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Showing posts with label DealBook Briefing.. Show all posts
Showing posts with label DealBook Briefing.. Show all posts

Oct 10, 2019

DealBook Briefing: Apple Gives Way to Pressure From Beijing

11-14 minutes - Source: NYT



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CreditCreditChris Mcgrath/Getty Images
Apple is the latest U.S. company to feel heat from China
The tech giant removed an app last night that allowed protesters in Hong Kong to track the police, after criticism from China’s state media. It’s the latest clash between American businesses and an increasingly political China willing to flex its muscles to promote its interests.
Apple said it had withdrawn the app from its App Store because it was being used to target and ambush police officers and threaten public safety. A Twitter account reportedly run by the app’s developer called that reasoning false and “ridiculous.”
The decision was made after a scathing editorial was published in People’s Daily, the Chinese Communist Party’s flagship newspaper. As Javier Hernández of the NYT notes, it’s the latest example of Beijing putting pressure on multinationals.
Apple is heavily dependent on China, given that it assembles nearly all its products there and tallied nearly $44 billion in sales in the country during the 12 months ended June 30. The company’s C.E.O., Tim Cook, travels there frequently and has remained largely silent on Chinese politics, even as he speaks out on American current affairs.
The move comes as the N.B.A. is still dealing with blowback from a Houston Rockets executive’s tweet supporting the Hong Kong protesters. Many of the league’s partners in China have cut ties, though N.B.A. officials remain unwilling to give Beijing an apology.
More: Farhad Manjoo of NYT Opinion argues that China’s economic riches aren’t worth the required capitulation.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced and Stephen Grocer.
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Representatives from the two countries are scheduled to sit down for another round of negotiations starting today, with the aim of avoiding a new set of tariffs. But complications in the trade war have made the chance of a big breakthrough less likely.
China’s vice premier, Liu He, and other officials are supposed to meet with U.S. Trade Representative Bob Lighthizer and Treasury Secretary Steven Mnuchin today and tomorrow.
There have been gestures toward compromise recently. Beijing has sought to appease Washington by increasing its purchases of American farm products and opening up its financial sector. And the Trump administration plans to let some American companies supply nonsensitive goods to China’s Huawei, the NYT reports.
But tensions have also grown. The White House blacklisted some Chinese tech companies this week, citing the use of their products in repressing Muslim minorities in China. And the Trump administration is reportedly considering a crackdown on shipments of contraband from China, the FT reports.
The state of the talks’ schedule is unclear. The White House denied a report by the South China Morning Post yesterday that Mr. Liu would leave Washington tonight. But an unnamed source told CNBC that the schedule for the talks has become “fluid” and that Friday’s session was “an open question.”
U.S. stock futures were slightly lower today ahead of the talks, as investors and other policymakers professed little hope that the discussions would lead to much. “It’s unrealistic to think we’re going to solve all the issues in one go,” Craig Allen, the president of the U.S.-China Business Council, told the WSJ. “We have too many issues.”
The current political environment might eventually lead to restrictions on the free flow of capital across national borders. That could pose a risk for the global economy, David McCormick, the co-C.E.O. of Bridgewater, the world’s biggest hedge fund, writes in an FT op-ed.
• Protectionism could lead to a bias against “megafunds,” which include the biggest sovereign wealth funds, national pension funds and other huge investment vehicles. Just 40 of them represent about $12 trillion in assets.
• “These funds deploy capital where others can’t or won’t, pushing the frontiers of capital markets,” Mr. McCormick writes. “This approach drives the expansion of capital formation by investing where liquidity is limited.”
• Though some policymakers may worry that these funds could be used for political ends, “these investors appear to have for the most part acted responsibly with free market economic motivations.”
• “Policymakers should take heed of the role they play in the global economy.”
Facebook’s C.E.O., Mark Zuckerberg, will testify before the House Financial Services Committee this month about his company’s cryptocurrency project, which has drawn political fire from around the world.
Lawmakers in the U.S. and elsewhere have argued that Libra poses a risk to the global financial system because its payments network could be used to launder money or finance terrorism. European regulators went further this week, saying that Libra had the potential to undermine the euro.
Two Democratic senators urged Visa, Mastercard and Stripe to reconsider their involvement in Libra. The lawmakers, Sherrod Brown of Ohio and Brian Schatz of Hawaii, cited news reports about difficulties that members of a coalition supporting Libra have had in obtaining information on the organization’s management.
Mr. Zuckerberg will seek to allay those concerns. He has already said that Facebook will not move forward with the project in the U.S. until regulators’ worries are quelled.
As Senator Elizabeth Warren rises in the polls among Democratic presidential candidates, corporate America is trying to prepare for a candidate who has built her campaign on criticizing business for a host of problems, Greg Ip of the WSJ writes.
