dealing with overcapacity sounds nice, but if even Rongsheng is not subject to market discipline then it will be hard to be optimistic about the tolerance for the deep dislocations needed to restructure the economy.

THE GOVERNMENT'S NEXT MOVE

This column has argued several times that Beijing does have a plan and is serious about economic reform. Economists inside the Chinese government, and certainly Premier Li, understand very clearly what the challenges are.

In August 2012, Li Zuojun, deputy director of the Institute of Resources and Environmental Policy Research at the Development Research Center of the State Council, published an article detailing nine major challenges the Chinese economy faces. His article received a fair amount of notice.

During the interbank crisis in June, Li Zuojun became an Internet sensation, not for that 2012 article but for a talk he gave in 2011 that predicted an economic crisis in July or August 2013. In that talk, Mr. Li said that China was in the midst of a bubble that would pop by 2015 or 2016.

Mr. Li argued that the new leadership that would be in place by 2013 would have the choice of either taking on the bubble and letting it run, in which case they would be responsible, or popping it soon after they took power in 2013, in which case they could blame the previous administration.

In addition, the new leaders could reset the benchmarks to a lower base and, assuming they could manage through the social challenges of an economic dislocation, would be able to show strong growth through the remainder of their term.

The Development Research Center is an influential government policy research group, one that worked with the World Bank to write the “China 2030” report, a road map for ambitious economic reforms released last year. Premier Li is widely believed to have supported the center in its work with the World Bank.

Transparency is not a strength of the Chinese government, so while there are signs that bigger things are going on it is difficult to be certain. Regardless, the long, hot summer is just getting started and the economy has more weakness ahead.

Senators Question Chinese Takeover of Smithfield

WASHINGTON - Members of the Senate Agriculture Committee raised questions on Wednesday about the economic and national security implications of a Chinese company's proposed acquisition of Smithfield Foods, the nation's largest pork producer.

While the chief executive of Smithfield, C. Larry Pope, said the $4.7 billion acquisition would have “no impact on the U.S. food supply and, therefore, no impact on food security,” several senators said they feared that promises by the Chinese company, Shuanghui International, would not be honored over the long term.

That could result, they said, in China eventually exporting pork to the United States that did not meet American safety standards or taking away sales by American companies in other overseas markets, like Japan.

Other senators raised questions about whether the acquisition would harm American interests by transferring food production technologies, including high-value genetic strains of hogs, advanced meat processing technology and manure management techniques, that were developed with the support of United States taxpayers.

The question of whether foreign acquisition of domestic companies affects national security is one that the United States has struggled with for years.

In 2012, the Obama administration blocked the purchase of four American wind farm companies by a Chinese-owned firm, citing national security concerns - the first time in 22 years that a president had done so.

And in 2006, Congress effectively blocked a deal under which Dubai Ports World, owned by the Dubai government, was to take over the management of six United States ports.

The Committee on Foreign Investments in the United States, an interagency government panel, is reviewing the Smithfield acquisition, which would be the largest acquisition to date of a United States company by a Chinese company.

Still, it is far from clear that the concerns expressed by the senators will carry enough weight to affect that review. Senator Debbie Stabenow, a Michigan Democrat who is the chairwoman of the Agriculture Committee, and 15 other committee members signed a letter asking the Treasury Department, which oversees the foreign investments committee, to include the Agriculture Department and the Food and Drug Administration on their review panel to consider food safety and security.

While the Treasury Department responded to the letter, it did not address the request, but instead cited restrictions on the confidentiality of the review.

Both Smithfield, based in Virginia, and Shuanghui have emphasized the mutual benefits of the deal. With Americans eating less pork than they once did, Smithfield is eager to increase its exports to China, where meat consumption has skyrocketed as the country's economy has boomed. But Chinese producers have had trouble keeping up with that rapidly growing appetite.

Mr. Pope told the senators that the benefits of the acquisition would flow not only to Smithfield but also to other American pork producers and their employees. “This means increased capacity for producers, more jobs in processing and more exports for the U.S. economy,” he said. “Shuanghui is committed to investing in Smithfield to produce more food, more jobs and more value in the U.S.”

Two witnesses called by the committee - Usha C.V. Haley, an expert on Chinese business strategy at West Virginia University, and Daniel Slane, a member of the U.S.-China Economic and Security Review Commission, a group appointed by Congress - expressed multiple doubts about the transaction.

Ms. Haley said that pork was a “strategically important industry for China” as the growing ranks of the middle class demand more sources of high-quality protein. “The same patterns that occurred in other strategically important industries,” like paper, steel and glass, she said, “will repeat in this sector and the United States will lose its competitive edge in food, becoming dependent on China.”

Mr. Slane said that the fact that Shuanghui was effectively controlled by the Chinese government meant that it presented a national security threat to the United States.

The top executive at Shuanghui “is a high-ranking member of the Chinese Communist Party,” Mr. Slane said, and he was appointed to that job by the party. “If he does not do what they say, they will remove him or worse.”

