DealBook Briefing: Say Hello to the E.C.B.’s New Chief, Christine Lagarde
03 July 2019 10:47
Good Wednesday morning. Lee Iacocca, the famed auto executive who led Ford and saved Chrysler, has died at age 94 — more on that below. We’ll be taking tomorrow off for Independence Day — enjoy the Fourth. (Was this email forwarded to you? Sign up here.)
European officials nominated Ms. Lagarde, the International Monetary Fund’s current leader, to succeed Mario Draghi as president of the European Central Bank, Matina Stevis-Gridneff of the NYT reports.
Ms. Lagarde will be the first non-economist to hold the post, and the first woman, too. She worked as a prominent corporate lawyer (eventually becoming chairwoman of the law firm Baker & McKenzie); held several cabinet positions in the French government; and since 2011 has been the managing director of the I.M.F., where she is credited with having restored the organization’s profile.
“She is widely regarded as a tough and energetic negotiator, qualities she will need to coordinate monetary policy and major economic decisions for the 19 nations, encompassing about 340 million people, who use the euro,” Ms. Stevis-Gridneff writes.
Her lack of formal economics training wasn’t a problem at the I.M.F. But “the job of E.C.B. president is inherently a policymaking role,” Ben Hall of the FT writes, and “she will have to go toe-to-toe with other governing council members who have different views on monetary policy.”
She will assume the role at a tricky time, with Europe facing a weakening economy, the rise of populist political movements in many of the E.C.B.’s member states, and global tensions involving trade and tech.
A new European Commission president was also nominated: Ursula von der Leyen, who is now Germany’s defense minister. The first woman to assume the role, she will replace Jean-Claude Juncker as the bloc’s most prominent official, attending Group of 20 meetings and representing the E.U. in global negotiations.
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.
Over the weekend, President Trump said he would partly suspend a ban on U.S. companies selling products to Huawei. But as the dust has settled, his announcement increasingly looks like a modest win for American companies that will have little impact on the Chinese company.
Huawei will remain blacklisted for U.S. government workers, according to a Commerce Department memo that Reuters has seen. Employees were told to continue treating applications for permission to sell products to Huawei with “presumption of denial.”
Some U.S. chip makers stand to gain from any easing of the ban, which may have been a result of a significant lobbying effort from the tech industry. Some products, like memory chips, are widely available from suppliers outside of the U.S., and are thought to present little national security risk if they are sold to Huawei. Components for use in 5G networking gear would almost certainly remain out of bounds. It’s unclear if software like Google’s Android operating system will get a pass.
But Huawei itself doesn’t expect much benefit. “President Trump’s statements are good for American companies. Huawei is also willing to continue to buy products from American companies,” Ren Zhengfei, Huawei’s founder, said in a statement to the FT. “But we don’t see much impact on what we are currently doing. We will still focus on doing our own job right.”
So expect the Chinese company to continue a push for self-reliance. “Huawei will try to design out U.S. components and continue to build its own capabilities,” Dan Wang, a technology analyst at Gavekal Dragonomics, a research firm, told the FT. “It can’t allow its survival to be contingent on U.S. political actions.”
T-Mobile and Sprint are that much closer to clinching their $26 billion merger — and Dish, the satellite TV service, could be the savior, our colleague Edmund Lee writes.
How would that work? T-Mobile and Sprint need the Justice Department’s approval, having already gotten a nod from the F.C.C.’s chairman. The department wants to make sure there are still four major wireless carriers after the deal (AT&T and Verizon are the others). That may weaken the financial attractions of the merger, but T-Mobile and Sprint think they will still be stronger together than separate.
What’s happening? Dish and T-Mobile have agreed to a deal in principle that would create a fourth carrier, according to a report from CNBC yesterday. Dish, which is controlled by the billionaire Charlie Ergen, owns a chunk of airwaves known as spectrum, a necessary component for selling wireless service. That’s why Dish is one of the few U.S. companies that could create a rival mobile network.
The caveat: It’s worth pointing out that T-Mobile wouldn’t be selling a core part of its and Sprint’s combined operations. Dish would most likely get a reseller business, which markets mobile service under a different brand. Those services would still run on T-Mobile and Sprint’s networks. One sticking point, according to CNBC: T-Mobile wants to limit how much of the wholesale network capacity it would be selling to about 12.5 percent.
One more thing: Even if the Justice Department approves the deal, it could still be scuttled by a lawsuit brought by over a dozen states that argues the merger would make cell service more expensive. If the Dish agreement doesn’t allay their concerns, the states could still try to stop the transaction.
Remember how Robinhood, the company that has hooked millennials on app-based investing, unveiled a “checking and savings” account which was withdrawn within two days? Business Insider has taken a look at how that played out inside the company:
• Product managers were reportedly nervous about the service. “The trouble, they argued, was that the money was not in a checking account or in a savings account: It was in a brokerage account. And unlike traditional bank accounts, brokerage accounts aren’t insured by the Federal Deposit Insurance Corp. Pitching the product as a bank account could mislead customers.”
• But Baiju Bhatt, Robinhood’s C.E.O., reportedly responded, “We’re doing it anyways.”
• Mr. Bhatt also reportedly decided, against lawyers’ advice, not to confirm with the Securities Investor Protection Corporation whether it would insure the contents of the new accounts. (The regulator already insured its brokerage accounts.)
• Unnamed sources told Business Insider that Mr. Bhatt thought “that the issues would work themselves out over time and ultimately resolve in his company’s favor.”
