Big Day for AT&T, Time Warner and U.S. as Court Rules in Antitrust Case

What are the possible outcomes?

Judge Leon could block the deal.

Doing so might encourage the Justice Department to act more aggressively when it looks at deals in the future, and might prompt a rethink by companies with similar deals in the works.

A key argument against the government’s case is that the deal is a so-called vertical merger, which means that the two companies do not produce competing products: One makes media content, and the other distributes it. Some big takeovers lately have had similar profiles — the purchase of the insurer Aetna by the drugstore chain CVS, and Amazon’s purchase of Whole Foods — and they typically make it past regulators.

So a win for the government could really shake up some businesses’ plans and open the door for a new definition of antitrust regulation.

He could let it proceed without attaching any conditions.

That would, of course, have the opposite effect. It could be the green light for more vertical takeovers, and would be seen as a setback for the Trump administration.

If the deal is allowed to proceed, Comcast is expected to make a bid for most of 21st Century Fox’s television assets — setting up a bidding war against the Walt Disney Company, which has already struck a deal to buy those holdings.


The Dallas headquarter of AT&T, whose proposed merger with Time Warner was challenged in court by the Trump administration. A ruling is expected Tuesday.

Dylan Hollingsworth for The New York Times

It’s possible that the Justice Department will appeal a ruling that goes against it, though, so things may not end there.

He could approve it but attach conditions.

The aim of the conditions would broadly be to keep AT&T from using its control of content like HBO or CNN as a weapon to increase costs for its rivals. The fear is that AT&T could charge rivals a high price for, say, HBO to make AT&T’s own product more competitive.

One way to address this would be to appoint a third party to oversee disagreements between AT&T and the cable companies that want to license Time Warner content. The government doesn’t like that approach.

Another option is to demand that AT&T and Time Warner sell off some plum assets. AT&T and Time Warner don’t like this approach, so would be expected to appeal any such decision.

Doesn’t the government challenge deals all the time?

It’s true that deals get challenged all the time, but the government’s focus in the past has typically been on protecting consumers by keeping one company, or a small group of companies, from owning too much of any one specific industry. It comes up when companies buy their competitors — what’s known as horizontal integration.

For example, in 2016, a federal judge blocked the merger of Staples and Office Depot after the Federal Trade Commission argued that the combination would leave Americans with only one dominant retailer focused on pens, paper clips and Post-it notes.

What makes the AT&T decision noteworthy is that the deal is being challenged even though it doesn’t share all the characteristics of horizontal integration.

“Vertical mergers do not fit the traditional horizontal-merger analytical framework used by the U.S. regulatory authorities,” R. Mark McCareins, a professor at the Kellogg School of Management at Northwestern University, wrote in an online discussion about vertical mergers. It means the trade commission and the Department of Justice “are faced with pounding a square peg into a round hole.”

[Read more: The Time Warner case is not AT&T’s first tangle with U.S. antitrust law.]

Didn’t this get political at one point?

Yup. Time Warner owns CNN, which President Trump has publicly and repeatedly attacked as fake news.

“AT&T is buying Time Warner, and thus CNN,” he said at a campaign rally when the deal was announced. He said it was “a deal we will not approve in my administration.”

The government had said that Mr. Trump did not communicate with antitrust officials on the deal and that their decision to oppose the merger had not been ordered by the White House. During the trial, Judge Leon rejected many of AT&T’s efforts to introduce evidence about political interference into the case.

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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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Live Briefing: Scott Pruitt on Capitol Hill: Round 3 in Progress

“I’m being asked, really constantly asked, to comment on housing and security and travel,” she said. “Instead of seeing articles about efforts to return your agency to its core mission, I’m reading articles about your interactions with the industries that you regulate. Some of this undoubtedly is a result of the ‘gotcha’ age, but I do think there are legitimate questions that need to be answered.’

Here’s what to watch for as Mr. Pruitt testifies.

What the Democrats are likely to ask

Democrats intend, as they did last month, to throw the kitchen sink at Mr. Pruitt. And they have plenty to ask about.

In the three weeks since Mr. Pruitt testified before the two House committees, the public has learned that the administrator has allowed lobbyists and Washington power brokers to arrange his foreign travel, that Mr. Pruitt’s aggressive effort to shroud his meetings and speaking engagements in secrecy was done primarily to avoid uncomfortable and unexpected questions and not out of a concern for security as his staff had claimed, and that E.P.A. aides took steps to conceal a dinner Mr. Pruitt held in Rome with Cardinal George Pell last year after they learned that the cardinal had been charged with sexual abuse.

That’s in addition to a raft of other longstanding questions about Mr. Pruitt’s first-class travel and the need for a 24-hour security detail of at least 20 people that has cost taxpayers more than $3 million so far.

