SoftBank Bets on G.M. Cruise’s Self-Driving Car Technology: DealBook Briefing

It also appears to be second in the state in terms of performance, based on the number of times a driver had to take over from the robotic vehicle. G.M. Cruise drivers had to take control once every 1,300 miles, while Waymo’s drivers intervened just once every 5,600.

The question: Is second place to Waymo good enough to seize a respectable slice of the autonomous car market?

— Jamie Condliffe

Sears’s latest loss shows time is ticking for a self-help plan

As the embattled retailer continues to struggle with its turnaround efforts, its first-quarter results show that its financial picture is getting cloudier — and that Eddie Lampert, the company’s C.E.O., has less room to maneuver.

The main takeaways

• The company lost $3.93 per share in the quarter ended May 5, compared to a $2.28 per-share profit a year ago. Revenue slid to $2.9 billion in the quarter.

• Same-store sales, a widely used retailer metric, fell 11.9 percent.

• It will close another 72 underperforming stores.

• The company had $466 million in cash and roughly $641 million in available credit as of May 5.

The big issue

Sears has a precarious cash position. While the company repaid some of its debt due next year, it still has more debt coming due in October of 2019. And over all it still has$3.8 billion in long-term debt that it must settle at some point.

Sears has already said that it will explore several strategic options, including potentially selling — sorry, “exploring third-party partnerships involving” — businesses like its Kenmore appliances brand and its home services unit. (Mr. Lampert has already offered to buy them.) The company has also pointed to some business initiatives, including business partnerships with Citigroup (a revised, co-branded credit card) and (tire installation) that are expected to bring in more cash.

But such efforts seem unlikely to counter its debts, and Thursday’s results are unikely to silence the whisperings of more financial troubles ahead.

— Michael de la Merced

The Fed lets Wall Street traders off the leash

The Fed has proposed relaxing the Volcker Rule, which restricts the risks banks can take when trading. They will no longer have to show how each of their trades would benefit customers or hedge risks, reopening a wider range of bets on derivatives and other financial products.

It’s part of a slow but steady removal of Obama-era limits placed on Wall Street — and a move that bank C.E.O.s like JPMorgan Chase’s Jamie Dimon had long pushed for. But critics like Senator Elizabeth Warren have warned that it could reintroduce a Wild West mentality on Wall Street, and potentially leave taxpayers on the hook if banks make poor decisions.

Paul Volcker himself has supported simplifying the rule — so long as the basic principle of no public bailouts for banks’ risky trades remained.

Peter Eavis’s take: The public can only hope that the people overseeing the big banks are up to their jobs.


Warren Buffett

Rick Wilking/Reuters

Warren Buffett wanted a $3 billion slice of Uber. He didn’t get it.

Berkshire Hathaway offered a financial lifeline to the ride-hailing company earlier this year, according to Bloomberg. More from Eric Newcomer and Olivia Zaleski:

Buffett would have effectively lent Uber his sterling reputation, along with some capital, in exchange for cushy deal terms. Under the proposed agreement, Berkshire Hathaway would have provided a convertible loan to Uber that would have protected Buffett’s investment should Uber hit financial straits, while providing significant upside if Uber continued to grow in value.

Uber’s C.E.O., Dara Khosrowshahi, reportedly suggested a smaller $2 billion deal, but the two sides couldn’t agree on terms.

Andrew’s take: It’s hard to see how the two could have ever reached a deal. Mr. Buffett would only make an investment that came with a lot of strings to guarantee himself an outsized return. Uber may be desperate, but it isn’t that desperate — at least not yet.

More Uber news: The company says it’s on track for a 2019 I.P.O. And it’s trying to convince Waymo to add its autonomous cars to the Uber network.


Robyn Beck/Agence France-Presse — Getty Images

The Dick’s gun-sales ban didn’t hurt after all

The retailer’s first-quarter sales far exceeded expectations, after it stopped offering assault-style rifles earlier this year.

Its success didn’t just arise from that decision: gun sales were always a small part of revenues, short sellers were forced to cover their bets, and Dick’s improved its overall business. But the C.E.O. said that gun-control advocates who decided to buy more from its stores had undoubtedly helped.

Andrew’s take: C.E.O.s around the country waiting to take a stance on guns, but worried that it might hurt their bottom line, should take note.

The political flyaround

• President Trump said drug companies would voluntarily cut prices next month. The industry seemed surprised. (Politico)

• The financier Glenn Hutchins has gone from Silicon Valley investor to central banking power player. (Bloomberg)

• California’s Senate approved a bill to reinstate net neutrality. (The Verge)

• Brussels plans a multibillion-euro bailout fund to help E.U. countries weather shocks. (FT)

• Lawyers for Michael Cohen have two weeks to review evidence seized by a federal raid on his office and hotel room. (NYT)


Lukas Schulze/Getty Images

America’s trade fight with Europe is on again

The Trump administration failed to negotiate permanent exemptions on imported metal tariffs for the E.U., Canada and Mexico. So now the president is ready to slap levies on their steel and aluminum, as soon as tomorrow. (The White House had hoped the threat of tariffs would bring trade concessions, but it only hardened allies’ opposition.)

More from William Mauldin, Bojan Pancevski and Vivian Salama of the WSJ:

European officials have said they plan to swiftly impose levies against as much as €2.8 billion ($3.3 billion) in U.S. exports under a rule at the World Trade Organization that allows members to punish a country immediately for inappropriately seeking a “safeguard” against their exports.

Critics’ corner: Greg Ip of the WSJ says President Trump is doing protectionism wrong. Karl Rove urged the White House to play a longer game on trade.

Elsewhere in trade

• The White House’s trade negotiators with China continued their public arguments.

• Beijing proposed loosening trade restrictions ahead of further talks.

• Toyota’s best-selling model in the U.S., the RAV4, is vulnerable to potential tariffs on imported cars.

Italy is calm after its storm

The next big financial crisis apparently didn’t last long. Stock markets and the euro largely returned to normal yesterday, as the threat of Italian political turmoil, including new elections, seemed to abate.

What gives? James Mackintosh of the WSJ has three explanations: Europe’s economies are more resilient than when the Greek crisis hit in 2012; investors elsewhere thought the risks weren’t that big; or, most troublesome, investors are complacent about the dangers Italy poses.

The bottom line: UBS Wealth Management’s chief economist Paul Donovan has some sage advice: “Take a deep breath and calm down.”


Shari Redstone

Mike Cohen for The New York Times

The deals flyaround

• The Redstones’ ultimate goal in pushing for a merger of CBS and Viacom: selling the combined company. (Heard on the Street)

• Disney and Fox investors will vote on their $52.4 billion deal on July 10. Lex says Rupert Murdoch is making a shrewd bet.

• Allergan plans to sell its women’s health and infectious disease units, to appease restless shareholders. (WSJ)

• Tencent has hired Goldman Sachs, Morgan Stanley and Bank of America Merrill Lynch to lead the I.P.O. of its music business. (FT)

• Goldman is said to be developing an app to help clients assess how vulnerable they are to activist investors. (Bloomberg)


Brian Chesky, Airbnb’s C.E.O.

