Federal regulators and the shadow banks

Federal regulators are considering bringing lenders and brokers in the so-called shadow banking system under tighter regulatory control. This opaque non-bank financial system grew rapidly over the past decade and had $10 trillion in assets by early 2007, putting it on par with the traditional banking system, according to the Federal Reserve. The financial institutions with the most to lose are the brokerages Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley. According to regulators, the problem with this system, which came to be a vital source of capital for the U.S. economy, is that its short-term borrowing dried up when things went south, turning a credit correction into a global crisis. (MarketWatch)

UBS banker pleads guilty to aiding tax fraud

Former UBS banker Bradley Birkenfeld pleaded guilty in U.S. federal court to helping extremely wealthy clients evade millions of dollars in U.S. taxes. Birkenfeld’s testimony opened a rare window into the super secretive world of Swiss banking, revealing the tricks he said the banks use to help their wealth-management clients flout U.S. tax laws. He had helped oversee $20 billion in assets. (The New York Times) In other business crime news, prosecutors said they had ample evidence to convict Bear Stearns managers Ralph Cioffi and Matthew Tannin for lying to investors about the health of two hedge funds that imploded, starting the subprime mortgage meltdown. Both were arrested yesterday. (Bloomberg)

Yahoo mulls business reorganization

Amid a number of departures of senior executives, Yahoo is considering a business reorganization that would combine its mail, search, and homepage divisions into a global product unit, according to several news media reports. (Reuters) Yesterday, three top employees, one from each of those divisions, were reported to be leaving the company, joining a growing number of departures since Yahoo and Microsoft ended merger talks. (The New York Times) Microsoft CEO Steve Ballmer quashed rumors that his company will go on an Internet buying spree to make up for the failed Yahoo bid. “People don’t understand what they’re talking about,” he said. “This is about the ad platform.” (Financial Times, free registration)

Living on fertilizer, buying in Florida

Russian fertilizer magnate Dmitry Rybolovlev is buying a Palm Beach, Fla., mansion for $100 million, in the most expensive single-family home sale on record in the U.S. The seller? Donald Trump. Trump bought the 33,000-square-foot French Regency-style Maison de l’Amitié at a bankruptcy auction in 2004, for $41.4 million. It has 475 feet of oceanfront property. Trump listed the house for $125 million three years ago, but cut the price in March. Rybolovlev says the house is an investment property, and he doesn’t plan to live there. “This is the highest price ever paid for a house,” Trump says. “And I think it’s a bargain.” (The Wall Street Journal)