Senator Tom Udall of New Mexico, the top Democrat on the panel, said Wednesday that he had asked the investigative arm of Congress, the Government Accountability Office, to investigate whether the E.P.A. acted improperly when it appeared to mock Democrats on Twitter after the Senate voted to confirm the agency’s second-in-command, Andrew Wheeler.

The tweet, sent from the agency’s official account on April 13, said, “The Senate does its duty: Andrew Wheeler confirmed by Senate as deputy administrator of @EPA. The Democrats couldn’t block the confirmation of environmental policy expert and former EPA staffer under both a Republican and a Democrat president.” Mr. Udall asked the accountability office to issue a legal opinion on whether the tweet violated the Antideficiency Act, which prohibits the use of federal funds for publicity or propaganda.

“This communication did nothing to further the public’s understanding of the environment or public health — and as an act of pure partisan taunting, the case is clear for why it represents a violation of federal law,” Mr. Udall said in a statement, adding, “We can add this investigation to the ever-expanding list of Scott Pruitt’s ethical transgressions.”

What Republicans are expected to talk about

This one is tougher. Senator Lisa Murkowski of Alaska, chairwoman of the appropriations committee’s environment panel, called for Mr. Pruitt to testify at a time when Republican support for Mr. Pruitt appeared to be on a downswing. Since then, however, Republicans have tamped down criticism of the E.P.A. chief.


The Behavior That Put Scott Pruitt at the Center of Federal Inquiries

The head of the Environmental Protection Agency faces nearly a dozen federal inquiries into his practices. We break down the accusations by category.

OPEN Graphic

One notable exception is Senator Chuck Grassley of Iowa.

Mr. Grassley on Tuesday threatened to be the first Republican to call on Mr. Pruitt to resign, citing his frustration with the administrator over waivers the E.P.A. has given to small fuel refineries exempting them from a federal ethanol mandate on the nation’s gasoline. While Mr. Grassley is not a member of the committee that Mr. Pruitt will face, his concerns are shared by other corn-state Republicans and could become an issue at the hearing.

If past is prologue, though, Mr. Pruitt is likely to hear Republicans express concerns about his stewardship of E.P.A. in their opening statements but mostly draw attention to the regulatory rollbacks that they, and many of their constituents, support.

What Pruitt is expected to say

Last time around, Mr. Pruitt repeatedly shifted blame to members of his staff for the spending and ethical issues dogging him.

He said his chief of staff, Ryan Jackson, had been solely responsible for giving $72,000 in raises to two aides who previously worked with Mr. Pruitt in Oklahoma. He said career staff members had signed off on spending $43,000 to install a secure phone booth, an expense that was ultimately found to violate federal law. And he said his security detail had insisted he fly first class for his own protection.

In one exchange with Representative Ben Ray Luján of New Mexico, Mr. Pruitt had to be asked three times if he was the E.P.A. administrator before answering in the affirmative, but avoided answering whether the buck stopped with him.

“That’s not a yes or no answer,” Mr. Pruitt replied then. It’s a safe bet Mr. Pruitt will continue to tread as carefully Wednesday, and the E.P.A. spokesman, Jahan Wilcox, said in a statement that Mr. Pruitt remained focused on policy.

“From advocating to leave the Paris Accord, working to repeal Obama’s Clean Power Plan and Waters of the United States, declaring a war on lead and cleaning up toxic Superfund sites, Administrator Pruitt is focused on advancing President Trump’s agenda of regulatory certainty and environmental stewardship,” Mr. Wilcox said.

Where the president stands

President Trump has remained steadfast in his support for Mr. Pruitt, despite the arguments of several White House aides — including John F. Kelly, the president’s chief of staff — that the administrator should be fired. Asked last week if he still had confidence in Mr. Pruitt, the president replied, “I do.”

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DealBook Briefing: A Modest Proposal on Remington for Gun Control Advocates

• Any settlements won’t limit what people can say about their experience.

“Our message to the world is that we need to turn the lights on,” Tony West, Uber’s chief legal officer, wrote in a blog post.


Les Moonves, CBS’s C.E.O.

Drew Angerer/Getty Images

What CBS’s declaration of war against Shari Redstone means

In suing Ms. Redstone to preserve the independence of his board, Les Moonves may have put his job as CBS’s C.E.O. on the line. If the lawsuit fails, Ms. Redstone could replace directors and installing a new chieftain. (Whether she would is another matter.)

CBS believes it can win in Delaware’s Court of Chancery, and that it has a good chance of ultimately issuing a special dividend that would dilute the Redstones’ voting stake from 79 percent to 17 percent. Ms. Redstone is equally sure that the courts won’t let that happen to a controlling shareholder with clear rights.