Adam Jourdan/Reuters

How Airbnb did a U-turn on its China plans

The company had planned to merge its China operations with a local rival, Tujia. Then its C.E.O., Brian Chesky, decided it would do better going on alone. More details from Bloomberg:

It was Chesky who pulled the plug, these people say. He worried that Airbnb would lose control of its carefully curated brand, they say. One investor likened Chesky’s attitude to someone who couldn’t commit to a long-term relationship.

Investors are still unhappy about the move, as it means Airbnb continues to burn cash in China.


Crown Prince Mohammed bin Salman of Saudi Arabia, center.

Tasneem Alsultan for The New York Times

The tech flyaround

• Cambridge Analytica’s parent company helped shape Saudi Arabia’s reform movement. (NYT)

• Commerce Secretary Wilbur Ross says the E.U.’s new G.D.P.R. data privacy laws could hurt trade. How about an American alternative?

• Tesla sent out a software fix to improve its Model 3’s braking. It worked. (NYT)

• China now has nine of the world’s biggest internet companies, according to the venture capitalist Mary Meeker. (Kleiner Perkins)

• A shift to electric vehicles could lead to a global fuel tax shortfall of $92 billion. (FT)

Revolving door

• Bank of America’s hedge-fund services unit has lost at least six employees. (FT)

• Former Republican congressman Charlie Dent is joining the law firm DLA Piper as a senior policy adviser. (Politico)

• The P.R. firm Sard Verbinnen has hired Miriam Sapiro, a former U.S. deputy trade representative, and Bruce Haynes, a veteran Washington communications executive, to lead its new Washington practice. (Sard Verbinnen)

The speed read

• Bill Gross is having a no good, very bad year. (NYT)

• Walmart said it would pay for its workers to earn college degrees. (NYT)

• It’s getting more expensive for corporations to say, “I’m sorry.” (WSJ)

• Stockton, Calif., looks set to be the first U.S. city to test a universal basic income. (NYT)

• Deutsche Bank insists that it’s committed to the U.S., even as it plans huge staff cuts there. (Bloomberg)

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The Danger That Italy’s Political Crisis Poses for the Global Economy

One thing that has become clear over the last decade is how effects can spread unpredictably across countries in times of financial disruption.

An honor guard outside the Palazzo del Quirinale in Rome, the presidential residence.CreditAlessandro Bianchi/Reuters

Italian political dysfunction is nothing new. Italian political dysfunction that ripples through global financial markets and has the potential to upend Europe is something the world woke up to Tuesday morning.

What are markets really signaling, and how much danger is there for the global economy? To answer, it helps to tease apart the crosscurrents between Italian politics, European institutions, financial markets and economies worldwide.

The New Political Risk in Italy

The Italian president, Sergio Mattarella, rejected an anti-E.U. nominee for economy minister, setting the stage for elections later in the year that, if a recent pattern repeats, could put in place a parliamentary majority that is hostile to European institutions.

In effect, those events have made it more likely that there will be a showdown between authorities in Rome and officials in Brussels, Berlin and Frankfurt over deficit spending, with an unraveling of the European Union one potential outcome, even if not the most likely one.

New Italian elections would help decide whether that is the case. In the last elections, in March, populist parties skeptical of European institutions won a comfortable majority of seats in parliament, but included both right-wing and left-wing parties that have struggled since then to form a coalition.

If the populists maintain or expand their advantages in elections, it raises the prospect of serious friction between Italian politicians looking to increase spending and a European Commission, European Central Bank and German government that insist upon fiscal austerity as a condition for, among other things, continued E.C.B. purchases of Italian bonds.

As a result, the European Union is entering yet another perilous phase, after years of crises that started in Greece nine years ago. No one would confuse the latest events with the high drama of the eurozone crisis from 2010 to 2012. But the ultimate stakes are higher. Italy is a much more populous country than Greece, more at the core of the European Union, and with much higher public debt.

What the Markets Are Telling Us

The movements Tuesday — a spike in Italian bond yields, and drops in the euro and stocks worldwide — suggest that the risk of some calamitous outcome for Europe has risen after a weekend of political drama in Rome, but that it’s still an unlikely outcome.

So far, there are few signs of “contagion effects,” in which developments in Italy could create a self-fulfilling crisis in other countries with similar economic challenges. But Italy is the third-largest economy in the eurozone and has one of the largest piles of public debt in the world. A crisis there could endanger banks and investment portfolios everywhere.

The Italian government’s borrowing costs for two years soared from 0.94 percent to 2.42 percent Tuesday, as investors demanded greater compensation against the risk that the Italian government might repay them not with the rock-solid euro but with less valuable newly issued currency.

Meanwhile, Spanish two-year bond yields rose only slightly Tuesday — by 0.07 percentage points, not the 1.48 percentage points of Italian yields.

“The contagion has been really muted,” said Megan Greene, global chief economist at Manulife Asset Management. “I think investors are correctly looking at this as an Italy-specific risk for now.”

Bond investors seem pretty well persuaded that the issue here is not a broad a loss of confidence in South European nations’ ability to pay their debts. Since 2012, the European Central Bank has instilled confidence that it is willing to do “whatever it takes” — to use the memorable phrase of the E.C.B. president Mario Draghi — to preserve the euro.

Europe’s Dilemma

What is happening in Italy is more a political crisis than a financial one. Mr. Draghi’s tools are helpful only when a country’s elected leaders are trying to avoid crisis. They are of little use if a government truly wants to break away from the rest of Europe.

Other European countries, especially powerful Germany, will have little desire to subsidize what they view as fiscal profligacy in Italy. The push toward greater economic unity across Europe since the Greek crisis has included jointly guaranteeing the continent’s banks and the E.C.B.’s purchase of government bonds.

If there is conflict, both sides have reason to work things out. Germany and European institutions certainly don’t want a crackup of the eurozone. And within Italy, the economic consequences of peeling away from Europe — high inflation and lost savings in the near term and the long-term growth consequences from being a less appealing place for investment — are severe enough that there would be reason to strike a deal.

Roberto Perli, a partner at Cornerstone Macro, puts the chance that Italy will exit the euro at only around 10 percent to 15 percent. He argues in a research note that European institutions will probably seek to de-escalate the tensions in the coming months.

The Risks for the U.S. and the World

So far the damage to markets outside Italy is mostly limited to a sell-off in global stock markets, including a 1.2 percent drop in the Standard & Poor’s 500 index Tuesday. As is often the case when the rest of the world looks risky, money flowed into Treasury bonds, lowering interest rates in the United States.

No doubt Italy has the most at risk economically, followed by the rest of Europe. But one thing that has become clear over the last decade is how effects can spread unpredictably in times of financial disruption.

For the last decade, the world has experienced a rolling series of crises, in which financial turmoil fuels economic despair which intensifies political dysfunction which — through financial markets — can spread across oceans and repeat the pattern.

No one would have thought that a crisis centered on home mortgages in the United States would prove the trigger for crises in Greece and across Europe all those years ago. If things go badly in Italy, there’s no telling where the damage could end up.

Neil Irwin is a senior economics correspondent for The Upshot. He previously wrote for The Washington Post and is the author of “The Alchemists: Three Central Bankers and a World on Fire.” @Neil_Irwin Facebook

Italy’s Chaos Might Be Everybody’s Problem: DealBook Briefing

Elsewhere in trade

• Chinese courts are clamping down on intellectual property theft from the U.S.

