www.adfast.info: 10/10/13

The biggest threat to Chinese banks' cozy oligopoly may be in the hands of the nation's consumers. Two online companies, Alibaba and Tencent, are making incursions into the country's financial services market, providing an alternative to the capped deposit rates and sluggish service offered by the country's big lenders. The disrupters are taking on risks, and savers should be glad.

Alibaba, the e-commerce group that just bought a 51 percent stake in the asset management company Tianhong for $193 million, is the banks' main foe. By July, it had made over $16 billion in short-term loans to companies that sell goods on its sites. Its real-time records of borrowers' cash flows and counterparties aid in lending decisions.

Banks' deposits are also under threat. WeChat, the mobile chat app that had more than 300 million users within two years of being started by Tencent, is working on distributing wealth products via smartphones, and offering payment for fund managers, according to Chinese media. Alibaba lets users reinvest surplus balances in their online payment accounts into money market funds. That gives savers a better return than the 3 percent capped rate they get on bank deposits.

Tech companies' desire to disrupt the financial services sector is understandable. China's big banks make returns on equity in excess of 20 percent. Regulators are basically supportive, unlike their counterparts in the West. The big four banks may have 66,000 branches, but younger consumers prefer the convenience of ubiquitous smartphones and always-on networks.

For the likes of Alibaba and Tencent, more digital channels for lending and saving could sow further confusion. China lacks clarity over who is liable if a product or lender fails. Consumers don't always appreciate the difference between a deposit and an investment, even if it's there in the small print.

That creates the risk that a tech company could find itself obliged to make good any losses on a product it distributed. The other danger is that the banks, whose bosses are basically politicians, may use their powerful contacts to crush the new competition. But the genie is out of the bottle: consumers now have a choice about where they put their funds. Even if Alibaba and Tencent's financial plans fail, the industry will have to raise its game.

John Foley is Reuters Breakingviews China Editor. For more independent commentary and analysis, visit breakingviews.com.

2 Founders of BlackBerry Weighing a Takeover Offer

OTTAWA - The two men who founded the company that became BlackBerry may now try to save it.

In a regulatory filing on Thursday, Mike Lazaridis and Douglas Fregin said that they were considering a bid for the 92 percent of the company that they do not own. They also said they had hired Goldman Sachs and Centerview Partners as advisers.

Their potential bid joins a growing list of expressions of interest in the company, which recently reported a $1 billion quarterly loss caused by the market's rejection of new smartphones that were supposed to revive BlackBerry's prominence.

Fairfax Financial Holdings Â of Toronto has made a conditional, nonbinding offer to buy the 90 percent of BlackBerry shares it does not own for $9 each. That would value the company at about $4.7 billion.

Many investors are skeptical about Fairfax's ability to finance that proposal by bringing in other investors and borrowing billions of dollars. Similar questions would apply to any rival offer from Mr. Lazaridis and Mr. Fregin, who are not working with Fairfax at the moment, according to a person briefed on the matter.

Cerberus Capital Management, a private equity firm known for its investments in distressed companies, has been pursuing a nondisclosure agreement with BlackBerry that would give it access to confidential data, a person briefed on those discussions has said. In addition, several media reports have indicated that BlackBerry has been sounding out other technology companies about their interest in buying at least part of its business or assets. It is not clear whether any of them will bid.

A spokesman for Mr. Lazaridis declined to comment. Adam Emery , a spokesman for BlackBerry, declined to specifically comment on Thursday's filing but said that the company â€œis conducting a robust and thorough review of strategic alternatives.â€

Mr. Lazaridis has already been casting about for potential partners, having approached the likes of the Blackstone Group and the Carlyle Group, people briefed on the matter have said. Talks with Blackstone have cooled off, while talks with Carlyle have not advanced beyond a preliminary stage, according to those people.

Shares of BlackBerry closed up just over 1 percent on Nasdaq, but at $8.20 a share, it remained below Fairfax's tentative $9-a-share offer.

Mr. Fregin and Mr. Lazaridis have been friends since attending elementary school in Windsor, Ontario. Mr. Fregin abandoned his engineering studies at the University of Windsor to join Mr. Lazaridis in Waterloo, Ontario, where he was studying, to start Research in Motion in 1984. The company changed its name to BlackBerry this year.

It was Mr. Lazaridis, however, who would become the public face of the company after its successful move into the smartphone business, along with Jim Balsillie, with whom he shared the title of chief executive and chairman until January 2012. Mr. Fregin worked quietly as the company's vice president for operations until 2007.

After Mr. Lazaridis stepped down from control at BlackBerry, the two men formed Quantum Valley Investments to invest in quantum-computing technologies.

There has been considerable speculation that Mr. Lazaridis would become involved in some kind of a bid. It includes the possibility that he would take over the company's handset business, which many analysts now say is virtually worthless, while other investors would acquire BlackBerry's software and services businesses. The viability of the phone business aside, such a separation might prove difficult.

In recent days, BlackBerry has been acting like a company preparing itself for sale, including settling some outstanding patent litigation. As part of a broad downsizing, BlackBerry said on Thursday that it would close an office in Halifax, Nova Scotia, with the potential loss of 350 jobs, mostly in technical support. The company would be required to repay about $2 million in government job grants.

Suit Revives Goldman Conflict Issue

At a March 2012 meeting, a group of examiners at the Federal Reserve Bank of New York agreed that Goldman Sachs had inadequate procedures to guard against conflicts of interest - guidelines aimed at stopping firms from putting their pursuit of profit ahead of their clients' best interests.

The examiners voted to downgrade a confidential rating assigned by the New York Fed that could have spurred costly enforcement actions and other regulatory penalties. It is not known whether the vote in fact led to a rating change. The former examiner who pushed for a downgrade, Carmen M. Segarra, now contends in a lawsuit filed on Thursday that just weeks after the vote, her superiors asked her to change her findings on Goldman and fired her after she refused.

The vote to downgrade, which has not been previously reported, could have been a big blow for Goldman.

â€œGoldman Sachs does not have a conflicts-of-interest policy, not firmwide, and not for any divisions,â€ Ms. Segarra wrote to Michael F. Silva, a senior executive at the New York Fed. â€œI would go so far as to say they have never had a policy on conflicts.â€

The lawsuit, along with a review by The New York Times of confidential government documents and internal e-mails, raises questions about the success of Goldman's efforts to police potential conflicts.

The bank has been buffeted by accusations that it has put its own interests ahead of its clients, a contention it denies. Goldman, for instance, faced accusations that in the run-up to the financial crisis that it sold billions of dollars in souring real estate assets to unsuspecting clients. Just weeks before the examiners' vote last year, the bank was publicly excoriated by a federal judge who found that Goldman had conflicts in a huge energy deal.

The lawsuit also provides a look into the often-opaque relationship between federal regulators and Wall Street. After the financial crisis, banking regulators faced criticism that they were too cozy with the banks that they were overseeing - a familiarity that failed to thwart some of the risky behavior precipitating the housing crisis and ensuing recession.

Even now, banks have sway over their regulators, especially those stationed at a bank's headquarters, according to two former regulators who spoke on the condition of anonymity. The banks, for example, can work behind the scenes to avert a vote like the one to downgrade Goldman. The people said, however, that once a vote to downgrade has taken place, it is difficult to reverse.

In the lawsuit, which was filed in Federal District Court in Manhattan, Ms. Segarra contends she was wrongfully terminated in violation of a federal law that affords protections to bank examiners who find wrongdoing in the course of doing their jobs. Mr. Silva, who is chief of staff for the executive group at the New York Fed, is among the defendants named in the suit.

Jack Gutt, a New York Fed spokesman, declined to comment on Ms. Segarra's case, citing rules that restrict what the regulator can discuss. â€œPersonnel decisions at the New York Fed are based exclusively on individual job performance and are subject to thorough review. We categorically reject any suggestions to the contrary,â€ he said in a statement.