In addition, the transaction is being financed in part by the Bank of China, Mr. Slane said. “The Bank of China does not finance any transaction unless it is told to do so by the Chinese government,” he said. “By any measure, this is a Chinese-controlled company.”

Those opinions drew some skepticism from some senators, however. “Did you realize you were the victim of a Chinese communist plot?” Senator Pat Roberts, a Kansas Republican, asked Mr. Pope.

Noting that plenty of companies in other industries received investments from foreign companies, Mr. Pope said that the cornerstone of the transaction for the American economy was that it would help an industry that has struggled to continue to grow.

“Without the opportunity to grow outside the U.S., there is no opportunity for us to grow as an industry,” he said.

Matthew J. Slaughter, an associate dean at the Tuck School of Business at Dartmouth who specializes in the politics of globalization, supported Mr. Pope's view. “There is nothing inherently worrisome or unusual” about the transaction, he said.

Ms. Stabenow said a major source of her suspicion about the transaction lies in the fact that if Smithfield Foods wanted to buy Shuanghui, it would not be allowed to do so.

“We need to evaluate how foreign purchases of our food supply will affect our economy broadly, and frankly, whether there is a level playing field when it comes to these kinds of business purchases,” Ms. Stabenow said.

“In the short term, I know this deal looks good for our producers,” she added. “But it's our job to be thinking about the big picture and the long term for American food security and economic security.”

Why Italy Could Be Fertile Ground for Deal-Makers

Overseas buyers should look again at Italy. It's hardly surprising that deal-making is slow east of the Alps. But Italian firms excel in fields from fashion to engineering. The country's parlous state isn't an insurmountable obstacle to foreign investment. Foreigners just need to find ways to coax Italy's aging entrepreneur-owners to the table.

No one denies the backdrop is dismal. Italy is enduring its longest recession since World War II. Gross domestic product could shrink 1.8 percent this year, the International Monetary Fund forecast this week. A nasty credit squeeze is under way. Bureaucracy and corruption are perennial headaches. And a fragile coalition government makes policy unpredictable.

The mergers and acquisitions business is correspondingly slow. Italian deals make up just 0.5 percent of cross-border M.&A. in 2013 - about half the average of recent years, according to Thomson Reuters data. Some private equity major players, such as Advent and Apax, have gone home.

But foreigners are missing out. The best deals are often contrarian. Italy churns out leaders in consumer and luxury goods, and in high-tech engineering and manufacturing: think of Prada, Ferrero or Ducati. And the country's distress should help drive prices down.

Even better, from an outsider's perspective, is that many businesses are family-owned, short of capital, and rather parochial. A crafty foreign acquirer, be it a blue-chip company or a buyout house, could help them expand abroad, far from Italy's travails and endemically weak growth.

The big hurdle may lie in persuading Italy's bosses to sell. Many are of pensionable age yet remain keen to maintain control. Some would prefer to raise funds through a listing. If only stock markets were buoyant enough.

One answer is to be patient, and gentle when needed. Witness LVMH's recent 2 billion euro ($2.6 billion) embrace of Loro Piana, whose cashmere sweaters and cardigans fetch more than 1,000 euros apiece. The selling brothers get a full price, keep a minority stake, and retain their titles at the head of the company.

Structured deals offer another route, particularly for financial investors. So a minority investment now could come with the ability to buy more later, or to cash out through a flotation. It may take creativity, but Italy is worth visiting, not only for the tourists.

Quentin Webb is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Adventures Abroad Could Hurt U.S. Companies

Carson C. Block is the director of research for Muddy Waters, an investment firm.

Analysts across Wall Street are just beginning to warn investors about trouble brewing in emerging markets. The International Monetary Fund this month downgraded its global growth forecast for the rest of 2013 and next year, citing a big slowdown in emerging market economies because of higher interest rates, asset price volatility, weaker domestic activity and currency depreciation.

We have been outspoken about the risks in emerging markets for some time, most recently reflecting on Standard Chartered's large exposure to China, India and Southeast Asia, and the fact that credit-default swap pricing on the company was implying that lending to Standard Chartered was less risky than lending to JPMorgan Chase. While that imbalance has now corrected itself, we continue to see instability in Brazil, Egypt, Turkey and South Africa, and severe corrections in Latin American and Indian currencies.

Despite all the instability, it is astounding how little risk the markets are currently pricing into public companies that have poured shareholder money into emerging markets over the last several years through acquisitions and start-up projects. Artificially low interest rates in the United States have driven many management teams to make investments abroad based on higher expected returns without incorporating the local risks. In many cases, local divisions tend to be run on the ground and are subject to all the same local risks, including inflation, fraud, nationalization, political whims of the local governments (which often emerge as “taxes”) and legal issues.

These are countries that tend not to be the transparent democratic and capitalist systems that Western investors are used to.