• Canadian Prime Minister Justin Trudeau says no Nafta is better than a bad Nafta.


Marco Bello/Reuters

What deal makers can learn from Bayer’s antitrust agreement

The bottom line from the Justice Department’s approval of Bayer’s $66 billion deal for Monsanto: The department wants asset sales, not behavioral changes, in exchange for approving mergers.

In this case, Bayer agreed to sell $9 billion worth of seed and herbicide businesses that compete with Monsanto’s operations. At least publicly, Bayer appears O.K. with the demand: It already had a deal to sell many of the units to BASF.

Why it matters: Under the Obama administration, the D.O.J. allowed so-called behavioral remedies as a cure for antitrust problems. Under President Trump, companies may need to sell divisions — or risk having their deals rejected.

The deals flyaround

• Shari Redstone sued CBS to overturn a board decision stripping her family of its control. She also said that she wasn’t interested in a CBS-Viacom merger for now. (NYT)

• Disney is said to be raising cash in case it needs to sweeten its bid for most of 21st Century Fox. (CNBC)

• KKR agreed to buy the enterprise software company BMC from its private equity owners. (KKR)

• Didit, a digital marketing company, is said to be close to buying The aim: make it a hub for positive news. (WSJ)

• Daimler led a $175 million fund-raising round for Taxify, a European rival to Uber. (FT)

• Bird, an electric scooter sharing start-up, is reportedly raising money at a $1 billion valuation. (Bloomberg)


Roseanne Barr

Mario Anzuoni/Reuters

‘Roseanne’ and the tightrope that businesses walk in the Trump era

ABC’s decision to cancel its hit sitcom, after the eponymous star posted a racist tweet, showed how carefully businesses must tread in the current political climate. The network’s parent company, Disney, had rebooted “Roseanne” to cater to conservative audiences; the result was its highest-rated show last season.

But keeping it after Roseanne Barr’s tweet could have endangered Disney’s efforts to present more inclusive programming — and potentially cut off millions in advertising dollars. So top Disney executives (including Channing Dungey, the African-American president of ABC Entertainment) moved quickly to cancel.

The question now: Will the cancellation lead to a big conservative backlash — perhaps led by President Trump, a supporter of Ms. Barr?

Elsewhere in business and social policy: A look inside Starbucks’s bias training day. Howard Schultz said some investors had questioned the cost, but he defended the initiative.


Bill Browder, center.

Robin Van Lonkhuijsen/Agence France-Presse — Getty Images

The political flyaround

• The financier Bill Browder, a critic of Moscow, was arrested in Spain on a Russian warrant but quickly released. (@billbrowder)

• The AOL founder Steve Case says that eliminating the International Entrepreneur Rule will hurt American business, particularly in the Midwest. (Inc.)

• Prime Minister Justin Trudeau of Canada said U.S. government borrowing was “not sustainable.” (Bloomberg)

• Kim Kardashian is reportedly expected at the White House today to discuss prison policy with President Trump and Jared Kushner. (Vanity Fair)

• The billionaire Democratic donor Tom Steyer explains why he isn’t listening to party leaders like Nancy Pelosi. (Politico)

The tech flyaround

• How a Pentagon contract turned into an identity crisis for Google. (NYT)

• Sheryl Sandberg said Facebook had failed to predict how its platform could be abused. Its new political ad policy is already experiencing hiccups. And Papua New Guinea could become a laboratory for Facebook regulation.

• The F.B.I. and the Department of Homeland Security said that North Korea was behind malware that stole information from U.S. companies. (AP)

• The Yahoo hacker who stole the personal data of 500 million users has been sentenced to five years in prison. (Ars Technica)

• Some new silicon: a powerful A.I. cloud server from Nvidia, and the first dedicated V.R. chips from Qualcomm.

• Age discrimination in Silicon Valley stretches beyond Intel. (Axios)

• China could crack the autonomous car challenge before America does. But its rise as a digital powerhouse more broadly is far from guaranteed.


Martin Sorrell

Mark Runnacles/Getty Images Europe

Revolving door

• Martin Sorrell is back: He will lead Derriston Capital, a publicly traded investment company that will acquire marketing companies. (Sky News)

• Cathie Lesjak, the C.F.O. of HP, plans to retire early next year. (MarketWatch)

• Paul Varga, the C.E.O. of the spirits maker Brown-Forman, plans to retire at year end. (Louisville Courier-Journal)

• UBS has hired Jonathan Hill, the British former member of the European Commission, as a senior adviser. (FT)


Evan Spiegel

Mark Lennihan/Associated Press

Quote of the day

“We would really appreciate it if they copied our data protection practices also.”

Evan Spiegel of Snap, on Facebook’s swiping of his company’s key product features.

The speed read

• U.S. food companies are churning through C.E.O.s as they struggle to innovate. (WSJ)

• Deutsche Bank employees will reportedly find out next month if they’re being fired. (Bloomberg)

• Blackstone’s offer to the superrich: invest in hedge funds and never pay taxes. (Bloomberg)

• The world’s longest commercial flight is back: 18 hours and 45 minutes, from Singapore to Newark. (NYT)

• In India, a million bank workers are striking over poor pay. (Quartz)

• Love pastrami? Katz’s Deli in Manhattan now does subscriptions. (Bloomberg)

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Comcast Confirms That It May Challenge Disney Over Fox: DealBook Briefing

Still, there is reason to worry that continued deregulation could pose problems for the financial industry down the line, Peter Eavis writes.

One other potential effect: more bank mergers.


Carlo Allegri/Reuters

What Congress’ revolt against the ZTE talks could achieve

Both Republicans and Democrats voted for legislation yesterday that could put limits on White House efforts to ease penalties on the Chinese telecom company. Senators voted for an amendment that would require the Trump administration to certify that ZTE didn’t break any laws over the past year before it let the company off the hook.

So far, the pushback appears to have prompted President Trump to slow his roll. He said yesterday that there’s no deal yet over ZTE, and that he wants to impose at least $1 billion in fines.

The current U.S. penalties are having an effect. ZTE is reportedly suffering from roughly $3 billion in losses because of the Trump sales ban.

Elsewhere in the China trade talks: Mr. Mnuchin said that Chinese steel and aluminum would still be subject to tariffs. Yet while Morgan Stanley economists think that China may buy $90 billion in additional U.S. goods in the coming years, local authorities in China are encouraging their farmers to grow more soybeans.


Mark Zuckerberg

Geert Vanden Wijngaert/Associated Press

How Mark Zuckerberg gamed his E.U. Parliament hearing

The Facebook C.E.O. faced tough questions from European lawmakers yesterday. His interrogators made it clear that they want to rein in the social network by making it more accountable to users, or even breaking up the firm.

But lawmakers were exasperated because the format of the hearing — where questions were asked one after another, all before Mr. Zuckerberg responded — left little time for detailed answers. So he wheeled out responses similar to those he gave to Congress, and the whole thing lasted less than two hours. (The C.E.O. needed to catch a flight to Paris.)

Facebook will provide many answers to officials’ questions in writing, giving the company plenty of time to carefully craft its responses.

Breaking up Facebook: Activists in the U.S. want the F.T.C. to follow in Europe’s footsteps.

The company’s new power brokers: A recent managerial reshuffle will give some senior execs more authority.

