Finance Bill Close To Passage In Senate (WSJ)
Sens. Scott Brown of Massachusetts and Olympia Snowe of Maine both said they would vote for the measure when Democrats bring it to a vote, which could happen as soon as this week. Democrats and administration officials believe this gives them the necessary backing to overcome a potential filibuster after weeks of uncertainty and unexpected pitfalls.

Paulson Likes What He Sees In Overhaul (NYT)
“We would have loved to have something like this for Lehman Brothers. There’s no doubt about it,” Mr. Paulson declared about midway into our conversation. He was referring to a provision of the bill known as resolution authority, which would enable the government to unwind a failing investment bank or insurance company in an orderly way without forcing it into bankruptcy, thus avoiding the unintended consequences that a bankruptcy might create.

Bankers – More Unpopular Than Benefit Fraudsters Or Bogus Asylum Seekers (HITC)
‘Sure, we all know that things have to change and that firms have to align bonus payments with long-term performance’, one banker told Here Is The City, ‘But let’s not hear all this nonsense about regaining the public’s trust; we never had the public’s trust in the first place, and thanks to the political rhetoric of the last 2 years, we’ll never be loved. And, let’s face it, given the choice, most of us would rather be hated and bonused up, than hated and poorly paid’.

Abu Dhabi May Make BP Investment, Crown Prince Says (Bloomberg)
“We are still thinking about it,” Sheikh Mohammed bin Zayed Al Nahyan said in an interview in Abu Dhabi today, when asked about potentially buying a stake in the London-based oil producer.

Moody’s Cuts Portugal’s Credit Rating (NYT)
Moody’s said it was cutting Portugal’s sovereign bond ratings to A1 — still investment grade — from Aa2. It noted that the national debt had risen sharply relative to gross domestic product as a result of spending on economic stimulus measures, and it warned that weak growth would weigh on government finances for two or three more years.

HSBC’s Green Says More Shocks Possible (WSJ)
Speaking at the British Bankers’ Association’s annual international banking conference, Mr. Green said he welcomes much of the effort by governments and regulators to improve financial system oversight—including the U.K.’s plan to create a new financial policy committee to try to guard against booms and busts in the economy—but that there’s also a risk that the new order for global supervision could lead to “rigidity, bureaucracy and complexity.” “We are three years in from a crisis that is far from over. We are not out of the woods yet and may see some shocks from countries” that are facing big amounts of debt, Mr. Green said.

George Steinbrenner Has Died From Heart Attack (USA Today)
George Steinbrenner died at about 6:30 a.m. ET today after suffering a heart attack last night.

Goldman Seeks Another Extension From SEC (NYP)
Sources tell The Post that Goldman has argued that the SEC has had years to build its case against the firm, while the maligned investment bank has had to handle other pressing issues, including dealing with other investigations while the firm prepares to release its second-quarter results on July 20.

Barclays Capped By Regulatory Risk (WSJ)
Barclays shares enjoyed a much-needed boost last week from speculation the U.K. bank was mulling a spinoff for Barclays Capital—something that would create significant value, according to a Mediobanca research report. Barclays was quick to dismiss the idea, reaffirming its commitment to the universal bank model. But the idea of a Barclays breakup being pain-free reassured those investors spooked by fears the U.K. may force such a split.

Article courtesy of Dealbreaker

Volcker Rule Under Attack as Lawmakers Seek Loophole (Bloomberg)
Senate negotiators will probably offer changes today that would soften the Volcker rule by allowing banks to sponsor hedge funds and invest their own money, within limits, alongside that of clients. The compromise, designed to win the support of at least three Republican senators, comes as lawmakers struggle to reach agreement on financial reform this week. To appease Democrats in favor of stronger regulation, negotiators also plan to make it harder for regulators to undermine the rule, according to lobbyists and congressional aides involved in the discussions.

BP Executive Prepares to Take Over Spill Response (NYT)
Robert Dudley, who takes charge of BP’s spill response on Wednesday, has plenty of experience dealing with a hostile government, unhappy partners and angry citizens. The former head of BP’s joint venture in Russia, TNK-BP, he was expelled from that country in 2008 after a nasty feud with the authorities and BP’s business partners. Whether Mr. Dudley, a soft-spoken man with a wisp of a Southern accent, can repair BP’s ruptured relationships on the Gulf Coast and in Washington remains to be seen.