Mr. Silva declined to comment through the Fed spokesman.

A Goldman spokesman, Michael DuVally, said his company had no knowledge of internal New York Fed discussions or matters related to Ms. Segarra. â€œAs we have described publicly in our Business Standards Committee report, Goldman Sachs has a comprehensive approach to addressing conflicts through firmwide and divisional policies and infrastructure.â€

In an interview, Ms. Segarra said that when she was fired, her bosses told her they had lost confidence in her judgment. Within the Fed, some people who worked with Ms. Segarra echoed those concerns, according to people with knowledge of her time at the agency. Ms. Segarra, these people said, sometimes developed â€œconspiracy theories.â€

Ms. Segarra landed the job at the New York Fed in October 2011 after a career on Wall Street that included jobs at Citigroup and Bank of America.

She was assigned to assess Goldman's conflict-of-interest program to determine whether it complied with Fed standards.

Banks are required to have detailed policies in place to deal with conflict of interests. Ms. Segarra said these policies typically defined what constituted various conflicts, how the bank might penalize employees who violated those rules and also how the firm made sure that it did not inadvertently promote questionable behavior.

Under the New York Fed's guidelines, banks are required to have â€œprocesses established to manage compliance risk across an entire organization, both within and across business lines, support units, legal entities, and jurisdictions of operation.â€

These guidelines are aimed at ensuring that banks have reviewed business transactions to make sure that relationships with one client do not conflict with other clients or with the bank itself.

After Ms. Segarra joined the New York Fed, she said she examined several potentially controversial Goldman deals. For instance, in 2012 Goldman advised El Paso, an energy company, on its decision to sell itself to Kinder Morgan. Goldman owned a big stake in Kinder Morgan, which angered a number of El Paso shareholders, who argued this gave Goldman an incentive to undervalue El Paso. Goldman maintained that it had properly managed the conflicts but was later admonished by a judge, who noted the â€œdisturbing behaviorâ€ that led to the deal.

As the deal was coming together, the lawsuit said, Ms. Segarra urged Goldman to provide her with its firmwide conflict-of-interest policy. But Goldman, the lawsuit said, told her that it had no such policy.

While Goldman lacked a broad conflict-of-interest policy, the lawsuit says, individual business units did have some procedures in place. For Ms. Segarra, the absence of a firmwide policy was alarming because it signaled that Goldman lacked the procedures to spot and police conflicts, according to the suit.

Such concerns, the lawsuit said, prompted Ms. Segarra to raise the issue with Mr. Silva, her boss, in a meeting in early December 2011. He seemed to agree. Mr. Silva â€œexpressed concern that Goldman would suffer significant financial harm if consumers and clients learned the extent of Goldman's noncompliance with the rules on conflict of interest,â€ according to the lawsuit.

Soon, though, Ms. Segarra was looking at another deal, involving Banco Santander, the largest bank in Spain, and Qatar Holding. As part of her review, Ms. Segarra asked Goldman to provide documentation that it had performed an anti-money-laundering analysis.

According to the lawsuit, Goldman executives told Ms. Segarra that it had done the analysis, but the bank later backpedaled, admitting that no such work had been performed.

Ms. Segarra took her concerns about the transaction to her bosses, who confronted Goldman. She contends that Michael S. Koh, another senior staff member at the New York Fed and a defendant in the lawsuit, told her that Goldman admitted to the misconduct but then he dismissed her concerns. Further efforts to raise the issue were also stymied and her bosses prohibited her from asking Goldman more questions about the deal - a decision that prevented her from finishing her report.

Mr. Koh, through the Fed spokesman, also declined to comment.

In March 2012, Ms. Segarra got her chance to voice her concerns to the New York Fed's legal and compliance risk team. At the meeting, the group, roughly 20 people, agreed that the issues with Goldman's conflict-of-interest procedures warranted a warning, known-as a â€œmatter requiring attention,â€ or M.R.A., according to the lawsuit. As a result, the team approved a downgrade of Goldman's annual rating from a 2, indicating satisfactory to a 3, indicating fair, according to a confidential document reviewed by The Times. The rating involving policies and procedures is one of several measurements that make up Goldman's overall score, which is confidential.

In the weeks after the vote, Ms. Segarra's supervisors began to question her findings about Goldman, according to a review of e-mails. Mr. Silva said her conclusions â€œare debatable at best, or alternatively, plainly incorrect,â€ according to a late-night e-mail sent on May 13, 2012. Mr. Silva explained that a â€œcursory reviewâ€ of Goldman's Web site showed that the bank had a conflict-of-interest section within its code of conduct that â€œseems to me to defineâ€ conflict of interest.

Days after this contentious exchange, Ms. Segarra said in the lawsuit, Mr. Silva and Mr. Koh pressed her to excise her negative findings on Goldman from her examination.

The men, Ms. Segarra said, told her that they did not find her position â€œcredible.â€ Ms. Segarra said she refused to modify her findings - a position she said she reiterated in an e-mail. On May 23, 2012, Ms. Segarra was terminated and escorted from the building.

Stocks Rally, Talks Stall, Then Skepticism Returns

Investors embraced signs of a political compromise that could avert a default on government debt, sending stocks surging on Thursday.

Yet Wall Street's relief was tempered by the realization that a fiscal deal was not yet at hand.

A Republican proposal to push the debt deadline facing the government off for six weeks propelled stocks to their biggest gains since January. The mood was diminished after the market closed when the White House signaled that it was not prepared to sign off on the deal, though it pledged to keep talking.

In the futures markets, which are open after stocks stop trading, United States stock index futures were slightly lower. The price of oil, which rose earlier in the day, fell modestly in the evening.

Wall Street will remain focused on any indications of progress in the talks. Investors fear the Treasury Department will miss payments on some of its debt after hitting its borrowing limit later this month. Markets showed some skepticism about the offer of a six-week reprieve on the debt ceiling, as Treasury bills that come due after Nov. 22 - when the Republican plan would end - fell in value.

â€œThe political situation has gone from horrible to bad, but we're still a long way from a constructive resolution,â€ said Michael Purves, chief global strategist at Weeden & Company.

Still, the biggest threat hanging over the markets - a government default - appeared to ease after Speaker John A. Boehner said that House Republicans were willing to raise the debt ceiling until Nov. 22 if Democrats opened negotiations on a longer-term budget deal.

After that news, the Standard & Poor's 500-stock index climbed to end the day up 2.18 percent, or 36.16 points, at 1,692.56. The Dow Jones industrial average rose 2.18 percent, or 323.09 points, to 15,126.07, while the Nasdaq composite index jumped 2.26 percent, or 82.97 points, to 3,760.75.

Thursday's gains helped make up nearly half of the losses stocks have suffered in recent days as the debt ceiling neared.

But the progress on a debt limit agreement became less certain when President Obama declined to immediately endorse it Thursday evening.

Wall Street had never gone into full panic mode about a potential default. Most strategists predicted that Republicans would be forced to compromise before the Treasury ran out of money.

In recent days, though, investors did begin to prepare for the possibility that the government might delay some payments on short-term government debt in the days after hitting the debt ceiling.

The pessimism was evident in money market funds, the popular mutual funds that invest in short-term debt. Over the last week, institutions sold $20 billion of money market funds that specialize in government debt, 2.5 percent of the total money in the funds, according to figures out Thursday from the Investment Company Institute.

Money market funds and banks, in turn, were dumping short-term government debt, known as Treasury bills, set to come due in October and November.

On Thursday, those bills were popular again, but debt coming due after Nov. 22 fell out of favor and dropped in value.

â€œThe relief is only a repositioning of risk a few weeks out,â€ said Adrian Miller, the director of fixed-income strategy at GMP Securities. â€œIt's another can-kicking episode.â€

Elsewhere in the market for government bonds, the price of the benchmark 10-year Treasury note fell 6/32, to 98 14/32, and its yield rose to 2.68 percent, from 2.66 percent late Wednesday

The price of insuring against losses on United States government debt fell only slightly on Thursday and was still almost twice as expensive as it was in early September.