The political flyaround

• The C.E.O. of Columbus Nova, the Russia-linked investment firm tied to Michael Cohen, had hoped that the Trump associate could open up business opportunities — but was ultimately disappointed. A business partner of Mr. Cohen’s, known as the Taxi King, is cooperating with prosecutors.

• A deep dive on how the Republican donor Elliott Broidy and his business partner, George Nader, courted Middle Eastern princes by promising access to the White House. (AP)

• President Trump said that he will propose additional tax cuts before November, but didn’t give any details. (Reuters)

• The Russian bank VTB said it has cut business ties to Oleg Deripaska, one of the oligarchs affected by U.S. sanctions. The U.S. Treasury Department is urging GAZ Group to do the same.


Sergio Perez/Reuters

Why would Barclays acquire Standard Chartered?

The FT reports that Barclays has been considering such a deal — which would be big, given Standard Chartered’s £25 billion market value. But it’s not clear what the strategic benefits would be, aside from gaining entrance into new geographic markets:

“What would you put on page one of the deal announcement?” asked one City of London veteran. “I’m not sure there are many synergies.”

Elsewhere in deals

• This year could break records for deal-making, with $2 trillion of M.&.A. announced so far. (CNBC)

• G.E. is reportedly exploring a sale of its insurance business, which is a source of huge accounting write-downs. (Reuters)

• Australia’s Santos rejected a $10.9 billion takeover bid by the investment firm Harbour Energy. (FT)

• Elliott Management’s reported next target: ThyssenKrupp of Germany, and in particular its C.E.O. (Bloomberg)

• Eddie Lampert may be wreaking havoc on investors who are betting against Sears’s debt. (Bloomberg)


Reed Saxon/Associated Press

Amazon’s A.I. work with law enforcement draws criticism

The company began pushing a facial recognition system to police departments as a means of identifying suspects in photos and video shortly after the tool was launched in 2016. The American Civil Liberties Union has complained, saying that law enforcers could use the technology to follow innocent citizens, such as protesters.

The larger point: The use of facial recognition technology is largely unregulated in America. But because such systems aren’t always accurate — and can often be biased — the A.C.L.U. wants more detailed rules about the technology’s use.

Our take: Don’t expect that kind of regulation anytime soon.

The tech flyaround

• Emmanuel Macron promised to make France a haven for start-ups, but has rhetoric outstripped reality? (NYT)

• Neither companies nor regulators are really ready for the E.U.’s new data privacy rules. (Verge)

• Almost three-quarters of American drivers say they would be too scared to ride in an autonomous car. (AAA)

• Tesla says it plans to improve its Model 3’s braking performance with a software update. Separately, Elon Musk’s derision of the United Auto Workers on Twitter could land him in trouble.

• Consumers love Netflix. Cable companies? Not so much. (Ars Technica)


Marvin Ellison, the outgoing C.E.O. of J.C. Penney

Jessica A. Stewart/The St. Joseph News-Press, via Associated Press

Revolving door

• J.C. Penney’s C.E.O., Marvin Ellison, is decamping to Lowe’s, raising questions about the fate of the embattled department store chain. (DealBook)

• Univision has reportedly picked Vincent Sandusky, who spent much of his career at Telemundo, as its next C.E.O. (WSJ)

• UBS named Sam Kendall, who currently leads its global equities business, as the next head of its Americas investment banking unit. (GlobalCapital)

• Goldman Sachs has hired Max Ritter from Morgan Stanley as its head of Latin America M.&A., a newly created role. (Bloomberg)

The speed read

• Cfius, the U.S. panel that reviews deals for national security concerns, is reportedly struggling to vet all the tech know-how leaking out of America into China. (Politico)

• You might think that 10-K filings are dull. You’re wrong. (Bloomberg)

• The F.B.I. may have overstated how troublesome encryption is during its investigations. (WaPo)

• A former Valeant executive has been convicted over using a kickback arrangement to defraud the drugmaker. (NYT)

• China is trimming tariffs on imported cars to 15 percent of their wholesale value. (NYT)

• As big banks have shunned cryptocurrencies, small lenders have taken advantage. (WSJ)

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AT&T’s C.E.O. Regretted Paying Michael Cohen: DealBook Briefing

Yet it also said that its legislative affairs team would now report to the telecom’s general counsel, David McAtee. The team’s senior executive vice president, Bob Quinn, will be “retiring.”

Here’s the full text of the memo, which was obtained by DealBook:

Our company has been in the headlines for all the wrong reasons these last few days and our reputation has been damaged. There is no other way to say it – AT&T hiring Michael Cohen as a political consultant was a big mistake.

To be clear, everything we did was done according to the law and entirely legitimate. But the fact is, our past association with Cohen was a serious misjudgment. In this instance, our Washington D.C. team’s vetting process clearly failed, and I take responsibility for that. Here is more information on this issue, if you’re interested.

For the foreseeable future, the External & Legislative Affairs (E&LA) group will report to our General Counsel David McAtee. Bob Quinn, Senior Executive Vice President – E&LA, will be retiring.

David’s number one priority is to ensure every one of the individuals and firms we use in the political arena are people who share our high standards and who we would be proud to have associated with AT&T.

To all of you who work tirelessly every day to serve customers and represent the brand proudly, thank you. My personal commitment to you is – we will do better.


In a separate document, the company discussed several other points about the hiring of Essential Consultants— including the fact that Mr. Cohen approached AT&T:

Michael Cohen approached our External Affairs organization during the post-election transition period and said he was going to leave the Trump Organization and do consulting for a select few companies that wanted his opinion on the new President and his administration – the key players, their priorities, and how they think.

The company also noted that it had hired “political consultants” in the past, especially at the beginning of new administrations.

The AT&T memo comes after Novartis’s C.E.O. of three months, Vasant Narasimhan told his employees on Thursday that the revelations of the drug company’s $1.2 million contract with Mr. Cohen led to “not a good day for Novartis.” (The contract was signed under Mr. Narasimhan’s predecessor.)

The big issue: It’s not clear that Novartis, seeking counsel on issues like drug pricing, or AT&T, which wanted advice on its Time Warner deal and net neutrality, got much from Mr. Cohen in the end. (The Justice Department sued to block AT&T’s transaction, after all.)

In other Michael Cohen news: The Treasury Department has begun an inquiry into how Michael Avenatti, Stormy Daniels’s lawyer, obtained Mr. Cohen’s bank records.

— Michael de la Merced


Wu Xiaohui, former chairman of Anbang.

Thomas Peter/Reuters

Behind China’s debt crackdown

As Beijing metes out tough prison sentences — the former chairman of Anbang Insurance Group, once a highflier, just got 18 years — and lets shadow lenders wither, China is signaling that it is serious about its debt problem. (The total was 256 percent of G.D.P. as of last year.)

Debt appears to be one of the things that keep President Xi Jinping awake. From a 2016 speech highlighted by the NYT:

“Some financial risks are longstanding, lurking sources of infection that are concealed very deep but may erupt in a flash. The United States subprime crisis erupted in a night. If we’re going to have big trouble in the future, it could well be in this area, and this demands high vigilance.”

(Another of his worries: losing a tech race to the West.)

But reducing debt will be difficult, as Christopher Lee of S.&P. Global told the NYT: “Like any deleveraging campaign, it is not painless.”


Oil rig pumpjacks, which extract crude.