Among the sweeping changes that Ms. Warren has proposed:
• Regulating Big Tech and breaking up big banks
• Banning fracking and phasing out carbon emissions from buildings, cars and power plants within 15 years
• Forcing big companies to appoint worker representatives to at least 40 percent of their board seats
• Banning private health insurance and, effectively, for-profit colleges
• Imposing higher taxes on the wealthy and on companies
Some executives and analysts worry that Ms. Warren would impose onerous burdens on businesses. “She could create an environment where it is next to impossible to function” for health insurers,” Vicky Gregg, the former C.E.O. of BlueCross BlueShield of Tennessee, told Mr. Ip.
Others think that few of her most radical proposals would become law, because she would be forced to tack to the center if she becomes the Democratic nominee, or because Congress and federal courts would oppose some of her agenda.
Many don’t have a problem with Ms. Warren’s goals, Mr. Ip writes — just with the speed and the way in which she might try to achieve them. Her carbon emissions targets, one utility executive said, are based on unrealistic expectations.
More: Ms. Warren said that she wouldn’t hold fund-raisers with big-dollar donors even as the Democratic nominee.
The bankrupt California utility no longer has the sole right to devise a financial reorganization plan, Peter Eavis of the NYT reports. That could lead to a competing plan devised by several owners of PG&E debt.
“Losing the exclusive right to put forward restructuring terms is a huge blow to PG&E’s management and its largest shareholders,” Mr. Eavis writes. In Chapter 11 bankruptcy proceedings, companies have the first chance to devise how to sort out their finances.
A rival proposal by creditors would give current shareholders a tiny stake in PG&E once it emerges from bankruptcy. But the company opposes that offer because, in its view, it lets bondholders take over the utility on the cheap.
The creditors’ plan is backed by individuals with claims against PG&E over wildfire damage. Their proposal would pay up to $14.5 billion to wildfire victims, while PG&E’s offer would pay them $8.4 billion.
The judge in the case appears to be encouraging a compromise. “A dual-track plan course going forward may facilitate negotiations for a global resolution and narrow the issues which are in legitimate dispute,” Judge Dennis Montali wrote.
Bed Bath & Beyond hired Mark Tritton, Target’s chief merchandising officer, as its new C.E.O.
Chief executives are leaving their posts at a record pace this year.
Deals
• Goldman Sachs said it was reconsidering its role in the Hong Kong I.P.O. of Megvii, a Chinese facial recognition start-up, after the Trump administration blacklisted the company. (Reuters)
• Senator Marco Rubio, Republican of Florida, urged a national security panel to review the takeover of the short-form video app Musical.ly by the Chinese company TikTok, citing concerns about censorship. (Reuters)
• The Hong Kong Stock Exchange’s failed takeover bid for its London rival shows the challenges of consolidating global stock markets. (WSJ)
• AT&T agreed to sell its operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America for $1.95 billion to help cut its debt load. Related: Some in Hollywood worry that media companies have too much debt. (Bloomberg, Hollywood Reporter)
Trump impeachment inquiry
• Joe Biden, for the first time, called for President Trump to be impeached. (NYT)
• House Democrats plan to issue more subpoenas related to Mr. Trump’s dealings with Ukraine. (NYT)
• Trey Gowdy, the former Republican lawmaker, has joined Mr. Trump’s legal team. (NYT)
Politics and policy
• President Trump reportedly urged then-Secretary of State Rex Tillerson to encourage the Justice Department to drop a case against an Iranian-Turkish trader who was a client of Rudy Giuliani. (Bloomberg)
• Several Fed policymakers worry that weaker business activity could lead to slower hiring and reduced consumer spending. (NYT)
• Central banks are slowly shifting their currency reserves away from the dollar. (FT)
• The European Central Bank restarted its bond-buying program despite objections from its monetary policy committee. (FT)
• A Pentagon analyst was charged yesterday with leaking classified information to two journalists. (NYT)
Brexit
• The E.U. warned Prime Minister Boris Johnson of Britain that Northern Ireland must remain in the European customs union. (FT)
• Mr. Johnson pledged that his Conservative Party’s election manifesto would not explicitly embrace a no-deal Brexit. (FT)
Tech
• The cost of staying atop Google’s search results is rising. (Bloomberg)
• A defense of Facebook’s policy for political ads. (Verge)
• Why Amazon reversed course on its film strategy, largely abandoning big-screen rollouts. (NYT)
• Consumer Reports criticized Tesla’s Smart Summon feature, comparing it to a distracted driver. (Consumer Reports)
• The I.R.S. published, for the first time in five years, guidance for calculating taxes owed on cryptocurrency holdings. (CoinDesk)
Best of the rest
• A new book by Ronan Farrow discloses fresh details about sexual assault accusations against Matt Lauer. He has denied the allegations. (NYT)
• A lawyer at Pimco sued the asset management giant, accusing it of gender and race discrimination. (FT)
• Nissan cleared a senior legal executive, Hari Nada, of “inappropriate involvement” in its inquiry into the ouster of Carlos Ghosn, its former chairman. (NYT)
• Corporate America’s coming earnings season doesn’t look good. (WSJ)
• The day Warren Buffett tried to call the C.E.O. of Bank of America with an investment offer — but dialed a call center and was rebuffed. (Bloomberg)