Whatever the outcome of the negotiations over the debt ceiling, there is little movement on ending the government shutdown.

Before the current stalemate, the economic recovery appeared to be gaining traction. But there are growing concerns on Wall Street that the shutdown, and the uncertainty over the debt ceiling, may exert a drag on economic growth in the final months of the year.

Economists have been scaling back their fears for how much the shutdown will hit economic expansion after the entire Defense Department was ordered back to work. But continuing closures of some government offices are still likely to weigh on the economy.

What is more, the shutdown has meant that crucial data is not being released, leaving investors in the dark about the health of the recovery.

The weekly data on new unemployment claims was released on Thursday, and it showed new claims jumping 66,000 from a week earlier. Some of this was because of distortions in the data, but the figures still left economists anxious.

â€œIt suggests that payroll growth after the shutdown might not strengthen as much as we had been hoping,â€ Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote to clients.

Two Brazilian Brothers to Pay Nearly $5 Million in Insider Trading Case

The bullish bet on H. J. Heinz flashed all the telltale signs of insider trading.

The bet came on Feb. 13, just a day before Berkshire Hathaway and the investment firm 3G Capital announced a $23 billion takeover of Heinz. The trade went through a Swiss Goldman Sachs brokerage account owned by an entity based in the Cayman Islands. And perhaps most telling, the traders' identities were a mystery.

On Thursday, the Securities and Exchange Commission unmasked those traders and said it had confirmed what it suspected for months: the bet amounted to insider trading.

The S.E.C., which acted quickly in February to freeze the assets in the Swiss account, has now amended its complaint to name two Brazilian brothers as the culprits. The brothers - Rodrigo and Michel Terpins - agreed to pay nearly $5 million to settle the charges.

Michel Terpins, 36, set the chain of events in motion, according to the S.E.C. After receiving a confidential tip that the Heinz deal was looming, the agency said, he alerted his brother.

Rodrigo Terpins, 40, then served as the trader. While vacationing at Walt Disney World in Orlando, Fla., the S.E.C. said, he bought nearly $90,000 in options contracts in Heinz. News of the takeover deal sent Heinz's shares, and the value of the options contracts, soaring. According to the S.E.C., the brothers' positions rose nearly 2,000 percent and they reaped over $1.8 million.

â€œRodrigo and Michel Terpins obtained confidential information prior to any public awareness that a Heinz deal was in the works, and they exploited it to the disadvantage of all other traders in the marketplace,â€ Sanjay Wadhwa, a senior S.E.C. enforcement official, said in a statement. â€œThose who use foreign accounts to commit insider trading in the U.S. markets should know that their activities can still be tracked and they will be held accountable by the S.E.C. for their actions.â€

The case illustrated the far reach of the agency, which traced the trades through a web of foreign accounts. But it also showed the challenges that regulators face in navigating a dizzyingly complex global marketplace.

The Terpins brothers routed their trades through a Goldman Sachs account in Zurich, where laws largely shield the account holder's identity. Without a direct window into the account, the S.E.C. had to freeze the assets to prevent the then-anonymous traders from spending their gains or moving the money.

Then came a lengthy waiting game for the S.E.C. The agency relied on Finma - the Swiss regulator that is the gatekeeper for the American authorities - to help with the release of information.

Although the settlement on Thursday capped an eight-month hunt for the traders, the investigation has hardly concluded.

The S.E.C. has yet to charge, or even identify, the person who tipped Michel Terpins to the Heinz deal. Instead, the commission's amended complaint identified the person as â€œa source who had access to the material nonpublic information and was under an obligation to not disclose the information,â€ suggesting that the agency was still weighing an action against the source.

The source, past S.E.C. actions suggest, probably came from a limited universe of insiders who knew about the deal. One set of potential insiders worked at 3G, a company with Brazilian roots.

No one at 3G has been accused of any wrongdoing.

Lawyers for the Terpins brothers did not respond to a request for comment. The brothers agreed to give up their $1.8 million in illicit profits and pay $3 million in penalties.

The S.E.C.'s amended complaint outlined the Terpinses' role in the Heinz case. After Rodrigo Terpins learned of the leak from his brother, he phoned a broker at Goldman Sachs on Feb. 13. At the time of the call, which Rodrigo Terpins made using a United States cellphone number, he was on vacation at Disney World.

The broker initially cautioned against the trade, noting that Goldman rated Heinz as a sell, meaning the bank suggested that investors steer clear of the stock. Undeterred, Rodrigo Terpins instructed the broker to place the trade anyway.

Ultimately, the brothers purchased 2,533 call options contracts. The trades allowed them to place a bullish bet on Heinz without the expense or obligation of actually buying the company's shares. The trades instead offered the brothers the flexibility to buy the shares at a given price - if they chose to do so - and allowed them up to four months to wait and see if the stock actually rose above that price.

The trades instantly set off alarm bells for the S.E.C. For one, before those trades, the account had not previously traded in Heinz, nor had it â€œmade any purchase of call options,â€ the complaint said.

Rodrigo Terpins, the S.E.C. said, also used a Swiss Goldman Sachs account to anonymously make the bet. Yet the account did not belong to Rodrigo Terpins, who â€œdid not have explicit authority to make tradesâ€ in the account. Instead, it was owned by Alpine Swift, which the S.E.C. identified as a â€œcorporate entity formed to hold assets.â€ The beneficial owner of Alpine Swift, the agency said, was â€œa close relativeâ€ of the Terpinses.

Glasses That Solve Colorblindness, for a Big Price Tag

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Problems With Your Gadgets? You Need a Consumer Advocate

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How Ballmer Missed the Tidal Shifts in Tech

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A Reader\'s Question: How Do You Hang Up on Voice Command?

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Use the Airline\'s App, and Other Tips for Flying Efficiency

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The Microsoft-Nokia Deal: Risks and Messiness

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An App That Sorts Your E-Mail Shopping Offers

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Surprising Enhancements to Apple\'s iPhone Line

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The Many Mysteries of Air Travel

September 12, 2013, 8:54 am

Technology and air travel have always gone hand in hand, and they're only getting more intertwined. From security at the airport to the rules about using electronics in flight to the final resting place of the plane's toilet contents, airplanes and tech are a constant source of conflict, passion - and questions.

If you'd like the answers, I highly recommend Patrick Smith's new book, â€œCockpit Confidential.â€ Mr. Smith is a pilot and blogger; much of the book's format and contents are on display at his Web site, AskThePilot.com, or in the archives of the â€œAsk the Pilotâ€ column he wrote for Salon.com for years.

But as a frequent flyer, I'd much rather have the book, which is a far more comprehensive book of questions and answers about airplanes, airports, airlines and the psychology of flying. Here are some excerpts - factoids that every flier should know:

â€œTurbulence scares me to death. Do I have reason to be afraid?â€

No. â€œA plane cannot be flipped upside-down, thrown into a tailspin or otherwise flung from the sky by even the mightiest gust or air pocket. Conditions might be annoying and uncomfortable, but the plane is not going to crash.â€

â€œIf all of a jet's engines were to fail, can the plane glide to a landing?â€

Yes. â€œThere's no greater prospect of instant calamity than switching off the engine in your car when coasting downhill. The car keeps going, and a plane will too.â€

â€œI understand that planes can jettison fuel. Is this done to lighten the load for landing?â€

Yes. â€œFor a few reasons, the obvious one being that touching down puts higher stresses on an airframe than taking off.â€ But Mr. Smith also points out that only some airplane models have the ability to dump fuel - the big ones. â€œThe 747, the 777, the A340, and the A330 all can dump fuel. A 737, an A320, or an RJ cannot. These smaller jets must circle or, if need be, land overweight.â€

â€œWhat happens when lightning hits an airplane?â€

Nothing. The energy â€œis discharged overboard through the plane's aluminum skin, which is an excellent electrical conductor.â€

â€œAre the contents of airplane toilets jettisoned during flight?â€

No. â€œThere is no way to jettison the contents of the lavatories during flight.â€ Instead, the toilet contents are vacuumed out into a tank truck at the end of the flight.