We believe both the companies themselves and the analysts covering them have made overzealous assumptions about the safety and the expected earnings growth for these acquisitions. In the United States, too many analysts price growth at high multiples without thinking about where that growth is coming from. Many companies have made acquisitions that we think will ultimately generate returns lower than those of local market bond yields. In these situations, management would have actually created more value for shareholders by just buying local currency government bonds. What is more, many of these acquisitions were purchased by issuing debt in United States dollars and failing to hedge the currency exposure of the emerging market country â€" essentially doubling down on their bet.

Indeed, you do not have to look far to find American companies that underestimated the risks of investing in emerging markets. Caterpillar discovered this firsthand earlier this year when it found “deliberate, multiyear, coordinated accounting misconduct” at a Chinese company it had recently acquired. The company was forced to write-down its entire $500 million investment.

How did that happen, especially when the fraud could have been discovered by simply looking at the records the subsidiary filed with the Chinese government? A former Caterpillar board member told Reuters that the board was “distracted” at the time by a larger acquisition.

There are plenty of other examples. Wal-Mart Stores has faced bribery accusations in Mexico. Vodafone is fighting an egregious tax bill in India. Brookfield Asset Management was recently shown to have badly miscalculated the risks of investing in Brazil.

Calculating the risks of making an acquisition in an emerging market is often more art than science. Still, many American companies seem to plug overzealous growth assumptions into their models, and then assume a dangerously low weighted-average cost of capital that does not reflect the myriad emerging market risks, which not only put their growth projections at risk, but also can lead to total loss. We suspect such model antics will become more apparent and dangerous as the air continues to come out of emerging markets. Investors would be wise to understand the true exposure they have to emerging markets through their investments in American companies before it's too late.

As Warren E. Buffett has famously said: “Only when the tide goes out do you discover who's been swimming naked.”

What Is Bank Capital, Anyway?

Regulators are butting heads with banks this week over capital, with new rules on the table that could force banks to hold more of it. But what exactly is capital, and why is it so important?

The question gets at the heart of finance today. In the crisis, a lack of capital brought some banks to the brink. Now, by requiring banks to bolster their capital, the government is trying to eliminate the need for taxpayer bailouts in the future.

Though capital is a centerpiece of Wall Street regulation, it resists a simple definition.

Capital is often described as a cushion that banks hold against losses. That's true, but the implications are not always clear. One unfortunate misconception that can arise is that capital is a “rainy day fund.”

To understand capital, think about how a financial firm does business. In a typical transaction, a firm pays for an investment with a combination of debt and equity. The more debt, or leverage, that finances the transaction, the more money the firm can make (or lose).

Say a firm pays for its investments with nine parts borrowing and one part equity. By using debt, the firm can magnify the return it makes on its equity. This is a principle banks use when determining how to finance their operations.

A bank's capital is analogous to equity in the above example. More capital (so, less debt) means banks are more able to withstand losses. But it also means they can't make as much money. This dynamic â€" more capital leading to lower returns â€" helps explain why banks tend to argue that holding more capital is “expensive.”

But even banks won't deny that capital is essential. Without it, the tiniest loss would put a bank out of business.

Think about capital this way: It designates the percentage of assets that a bank can stand to lose without becoming insolvent.

If a bank's assets decline in value, it has to account for that by adjusting the source of financing that it used. Liabilities like debt and deposits can't be reduced, as they represent money that the bank has promised to pay to bondholders or depositors.

But what's useful about capital is that it can be reduced, or written down. That's the whole point. Shareholders, who contribute to capital, agree to absorb losses if the bank falls on hard times. So, rather than a “rainy day fund,” capital is a measure of a bank's potential to absorb losses.

How does a bank increase its capital? There are few ways to do this, none of which banks particularly love. One is for banks to retain more of their profit, and not pay it out as dividends or spend it on share buybacks.

Another is to sell more shares in the market. That's generally unappealing to banks because the shares would very likely be sold at a discount, and the slug of new shares could dilute the stakes of other shareholders.

A third method is reducing assets. This doesn't actually increase the nominal level of capital. But it does increase ratio of capital to assets, which is one way that regulators measure the adequacy of a bank's capital. If banks sell some of the things they own, that can have the effect of bolstering capital ratios.

When banks threaten to reduce lending or sell assets if they are forced to raise capital, this is the dynamic they are referring to.

The issue is complicated enough as it is, without the political posturing that is taking place. As regulators tinker with the rules, an understanding of capital will help reveal what's at stake.

S.E.C. Lifts Advertising Ban on Private Investments

Federal regulators on Wednesday lifted an 80-year-old ban on advertising by hedge funds, buyout firms and start-up companies seeking capital, a move that will fundamentally change the way that many issuers raise money in the private marketplace.

The Securities and Exchange Commission voted to approve a rule that Congress included in last year's Jumpstart Our Business Startups Act, a law meant to help bolster small businesses and create jobs after the financial crisis.

The move allows start-ups and small businesses to use advertising to raise money through private offerings. Hedge funds and buyout firms, whose investment vehicles fall under regulations for private offerings, will also be able to promote their products to the general public, though restrictions remain on who can invest in them.