David Mcnew/Reuters

What’s on our economic radar

Oil: Bank of America Merrill Lynch analysts are talking about $100 a barrel next year. Military exchanges between Israel and Iran haven’t helped. (But the Blackstone Group appears ready to profit if prices rise.)

Lending: It has been a huge driver of economic growth, but has slowed in recent years, Peter Eavis writes. In March, bank loans to companies rose just 2.5 percent, compared with an average of 7 percent over the past three years; corporate bond issuance is down 14 percent from last year. The longer credit growth lags, the less likely a Trump boom becomes.

Trade: While Commerce Secretary Wilbur Ross said the U.S. had made progress in negotiations with China, there’s more to do. And if the White House wants a new Nafta deal passed this year, House Speaker Paul Ryan says the deadline for a final version is next Thursday.

Stocks: Third Point’s Dan Loeb thinks that investors are getting worried about companies’ trading multiples and is looking for signs of a looming recession.

The political flyaround

• Rudy Giuliani resigned from the law firm Greenberg Traurig, which then undercut his claims about payments to Stormy Daniels. (NYT)

• President Trump is expected to drop a campaign pledge to have Medicare negotiate lower drug prices. The F.D.A. acknowledged a shortage of EpiPens.

• What automakers are likely to raise with Mr. Trump at a C.E.O.s’ meeting today. (NYT)

• The White House’s choice for assistant Treasury secretary for international finance, Adam Lerrick, has withdrawn. (Politico)

• Scott Pruitt dined in Rome with a cardinal who has denounced action against climate change as “pagan emptiness” (and who faces sexual abuse charges). A White House spokesman said yesterday that allegations against the E.P.A. chief “have raised some concerns.”


Nicolas Asfouri/Agence France-Presse — Getty Images

What happens when Apple and Goldman Sachs team up?

They’re working on an Apple Pay-branded credit card. That would let Apple juice its services revenue as iPhone sales slow, and Goldman expand its consumer lending to make up for falling trading revenue. The loser: Barclays, whom Goldman would replace.

But they would face challenges. More from Tripp Mickle and Liz Hoffman of the WSJ:

The push into credit cards is fraught for Goldman, whose track record in consumer finance is scarcely two years old. Credit cards are a cutthroat business dominated by larger rivals like JPMorgan Chase and Citigroup. Yields are falling. And Goldman lacks much of the infrastructure to be able to issue credit cards and process payments to merchants.

Elsewhere in financial services: Morale at Deutsche Bank’s U.S. operations is dropping. Bank of America spoke of selling its piece of a loan to Remington Outdoor.


Andy Samberg, left, and Andre Braugher in Brooklyn Nine-Nine.

John P. Fleenor/Fox

The deals flyaround

• Media M.&A. moves have clouded the fate of television shows. (That said, R.I.P. “Brooklyn Nine-Nine.”) What Liberty Media’s Greg Maffei thinks of the deal making.

• Silver Lake agreed to buy ZPG, a British online real estate platform operator, for about $3 billion. (Bloomberg)

• We like the code names in Takeda Pharmaceutical’s deal for Shire: Takeda was “Yamazaki,” Shire “Hibiki.” (Bloomberg)

• Dan Loeb’s Third Point is reportedly in talks to set up a blank-check acquisition company. (Reuters)

• Why Alphabet might invest in Flipkart alongside Walmart. Robinhood, an online brokerage, has raised $363 million at a $5.6 billion valuation from the likes of DST Global. New Zealand’s sovereign wealth fund has invested $65 million in Rubicon Global, a trash-collecting start-up.

• Volvo’s parent company has reportedly hired Citigroup, Goldman Sachs and Morgan Stanley to run an I.P.O. The biggest I.P.O. of the year so far, AXA Equitable, fell in initial trading. Thoma Bravo is reportedly considering an I.P.O. or sale of Dynatrace, a business software maker.

• Saint-Gobain of France dropped its long-running takeover bid for a Swiss rival, Sika. (FT)


Eric Thayer for The New York Times

See thousands of the Russian ads that ran on Facebook

Democrats on the House Intelligence Committee published 3,519 ads bought by the Internet Research Agency, a Russian entity accused of interfering in the 2016 presidential election. Their target audiences include fans of Sean Hannity and supporters of Black Lives Matter. Facebook conceded that it was “too slow to spot this type of information operations interference,” but said it was working to prevent such abuse.

Elsewhere in Facebook: A Calstrs portfolio manager compared the company’s dual-class stock structure to a “dictatorship.” (Note: The New York Times Company also has dual-class stock.)

Cryptocurrency corner: Huawei is giving its users easier access to Bitcoin. Cryptocurrency-inspired art is now a thing, with a disintegrating portrait of Jamie Dimon fetching $33,000.

Elsewhere in tech: SoftBank’s Masa Son has changed tech investing, for good and bad. Amazon has reportedly stopped buying “Shopping” ads in Google results. Apple has scrapped plans for a $1 billion data center in Ireland. How Didi Chuxing teamed up with Uber’s biggest rival in Brazil, 99. Panasonic is reportedly hesitant to invest more in a battery partnership with Tesla.

Revolving door

• JPMorgan Chase named Chris Berthe as global head of cash equities execution, leading teams that electronically match stock buyers and sellers. (CNBC)

• Moelis & Company has hired Anuj Mathur as a managing director specializing in internet and digital media investment banking. (Moelis)

The speed read

• Spotify said it would stop promoting or recommending music by artists whose conduct or content it deemed offensive, including R. Kelly. (NYT)

• Elaine Wynn has emerged as a champion of shareholder rights and good corporate governance. (NYT)

• The novelist Junot Díaz, facing sexual misconduct allegations at M.I.T., is stepping down as chairman of the Pulitzer Prize board. (NYT)

• Marchesa, the brand codesigned by Harvey Weinstein’s estranged wife Georgina Chapman, is making a comeback with the support of Anna Wintour and Scarlett Johansson. (NYT)

• Bloomberg Philanthropies is investing $43 million in more than 20 small and midsize cultural organizations in seven cities. (NYT)

• MoviePass has competition. (Wired)

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Should the Fed Create ‘FedCoin’ to Rival Bitcoin? A Former Top Official Says ‘Maybe’

If cryptocurrency and blockchain technology really are the future of money, the world’s central banks need to get involved, a former Fed governor argues.

Kevin Warsh in London in 2014. “It strikes me that a central bank digital currency might have a role to play,” he said Thursday night.CreditPool photo by Alastair Grant

Many enthusiasts of Bitcoin and other cryptocurrencies are motivated by deep skepticism of the central banks that control the world’s money supply.

But what if central banks themselves entered the game? What would happen if the Federal Reserve, or the European Central Bank or the Bank of Japan used blockchain technology to create their own virtual currencies? Besides, that is, having some cryptocurrency fans’ heads explode?

A former Fed governor — who was also a finalist to lead the central bank — thinks the idea deserves serious consideration.

“Most central banks have a view that these crypto-assets are clever, like guys in the garage did it and it’s kind of cool, or risky,” given the potential investor losses and widespread fraud, said Kevin Warsh, who was a governor at the Fed from 2006 to 2011 and was a top contender to become its chairman late last year when President Trump instead appointed Jerome Powell.