The context: CBS and Viacom had been making progress in merger negotiations. But they were still far apart on management of the combined company.

Of note: One of the plaintiffs in CBS’s lawsuit is Martha Minow, the former Harvard Law School dean whom Ms. Redstone placed on the board last year.

Critics’ corner: It’s a clash of egos, says Jennifer Saba of Breakingviews. Investors have reason to celebrate (unless the company’s gambit fails), argues Elizabeth Winkler of Heard on the Street. Mr. Moonves might be making a huge mistake, writes Tara Lachapelle of Bloomberg Opinion.

Elsewhere in deals: Fujifilm won’t sweeten its bid for Xerox; here’s how Carl Icahn beat it. Sears is exploring a potential sale of assets. Two Canadian medical marijuana companies agreed a $2.5 billion merger.

The political flyaround

• Moguls like Paul Singer of Elliott Management and Ken Griffin of Citadel have reportedly cut donations to Republicans because of the tax overhaul treats hedge funds. (CNN)

• How Michael Cohen shed light on the “shadow lobbying” industry. (FT)

• The Trump administration defended its revised plans to lower drug prices, which critics say would have little effect. (NYT)

• Ben Bernanke and Stanley Fischer are among the Fed alumni who support appointing Richard Clarida as No. 2 there. Another Fed nominee, Michelle Bowman, plans to criticize postcrisis banking regulations at her Senate confirmation hearing.

• Senators led by Susan Collins of Maine introduced a bill to halt tariffs on Canadian paper imports. (Bloomberg)

• The White House and the E.P.A. blocked publication of a study on the effects of water contamination. The E.P.A.’s internal watchdog said that Scott Pruitt demanded a 24-hour security detail from Day 1.


Joe Raedle/Getty Images

ZTE shows Trump’s swing away from trade hard-liners

Now we know why President Trump offered to save the Chinese telecom company: to convince China to lift restrictions on U.S. agricultural exports. That’s counter to the approach favored by the likes of Peter Navarro, a trade adviser, and the U.S. trade representative, Bob Lighthizer.

It also reportedly reflects a loss of influence for Commerce Secretary Wilbur Ross, whose department Mr. Trump directed to explore alternatives to ZTE sanctions.

Other potential winners from the move: Qualcomm, whose takeover of NXP Semiconductors will be reviewed again by Chinese regulators, and JPMorgan Chase, which hopes to expand in China.

Elsewhere in trade: Senators dropped a plan for national security reviews of outbound investments by U.S. companies.


The sports book at the South Point hotel and casino in Las Vegas.

John Locher/Associated Press

What’s next for sports gambling

After the Supreme Court legalized a line of business already estimated to bring in $150 billion of bets each year, a swath of industries is figuring out how to cash in.

Tom Rogers, the chairman of the mobile sports betting start-up WinView (and former TiVo C.E.O.), told Michael that broadcasters like ESPN could use online betting to bolster falling ratings:

Those players are the ones hurting and are dealing with declining metrics. This provides a possible opportunity. We’ll be talking with them.

Other potential winners: Sports leagues. States like New Jersey. And DraftKings and FanDuel, obviously. (Buy Lex recommends shorting the mafia.)


Richard Drew/Associated Press

Interpreting the Goldman trading shake-up

At the Wall Street giant’s fabled securities division, two of the three top executives, Pablo Salame and Isabelle Ealet, are preparing to retire. It’s a sign of how the operation has struggled — and how the bank’s power center continues to tilt away from trading.

Sarah Butcher of eFinancialcareers had a more acerbic take:

For a firm which likes to clear out its bottom 5 percent of performers annually, Goldman seemed strangely wedded to its underperforming senior partners.

Elsewhere in finance: Hedge fund moguls like Dan Loeb love the Robin Hood Foundation, but it has backed nonprofits that have protested their industry. The former head of JPMorgan Chase’s blockchain team, Amber Baldet, has unveiled a blockchain start-up, Clovyr.


Protesters in Seattle campaigning for a business tax that Amazon opposed.

Gregory Scruggs/Reuters

The tech flyaround

• Under pressure from Amazon, Seattle scaled back its forthcoming tax on big businesses. Under pressure from employees, the company agreed to a rule to improve its board’s diversity. It’s also testing an advertising tool to challenge Google.

• WhatsApp is playing a central role in India’s elections. (NYT)

• After Cambridge Analytica and Europe’s new privacy rules, some advertisers are questioning Facebook’s value to them. And the company’s investigation into data privacy abuses has blocked some 200 apps.

• Tesla reportedly rejected a plan to give its Autopilot feature sensors to check drivers were paying attention. The company said it would “flatten” its management structure.

