Credit Suisse Under Scrutiny

SENATE SCRUTINIZES CREDIT SUISSE OVER HIDDEN ASSETS  |  A Senate panel criticized Credit Suisse at a hearing on Wednesday, contending that the Swiss bank helped as many as 22,000 Americans hide an estimated $10 billion to $12 billion in assets from the United States tax authorities, Annie Lowrey writes in DealBook. The Senate hearing, the result of a two-year investigation into practices at the bank from 2001 through 2008, followed a scathing report issued on Tuesday by the Senate Permanent Subcommittee on Investigations that at times read like a legal thriller for its bizarre details on the lengths the bank went to aid Americans in tax evasion.

But Brady W. Dougan, the chief executive of Credit Suisse, said that only a small number of employees were involved in actively recruiting American clients and helping them hide money offshore. “Some Swiss-based private bankers went to great lengths to disguise their bad conduct from Credit Suisse executive management,” Mr. Dougan told the panel. “While that employee misconduct violated our policies and was unknown to our executive management, we accept responsibility for and deeply regret these employees’ actions.” The bank said that Swiss law prevented them from disclosing certain client information.

The Swiss bank wasn’t the only entity under attack at the hearing. Senators also criticized the Justice Department for dragging its feet in prosecuting or settling with Swiss banks under investigation.

R.B.S. POSTS $15 BILLION LOSS  |  The Royal Bank of Scotland Group on Thursday reported a net loss of 9 billion pounds â€" about $15 billion â€" for 2013, nearly 50 percent larger than the £6.1 billion loss it reported a year earlier, David Jolly writes in DealBook. The loss grew as the bank set aside £3.8 billion for possible legal bills and wrote down the value of assets by £4.8 billion.

The bank said it would cut £5.3 billion from costs over the medium term, partly by simplifying its operating structure to focus on its home market in Britain. It also said it had reduced its bonus pool for 2013 by 15 percent. “Even by recent standards, 2013 was a difficult year,” Ross McEwan, the bank’s chief executive, said in a statement.

TAMING BITCOIN  |  For its entire existence, Bitcoin has been free from the tethers of formal oversight. But now, after the collapse on Monday of the prominent Bitcoin exchange Mt. Gox, authorities around the world are scrambling to figure out how to regulate the virtual currency, Hiroko Tabuchi and Rachel Abrams write in DealBook.

Japan’s top government spokesman said in Tokyo on Wednesday that agencies there were collecting information on the country’s Bitcoin trade with an eye toward regulatory action. Federal prosecutors in Manhattan have formed a partnership with the Internal Revenue Service and other federal agencies to crack down on companies using Bitcoin exchanges to support drug trafficking. In addition, New York State’s top financial regulator, Benjamin M. Lawsky, has also been vocal about regulating the virtual currency, and the Commodity Futures Trading Commission and the F.B.I. are examining their authority over Bitcoin exchanges.

From Senator Joe Manchin III of West Virginia, in a letter: “I write to express my concerns about Bitcoin. The virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy. For the reasons outlined below, I urge regulators to take appropriate action to limit the abilities of this highly unstable currency.”

“While it is disappointing that the world leader and epicenter of the banking industry will only follow suit instead of making policy, it is high time that the United States heed our allies’ warnings. I am most concerned that as Bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.”

From Felix Salmon at Reuters: “As far as the public is concerned, Mt. Gox was Bitcoin. Most of us who never bought any Bitcoins in the first place feel as though we likely dodged a bullet. And we have no particular desire to enter that war zone now, even if it is marginally safer than it was before.“

ANOTHER HEADACHE FOR OCWEN  |  Ocwen Financial, one of the nation’s largest mortgage servicing companies, is facing scrutiny over conflicts of interest. The claims are the latest hurdle for a company that has increasingly come under regulatory fire as large banks have sought to shed the servicing of their most problematic subprime loans, Michael Corkery writes in DealBook. The concerns were disclosed in a letter to Ocwen released on Wednesday by New York State’s top financial regulator, Benjamin M. Lawsky.

Mr. Lawsky wrote that potential conflicts of interest between Ocwen and four other publicly traded companies of which William C. Erbey is chairman could “harm borrowers and push homeowners unduly into foreclosure.” Ocwen has said that it maintains an arm’s-length business relationship with other companies, which rent foreclosed houses and sell houses online and that Mr. Erbey has recused himself from any discussions where the businesses of the five companies overlap.