Oct 3, 2019

DealBook Briefing: Europe Deals a Big Blow to Facebook

11-14 minutes - Source: NYT



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CreditCreditDenis Charlet/Agence France-Presse, via Afp Via Getty Images
Good Thursday morning. Vanity Fair just published its latest New Establishment list, and those riding high include Jeff Bezos, Susan Wojcicki of YouTube and Ted Sarandos of Netflix. (Was this email forwarded to you? Sign up here.).
The E.U.’s top court ruled this morning that an individual country can order the social network to take down content and restrict global access to that material, Adam Satariano of the NYT writes. It expands Europe’s role as the world’s digital cop.
The European Court of Justice’s decision came in a case involving an Austrian politician who wanted Facebook to remove disparaging comments about her that had been posted on an individual’s personal page.
It’s a defeat for Facebook and other digital platforms, placing more responsibility on them to patrol their sites for content deemed illegal.
And it widens Europe’s ability to govern global tech companies, though it comes days after the same court ruled that the E.U.’s “right to be forgotten” privacy law does not extend beyond European borders.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced, Lindsey Underwood and Stephen Grocer.
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CreditDrew Angerer/Getty Images
Stock futures are up slightly in premarket trading this morning, after indexes tumbled yesterday amid concerns that the trade wars are only deepening economic problems. But there’s plenty of reason to remain concerned.
The S&P slid 1.8 percent yesterday, its worst drop since late August. Shares in energy, financial and industrial companies all fell sharply, while crude oil prices and yields on government bonds also dropped.
Recession may no longer be a concern, but a slowdown still is. Other reasons to worry include the most recent Institute for Supply Management survey of American factories, which showed that activity levels had fallen to depths unseen since the end of the financial crisis. And spending on nonresidential construction fell 0.5 percent in August, showing that businesses are slowing down their investments.
The U.S. is increasingly in thrall to global economic problems. Yesterday’s sell-off was preceded by an even bigger one in European markets. And Greg Ip of the WSJ writes, “From tariff-related tension to a German auto-emissions scandal and a Chinese credit squeeze, forces weighing on external economies have begun to wash back on the U.S.
That’s why any signs of economic optimism should be tempered by skepticism, Neil Irwin of the Upshot writes: “We are only starting to see the delayed economic impact of a series of trade escalations over the summer and of a slowdown in the global economy.”