• New Enterprise Associates is reportedly planning to sell roughly $1 billion worth of stakes in start-ups to a new venture firm it would create. (WSJ)


Bill O’Reilly

Andy Kropa/Invision, via Associated Press

Revolving door

Bill O’Reilly is reportedly in advanced talks to return to TV — at Newsmax. (Page Six)

Vittorio Colao, Vodafone’s C.E.O. for a decade, plans to step down in October, after engineering its $22 billion Liberty Global deal. (Bloomberg)

Ted Eliopoulos, chief investment officer of the Calpers public pension fund and the architect of its move away from hedge funds, plans to retire at year end to move to New York for family reasons. (Institutional Investor)

• Two directors at Wynn Resorts, John Hagenbuch and Robert Miller, have resigned. (Bloomberg)

The speed read

• A U.S. federal judge looks likely to award the Justice Department a $250 million yacht. It’s owned by Low Taek Jho, a Malaysian financier caught up in the 1MDB scandal. (Bloomberg)

• The best-paid C.E.O.s don’t necessarily run the best-performing companies. (WSJ)

• Can robots help both employers and employees? In some industries, probably yes. (WSJ)

• Royal Dutch Shell’s takeover of an English energy start-up shows how oil giants are remaking themselves. (NYT)

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Who Strikes Fear Into Silicon Valley? Margrethe Vestager, Europe’s Antitrust Enforcer

“Europe is acting to enforce antitrust laws where the U.S. is not,” said Jeremy Stoppelman, the chief executive of Yelp, who feels that American regulators dropped the ball when they decided not to pursue a case against Google in 2013 (Yelp is a longtime Google antagonist). “Ironically, many of the complainants in the E.U. antitrust case against Google are U.S. companies, pursuing justice in Europe precisely because the U.S., has not acted,” he said in an email.

While Ms. Vestager’s global influence is ascendant, her political fate is murky. She has made it clear that she would like a second term as competition commissioner, but there is no guarantee that the Danish government will reappoint her to the commission next year. In fact, the new prime minister, who comes from a rival party, has said he will not do so.

Though a long shot, Ms. Vestager is among the potential contenders for president of the European Commission, the executive arm of the European Union. It is the most powerful job in the bloc — one never held by a woman, or by someone with her public profile.


Facebook’s C.E.O., Mark Zuckerberg, spent two days being interrogated by lawmakers in Washington in April.

Tom Brenner/The New York Times

Her appeal partly speaks to a populist impulse from the political left, a David-versus-Goliath belief that it is high time someone stood up to giant corporations, particularly those that exert so much power. But not everyone views her as a heroic regulatory warrior.

Critics of Ms. Vestager include leaders of American tech companies who have crossed her and who take issue with both her approach and her facts; Republicans in Congress; some members of the Trump administration; the Wall Street Journal editorial board; and groups like the Business Roundtable, a conservative-leaning, pro-business collection of American chief executives.

Apple is especially aggrieved. In 2016, Ms. Vestager ordered Ireland to reclaim 13 billion euros in back taxes, or about $15.5 billion, saying that the company had illegally received a tax break that was not available to others. Apple has begun paying the money into an escrow account, but both the company and Ireland have appealed the decision. They say it ignores how much tax Apple has already paid to Ireland, misrepresents the tax rate the company is subject to there, and reflects either a willful misreading or an ignorance of tax law.

Critics also accuse her of grandstanding, and of displaying bias against American companies.

“I think she has this vision of what the law should be, and it seems to me that when this radically affects major companies that are headquartered in the U.S., you might want to have more of a dialogue with the U.S. regulators and the U.S. government about it,” said Joe Kennedy, a senior fellow at the Information Technology and Innovation Foundation, a nonprofit think tank based in Washington.

Both Timothy D. Cook, Apple’s chief executive, and Sundar Pichai, Google’s chief, have traveled to Brussels to argue their cases in person, apparently in vain. Last June, Ms. Vestager fined Google €2.4 billion, or about $2.8 billion, after concluding that it had unfairly used its search engine to favor its services over those of its rivals. It was the largest such penalty in the European Commission’s history, and more than double similar fines levied by the United States.

Last May, she fined Facebook €110 million, or about $131 million, after concluding that it had misled the European authorities about its acquisition of the messaging service WhatsApp. And in January, she fined the American chip maker Qualcomm €997 million, or about $1.2 billion, saying it had abused its market dominance to shut out competitors.

For the moment, the attention is on data privacy, and whether it is possible to regulate how technology companies share and profit from users’ personal information.

As the top European official enforcing competition laws, Ms. Vestager has primarily concentrated on how a range of companies use, or abuse, their market dominance. But she has also emerged as a major voice of warning about the effect of tech firms on our habits, our privacy, our ability to make human connections and even democracy itself. (Europe has a new data privacy law that is to take effect May 25.)

