Wireless Mergers Will Draw Scrutiny, Antitrust Chief Says

WASHINGTON â€" The nation’s leading antitrust enforcer said this week that it would be difficult for the Justice Department to approve a merger among any of the top four wireless phone companies, casting doubt on recent speculation that T-Mobile and Sprint might consummate a deal in coming months.

William J. Baer, assistant attorney general for the antitrust division, said in an interview that further consolidation among the top wireless carriers would face intense scrutiny because consumers have enjoyed “much more favorable competitive conditions” since the division blocked a proposed merger between AT&T and T-Mobile in 2011.

“It’s going to be hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers,” he said, without referring to any specific merger proposal. “Any proposed transaction would get a very hard look from the antitrust division.”

Mr. Baer said that the division would similarly scrutinize any proposed merger among cable television companies. Analysts say that the cable market has evolved in recent years from a largely local market to a national one, where advertising, programming and sometimes subscription rates are set nationally.

This month, Charter Communications offered $37.8 billion to acquire Time Warner Cable, the country’s second-largest cable operator. Time Warner rejected the offer as inadequate.

Since then, Comcast has been reported to be interested in buying some of Time Warner Cable’s markets from Charter if the deal goes through.

That kind of merger and divestiture proposal has been common in recent years, including most recently in the settlement of the government’s antitrust case that sought to block US Airways’ merger with American Airlines. There, the two airlines agreed that the combined carrier would give up a certain number of gates as well as takeoff and landing slots at certain busy airports, including Washington’s Reagan National, La Guardia in New York and O’Hare in Chicag..

But Mr. Baer is expected to warn a group of antitrust lawyers on Thursday that the antitrust department too often sees merger proposals that include little more than token efforts to deal with competitive issues.

Those fig leaf offers are often an attempt to disguise what is essentially an effort to eliminate a big market participant, Mr. Baer is expected to say, while giving up something to a tiny competitor that, in truth, does not play a significant role in industry competition.

Those types of efforts are unlikely to succeed, Mr. Baer is expected to say Thursday evening at a meeting of the New York State Bar Association.

Mr. Baer is also expected to make a forceful argument that the Justice Department’s antitrust actions over the last five years have upheld the promises made by Barack Obama in the 2008 campaign.

The division filed 339 criminal antitrust cases over the last five years, an increase of more than 60 percent over the previous five-year period. Those cases elicited $4.2 billion in criminal fines, according to Justice Department statistics.

In its recent antitrust lawsuit involving e-books, the antitrust division said in court papers that after Apple made an agreement with publishers on e-book prices, the price of e-book best-sellers rose to at least $12.99 from $9.99.

Since it began an action against Apple and the publishers, the Justice Department contends, the average price of the best-selling e-books has dropped to about $6.

Similar benefits have been seen in the wireless phone business, Mr. Baer is expected to say. Since the AT&T-T-Mobile deal was abandoned, T-Mobile has rebounded thanks to aggressive investment in its network and new pricing plans that reduce handset prices and offer cheaper subscriptions.

In the third quarter of 2013 alone, T-Mobile signed up nearly 650,000 new subscribers. Other wireless companies have responded to T-Mobile’s offers with aggressive pricing of their own.

“We’ve looked long and hard at the wireless industry,” Mr. Baer said in the interview. “We’ve seen the benefits over the last two and a half years of four-firm competition. Experience teaches us that the market is thriving and consumers are benefiting from the current competitive dynamic.”

Two of Mr. Baer’s deputies gave speeches last week at a conference focused on antitrust and intellectual property.

One, Renata B. Hesse, deputy assistant attorney general for the antitrust division, told an audience in Silicon Valley that the division has often found “compelling evidence” in internal company documents that indicates anticompetitive behavior among companies proposing to merge.

Often, company executives have written in emails and other documents about how the previous rivalry between companies “was an important driver of innovation,” Ms. Hesse said. “We are concerned by evidence that shows that a firm being acquired has been a particularly innovative or disruptive competitor.”

A Former Regulator Returns to Private Practice

Before David Meister was butting heads with Wall Street’s top defense lawyers, he was one of them.

And now, after spending nearly three years as a federal regulator, Mr. Meister is returning to his defense lawyer past.

Mr. Meister, who left Skadden, Arps, Slate, Meagher & Flom to run the enforcement unit of the Commodity Futures Trading Commission, is rejoining the law firm as a partner in New York.

His arrival next month will prompt a modest reshuffling at Skadden. Mr. Meister, who left the C.F.T.C. in October, will lead the white-collar group in Skadden’s New York office, taking over for David M. Zornow, who founded the group in 1989.

“His experience on the government side is going to be incredibly valuable to our clients,” said Mr. Zornow, who will remain global head of Skadden’s litigation practice.

Mr. Meister’s C.F.T.C. experience â€" he took aim at some of Wall Street’s biggest banks â€" all but guaranteed him a lucrative partnership. Wall Street’s top law firms, flush with business from banks increasingly caught in the government’s cross hairs, are clamoring for marquee lawyers with government résumés.

Mr. Meister, 51, is the latest to switch sides. Robert S. Khuzami, the former head of enforcement at the Securities and Exchange Commission, landed at Kirkland & Ellis last year, raising questions about whether Washington’s revolving door blurs the line between defense and prosecution.

Underscoring the demand for lawyers with experience on both sides, Mr. Khuzami is receiving more than $5 million a year at Kirkand. While Mr. Meister received a somewhat smaller deal, he is still expected to earn a few million dollars annually.

Big Law was not always so welcoming. New York’s largest firms once turned up their noses at defense work, dismissing it as unprofitable and messy.

But the defense bar has developed a certain cachet in recent years â€" a phenomenon coinciding with its becoming more and more lucrative. As companies and banks grapple with heightened government scrutiny, they rely on large teams of lawyers to conduct lengthy internal investigations.

“There is a large â€" and growing â€" demand for regulatory advice,” Thomas J. Perrelli, a partner at Jenner & Block, said on Wednesday in a statement announcing the firm’s hire of Timothy Karpoff, another former C.F.T.C. official.

At Skadden, Mr. Meister will join a deep bench of onetime government lawyers.

Mr. Zornow, a former federal prosecutor, recently represented BlackRock in a favorable settlement with the New York attorney general. Keith D. Krakaur, another former federal prosecutor, represents foreign banks facing various investigations. Stephen C. Robinson, a former federal judge, and John K. Carroll, who prosecuted Michael Milken, also work in Skadden’s white-collar group in New York.

“Skadden has some of my closest friends and is involved in many of the most important white-collar matters in the world,” Mr. Meister said. “It made perfect sense for me to return.”

His return, however, could reignite concerns about hopping between Washington and Wall Street. Even though Mr. Meister cannot contact the C.F.T.C. about official business for one year â€" and is forever banned from defending cases he had a role in investigating â€" his relationships in Washington could give him a leg up with clients.

“You have to worry about conflicts of interest,” said Dennis Kelleher, a former Skadden partner who is now the head of Better Markets, an advocacy group. “But Meister went after the industry without fear or favor. Assuming he does not now capitalize on the influence he gained at the C.F.T.C., I don’t see a problem.”

At the C.F.T.C., Mr. Meister filed a record number of actions against big names in finance, including JPMorgan Chase and Jon S. Corzine, the former chief of MF Global. The agency’s investigation into the manipulation of interest rates ensnared UBS and Barclays.

Mr. Meister, who was also a federal prosecutor, said his return to Skadden stemmed in part from the firm’s “collegial culture.”

Mr. Zornow is known for erecting a Bob Dylan “shrine” in his conference room. In his own office, Mr. Meister plans to hang a poster from the movie “Trading Places,” starring Eddie Murphy, which humorously exposed the legality of insider trading in commodities.

In 2010, the C.F.T.C. gained authority to outlaw such trading, a measure known as the “Eddie Murphy rule.”

Senator Asks Veterans Agency to Review How Financial Advisers Are Accredited

Senator Claire McCaskill of Missouri is asking the Department of Veteran Affairs to examine its process for accrediting thousands of financial advisers in the face of concerns over abuses of veterans’ benefits.

In a letter to Eric K. Shinseki, the secretary of veterans affairs, Ms. McCaskill, a Democrat who leads the Senate subcommittee on Financial and Contracting Oversight, wrote, “The V.A. may not be adequately managing and overseeing the accreditation process” of advisers.

Through a lax accreditation process, Ms. McCaskill said, the agency is effectively “providing unscrupulous or unqualified individuals with the opportunity to both abuse taxpayer dollars and directly harm our nation’s veterans.”

Across the country, as the vast baby boom generation retires, a cottage industry has sprung up around the Veterans Pension program. Under the V.A. program, war veterans who have low incomes or are disabled or over 65, can be eligible for as much as $20,000 a year. With retirement savings reduced by the financial crisis, a growing number of veterans have clamored for the benefit, seeking money to help cover the cost of assisted living or nursing homes.

As demand soars, the V.A.’s accreditation process, which allows advisers to prepare benefit applications for veterans, has become increasingly important to weed out unfit advisers, state and federal authorities said. But the process is so loose that prospective advisers are allowed to provide their own background information, including any criminal records.

Although the department accredits more than 20,000 advisers and gets more than 5,000 new applicants annually, the agency only has four full-time employees to review those applications, Ms. McCaskill said in her letter.

Once advisers secure the coveted accreditation, they rarely lose it, even if they are dogged by customer complaints or if their records are tarnished by regulatory actions. The V.A. has revoked the credentials of only two advisers.

Some accredited advisers sell financial products like annuities and trusts that are meant to mask veterans’ assets or income â€" arrangements that can entangle a veteran’s money for years or even decades. Others circumvent V.A. rules and charge hundreds or even thousands of dollars for advice that veterans can receive free.