Americans, prepare to pay more for that glass of French wine
President Trump is ready to impose $7.5 billion worth of tariffs on European goods —including airplanes, French wine and Spanish olive oil — after receiving permission from the W.T.O., Ana Swanson of the NYT writes.
They’re part of long-running American complaints over European subsidies to Airbus, and are meant to help the U.S. recoup some losses that Boeing sustained because of the E.U.’s trade practices.
The list of products subject to U.S. levies “reads like a gourmet shopping list,” Ms. Swanson notes. The administration will levy a 25 percent tax on imports of Parmesan cheese, mussels, coffee, single malt whiskeys and other agricultural goods from Europe. (CNBC notes that U.S. travelers may end up paying higher fares as a result of levies on Airbus planes.)
Mr. Trump’s new tariffs are the biggest action against the E.U. since the administration imposed levies on imported steel and aluminum last year, and threaten to sour already-strained relations between the two allies.
But Europe may have a chance to respond. While E.U. officials say they’re eager to find a solution, they’re awaiting a W.T.O. decision in a parallel case on whether the U.S. improperly subsidized Boeing. That decision could be announced early next year, and the E.U. has drawn up a list of $20 billion worth of American imports that it could tax.
Chinese consumers are being more cautious with spending during this economic downturn, Alexandra Stevenson of the NYT reports.
• “The Chinese economy is slowing, and the cost of living is rising,” Ms. Stevenson writes. “The trade war with the United States shows no sign of ending. Wage growth is sluggish. More young people are chasing fewer job prospects.”
• “For China’s young people, who have never experienced a prolonged slump in their lives, the shift is especially stark. China has seen slowdowns before, but its consumers kept spending through most of those downturns.”
• “The retreat of Chinese consumers — a powerful force generating $4.9 trillion in economic activity a year — will have global repercussions. Their appetite for homes, cars and iPhones transformed the world, powering global growth and making fortunes for companies like Apple and General Electric.”
• “It also poses an immediate challenge to China’s leadership, which draws its legitimacy from the wealth and confidence of the Chinese people.”


A senior Boeing engineer filed a formal internal ethics complaint this year alleging that the company rejected the inclusion of a safety system in the 737 Max in order to cut costs, the NYT reports.
The system could have reduced risks that contributed to two deadly crashes, the engineer, Curtis Ewbank, suggested. “In his complaint to Boeing, he said managers had been urged to study a backup system for calculating the plane’s airspeed,” the NYT reports. “The system, known as synthetic airspeed, draws on several data sources to measure how fast a plane is moving.”
“Ray Craig, a chief test pilot of the 737, and other engineers wanted to study the possibility of adding the synthetic airspeed system to the Max,” the NYT adds, citing the complaint. “But a Boeing executive decided not to look into the matter because of its potential cost and effect on training requirements for pilots.”
Boeing provided the report to the Justice Department as part of a federal inquiry into the design of the 737 Max. Investigators have questioned at least one former Boeing employee about the accusations, the NYT reports, citing unnamed sources.

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CreditBebeto Matthews/Associated Press
A recent protest at the Whitney Museum of American Art has brought new scrutiny to the relationship that museums have with wealthy board members, the NYT reports.
Warren Kanders resigned from the Whitney’s board in July, after a report that tear gas made by his company had been used against migrants on America’s southern border stoked protests against the museum.
“The tumult at the Whitney sent a lightning bolt through the entire museum world,” Robin Pogrebin, Elizabeth Harris and Graham Bowley of the NYT write. “If board members can be forced out because of what they do for a living, what does that mean for cultural institutions that depend on their generosity to survive?”
About 40 percent of the more than 500 trustees of the most popular art museums in the U.S. work in or derived their wealth from the finance industry. Many other board members are in real estate or the energy industry.
There’s a lot at stake for museums. Many rely on trustees — who pay millions of dollars to join and give annual donations in the six figures — for more than 20 percent of their budgets.
Vernon Hill will step down as chairman of Britain’s Metro Bank by the end of the year.
Dave Lewis will depart as C.E.O. of Tesco, the British supermarket chain, next year. He’ll be succeeded by Ken Murphy, Walgreens’ chief commercial officer.
Celeste Guth, whom Deutsche Bank named as its global head of M.&A. only a month ago, is leaving to join PJT Partners.
The investment bank Moelis & Company has hired Ted Conway from Barclays as a managing director focused on specialty finance clients.
SoftBank hired Ralf Wenzel, the founder of the food delivery company Foodpanda, as the C.E.O. of its Latin American joint ventures arm.
Deals
• Vice agreed to buy Refinery29, the online women’s lifestyle publication, for $400 million. (NYT)
• BlackRock has reportedly held talks with Tencent of China about a potential partnership that would help it enter the Chinese market. (WSJ)
• The cybersecurity company FireEye has reportedly hired Goldman Sachs to help it consider a sale of itself. (Reuters)
• Blackstone agreed to buy 65 percent of the indoor water parks operator Great Wolf from Centerbridge in a deal that values the company at $2.9 billion. (WSJ)
Trump impeachment inquiry
• House Democrats moved to subpoena the White House over the Ukraine scandal, prompting angry blowback from President Trump. (NYT)
• Rudy Giuliani has consulted with Paul Manafort, the imprisoned former chairman of the 2016 Trump campaign, as part of his investigation into a conspiracy theory involving Ukraine. (WaPo)
• The Ukraine whistle-blower asked an aide to Representative Adam Schiff, the chairman of the House Intelligence Committee, for advice on how to proceed. (NYT)
Politics and policy
• The Justice Department has asked a federal judge to temporarily block a subpoena by Manhattan prosecutors requesting President Trump’s state tax returns. (NYT)
• The federal government now guarantees $7 trillion worth of mortgage-related debt, 33 percent more than it did before the housing crisis. (WaPo)
• Senator Bernie Sanders was hospitalized yesterday after treatment for blockage of an artery, raising uncertainty about his presidential campaign. (NYT)
• The C.E.O. of the German insurer Allianz bitterly criticized the European Central Bank’s easy-money policy. (FT)
Brexit
• Prime Minister Boris Johnson of Britain presented a new plan to leave the E.U. by the end of the month. (NYT)
Tech
• Start-ups like Rhino could let renters lease apartments without a security deposit. (NYT)
• Apple’s C.E.O., Tim Cook, publicly criticized President Trump’s decision to end DACA, the program to help young undocumented immigrants. (CNBC)
• Uber is reportedly set to open Uber Works in Chicago, a program that will match temporary workers with businesses that need to fill gaps. (FT)
• Postmates and DoorDash want to deliver groceries rather than just restaurant meal orders. (WSJ)
• Google is rolling out Incognito mode for Maps. (Gizmodo)
Best of the rest
• Federal prosecutors have reportedly begun an investigation into U.S.A. Swimming over its business practices and accusations that the organization stifled sexual abuse claims. (WSJ)
• AdvoCare, which used sports stars to market its health products, agreed to pay $150 million to settle charges by the F.T.C. that it was a pyramid scheme. (NYT)
• The spying scandal at Credit Suisse has cast a pall over Tidjane Thiam, the Swiss bank’s C.E.O. (WSJ)
• Manhattan apartment prices are facing their steepest slide in nearly a decade. (FT)
• Doctors at the Mayo Clinic say that lung damage in patients with vaping-related illnesses resembles a chemical burn. (NYT)

