Hank Greenberg Wants to Defang the N.Y. Law That Brought Him Down: DealBook Briefing
Good Monday. Here’s what we’re watching:
• Bank of America reported that its first-quarter earnings rose 30 percent from the same time last year.
• Hank Greenberg wants to neuter the Martin Act.
• The C.E.O.s of AT&T and Time Warner are expected to testify this week.
Want this in your inbox each morning? Sign up here.
Behind Hank Greenberg’s legal battle
The former A.I.G. magnate has spent over a decade fighting the civil fraud charges that led to his ouster. Now he’s taking his campaign nationwide — and is taking aim at the Martin Act, the securities law that brought him down.
What he favors: a bill introduced by Representative Tom MacArthur of New Jersey (a Republican who once worked for Mr. Greenberg at A.I.G.) to limit civil securities fraud cases solely to federal regulators. But state prosecutors say the bill would block them from filing criminal cases in their districts.
What Mr. Greenberg told the NYT:
“I care about my country and I care about the rule of law … I fought two wars for my country. This is another war.”
The response: State securities regulators complained that they would be kneecapped. Eric Schneiderman, the N.Y. attorney general, told the NYT, “This bill would be terrible for investors all across America.”
Elsewhere in N.Y. law enforcement: Get to know the Southern District of N.Y., the fiercely independent “Sovereign District” that is overseeing the investigation into President Trump’s personal lawyer, Michael Cohen. (The lead on that case: Robert Khuzami, the former S.E.C. director of enforcement.)
Bank of America’s earnings jump.
Cost cutting, higher interest rates and the new tax law lifted Bank of America’s first-quarter earnings.
Here are the numbers:
• Earnings grew 30 percent to $6.92 billion from $5.34 billion a year ago.
• Per-share earnings came in at 62 cents. Analysts polled by Thomson Reuters had expected 59 cents per share.
• Revenue grew to $23.13 billion, up from $22.25 billion in the first quarter of 2017. Analysts had expected $23.06 billion.
• BofA’s effective tax rate fell by 9 percentage points. The firm paid $1.48 billion in income taxes, compared with $1.98 billion a year ago.
• Income before taxes rose 15 percent to $8.39 billion from $7.32 billion a year earlier.
• Trading revenue increased to $4.05 billion, compared with $4.03 billion during the first quarter of 2017.
• Revenue from equities trading jumped 38 percent to $1.52 billion.
• Revenue from fixed-income trading fell 13 percent to $2.54 billion.
• First-quarter expenses were 60 percent of revenue. That’s the best ratio in more than five years, according to Bloomberg.
•The net interest margin was 2.39 percent, flat from the first quarter of 2017.
What will the AT&T and Time Warner C.E.O.s say on the stand?
Randall Stephenson of AT&T and Jeffrey Bewkes of Time Warner are expected to testify early this week in the trial for the Justice Department’s lawsuit to block the companies’ $85 billion deal.
What to expect, from Cecilia Kang: Both men will vigorously defend Time Warner’s sale to AT&T, which they say will create a stronger competitor to streaming video services. The Justice Department is likely to pose tough questions about how the combined companies could try to raise prices on rival cable and satellite firms — increases that would probably make their way to consumers.
Calculating the wider effects of tariffs on business
So far, the trade fight between the U.S. and China has played out rhetorically. But the magazine Barron’s writes about the effects that the battle is already having on companies, including fears among steel producers and pork farmers, noting that trade is being listed as a risk factor in more companies’ S.E.C. filings.
More from Avi Salzman and Daren Fonda of Barron’s:
“There has been optimism that we’re going to get 3 percent growth this year; tax reform is providing a huge stimulus for the overall economy,” notes Chad Moutray, chief economist for the National Association of Manufacturers. Now, tariff talk is “pushing back against that.”
Elsewhere in trade: The White House trade guru Peter Navarro argues in a WSJ op-ed that tariffs are necessary because China isn’t playing fair. And here’s how U.S. carmakers are trapped in the crossfire.
The political flyaround
• James Comey called President Trump unfit for office and a “stain” on those around him, along with many other criticisms, in a long-awaited interview ahead of the release of his tell-all book. (NYT)
• The Trump administration plans to unveil more sanctions on Russia in response to its role in the Syrian civil war. (NYT)
• This week, the Supreme Court could upend how e-commerce companies collect state sales taxes. The WSJ’s editorial board asserts that letting states expand their tax-collecting powers would harm business.
• David Leonhardt argues that Democrats, not Republicans, are now the party of fiscal responsibility. (NYT)
• Federal reconstruction money should go to help rebuild Puerto Rico, not benefit the island’s creditors, Desmond Lachman, Brad Setser and Antonio Weiss argue. (Bloomberg View)
• How the public pension funds of Oregon and other states are feeling the squeeze — in part because of their own actions. (NYT)
• Smaller banks say the rollback of Dodd-Frank doesn’t go far enough and mainly benefits the biggest regional lenders. (WSJ)
Can WPP thrive without Martin Sorrell?