If he had returned to the Fed, Mr. Warsh said, he would have appointed a team “to think about the Fed creating FedCoin, where we would bring legal activities into a digital coin.”

“Not that it would supplant and replace cash,” he said, “but it would be a pretty effective way when the next crisis happens for us to maybe conduct monetary policy.”

He added that blockchain technology, which allows reliable, decentralized record keeping of transactions, could be useful in the payment systems operated by the Fed, which enable the transfer of trillions of dollars between banks.

“It strikes me that a central bank digital currency might have a role to play there,” Mr. Warsh, who is now a distinguished visiting fellow at the Hoover Institution at Stanford, told several reporters Thursday evening.

Some central banks are already doing work in this vein, including the Monetary Authority of Singapore and the Bank of England. And Mr. Powell acknowledged the potential applications in his confirmation hearing for the Fed chairmanship in November, saying, “We actually look at blockchain as something that may have significant applications in the wholesale payments part of the economy.”

It would be quite a twist if a technology whose most ardent fans are motivated by distrust of central banks became a key tool for those banks.

But it would address some of the concerns connected to Bitcoin and its many privately created rivals. To the degree that the value of existing cryptocurrencies fluctuates wildly, they are ill-suited as a medium of exchange. Central banks have spent hundreds of years learning how to keep the value of money stable.

And to the degree Bitcoin and the like facilitate tax evasion, money laundering and fraud, they will be a target of global law enforcement. Central banks are used to building systems that allow enforcement of those laws.

It’s clear that central banks weighing use of blockchain technology don’t share the more anarchist impulses of some of the most die-hard cryptocurrency enthusiasts. But there may be more commonality than it might seem. As Mr. Warsh argues, if people really do believe that digital currencies in some form are the future of money, it would behoove central banks to treat them as more than a novelty.

“Congress gave the Fed a monopoly over money,” Mr. Warsh said. “And if the next generation of cryptocurrencies look more like money and less like gold — and have less volatility associated with them so they would be not just a speculative asset but could be a reliable unit of account — as a purely defensive matter I wouldn’t want somebody to take that monopoly from me.”

In other words, if cryptocurrency enthusiasts are correct that this technology could become a better way of carrying out even routine transactions, the Fed and its counterparts are the institutions that have the most to lose.

Neil Irwin is a senior economics correspondent for The Upshot. He previously wrote for The Washington Post and is the author of “The Alchemists: Three Central Bankers and a World on Fire.”@Neil_IrwinFacebook

Goldman Sachs to Open a Bitcoin Trading Operation

“I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world,” Ms. Yared said. “For almost every person involved, there has been personal skepticism brought to the table.”


Justin Schmidt, left, who will run Goldman Sachs’s Bitcoin operation, with Marianna Lopert-Schaye, vice president of principal strategic investments, and Neema Raphael, who leads research and development.

Andres Kudacki for The New York Times

Still, the suggestion that Goldman Sachs, among the most vaunted banks on Wall Street and a frequent target for criticism, would even consider trading Bitcoin would have been viewed as preposterous a few years ago, when Bitcoin was primarily known as a way to buy drugs online.

Bitcoin was created in 2009 by an anonymous figure going by the name Satoshi Nakamoto, who talked about replacing Wall Street banks — not giving them a new revenue line.

Over the last two years, however, a growing number of hedge funds and other large investors around the world have expressed an interest in virtual currencies. Tech companies like Square have begun offering Bitcoin services to their customers, and the commodity exchanges in Chicago started allowing customers to trade Bitcoin futures contracts in December.

But until now, regulated financial institutions have steered clear of Bitcoin, with some going so far as to shut down the accounts of customers who traded Bitcoin. Jamie Dimon, the chief executive of JPMorgan Chase, famously called it a fraud, and many other bank chief executives have said Bitcoin is nothing more than a speculative bubble.

Ms. Yared said Goldman had concluded that Bitcoin is not a fraud and does not have the characteristics of a currency. But a number of clients wanted to hold it as a valuable commodity, similar to gold, given the limited quantity of Bitcoin that can ever be “mined” in a complex, virtual system.

“It resonates with us when a client says, ‘I want to hold Bitcoin or Bitcoin futures because I think it is an alternate store of value,’” she said.


Baffled by Bitcoin? How Cryptocurrency Works

From Bitcoin to Litecoin to Ethereum, we explain how cryptocurrency transactions work.

By DREW JORDAN and SARAH STEIN KERR on Publish Date March 30, 2018.


Watch in Times Video »

Ms. Yared said the bank had received inquiries from hedge funds, as well as endowments and foundations that received virtual currency donations from newly minted Bitcoin millionaires and didn’t know how to handle them. The ultimate decision to begin trading Bitcoin contracts was approved by Goldman’s board of directors.

The step comes with plenty of uncertainties. Bitcoin prices are primarily set on unregulated exchanges in other countries where there are few measures in place to prevent market manipulation.

Since the beginning of the year, the price of Bitcoin has plunged — and recovered significantly — as traders have faced uncertainty about how regulators will deal with virtual currencies.

“It is not a new risk that we don’t understand,” Ms. Yared said. “It is just a heightened risk that we need to be extra aware of here.”

Goldman has already been doing more than most banks in the area, clearing trades for customers who want to buy and sell Bitcoin futures on the Chicago Mercantile Exchange and the Chicago Board Options Exchange.

In the next few weeks — the exact start date has not been set — Goldman will begin using its own money to trade Bitcoin futures contracts on behalf of clients. It will also create its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients.


“It is not a new risk that we don’t understand,” said Rana Yared, an executive overseeing the creation of the Bitcoin operation. “It is just a heightened risk that we need to be extra aware of here.”

Andres Kudacki for The New York Times

The bank’s first “digital asset” trader, Justin Schmidt, joined Goldman two weeks ago to handle the day-to-day operations, a hiring that was first reported by Tearsheet. In his last job, Mr. Schmidt, 38, was an electronic trader at the hedge fund Seven Eight Capital. In 2017, he left that job to trade virtual currencies on his own.

He will initially be placed on Goldman’s foreign currency desk because Bitcoin trading has the most similarity to movements in emerging market currencies, Ms. Yared said.

Mr. Schmidt is looking at trading actual Bitcoin — or physical Bitcoin, as it is somewhat ironically called — if the bank can secure regulatory approval from the Federal Reserve and New York authorities.

The firm also has to find a way to confidently hold Bitcoin for customers without its being stolen by hackers, as has happened to many Bitcoin exchanges. Mr. Schmidt and Ms. Yared said the current options for holding Bitcoin for clients did not yet meet Wall Street standards.

Goldman is known for pushing the envelope in the trading of complicated products. The firm faced significant criticism after the financial crisis for its profitable trading of so-called synthetic derivatives tied to the subprime mortgage markets.

Since the crisis, Goldman has made a big push to position itself as the most technologically sophisticated firm on Wall Street. Among other things, it has started an online lending service, known as Marcus, that has brought the firm into contact with retail customers for the first time. The virtual currency trading, though, will be available only to big institutional investors.

Mr. Schmidt said Goldman’s sophistication was a big part of the reason he was open to the job, despite many other opportunities in the virtual currency world.

“In terms of having a trusted institutional player, it has been something I have been looking for in my own crypto trading — but it didn’t exist,” he said.