U.S. Seeks Assets of Ex-Madoff Workers (WSJ)
The lawsuits, which offer further detail about the autumn 2008 spiral of Mr. Madoff’s firm, seek to seize about $5 million in assets from the two employees, Annette Bongiorno and JoAnn “Jodi” Crupi. Among the assets prosecutors are seeking from the women are a 2005 Bentley Continental and 2007 Mercedes Benz from Ms. Bongiorno, and a $2 million New Jersey home that Ms. Crupi allegedly helped purchase with funds from what was Mr. Madoff’s firm, Bernard L. Madoff Investment Securities LLC.

`Mamma Mia’ Goes Dark, Bankers Stay Home as G-20 Hits Toronto (Bloomberg)
The Toronto Blue Jays baseball team is leaving town, the Royal Alexandra Theatre is closing for the first time in more than a century and thousands of bankers and money managers such as David Cockfield are working from home. “People coming to cover the G-20 are going to find Toronto just empty, with wind blowing through the downtown canyons, asking ‘Where are all the people?’” said Cockfield, a portfolio manager at MacNicol and Associates Asset Management Inc., which oversees about C$300 million ($293 million).

Former SocGen Chairman Has Sharp Words for Trader (NYT)
His voice often quavering with emotion, Mr. Bouton, 60, spoke of his “formidable anger” upon learning of Mr. Kerviel’s “monstrous” bets, which exposed the bank to €50 billion worth of risk, more than the bank’s market value. “It is not the business of a bank to risk its very existence,” Mr. Bouton said, turning to face Mr. Kerviel, seated behind him, who averted his gaze. “I cannot believe for one second any of Jérôme Kerviel’s supervisors were aware. I’m sorry, my dear fellow.” In the days following the bank’s disclosure of the Kerviel scandal — which remains the largest trading fraud in history — Mr. Bouton had set the tone for Société Générale’s initial version of events, calling Mr. Kerviel “a crook, a fraudster and a terrorist” who acted alone.

Op-Ed: Our Agenda For The G-20
(WJS)
Summers And Geithner: “Countries must put in place credible plans to stabilize debt-to-GDP levels and set a pace of consolidation that reinforces the momentum of growth. We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth. Without growth now, deficits will rise further and undermine future growth. ”

Pearl River Necklace bridge comes with a twist (BLD)
And an interesting name.

Article courtesy of Dealbreaker

The Federal Communications Commission today voted 3-2 to begin the process of re-regulating Internet access, in a move that would reverse a 2002 FCC decision that deregulated broadband lines.
The move was supported by Chairman Julius Genachowski and the two other Democrats on the commission, but opposed by the two Republican [...]

Article courtesy of BARRONS.com: Tech Trader Daily

The U.S. House of Representatives has passed HR 4213, a bill that will double the tax on carried interest — that’s “carry” if you’re a venture capitalist — which many investors factor in as part of their long-term investments in startups.

What’s carried interest? Let’s sharpen Wikipedia’s entry: Carry is a share of the profits of a successful partnership that is paid to the manager of, say, a private-equity fund. It’s a form of compensation designed to reward the manager when they make money for investors.

In private equity, in order to receive carried interest, the manager must first return all capital contributed by the investors, and, in certain cases, the fund must also return a previously agreed upon rate of return — the hurdle rate — to investors.

The details vary from firm to firm and fund to fund, but here’s what matters: Carry is taxed as capital gains, just like the profits from a successful IPO.

HR 4213, if passed into law, will change the tax status of carried interest to a blend. One fourth of the income remains capital gains, but 75% will be taxed as regular income. To investors, the change not only cuts into their take, it also implies the value they’ve built is the same kind of money as a regular paycheck. That’s why they’re extra-angry.

Carried interest is one of several easy targets for Congress, which is looking for ways to bring in fresh revenue for the U.S. government while also granting temporary extensions to corporations that might otherwise need to cut jobs, or to get creative with the accounting books in ways that won’t end up as taxes paid at some point.