The growing abuses surrounding the veterans’ benefit and the perils of the accreditation process were detailed in a front-page article in The New York Times last month.

In her letter, Ms. McCaskill referred to the article, emphasizing that it had been jarring to learn of “fraud and negligent representation of veterans by individuals who have received accreditation from the Department of Veterans Affairs.”

In a statement on Wednesday, a V.A. spokesman said the agency, which plans to respond to Ms. McCaskill’s letter, “is committed to providing veterans and their survivors with the benefits they have earned and deserve.”

In December, a V.A. spokesman said that the agency planned to perform more thorough background checks “as necessary.” The spokesman also said, “we realize there are some areas in the program that we could improve to ensure that individuals who obtain and maintain V.A. accreditation are qualified.”

Foundations Band Together to Get Rid of Fossil-Fuel Investments

Seventeen foundations controlling nearly $1.8 billion in investments have united to commit to pulling their money out of companies that do business in fossil fuels, the group plans to announce on Thursday.

The move is a victory for a developing divestiture campaign that has found success largely among small colleges and environmentally conscious cities, but has not yet won over the wealthiest institutions like Harvard, Brown and Swarthmore.

But the participation of the foundations, including the Russell Family Foundation, the Educational Foundation of America and the John Merck Fund, is the largest commitment to the effort, and stems in part from a push among philanthropies to bring their investing in line with their missions.

“At a minimum, our grants should not be undercut by our investments,” said Ellen Dorsey, executive director of the Wallace Global Fund, which is practically divested of fossil fuels already and is coordinating the effort among foundations. “If you owned fossil fuels in your investment portfolio, it became increasingly clear to foundations that they own climate change, and they’re potentially profiting from those investments,” at the same time as they make grants to fight the issue.

She said she expected several larger foundations to commit to the effort, which includes moving investments to renewable energy or other sustainability ventures, in the coming months.

Among the largest in the current group is the Park Foundation, with a portfolio worth roughly $335 million, and the Schmidt Family Foundation, with about $304 million, co-founded by Google’s executive chairman, Eric E. Schmidt.

The divestiture campaign is modeled on earlier efforts aimed at ending apartheid in South Africa and ceasing to support tobacco companies. Many groups are involved, but the movement has largely been escalated by a grass-roots organization, 350.org, whose name refers to 350 parts per million of carbon dioxide in the atmosphere, which some scientists say is the maximum safe level, a threshold already exceeded.

In addition to the foundations, 22 cities, two counties, 20 religious organizations, nine colleges and universities and six other institutions had signed up to rid themselves of investments in fossil fuel companies, frequently defined as the top 200 coal-, oil- and gas-producing companies identified in a report from the Carbon Tracker Initiative based in London.

The campaign’s expansion comes as institutions like public pension funds are changing their investment strategies to reflect a calculation of the so-called carbon bubble. That idea holds that most of the coal, oil and gas reserves owned by fossil fuel-based companies cannot be burned without dire climate consequences, meaning that the value of those companies will plummet once governments start strictly limiting emissions.

Some pension funds, like those of California and New York, are looking to pressure conventional energy companies to address the risks of climate change. But in some cities, like San Francisco and Boulder, Colo., officials are urging their pension funds to divest themselves of the investments.

Bill McKibben, president and co-founder of 350.org, said he had been encouraged by the spread of the argument “that fossil fuel companies as they’re currently incarnated are essentially rogue companies, that they have in their reserves far more carbon than any scientist thinks it’s safe to burn.”

Divestment advocates have run up against opposition from some of the major academic institutions, which argue that the move would have little practical effect on the activities of fossil fuel companies and that institutions would be better positioned to press for change through their roles as shareholders. Endowment officials have also said that their primary purpose is to maximize returns.
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“Universities own a very small fraction of the market capitalization of fossil fuel companies,” Drew Faust, Harvard’s president wrote in a statement in October of the university’s decision not to sell. “If we and others were to sell our shares, those shares would no doubt find other willing buyers. Divestment is likely to have negligible financial impact on the affected companies. And such a strategy would diminish the influence or voice we might have with this industry.”

But the foundation executives, whose organizations are at different stages of examining and shifting their investments, said they were convinced that the more compelling action was to take their money away.

Olivia Farr, chairwoman of the John Merck Fund, said there had been concern about financial performance among some board members at first. “But that was pretty quickly alleviated as we got excited about some of the new investments we were making,” she said, adding that the fund, which is about 97 percent divested of fossil fuel, was up roughly 20 percent last year.

Executives said they had become convinced that the move made economic sense.

“Freeing up resources through the divestment allows us to concentrate on the renewables future,” said Richard Woo, chief executive of the Russell Family Foundation, “and to really see the marketplace as a platform for this kind of change.”

Colleague of SAC Leader Was Not Alerted to Trades

The billionaire investor Steven A. Cohen kept one of his closest associates at SAC Capital Advisors in the dark about the hedge fund’s rapid selling of a substantial stock position in two drug companies, just days before the companies reported disappointing results of a clinical trial for an Alzheimer’s drug.

Chandler Bocklage, who for nearly a decade sat next to Mr. Cohen and helped the SAC founder make trades in his own multibillion-dollar account at the firm, said he learned about the big trade only after it had happened.

Mr. Bocklage, testifying on Wednesday at the insider trading trial of Mathew Martoma, a former SAC portfolio manager, said that when the results of the clinical trial were made public in July 2008, he thought the hedge fund had incurred big losses in shares of Elan and Wyeth.

“I was told after the fact that we weren’t involved anymore,” said Mr. Bocklage, who was called as a defense witness for Mr. Martoma. When asked how he learned of the trade, Mr. Bocklage said he believed he was told by Mr. Cohen. “I think Steve did, but I’m not sure.”

Federal prosecutors have charged Mr. Martoma with using inside information about the clinical trial to help Mr. Cohen’s firm avoid losses and generate profits totaling $276 million in shares of Elan and Wyeth. Prosecutors have said that Mr. Martoma was involved in the most lucrative insider trading scheme on record and that the scheme was indicative of a pattern of insider trading at the hedge fund.

Mr. Cohen has not been charged with any criminal wrongdoing. But prosecutors contend SAC began unloading its once-substantial share position in Elan and Wyeth after Mr. Martoma called Mr. Cohen at his home in Greenwich, Conn., and spoke with him for 20 minutes.

On Tuesday, Phillipp Villhauer, SAC’s head of trading execution, testified that Mr. Cohen instructed him on July 21, a day after Mr. Martoma’s phone call, to begin selling shares of Elan from the accounts that did not have “as many eyes” watching them.

Before Mr. Villhauer began selling the Elan shares, the hedge fund had a stake of roughly $700 million in shares of both companies. The stocks plummeted after Elan disclosed at a July 29, 2008, conference some potentially harmful side effects with the Alzheimer drug.

Mr. Bocklage, who testified that he worked “very closely with Steve,” said he normally would be aware of any trades made in Mr. Cohen’s account, referred to as the “COHE” account. But Mr. Bocklage said he could understand why the hedge fund might use less visible accounts to sell shares to avoid alerting other firms and hedge funds to what SAC was doing.

“I personally think Steve is the greatest trader of all time,” Mr. Bocklage said at one point. He noted that he mainly advised Mr. Cohen on industrial stocks.

The jury of seven women and five men also heard testimony on Wednesday from a former analyst with another hedge fund, Tokum Capital, who said he, too, had conversations with Dr. Sidney Gilman, an adviser to Elan on the drug trial who has testified that he provided Mr. Martoma with inside information about the troubled clinical drug trial.

Mr. Martoma’s lawyers questioned the former analyst, Rene Shen, about detailed notes he had taken of several meetings and phone calls with Dr. Gilman. The notes revealed that Dr. Gilman talked quite freely about the experimental drug to Mr. Shen.

Wall Street’s New Housing Bonanza

Wall Street’s latest trillion-dollar idea involves slicing and dicing debt tied to single-family homes and selling the bonds to investors around the world.

That might sound a lot like the activities that at one point set off a global financial crisis. But there is a twist this time. Investment bankers and lawyers are now lining up to finance investors, from big private equity firms to plumbers and dentists moonlighting as landlords, who are buying up foreclosed houses and renting them out.

The latest company to test this emerging frontier in securitization is American Homes 4 Rent. The company talked to prospective investors at a conference in Las Vegas last week about selling securities tied to $500 million of debt, according to people briefed on the matter.

American Homes 4 Rent, which went public in August, has tapped JPMorgan Chase, Goldman Sachs and Wells Fargo as its bankers for a debt deal that is expected to be sold by the end of the first quarter, these people said.

While this securitization market is still in its infancy, a recent Wall Street estimate put potential financing opportunities for the single-family rental industry as high as $1.5 trillion. Already some members of Congress and economists are worried about another credit bubble.

“The investment and lending opportunities are immense and perhaps just beginning,” Jade Rahmani, a real estate analyst with Keefe, Bruyette & Woods, wrote in a recent report.

In just the last two years, large investors have bought as many as 200,000 single-family houses and are now renting them out, according to the K.B.W. report.

The private equity giant Blackstone Group sold the first single-family rental securitization of its kind last fall, a $479 million bond, attracting six times as many investors as the private equity firm could accept, a person involved in the deal said.

Investors like mutual funds and insurance companies bought slices of the bond, which are backed by the rental homes owned by Blackstone’s company, Invitation Homes.

The rental business is still dominated by landlords who own and manage only a handful of properties. Wall Street has found a way to finance them, too. Cerberus Capital Management and Blackstone have started businesses that lend to small-time and medium-size investors.

And there are discussions about bundling many of these small loans and securitizing them also.