Some regulators, lawmakers and consumer protection groups faulted the S.E.C.'s decision. Luis A. Aguilar, the lone dissenter among the S.E.C.'s five commissioners, called the adoption of the rule reckless. He said it was being approved without appropriate investor safeguards and worried that it would lead to abuse. “The record is clear that general solicitation will make fraud easier by allowing fraudsters to cast a wider net for victims,” Mr. Aguilar said.

Senator Carl M. Levin, the Michigan Democrat who has pushed for greater regulation of Wall Street, criticized the rule and the S.E.C.'s new chairwoman, Mary Jo White. “Proceeding today with this flawed rule will ultimately damage the investing public and investor confidence in U.S. markets,” Mr. Levin said in a statement. “I am disappointed that Mary Jo White, who knows what it's like to combat financial fraud, let this rule go with so few investor protections.”

Proponents of the rule argue that there still are substantial limits on who can invest in these private offerings. Those who qualify - called “accredited investors” - must have a net worth of at least $1 million, excluding their primary residence, or annual income of more than $200,000 in each of the previous two years.

Yet, opponents contend that there are lax safeguards for verifying that investors are accredited. The regulation dictates that the company or fund raising money have a reasonable basis to conclude that the investor is qualified and includes various verification methods, including reviewing tax returns.

Several state securities regulators also denounced the rule. The Arkansas securities commissioner, A. Heath Abshure, said that the S.E.C., in allowing small, speculative companies and high-risk hedge funds to raise money through public advertising, had failed to ensure the integrity of the market. “You can't just open the door of a new way of offering securities without ensuring the integrity of the market,” Mr. Abshure said. “And the idea that the accredited investor is a sophisticated investor is ridiculous.”

As part of its effort to guard against potential abuse, the S.E.C. also voted on Wednesday to bar felons and other “bad actors” convicted of securities fraud from raising money through private offerings.

Supporters of the rule said that it helps bring securities regulations in line with modern financial markets. The advertising ban on private offerings was adopted in 1933 as part of a series of investor protection laws enacted during the Great Depression. Today, hedge funds, private equity and private offerings, once exclusively the domain of large pension funds and wealthy families, have become far more accessible and visible to the investing public.

“There is a larger and deeper investor base, a bigger and more diverse pool of issuers, and a proliferation of technologies that allow information to be conveyed across the globe nearly instantaneously,” said Matthew E. Kaplan, a partner at the law firm Debevoise & Plimpton. “Those factors underpinned the general consensus that it was time to consider updating rules that many viewed as being a bit long in the tooth.”

Hedge fund managers were once small, niche players in the financial markets and rarely sought publicity. Today, many of them grant interview requests, make frequent television appearances and lecture at conferences. Some large ones, like Och-Ziff Capital Management, are publicly traded companies.

Similarly, several of the world's largest private equity firms, including the Blackstone Group and Kohlberg Kravis Roberts, are publicly traded on the New York Stock Exchange. Even investing in privately held companies has become more accessible to the public. In recent years, so-called secondary exchanges like SecondMarket have developed on which trading in private companies takes place. And small companies are look ing to raise money through social media and other technology.

Though they get far less publicity than splashy initial public offerings, private placements play a prominent role in the financial markets. The amount of money raised through private offerings in 2011 was about $900 billion, compared with about $1.2 trillion in public stock offerings and debt deals.

The ban on advertising will officially end some time later this year, after a 60-day waiting period. The rule will require hedge funds and companies that use general advertising to notify the S.E.C. 15 days before the solicitation begins.

But most hedge fund and private equity lawyers said that they did not expect the airwaves to be filled with hedge fund ads promoting their superior risk-adjusted returns. Because only about 7 percent - or 7.6 million households - are accredited investors, mass advertising through television or magazines makes little economic sense for most funds.

“It's likely that the new rules will take some time to pick up much momentum, and that there will only be a handful of pioneer-types at first who will look to dip their toes in the advertising waters,” said Steven B. Nadel, a lawyer at Seward & Kissel.

Elisse B. Walter, an S.E.C. commissioner who voted to eliminate the advertising ban, noted that the agency must continue to be vigilant in monitoring whether the looser regulations and increased advertising put investors at greater risk.

“It's important that investors have confidence that the market for private investments has not turned into the Wild West,” she said.

At Sun Valley, Conspicuous by His Absence

SUN VALLEY, Idaho - Despite a flurry of attention over the deal-makers at the Allen & Company media and technology conference here - Rupert Murdoch! John C. Malone! Robert Iger! - one of the most-often mentioned names among attendees was one person who isn't here.

That would be Larry Page, the chief executive of Google.

The search giant is well-represented by a number of senior executives, to be sure. Eric Schmidt, the company's executive chairman, is here. So are Nikesh Arora, its chief business officer, and Salar Kamangar, the chief executive of its YouTube division.