But the bill, according to the National Venture Capital Association which represents more than 425 VC firms, “effectively removes any meaningful tax incentive for long term investment in new companies” by averaging out to a 35 percent tax rate on fund managers’ carry.

A group of conservative Democrats known as the Blue Dogs failed to keep the House from passing the bill, or from reducing the increased carry tax.

NVCA issued a statement on the bill’s passage that said, “If this bill is signed into law, Congress should expect a further decline of venture investment over time, a move away from seed and early stage investment, and less innovation and job creation for our country.”

Tags: taxes

Article courtesy of VentureBeat » Deals & More

We knew Leo Hindery, private equity investor, founder of the YES Network and staunch Democrat, was not a big fan of Wall Street. But his latest column on regulatory reform basically blames financiers for, well, just about everything.

. . .the profit-driven, greedy, selfish institution that with its unbridled compensation practices and current light-touch regulatory regime is, I truly believe, behind almost every major societal and economic ill that has befallen the United States since 1980.

Damn, Leo, that’s harsh. But he goes on.

In the specific case of Wall Streeters, if we miss ‘getting’ them now, as they say, these greedy guys will simply get greedier and their practices more harmful as their securities become ever more complex and thus beyond any reasonable regulatory oversight capability.

But wait, being a beneficiary of carried interest as an MD of InterMedia Partners, you’d think Hindery might side with the industry against the current proposals to raise taxes on partners at PE funds. Think again.

As sort of a ‘canary in the coal mine’ to larger financial reform, we’ve seen on the relatively simple issue of trying to reform the abusive tax treatment of “carried interest”, which costs the Treasury $10 to $12 billion per year, just how disingenuous, misleading and vile the anti-financial reform crowd can be.

Not only does Hindery support the increase in carried interest taxes, he thinks the PE lobby is spewing total “B.S., as neither overall financial reform nor, least of all, reforming carried interest has anything at all to do with ‘job creation’, and it is unconscionable to threaten the American people this way.”

Leopards Can’t Change Their Spots; Neither Can Wall Streeters [HuffPo]

Article courtesy of Dealbreaker

Jamie Dimon Broadly Optimistic On Reform (Reuters)
“We’ll end up with something better than what we had before,” he said last night at the Japan Society’s Annual Dinner in New York, although he added that he is not expecting perfection. Paul Volcker introduced Dimon, 54, as a man “at the top of his game” and said under his leadership JPMorgan “maintained stability throughout the crisis.” “I’m also proud to call myself a banker,” Dimon said.

Senators Pick Financial Bill Conferees (WSJ)
U.S. Senate leaders are expected as soon as Tuesday to appoint seven Democrats and five Republicans. Senate Banking Chairman Christopher Dodd (D., Conn.) and Agriculture Chairman Blanche Lincoln (D., Ark.) are expected to play a key role for Democrats, while Sens. Richard Shelby of Alabama and Judd Gregg of New Hampshire are anticipated to be among those representing the GOP.

Germany Eyes Wider Short-Selling Ban (Reuters)
A leaked Finance Ministry document said planned measures aimed at stabilizing financial markets would include a “ban on naked short selling of shares, including derivatives referring thereto.”

Four Regional Banks Make Initial Merger Pact in Spain (Reuters)
The agreement, which is being led by Caja de Ahorros de Mediterráneo and includes Cajastur, Caja de Extremadura and Caja Cantabria, aims to create a joint banking group to “strengthen solvency and assets of the participating banks,” the banks said in a statement.

Italian cabinet prepares austerity package (FT)
Italy’s cabinet is due to meet on Tuesday evening to approve an austerity package aimed at reducing the state budget deficit by €24bn over 2011 and 2012. Gianni Letta, cabinet under-secretary, warned that there would have to be “tough sacrifices” for Italy to avoid following Greece into crisis. The emergency budget measures aim to bring the deficit below 3 per cent of gross domestic product by 2012 from 5.3 per cent last year.

