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Bank chiefs talk regulation, Russia and recession
The C.E.O.s of seven huge American banks testified on Capitol Hill yesterday — the first time since 2009 that top Wall Street C.E.O.s have appeared en masse before Congress. Here’s how they responded to a grilling by House Democrats on a variety of issues.
Banking rules: The C.E.O.s argued that the financial system is much safer today than it was a decade ago, despite recent easing of regulations.
Russia: Brian Moynihan of Bank of America, James Gorman of Morgan Stanley and Mike Corbat of Citigroup all said they had reviewed their account holders for potential Russian money-laundering. Mr. Corbat was the only one to say he “could not comment on ongoing investigations.”
Guns: When asked whether JPMorgan Chase would “adopt a formal policy” on its ties to the firearms industry, Jamie Dimon said his bank would “consider” a responsible lending plan. Mr. Gorman said Morgan Stanley had clamped down on doing business with gunmakers; Citi and Bank of America have already done so.
The economy: Asked about the biggest economic threat facing the U.S., Mr. Corbat answered, “Our ability to talk ourselves into the next recession.”
Diversity: Not one of the C.E.O.s thought that his successor would be a woman or a person of color.
More: Lloyd Blankfein, the former Goldman Sachs C.E.O. who testified at the 2009 hearing, tweeted yesterday, “Boy, I really miss my old job!!!”
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.
What social media could learn from Wall Street
To curb disinformation and hateful content, Andrew suggests in his latest column that tech giants take a page from the banking industry and make sure they know who they’re doing business with.
• “The concept is ‘know your customer’ — or KYC, as it’s called on Wall Street — and it’s straightforward: Given concerns about privacy, security and fraud when it comes to money, no bank is allowed to take on a new customer without verifying its existence and vetting its background.”
• “What if social media companies had to verify their users the same way banks do? You’d probably feel more confident that you were interacting with real people and were not just a target for malicious bots.”
• “When I broached the idea of applying a ‘know your customer’ principle to their business, several senior executives at social media companies recoiled at the prospect, questioning how they would pull off such a huge feat, especially in emerging markets where many people lack credit cards, and even fixed street addresses.”
• But there’s precedent: NextDoor, the social network focused on local communities, requires users to submit a credit card or phone number, which it checks against databases.
• A “know your customer” rule could become more important as social networks like Facebook become fully encrypted. Fake users could easily spread misinformation and be harder to stop in an encrypted world — unless there was a way to verify their identities at the outset.
More: Facebook says it is expanding its efforts to clamp down on disinformation through steps like expanding fact-checking operations and reducing the reach of groups that share misleading content. It’s also taking steps to minimize unwelcome reminders of dead friends on its network.
Uber gives a peek at its $100 billion I.P.O.
The ride-hailing giant has told some investors that its forthcoming market debut could value it at up to $100 billion. It’s the first sign from the company about how big its I.P.O. will be.
Uber told holders of some convertible bonds that its stock could be valued at $48 to $55 a share. That translates into a valuation of about $90 billion to $100 billion, including the $10 billion it plans to raise during the I.P.O.
That’s below the $120 billion that bankers had predicted last year, prompting some commentators to wonder whether Lyft’s struggles in the public markets had forced Uber to lower its aims. (Shares in the smaller ride-hailing company are now down nearly 17 percent from their I.P.O. price.)
The big question for Uber, along with many of the other tech companies going public this year: How long will investors tolerate losses? Earlier this year, Uber disclosed that it lost $842 million in the last three months of 2018 alone. And the company acknowledges it will lose money for a long time, though it plans to show a path to profits.
We expect to learn more about Uber’s I.P.O. later today, when the company plans to publish a prospectus for the stock sale. Its shares are expected to begin trading next month.
More: Uber, Pinterest and other unicorns are reportedly worried about their existing shareholders’ lock-up agreements, which prevent them from selling for several weeks after an I.P.O.
Brexit is delayed until Halloween
Less than 48 hours before Britain’s scheduled departure, the E.U. last night extended the exit deadline until Oct. 31, Stephen Castle and Steven Erlanger of the NYT write.
It took nine hours for European leaders to agree on the delay. The six-month extension is more than the three months that the British prime minister, Theresa May, had asked for — and that President Emmanuel Macron of France had pushed for — but shorter than the year that some E.U. leaders favored.
The delay gives Britain time to get its ducks in a row. The European Council president, Donald Tusk, urged the U.K., “Please do not waste this time.” Mrs. May acknowledged that there would be “huge frustration” back home over the extension, but said she would again seek to persuade lawmakers to back her deal. The extension could be cut short if she manages to do so.
But “the path ahead still resembles a minefield, dotted with explosive issues like a possible attempt to topple Mrs. May, a general election or a second Brexit referendum — or some combination of the three,” Mr. Castle and Mr. Erlanger write. “Most immediately, Mrs. May is likely to face calls to step down, and potential successors are already trying to raise money and advertise their credentials.”
Don’t rule out another extension. At a news conference last night, Mr. Tusk told journalists, “Our wish and hope is the U.K. will be ready with a final solution at the end of October — but I’m too old to exclude another scenario.”
The National Enquirer is up for sale
American Media Inc., which owns the tabloid, said yesterday that the Enquirer is on the block. And a deal could be reached within days, Ed Lee, Andrew and Ben Protess of the NYT report.