But it's Mr. Page, whom several attendees said they'd been hoping to hear speak on Wednesday morning, whose name cropped up an awful lot. The chief executive has disclosed that he suffers from a chronic illness that affects his vocal cords and breathing.

Many executives praised his performance as Google's leader, noting his vision and his ability to see the broader picture. A few also pointed to the company's stock, which has risen 54 percent since April 4, when he took over from Mr. Schmidt. (It closed on Wednesday at $905.99, valuing the company at a little over $300 billion.)

Under Mr. Page, Google has moved to streamline its wide-ranging product offerings, while also committing to successes like Android and YouTube.

“I think we'll see him as one of the best C.E.O.'s of all time,” said Bing Gordon, a partner at the venture capital firm Kleiner Perkins Caufield & Byers.

Still, some attendees said they enjoyed other sessions, like a panel featuring the commissioners of several American professional sports leagues.

Deal Reached to Rein In Overseas Trading

Regulators in Washington have agreed in principle on a plan to rein in risky trading by banks overseas, according to people briefed on the matter, a truce that follows a messy split in the Commodity Futures Trading Commission.

The potential deal, subject to final approval by the agency, would be reached with only hours to spare before a deadline on Friday. The commission had established the deadline when it set out to decide how to regulate trading by American banks in London and beyond - a major factor in the 2008 financial crisis.

Until now, the trading commission seemed destined to miss the date. Some officials at the agency, which oversees trillions of dollars in Wall Street activity, had warned that a compromise was proving elusive as tension mounted.

The dispute traced largely to the agency's Democratic chairman, Gary Gensler, and Mark Wetjen, a Democratic commissioner with an independent streak. While Mr. Gensler was adamant that the agency complete its plan on time, Mr. Wetjen recently called the deadline “arbitrary.” And with the agency's Republican commissioner pushing for a delay, Mr. Wetjen holds the swing vote.

But in recent days, they showed signs of progress. Mr. Gensler and Mr. Wetjen have been meeting in person throughout the week, the people briefed on the matter said, and had struck a preliminary deal by Wednesday.

While both are likely to claim victory, the deal does not come without sacrifice for each side.

The contours of the plan, the people briefed on the matter said, suggest that firms like Goldman Sachs International and Citigroup's London branch will face a wave of new scrutiny, a sticking point for Mr. Gensler.

In a move likely to appease Mr. Wetjen, Mr. Gensler is expected to phase in the cross-border oversight. And in a concession to Wall Street and foreign finance ministers, the plan would defer to European regulators if they ultimately agree to scrutinize banks in a way that is similar to the monitoring by the trading commission.

Wall Street, while objecting to the new oversight, would exhale at the prospect of a deal being reached by Friday. If the agency fails to produce the guidelines but declines to extend the deadline, some banks feared widespread confusion would ensue.

The people briefed on the matter, who insisted on anonymity to discuss private negotiations, cautioned that the deal was not final. The agency's lawyers must now draft the plan to reflect compromises hashed out in recent days. If either side makes last-minute changes, the people said, the deal could collapse.

If the deal is approved, it is unclear when the agency might announce the decision. It tentatively scheduled a public meeting for Friday to vote on the plan, though the agency could also vote in private over the next few days.

The agency's spokesman, Steven Adamske, declined to say whether the commissioners had struck a deal. Instead, he said that “progress is being made,” adding that “we remain hopeful for a vote on Friday.”

The agency and European regulators are also poised to announce a framework for collaborating in the coming years the people briefed on the matter said. The deal, which is expected to be announced this week, could subdue cross-border tensions among the various regulators.

The delicacy reflects the importance of a plan that took shape after the financial crisis highlighted the risk of overseas trading.

Trades by a London unit of the insurance giant American International Group, for example, nearly toppled the company. And JPMorgan Chase's $6 billion trading loss in London last year reignited concerns that risk-taking could come crashing back to American shores.

The blowups by A.I.G. and others spurred the Dodd-Frank Act, a law that mandated a sweeping overhaul of the $700 trillion marketplace for derivatives, financial contracts that derive their value from an underlying asset like a bond or an interest rate. Under that 2010 law, the trading commission is supposed to extend new derivatives changes - including tougher capital standards - if overseas trading has “a direct and significant connection with activities” of the United States.

That broad template left it up to the agency to draft a plan for how Dodd-Frank applies to everyday trading overseas. Ever since, Wall Street lobbyists have complained to the agency that certain requirements could drive trading business away from United States banks.

In a statement on Wednesday, the co-authors of the law, Christopher J. Dodd and Barney Frank, called on the trading commission to resist Wall Street's talking points. The former lawmakers, Mr. Frank, a Congressman from Massachusetts who retired in January year, and Mr. Dodd, a Democratic senator from Connecticut who left office in 2011, cited the chaos of 2008 as the impetus for the crackdown.

“Only people who have never heard of A.I.G. can deny that overseas failures by large domestic entities have direct impacts here,” Mr. Dodd and Mr. Frank said in the statement. “The failure to regulate derivatives as their role in our financial system expanded greatly was one of the most serious weaknesses in the regulatory system which we sought to correct.”