“What’s fascinating about her role is that in her mind, the new antitrust is about data, not about market power,” said Randy Komisar, a veteran Silicon Valley executive and now a general partner at the venture capital firm Kleiner Perkins Caufield & Byers.


Apple’s headquarters in Cork, Ireland. In 2016, Ms. Vestager ordered Ireland to reclaim 13 billion euros in back taxes from the company.

Andrew Testa for The New York Times

He added: “I believe the European approach is more appropriate than the U.S. laissez-faire approach. The U.S. economy sort of lives or dies by the notion of free markets, and I think what we’re seeing is a perversion of free market economics that is very difficult to counter without regulation.”

Appearing last November at a tech summit meeting in Lisbon, Ms. Vestager was interviewed onstage by Kara Swisher, host of the Recode Decode podcast, as about 15,000 people looked on. Many in the audience were young techies who greeted the commissioner with something like euphoria, particularly when she declared that “we need to take our democracy back” from social media.

“She’s what my generation looks for in a politician,” said Corina Stoenescu, a Harvard Business School student who helped organize a conference in March where Ms. Vestager was the keynote speaker. She added: “The moment tech giants come into question, then Vestager comes into question. She’s the only person on the planet who has a voice about it.”

Other jurisdictions are following Europe’s regulatory lead. Brazil, among other countries, has begun an antitrust case against Google, and one of the search giant’s Brazilian competitors said last summer that it would use the European arguments in its own lawsuit. And in November, the state of Missouri opened an investigation into whether Google violated the state’s antitrust and consumer protection laws.

“It’s good if we can inspire each other globally,” Ms. Vestager said in a recent interview in Copenhagen.

She was juggling interviews and preparing for a speech, as a bag of knitting rested nearby. She likes to knit in meetings, and has recently been making elephants, after moving on from socks. (She also sometimes sews her own clothes.)

Trained as an economist, she grew up in Glostrup, a suburb of Copenhagen, the daughter of two Lutheran ministers. (She’s not a fan of organized religion, she said, and follows a “Believe in God, fear the church” philosophy.)

She entered politics at 21, joining the tiny centrist Danish Social Liberal Party, which was founded by her great-grandfather. Elected to Parliament in 2001, she rose to become the party’s parliamentary leader six years later — she was already national chairwoman — and was blamed as being too young, too boring and female when the Social Liberals lost half their seats in the subsequent election.

“She was very, very young, but if she had been a man, people would not have complained in the same way,” said her biographer, Elisabet Svane.


Ms. Vestager in Copenhagen during a European Union Economic and Financial Affairs Council meeting in 2012. As Danish economics and interior minister, Ms. Vestager pushed through deeply unpopular cuts in retirement and unemployment benefits.

Keld Navntoft/Scanpix, via Getty Images

As for the boring part: “She has a lot of humor, but she is a little boring sometimes,” Ms. Svane said in an interview. “The party is boring. They are technocrats and teachers, and they always know what is best for society.”

Ms. Vestager brought in a media consultant, Henrik Kjerrumgaard, who advised her to drop the dull platitudes, simplify her message and stick to her beliefs — even if they made her unpopular. She rethought how to present herself.

“All of us have multiple selves,” she said. “Being a public figure is not about changing yourself, but maybe bringing out some other side of yourself.” She learned to smile more, she said, “to be more direct, less detailed, not like an economist lecturing.”

Her party rebounded in the 2011 elections and joined a three-party governing coalition led by the Social Democrats under Helle Thorning-Schmidt. Appointed to the new post of economics and interior minister, Ms. Vestager pushed through deeply unpopular cuts in retirement and unemployment benefits — forcing Ms. Thorning-Schmidt to renege on her own campaign promises — while helping enact more liberal immigration policies.

She made a fair share of enemies, among them a group of long-term unemployed workers angry about reductions in their benefits. She still keeps the sculpture they gave her, of a middle-finger-brandishing hand, in her office in Brussels, saying it was “a reminder that you will make mistakes, and people will have a different point of view, and that should be part of your understanding of yourself.”

In 2014, Denmark made her the country’s appointee to the European Commission, and she took charge of the competition portfolio.

Ms. Vestager appears to have found that rare thing, a decent work-life balance. (By comparison, the fictional character she and Ms. Thorning-Schmidt are collectively said to have inspired, Birgitte Nyborg, the central figure of the Danish political drama “Borgen,” struggles unsuccessfully to hang onto her marriage.) Ms. Vestager’s husband, Thomas Jensen, a math and philosophy teacher, lives in Copenhagen with their youngest daughter, 15. Their two older daughters are in college.

“Here, it’s more the rule than the exception to be a working mother,” she said. “I have sometimes been asked if I’m a bad mother to my daughters, and I say, ‘They don’t know any different — this is the mother they’ve got.’”