American Media is led by David Pecker, who helped silence a woman who said she had an affair with President Trump by buying her story for $150,000 before his 2016 election and never publishing it. Prosecutors who investigated the arrangement gave the company a nonprosecution deal, which requires it to avoid committing crimes for the next several years.
But American Media is in a tough spot over The Enquirer’s feud with Jeff Bezos, who says he was threatened by the publication. Mr. Bezos is expected to meet with federal prosecutors this week to discuss his claims. If prosecutors move forward with a case, it could jeopardize American Media’s non-prosecution agreement.
The controversy is spurring the sale. American Media’s principal owner is behind the push to sell the tabloid, the NYT reports. That company, the hedge fund Chatham Asset Management, “no longer saw an upside in being associated with The Enquirer.” An unnamed source told the WaPo that American Media’s investors were uncomfortable owning a tabloid involved in supporting Mr. Trump.
But the publisher says its business focus has shifted away from tabloids to glossy magazines like Us Weekly and Men’s Journal. “Because of this focus, we feel the future opportunities with the tabloids can be best exploited by a different ownership,” the company said in a statement.
The House backs net neutrality
The House approved legislation yesterday that seeks to revive so-called net neutrality regulations that the Trump administration overturned in 2017, Cecilia Kang of the NYT writes.
• “The legislation would prohibit blocking and throttling web traffic and would categorize broadband as a service open to heavy regulation,” Ms. Kang writes. The 232-to-190 vote effectively supports giving users equal access to content.
• “Supporters say the regulation would prevent companies from blocking or slowing the delivery of content like videos.”
• “Opponents say it would strap broadband providers like Verizon and Comcast with heavy-handed restrictions, and could lead to price controls.”
But the legislation faces long odds in the Republican-led Senate. The Senate majority leader, Mitch McConnell, said this week that the legislation would be “dead on arrival.” And earlier this week, the Office of Management and Budget “advised the White House to veto the law if it reached the president’s desk,” Ms. Kang writes.
Either Amazon or Microsoft will build the Pentagon’s cloud
And then there were two. The Pentagon said yesterday that only two candidates remained in its contest to win a $10 billion contract: Amazon and Microsoft.
Those were the only companies to meet the “minimum requirements” for the contract, according to the Defense Department. Only one provider will win the huge contract, which will build the main global data repository for U.S. military services and is known as JEDI.
The contest had been mired in controversy since Oracle, one of the now-rejected bidders, alleged that an Amazon employee who had worked on JEDI during a stint at the Defense Department had undue influence on the process. A Pentagon spokeswoman said yesterday that the employee had “no adverse impact on the integrity of the acquisition process.”
The P.R. firm Gladstone Place Partners has hired Christina Stenson, most recently of the Brunswick Group, as a partner in San Francisco.
The speed read
• U.S. authorities reportedly pressured Pamplona Capital Management, an investment firm backed in part by a Russian billionaire, into selling a stake in the cybersecurity company Cofense over national security concerns. (WSJ)
• Barclays’ former investment banking chief, Tim Throsby, reportedly clashed with the bank’s C.E.O., Jes Staley, over profit targets. (FT)
• Deutsche Bank reportedly wants more time to consider whether to merge with Commerzbank. (Reuters)
• Saudi Aramco’s newly issued bonds have already slipped below their offering price. (FT)
• The I.T. services company PagerDuty raised $218 million in its I.P.O., after increasing its price range. (Bloomberg)
Politics and policy
• Gregory Craig, a former White House counsel in the Obama administration, is expected to be charged over his work for Ukraine in a case linked to Robert Mueller’s investigation. (NYT)
• The Treasury Department won’t meet a deadline for a House committee’s request for President Trump’s tax returns. (NYT)
• Attorney General William Barr told Congress that the Justice Department will look into potential “spying” into the 2016 Trump campaign. (NYT)
• The F.A.A. didn’t review modifications that Boeing made to anti-stall software for the 737 Max 8 jet after an initial safety review. (NYT)
• The transportation secretary, Elaine Chao, defended the F.A.A.’s delayed grounding of the Boeing jets. (WSJ)
• Treasury Secretary Steven Mnuchin said that the U.S. and China had agreed on a trade deal enforcement mechanism. (CNBC)
• Disney is expected to reveal details about its streaming service, called Disney Plus, to investors later today. (WSJ)
• The NYT has launched the Privacy Project to answer some of the biggest questions in our digital lives: Does privacy matter? What do companies know, and how do they know it? And what can we do about it? (NYT)
• Over 3,500 Amazon employees urged the company to do more on climate change. Others have been listening to audio clips from users’ utterances to Alexa — and sharing amusing ones in an internal chat room. (NYT, Bloomberg)
• A new bill in Congress would force tech companies to evaluate their algorithms for bias. (Verge)
• Ads could be coming to Google Maps. (Bloomberg)
Best of the rest
• The head of the I.R.S. said that parents in the college admissions scandal could face big tax bills. (Bloomberg)
• Automakers are preparing for regulatory chaos and a divided U.S. car market when the Trump administration rolls back emissions standards. (NYT)
• JetBlue will start operating flights to London. (NYT)
• Minutes from the last Fed meeting suggest a growing belief at the central bank that there is little need to change rates this year. (WSJ)
• Why investors need more transparency into how C.E.O. pay is linked to performance. (WSJ op-ed)
• Julian Assange was taken into police custody this morning after being evicted from the Ecuadorean Embassy in London. (NYT)
Thanks for reading! We’ll see you tomorrow.
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