â€œWhat do the dings and chimes mean?â€

There are two kinds of chimes. â€œThe first kind is basically just a phone callâ€ fromÂ the cockpit toÂ the flight attendants; it means, â€œpick upÂ the intercom.â€ The other type is a â€œsignaling device forÂ the cabin crewâ€ - when the seat-belt sign is turned on or off, whenÂ the plane reaches 10,000 feet (soÂ that electronics are o.k. to use) and when initial descent begins, so it's time to prepareÂ the plane for landing.

â€œMany of the three-letter codes for airports make no sense.â€

The non-obvious ones are probably holdovers from the airports' previous names. â€œMCO is derived from MCCoy Field, the original name for Orlando International. Chicago O'Hare's identifier, ORD, pays honors to the old Orchard Field.â€

I should mention, by the way, that this book is frequently funny. For example, the author notes, â€œA campaign was launched in 2002 to change the identifier for the Sioux City, Iowa, from SUX to something less objectionable. The campaign failed.â€

â€œWe are told that modern commercial airplanes can essential fly themselves.â€

Emphatically no. â€œA plane is able to fly itself about as much as the modern operating room can perform an operation by itself.â€ Autopilot is a tool, but â€œyou still need to tell it what to do, when to do it, and how to do it.â€

â€œWhy the annoying rules pertaining to window shades, seat backs, tray tables, and cabin lights during takeoffs and landings?â€

â€œYour tray has to be latched so that, in the event of an impact or sudden deceleration, you don't impale yourself on it. The restriction on seat recline provides easier access to the aisle and also keeps your body in the safest position.â€ Raising your window shade, meanwhile, â€œMakes it easier for the flight attendants to assess any exterior hazards- fire, debris - that might interfere with an emergency evacuation.â€ Dimming the lights is the same precaution.

â€œIs it true that pilots reduce oxygen levels to keep passengers docile?â€

No.

â€œCould some crazy or ill-intentioned person open one of the doors during flight?â€

No. â€œYou cannot - I repeat, cannot - open the doors or emergency hatches of an airplane in flight. The cabin pressure won't allow it.â€

Are cellphones and gadgets really dangerous to flight?

It depends. Laptops have to be put away for takeoff and landing â€œto prevent them from becoming high-speed projectiles during a sudden deceleration or impact.â€ As for tablets and e-book readers, â€œit's tough to take a prohibition seriously now that many pilots are using tablets in the cockpit.â€ That's why the Federal Aviation Administration is considering relaxing the ban on those gadgets.

And can cellphones really disrupt cockpit equipment? Probably not. â€œI'd venture to guess at least half of all phones, whether inadvertently or out of laziness, are left on during flight. If indeed this was a recipe for disaster, I think we'd have more evidence by now.â€

My favorite bits of â€œCockpit Confidentialâ€ are Mr. Smith's rants. He's a frequent passenger as well as a pilot, so he's well equipped to rail about the stupidity of the methods for boarding a plane, and about the Transportation Security Administration's expensive, absurdly misguided efforts. (One of the book's funniest passages: the tale of the time he tried to carry airline silverware onto a flight, â€œpart of my hotel survival kit.â€ The T.S.A. agent confiscated them - even though it was the same silverware the airline itself issues to passengers in flight!)

Truth is, the world would be a better place if the airline industry weren't so secretive in the first place. The actions of pilots are hidden behind safety-reinforced doors, they speak to the flight attendants with signals and jargon and the airlines' behavior in scheduling and pricing flights are always mysterious. They'd serve all of us better, including themselves, by offering a little transparency.

Until that day arrives, â€œCockpit Confidentialâ€ is the document that belongs in the seat-back pocket in front of you.

Yes, There\'s a New iPhone. But That\'s Not the Big News.

September 17, 2013, 9:01 pm

Updated to clarify how to access the Spotlight search screen.

The big Apple news this week might seem to be the new iPhones. But truth be told, the bigger news is iOS 7.

This is the free software update for iPhones (iPhone 4 and later), iPads (iPad 2 and later) and iPod Touches (fifth generation). It's a radical, huge redesign. Its master architect was Jonathan Ive, the Apple designer who has brought us astonishing hardware designs for many years; now, for the first time, he's been put in charge of a whole software universe.

The look of iOS 7 is sparse, white - almost plain in spots. No more fake leather, fake woodgrain, fake green felt, fake yellow note paper. It's all blue Helvetica Neue against white.

The complete absence of graphic embellishments makes it especially utilitarian - in both senses of the word. That's good, because whatever button or function you need is easier to find; it's bad, because, well, it can look a little boring.

Then again, the new look is primarily visible at the Home screen, where a jarringly different color palette greets you on the Apple app icons, and on the options screen. The rest of the time, you'll be using your regular apps, many of which will look no different than before.

The look of iOS 7 may grab you or not. But once the fuss about the visuals dies down, something even more important comes into focus: the work that's been done on making iOS better. The longer you spend with the new OS, the more you're grateful for the fixing and de-annoyifying on display.

For example, you no longer have to burrow into infinitely nested Settings screens to adjust your control panels. Now you can just speak what you want, using Siri: â€œOpen Wi-Fi settings,â€ for example, or â€œOpen brightness settings.â€

Or, when speaking to your phone isn't socially appropriate, you can swipe upward from the bottom of the screen to open the Control Center: a compact, visual palette of controls for the settings and functions you're most likely to need: brightness, volume, Bluetooth, WiFi, Airplane Mode, Play/Pause Music, calculator, camera, and - my favorite - Flashlight. This panel slides in over whatever app you're using, so you don't lose your place.

This idea - swiping in from the margins of the phone - also plays out in the new Back gesture. The iPhone doesn't have a Back button, as Android phones do. But now you can swipe in from the left margin of the phone to go back one screen. It works in Mail, Settings, Notes, Messages, Safari, Facebook and some other apps. It'd be great if worked in every app.

The iPhone has never had a system-wide Search button, either, but here again, Apple has made some strides. The Search screen is no longer off to the left of the Home screens; now it's above them - all of them. You can now open Spotlight search by dragging downward from any Home screen.

Reducing steps seems to be a running theme in this release.

To turn on Private Browsing in Safari, for example, you used to have to open the Settings app, burrow around, find the on-off switch, then return to the browser. Now the Private button is right in Safari, where it belongs.

The Camera app has gained a better design. Now you swipe across the preview screen to switch among modes: Video, Slow-motion video (on the iPhone 5s), still photos, Square photos with Instagram-type filters, and Panorama. It's easy to learn and use, but it does mean that it's harder to open a photo you've just taken for inspection. (Swiping to the right used to make it appear; now you have to tap the tiny thumbnail button in the corner.)

There was supposed to be a password- and credit-card memorizing feature that would make it much easier to buy stuff and fill in forms on the Web, like the LastPass, 1Password or Dashlane apps. And this information would sync across all your Apple gadgets. But it mysteriously disappeared in the release version; Apple says it will reappear in a few weeks, at about the same time as OS X â€œMavericks.â€

The new iTunes Radio is here, though, and it's very good. The idea is exactly like Pandora; you choose a â€œseedâ€ song, performer or musical genre, and it plays nonstop songs in that style. But it's not as sophisticated as Pandora, and not nearly as powerful as Spotify; on iTunes Radio, you can't explicitly request a certain song or album by name.

Still, having it built in is nice. For example, you can say, â€œPlay Soft Guitar radio,â€ or whatever you've named your â€œseedâ€-based station, to start it up.

As with Pandora, the free version subjects you to a brief audio ad every now and then; also as with Pandora, you can pay for an ad-free version. It's $25 a year - part of Apple's existing iTunes Match service.