Lately she has been thinking about power — what it is, who has it, how it is used — after reading the historian Mary Beard’s latest book, “Women and Power.” “The #MeToo movement can be maybe the most important catalyst for decades in doing that,” Ms. Vestager said. “It tears down our understanding of power.

“Power is not something you own,” she continued. “It’s only something you’re borrowing.”

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Sprint and T-Mobile C.E.O.s Are in Washington to Sell Their Merger. Here’s What They’ll Confront.

The reason for two American carriers to need approval? T-Mobile, which is acquiring Sprint, is controlled by Deutsche Telekom of Germany. Sprint is mostly owned by SoftBank of Japan.

Deutsche Telekom and SoftBank had to undergo reviews by Cfius when they bought control of their respective American wireless providers years ago, which suggests that any transfer of assets between the two now would pass muster.

But the Trump administration has recently taken a harder stance on foreign-owned acquisitions. It pre-emptively blocked Broadcom’s hostile bid for the chip maker Qualcomm. While Broadcom is based in Singapore, and had announced that it would relocate to the United States, the logic was that any change at Qualcomm could hamper its ability to help build out the next-generation wireless network, known as 5G, in the United States. The administration has also said it might consider nationalizing the 5G network, underscoring the sensitivity of the technology that underlies a merger between Sprint and T-Mobile.

Complicating matters are the business dealings of Sprint’s owner, SoftBank. It has ties to Huawei and ZTE, two Chinese tech companies whose connections to Beijing have been a matter of controversy.

But Sprint and T-Mobile are likely to point out that each has already passed a Cfius review in the past, and are willing to make concessions to win over the panel now.


The business dealings of Sprint’s owner, SoftBank, might complicate the merger. SoftBank has ties to Huawei and ZTE, two Chinese tech companies whose connections to Beijing have been a matter of controversy.

Jeenah Moon for The New York Times

F.C.C.: What’s in the public interest?

The Federal Communications Commission has scrutinized a possible T-Mobile-Sprint merger before.

In 2014, SoftBank’s founder, Masayoshi Son, met with the chairman of the F.C.C. at the time, Tom Wheeler, and the Justice Department’s antitrust chief at the time, Bill Baer. Mr. Son’s goal: to convince the regulators that AT&T and Verizon were an oligopoly that had a stranglehold on the United States wireless market. The best way to combat that, Mr. Son argued, was by letting Sprint combine with T-Mobile.

Mr. Wheeler and Mr. Baer rejected the argument, concluding that effectively reducing the wireless market to three major carriers from four would not be good for consumers. “The merger made no sense before, and it makes no sense today,” the two wrote in an op-ed on last year, as T-Mobile and Sprint resumed merger talks.

Sprint and T-Mobile are now betting that the new F.C.C. chairman, Ajit Pai, feels differently.

A Trump appointee, Mr. Pai has said that he would employ “humility” in determining which mergers should be allowed to go through. Last year, he pushed the F.C.C. to relax rules limiting how many television stations a broadcaster could own. Weeks later, the Sinclair Broadcast Group unveiled a deal to buy Tribune, a transaction that, if completed, would make the company the most powerful television station owner in the country. (The F.C.C.’s internal watchdog has begun an inquiry into that deregulatory push and whether it had been timed to help Sinclair.)

One question is how the F.C.C. will regard Sprint and T-Mobile’s argument that they need to fend off new players in the market. The carriers have pointed out that Comcast has begun bundling wireless service with cable television offerings, essentially by reselling access to Verizon’s network. Charter Communications is expected to unveil a similar service as well.

Craig Moffett, an analyst at the research firm MoffettNathanson, said that the commission has not traditionally considered offerings from cable companies when it comes to analyzing concentration in the wireless market. Whether it will now is unclear.


Makan Delrahim, the Justice Department’s antitrust chief, sued to block AT&T’s $85.4 billion takeover of Time Warner, arguing that the combination would bring higher prices for consumers.

Stephen Voss for The New York Times

Justice Department: Will people pay higher prices?

The biggest regulatory wild cards may be the Justice Department and its current antitrust chief, Makan Delrahim. Late last year, the Trump appointee sued to block AT&T’s $85.4 billion takeover of Time Warner, arguing that the combination would lead to higher prices for content from HBO and Turner Broadcasting channels.

The move was notable because AT&T’s deal involved buying a content company, not another telecommunications rival.

T-Mobile and Sprint’s deal would unite two direct competitors, a type of deal that regulators have traditionally been harder on.

Mr. Delrahim has also opened an investigation into whether AT&T, Verizon and potentially other carriers have colluded to hamstring an effort to help consumers switch wireless service providers more easily.

