Diamond, in the Rough

Robert E. Diamond Jr., former chief executive of Barclays, has gone from being one of the highest-ranking and highest-paid bankers in Britain to a guy who takes the subway to an office in exile, Andrew Ross Sorkin writes in an article for The New York Times Magazine. “It’s hard for me to talk about it,” Mr. Diamond said. “I’ve tried to move on.”

Mr. Diamond left the bank in July after authorities in Washington and London uncovered a scheme by several banks, including Barclays, to manipulate the London interbank offered rate, or Libor. The former chief executive’s role in the scandal was minimal. “Do you want the truth?” Mr. Diamond said. “Up until all of this, I didn’t even know the mechanics of how Libor was set. If you asked me who at Barclays submitted the rate every day, I wouldn’t be able to tell you. I bet you if you asked any chief executive of any bank on the street, they would give you the same answer.”

The article is part of a magazine issue centered on money, including a piece on Y Combinator, “an organization that can be likened to a sleep-away camp for start-up companies,” and another exploring the country’s economic future.

EASING THE CAPITAL COST OF LOANS TO BROKERS  |  It is common practice for brokerage firms to offer their financial advisers loans that are forgiven over time if the employee meets various requirements. But Morgan Stanley does things differently than rivals, setting aside a much lower amount of capital to protect against losses on the loans, DealBook’s Susanne Craig reports.

Brokerage firms are required by the Securities and Exchange Commission to hold one dollar for each dollar lent. Morgan Stanley, however, houses the roughly $6 billion in loans made to its financial advisers outside its broker-dealer unit, allowing the bank to set aside just 8 cents for every dollar lent. Wells Fargo, by comparison, keeps all the loans at its broker-dealer; Bank of America keeps some at its broker-dealer and some in a unit that lets it hold less capital. Rebel A. Cole, a professor of finance at DePaul University, called the move by Morgan Stanley “classic regulatory arbitrage.”

A spokesman for Morgan Stanley, James Wiggins, said the loans were held outside the brokerage operation because they were not related to customer activity. “While carrying the loans in the servicing entity does decrease the amount of capital held in the broker-dealer subsidiary, it does not reduce the amount of capital held against them at the overall company level,” he said.

Such decisions about capital “have become more important since the financial crisis as regulators have pushed banks to hold more capital to protect against potential losses,” Ms. Craig notes. Details about Morgan Stanley’s arrangement emerged in an arbitration case in Tampa, Fla., in which a broker argued defamation of character and wrongful dismissal.

GOOGLE INVESTS IN LENDING CLUB  |  Lending Club, a fast-growing marketplace for peer-to-peer loans, plans to announce on Thursday that Google led a $125 million deal to buy a stake in the company from existing investors, DealBook’s Michael J. de la Merced reports. The investment values Lending Club at $1.55 billion, almost triple the valuation of the last financing round that closed last summer.

“Google’s arrival signals another significant partner for Lending Club, ahead of a potential initial public offering that could come as soon as next year,” Mr. de la Merced writes. Google is taking a stake of less than 7 percent in Lending Club, and David Lawee, vice president for corporate development at Google, will sit as an observer on the start-up’s board. “We’re trying to be the good guys of finance and banking, and Google has a reputation of being the good guys of technology,” Renaud Laplanche, Lending Club’s chief executive, said in an interview.

LESSONS FROM BROWN-VITTER BILL  |  A bill introduced by Senator Sherrod Brown, Democrat of Ohio, and Senator David Vitter, Republican of Louisiana, which aims to make big banks safer and aims to prevent future taxpayer bailouts, probably will not get passed, Jesse Eisinger of ProPublica writes in his column, The Trade. “But its underlying premise cannot be dislodged from the Washington conversation.” A main premise of the bill is that banks need to hold more capital to absorb losses.

“Brown-Vitter doesn’t go far enough. The bill’s definition of equity could be tighter. It still contains bookkeeping entries called intangible assets and deferred tax assets, which don’t absorb losses,” Mr. Eisinger writes. “But, gratifyingly, Brown-Vitter does tighten up the definition of assets. Capital is the numerator and assets are the denominator. Both need to be made as solid and trustworthy — and resistant to manipulation by banks or regulatory capture — as they can be. When calculating assets, Brown-Vitter tightens up rules on things like how the banks measure their exposure to derivatives.”

ON THE AGENDA  |  The CME Group, Och-Ziff, Fortress and General Motors report earnings before the market opens. American International Group and LinkedIn report results on Thursday evening. The European Central Bank releases a decision on interest rates. Lloyd C. Blankfein, chief executive of Goldman Sachs, speaks at a meeting of the Investment Company Institute in Washington. The financier Ronald O. Perelman is on CNBC at 8 a.m. Robert H. Benmosche, chief executive of A.I.G., is on CNBC at 4:30 p.m.

CONTROVERSY OVER MORTGAGE AGENCY PICK  |  President Obama took a significant step on Wednesday in his effort to overhaul the mortgage market, announcing his intention to nominate Representative Melvin L. Watt, Democrat of North Carolina, as the new director of the Federal Housing Finance Agency. “Mr. Watt has advocated for strong measures to provide relief to struggling homeowners, including reducing how much borrowers owe on their mortgages,” Peter Eavis and Annie Lowrey write in DealBook.