Siri, over all, is much better. The voice sounds more natural, and you have a choice of male or female. Apple did a lot of work â€œon the back end,â€ so that Siri responds much faster to commands. The Siri screens are redesigned to look nicer. And Siri can do more things.

More stuff:

- Internet phone calls. Now free, high-quality voice calls (to other Apple phones, tablets and Macs) are built right in. Apple calls it Audio-Only FaceTime.

- Carpenter's Level. The Compass app now has a three-dimensional level in it!

- Auto-app updates. You can opt to have new versions of your apps downloaded and installed automatically, in the background. The App Store app keeps a list of everything you've received.

- Today screen. As on Android, there's a single screen that lists everything that's happening today: your next appointment, today's weather, reminders due, whose birthday it is and so on. (Right now, mine says: â€œIt looks busy right now. There are 8 events scheduled, and the first one starts at 8:30 am.â€)

- Smarter Wi-Fi network alerts. If you're driving, iOS 7 on the new iPhone 5s no longer keeps announcing that it's discovered new Wi-Fi networks. Obviously, you're moving too fast to hop onto any of them, so this is a smart little tweak.

- Photos. The app that displays all your photos used to be a single endless scroll of tiny thumbnails. Navigationally speaking, it was really pretty useless. Now it self-assembles into clusters by year, by month and by occasion (based on time and location data). Sooooo much better.

- Maps. Apple still has work to do before its Maps app has anywhere near the quality of Google's Maps app. Apple's Maps still can't give you directions using public transportation, but at least it now has walking directions. And when you're driving at night, Maps automatically enters Night Mode, in which the map itself is dark gray instead of very bright.

- Global Type Size control. For the first time, there's a slider that controls the font size in all your apps. Well, all of them that have been rewritten to hook into this feature, anyway. So far, it's mostly just Apple's built-in apps.

- Activation Lock. Brilliant, brilliant, brilliant. If some thug steals your phone, it's worthless to him unless he enters your Apple password. Even if he tries to erase it, even if he jailbreaks it, even if he force-reinstalls the operating system. Thousands of iPhones will not be stolen now, because thieves will learn that they'll be â€œbrickedâ€ without your password. (To make this work, you have to turn on the â€œFind My iPhoneâ€ feature. Which you should do anyway.)

There are a zillion other nips and tucks, many of which make you smack your forehead and say, â€œYes! Why didn't they think of this sooner?â€

The software is available to download on your existing iPhone, iPad or iPod Touch tomorrow, Sept. 18.

If you decide to install iOS 7, as you learn your way around the new system you'll stumble across all kinds of handy features and techniques. But without any further delay, at least make these two features part of your new routine: Control Center (swipe upward from below the screen) and Siri's new settings-changing commands.

I think you should install it. The structure, layout and features represent some of Apple's best work. The look of iOS 7 - well, that judgment is up to you.

This post has been revised to reflect the following correction:

Correction: September 20, 2013

The State of the Art column on Thursday about iOS 7, the new Apple operating system, described incorrectly the method for opening the Spotlight search screen on the iPhone. To open it, the user swipes downward on any Home screen, but not from the top margin. (Swiping from the top margin opens the Notification Center.)

A version of this article appears in print on 09/19/2013, on page B8 of the NewYork edition with the headline: Simple Look, and Loads of Updates, in iOS 7.

The iPhone 5s\'s Fingerprint Scanner Was Hacked, but I\'m Not Worried

Well, that didn't take long. Only a couple of days after Apple's iPhone 5s went on sale, somebody managed to fool its fingerprint sensor.

The headlines and blog comments were predictable and instantaneous: â€œOooooh, Apple blew it! The star feature of its new phone is worthless!â€

I'll admit it: I love that darned sensor. You unlock your phone dozens of times a day. Each time is a few seconds of tedium and looking down at it, over and over and over, to enter your password. It's a drag.

And then there are the 50 percent of iPhone users who don't even bother with a password. If you're among them, then your phone and your life are susceptible to snooping should you lose your phone, find it stolen or leave it on your desk while you get coffee.

On the iPhone 5s, you wake the phone by pressing the Home button - and then just leave your finger on it for half a second, and boom: it unlocks.

But should we be concerned, then, that the hacker's exploits render the fingerprint reader useless?

Not at all. For three giant reasons.

First of all, Apple doesn't let you create a fingerprint â€œpasswordâ€ without also creating a regular password. Every so often, you're required to enter the regular password as a security precaution - including every time you restart the phone and every time 48 hours have elapsed since you last used it. If someone managed to bypass the fingerprint scanner, the joyride wouldn't last long.

Second, the fact that the fingerprint scanner was fooled is important, but so is how it was fooled.

Marc Rogers, who works at Lookout, a mobile security company, and the guy who â€œhackedâ€ the Touch ID fingerprint system (or, more properly, fooled it), wrote a blog post about his experiment. It's â€œWhy I Hacked Apple's TouchID, And Still Think It Is Awesome.â€

He writes: â€œPractically, an attack is still a little bit in the realm of a John le CarrÃ© novel. It is certainly not something your average street thief would be able to do, and even then, they would have to get lucky. Don't forget you only get five attempts before TouchID rejects all fingerprints, requiring a PIN code to unlock it.â€

The steps are ridiculously difficult and expensive.

The first hard part is just getting the fingerprint. â€œA suitable print needs to be unsmudged and be a complete print of the correct finger that unlocks a phone. If you use your thumb to unlock it, the way Apple designed it, then you are looking for the finger which is least likely to leave a decent print on the iPhone.â€ To get your fingerprint, â€œa thief would have to work out which finger is correct AND lift a good clean print of the correct finger.â€

Describing one technique, he goes on: â€œYou take the cleaned print image and without inverting it, print it to transparency film. Next, you take the transparency film and use it to expose some thick copper clad photosensitive PCB board that's commonly used in amateur electrical projects. After developing the image on the PCB using special chemicals, you put the PCB through a process called â€˜etching' which washes away all of the exposed copper leaving behind a fingerprint mold.â€

Seriously?

His conclusion: â€œThe reality is these flaws are not something that the average consumer should worry about.â€

Why? Because exploiting them was anything but trivial. Hacking Touch ID â€œrelies upon a combination of skills, existing academic research and the patience of a Crime Scene Technician.â€

If you really think somebody wants to get into your phone that badly - â€œa dedicated attacker with time and resources to observe his victim and collect dataâ€ - well, spoofing your fingerprint is not the method he'd take.

He'd save a lot of time and effort by learning your password instead. Maybe by holding a knife to your neck and asking for it.

It's just not a real-world concern, if you ask me.

But there's a third reason that I still plan to use the fingerprint scanner. It's very simple: If someone gets your iPhone, either because you lost it or it was stolen, you can erase it or lock it by remote control at iCloud.com.

(Better yet, the new iOS 7 Activation Lock means that a stolen phone can never be erased without your Apple ID, even if it's force-restored or jailbroken. It's essentially a worthless brick.)

I'm guessing that if you're in an industry where your phone is so important to espionage agents that they'd mount a â€œtargeted attack,â€ you'll have realized that you're missing your phone and locked it by remote control long before the bad guy has had time to put it through â€œa lengthy process that takes several hours and uses over a thousand dollars worth of equipment,â€ as Mr. Rogers said.

Of course, we all know that some people won't get past the phrase â€œhacked the fingerprint reader.â€ And that's fine. The fingerprint reader is optional. If you feel safer using a password, you're welcome to!

But as Mr. Rogers himself concludes: â€œFingerprint security will help protect you against the three biggest threats facing smartphone users today:

Fingerprint security will protect your data from a street thief that grabs your phone.
Fingerprint security will protect you in the event you drop/forget/misplace your phone.
Fingerprint security could protect you against phishing attacks (if Apple allows it).â€

Let's be vigilant about security threats. But let's also be rational.

