Morning Agenda: Power Couple Ties Up S.E.C. February 24, 2015 7:13 am

POWER COUPLE TIES UP S.E.C. | Mary Jo White, who leads the Securities and Exchange Commission, and her husband, John, who practices law at an elite old-guard firm, are “a legal power couple that straddles Wall Street and Washington like few others,” DealBook’s Peter Eavis and Ben Protess write. But their careers can at times collide, creating headaches for the S.E.C. as it pursues wrongdoing in the nation’s financial markets, according to interviews with lawyers and a review of federal records.

In the nearly two years since Ms. White took over the agency, she has had to recuse herself from more than four dozen enforcement investigations. She has sat out of cases involving Debevoise & Plimpton, where she was a defense lawyer, and her clients there, which included JPMorgan Chase and Bank of America’s former chief executive. Those restrictions end in April, but Ms. White will still have to sit out cases that involve her husband’s firm, Cravath, Swaine & Moore. So far, she has had to recuse herself from at least 10 investigations into clients of Cravath, including some that came before Ms. White joined the agency and at least four that involved Mr. White himself.

Because of ethics rules that Ms. White follows, she must leave all Cravath cases in the hands of a polarized commission. Without Ms. White, some cases have split the agency’s four remaining commissioners. The prospect of a party-line stalemate without Ms. White has helped shape a case against the Computer Sciences Corporation, a large technology company suspected of accounting irregularities. Enforcement staff members have expressed concern that companies facing S.E.C. investigations might choose to hire Cravath to neutralize Ms. White, though records indicate this has not become a widespread pattern.

AMEX RULING MAY NOT HELP CONSUMERS | When a federal judge ruled last week that American Express had engaged in anticompetitive practices for more than a decade, he declared that the result of his decision would be increased competition that would benefit the consumer. Because American Express charges merchants a higher percentage of each sale than its competitors, the court determined the practice led retailers to pass the higher cost onto all customers. The judge’s “heart may be in the right place,” Andrew Ross Sorkin writes in the DealBook Column. “But if history is any guide, his ruling will lead to the opposite outcome.”

“The result, at best, will be that fees will come down for retailers but they will pocket the difference and simply end up with bigger profits. That’s not necessarily a bad thing if you’re a retailer, but it’s clearly not the virtuous outcome for consumers that the judge seems to think his ruling will create,” Mr. Sorkin writes. Card companies like American Express, Visa and MasterCard may also end up raising their annual fees and lending rates because they will need to make up revenue lost from the merchant fees to pay for the various rewards programs they have created.

HEADACHES AT HSBC | The British bank HSBC is facing battles on multiple fronts. Already forced to apologize for helping clients hide their income from tax authorities, the bank also had to explain on Monday why its chief executive, Stuart Gulliver, went to lengths for years to hide his bonus, at least from his co-workers, Jenny Anderson writes in DealBook. On top of all that, HSBC, which generates much of its income from Asia, reported abysmal results for 2014, saying that its profit fell 15 percent, to $13.7 billion, compared with $16.2 billion in 2013.

The Guardian newspaper reported late Sunday that Mr. Gulliver held at least 5 million pounds, or $7.7 million, in a Swiss account through a Panamanian company until 2003. Mr. Gulliver said on Monday that the account was legal and that he had paid all the required taxes, but his maneuvers nevertheless compound a problem for the bank’s reputation, which is still dealing with the fallout from efforts by its Swiss private banking arm to help wealthy clients evade taxes, Ms. Anderson writes.

Mark Gilbert of Bloomberg View writes: “The cascade of recent revelations suggests HSBC still hasn’t learned its lesson and is more of a social menace than a social good. Mr. Gulliver’s personal tax arrangements may not be illegal, but they are surely ill-advised and inappropriate.” Unless Douglas Flint, HSBC’s chairman, “pulls off an Oscar-worthy performance at Wednesday’s parliamentary hearing, HSBC will only have itself to blame if the authorities decide the bank is too big to regulate and respond by seeking its dismemberment.”

ON THE AGENDA | The Standard & Poor’s/Case-Shiller home price index for December comes out at 9 a.m. The Markit flash services purchasing managers’ index comes out at 9:45 a.m. The Conference Board’s consumer confidence index comes out at 10 a.m. Comcast reports fourth-quarter earnings before the market opens. Hewlett-Packard and Lending Club report quarterly results after the market closes. JPMorgan Chase holds its annual investor day.

On the Hill: Janet L. Yellen, chairwoman of the Federal Reserve, delivers her semiannual testimony on monetary policy to the Senate Banking Committee at 10 a.m.

‘WALL STREET WEEK’ RETURNS | “Wall Street Week,” the iconic financial television show first broadcast in 1970, is making a comeback, this time hosted by Anthony Scaramucci, the founder of the global investment firm SkyBridge Capital. The show’s first episode will be broadcast on April 19 on local television stations in top United States markets, including New York, Washington and San Francisco. The show will also be streamed on WallStreetWeek.com.

From 1970 to 2005, “Wall Street Week,” originally hosted by Louis Rukeyser, ran on PBS on Friday nights, where it attracted the biggest audience on public television. In the show’s new incarnation, financial gurus, including investors and chief executives, will appear as one-on-one guests and in panel discussions.

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Mergers & Acquisitions »

General Electric Deal for Alstom Raises Concerns Among European Authorities | The European Commission said it was worried that G.E., as the world’s top maker of heavy-duty gas turbines, would be eliminating a chief competitor.