And it was the Justice Department that first moved to block AT&T’s 2011 bid for T-Mobile. In its lawsuit, the department argued that shrinking from four carriers to three “would remove a significant competitive force from the market.” That attitude prevailed again in 2014 when Mr. Baer pushed back against a union of T-Mobile and Sprint.

Many of the department’s antitrust staff members today are holdovers from 2014, suggesting they may take similar stances now as they did then.

Though corporate America assumed that a Trump presidency would be more lenient toward deal-making, it has maintained an aggressiveness in regulating mergers, according to Norman Armstrong Jr., the co-head of the antitrust practice at the law firm King & Spalding.

“Overall I haven’t seen much change from the last administration to this one,” he said.

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DealBook Briefing: Jay-Z Has 99 Problems. The S.E.C. Is One.

• Mr. Icahn and Mr. Deason say the board had demanded “unprecedented” legal protections.

What’s next: Fujifilm will want Xerox to continue pursuing their deal. Mr. Icahn and Mr. Deason will keep fighting the board — and also Fujifilm, as “an aider and abettor” of what they argue to be breaches of fiduciary duty.


Steven Mnuchin in Beijing.

Andy Wong/Associated Press

What have the Beijing trade talks achieved so far?

Not much in terms of solid plans. The U.S. delegation reiterated demands like a $200 billion cut in the trade deficit with China, which Beijing deemed “unfair.”

We’ve written before about the splits in the U.S. delegation between free-traders like Treasury Secretary Steven Mnuchin and hard-liners like the U.S. trade representative, Robert Lighthizer. But China’s negotiators face their own problem: They’re superqualified on economics, less so on trade law.

A sign that relations haven’t completely frozen over: Beijing approved Qualcomm’s plans for a Chinese joint venture on smartphone chips. (Still no word on the NXP takeover.) And UBS is seeking control of its Chinese joint venture.

Elsewhere in trade: A congressional race in Boeing’s home district is suddenly a tossup. How tariffs are reshaping the solar industry, including by spurring M.&A.

The political flyaround

• Rudy Giuliani’s disclosures might have been aimed at solving a legal problem for President Trump, but they may have created several others. (More explanation here.) Mr. Giuliani also contradicted some of the president’s accounts of James Comey’s firing. White House staffers were blindsided.

• How Fox News, normally a safe space for Mr. Trump, became a source of problems for him. (NYT)

• Scott Pruitt didn’t just buy an Oklahoma house from a lobbyist; he bought it in partnership with another lobbyist. (NYT)

• The Justice Department updated its sexual harassment guidelines. Critics worry about how they’ll be applied. (NYT)

• There has been an uptick in scam PACs ostensibly supporting causes like police and cancer victims. (Politico)


Cristina Chen-Oster, right, with a fellow plaintiff against Goldman Sachs, Shanna Orlich.

Richard Perry/The New York Times

Is #MeToo finally changing Wall Street?

After 13 years and dozens of lawyers, a lawsuit alleging gender discrimination at Goldman Sachs has won class action status. One of the plaintiffs, Cristina Chen-Oster, spoke to Bloomberg Businessweek:

Goldman’s ferocious defense and the long arc of the case so far might seem like a warning to women considering new battles. Chen-Oster takes a sunnier view. She laughs when she recounts how a friend at a different financial firm went to compliance training that, she said, boiled down to: Do whatever it takes to avoid another Chen-Oster vs. Goldman Sachs. “It’s having a positive impact,” she says.

Elsewhere in banking: How James Gorman’s take-it-or-leave-it approach helped Morgan Stanley. A judge upheld a conviction against a former Goldman Sachs programmer for stealing its high-frequency trading code. HSBC’s C.E.O. is preparing a new strategy as the firm plans a $2 billion stock buyback. Why it’s hard to show when a trading strategy turns criminal.


Gene J. Puskar/Associated Press

Why Lyft has never caught up to Uber

When its bigger rival kept hitting problems last year, Lyft wasn’t fast or aggressive enough to blow up the Death Star of its industry. “We couldn’t get out of our own way from a product and engineering perspective,” a former Lyft manager told The Information. Travis Kalanick once deemed one of Lyft’s C.E.O.s “lame sauce.”

An example, from Amir Efrati of The Information:

Lyft developed a cheaper shared-ride service called Lyft Line before Uber, but allowed Uber to get ahead with announcing its own, not-yet-developed version, called UberPool. Lyft worked on “upfront pricing” — telling riders the price of a ride before they book — for months before Uber beat it to the punch.

Elsewhere in tech: Facebook has fired several employees for abusing access to user data. Its staffers get a “Sauron alert” when their profiles a viewed by a colleague, something not available to the public. The tale of the Great Bitcoin Heist. Twitter urged users to change their passwords after a glitch caused some to be stored in an unencrypted format. Lawmakers want the tech industry to move faster on improving employee diversity.