A New Kindle Fire, Just in Time for the Holiday Season

If it's October, that must mean the holiday buying season has begun - and that means Amazon will offer a new color tablet.

It's the Kindle Fire HDX. It costs $230, and it's terrific. The battery goes for about 11 hours, or 17 in a power-saving, reading-only mode. The stereo speakers sound great. The plastic case weighs less than the prior version and has narrower margins around the screen. There's a mediocre camera on the front for video chatting (not on the back on the 7-inch model). The one big misfire was putting the power and volume keys on the back; you'll spend the first week hitting the Off button by mistake while trying to turn it up the sound.

The X in â€œHDXâ€ is a reference to the screen's clarity. It packs in 323 tiny dots per inch, making it sharper than high definition, and making the iPad Mini's 163 dots per inch look coarse.

The HDX's screen really is spectacular, if infuriatingly reflective. The trouble is, you can see the new sharpness only when you're looking at source material with resolution that high. The type in books and magazines looks razor-sharp, but most of the 150,000 TV shows and videos in Amazon's catalog don't look any clearer. Movies are also the wrong shape for the screen; you see black bands above and below.

Although the Kindle is based on the Android operating system, Amazon has thoroughly disguised it.

The home screen still features a sliding horizontal â€œcarouselâ€ of everything you've had open recently - books, movies, music, apps. Below that carousel, you now see a traditional grid of icons, just as on other tablets. Good.

Parental controls are easy and effective. You can limit your kids' time each day or limit which items they can use, watch or read.

Amazon has started to bring its X-Ray trivia feature to movies and music. Some of the songs you buy from Amazon (a few thousand, apparently) now display scrolling lyrics. And watching a movie with the X-Ray panel open is great fun; it identifies the actors in the scene before you, their bios one tap away, and tells you the name of the song playing in the background.

The company says that in an upcoming software update, you'll be able to fling the video to a PlayStation 3 or a Samsung TV, while continuing to read the X-Ray details on your Kindle Fire. That doesn't fully compensate, however, for the loss of any other way to connect the Fire to a TV (the HDMI jack is gone).

Boldest and most stunning of all, though, is Mayday: a button that places an instant, free video call to a 24-hour help technician. The agents can see your screen, but can't see you. You can see the agents (in a tiny, 1-inch movable window), and accept their invitation to take control of your Kindle or draw with virtual highlighter pens around elements of the screen.

Mayday is amazing and truly practical - but keep in mind that the HDX (the 7-inch and its $380 9-inch sibling) won't be for sale until later this month. Will there be enough of those video agents to go around, especially Christmas week?

Now, $230 is an excellent price for a tablet this fast, smooth and satisfying - and this Amazon tablet finally includes a wall charger. It's $30 more than last year's model, but bargain hunters might be happy with the revamped Kindle Fire HD, which is only $140 despite being, as a rep told me, â€œmore performantâ€ (I'm pretty sure that's supposed to mean â€œfasterâ€).

But $230 also happens to be the price of Google's Nexus 7 tablet, which is also fast, smooth and satisfying, and also has a 323-d.p.i. screen. On the Kindle, though, you see a full-screen ad every time you turn on the device; getting rid of them forever costs another $15. For another $50, you can buy a cover that attaches magnetically and folds in weird ways to act as a stand.

So which is the better deal?

Depends on what you're looking for. The Nexus is a real tablet, with all of the flexibility and complexity that entails. The Kindle Fire is still clearly intended to show off the books, TV shows, music and videos you've bought from Amazon.

It still doesn't seem like a â€œrealâ€ tablet. There's still no GPS navigation, no speech recognition, no to-do list or notes app. It doesn't run standard Android apps, and can't access the Google Play store that houses a million of them. About 100,000 apps have been tailored for the Fire, but lots of important ones are missing - including Dropbox, SkyDrive and anything by Google.

That's not a slam, either. The Kindle's simplicity and dedication to its purpose has always been its primary virtue. Amazon should tread carefully; piling on features risks junking up this focused, efficient reader. Already, the company intends to add â€œenterpriseâ€ features in a software update this fall: V.P.N. access, Office-compatible productivity suite, hardware data encryption and so on.

But never mind. As it is, the Kindle Fire HDX is a lightweight, sharp-screened, superfast pleasure.

T-Mobile Hands Consumers a Pleasant Shocker

Back in March, T-Mobile burned every possible bridge it had with the other cellphone carriers. As I wrote then, it eliminated the two-year contract; you can now quit T-Mobile whenever you like.

It also became the first carrier to eliminate the infuriating 15-second recording of voicemail instructions every time you try to leave a message - a waste of your time and your callers' airtime.

And T-Mobile also ended the Great Cellphone Subsidy Con. That's where you buy a $600 phone (like the iPhone) for $200, with the understanding that you'll pay the cellphone company the rest over your two-year contract - yet after you've repaid it, your monthly bill doesn't drop!

T-Mobile was basically prancing around, demonstrating that Emperors Verizon, Sprint and AT&T have no clothes.

I was pleasantly surprised - shocked, really - since those con games have been baked into the American cellphone carriers' business plans for years. And we, the American sheep, just assumed that we had to accept them.

Apparently, lots of other people were pleasantly surprised, too. The company says that in the second quarter of 2013, it signed up 685,000 new customers - more than Verizon, AT&T and Sprint combined.

Well, on Wednesday, T-Mobile did it again. It announced an even bigger shocker: Starting next month, it will eliminate the sky-high, nosebleed, ridiculous, usurious international roaming charges that have terrified and enraged overseas travelers for years.

Millions of Americans just put their phones into airplane mode when they go to Europe, daunted by the stories of people coming home to $5,000 international-roaming overage charges.

And no wonder; the other carriers' international plans are exorbitant and ridiculously complex. Here's AT&T's rates, but of course Verizon and Sprint have similar programs.

Going to Europe? You have to sign up for three plans before you go: Data (Internet use), texts and voice calls.

Data: AT&T charges, for example, $60 for 300 megabytes of data usage overseas. But that's nothing; you can blast through that in a day. All kinds of things on your phone use data when you're not even aware of it. After 300 megabyes, you'll quietly rack up $30 for every additional 120 megabytes of data.

Texts: The least expensive AT&T plan is $10 for 50 messages, which comes to 20 cents a text. Again, it comes with nasty overages (40 cents each).

Calls: Even if you sign up for the one-month minimum plan at $30 for the month, you're still paying $1 a minute to talk on the phone.

No wonder people turn off their phones in terror.

OK, now for T-Mobile's new international roaming:

Data: Unlimited and free.

Texts: Unlimited and free.

Calls: 20 cents a minute.

You get all of this automatically. You don't have to sign up for anything before you go. You don't have to sign up for anything at all. You just travel to Europe and know that your texts and e-mail are going to be free.

Now, two footnotes. First, those T-Mobile prices cover you in 115 countries - according to the company, the ones that represent 95 percent of Americans' travel. Note, however, that you don't ever have to worry about what country you're calling to; once you arrive, every call is 20 cents a minute to every country on earth.

Including back home.

Second, all that free Internet is for slower speeds, suitable for Facebook, Twitter, e-mail and Web pages. If you want streaming video or big file downloads, you can sign up (even after you arrive) for Speed Boost packages. Example: $25 for 200 megabytes in a week. After that amount or that interval, you go back to the free, slower service.

But otherwise - I mean, are they kidding?

Look: international roaming has always been insanely priced. And like many people, I've always assumed that there's some reason for it. International tariffs, maybe. Special equipment. Something. It couldn't be as simple as outrageous, consumer-hostile greed, could it?

Yes, it could.

â€œThe big carriers have created a perception that it costs this much. But it really doesn't,â€ Mike Sievert, T-Mobile's chief marketing officer, told me. â€œIt's just that they've gotten away with charging us these bloated 90 percent profit margins.â€

If that's true, then the executives at Verizon, AT&T and Sprint must be having a really, really bad week. Because now we know their big secret. We've been paying those insane roaming fees for nothing.