The former lawmakers also said they weighed in with the hope of speeding the agency along.

“I respect that getting it right is not easy, but the fact that it's taken three years sort of stuns me,” Mr. Dodd, who is now chairman and chief executive of the Motion Picture Association of America, said in an interview on Wednesday. “What do you need to know?”

Mr. Gensler echoed Mr. Dodd's concerns in a meeting last month with Wall Street lobbyists , who urged the agency to extend its deadline past Friday. Mr. Gensler, summoning into his office a pregnant speechwriter at the agency whose due date was Friday, asked her what she thought of the deadline. In reply, she exclaimed, “No delay.”

The speechwriter, Stephanie Allen, gave birth a week later. Some people said that was a positive omen Mr. Gensler and Mr. Wetjen would make their deadline.

Photoshop\'s New Rental Program, and the Outrage Factor

My review of Photoshop CC on Thursday - especially its availability only as a rental, with a monthly or yearly subscription fee - generated a lot of reader feedback. Some of it was astonishing.

Here's a sampling, with my responses.

Can you rent for a few months, stop for a couple of months, resume as needed, stop as desired? That could have advantages for non-pros.

Yes, you can. That's the purpose of the month-to-month rental programs ($30 a month for a single program, like Photoshop). Of course, having the software is much less expensive if you agree to rent for an entire year ($240 a year instead of $360).

There is an alternative to Photoshop you didn't mention: GIMP. It has one big advantage: it is free.

Many readers wondered why I didn't mention the free GIMP program. It does indeed do most of what Photoshop does. I've found it to be even more dense and complex than Photoshop. But since it's free, everyone who's unhappy with Adobe's new rental program for Photoshop should definitely give it a try.

Good article but you fail to mention what happens with plug in programs. Many of us find programs like the Nik series to be much better at doing some adjustments than Photoshop. How does CC handle this?

Exactly the same way. Remember: Photoshop CC is a program that you download to your computer and run from there - exactly like previous Photoshop versions. Nothing changes in the way it works with plug-ins.

Does Adobe actually pay you for mindlessly reprinting their press releases and calling it “news”? An actual journalist would have at least mentioned that huge numbers of Photoshop users are FURIOUS about this sleazy move by Adobe and are refusing to go along with it. More than 35,000 people have signed a Change.org petition to demand the restoration of the perpetual license. Lots of people are going to be seriously hurt by your journalistic malpractice.

I was stunned by the number of readers who came away from my column thinking that I am a fan of Adobe's new rental-only program. In fact, I thought that I had written a 1,300-word condemnation of this practice.

“You have to pay $30 a month, or $240 a year, for the privilege of using the latest Photoshop version,” I wrote. “Adobe isn't offering the rental plan - it's dictating it. The 800-pound gorilla of the creative world has become the 1,600-pound gorilla.”

I then listed alternatives to Photoshop, and concluded: “Nobody knows what improvements Adobe plans to add, how many, how often, or what the subscription rates will be next year or the year after that. Adobe is just saying, ‘Trust us.'”

As for the Change.org petition with 35,000 signatures: Somehow my readers managed to miss this paragraph in my column:

“The switch to a rental-only plan may sound like a rotten deal for many creative people, especially small operators on a budget. And, indeed, many of them are horrified by the switcheroo. A touching but entirely hopeless petition (http://j.mp/1aynMtK) has 35,000 signatures so far. (‘We want you to restart development for Adobe Creative Suite 7 and all future Creative Suites,' it says. ‘Do it for the freelancers. For the small businesses. For the average consumer.')”

It's possible that what angered these readers so much is my reference to the petition as “touching but entirely hopeless.” This is not a put-down of the petition. This is a simple acknowledgment that companies like Adobe have already factored in the anger.

Remember when Netflix raised the price of its most popular DVD rental/streaming-movie price by 60 percent? A million people canceled their Netflix subscriptions.

An employee told me at the time that, incredibly, Netflix's spreadsheets showed that the company would still come out ahead, even with the mass defections. Netflix had already factored the anger into its business plan.

And that's exactly what Adobe's spreadsheets show. Even if the predicted number of angry customers abandon Photoshop, the total annual revenue for Photoshop will increase as a result of the rental-only program.

That's why the petition is utterly hopeless. Adobe won't change its course, because Adobe doesn't care about those people. It already considers them a lost cause.

It's very clearly a case where customer happiness is being sacrificed for more profit. And that's the most upsetting part of all.

A Better Google Maps App for Apple and Android Devices

Our story so far: Last September, Apple decided to dump the Google Maps app that had been on the iPhone for years. Apple replaced it with its own Maps app - software with so many problems that Apple's chief executive, Tim Cook, apologized and even recommended that people use other apps until Apple could fix its own one.