Shares in the advertising giant fell today after Mr. Sorrell, its longtime C.E.O., resigned over the weekend. (For now, Roberto Quarta has graduated from chairman to executive chairman.) It’s a stunning fall for Mr. Sorrell, the mogul who built a wire baskets company into a colossus with over 400 agencies.
Investment bankers are now undoubtedly circling the company, hoping to win a mandate for the sale of at least some businesses.
The back story, from the WSJ:
As a board meeting — scheduled for Tuesday long before the investigation — approached, Mr. Sorrell made his decision. “He felt sitting around the boardroom table and looking at those guys in the eyes after what he’d been put through was not a particularly attractive option,” the person close to Mr. Sorrell said.
How CBS and Viacom ended up in their current predicament
As CBS and Viacom bicker over the terms of a potential merger — and Leslie Moonves, CBS’s chief, faces the prospect of being ousted if he protests too much — it’s worth considering why the two companies are in that position. It’s because of the super-voting powers of the Redstone family, Michael writes.
A recap of the power that the Redstones have: Despite owning roughly 10 percent of outstanding shares at each company, the family has about 80 percent of the voting power at each, and it could replace the board at either company at any time.
Legal experts told Michael that the Redstones unquestionably had the power to do whatever they wanted. “You can stack the board,” said John Coffee of Columbia Law School, but he added that “it might be poor form” to do that to force a change.
The deals flyaround
• Darwin Deason, one of Xerox’s biggest shareholders, asserts in an amended lawsuit against the company that its C.E.O., Jeff Jacobson, pressed ahead for a deal with Fujifilm that would keep him in control. (WSJ)
• General Assembly has agreed to be acquired by the Swiss work force company Adecco for $412.5 million. (Axios)
• Goldman Sachs has bought Clarity Money, a personal-finance app founded by Adam Dell, Michael Dell’s brother. (Adam Dell is now Goldman’s newest partner). (WSJ)
• Shire agreed to sell its oncology unit to Servier of France for $2.4 billion, potentially throwing a wrench into Takeda’s plans to buy the Irish drug maker. And Advent International is reportedly near a deal to buy Sanofi’s European generic drugs business.
• ChemChina is said to be closing in on a deal to buy a stake in the Swiss trading firm Mercuria. (FT)
• Barclays is setting up a venture capital arm. (FT)
The SoftBank-powered V.C. arms race in Silicon Valley
Masayoshi Son’s Japanese conglomerate shook the investing world by unveiling its nearly $100 billion Vision Fund. Now other giant investors — from Abu Dhabi’s Mubadala to the Qatar Investment Authority — want to invest directly in start-ups, flooding Silicon Valley with cash.
That has prompted even some old-guard firms like Sequoia Capital to respond in kind, according to Eliot Brown of the WSJ:
“We’re encouraging the excessive use of capital,” Bill Gurley, a partner at Benchmark, said of venture capitalists at a February tech conference. “We’re all doing it because it’s the game on the field.”
The tech flyaround
• Silicon Valley’s top venture capitalists are preparing for a wave of I.P.O.s over the next few years. (NYT)
• Before Mark Zuckerberg testified before Congress, Bill Gates showed how a tech C.E.O. should do it. (NYT)
• Moscow moved to ban the messaging app Telegram after it refused to open up its users’s encrypted messages to the Russian government. (NYT)
• Elon Musk’s signature tactic of defiance may not work so well as Tesla deals with the National Transportation Safety Board — and as it struggles to hit performance targets. (WSJ)
• Genetic testing is becoming more popular, thanks in part to employers who provide it as a benefit. But how useful is it? (NYT)
• British lawmakers warned against letting tech giants like Google, IBM and Microsoft dominate the development of artificial intelligence. (Bloomberg)
• AngloGold Ashanti’s C.E.O., Srinivasan Venkatakrishnan, will leave the company to become the chief of Vedanta Resources. (Bloomberg)
The speed read
• An industry that makes money by coaxing women into having surgery — sometimes unnecessarily — is growing, because of an alliance of banks, private equity firms and hedge funds. (NYT)
• How Nelson Mandela’s political heirs grew rich off corruption. (NYT)
• Kevin Johnson, the C.E.O. of Starbucks, apologized after two black men were arrested in a Philadelphia branch. (NYT)
• KPMG South Africa, under scrutiny over its auditing work on the failed VBS Mutual Bank and on companies linked to the Gupta family, said all staff members would face background checks every two years. (Bloomberg)
• How the Communist Party in China is strengthening its influence over international firms doing business in the country. Separately, a Chinese social media site reversed its plans to censor gay-themed content after a backlash from users.
• The Mexican Congress is preparing to regulate government spending on advertising. Opposition parties and citizen watchdog groups say the bill is a sham. (NYT)
• Report for America, a nonprofit organization, is making journalism part of a national service program. (NYT)
• Mindy Grossman is trying to remake Weight Watchers as a “wellness” company. (NYT)