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Deutsche Bank Abandons Wall Street Ambitions, and Focuses on Europe

But he said that the bank would aim to become less dependent on revenue from investment banking, which is often erratic, and instead look for growth in markets closer to home like Italy and Spain.

Mr. Sewing spoke after Deutsche Bank said Thursday morning that net profit had fallen nearly 80 percent in the first quarter of 2018 to 120 million euros, or $146 million, on revenue of €7 billion.

The meager return “underscores the need for immediate action,” said Mr. Sewing, a risk management specialist who replaced John Cryan as chief executive at the beginning of April. “Our shareholder returns are not satisfactory.”

The plan will also include job cuts, but Deutsche Bank did not give specifics.

Deutsche Bank became a major presence on Wall Street in 1998 when it acquired Bankers Trust. But the deal was troubled from the start. The $10.1 billion purchase price was widely viewed as inflated, and the risk-happy traders of Bankers Trust clashed with Deutsche Bank’s conservative German leadership.

The hidden risks of Deutsche Bank’s investment banking operations became clear after the onset of the financial crisis in 2008. The bank had a hand in virtually all of the major scandals of the era. It paid billions of dollars in fines and settlements related to fraudulent sale of mortgage bank securities, and over its role in a conspiracy to rig the benchmarks used to set the interest rates on trillions of dollars in loans and other financial products.

Still, Deutsche Bank was more reluctant than its European rivals to reduce its Wall Street presence. Others like Credit Suisse moved more quickly, and have since been rewarded with better profits.

Deutsche Bank’s position in investment banking has become increasingly untenable. The bank’s share price has fallen 30 percent since December, and it has not reported an annual profit since 2014. The stock market values the bank at less than half of the nominal value of its assets, an indication that investors believe there are hidden risks.

Traders seemed Thursday to be waiting to see if Deutsche Bank’s latest strategic plan by would be more successful than others. The bank’s stock price was little changed at €12 per share.

Deutsche Bank has also been under intense pressure from regulators. The European Central Bank, which has ultimate authority for bank regulation in the eurozone, has asked the lender to calculate the cost of winding down its derivative holdings.

Though the analysis is hypothetical, it underscores regulators’ concern about risks that may be lurking in Deutsche Bank’s balance sheet.

Mr. Cryan, who served less than three years as chief executive, had already started trimming the investment bank. But he was criticized as not moving fast enough. Mr. Sewing’s plan appears to go much further by explicitly shifting the focus from the United States to Europe.

“We will change the path of our bank now,” Mr. Sewing said. “There is no time to waste.”

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Washington Wants to Weaken Bank Rules. Not Every Regulator Agrees.

Regulators appear ready to agree. The Federal Reserve, along with the Office of the Comptroller of the Currency, has proposed changing the capital requirement to make it “more closely tailored to each firm.” That could wind up lowering the amount of capital that big banks must maintain.

The change was not supported by another bank regulator, the Federal Deposit Insurance Corporation, which is currently headed by Martin J. Gruenberg, an Obama administration appointee. It also prompted a “no” vote from one of the Fed’s three sitting governors, Lael Brainard, also an Obama administration appointee, who recently said it was too soon to lower capital requirements for the biggest banks.

“Some observers contend that current capital requirements are too onerous and are choking off credit,” Ms. Brainard said last Thursday in a broad speech about bank regulation. “But the evidence suggests otherwise: U.S. bank lending has been healthy over recent years and profits are strong.”

Under the Fed’s proposed new method, Bank of America and Goldman Sachs’s leverage ratio would most likely drop from 5 percent to 4.25 percent of their assets and certain off-balance sheet holdings, while Wells Fargo’s might fall to 4 percent. Capital required for eight large banks under the proposed leverage ratios is around $86 billion less than the amount demanded at the 5 percent level, according to calculations by The New York Times.


Randal K. Quarles, who oversees bank supervision at the Federal Reserve, has spearheaded a plan to ease some financial regulations.

Zach Gibson/Bloomberg

The Fed, in explaining the impact of the changes, said capital held by the banks would not fall by much. That’s because a second set of capital requirements, based on assets’ riskiness, would be set higher than the leverage ratio after the changes. The Fed estimated a theoretical reduction of $9 billion across the eight banks. That amount would be even smaller once the Fed’s annual tests of banks’ strength are taken into account.

But as regulators adjust capital rules in the coming months, the big banks are expected to enjoy significant relief. Several proposed changes could free up more than $50 billion of capital at large banks, according to recent research by Goldman Sachs, money that could in theory be distributed to shareholders.

The changes are part of a push, spearheaded by Randal K. Quarles, who oversees bank supervision at the Fed, to ease some of the regulations that came into effect after the financial crisis of 2008. The leverage ratio proposal builds on ideas that were under discussion at the Fed before Mr. Quarles’s confirmation as a Fed governor last year but go beyond that approach. It is prompting concern from those who view the leverage ratio as an important tool to help protect the financial system by preventing banks from becoming overextended.

“The leverage ratio was a much better predictor of financial health of banks going into the crisis,” said Sheila C. Bair, who was head of the F.D.I.C. during the tumult of 2008, and who does not support the proposed changes.

The change most likely won’t lead to an immediate weakening of the financial system. But, over time, if the financial industry keeps pressing for looser regulations, and Washington obliges, there is concern that the absence of a strong leverage ratio could reduce confidence in the financial system, particularly in periods of stress.

The leverage ratio’s importance is revealed in how large banks finance themselves. They get most of the money they need for lending and trading from two main sources — they borrow it in markets or they raise it from depositors. But an overreliance on those two sources can leave a bank vulnerable to runs, because many of the creditors and depositors can demand the bank return their money at short notice. That is why banks must get some of their funding from equity capital, which consists of retained profits and funds from shareholders, who cannot demand immediate repayment of their money.

Some capital rules allow banks to hold less capital against an asset that is perceived by regulators to be less risky. The weakness of this approach was revealed in 2008 and during the European debt crisis when supposedly safe assets turned out to be dangerously risky. The leverage ratio, by contrast, requires banks to have a set amount of capital, regardless of the type of assets it holds.

Acknowledging the importance of the leverage ratio, regulators increased it for the largest banks four years ago. At the higher ratio, the big banks had to have capital equivalent to 5 percent of their assets and certain off-balance sheet holdings. Under the new rule, it would decline significantly. The Fed and the Comptroller want to set the ratio at 3 percent, and then add half of a capital surcharge that is applied to eight large United States banks because their operations pose a heightened risk to the global financial system. (Daniel K. Tarullo, the Fed governor who previously oversaw bank supervision, floated this sort of change a year ago, but his suggestion would not have led to lower leverage ratios for three banks and it would have resulted in smaller reductions for the five others.)

Bank representatives say the leverage ratio has been a crude tool that has not made the financial system safer. “The best analogy is that it’s like having the same speed limit for every road in the country,” said Greg Baer, president of the Clearing House Association, which represents banks.

Supporters of the leverage ratio, however, say that it should be at least as important as the malleable capital requirements, to provide reliable protection in a storm. “It’s important to have strong, vigilant regulators but we shouldn’t put all of our faith in them,” Gregg Gelzinis of the left-leaning Center for American Progress said. “We should have this capital requirement that is simple, transparent and doesn’t rely on expert determinations.”