“That’s the part of the business that will take off,” said Stephen D. Blevit, a lawyer at Sidley Austin. “Providing cheap financing to mom-and-pop investors who save their pennies, buy a few properties and do all the maintenance themselves.”

What the new securitization boom will mean for homeowners and renters is less clear.

Wall Street may be clamoring to lend to investors in single-family homes, but it is still difficult for millions of Americans to qualify for a mortgage. The easy financing could give investors the upper hand in bidding for homes on the market.

Representative Mark Takano, Democrat of California, whose district includes the Inland Empire just east of Los Angeles, which was hit by a tidal wave of foreclosures, has asked the House Financial Services Committee to hold hearings on the impact that single-family rental bonds could have on the housing market.

“Proper oversight of new financial innovation is key to ensuring we don’t go down the same road of the unchecked mortgage-backed security and create an unsustainable bubble that will wreak havoc when it bursts,” Mr. Takano said in a letter to the committee last week.

Securitization, however, could provide a pick-me-up to Wall Street’s mortgage machine, a once-mighty profit engine that has never fully recovered from the financial crisis. Bankers estimate that single family-rental bond deals could total as much as $7 billion this year and eventually grow to about $20 billion a year.

For landlords like American Homes 4 Rent, securitizing debt would provide them with more leverage to buy more homes. It would also increase their profits by lowering their borrowing costs.

With securitization, landlords could in theory put as little as 25 percent of equity into their properties, while borrowing the rest. Credit lines from banks typically require 40 percent equity.

Last month, economists at the Federal Reserve warned that if large landlords took on too much debt, they might feel pressure to hold fire sales of their properties, flooding the housing market with supply.

“Financial stability concerns may become more significant should debt financing become more prevalent or if the share of homes owned by investors in certain markets rises significantly further,” the Fed economists wrote.

They added that it was important to monitor the emergence of single-family rental securitization for signs that it could destabilize “financial markets.”

For now, though, companies like American Homes 4 Rent are earning their early investors big profits. Many tenants used to own the houses they are now renting from the company, said a person with knowledge of the matter.

A spokesman for the company, which owns 21,000 homes, did not return calls requesting comment.

The company, whose executives are based in Agoura Hills, Calif., started out with little leverage when it began buying homes as a private venture founded by B. Wayne Hughes with money from the Alaska Permanent Fund Corporation in the summer of 2012, said the corporation’s executive director, Michael J. Burns.

The Alaska fund draws money from royalties paid by big oil companies and doles out annual dividend checks to every state resident. Last year, those checks totaled $900 each.

Mr. Burns said his investment staff had heard Mr. Hughes was buying foreclosed and other inexpensive houses as part of a private venture. Mr. Hughes, who founded the company Public Storage and is listed on the Forbes 400 richest Americans, agreed to meet the Alaska investment team at his office in Malibu, Calif.

“Wayne said he thought this was the biggest real estate opportunity of his lifetime,” Mr. Burns recalled.

With an initial $250 million investment from Alaska in the summer of 2012, Mr. Hughes’s fund went on a buying spree in Arizona, California and Nevada. American Homes 4 Rent now rents out houses in 22 states.

The company is a real estate investment trust, a structure that has tax advantages over other companies but tends to borrow heavily. Mr. Burns says leverage is “a fact of life” for a company like this. Alaska’s equity investment of $625 million in the company has gained about 17 percent in value.

“We have been very pleased with how this turned out,” he said.

Still, Mr. Burns said that it had been “heart wrenching” at times acquiring homes that families have had to turn over to the bank.

“Some other family is going to move in and make it their home,” he said.

Blue Bottle Raises $25.75 Million, Including From High-Powered Friends

Few brands are as beloved in the tech community as the Blue Bottle Coffee Company, a nearly 12-year-old purveyor of gourmet brews made in painstakingly detailed fashion.

So perhaps it’s no surprise that some of the biggest names in Silicon Valley â€" including the Instagram co-founder Kevin Systrom and the Twitter co-founder Evan Williams â€" are contributing to the coffee seller’s latest fund-raising round.

Blue Bottle’s chief executive, James Freeman, confirmed to DealBook on Wednesday that his company had raised $25.75 million in a new round of financing. Besides Mr. Systrom and Mr. Williams, the investor group also included Google Ventures, True Ventures and “a group of mutual funds and investment vehicles” organized by Morgan Stanley Investment Management.

The fund-raising round â€" first reported by Kara Swisher on ReCode â€" had been in the works for only a few months, Mr. Freeman said. After all, Blue Bottle had raised just under $20 million in October 2012.

But the company’s chief financial officer, David Bowman, told him that a group of bankers from Morgan Stanley wanted to meet for three hours. At the time, Mr. Freeman was less than enthusiastic.

“I talked to David and said, ‘Jeez, three hours, really?’ ” he said, laughing. “But they were lovely and really knowledgeable. I really felt bad for thinking bad about them.”

At the meeting, the Morgan Stanley executives brought morning buns from Tartine, a popular San Francisco bakery, while Mr. Freeman and his cohort brought the coffee. What emerged from the talks was the sense that the company could raise enough money to finance its growth for the next four to five years.

Blue Bottle eventually brought in some investors from its previous fund-raising round as well, including the pro skateboarder Tony Hawk.

Why are technology types so interested in the company’s decidedly old-school coffee? Mr. Freeman guesses that the care and special attention to detail that his employees pay to the brewing process appeal to hacking culture. It’s an attraction that dates back to when Jack Dorsey all but set up shop at the company’s Mint Plaza location in San Francisco. (“I would have traded him coffee for a tiny sliver of Square,” Mr. Freeman joked.)

Here’s what True Ventures had to say about the fund-raising:

We believe Blue Bottle Coffee is at the forefront of a “consumer movement” or mega-trend in which consumers are moving to higher quality, artisanal micro-roasters of coffee, where quality, attention to detail, beauty and a distinctive experience are being sought over more mainstream alternatives.

While Mr. Freeman declined to comment on the privately held company’s performance, other than allowing that same-store sales are up, he said that the goal remained trying to bring Blue Bottle’s vision of gourmet coffee to more locations beyond its current lineup of 11 locations in the Bay Area and New York City.

Already, the coffee brewer has signed up seven or eight leases for locations this year, including in Los Angeles. And Mr. Freeman promoted what he said were improving standards for both coffee and employee services.

But can Blue Bottle grow anywhere near as big as Starbucks, which serves as a useful counterpoint? Mr. Freeman isn’t sure.

“Could we be the first 20-store chain, or 50- or 100-store chain that doesn’t suck?” he said. “What’s important to me is that the coffee gets better every year.”

Did Google Really Lose on Its Original Motorola Deal?

Updated, 6:53 p.m. |

The deal universe is abuzz about how Google lost billions of dollars in selling Motorola Mobility to Lenovo for $2.91 billion. After all, the technology giant paid $12.5 billion for Motorola, so clearly it would take a $9.5 billion hit, right?

Not so fast.

Breaking down the admittedly messy math shows that Google didn’t exactly lose nearly $10 billion on the deal. Here are some back of the envelope calculations.

• When Google bought Motorola, the hardware maker had about $3 billion in cash on hand and nearly $1 billion in tax credits. So that brings the original deal’s price down to about $8.5 billion.
• Then, Google sold Motorola’s set-top box business to Arris for nearly $2.4 billion. That lowers the price down to roughly $6.1 billion.
• Now, Google is selling Motorola Mobility â€" primarily the handset business, along with a few patents â€" for $2.9 billion. So we’re at about $3.2 billion.

It’s worth noting a few more things. In a regulatory filing in 2012, Google disclosed that it valued Motorola’s overall “patents and developed technology” at about $5.5 billion.

Under the terms of the deal announced on Wednesday, Google will hold onto the bulk of Motorola Mobility’s patents. By comparison, the group of companies like Apple Inc. and Microsoft that bought Nortel Networks‘ patents out of bankruptcy paid about $4.5 billion in total. So Google got a pretty good deal.

Moreover, it has drawn revenue from Motorola’s patents since the transaction closed, putting a further dent in that deal’s cost.

Of course, these calculations ignore the strategic benefits Google has enjoyed from the deal. It locked up important patents to defend its Android ecosystem, while climbing into a position to pick the right strategic partners for the Motorola hardware businesses.

Admittedly, Motorola has also run up millions of dollars worth of operating losses during its time as a Google subsidiary. But all told, the technology giant did not do so bad after all.

Obama’s Speech Raises Hopes of Advocates of Mortgage Finance Overhaul

The president’s State of the Union address on Tuesday provided a glimmer of hope for those looking for action to revamp America’s mortgage system.

In a brief nod in the address, and in an elaboration of his proposals posted on the White House’s website, President Obama reiterated his commitment to fixing the system’s problems, albeit at the end of a long list of executive actions that focused on job creation, immigration reform and other domestic issues.

“Since the most important investment many families make is their home,” Mr. Obama said on Tuesday night, “send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of home ownership alive for future generations.”

The White House document further outlined a plan to end the business model of the mortgage finance giants Fannie Mae and Freddie Mac and ensure widespread access to mortgages. “The president has made clear that it is time to turn the page on an era of reckless lending and taxpayer bailouts, and build a new housing finance system that will provide secure home ownership for responsible middle class families and those striving to join them,” the document said.

Mr. Obama’s housing pledges are not exactly new - he has been calling for an overhaul of Fannie Mae and Freddie Mac for years. But some listeners are hopeful that the comments do more than just repeat old rhetoric.

“There’s nothing substantively new, but what it does do is that it does provide a call to action, it does push to make this a timely issue,” said Alison Hawkins, the vice president of communications at the Financial Services Roundtable, a banking and insurance industry trade group. “The sense on the Hill is that if this doesn’t move soon, it’s really not going to move.”