In December - incredibly quickly - Google responded by introducing its own Maps app for iPhone. It's a spectacular app, among the best apps ever written. It's fast, beautiful and so good at guessing what you mean when you start typing a destination, it's almost mind reading. You can read the details here.

Today, that delightful news gets even better. Not only has Google improved Google Maps for iPhone, it's also brought that same free app to three machines that never had it: the iPad, Android phones and Android tablets. (The Android versions are available for download today; it requires the Ice Cream Sandwich or Jelly Bean version of Android - recent versions, in other words. The iOS versions will be available shortly.)

For Androidians, the biggest news is the design of the app itself. It's modeled on the iPhone app, the one that's simple and fast and elegant. It's also uncluttered by the morass of menus that have always plagued the existing Maps app for Android.

But for practitioners of all religions - tablet, phone, iOS, Android - the other news is the new features that today's new version brings. They include:

* Greater speed. All app versions are faster than before.

* Better place information. Half the time, you don't even need navigation instructions; you just use Google Maps as the world's smartest Yellow Pages, to find a nearby restaurant, movie theater, drugstore or whatever.

The details for found places now include a one-line description (“Chinese restaurant famous for dim sum”); a five-star rating system (including a decimal - “4.3,” for example - because, let's face it, almost everything these days winds up with a four-star rating); the ability to upload your own photos of a place; and a more complete integration of the Zagat guides, which Google bought.

* Greater emphasis on exploration. Google Maps has always excelled at getting you to a known destination. But Google now wants the app to help you choose a restaurant, bar, store, recreation center or hotel, at least in major United States and European cities.

If you tap in the Search box without typing anything, new, photographic buttons appear: Eat, Drink, Shop, Play, Sleep. Each opens lists of corresponding facilities, sorted by criteria like Local Favorites, Popular with Tourists and so on. (Google says that these recommendations are never paid placement.)

* Traffic incidents and auto-rerouting. At last: Google Maps shows more than colored lines indicating current traffic speeds on major roads. Now it also displays tiny icons that represent accidents and construction. Tap one to read the details: “Right lane blocked on 680,” for example. (In case you were wondering, the information on traffic incidents doesn't come from Waze, the traffic-incident app that Google recently bought. That data has yet to be incorporated into Maps.)

Better yet: Maps now looks ahead for traffic jams on your route, and interrupts your drive with a dialog box that offers to route you around it (if the new path would be quicker, of course). On its own.

* Offline maps. This feature is something of an Easter egg. It's undocumented, a feature inserted by Google engineers simply because they wanted it. You can access it only if you know the secret. But wow, is it worth it.

This feature memorizes the map data for whatever area is displayed on your screen right now (up to a whole city in size). That way, you can use Google Maps even when you're overseas and don't want to turn on data roaming (because that's insanely expensive), or when you're in an area where there's no cell reception. It's very handy.

To capture a map snapshot like this, tap in the Search box. Use the speech-recognition button and say, “OK Maps.” (It's a riff on the command “OK Glass” that prepares Google Glass, the company's “smart headband,” for voice commands.)

A message quietly lets you know you've successfully stored the displayed area.

*Nice tablet layouts. On a tablet, Maps really shines. The app smartly reformats itself to take best advantage of whatever screen shape you have: two or three columns of place listings, for example, and luxuriously displayed photos and reviews for each business.

This new, improved Maps app works identically on both major flavors of phone and tablet. You know what? I don't care how much you distrust Google and its motives. This is crazy good software, some of the best work Google has ever done.

Deal Reached to Rein in Overseas Trading

Regulators in Washington have agreed in principle on a plan to rein in risky trading by banks overseas, according to people briefed on the matter, a truce that follows a messy split in the Commodity Futures Trading Commission.

The potential deal, subject to final approval by the agency, would be reached with only hours to spare before a deadline on Friday. The commission had established the deadline when it set out to decide how to regulate trading by American banks in London and beyond â€" a major factor in the 2008 financial crisis.

Until now, the trading commission seemed destined to miss the date. Some officials at the agency, which oversees trillions of dollars in Wall Street activity, had warned that a compromise was proving elusive as tension mounted.

The dispute traced largely to the agency’s Democratic chairman, Gary Gensler, and Mark Wetjen, a Democratic commissioner with an independent streak. While Mr. Gensler was adamant that the agency complete its plan on time, Mr. Wetjen recently called the deadline “arbitrary.” And with the agency’s Republican commissioner pushing for a delay, Mr. Wetjen holds the swing vote.

But in recent days, they showed signs of progress. Mr. Gensler and Mr. Wetjen have been meeting in person throughout the week, the people briefed on the matter said, and had struck a preliminary deal by Wednesday.

While both are likely to claim victory, the deal does not come without sacrifice for each side.

The contours of the plan, the people briefed on the matter said, suggest that firms like Goldman Sachs International and Citigroup’s London branch will face a wave of new scrutiny, a sticking point for Mr. Gensler.