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Richard Jenrette, 89, Wall St. Power and Preservationist, Dies

For his part, Mr. Jenrette believed that while big companies were quite profitable, their stocks had become so expensive as to suggest limited further gains.

“We concocted something that was totally contrarian,” he recounted in his 1997 memoir, “Jenrette: The Contrarian Manager.”

The firm built its business serving institutional clients by providing them with detailed research on small-capitalization stocks. At the time, at least in the early years, most Wall Street firms were still focusing on big stocks for individual investors.

Institutions began showering D.L.J. with commissions at a time when commission rates were still fixed at high levels and portfolio managers were beginning to trade more frequently.


Mr. Jenrette in his Manhattan office in 1990, when he was chairman of Equitable Life. His capital-raising solution rescued the company.

William E. Sauro/The New York Times

“We hit a gusher,” Mr. Jenrette wrote.

D.L.J. made its precedent-setting public stock offering in early 1970, and the considerable profits it reaped very likely contributed to the demise, about five years later, of fixed commissions, pressure for which was already building.

Many securities firms followed with public offerings of their own, giving rise to criticism that publicly owned firms took on more risk than they would have had they remained private partnerships.

When Mr. Donaldson and Mr. Lufkin left the firm, Mr. Jenrette became chief executive and, after surviving a severe downturn in 1974, restored high profitability and sold D.L.J. to Equitable Life for $440 million, twice its book value, in 1985.

Like his houses, Mr. Jenrette said, “I considered D.L.J. a restoration job.”

Mr. Jenrette was induced to join Equitable as vice chairman and as president and chief executive of the Equitable Investment Corporation, the holding company for Equitable’s investment-oriented subsidiaries, including the D.L.J. brokerage firm and its Real Estate Group. The investment corporation thrived, and in 1987 Mr. Jenrette was named chairman of Equitable.

Equitable, then a 140-year old insurance grande dame owned by its policyholders, had gotten into debilitating financial trouble with a flawed version of a product called guaranteed investment contracts, and it had suffered reverses in junk bonds and real estate.

Mr. Jenrette’s capital-raising solution was the industry’s first significant demutualization — the process by which a customer-owned mutual organization is transformed into a joint stock company. Accomplished in two years, the process led to a highly successful public stock offering. Mr. Jenrette retired in 1996.

His basic precept as a manager was to “hire people smarter than you are,” he said, and he often used handwriting analysis and color charts to evaluate candidates. He also expressed more than a passing interest in astrology, to which he devoted 16 pages of his memoir, providing the signs of dozens of prominent business, political and sports figures.

Mr. Jenrette indulged a passion for meticulous record-keeping. He weighed himself daily, kept a diary for the bulk of his adult life and even in his advanced retirement years calculated the value of his liquid assets every day.

At the same time, he was building a far-ranging reputation involving what he called his hobby: buying and restoring historic American homes, more than a dozen of which he lavishly decorated and furnished with period antiques.

“I’m probably better known for old houses and antiques than for Wall Street,’’ Mr. Jenrette said in an interview for this obituary in 2012.


Edgewater, the 19th-century estate on the Hudson River that Mr. Jenrette bought from the author Gore Vidal in 1969.

Phil Mansfield for The New York Times

The setting for the interview was the high-ceilinged octagonal library at Edgewater, his six-columned home built in 1824 on a Hudson River peninsula just north of Poughkeepsie in Dutchess County, N.Y. He bought the home in 1969 from the author Gore Vidal, who had done his writing in the library. It still housed a large collection of Mr. Vidal’s books.

Mr. Jenrette “had a major impact on preservation,’’ probably as much as any single individual, said David J. Brown, executive vice president of the National Trust for Historic Preservation.

Mr. Brown cited in particular two Jenrette rescues in Charleston: the elegant Mills House hotel and the Roper House, on the Battery overlooking the harbor and Fort Sumter. Those restorations, Mr. Brown said, helped spark the city’s renaissance as a destination for what has become known as heritage tourism.

A self-acknowledged “house-aholic,” Mr. Jenrette explained his interest by saying that it was probably inspired by “a dozen too many’’ viewings of “Gone With the Wind” as a child.

Mr. Jenrette’s renown in historic restoration circles led to his hosting world dignitaries, including the emperor and empress of Japan and Charles, the Prince of Wales, who wrote the foreword to Mr. Jenrette’s 1995 book, “Adventures With Old Houses.’’

He also assembled what was believed to be the largest private collection of Duncan Phyfe furniture; many of the pieces are now at the Metropolitan Museum of Art in New York.

Richard Hampton Jenrette was born on April 5, 1929, in Raleigh, N.C. His father, Joseph, was a successful local insurance salesman. His mother, Emma,was an avid gardener and lived to 101, according to the publication New York Social Diary.

Richard was still in public school when he took a summer job as a sportswriter on The Raleigh Times. His boss was Jesse Helms, who would serve six terms in the United States Senate. Mr. Jenrette later moved to The News & Observer in Raleigh, the state capital.

After graduating from the University of North Carolina, where he majored in journalism and edited The Daily Tar Heel, Mr. Jenrette reluctantly apprenticed as an insurance salesman, taking after his father.

He didn’t relish a career prospecting for clients, he said, though what he called “a great two-year sales experience’’ gave him credibility four decades later when he found himself chief executive of Equitable Life.


The octagonal library at Edgewater, where Mr. Vidal did his writing before selling the house to Mr. Jenrette.

Phil Mansfield for The New York Times

With the Korean War on and his draft board hovering, Mr. Jenrette started a two-year active stint with the North Carolina National Guard. As a sergeant assigned to counterintelligence duty, he met a group of Harvard graduates.

Having heard that Harvard Business School was seeking to become more diverse — “affirmative action in 1951 was a Southern white male,” he remarked — he secretly applied to the school without telling his family that he hoped to quit the insurance business.

After graduating with a master’s in business administration and weighing various job offers, he joined Brown Brothers Harriman, the very model of an old-time Wall Street firm, whose oak-paneled ambience included roll-top desks, a large coal-burning fireplace and oil paintings of the founders.

He spent two years there as a portfolio manager — one client was Greta Garbo — before leaving at 30 to start his own firm with Mr. Donaldson and Mr. Lufki.

Mr. Jenrette’s partner, William L. Thompson, died in 2013. He is survived by a nephew and nieces with whom he was close: Dr. Joseph M. Jenrette III, Helen Wooddy, Betty Romberg and Nancy Reynolds.

In his later years Mr. Jenrette had owned several historic houses, all of which were to go to his Classical American Homes Preservation Trust. In addition to the Roper House, they included Millford Plantation in Pinewood, S.C., Ayr Mount in Hillsborough, N.C., and Cane Garden on St. Croix, in the United States Virgin Islands.

In Manhattan, his townhouses at 67 East 93rd Street and the adjacent No.69, which was his office, once belonged to George F. Baker, the New York banker who donated the money for the campus of the Harvard Business School.

“I’m a bachelor,” Mr. Jenrette said in 2012, “so these houses are kind of like my children.”

Ms. Howell, of the Preservation Trust, said Mr. Jenrette had regarded Edgewater as his primary residence. He bought the estate from Mr. Vidal for $125,000; in 2012 it was estimated to be worth as much as $15 million.

It was, Mr. Jenrette said, “the great love of my life.”

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