Geithner Confident About China’s Currency Reforms (CNBC)
“I think China’s economy looks very strong,” Geithner said. “They’re very committed to reinforcing growth, strengthening domestic demand. That’s important for the US, China and the world.” Asked if he felt confident that China would revalue its currency, he said, “Absolutely. They’re going to look at what’s happening in the world. Their growth should come more from domestic demand, and raising incomes.”

BP hatches ‘top kill’ bid to plug oil leak (SMH)
The British oil firm’s chief operating officer Doug Suttles said the already-delayed operation would now take place Wednesday. He told CNN that the bid, using robotic submarines on the seabed, had a six or seven out of 10 chance of working. If the “top kill” effort fails, relief wells to divert the flow and allow the leaking well to be sealed will not be ready until August at the earliest, meaning tens of millions more barrels of crude could stream into the Gulf.

Lohan’s Ankle Bracelet Has Breathalyzer Technology (AP)
The bracelet uses the same technology as a Breathalyzer, but instead of checking the breath for alcohol, it samples the perspiration on the skin. After alcohol is consumed, it eventually enters the bloodstream and a small amount is expelled through the skin.

Private-equity bigs fume at lobbying reps (NYP)
Sources familiar with the matter said that several high-profile private-equity barons are fuming over the hit they’ll sustain from legislation that sharply raises the tax they pay on carried interest and they are assigning some of the blame to the lobbying group they pay dearly to represent their interests. A Blackstone spokesman denied there was any dissatisfaction with the council, and a KKR spokesman said it was in 100 percent alignment with the lobbying group.

Pimco’s Developing Markets Fund Lags Behind Peers, Beats Underlying Index (Bloomberg)
Pimco’s $2.9 billion Developing Local Markets Fund lost 1.9 percent this year, lagging behind 97 percent of U.S.-based funds invested in emerging-market debt, Bloomberg data show.

For sale: One brothel (Chron)
Harris County has a whorehouse for sale. Commissioners Court has on its hands the Velvet Touch, a business that operated on Highway 6 South, and will consider this morning how to dispose of it.

Article courtesy of Dealbreaker

Jim Rogers: Someone Should ‘Hang’ The NYSE (CNBC)
“Somebody should hang this New York Stock Exchange,” Rogers said. “They claim to be the center of the world’s capitalism, of the world’s financial markets, you would think that in 2010 they could sort out simple things like electronics.”

Stock plunge raises alarm on algo trading (Reuters)
“The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today,” Senator Edward Kaufman said in a statement. “The battle of the algorithms — not understood by nor even remotely transparent to the Securities and Exchange Commission — simply must be carefully reviewed and placed within a meaningful regulatory framework soon.” Kaufman and Senator Mark Warner — both Democrats — said Congress needs to investigate the plunge, which at its deepest point wiped nearly $1 trillion off equity values.

Goldman, SEC Discuss Settlement (WSJ)
The two sides remain far apart. The preliminary settlement talks, held Tuesday, between Goldman co-general counsel Gregory Palm and other lawyers representing the New York company and SEC officials didn’t include any specific settlement terms, such as the amount of a fine or agreements Goldman could make with the agency, people familiar with the situation said.

SEC Said to Probe Causes, Exploitation of Yesterday’s Stock-Market Turmoil (Bloomberg)
SEC officials, who haven’t drawn conclusions, began preparing for inquiries in the hours after a U.S. selloff triggered by Europe’s debt crisis briefly erased more than $1 trillion in market value, beginning around 2:40 p.m. in New York. U.S. stocks tumbled the most in a year as waves of computerized trading exacerbated the rout, sparking a slide in Asian shares. The SEC and CFTC said in a joint statement that they will examine “unusual trading” that contributed to the plunge. “We will make public the findings of our review along with recommendations for appropriate action,” they said.

AIG Swings To Profit (WSJ)
AIG reported a first-quarter profit of $1.45 billion, or $2.16 a share, compared with a prior-year loss of $4.35 billion, or $39.67 a share. Excluding investment and divestiture impacts,the company recorded earnings of $1.21 a share compared with a prior-year loss of $22.90.