Warren Buffett

Rick Wilking/Reuters

The deals flyaround

• Berkshire Hathaway bought 75 million shares in Apple — “an unbelievable company,” in Warren Buffett’s estimation — in the first quarter. (CNBC)

• Jim Stewart asks if Amazon and Netflix should change how antitrust regulators look at the Time Warner deal and other mergers. Jennifer Saba of Breakingviews thinks T-Mobile’s justification for its Sprint acquisition, building out a 5G network, makes sense.

• Xiaomi’s forthcoming Hong Kong I.P.O. shows Chinese companies choosing to list closer to home. (NYT)

• BP has reportedly hired Morgan Stanley to consider buying some of BHP Billiton’s assets. (Bloomberg)

• Bayer sold its remaining stake in Covestro, a maker of polymers, for $2.6 billion to help pay for its Monsanto deal. (Bloomberg)


How crime (sometimes) pays

In this weekend’s NYT Magazine, read up on true financial crime tales:

• How hackers tried to steal nearly $1 billion from Bangladesh’s central bank using the financial world’s wire transfer system.

• The opioid maker Insys said its doctor payments were part of a speakers’ program; prosecutors called them kickbacks.

• Why thieves love baby formula.

Revolving door

• Silver Lake has hired A.J. Murphy, Bank of America Merrill Lynch’s head of global capital markets — a rare arrival from outside at the managing director level, the firm told Michael.

Thomas Piquemal, Deutsche Bank’s global head of M.&A., has gone to Fimalac, the investment vehicle for the French mogul Marc Ladreit de Lacharrière, as deputy C.E.O. (FT)

• Société Générale has extended the contract of its C.E.O., Frédéric Oudéa, and named four deputy C.E.O.s: Séverin Cabannes, Diony Lebot, Philippe Aymerich and Philippe Heim. (FT)

• JPMorgan Chase has hired Manuela Veloso, head of Carnegie Mellon’s machine-learning department, as its first head of A.I. research. (WSJ)

The speed read

• The former Volkswagen chief executive Martin Winterkorn was charged with conspiracy over the diesel emissions scandal. (NYT)

• Is Warren Buffett a job creator? It depends where you look. (Bloomberg)

• Prominent Theranos investors including Education Secretary Betsy DeVos have disclosed losses of $600 million in a lawsuit. (WSJ)

• Nike’s C.E.O., Mark Parker, apologized to employees after recent turmoil over misconduct, unnamed sources said. (WSJ)

• The fast-food industry has a problem: not enough teenagers. (NYT)

• Chuck Plunkett, the Denver Post editorial page editor who called the paper’s owners “vulture capitalists,” resigned. (NYT)

• The family dispute behind a lawsuit to prevent Sotheby’s auctioning a piece by Jean-Michel Basquiat. (NYT)

• Remington Outdoor said that a bankruptcy judge had approved its reorganization plan, which will transfer ownership to creditors including JPMorgan Chase. (NYT)

• James Avery, a self-taught jeweler who built a Southern empire, died on Monday. (NYT)

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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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Facebook Replaces Lobbying Executive Amid Regulatory Scrutiny


Facebook has been scrambling to respond to intense scrutiny from federal regulators and lawmakers.

Jason Henry for The New York Times

WASHINGTON — Facebook on Tuesday replaced its head of policy in the United States, Erin Egan, as the social network scrambles to respond to intense scrutiny from federal regulators and lawmakers.

Ms. Egan, who is also Facebook’s chief privacy officer, was responsible for lobbying and government relations as head of policy for the last two years. She will be replaced by Kevin Martin on an interim basis, the company said. Mr. Martin has been Facebook’s vice president of mobile and global access policy and is a former Republican chairman of the Federal Communications Commission.

Ms. Egan will remain chief privacy officer and focus on privacy policies across the globe, Andy Stone, a Facebook spokesman, said.

The executive reshuffling in Facebook’s Washington offices followed a period of tumult for the company, which has put it increasingly in the spotlight on Capitol Hill. Last month, The New York Times and others reported that the data of millions of Facebook users had been harvested by the British political research firm Cambridge Analytica. The ensuing outcry led Facebook’s chief executive, Mark Zuckerberg, to testify at two congressional hearings this month.

Since the revelations about Cambridge Analytica, the Federal Trade Commission has started an investigation of whether Facebook violated promises it made in 2011 to protect the privacy of users, making it harder for the company to share data with third parties.

At the same time, Facebook is grappling with increased privacy regulations outside the United States. Sweeping new privacy laws called the General Data Protection Regulation are set to take effect in Europe next month. And Facebook has been called to talk to regulators in several countries, including Ireland, Germany and Indonesia, about its handling of user data.

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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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