Fannie and Freddie process the majority of all private-sector loans. Mr. Obama’s proposal mentioned legislation created by Senators Bob Corker and Mark Warner, which outlines a plan to unwind the two organizations. The bill includes provisions to establish a Federal Mortgage Insurance Corporation, which would act as a government backstop for private-sector loans. Think Federal Deposit Insurance Corporation, but for mortgages.

The proposal also refers to Senators Tim Johnson and Mike Crapo, who are working on a bill to overhaul the Federal Housing Administration, which is involved in about a quarter of all mortgages. Ms. Hawkins said she hoped that meant that final legislation was on the way.

“The word on the street is that they are working on it, but nobody has actually seen the legislation yet,” Ms. Hawkins said.

Fannie and Freddie participate in the secondary mortgage market, which means they don’t actually make loans to prospective home buyers. Instead, they buy up mortgages other lenders have made, or buy and sell securities made up of mortgages that have been bundled together. That means that banks lending directly to consumers have a way to get those loans off their books. Theoretically, that frees up more money that can be used to make more loans.

Ending Fannie and Freddie poses a number of challenges. One of the biggest is whether the private sector can rebuild that secondary market on its own. The White House, therefore, faces a delicate balancing act in trying to shift its role in the mortgage market without destabilizing it.

“There’s one view that says the secondary mortgage market would not be able to recreate itself without some government entity” like the Federal Mortgage Insurance Corporation “being there as a backstop,” said Lawrence White, an economics professor at New York University’s Stern School of Business. “The House view is, let’s just get Fannie and Freddie out of there and the mortgage markets will take care of themselves just fine.”

Mr. Obama isn’t just concerned with Americans’ ability to buy homes. The need for affordable rental housing for the middle class was tucked at the very end of his proposal on housing.

“I think that’s terrifically important,” Professor White said. “Rental housing is often the forgotten element of a lot of rhetoric about housing. Even in the president’s speech last night, it was about the American dream, which is supposedly home ownership, but surely if we have learned anything over these past five, eight years, it’s that home ownership is not for everybody.”

E.U. Bank Proposal Arrives, but Late to the Party

BRUSSELS â€" The European Union on Wednesday revealed a long-awaited proposal to reduce the systemic risk posed by big banks, a measure that would bring the bloc’s regulations more closely into line with those of the United States. But it is unlikely to become law anytime soon.

Presenting the plan at a news conference here, Michel Barnier, the commissioner responsible for overseeing financial services, described it as “the final stone in the structure of our ambitious financial reform.”

Like the Volcker Rule in the United States, the proposal aims to limit the likelihood that big banks will again endanger the financial system with the kind of risky behavior that brought on the financial crisis.

The proposal would affect “around 30” of the largest European banks and a handful of foreign banks with big European subsidiaries, institutions that Mr. Barnier described as being “too big to fail, too expensive to bail out and too complex to resolve.”

Banks would be barred from proprietary trading, or trading for their own profit. It would require institutions, guided by national regulators, to spin off some risky operations into subsidiaries to ensure that taxpayer-guaranteed deposits are not used to finance those activities â€" a step beyond the “ring-fencing,” or isolating, of depositors’ assets required under Britain’s Vickers Rule. And it would require institutions to disclose more information on their so-called shadow banking activities, where they lend against securities and trade in a derivatives market many times larger than the world economy.

“The proposal does not call into question the concept of a universal bank,” Mr. Barnier said. “We’re looking for a structured universal bank.”

The European Banking Federation, an industry lobbying group, said in a statement that it was “deeply concerned” about the proposal. It said the measure could separate activities “that are client-driven and useful for the real economy,” like market-making, which ensures liquidity for customers.

Despite the obvious zeal with which Mr. Barnier presented his plan, the proposal was weaker than had been expected when a group led by Erkki Liikanen, governor of the Finnish central bank, proposed a structural overhaul of the European banking sector in October 2012. It was also released far too late to be adopted under the current European Parliament, which has its final session in mid-April. Mr. Barnier, whose term as commissioner ends this year, has an eye on succeeding José Manuel Barroso as president of the European Commission, the European Union’s executive body. He defended his decision to bring out the proposal now, even though the incoming Parliament will not be bound to consider it.

“It would have been further watered down if I hadn’t come out with it,” he said.

Arlene McCarthy, vice chairwoman of the Parliament’s Committee on Economic and Monetary Affairs, said she was happy that the proposal enshrined the principle that depositors’ money must be protected, but she noted that opponents of banking reform had guaranteed there would be no “E.U.-harmonized approach.”

“It can’t be done under this Parliament,” she said. The new Parliament will “decide whether to pick this up and run with it.”

Ms. McCarthy said it was unfair to blame the late arrival of the proposal on Mr. Barnier. Rather, she attributed it to an “an unholy alliance,” led by the banking lobby and member states including Britain, France and Germany, which were out to defend their national banking sectors, and rightist members of the European Parliament who sought to resist any further regulation.

The announcement of tighter regulations for so-called too-big-to-fail institutions comes after landmark initiatives to strengthen Europe’s march toward a full banking union. The European Union has given the European Central Bank responsibility for supervising big banks in the 18-country euro zone. It has also taken a significant step toward creating a pan-European authority for winding down failing institutions, though that initiative is faltering against the same time constraints that have doomed Mr. Barnier’s plan.

Nicolas Véron, a fellow with the Bruegel Institute in Brussels, suggested that political considerations had led Mr. Barnier to release the plan now. “Future commissioners can’t ignore it,” he said, “but there will be scope for them to take a completely different approach. They could completely rewrite it.”

Google Is Selling Its Mobility Unit to Lenovo for About $3 Billion

Updated, 5:51 p.m. |
Google is selling its Motorola Mobility smartphone unit to Lenovo for about $2.91 billion, the companies announced on Wednesday.

Google’s Mobility unit includes handset technology that the search giant acquired when it bought Motorola Mobility for $12.5 billion in 2011.

That  acquisition was Google’s largest by far, and the biggest bet that Larry Page, its co-founder, has made since returning as chief executive in 2011. Google wanted Motorola’s patents and a cellphone maker to help its mobile business, and named Dennis Woodside, a former Google operations executive, as C.E.O.

Selling a major portion of the business would be a concession of defeat for Google and particularly for Mr. Page. Motorola has continued to bleed money, aggravating shareholders and stock analysts, and its new flagship phone, the Moto X, did not sell as well as expected.

However, this is the second divesture Google has made from the assets it acquired after buying Motorola Mobility, which was its largest ever acquisition. In 2012, just months after that deal, Google sold Motorola Home, which included its set-top boxes and cable modems, to Arris for $2.35 billion.

Google will also retain most of the patents it acquired as part of its original deal for Motorola, while granting Lenovo a license to use certain ones for its new handsets.

And in a blog post on Wednesday, Mr. Page characterized the initial Motorola deal as more about patents than hardware. “We acquired Motorola in 2012 to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users,” he said.

For its part, Lenovo appears to be building a comprehensive business in simple computers. Once known primarily as a maker of personal computers, last week Lenovo paid $2.3 billion for a big part the computer server business of IBM. Already the world’s largest maker of PCs, the IBM purchase got Lenovo about 7.5 percent of the world market for low-margin servers based on off the shelf semiconductors.

Lenovo’s shopping spree may be driven by the necessity of moving into other markets. Last year, the world PC market contracted by 10 percent, according to IDC, to 314.5 million units.The reason is that people now buy smartphones and tablets instead of PCs. While IBM executives said they could not make a sufficient profit in commodity servers, Lenovo may hope to build an economy of scale buy buying chips for both PCs and servers in even greater bulk.

The same case could be made for phones, where Apple and Samsung have taken share from almost all other suppliers. According to NDP Group, in the U.S. market, the largest for high-end smartphones, Apple and Samsung have 68 percent of the market. The rest is divided up among a number of players, including Motorola Mobility, HTC, and Blackberry. While phones use different kinds of chips than PCs or servers, many parts and much of the contract manufacturing is done by the same companies. With more products, Lenovo can squeeze its suppliers harder.

“We will immediately have the opportunity to become a strong global player in the fast-growing mobile space,” Yang Yuanqing, Lenovo’s chief executive, said in a statement. “We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business.”

Away from the United States, Lenovo may be concerned about the rise of the smartphone market in its home country. China’s smartphone market includes, aside from the U.S. players, such local manufacturers as Huawei, ZTE, and Xiaomi. Products from all of these manufacturers are increasingly well-regarded, and have made inroads in several markets outside the U.S.

“It makes strategic sense for both google and Lenovo,” said Andrew Costello, a principal at IBB Consulting. “It will give Lenovo a strong brand in the mobile space outside of China that they don’t have today, and it gives them deep operator relationships with AT&T and Verizon. And for Google, they’re able to focus on the services side, which is what they’re best at, and retain the patent holdings.”

Google will receive $660 million in cash, $750 million worth of Lenovo shares and a three year promissory note worth $1.5 billion.

People close to Lenovo say they believe the deal will win approval from the Committee on Foreign Investment in the United States.

Credit Suisse is advising Lenovo, while Lazard is advising Google.

Law Enforcement Strikes Back in Bitcoin Hearing

Law enforcement officials testified on Wednesday that virtual currencies like Bitcoin have opened up new avenues for crime that government has not been able to keep up with.

The most forceful statements came from a prosecutor with the United States attorney’s office in Manhattan, Richard B. Zabel, during the second day of hearings about virtual currencies held by New York’s top financial regulator, Benjamin M. Lawsky.

Mr. Zabel went through a list of six ways in which virtual currencies are more prone to crime than current forms of money transfer, including the ease with which money can be laundered over borders at the click of a mouse.