ON THE AGENDA  |  Janet L. Yellen, the chairwoman of the Federal Reserve, testifies in front of the Senate Committee on Banking, Housing, and Urban Affairs on monetary policy at 10 a.m. Weekly jobless claims are out at 8:30 a.m. January’s durable goods orders are released at 8:30 a.m. Richard W. Fisher, the president of the Dallas Fed, is on a panel in Frankfurt, Germany, at 10:30 a.m. discussing the post-financial crisis role of central banks. Dennis P. Lockhart, the president of the Atlanta Fed, and Esther George, the president of the Kansas City Fed, speak at the Atlanta Fed’s annual banking conference at 3:15 p.m. Frank Keating, president and chief executive of the American Bankers Association, is on CNBC at 7 p.m. Kevin Roose, the author of “Young Money,” is on “The Daily Show with Jon Stewart” at 11 p.m.

BLACKSTONE FALLS UNDER VERSACE’S SPELL  |  The Italian fashion house Versace has long dazzled the fashion industry. Now, it seems to have caught the fancy of the Blackstone Group. News emerged on Wednesday that Versace was in advanced talks to take on Blackstone as a minority investor “in the latest sign that the finance industry’s interest in high fashion shows few signs of abating,” Michael J. de la Merced writes in DealBook. Blackstone on Thursday agreed to buy a 20 percent stake in the company at a valuation of about 1 billion euros, or $1.37 billion, Reuters reports.

Mergers & Acquisitions »

Judge Expedites Men’s Wearhouse Lawsuit  |  A Delaware judge ordered Jos. A. Bank to quickly submit documents relating to its proposed acquisition of Eddie Bauer, which is seen as a defensive measure to stop a takeover bid by Men’s Wearhouse.
DealBook »

China’s Tencent Considers Stake in Online Retailer  |  Tencent Holdings, the Chinese social networking and gaming company, has selected Barclays to advise it on a potential purchase of a stake in the Chinese online retailer JD.com, previously called 360Buy, The Wall Street Journal writes. JD.com is preparing for a $1.5 billion initial public offering in the United States.
WALL STREET JOURNAL

EBay Leads $134 Million Investment in India’s Snapdeal  |  EBay is leading a $133.7 million investment in Snapdeal, an online shopping site based in India, that could result in a buyout of the company, which is considered the eBay of India, ReCode writes. EBay also led a $50 million investment in Snapdeal last spring.
RECODE

Patton Boggs in Merger Talks With Squire Sanders  |  The Washington law and lobbying firm Patton Boggs is in preliminary merger talks with the global law firm Squire Sanders, only months after merger talks between Patton Boggs and the law firm Locke Lord fell through, Reuters writes. A combination of the two law firms could create a global entity with about 1,700 lawyers.
REUTERS

A Plan for Facebook to Justify WhatsApp Deal  |  “Sooner rather than later, Facebook will become a hybrid â€" WhatsBook or FaceApp or however the chattering classes will malign it right up until its ad sales machine blows away Wall Street’s expectations. It also means, for Facebook’s sake, it’s going to have to come to resemble its competitors, not just by bolting a messaging service onto Facebook, but by truly integrating the two,” Quartz writes.
QUARTZ

INVESTMENT BANKING »

JPMorgan Said to Plan Move of 2,000 Workers to Brooklyn  |  JPMorgan Chase is said to be planning to move about 2,000 employees from several of its business units to offices in Brooklyn’s MetroTech Center, Bloomberg News writes, citing an unidentified person familiar with the situation. The move is part of the bank’s efforts to cut expenses.
BLOOMBERG NEWS

In a Retirement, a Loss for Barclays  |  Hans-Joerg Rudloff’s retirement as chairman of investment banking at Barclays comes at an unhelpful time for the British lender, writes Dominic Elliott of Reuters Breakingviews. The new chief executive could use his help as a continuity figure and mentor.
DealBook »

@GSElevator Cashes In on a Cultural Moment  |  The publisher of a new book by @GSElevator, whose author this week was exposed as John Lefevre, a Texas bond trader, failed to mention Mr. Lefevre’s credibility and “apparently felt no need to,” The New York Times writes in an editorial.
NEW YORK TIMES

Citigroup Alums Take on Washington  |  The number of Obama administration picks who have worked at Citigroup illustrates “how quickly the banking giant’s reputation has recovered in Washington since it was bailed out during the financial crisis,” Politico writes.

POLITICO

Fewer Banks Share Rising Profits  |  American banks raked in profits of $154 billion in 2013, up 10 percent from 2012 and up 6 percent from the $145 billion in profits banks posted in 2006, even as the number of banks has decreased, Quartz writes.
QUARTZ

PRIVATE EQUITY »

House Proposal Would Raise Taxes on Private Equity Income  |  The investment profits generated by private equity, long a subject of debate in Washington, would be taxed at a higher rate under a proposal on Wednesday by the chairman of the House Ways and Means Committee.
DealBook »

The So-Called Blackstone Bill, Resurrected  |  If a proposal by Representative Dave Camp goes through, publicly traded private equity firms would either have to take themselves private again or pay corporate-level taxes, Victor Fleischer writes in the Standard Deduction column.
DealBook »