I'm trumpeting T-Mobile's move to the skies because I think it's bold, it's transparent and it's a resounding win for consumers. I'm still not, however, a T-Mobile subscriber, because its service still isn't good where I live. The company has made enormous strides over the last year installing its 4G LTE high-speed Internet networks in this country; but if you're considering switching, you should certainly check the coverage maps for your home area.

But I have to say: Mr. Sievert, a former chief marketing officer for AT&T, told me something really great. â€œThose other companies sit around trying to figure out what customer charges they can get away with,â€ he said. â€œWe sit around and say, â€˜What can we get away with not charging the customer?'â€

O.K., yes, that's a great line. And yes, he's a marketing officer.

But you know what? If T-Mobile's actions are any indication, it sure seems to be true.

Two Brazilian Brothers to Pay Nearly $5 Million in Insider Trading Case

The bullish bet on H. J. Heinz flashed all the telltale signs of insider trading.

On Thursday, the Securities and Exchange Commission unmasked those traders and said it had confirmed what it suspected for months: the bet amounted to insider trading.

The S.E.C., which acted quickly in February to freeze the assets in the Swiss account, has now amended its complaint to name two Brazilian brothers as the culprits. The brothers â€" Rodrigo and Michel Terpins â€" agreed to pay nearly $5 million to settle the charges.

Michel Terpins, 36, set the chain of events in motion, according to the S.E.C. After receiving a confidential tip that the Heinz deal was looming, the agency said, he alerted his brother.

Rodrigo Terpins, 40, then served as the trader. While vacationing at Walt Disney World in Orlando, Fla., the S.E.C. said, he bought nearly $90,000 in options contracts in Heinz. News of the takeover deal sent Heinzâ€™s shares, and the value of the options contracts, soaring. According to the S.E.C., the brothersâ€™ positions rose nearly 2,000 percent and they reaped over $1.8 million.

The Terpins brothers routed their trades through a Goldman Sachs account in Zurich, where laws largely shield the account holderâ€™s identity. Without a direct window into the account, the S.E.C. had to freeze the assets to prevent the then-anonymous traders from spending their gains or moving the money.

Then came a lengthy waiting game for the S.E.C. The agency relied on Finma â€" the Swiss regulator that is the gatekeeper for the American authorities â€" to help with the release of information.

Although the settlement on Thursday capped an eight-month hunt for the traders, the investigation has hardly concluded.

The S.E.C. has yet to charge, or even identify, the person who tipped Michel Terpins to the Heinz deal. Instead, the commissionâ€™s amended complaint identified the person as â€œa source who had access to the material nonpublic information and was under an obligation to not disclose the information,â€ suggesting that the agency was still weighing an action against the source.

The source, past S.E.C. actions suggest, probably came from a limited universe of insiders who knew about the deal. One set of potential insiders worked at 3G, a company with Brazilian roots.

No one at 3G has been accused of any wrongdoing.

Lawyers for the Terpins brothers did not respond to a request for comment. The brothers agreed to give up their $1.8 million in illicit profits and pay $3 million in penalties.

The S.E.C.â€™s amended complaint outlined the Terpinsesâ€™ role in the Heinz case. After Rodrigo Terpins learned of the leak from his brother, he phoned a broker at Goldman Sachs on Feb. 13. At the time of the call, which Rodrigo Terpins made using a United States cellphone number, he was on vacation at Disney World.

Ultimately, the brothers purchased 2,533 call options contracts. The trades allowed them to place a bullish bet on Heinz without the expense or obligation of actually buying the companyâ€™s shares. The trades instead offered the brothers the flexibility to buy the shares at a given price â€" if they chose to do so â€" and allowed them up to four months to wait and see if the stock actually rose above that price.

Stocks Rally, Talks Stall, Then Skepticism Returns

Investors embraced signs of a political compromise that could avert a default on government debt, sending stocks surging on Thursday.

Yet Wall Streetâ€™s relief was tempered by the realization that a fiscal deal was not yet at hand.

A Republican proposal to push the debt deadline facing the government off for six weeks sent stocks to their biggest gains since January. The mood was diminished after the market closed when the White House signaled that it was not prepared to sign off on the deal, though it pledged to keep talking.

In the futures markets, which are open after stocks stop trading, United States stock index futures were slightly lower. The price of oil, which rose earlier in the day, fell modestly in the evening. Wall Street will remain focused on any indications of progress in the talks. Investors fear the Treasury Department will miss payments on some of its debt after hitting its borrowing limit later this month. Markets showed some skepticism about the offer of a six-week reprieve on the debt ceiling, as Treasury bills that come due after Nov. 22 â€" when the Republican plan would end â€" fell in value./p>

â€œThe political situation has gone from horrible to bad, but weâ€™re still a long way from a constructive resolution,â€ said Michael Purves, chief global strategist at Weeden & Company.

Still, the biggest threat hanging over the markets â€" a government default â€" appeared to ease after Speaker John A. Boehner said that House Republicans were willing to raise the debt ceiling until Nov. 22 if Democrats opened negotiations on a longer-term budget deal.

After that news, the Standard & Poorâ€™s 500-stock index climbed to end the day up 2.18 percent, or 36.16 points, at 1,692.56. The Dow Jones industrial average rose 2.18 percent, or 323.09 points, to 15,126.07, while the Nasdaq composite index jumped 2.26 percent, or 82.97 points, to 3,760.75.

Thursdayâ€™s gains helped make up nearly half of the losses stocks have suffered in recent days as the debt ceiling neared.

But the progress of a debt limit agreement became less certain when President Obama declined to immediately endorse it Thursday evening.

Wall Street never went into full panic mode about a potential default. Most strategists predicted that Republicans would be forced to compromise before the Treasury ran out of money.

In recent days, though, investors did begin to prepare for the possibility that the government might delay some payments on short-term government debt in the days after hitting the debt ceiling.

Money market funds and banks, in turn, were dumping short-term government debt, known as Treasury bills, set to come due in October and November.

On Thursday, those bills were popular again, but debt coming due after Nov. 22 fell out of favor and dropped in value.

â€œThe relief is only a repositioning of risk a few weeks out,â€ said Adrian Miller, the director of fixed-income strategy at GMP Securities. â€œItâ€™s another can-kicking episode.â€

Elsewhere in the market for government bonds, the price of the benchmark 10-year Treasury note fell 6/32, to 98 14/32, and its yield rose to 2.68 percent, from 2.66 percent late Wednesday

The price of insuring against losses on United States government debt fell only slightly on Thursday and was still almost twice as expensive as it was in early September.

Whatever the outcome of the negotiations over the debt ceiling, there is little movement on ending the government shutdown.

What is more, the shutdown has meant that crucial data is not being released, leaving investors in the dark about the health of the recovery.

â€œIt suggests that payroll growth after the shutdown might not strengthen as much as we had been hoping,â€ Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote to clients.

Bank Examiner Was Told to Back Off Goldman, Suit Says

In a March 2012 meeting, a group of examiners at the Federal Reserve Bank of New York agreed that Goldman Sachs had inadequate procedures to guard against conflicts of interest â€" guidelines aimed at stopping firms from putting their pursuit of profit ahead of their clientsâ€™ best interests.

The examiners voted to downgrade a confidential rating assigned by the New York Fed that could have spurred costly enforcement actions and other regulatory penalties. It is not known whether the vote materialized in a rating change. The former examiner who pushed for a downgrade, Carmen Segarra, now contends in a lawsuit filed Thursday that just weeks after the vote, her superiors asked her to change her findings on Goldman and fired her after she refused.

The vote to downgrade, which has not been previously reported, could have been a big blow for Goldman.