• Only they didn’t, and the money wasn’t covered. Robinhood eventually withdrew the product. It has now been rebranded as “cash management” — and still has not been launched.
President Trump plans to nominate two economists to the Federal Reserve’s seven-member board: Christopher Waller, a longtime official at the St. Louis Fed, and Judy Shelton, a former adviser to his campaign. They represent very different approaches.
• Mr. Waller has been research director of the St. Louis Fed since 2009, and was previously a professor at the University of Notre Dame.
• Ms. Shelton is currently the U.S. executive director of the European Bank for Reconstruction and Development and previously advised both Mr. Trump and Ben Carson, the former presidential candidate.
They have differing views on a hot topic, the Fed’s political independence:
• Ms. Shelton is firmly aligned with Mr. Trump on the need for lower interest rates, having called the Fed’s ability to set rates a “Soviet power.” She has also lauded his administration’s trade war with China and been sympathetic to returning to the use of a gold standard.
• Mr. Waller wrote in 2011, “The key point to remember is that giving the central bank independence is the best method for governments to tie their own hands and prevent them from misusing monetary policy for short-term political reasons.”
If nominated, they will need to be confirmed by the Senate. That’s not a given: Several of Mr. Trump’s previous picks — both controversial ones like Herman Cain and conventional ones like the economist Marvin Goodfriend — failed to gain support.
The shoe giant earlier this week pulled a special-edition sneaker featuring a flag associated with the Revolutionary War, after feedback from the athlete and activist Colin Kaepernick that the symbol was offensive. Now both ends of the spectrum are unhappy.
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Nike had made a version of the Air Max 1 featuring the so-called Betsy Ross flag, which had 13 stars and was tied to the Fourth of July holiday. It canceled the release after Mr. Kaepernick, a spokesman for the company, privately raised concerns about the design and the flag’s associations with an era of slavery, according to the WSJ.
The move generated fallout. Gov. Doug Ducey, Republican of Arizona, tweeted that his state would withdraw support for a new Nike plant that would have employed more than 500 people. He wrote, “Arizona’s economy is doing just fine without Nike.”
But other politicians sought to step into the breach. Goodyear, the Arizona city where the plant was meant to be built, said its offer of financial incentives still stood. And Gov. Michelle Lujan Grisham of neighboring New Mexico tweeted, “Hey @Nike, let’s talk.”
The hard-charging executive, who was the only person in modern times to lead two of the Big Three automakers, died yesterday at age 94.
• “In the 1970s and ’80s, with Detroit still dominating the nation’s automobile market, his name evoked images of executive suites, infighting, power plays and the grit and savvy to sell American cars,” Robert D. McFadden of the NYT writes.
• At Ford, he oversaw the introduction of the Mustang and made the covers of Time and Newsweek, only to be fired by Henry Ford II, the grandson of the company’s founder, in 1978.
• He then took over Chrysler and nursed it back to health “in what experts called one of the most brilliant turnarounds in business history,” Mr. McFadden writes.
• “He was so widely admired that there was serious talk of his running for president of the U.S. in 1988.”
Senator Elizabeth Warren called on Scott Gottlieb, the former head of the F.D.A., to quit his new role on Pfizer’s board.
Bankers in London are bracing for a wave of job cuts in the city.
• Broadcom is reportedly near a deal to buy the cybersecurity software maker Symantec. (Bloomberg)
• Deutsche Bank is said to have held talks with rivals like Citigroup and BNP Paribas about selling parts of its equities business, as part of its turnaround plan. (WSJ)
• Anheuser-Busch InBev plans to raise as much as $9.8 billion in the I.P.O. of its Asia-Pacific business. (Reuters)
• Investment banks are reportedly scrambling to secure positions on Saudi Aramco’s potentially restarted I.P.O. (Reuters)
• AT&T is said to be considering selling its regional sports networks. (Bloomberg)
Politics and policy
• The Trump administration has dropped efforts to put a citizenship question in the 2020 census. (NYT)
• House lawmakers sued the Treasury Department and the I.R.S., demanding access to President Trump’s tax returns. (NYT)
• Over 200 companies signed onto a friend-of-the-court filing urging the Supreme Court to protect the rights of L.G.B.T.Q. workers. (Fortune)
• U.S. intelligence officials have reportedly complained about an overhaul proposed by McKinsey & Company, saying it has made espionage less effective. (Politico)
• Tesla said that it delivered 95,200 cars in the most recent quarter, a record for the company. (NYT)
• Border authorities in the Xinjiang region of China routinely install an app that gathers personal data on the phones of tourists and other visitors. (NYT)
• Four House Democrats have asked Facebook to put a moratorium on the development of its Libra cryptocurrency. The company is also coming under antitrust scrutiny in Europe. (FT)
• The hot email start-up Superhuman, which charges users $30 a month, has been criticized for using what some people consider unethical tracking techniques. (Gizmodo)
• A planned social media summit at the White House will include conservative critics of big tech. (WaPo)
• The former Google executive Andy Rubin is accused of helping run a sex ring, according to newly unsealed court documents. (Business Insider)
Best of the rest
• For the first time, there are more college-educated women in the work force than college-educated men. But they still make less money. (NYT)
• Under the new tax law, people earning $100,000 to $250,000 annually became “less likely to receive refunds and more likely to owe money with their returns.” (WSJ)
• How start-ups plan to shake up your business travel. (FT)
Thanks for reading! We’ll see you on Friday.
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