RBS Only U.K. Bank With First-Quarter Loss as Investment Bank Profit Drops (Bloomberg)
The bank reported a loss for the first quarter, the only major British financial institution to do so, as investment-banking profit unexpectedly slumped at the government-controlled company. Profit at RBS’s investment bank fell 58 percent to 1.47 billion pounds ($2.2 billion) from a profit of 3.47 billion pounds a year earlier.

AIG Is Said To Replace Goldman As Top Adviser (NYT)
AIG had planned to retain Goldman to help reorganize its businesses, but has replaced Goldman as its main corporate adviser, according to three people with knowledge of the matter, which was not intended to be public. Instead, the insurer is turning to Citigroup and Bank of America.

A Day Chasing Kim Jong II (Reuters)
Rumors of a visit had been circulating for months, and several colleagues had already been sent up to Dandong on futile “Kim watch” missions that involved long shifts of watching and waiting. But on the early hours of May 3, I sensed that this time might be different.

Audio Of Guy Giving Webinar During Yesterday’s Festivities (Reformed Broker)

Article courtesy of Dealbreaker

Meet The Real Villain Of The Financial Crisis (NYT)
Bethany McLean: “The transaction at the heart of the S.E.C.’s complaint is a microcosm of the entire credit crisis. That is, there are no good guys here. It’s dishonest and ultimately dangerous to pretend that Goldman is the only bad actor. And the worst actor of all is the one leading the charge against Goldman: our government…Come to think about it, shouldn’t Congress have its turn on the hot seat as well? Seeing Goldman executives get their comeuppance may make us all feel better in the short term. But today’s spectacle shouldn’t provide our government with a convenient way to deflect the blame it so richly deserves.”

A Crowd With Pity For Goldman (NYT)
“I don’t want to use the word childish … but it’s childish.” That’s how Kenneth Griffin described the SEC’s decision to pursue a civil fraud case against Goldman. “I think that the disclosure around one transaction being the justification to vilify Goldman Sachs or to pass regulatory reform is just incredible,” Mr. Griffin said. “I think the Goldman Sachs case has clearly energized the Democrats with respect to passing the regulatory reform.”

Tourre: A Hero in Villain’s Garb? (WSJ)
Dennis Berman: “Mr. Tourre, as they say on Wall Street, gets the joke. His job constructing highly structured mortgage products is a farce. And he feels uneasy about it. “[T]he real purpose of my job is to make capital markets more efficient and ultimately provide the US consumer with more efficient ways to leverage and finance himself, so there is a humble, noble and ethical reason for my job ” he writes to his girlfriend Marine Serres in January 2007. At Goldman’s top levels, there is little farce. Instead, there is what the firm proudly touts as “conflict management”—the thorough, technical handling of competing interests inside and outside the firm.”

Deutsche Bank profit up 49% on investment-bank strength (MarketWatch)
The Germans reported profit of 1.76 billion euros ($2.34 billion), compared with 1.19 billion euros a year earlier and ahead of the 1.39 billion euro consensus estimate of analysts. “This is a low level by peer group standards and, given regulatory developments, suggests limited dividend progression for 2010,” said Nomura analyst Jon Peace in a note to clients.

Deutsche Bank faces U.S. mortgage securities suit (Reuters)
No worries, though, the Krauts aren’t sweating the potential U.S. class-action lawsuit over mortgage-related securities.

Roubini: Greece Just Tip of Debt Crisis Iceberg (CNBC)
“The recent problems faced by Greece are only the tip of a sovereign-debt iceberg in many advanced economies,” Roubini told readers of RGE Monitor. “Bond-market vigilantes already have taken aim at Greece, Spain, Portugal, the United Kingdom, Ireland, and Iceland, pushing government bond yields higher.” “Eventually they may take aim at other countries – even Japan and the United States — where fiscal policy is on an unsustainable path,” he wrote.

Finance Bill Hits Impasse In Senate (WSJ)
On a 57-41 vote, Democrats fell short of the 60 votes they needed to begin debate, even losing one of their own.

Nomura Defections Damage Bid to Catch Up With Rivals (Bloomberg)
“The airplane just left the ground last year,” Chief Operating Officer Takumi Shibata said at the event at Tokyo’s Grand Prince Hotel New Takanawa. “It needs to gain more altitude.”

