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Sep 9, 2016

DealBook Morning News - September 9, 2016Dodd-Frank Tussles, Sham Accounts at Wells Fargo, and a Curious Short Inbox x

The New York Times 

By Amie Tsang

The Dodd-Frank Act must be a real drag for private equity. After years of scant federal oversight, the sector was suddenly lumped with a new set of regulatory exams and reporting obligations.
Private equity has been lobbying hard, though, and the years of persistence may just pay off today, when the House votes on a bill the industry has championed.
If it passes, private equity firms will still have to put up with federal exams, but their reporting obligations will be loosened.
The bill comes soon after several enforcement actions against private equity firms by the Securities and Exchange Commission. This, critics say, raises the question: Why would you undo restrictions on the industry just as the S.E.C. is identifying problems with it?
And it’s not just any industry. It is one that, as an investigation by The New York Times found, has expanded its reach into parts of daily life in the United States.
It almost makes you feel bad for banks. Just as private equity gets a little wiggle room, regulators spring a report on them suggesting that Congress should bar banks from getting involved in the physical commodities market or owning private equity-like stakes in outside companies.
Wells Fargo Fined for Fake Accounts
Wells Fargo has long presented itself as a bank that cares more about long-term relationships than making a quick buck.
So much for that image.
It took a hit when it emerged that employees secretly issued credit cards and set up sham accounts. The fraudulent banking practices cost the bank $185 million in fines.
Regulators concede that the financial harm to consumers was not huge. But what does it say about the culture of the bank?
Employees were rewarded financially for opening new accounts and said they felt extreme pressure to open as many accounts as possible.
Maybe it’s time to examine these incentives a little more closely.
Short-Selling Meets Computer Hacking
Imagine a pacemaker being hacked.
This was the disturbing vision raised by Carson Block, an investor known for betting against companies’ stocks. His hedge fund, Muddy Waters, was in a rather unorthodox partnership with MedSec, a company that engages in bounty hunting for bugs and considers its research on vulnerabilities in medical devices a public service.
The pair announced last month that they had uncovered “troubling cybersecurity flaws” in pacemakers made by St. Jude Medical. It seemed more like a scene from a spy thriller than the usual accounting issues that Mr. Block specialized in.
MedSec, however, has a curious history, and the story of how the company teamed up with Mr. Block is an interesting one.
Contact amie.tsang@nytimes.com
Deals
Private Equity Consortium Said to Vie for Data Center
By REUTERS
Four private equity firms have formed a consortium to bid on a data center business owned by CenturyLink, which is hoping to sell it for more than $2.5 billion, according to people familiar with the matter.
Enterprise Products Withdraws Interest in Williams
By THE WALL STREET JOURNAL
“As a result of rumors with respect to our proposals, as well as the lack of engagement by Williams, we have determined that there is no actionable path forward toward an agreement,” Enterprise Products Partners said.
Snapchat Said to Hire Morgan Stanley to Raise Debt Financing
By RECODE
Snapchat has taken a new line of credit and Morgan Stanley is the lead bank, Recode reports, citing unnamed sources.
 
Banking
Bank of America to Pay Former Merrill Lynch Brokers $12.8 Million
By REUTERS
Bank of America agreed to settle claims made by more than 270 former employees that the bank did not follow proper procedures after firing them.
 
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Legal and Regulatory
Mario Draghi, president of the European Central Bank, whose Governing Council met on Thursday.
As Issues Swirl in Europe, E.C.B. Holds Interest Rate at Zero
By DAVID JOLLY
The central bank is confronting sluggish economic growth, uncertainty over the impact of the British referendum to leave the European Union and doubts that the bank’s policies are having an impact.
Gov. Andrew Cuomo of New York
Workers Paid by Card Will Gain Protections in New York State
By STACY COWLEY
New rules will require that free withdrawals be allowed from at least one A.T.M., restrict fees and let employees choose other forms of payment.
Former Real Estate Investing Executive Is Charged With Fraud
By LIZ MOYER
Prosecutors said Brian Block, the former chief financial officer of American Realty Capital Properties, inflated the company’s financial results in 2014.
Ford Expands Costly Door Latch Recall
By THE ASSOCIATED PRESS
The automaker will spend $640 million to replace latches to prevent doors from unexpectedly popping open in some 2.4 million vehicles.
Samsung is recalling 2.5 million Galaxy Note 7 models after discovering a flaw in the battery cell that could result in fires.
F.A.A. ‘Strongly Advises’ Against Using Samsung Galaxy Note 7 Onboard Planes
By CHRISTOPHER MELE
The advisory comes after Samsung, the maker of the smartphone, discovered a battery cell flaw that could cause fires.
A General Electric dredging barge lifting soil to remove PCBs from a Hudson River bank near Troy, N.Y., in May 2015.
G.E. Spent Years Cleaning Up the Hudson. Was It Enough?
By JESSE MCKINLEY
The New York State Department of Environmental Conservation is pushing to reopen the issue of whether General Electric’s efforts to remove PCBs from the water have succeeded.
 
Business
Airbnb, whose San Francisco headquarters are seen here, said that it would institute a new nondiscrimination policy that goes beyond what is outlined in several anti-discrimination laws.
Airbnb Adopts Rules to Fight Discrimination by Its Hosts
By KATIE BENNER
The short-term rental company has been facing criticism that some hosts reject renters based on race, religion, gender, ethnicity, age or disability.
Dr. Glen Stettin, the chief innovation officer at Express Scripts. The company is advising insurers and employers to cover a narrower range of anti-inflammatory drugs to try to foster competition and control prices.
A Push to Lower Drug Prices That Hit Insurers and Employers the Hardest
By KATIE THOMAS
Seeking to force drug price competition in an expensive category, the company wants insurers to cover fewer anti-inflammatory drugs, at least as a first-line treatment.
The new Amazon Fire HD 8 tablets.
Amazon Has a Potent Weapon in the Tablet Wars: Low Prices
By NICK WINGFIELD
The overall tablet market is no longer a growth juggernaut, with weak sales from the likes of Apple and Samsung. But Amazon’s sales are rising.
Breakingviews
Apple’s chief, Tim Cook, said that the hit game Super Mario would come to the App Store.
Nintendo Is Ready to Level Up to Mobile Games
By QUENTIN WEBB
The appearance of Super Mario at Apple’s presentation confirms that Nintendo is ready to use top characters on mobile.