â€œGoldman Sachs does not have a conflicts-of-interest policy, not firmwide, and not for any divisions,â€ the examiner wrote to Michael Silva, a senior executive at the New York Fed. â€œI would go so far as to say they have never had a policy on conflicts.â€

The lawsuit, along with a review by The New York Times of confidential government documents and internal e-mails, raises questions about the success of Goldmanâ€™s efforts to police potential conflicts.

The bank has been buffeted by accusations that it has put its own interests ahead of its clients, a contention it denies. Goldman, for instance, faced accusations that in the run-up to the financial crisis it sold billions of dollars in souring real estate assets to unsuspecting clients. Just weeks before the examinersâ€™ vote last year, the bank had been publicly excoriated by a federal judge who found that Goldman had conflicts in a huge energy deal.

The lawsuit also provides a rare glimpse at the often-opaque relationship between federal regulators and Wall Street. In the aftermath of the financial crisis, banking regulators faced criticism that they were too cozy with the banks that they were overseeing â€" a familiarity that failed to thwart some of the risky behavior precipitating the housing crisis and ensuing recession.

Even now, banks have sway over their regulators, especially those stationed on site at a bankâ€™s headquarters, according to two former regulators who spoke on the condition of anonymity. The banks, for example, can work behind the scenes to avert a vote like the one to downgrade Goldman. However, the people say, once a vote to downgrade has taken place, it is difficult to reverse.

In the lawsuit, Ms. Segarra contends she was wrongfully terminated in violation of a federal law that affords protections to bank examiners who find wrongdoing in the course of doing their jobs. Mr. Silva, who is chief of staff for the executive group at the New York Fed, is among the defendants named in the suit.

Jack Gutt, a New York Fed spokesman, declined to comment on Ms. Segarra, citing rules that restrict what the regulator can discuss. â€œPersonnel decisions at the New York Fed are based exclusively on individual job performance and are subject to thorough review. We categorically reject any suggestions to the contrary,â€ he said in a statement.

Mr. Silva declined to comment through the New York Fed spokesman.

A Goldman spokesman, Michael DuVally, said his company had no knowledge of internal New York Fed discussions or matters related to Ms. Segarra. â€œAs we have described publically in our Business Standards Committee report, Goldman Sachs has a comprehensive approach to addressing conflicts through firmwide and divisional policies and infrastructure.â€

In an interview, Ms. Segarra said that when she was fired, her bosses told her they had lost confidence in her judgment. Within the Fed, some people who worked with Ms. Segarra echoed those concerns, according to people familiar with her time at the agency but not authorized to speak on the record. Ms. Segarra, these people said, sometimes developed â€œconspiracy theories.â€

Ms. Segarra landed the job at the New York Fed in October 2011 after a career on Wall Street that included jobs at Citigroup and Bank of America.

She was assigned to assess Goldmanâ€™s conflict-of-interest program to determine whether it complied with Fed standards.

Banks are required to have detailed policies in place to deal with conflict of interests. Ms. Segarra says these policies typically define what constitutes various conflicts, how the bank might penalize employees that violate those rules and also how the firm does not inadvertently promote questionable behavior.

Under the New York Fedâ€™s guidelines, banks are required to have â€œprocesses established to manage compliance risk across an entire organization, both within and across business lines, support units, legal entities, and jurisdictions of operation.â€

These guidelines are aimed at ensuring banks have reviewed business transactions to make sure that relationships with one client do not conflict with other clients or with the bank itself.

After Ms. Segarra joined the New York Fed, she said she examined several potentially controversial Goldman deals. For instance, in 2012 Goldman advised El Paso, an energy company, on its decision to sell itself to Kinder Morgan. Goldman owned a big stake in Kinder Morgan, which angered a number of El Paso shareholders, who argued this gave Goldman an incentive to undervalue El Paso. Goldman, though, maintained it had properly managed the conflicts but was later admonished by a judge, who noted the â€œdisturbing behaviorâ€ that led to the deal.

While Goldman, the lawsuit says, lacked a broad conflict-of-interest policy, individual business units did have some procedures in place. For Ms. Segarra, the absence of a firmwide policy was alarming because it signaled that Goldman lacked the procedures to spot and police conflicts, according to the suit.

Such concerns, the lawsuit said, prompted Ms. Segarra to raise the issue with Mr. Silva, her boss, during a meeting in early December 2011. He seemed to agree. Mr. Silva â€œexpressed concern that Goldman would suffer significant financial harm if consumers and clients learned the extent of Goldmanâ€™s noncompliance with the rules on conflict of interest,â€ according to the lawsuit.

While Goldman executives, the lawsuit said, told Ms. Segarra that it had done the analysis, the bank later backpedaled, admitting that no such work had been performed.

Ms. Segarra took her concerns about the transaction to her bosses, who confronted Goldman. She contends Michael Koh, another senior staff member at the New York Fed and a defendant in the lawsuit, told her Goldman admitted to the misconduct but then he dismissed her concerns. Further attempts to raise the issue were also stymied and her bosses prohibited her from asking Goldman more questions about the deal â€" a decision that prevented her from finishing her report.

Mr. Koh also declined to comment through the New York Fed spokesman.

In March 2012, Ms. Segarra got her chance to voice her concerns to the New York Fedâ€™s legal and compliance risk team. At the meeting, the group, roughly 20 people, agreed that the issues with Goldmanâ€™s conflict-of-interest procedures warranted a warning, known-as a â€œmatter requiring attention,â€ or M.R.A., according to the lawsuit. As a result, the team approved a downgrade of Goldmanâ€™s annual rating from a 2, indicating â€œsatisfactoryâ€ to a 3, indicating â€œfair,â€ according to a confidential document reviewed by The Times. The rating involving policies and procedures is one of several measurements that make up Goldmanâ€™s overall score, which is confidential.

In the weeks after the vote, Ms. Segarraâ€™s supervisors began to question her findings about Goldman, according to a review of e-mails. Mr. Silva said her conclusions â€œare debatable at best, or alternatively, plainly incorrect,â€ according to a late-night e-mail sent on May 13, 2012. Mr. Silva explained that a â€œcursory reviewâ€ of Goldmanâ€™s Web site showed that the bank had a conflict-of-interest section within its code of conduct that â€œseems to me to defineâ€ conflict of interest.

Days after this contentious exchange, Ms. Segarra said in the lawsuit, Mr. Silva and Mr. Koh pressed her to excise her negative findings on Goldman from her examination.

The men, she said, told Ms. Segarra that they did not find her position â€œcredible.â€ Ms. Segarra said she refused to modify her findings â€" a position she said she reiterated in an e-mail. On May 23, 2012, Ms. Segarra was terminated and escorted from the building.

BlackBerry Founders Explore Bid for Company

BlackBerryâ€˜s founders disclosed in a regulatory filing on Thursday that they are exploring a bid for the flailing smartphone maker, as it casts about for a potential savior.

The two men, Mike Lazaridis and Douglas E. Fregin, said that they were weighing a bid for 92 percent of the company that they donâ€™t already own, and that they had hired Goldman Sachs and Centerview Partners as advisers.

Representatives for BlackBerry Mr. Lazaridis were not immediately available for comment.

The formal entrance of the two men adds yet another wild card to the fate of BlackBerry, which is seeking to sell itself amid a precipitous decline in sales. It has already signed a letter of intent with one of its largest shareholders, Fairfax Financial Holdings, that would lead to a $4.7 billion deal. That offer, worth $9 a share, is highly preliminary and still subject to financing and other conditions.

Mr. Lazaridis has already been casting about for potential partners, having approached the likes of the Blackstone Group and the Carlyle Group, people briefed on the matter have said.

Others have expressed interest in a potential deal for some or all of the handset maker as well. Cerberus Capital Management, the private equity firm known for its investments in distressed companies, has been pursuing a nondisclosure agreement with BlackBerry that would give it access to confidential data, a person briefed on those discussions has said.

Shares of BlackBerry were trading nearly 1 percent higher, but still below $9 a shares.

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