The testimony of Mr. Zabel and Cyrus Vance, the Manhattan district attorney, was a blow to Bitcoin advocates who have said that digital money carries no more risk than ordinary money and should not be treated with harsher regulations.

Both Mr. Zabel and Mr. Vance said that they needed more tools than they now have to stem the tide of problems cropping up with virtual currencies as they have become more popular.

“Whatever weaknesses they have must be addressed much more seriously,” Mr. Zabel said.

Mr. Lawsky has indicated that Bitcoin is becoming popular enough that regulators need to create regulations that can encourage its growth but limit illegal activity. The price of an individual Bitcoin has risen more than 5,000 percent over the last year, but there has also been a growing list of serious crimes committed in the Bitcoin network, which government officials have struggled to clamp down on.

For their part, Bitcoin advocates have said that virtual currencies are no more prone to crime than credit cards or cash. One of the most popular arguments put forward is that transactions done by criminals using Bitcoin are easy for law enforcement to trace because of the public ledger where transactions are recorded. Earlier this week, Mr. Zabel’s office unsealed a complaint against two men accused of helping exchange Bitcoins for people interested in making drug purchases.

On Tuesday, during the first day of the hearings, Tyler Winklevoss, a Bitcoin investor with his twin brother, Cameron, said that “Bitcoin is a terrible place for criminals to conduct criminal activity” because of the public ledger.

But Mr. Zabel said that while it might be possible to find the computer that a particular Bitcoin purchase came from, digital money users have countless ways to cover their tracks that are not available to people going through traditional banks.

Mr. Zabel was involved in the team that tracked down Ross Ulbricht, whom the authorities contend is the owner of the Silk Road online market, where drugs and child pornography were available. Mr. Ulbricht used a so-called Tor network to obscure himself, the authorities said, and Mr. Zabel said it was only after overcoming “substantial hurdles” that his office found Mr. Ulbricht.

Another argument put forward by virtual currency advocates is that cash is actually more attractive to criminals than new forms of digital money, because cash can be moved without any digital trace. Mr. Zabel struck back at that idea by pointing to the difficulty of moving large amounts of cash around the globe.

“Although cash is also an anonymous form of currency, there are significant barriers to transferring bulk cash out of the banking system,” he said.

The people representing the Bitcoin industry at the hearings pushed back against any strenuous new regulations on virtual currency companies. But at another panel on Wednesday, top executives of two of the most prominent Bitcoin companies said they were hoping that Mr. Lawsky does provide more regulatory clarity so that everyone will feel more comfortable using digital money.

“Regulation could be a good thing,” said Fred Ehrsam, the co-founder of Coinbase, the largest middleman for Bitcoin transactions.

Regulators around the world have been grappling with the appropriate way to treat Bitcoin, coming up with very different approaches. The Chinese government recently made many types of virtual currency transactions illegal. The hearings in New York drew a global audience. Mr. Lawsky said that viewers from 108 different countries tuned in to the webcast his office set up.

Itaú Unibanco Buys Controlling Stake in CorpBanca of Chile

SÃO PAULO, Brazil - The Brazilian bank Itaú Unibanco has acquired a controlling stake in the Chilean bank CorpBanca, a move that follows its growing ambitions to expand in Latin America.

The deal, announced on Wednesday, will be a stock-and-cash transaction. Itaú Unibanco will provide its Chilean unit, Itaú Chile, with $652 million in new cash. The Chilean unit will then merge with CorpBanca to create the new entity, to be named Itaú CorpBanca. Itaú Unibanco will also obtain 172 billion shares in CorpBanca, valued at about $2.2 billion, based on Tuesday’s stock price and Bloomberg data.

Itaú Unibanco will obtain a 33.58 percent controlling share in Itaú CorpBanca in one of the largest financial transactions in Latin America in years. As part of the deal, Itaú CorpBanca will also control CorpBanco and Itaú Unibanco’s entities in Colombia. CorpBanca’s assets in Colombia include Santander Colombia which it acquired in 2012.

Based on Tuesday’s prices, the new entity has a $59 billion market capitalization. It will be among the largest banks in Chile and Colombia, with $45 billion in assets and $34 billion in total loan portfolio.

The deal requires approval by regulators in Brazil, Chile, Colombia, Panama and the United States, as well as by shareholders. The companies said they would file for regulatory approvals in March and expect the transaction to close by the fourth quarter.

Jorge Andrés Saieh, chairman of CorpBanca, said during a conference call on Wednesday that he had already been in discussions with regulators and that he did not expect to have any issues with approvals.

Mr. Saieh said he was in negotiations for over a year. He will become chairman of Itaú CorpBanca. Boris Buvincic, the chief executive of for Itaú Chile, will be the first chief executive of the new entity.

Itaú Unibanco, with $447.5 billion in assets as of the third quarter last year, has sought to tap into the Chilean market for years. Out if its $19.9 billion Latin American assets outside of Brazil, $11.8 billion come from Chile according to 2013 third-quarter figures.

Itaú Unibanco moved into Chile in 2006 when it acquired Bank of Boston’s operations there. In 2011, it acquired HSBC’s premium banking services.

The deal comes at a time when several major Brazilian banks have been seeking to expand in the region.

BTG Pactual has recently made acquisitions in Chile, Peru, and Colombia. In the first half of this year, it expects to get banking licenses in Chile and Colombia, according to the Brazilian newspaper Estadao. Bradesco BBI is also increasingly focused on regional transactions.

Citigroup Joins Rivals in Permitting Junior Bankers to Take Saturdays Off

Memo to junior bankers at Citigroup: You can soon join your friends at other Wall Street banks in taking Saturdays off.

Citigroup said internally on Wednesday that it was making an effort to improve the lives of the analysts and associates in its investment bank, the two lowest employee levels in that division. Those junior bankers are now encouraged to stay out of the office from 10 p.m. on Friday through 10 a.m. on Sunday. Citigroup also said on Wednesday that junior bankers were expected to take all of their annual vacation days.

The new policy follows similar moves by some of the biggest banks on Wall Street. Goldman Sachs recommended last year that analysts take weekends off whenever possible, while JPMorgan Chase plans to ensure that young employees have one “protected weekend” set aside for rest each month.

Credit Suisse recently discouraged analysts and associates from working on Saturdays, while Bank of America Merrill Lynch said that junior bankers should take four days off a month, on the weekends

While these guidelines might seem like punishment to workers in other industries, they are intended as a bit of relief for Wall Street’s junior bankers, who regularly work into the wee hours and sometimes around the clock. For these employees, weekend work is common.

The potential consequences of such a grueling schedule came into focus after the death of a 21-year-old intern in the London office of Bank of America Merrill Lynch last year. His death was determined to have been caused by epilepsy, and unconfirmed reports on social network forums suggested that he had worked through three consecutive nights as part of the internship.

Analysts and associates should not try to get around the new rules by working from home, Citigroup said in its memo. “We do not expect them to log on remotely to work during this time,” said the guidelines, which were reviewed by DealBook.

“However, we would expect that they will continue to check their email in the event that any business critical issues arise,” the bank said.

The policy, which was reported earlier by Dealbreaker, applies to junior bankers in two groups: corporate and investment banking, and capital markets origination. It takes effect on Feb. 7.

Dow Chief Says Buffett Supports Him in Loeb Fight

Dow Chemical may have expanded its stock buyback program and dividend, but it showed little inclination to make further concessions to activist investors like Daniel S. Loeb.

And according to the chemical maker’s chief executive, Andrew Liveris, that suits one major shareholder just fine.

Mr. Liveris told CNBC on Wednesday morning that he heard the following words from none other than Warren E. Buffett: “Frankly, we think you’ve been running the company for the investors who will stay versus the investors who will leave. And frankly, keep doing that.”

Mr. Buffett’s Berkshire Hathaway has ties to Dow through the $3 billion worth of convertible preferred shares that it issued to the chemical maker in 2008 to help it buy Rohm & Haas.

Mr. Liveris also believes that the company has already done one of the things that Mr. Loeb had asked for:

“It is almost impossible to think of Dow as a petrochemical company anymore,” Mr. Liveris said. “We’ve actually done the divestment of what might be called the traditional petchem business.”

Sotheby’s Sets Financial Path. Now, for the Art.

Sotheby’s is revamping its financial science â€" now, for the art. The auctioneer’s stock popped, at least initially, on the news on Wednesday of a $300 million special dividend and new criteria for investment. The plan addresses some aspects of the critique by the activist investor Daniel S. Loeb. But governance and broader strategy remain at issue.

The review undertaken by Patrick McClymont, the former Goldman Sachs investment banker hired as Sotheby’s finance chief in September, looks thorough. He has concluded that the firm’s art auction and private sales business should be funded separately from its art lending activities. Using more outside leverage for the finance side will help release cash to pay the dividend.

Mr. McClymont has also identified $22 million in cost cuts this year, roughly 10 percent of analysts’ estimated pretax profit, according to Thomson Reuters. That should somewhat appease Mr. Loeb, whose broadside last fall included claims of wasteful spending. Mr. McClymont also set out investment targets for the newly named agency and financial services businesses â€" a 15 percent return on invested capital and a 20 percent return on equity, respectively â€" in the absence of which, capital would be periodically returned to shareholders.

It was all rational and laid out with unusual clarity, which pleased analysts on Wednesday’s conference call. It should also show Sotheby’s shareholders that there’s a transparent framework in place, even if some might argue the company could have been more aggressive and paid out a bigger sum.

Perhaps more important, though, Mr. Loeb’s complaints, some of which have merit, were mostly aimed at Bill Ruprecht â€" the chairman, chief executive and president of Sotheby’s â€" and the company’s board, calling into question its strategy in crucial areas like red-hot contemporary art and use of the Internet.