In a move likely to appease Mr. Wetjen, Mr. Gensler is expected to phase in the cross-border oversight. And in a concession to Wall Street and foreign finance ministers, the plan would defer to European regulators if they ultimately agree to scrutinize banks in a way that is similar to the monitoring by the trading commission.

Wall Street, while objecting to the new oversight, would exhale at the prospect of a deal being reached by Friday. If the agency fails to produce the guidelines but declines to extend the deadline, some banks feared widespread confusion would ensue.

The people briefed on the matter, who insisted on anonymity to discuss private negotiations, cautioned that the deal was not final. The agency’s lawyers must now draft the plan to reflect compromises hashed out in recent days. If either side makes last-minute changes, the people said, the deal could collapse.

If the deal is approved, it is unclear when the agency might announce the decision. It tentatively scheduled a public meeting for Friday to vote on the plan, though the agency could also vote in private over the next few days.

The agency’s spokesman, Steven Adamske, declined to say whether the commissioners had struck a deal. Instead, he said that “progress is being made,” adding that “we remain hopeful for a vote on Friday.”

The agency and European regulators are also poised to announce a framework for collaborating in the coming years the people briefed on the matter said. The deal, which is expected to be announced this week, could subdue cross-border tensions among the various regulators.

The delicacy reflects the importance of a plan that took shape after the financial crisis highlighted the risk of overseas trading.

Trades by a London unit of the insurance giant American International Group, for example, nearly toppled the company. And JPMorgan Chase’s $6 billion trading loss in London last year reignited concerns that risk-taking could come crashing back to American shores.

The blowups by A.I.G. and others spurred the Dodd-Frank Act, a law that mandated a sweeping overhaul of the $700 trillion marketplace for derivatives, financial contracts that derive their value from an underlying asset like a bond or an interest rate. Under that 2010 law, the trading commission is supposed to extend new derivatives changes â€" including tougher capital standards â€" if overseas trading has “a direct and significant connection with activities” of the United States.

That broad template left it up to the agency to draft a plan for how Dodd-Frank applies to everyday trading overseas. Ever since, Wall Street lobbyists have complained to the agency that certain requirements could drive trading business away from United States banks.

In a statement on Wednesday, the co-authors of the law, Christopher J. Dodd and Barney Frank, called on the trading commission to resist Wall Street’s talking points. The former lawmakers, Mr. Frank, a Congressman from Massachusetts who retired in January year, and Mr. Dodd, a Democratic senator from Connecticut who left office in 2011, cited the chaos of 2008 as the impetus for the crackdown.

“Only people who have never heard of A.I.G. can deny that overseas failures by large domestic entities have direct impacts here,” Mr. Dodd and Mr. Frank said in the statement. “The failure to regulate derivatives as their role in our financial system expanded greatly was one of the most serious weaknesses in the regulatory system which we sought to correct.”

The former lawmakers also said they weighed in with the hope of speeding the agency along.

“I respect that getting it right is not easy, but the fact that it’s taken three years sort of stuns me,” Mr. Dodd, who is now chairman and chief executive of the Motion Picture Association of America, said in an interview on Wednesday. “What do you need to know?”

Mr. Gensler echoed Mr. Dodd’s concerns in a meeting last month with Wall Street lobbyists , who urged the agency to extend its deadline past Friday. Mr. Gensler, summoning into his office a pregnant speechwriter at the agency whose due date was Friday, asked her what she thought of the deadline. In reply, she exclaimed, “No delay.”

The speechwriter, Stephanie Allen, gave birth a week later. Some people said that was a positive omen Mr. Gensler and Mr. Wetjen would make their deadline.

At Sun Valley, Conspicuous by His Absence

SUN VALLEY, Idaho â€" Despite a flurry of attention over the deal-makers at the Allen & Company media and technology conference here â€" Rupert Murdoch! John C. Malone! Robert Iger! â€" one of the most-often mentioned names among attendees was one person who isn’t here.

That would be Larry Page, the chief executive of Google.

The search giant is well-represented by a number of senior executives, to be sure. Eric Schmidt, the company’s executive chairman, is here. So are Nikesh Arora, its chief business officer, and Salar Kamangar, the chief executive of its YouTube division.

But it’s Mr. Page, whom several attendees said they’d been hoping to hear speak on Wednesday morning, whose name cropped up an awful lot. The chief executive has disclosed that he suffers from a chronic illness that affects his vocal cords and breathing.

Many executives praised his performance as Google’s leader, noting his vision and his ability to see the broader picture. A few also pointed to the company’s stock, which has risen 54 percent since April 4, when he took over from Mr. Schmidt. (It closed on Wednesday at $905.99, valuing the company at a little over $300 billion.)

Under Mr. Page, Google has moved to streamline its wide-ranging product offerings, while also committing to successes like Android and YouTube.

“I think we’ll see him as one of the best C.E.O.’s of all time,” said Bing Gordon, a partner at the venture capital firm Kleiner Perkins Caufield & Byers.

Still, some attendees said they enjoyed other sessions, like a panel featuring the commissioners of several American professional sports leagues.