Article courtesy of Dealbreaker

Bank of America Reports 25% Profit Drop (MW)
First-quarter net income was $3.2 billion, or 28 cents a share, versus $4.2 billion, or 44 cents a share, a year earlier, Bank of America said. Revenue at the bank fell 11% year-on-year to $32 billion, driven by what it said were the absence of credit-related gains on Merrill Lynch-structured notes that it had enjoyed last year, as well lower mortgage-banking volume and income. First-quarter provision for credit losses was $9.8 billion, down from $13.4 billion in the first quarter of 2009. But despite the drop, the results outpaced analyst estimates. Bank of America was expected to make 9 cents a share, according to the average estimate of analysts surveyed by FactSet Research.

Geithner Won’t Call For Derivatives Ban (WSJ)
Mr. Geithner, in a letter to Senate Agriculture Committee Chairman Blanche Lincoln (D., Ark.), said new financial rules must create restrictions on how over-the-counter derivatives are traded “in order to curb abuses that were at the very center of the financial crisis.” But he notably stopped short of endorsing a proposal from Ms. Lincoln to force large banks to spin off derivatives trading businesses entirely.

Goldman Director To Step Down (WSJ)
Rajat Guptatold Goldman Sachs Group Inc. in March he wouldn’t stand for re-election as a director, after receiving notice from prosecutors that they were reviewing recorded conversations between him and Galleon Group founder Raj Rajaratnam, people close to the matter say.

NY Democrats Antagonizing Their Backers On Wall Street (Reuters)
“Schumer is a bit of an anathema because sometimes he’s with us and sometimes he’s against us,” said one financial industry lobbyist who declined to be identified in order to preserve friendly relations with New York politicians.

Goldman Real Estate Fund Lost 98 Cents on the Dollar (FT)
Whitehall Street International, Goldman Sachs’ international real estate investment fund, has lost almost all of its $1.8 billion of equity following soured property investments in the U.S., Germany and Japan, according to the fund’s estimates.

Arrested in Shoeshine Arsons, and Back Out Shining Shoes (NYT)
The gentlest-looking person on an otherwise sharp-elbowed stretch of 42nd Street on Thursday seemed to be a short, sweet-faced man of 71 years, hunched over a little wooden shoeshine box. The man, John Swain, wore a cardboard sign around his neck, with the words “Shoe Shine” stenciled in black lettering. There he was, fresh from his arrest the day before on charges of burning down a nearby shoeshine stand — twice. There he was, back out there offering shines for $4 apiece. “Yep, that’s me,” Mr. Swain said when showed a photograph of himself in the morning newspaper, along with an article saying he was accused of setting fire to a three-seat stand near Bryant Park on March 22, and then torching a replacement stand on April 6.

2 Charged in International Tax Evasion Scheme Said to Involve HSBC (NYT)
The property developers — Mauricio Cohen Assor and his son, Leon Cohen-Levy — were taken into custody in New York, a day after they were jointly charged in a criminal complaint filed in Federal District Court in Fort Lauderdale, Fla., court papers show.

Jay-Z clubs Papi with suit (NYP)
J hit David Ortiz with a $5 million-plus suit yesterday, claiming the Boston slugger apparently liked Jay-Z’s 40/40 Club so much, he decided to open his own. The Manhattan federal court filing accuses Ortiz and his sister, Albania Ortiz, of trademark infringement, unjust enrichment and “false designation of sponsorship” in connection with the “Forty Forty” nightclub they opened in the Dominican Republic last year. The suit also charges them with “cybersquatting” for running a Spanish-language Web site at www.fortyforty.net.

Lehman Wins OK To Create Asset Management Company (Reuters)
“I’ve never seen anything quite like this,” U.S. Bankruptcy Judge James Peck said at a court hearing.

Ash-Cloud Flight Disruptions Intensify in Europe, Will Extend Into Weekend (Bloomberg)
As many as 15,000 flights may be lost in the region today, or about half the usual timetable, according to Brian Flynn, operations chief at Eurocontrol, which oversees the region’s flight paths. That’s up from 8,000 cancellations yesterday.

Article courtesy of Dealbreaker