The financial review wasn’t intended to address those issues or the poison pill provisions that Sotheby’s introduced after Mr. Loeb revealed a 9.3 percent stake in October. It’s perhaps telling, however, that when the troubled retailer Abercrombie & Fitch abandoned its takeover defenses, stripped its chief executive of his chairman title and added new board members on Tuesday, its shares bounced 5 percent. Sotheby’s doesn’t have Abercrombie’s problems, but checks on executive power and the prospect of being acquired can be worth just as much as hard cash.

Richard Beales is assistant editor for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

China’s Largest Lender Gains Entree Into Trading in London

LONDON - The Industrial and Commercial Bank of China agreed on Wednesday to buy a controlling interest in Standard Bank’s global markets business in London for about $765 million in cash.

The deal makes it the first large Chinese lender to have a substantial trading operation in London and could be a precursor to investment in Britain by other Chinese financial companies.

The British government has been actively recruiting investment from China, including saying last year that it would ease the roadblocks to Chinese banks opening branches in the British capital.

“The large amount of commodities trading and the consequential needs for hedging resulting from the development of the Chinese economy, as well as financial reforms such as the deregulation of interest rates and foreign exchange rates, along with the two-way opening-up of capital markets, have posed new demands for the transformation of the service capabilities and business model of Chinese banks,” said Jianqing Jiang, chairman of I.C.B.C., as China’s largest bank is known.

“This transaction will elevate I.C.B.C.’s global markets capabilities in business development, risk management, operations, and innovation in order to better serve our clients’ needs,” he added.

Under terms of the transaction, Standard Bank, the largest bank in Africa, will sell a 60 percent stake in its London-based markets business to I.C.B.C. and grant the Chinese bank a five-year option to buy another 20 percent of the unit.

The entity being sold focuses on commodities, fixed income, currency, credit and equities trading.

As part of the transaction, the state-controlled bank will buy a 20.1 percent stake in Standard Bank.

“We are excited about the prospects of deepening and extending our cooperation with I.C.B.C. through the global markets platform that we have built outside Africa,” said Ben Kruger, joint chief executive of Standard Bank. “The strength and reach of I.C.B.C., our strategic partner, will open a wide range of new business opportunities for the global markets business, while continuing to serve Standard Bank’s African clients as their economies continue to grow and develop.”

I.C.B.C. has more than 4.6 million corporate clients and 410 million individual customers.

Last fall, the British government engaged in a five-day trade mission to Beijing where it announced a series of measures it hoped would make London a global center for Chinese investment and trading in China’s currency.

George Osborne, Britain’s chancellor of the Exchequer, said in October that the Prudential Regulation Authority, a financial regulator, would begin discussions to allow Chinese banks to open wholesale branches, rather than subsidiaries, for the first time.

By opening branches, a Chinese bank will be able to use its parent company’s capital to meet British rules for reserves and other financial requirements. British officials hope it will spur Chinese investment. The five largest banks in China, including I.C.B.C., already have subsidiaries in Britain.

In October, the British government also reached an agreement that allows investors in London to apply for a license to invest directly in Chinese stocks and bonds in the Chinese currency, the renminbi. It is the first Western country to reach such an agreement.

In the past, investors had to go through a counterparty in Hong Kong to invest in Chinese stocks and bonds, which could carry a higher cost.

Britain is also a Western trading hub for the renminbi, accounting for 62 percent of global trading in that currency outside of China and Hong Kong.

After the deal, Standard Bank will retain the investment banking, investment management and London-based services businesses. Those business lines remain a “critical part” of Standard Bank’s business in Africa and will be incorporated in a new British-based entity or other Standard Bank entities.

The deal is subject to shareholder approval, as well as regulatory approval in South Africa, China, Britain and Singapore. The transaction is expected to be completed in the fourth quarter of this year.

Standard Bank operates in 18 African countries, including South Africa, and has about $171 billion in assets. It also owns a controlling stake in the South African insurance and financial services company, Liberty Holdings.

The bank has operated in South Africa for 150 years and employs about 49,000 people.

Standard Bank said it expected to use proceeds from the sale to increase the size of its operations in South Africa and the African continent.

Wall Street Is a Short-Attention Span Theater for Obama’s Speech

Investors had a there’s-not-much-to-see-here reaction to the president’s State of the Union address and turned their focus quickly to something else on Wednesday morning

The Dow Jones industrial average, the Standard & Poor’s 500-stock index and the Nasdaq were all down less than 1 percent Wednesday morning, the day after President Obama’s speech. He touched on more Main Street-focused issues, including immigration reform, jobs and the environment, and investors appeared to be more interested in gleaning whatever information they can about cuts in the Federal Reserve’s bond-buying program when the central bank issues its statement at 2 p.m. after a two-day meeting.

“What’s going on this morning is very much a continuation of what’s been going on this year,” said Barry Knapp, the head of Barclays US equity portfolio strategy.

A muted reaction is fairly typical to a State of the Union address, which is generally sterile and scrubbed over. The Dow has almost never moved more than 2 percent the day after an address, according to data compiled by the Wall Street Journal Market Data Group that tracked reactions back to 1961.

The worst response to a presidential State of the Union address came in 2000, when the Dow fell 2.6 percent the day after President Bill Clinton’s speech on Jan. 27. The speech came amid investor fears about employment costs and higher interest rates.

The Dow rose 1.9 percent after President George H.W. Bush delivered his address on Jan. 29, 1991, the biggest market reaction to a president since 1961. While the Gulf War raged, Mr. Bush addressed a banking overhaul that would help break down barriers between commercial banks, investment banks and stock brokerage firms.

Analysts had been listening on Tuesday night for clues about tax reform and mortgage lending. While President Obama made a passing reference to corporate tax reform, those remarks did not appear to have much of an effect on after-hours trading when they came up.

“I looked to see if there was a market reaction, and there was not one,” Mr. Knapp said.

One reason, Mr. Knapp suggested, could have been that tax reform was mentioned in the context of job creation, a focus throughout Mr. Obama’s speech.

“Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation,” President Obama said. “Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs right here at home.”

Wall Street Is a Short-Attention Span Theater for Obama’s Speech

Investors had a there’s-not-much-to-see-here reaction to the president’s State of the Union address and turned their focus quickly to something else on Wednesday morning

The Dow Jones industrial average, the Standard & Poor’s 500-stock index and the Nasdaq were all down less than 1 percent Wednesday morning, the day after President Obama’s speech. He touched on more Main Street-focused issues, including immigration reform, jobs and the environment, and investors appeared to be more interested in gleaning whatever information they can about cuts in the Federal Reserve’s bond-buying program when the central bank issues its statement at 2 p.m. after a two-day meeting.

“What’s going on this morning is very much a continuation of what’s been going on this year,” said Barry Knapp, the head of Barclays US equity portfolio strategy.

A muted reaction is fairly typical to a State of the Union address, which is generally sterile and scrubbed over. The Dow has almost never moved more than 2 percent the day after an address, according to data compiled by the Wall Street Journal Market Data Group that tracked reactions back to 1961.

The worst response to a presidential State of the Union address came in 2000, when the Dow fell 2.6 percent the day after President Bill Clinton’s speech on Jan. 27. The speech came amid investor fears about employment costs and higher interest rates.

The Dow rose 1.9 percent after President George H.W. Bush delivered his address on Jan. 29, 1991, the biggest market reaction to a president since 1961. While the Gulf War raged, Mr. Bush addressed a banking overhaul that would help break down barriers between commercial banks, investment banks and stock brokerage firms.

Analysts had been listening on Tuesday night for clues about tax reform and mortgage lending. While President Obama made a passing reference to corporate tax reform, those remarks did not appear to have much of an effect on after-hours trading when they came up.

“I looked to see if there was a market reaction, and there was not one,” Mr. Knapp said.

One reason, Mr. Knapp suggested, could have been that tax reform was mentioned in the context of job creation, a focus throughout Mr. Obama’s speech.

“Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation,” President Obama said. “Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs right here at home.”

Analyst Who Worked on Herbalife Leaves Pershing Square

An investment analyst who played a leading role in Pershing Square Capital Management’s bet against Herbalife has decided to leave the hedge fund, according to a letter sent to its investors Tuesday evening.

The analyst, Shane Dinneen, is leaving for “areas of his own interest outside of activist investing,” William A. Ackman, the head of Pershing Square, said in the letter. Mr. Dinneen, who joined the hedge fund’s investment team in late 2007, has been publicly singled out for praise by his boss.

Mr. Dinneen performed much of the research underpinning Mr. Ackman’s contention that Herbalife, a nutritional supplements company, is an abusive pyramid scheme. When Mr. Ackman announced a $1 billion short-selling bet against Herbalife in late 2012, Mr. Dinneen appeared on a stage at a hedge fund conference in Manhattan to give a detailed presentation on the company.

“As Shane is one of the most talented investment analysts I have ever worked with and someone I hold in high regard, I have done my best to convince him to stay with the firm,” Mr. Ackman said in the letter, which was reviewed by DealBook.

But Mr. Ackman noted that Mr. Dinneen no longer had a major role with the firm’s bet against Herbalife. Over the past year, Mr. Ackman, along with Roy Katzovicz, the chief legal offer, and David Klafter, the senior counsel, have led an effort to persuade regulators of their point of view.

“As our Herbalife investment has moved from financial analysis to a regulatory and legal execution, Shane has not been leading this investment for some time,” Mr. Ackman said.

Herbalife has denied Mr. Ackman’s assertions. Its stock rose sharply last year, putting pressure on Mr. Ackman’s position.

But one prominent lawmaker, Senator Edward J. Markey of Massachusetts, sent letters to federal regulators last week urging them to investigate Herbalife. “I have seen reports from Massachusetts residents that suggest Herbalife is a pyramid scheme,” Mr. Markey wrote.