Carlyle’s Co-Founder Says More Private Equity Firms Likely to Go Public  |  The wave of public offerings of private equity firms is likely to continue as smaller firms begin to follow public floats by the industry’s largest players in recent years, said David M. Rubenstein, the co-founder of the Carlyle Group.
DealBook »

Private Equity Leaders See Opportunities in Europe  |  Europe is ripe for investments as the economic recovery continues there, private equity investors said at the SuperReturn International gathering in Berlin.
DealBook »

Warburg Pincus Considering More E.T.F. Deals  |  The private equity firm Warburg Pincus said it might pursue further acquisitions in Europe’s exchange-traded fund market following its purchase in January of a majority stake in Source, an E.T.F. provider based in London, The Financial Times writes. Warburg Pincus has created an $11.2 billion fund to expand its asset management presence.
FINANCIAL TIMES

HEDGE FUNDS »

A Hedge Fund Manager Says SAC Taint Is Manageable  |  Dmitry Balyasny’s hedge fund Balyasny Asset Management has hired three people who used to work for SAC Capital Advisors and, he said, would consider hiring more.
DealBook »

Soros Tops List of 2013 Hedge Fund Earners  |  Prominent hedge fund managers and traders did not have to match the 32 percent return of the Standard & Poor’s 500-stock index to make a lot of money in 2013, Forbes reports.
FORBES

Former Hedge Fund Manager Selling Florida Home for $13 Million  |  Alberto Franco, a former hedge fund manager at Quantek Frontier, is selling his steel-and-glass beachfront home near Miami for $13 million, The Wall Street Journal reports.
WALL STREET JOURNAL

Elliott Takes 11% stake in F&C  |  The hedge fund Elliott Management disclosed an 11 percent stake in the British asset manager F&C, worth about £80 million, The Financial Times writes. Analysts expect Elliott to use its stake to attract new bidders and push for a higher sale price.
FINANCIAL TIMES

I.P.O./OFFERINGS »

Biomet Chooses Banks for I.P.O.  |  Biomet, a medical device unit that was taken private by private equity firms in 2007 for $11.4 billion, is said to have selected Bank of America Merrill Lynch, Goldman Sachs and JPMorgan Chase as the lead underwriters for the company’s initial public offering, expected this year, Reuters writes, citing unidentified people familiar with the situation.
REUTERS

Foreign Banks’ Share of China’s I.P.O. Market Hits 5-Year High  |  Foreign investment banks’ securities joint ventures have underwritten 8 percent of the initial public offerings in China so far this year, a five-year high, The Wall Street Journal reports.
WALL STREET JOURNAL

VENTURE CAPITAL »

Sequoia Capital Leads Investment in Kahuna  |  Sequoia Capital, the venture capital firm now known for being the sole investor in WhatsApp, has led an $11 million round of funding in Kahuna, a start-up that helps companies bolster use of their mobile applications, ReCode writes.
RECODE

Collaborative Raises $33 Million Venture Fund  |  Collaborative Fund has raised a $33 million venture capital fund from investors including the artist Shepard Fairey to focus on the shared economy, which allows people to rent out personal property and services, Reuters writes.
REUTERS

Zefr Raises $30 Million  |  Zefr, a start-up that helps companies track their videos on YouTube, has raised $30 million in a funding round led by Institutional Venture Partners, ReCode writes. The new funding brings Zefr’s total to $60 million.
RECODE

LEGAL/REGULATORY »

A Top Financial Prosecutor to Leave  |  Mythili Raman, an acting assistant attorney general overseeing some of the biggest investigations into Wall Street misdeeds, will soon depart the Justice Department.
DealBook »

Foreign Exchange Firm Fined in Britain  |  The Financial Conduct Authority said that the British units of FXCM, a retail foreign exchange trading firm, withheld nearly $10 million in profits from its customers but passed on any losses.
DealBook »

Bernanke to Testify in A.I.G. Suit  |  Ben S. Bernanke, the former chairman of the Federal Reserve, will give a deposition on Thursday in a lawsuit over the 2008 bailout of the American International Group, The Wall Street Journal writes. Mr. Bernanke is one of at least 50 witnesses, including the former Treasury secretaries Henry M. Paulson Jr. and Timothy F. Geithner.
WALL STREET JOURNAL

Borrowing Bill Faces Challenge From Puerto Rico Senators  |  Puerto Rico senators are opposing language from pending legislation over the island’s impending bond sale that would allow investors to sue the beleaguered island in United States court rather than going through the island’s local legal system if problems arise, The Wall Street Journal writes.
WALL STREET JOURNAL

British Trading Houses to Come Under Increased Scrutiny  |  The Financial Conduct Authority, Britain’s financial watchdog, will focus more attention on trading houses as commodity markets come under increased political and regulatory scrutiny, The Financial Times writes.
FINANCIAL TIMES