“Still, Mr. Watt’s nomination will most likely inflame long-running political battles over how much the government should do to make mortgages available and support homeowners. Most immediately, Republican senators opposed to Mr. Watt’s housing stances might try to hold up his confirmation.”

 |  Contact: @williamalden | E-mail

After Xstrata, What’s Next for Glencore?  |  Glencore on Thursday said its merger with Xstrata was complete. But as Chris LaFemina, an analyst at Jefferies put it, “This is not the endgame, this is the beginning.” REUTERS

Shell C.E.O. to Step Down Next Year  | 
ASSOCIATED PRESS

Chairman of Dish Network Defends Bid for Sprint  |  “We’re offering a higher price. That’s just math,” Charles W. Ergen, the chairman of Dish Network, told USA Today, after remarks by the chief of SoftBank, which is seeking to buy 70 percent of Sprint. USA TODAY

French Efforts to Block Yahoo Bid for Stake in Start-Up Are Criticized  |  The French government’s objections to plans by Yahoo to buy a controlling stake in the video-sharing site DailyMotion has alarmed entrepreneurs in France. DealBook »

Lenovo’s Talks With I.B.M. Over Server Business Said to Stall  |  Lenovo’s negotiations to buy a piece of the server business of International Business Machines “have broken down due to differences over price, a person familiar with the matter said Thursday,” The Wall Street Journal writes. WALL STREET JOURNAL

Berkshire Hathaway to Acquire the Rest of IMC for $2 Billion  |  By buying the rest of IMC, an Israeli tool maker, from its founding Wertheimer family, Mr. Buffett is completing an acquisition that he began seven years ago. DealBook »

Berkshire Hathaway Sells More Shares in Moody’s  | 
BLOOMBERG NEWS

T-Mobile Completes Deal for MetroPCS  |  T-Mobile USA has completed its acquisition of MetroPCS Communications after T-Mobile’s parent company, Deutsche Telekom, raised its bid last month. The combined company, T-Mobile US Inc., will begin trading on the New York Stock Exchange on Wednesday under the ticker TMUS. DealBook »

Activist Investor Seeks Breakup of UBS  |  The activist investment firm Knight Vinke said in a letter that risky trading activity in the investment banking unit posed a threat to UBS’s wealth management business, and should be separated from the bank’s overall operations. DealBook »

A Goldman Sachs Partner at the Racetrack  |  “James Covello says that when it comes to race horses, his work on Wall Street has taught him it’s all about spreading the risk,” Bloomberg News writes. BLOOMBERG NEWS

Goldman Names Head of Special Situations Group  |  Goldman Sachs has named Julian Salisbury to lead its global special situations group, an elite division that invests in and lends to companies. DealBook »

Credit Suisse Is Said to Elevate 2 Investment Bankers  |  Credit Suisse is said to have named Marisa Drew and Ewen Stevenson as co-heads of its investment banking operations in Europe, the Middle East and Africa. DealBook »

A Big Loan for Alibaba  |  The Chinese e-commerce giant Alibaba “has secured an $8 billion loan from nine banks, a person with knowledge of the matter said,” according to The Wall Street Journal. WALL STREET JOURNAL

In Bond Funds, a Dearth of Bonds  | 
WALL STREET JOURNAL

Cerberus Said to Raise $2.61 Billion for Latest Fund  |  The new private equity fund is the first by Cerberus Capital Management since it said in December that it would sell the Freedom Group, Reuters reports. REUTERS

Carlyle Hires Energy Investment Team  | 
REUTERS

Greenlight Capital Is Stung by Gold  |  A fall in gold prices contributed to a 0.6 percent decline for David Einhorn’s Greenlight Capital in April, according to The New York Post. NEW YORK POST

Centaurus Capital Said to Be Returning Money to Investors  |  Reuters reports: “Hedge fund firm Centaurus Capital is returning all money to external investors after disagreements with clients about where the best moneymaking opportunities lie, a source familiar with the firm said.” REUTERS

Mobile Ads Support Facebook’s Earnings  |  Facebook’s quarterly results “offered early signs that the company was cracking the mobile revenue code,” The New York Times writes. NEW YORK TIMES

ING’s U.S. Unit Prices Its Market Debut Below Expectations  |  The American arm of the ING Group, the Dutch financial services firm, priced its initial public offering at $19.50 a share, below its expected range of $21 to $24. But with nearly $1.3 billion in proceeds, the deal is the second-biggest I.P.O. in the United States this year. DealBook »

Craigslist Loses Legal Challenge Against Competitors  |  “Craigslist does not have exclusive licenses to the postings on its classified advertising Web site, a federal court ruled on Tuesday,” the Bits blog writes. NEW YORK TIMES BITS

In Libor Scandal, a Clubby Culture Crossed a Line  |  The Wall Street Journal writes: “Traders and brokers have always enjoyed chummy, symbiotic relationships. But investigations into attempts to manipulate Libor highlight how efforts to curry favor escalated from expense-account meals and nighttime carousing to more legally questionable activities.” WALL STREET JOURNAL

Pick for F.C.C. Faces Immediate Challenges  |  Among other issues, Tom Wheeler, President Obama’s pick to be the next chairman of the Federal Communications Commission, would face a complicated auction next year of bands of spectrum, The New York Times writes. NEW YORK TIMES

Fed Stands by Stimulus  |  “The Federal Reserve said Wednesday that its economic stimulus campaign would press forward at the same pace it has maintained since December, putting to rest for now any suggestion that it was leaning toward doing less,” The New York Times reports. NEW YORK TIMES

Regulators Said to Pressure Banks on Capital  |  “Federal regulators, concerned that large U.S. banks remain a risk to the financial system, are pushing very large banks to hold higher levels of capital,” The Wall Street Journal writes. “This additional capital could likely include a minimum amount of unsecured long-term debt that would place a greater burden on creditors, rather than taxpayers, in the event of a bank’s demise.” WALL STREET JOURNAL

Tax Deal by Goldman Sachs to Be Reviewed by British Court  | 
BLOOMBERG NEWS