Stifel Financial to Acquire Sterne Agee | In acquiring Sterne Agee, Stifel will gain about 730 financial advisers and management of more than $20 billion of client assets.

Valeant Looks to Smaller Deals to Build on Purchases | J. Michael Pearson, the chief executive of Valeant Pharmaceuticals, said on Monday that the company planned to make smaller deals to build on its acquisitions of Salix Pharmaceuticals and Dendreon assets, Reuters reports.
REUTERS

Valeant’s Deal for Salix Continues Frenzied Deal-Making in Drug Sector | Valeant’s backers are relieved that the company has returned to signing deals after its long pursuit of Allergan left it empty-handed, Robert Cyran of Reuters Breakingviews writes.
Breakingviews »

Dish’s Ergen to Return as Chief

Dish’s Ergen to Return as Chief | Charlie Ergen, a founder of Dish Network, is taking back the reins at the satellite provider as its competitive landscape is poised for big changes, with a series of megadeals and shifts in how people watch television.

Finmeccanica of Italy Agres to Sell Rail Units to Hitachi | The Italian defense group Finmeccanica has agreed to sell its rail assets to Hitachi of Japan in a potential $2.15 billion deal that would cut its debt by 15 percent and help it to refocus on aerospace and defense, Reuters writes.
REUTERS

Specialty Alloy Companies to Merge | The combination of Grupo FerroAtlántica of Spain and Globe Specialty Metals of Florida will create a big international producer valued at about $3.1 billion.

Polypore Sells Industrial Businesses | Asahi Kasei will buy the battery business and 3M will purchase the filtration operation in a deal with a $3.2 billion enterprise value.

INVESTMENT BANKING »

Big Banks Said to Face Inquiry Over Metals Pricing | United States officials are said to be investigating at least 10 large banks ‒ including HSBC, Goldman Sachs, Deutsche Bank and Barclays ‒ for possible rigging of precious-metals markets, The Wall Street Journal reports, citing unidentified people close to the inquiries.
WALL STREET JOURNAL

Wall St. and Law Firms Plan Cooperative Body to Bolster Online Security

Wall St. and Law Firms Plan Cooperative Body to Bolster Online Security | Banks and law firms are planning to set up a group that would be affiliated with the banking industry’s forum for sharing data on online threats.

JPMorgan Said to Begin Charging Big Clients on Deposits | JPMorgan Chase is said to be preparing to charge big institutional customers for some deposits because of new rules that make holding money for the clients too costly, The Wall Street Journal writes, citing a memo and unidentified people familiar with the plan.
WALL STREET JOURNAL

New Housing to Benefit as Citigroup Sells Queens Site

New Housing to Benefit as Citigroup Sells Queens Site | The financial services giant built a first tower in Long Island City in 1989, but the area has since shifted its focus from office tenants to the growing housing market.

PRIVATE EQUITY »

Onex Said to Weigh Sale of Sitel Worldwide | The private equity firm Onex is said to be looking to sell Sitel Worldwide, one of the world’s biggest call center operators, in a deal that could value the company at roughly $1 billion, including debt, Reuters writes, citing unidentified people familiar with the matter.
REUTERS

HEDGE FUNDS »

Jana Partners Takes Aim at Computer Sciences | The activist hedge fund Jana Partners has disclosed a 5.9 percent stake in the Computer Sciences Corporation and said it would continue talks with the big technology company about strategic alternatives and board composition, Reuters reports.
REUTERS

I.P.O./OFFERINGS »

Postal Savings Bank of China Courts Pre-I.P.O. Investors | The Postal Savings Bank of China is in talks with potential investors, including an affiliate of Alibaba, United States private equity groups and Asian sovereign wealth funds, about selling minority stakes before a possible initial public offering in early 2016, The Financial Times reports.
FINANCIAL TIMES

Aldermore of Britain Plans London I.P.O. | The Aldermore Group, a British lender looking to challenge the dominance of big banks, said it was planning an initial public offering on the London Stock Exchange in March to raise about $116 million, Bloomberg Business reports.
BLOOMBERG BUSINESS

VENTURE CAPITAL »

Chegg Is Shifting Its Services to Focus on Digital Push | The company will hand off the management of physical books that it rents to students to the Ingram Content Group.

LEGAL/REGULATORY »
Greece Delays Submission of Its Overhaul Plans

Greece Delays Submission of Its Overhaul Plans | The government will now present its list on Tuesday, a day after the deadline. The proposals are a condition of the agreement to extend its bailout.

Local Bankers as Fed Ally in Audit Bill Battle | Local bankers are joining the fight against a congressional proposal to audit the Federal Reserve’s policy decisions, with more expected to lobby against the bill if it gains traction in Washington, Reuters writes.
REUTERS

Insider Trading Case Could Push Congress to Define a Murky World

Insider Trading Case Could Push Congress to Define a Murky World | An appeals court decision is leading some people like Mark Cuban to demand that Congress step in to better define illegal insider trading, Peter J. Henning writes in the White Collar Watch column.
White Collar Watch »

Former Treasury Nominee Becomes Key Debt Official | Antonio Weiss, who withdrew his name in January from consideration to be a senior Treasury Department official in the face of liberal opposition, is one of the top Treasury aides with broad financial industry experience and is likely to take on an influential role in shaping policy, former officials say.
BLOOMBERG BUSINESS