In the letter on Tuesday, Mr. Ackman said he was “encouraged by the recent regulatory developments concerning the company.”

In addition to Herbalife, Mr. Dinneen “did superb work” on Pershing Square’s investments in General Growth Properties and Burger King, Mr. Ackman said.

His departure was reported earlier by The New York Post.

“We wish Shane success in his future endeavors and have let him know that we will keep a seat open for him on the investment team if and when he decides to return,” Mr. Ackman said. “Shane intends to remain a meaningful investor in Pershing Square.”

Dow Chemical Increases Stock Buyback Plan

Dow Chemical, the latest target of an activist hedge fund manager, announced measures on Wednesday intended to make shareholders happy.

The company said it would expand its authorized buyback program this year to $4.5 billion worth of stock from $1.5 billion. It also said it would increase its first-quarter dividend by 5 cents, to 37 cents a share. The moves, Dow said, were part of its previously announced strategy.

Wall Street was paying particularly close attention to the announcement because of recent moves by Daniel S. Loeb, the hedge fund manager who runs Third Point. In a letter to his investors last week, Mr. Loeb said he had taken a large stake in Dow Chemical and urged the company to hire outside advisers to study a possible spinoff of its petrochemical business.

Mr. Loeb also suggested in the letter that the company should consider a large share buyback. “As Dow management looks to further its journey in unlocking value for shareholders, it now has the balance sheet flexibility to consider a meaningful share buyback,” the letter said.

Dow was silent on Wednesday on Mr. Loeb’s proposal that it separate its petrochemical operations.

“The board’s actions today finalize a decision that it has been reviewing on an ongoing basis with particular focus over the last several quarters,” Andrew N. Liveris, Dow’s chairman and chief executive, said in a statement.

In a separate announcement, the company said it swung to a profit in the fourth quarter of 2013. Net income rose to $963 million from a loss of $716 million in the period a year earlier.

Excluding certain one-time items, the company’s quarterly profit was 65 cents a share, exceeding expectations of 43 cents a share among analysts polled by Thomson Reuters.

Shares of Dow Chemical rose about 5 percent in early trading on Wednesday.

“Dow’s fourth-quarter and full-year performance is the result of successful execution against our stated goals and commitments throughout the year,” Mr. Liveris said. “Our strategy and actions are delivering record cash flow and we remain squarely focused on increasingly rewarding shareholders, funding high-return organic growth projects and further enhancing our capital structure.”

Fiat Makes Changes as It Absorbs Chrysler

Sergio Marchionne, right, the chief executive of both Chrysler and Fiat, shows Vice President Joseph R. Biden Jr. a Chrysler car at the Detroit auto show. Carlos Osorio/Associated Press

DETROIT â€" As Chrysler on Wednesday reported fourth-quarter net income of $1.62 billion, bolstered by a big one-time tax gain, its owner, the Italian car company Fiat, unveiled its plans to rename the combined entity and have its primary listing on the New York Stock Exchange.

Fiat’s board said Wednesday that the new name of the American-Italian automaker would be Fiat Chrysler Automobiles. It will be organized as a corporation in the Netherlands and based in Britain for tax purposes. As expected, the shares in the new company will be listed on both the New York and Milan stock exchanges.

The new company is the seventh-largest automaker in the world, and combines Chrysler’ strength in North America, particularly in the truck market, with Fiat’s core businesses in Europe and South America.

Sergio Marchionne, the chief executive of both Fiat and Chrysler, said the two companies have already been successfully integrated over the last five years. “Today we can say we have succeeded in creating solid foundations for a global automaker with a mix of experience and know-how on a level with the best of our competitors,” he said in a statement.

Chrysler’s strong quarterly and full-year performance helped prop up Fiat, which struggled for the quarter. Fiat earned €252 million, or $345 million, for the quarter, excluding one-time items. Without earnings from Chrysler, Fiat would have lost €235 million, nearly double the loss from a year ago.

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Fiat posted a profit of €943 million for the year without one-time items, but it would have lost €911 million without profits from Chrysler.

The Italian automaker’s board also announced it had decided to end the company’s dividend since taking full control of Chrysler. Chrysler has been controlled by Fiat since its bankruptcy and government bailout five years ago. But Fiat took full ownership of Chrysler last week after buying out the large minority stake held by a health care trust for retired American autoworkers and their families. Fiat spent $1.75 billion in cash and $1.9 billion in extraordinary dividends.

The fourth quarter of 2013 was the 10th consecutive profitale quarter for Chrysler, which is the third-largest domestic car manufacturer after General Motors and Ford Motor. For the quarter, Chrysler received a one-time $962 million tax benefit related to valuation allowances on deferred assets.

Without the tax gain, Chrysler earned a fourth-quarter profit of $659 million, an increase of 74 percent over the $378 million it earned in the period a year earlier.

Chrysler’s profit in the fourth quarter was driven by the continued success of core models like the Ram pickup and Jeep sport utility vehicles. It reported revenue for the quarter of $21.2 billion, a 24 percent increase over the year-ago period.

The company also kept i! nvesting ! in new products, like the Jeep Cherokee, a small S.U.V., and the Chrysler 200 midsize sedan.

“The 2013 year-end financial results reflect the commitment Chrysler Group has made to rapidly refresh our product lineup with vehicles that achieve exacting performance standards,” Sergio Marchionne, the chief executive of both Chrysler and Fiat, said in a statement.

For the full year, Chrysler reported net income of $2.76 billion. Without the tax gain, the company earned $1.82 billion, which was a 9 percent improvement over 2012.

Chrysler said it sold 2.4 million vehicles worldwide in 2013, a 9 percent gain over the 2.19 million cars and trucks that it sold in 2012.

In the United States, Chrysler’s market share rose to 11.4 percent for the year, up from 11.2 percent in 2012.

Mr. Marchionne said Chrysler had set a target of 2.8 million vehicle sales this year, and expected to earn $2.3 billion to $2.5 billion in net income.

State of the Union Highlights Economic Inequality

In his State of the Union address before Congress on Tuesday night, President Obama promised to do something about economic disparity in a “year of action,” vowing to act alone if necessary. While Mr. Obama covered a broad swath of issues, his message centered on income inequality. “Those at the top have never done better,” he said. “But average wages have barely budged. Inequality has deepened. Upward mobility has stalled.”

His moderate ambitions stood in contrast with his sweeping legislation of years past, when he proposed stiff regulations on Wall Street. This year, Mr. Obama proposed closing the economic gap by raising the minimum wage, expanding the earned-income tax credit for low-wage workers without children and creating a new retirement savings plan.

While Mr. Obama did not directly focus on Wall Street’s problems, he did vow to address the tax code. He said he would work with the Treasury to create a new way for Americans to start their own retirement savings called MyRA, which “encourages folks to build a nest egg.”

“MyRA guarantees a decent return with no risk of losing what you put in. And if this Congress wants to help, work with me to fix an upside-down tax code that gives big tax breaks to help the wealthy save, but does little or nothing for middle-class Americans, offer every American access to an automatic I.R.A. on the job, so they can save at work just like everybody in this chamber can.

“And since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of homeownership alive for future generations.”

HEDGE FUNDS BET ON BANKS’ LEGAL SETTLEMENTS  |  Despite the hefty penalties banks have incurred for their role in shoddy mortgage practices before the financial crisis, some hedge funds are betting that these legal settlements were not large enough. Following this logic, these hedge funds have purchased subprime mortgage-backed securities that they believe will rise in value if Wall Street banks pay out a lot more money to settle even harsher penalties, Peter Eavis writes in DealBook. Now, these hedge funds have put the onus on themselves to go after the banks for larger settlements.

Mr. Eavis writes: “If the more exacting lawsuits succeed, and the banks have to plow money into the bonds, the hedge funds stand to make a windfall. And the bond prices could rise merely if investors anticipate legal success, well before any settlement is ever reached.”

ALIBABA SCRUTINY INTENSIFIES  |  As the Chinese Internet giant Alibaba moves toward an initial public offering, any one of its decisions could send investors into a tizzy. Consider, for example, Alibaba’s announcement last week that it was acquiring a 54.3 percent stake in Citic 21CN.

Not much is known about Citic 21CN â€" it does not even have an active website â€" except that it has been listed in Hong Kong since 1972, with its principal business in “system integration and software development.” So why, Steven M. Davidoff asks in the Deal Professor column, did Alibaba acquire this company?

There are a number of possible answers, including that Alibaba’s investment in the company was a “backdoor listing,” because Alibaba sees the Hong Kong Stock Exchange as having restrictive rules on voting rights for shares. But whatever the reason, Alibaba’s investment is fueling speculation that shows no sign of abating.

Mr. Davidoff writes: “The scrutiny is only going to get worse for Alibaba as it heads toward a public listing. Once Alibaba does go public, it no longer has the luxury of being coy about its actions, no matter how small. That’s the price you pay for being in the limelight, up among the technology giants of the world.”

Alibaba continued to be the focus of attention on Tuesday after Yahoo, which owns a significant stake in the company, released its fourth-quarter earnings.

ON THE AGENDA  |  The Federal Open Market Committee makes its January announcement at 2 p.m. Boeing releases earnings before the bell. Facebook releases earnings after the market closes. The Senate Subcommittee on Economic Policy holds a hearing on the annual report and oversight of the Office of Financial Research at 3:30 p.m. Benjamin M. Lawsky, the New York State superintendent of financial services, is on Bloomberg TV at 8 a.m. William H. Gross, the founder and co-chief investment officer of Pimco, is on CNBC at 2 p.m.

A LESSON ON J.C. PENNEY’S POISON PILL  |  Though the retailer J.C. Penney has attracted considerable hedge fund attention as of late â€" William A. Ackman’s Pershing Square Capital Management, David Tepper’s Appaloosa Management, among others â€" many of these activist investors seem to have lost interest in the struggling company. So J.C. Penney’s announcement on Tuesday that it had set a new, lower threshold for its poison pill has left people scratching their heads, Steven M. Davidoff writes in a Deal Professor column.

The immediate conclusion was that J.C. Penney’s move was intended to prevent more activist investors from accumulating a large stake in the company. But the retailer’s decision may have been driven more by tax rules, which set limits on net operating losses if there is a transfer of ownership. Of course, the way this change is defined is broad, but suffice it to say that the new poison pill threshold may have been set to prevent such an ownership change, which ultimately could put the company at risk of losing its net operating losses. But J.C. Penney’s reasoning remains unclear, because hedge funds have, for the most part, come and gone.

Mr. Davidoff writes: “Perhaps now that things have settled down â€" Mr. Ackman has left and J.C. Penney’s former chief executive has rejoined the company â€" the board felt that it was safe to just deal with this issue. Or maybe the board felt that it wanted to protect management for a while to make sure it had time to turn around the company’s fortunes.”

 

Mergers & Acquisitions »

With Eye on Spain, Liberty Is Said to Join Hunt for ONO  |  The Spanish cable operator ONO, an enticing prospect for any large telecommunications company looking to expand in Europe, has reportedly drawn interest from John C. Malone’s Liberty Global media company as well as the British cellphone giant Vodafone. DealBook »

Vodafone and Verizon Shareholders Approve Wireless Deal  |  The deal to sell Vodafone’s 45 percent stake in Verizon Wireless will return about $84 billion to Vodafone shareholders in what the company said was the single largest return of value in history, according to a presentation on Vodafone’s website. DealBook »

Martin Marietta Materials Seals Deal for Texas Industries  |  The acquisition of the construction supplies company Texas Industries will allow Martin Marietta Materials, a big producer of sand and gravel, to expand its range of offerings and deepen its presence in the fast growing Texas market. DealBook »

Shell Selling a Stake in Brazilian Oil Project  |  Shell is selling 23 percent of the Brazilian project to Qatar for about $1 billion. The offshore project is the type of asset Shell and other large oil companies are looking to dispose of as investors demand better returns. DealBook »

Google’s Purchase of Nest Could Inspire More Deals  |  Google’s $3.2 billion acquisition of Nest Labs this month may set off a race to purchase companies that make Internet-connected home devices like thermostats and smoke detectors, Bloomberg News reports. BLOOMBERG NEWS

Google Buys DeepMind to Improve Search, Not Robots  |  Google’s purchase of the British artificial intelligence company DeepMind on Monday is less about making robots smarter and more about making its search function more human, Nick Bilton writes in the Bits blog. NEW YORK TIMES BITS

Time Warner Cable Can Take Heart in History of Failed Hostile Bids  |  A review of many of the most prominent failed hostile bids suggests that targets that avoided being pressured into an unwanted deal often came out ahead. DealBook »

INVESTMENT BANKING »

Lloyds Banking Group to Cut More Than 1,000 Jobs  |  The Lloyds Banking Group will eliminate an additional 1,080 jobs and outsource 310 jobs as part of a restructuring it began in 2011. DealBook »

Bowles to Lead Morgan Stanley Board  |  Erskine Bowles, who has served on the Morgan Stanley board since 2005, has been named as lead director, succeeding C. Robert Kidder. DealBook »

Barclays Said to Plan Job Cuts  |  Barclays is said to be planning to cut hundreds of jobs at its investment bank, Bloomberg News reports, citing an unidentified person familiar with the situation. Cuts will include directors and managing directors. BLOOMBERG NEWS

Deutsche Bank Cuts Compensation for Bankers  |  Deutsche Bank reduced compensation for its investment bankers by 23 percent in the fourth quarter, Bloomberg News reports. BLOOMBERG NEWS

Employee Falls to His Death at JPMorgan Building in London  |  A JPMorgan Chase employee died after a fall from the office tower headquarters of the investment bank in London on Tuesday morning. DealBook »

PRIVATE EQUITY »

Diamond’s New Firm Hires Executive From J. C. Flowers  |  Atlas Merchant Capital, the firm Robert E. Diamond Jr. founded last year, said late on Monday that it had hired David Schamis from J.C. Flowers & Company as a founding partner. DealBook »

Former Charterhouse Executive in Court Over Pay Cut  |  Geoffrey Arbuthnott, a former executive at the London-based private equity firm Charterhouse Capital Partners, is suing the chairman and the 16 other owners of the firm over a $66 million pay cut proposal, Bloomberg News writes. BLOOMBERG NEWS

Private Equity Targets Marijuana Investments  |  Brendan Kennedy, chief executive of the private equity firm Privateer Holdings, discusses private equity investments in legalized marijuana as banks reject the industry in a Bloomberg Television video. “Legalization is inevitable,” Mr. Kennedy says. BLOOMBERG TELEVISION

HEDGE FUNDS »

SAC’s Counsel Testifies at Insider Trading Trial in Unexpected Move by the Defense  |  Testimony by the chief counsel at SAC Capital Advisors could allow prosecutors to scrutinize compliance at the multibillion-dollar hedge fund founded by Steven A. Cohen. DealBook »

As Apple Shares Fall, Icahn Plucks More  |  Carl C. Icahn took to his favorite broadcasting tool, Twitter, on Tuesday to disclose that he had purchased an additional $500 million in shares of the iPhone maker. DEALBOOK

Founder of Elliott Management Surprised by Bitcoin Success  |  Paul E. Singer, the founder of the hedge fund Elliott Management, told investors he was “shocked” by Bitcoin’s popularity, The Wall Street Journal writes. “There is no reason to believe that Bitcoin will stand the test of time than that governments will protect the value of government-created money,” Mr. Singer wrote in a quarterly letter this week. WALL STREET JOURNAL

J.C. Penney Amends Poison Pill Plan  |  The retailer lowered the threshold for its poison pill plan to 4.9 percent from 10 percent as it sought to defend itself against potential activist investors and preserve a tax benefit. DealBook »

Casablanca Capital Urges Changes at Cliffs Natural Resources  |  Casablanca Capital, an activist hedge fund, disclosed on Tuesday that it had taken a 5.2 percent stake in Cliffs Natural Resources, while urging the mining company to spin off its international assets and make other changes. DealBook »

I.P.O./OFFERINGS »

Fantex Moves Forward With Football Player I.P.O.  |  Fantex, a start-up looking to sell stocks tied to athletes’ earnings, said on Tuesday that it was moving forward with a planned initial public offering of stock linked to Vernon Davis, the star tight end of the San Francisco 49ers who experienced a concussion last fall. DealBook »

A Familiar Trip for a Precrisis Buyout  |  Seven years after taking the airline reservations operator Sabre private, TPG and Silver Lake are returning to the public markets. It’s one of many big buyouts that should land safely, says Jeffrey Goldfarb of Reuters Breakingviews. DealBook »

Skylark Selects Banks for I.P.O.  |  Skylark, a Japanese restaurant operator controlled by the private equity firm Bain Capital, is said to have chosen Nomura Holdings and Bank of America to prepare its initial public offering, Bloomberg News writes, citing unidentified people familiar with the situation. BLOOMBERG NEWS

HubSpot Considers I.P.O.  |  HubSpot, an online marketing company, is exploring an initial public offering after revenue increased 50 percent last year, to $77 million, The Wall Street Journal reports. WALL STREET JOURNAL

VENTURE CAPITAL »

Indiegogo Raises $40 Million  |  The San Francisco-based start-up Indiegogo, a crowdfunding site, announced that it had raised $40 million in a new round of funding led by Institutional Venture Partners and Kleiner Perkins Caufield & Byers, The Bits blog writes. The total is the largest venture capital investment in a crowdfunding business to date. NEW YORK TIMES BITS

Medium Raises $25 Million in New Financing Round  |  Medium, the blogging-as-longform-publishing platform started by a Twitter co-founder, Evan Williams, has raised $25 million in a new round of financing, ReCode reported on Tuesday. DealBook »

Income Inequality Debate Shifts Coasts  |  The income inequality debate has moved from Wall Street to San Francisco, where agitators are taking to the streets to protest the technology industry, Bloomberg News reports. BLOOMBERG NEWS

LEGAL/REGULATORY »

A Swipe at Traditional Banking at a Forum Illuminating Bitcoin  |  A hearing on the regulatory future of Bitcoin gave advocates the chance to enumerate what they view as the advantages Bitcoin could provide over current monetary systems. DealBook »

R.B.S. to Reduce Foreign Exchange Benchmark Offerings  |  The Royal Bank of Scotland will reduce the range of foreign exchange benchmarks it offers to clients amid investigations into whether some traders colluded to manipulate the $5-trillion-a-day currency markets. DealBook »

Challenges for the Yellen Fed  |  As Federal Reserve chief, Janet L. Yellen faces the task of tightening monetary policy without choking off domestic recovery or causing upheaval overseas that could rebound on the United States, the economist Phillip Swagel writes in the Exonomix blog. NEW YORK TIMES ECONOMIX

Adding Up the Costs of Data Breaches  |  Companies victimized by cyberattacks face a big need to disclose information, both to the victims and to shareholders, writes Peter J. Henning in the White Collar Watch column. DealBook »

Silicon Valley Group Reaches Out to Republicans  |  A Silicon Valley lobbying group, whose members include Google, Facebook and Amazon, held an event earlier this month in New York for more than 50 Republican campaign consultants, The Wall Street Journal writes. The event was meant to foster a relationship with Republicans, said one of the company’s members. WALL STREET JOURNAL