Sep 23, 2019

DealBook Briefing: WeWork May Be Headed for Civil War

12-15 minutes Source: NYT



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CreditCreditEduardo Munoz/Reuters
Good Monday morning. (Was this email forwarded to you? Sign up here.)
Some directors and large investors in WeWork — including the company’s biggest backer, SoftBank — are discussing whether and how to oust its co-founder Adam Neumann as C.E.O., the NYT reports. But Mr. Neumann doesn’t want to go, setting up a potential boardroom battle for the ages.
The discussions arose after some big money managers refused to invest in WeWork unless the company brought in an experienced operator, according to the NYT. Their reluctance to take part in WeWork’s I.P.O. led the company to postpone the stock offering — even after reducing its valuation to as low as $15 billion, from $47 billion.
Having SoftBank on board for any insurrection is key. The Japanese tech giant has invested over $10.5 billion in WeWork. While SoftBank has tried to cultivate an image of supporting entrepreneurs, defending Mr. Neumann has become harder.
Ousting Mr. Neumann could be tricky, since he controls the company through a special class of shares. The WSJ notes that he could replace the entire board — though that would be a hugely risky move unlikely to ease investors’ concerns over the company’s stability.
Several investors have floated the idea of threatening Mr. Neumann with legal action, potentially over self-dealing, the NYT reports. Some have also expressed support for investigating his use of corporate money and whether he used drugs on the job.
Expect the drama to heat up quickly. The board, which is expected to meet as soon as this week, hasn’t yet formally approached Mr. Neumann about stepping down. Whether he bows to the pressure or prepares for a battle remains to be seen.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced, Lindsey Underwood and Stephen Grocer.
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CreditHannah Mckay/Reuters
The European Court of Justice is scheduled to rule on two cases this week that could further expand the right of European citizens to ask a website to take down material considered old or inaccurate, Adam Satariano and Emma Bubola of the NYT write.
Google could be forced to scrub search results for users outside the E.U. for the first time. People could also have an easier time forcing Google and others to delete links to websites with certain personal information, such as health and religion.
The search engine has been the most frequent target of the policy. Since 2014, Google said, it has received more than 3.3 million requests in Europe to delete links from search results. The company has accepted about 45 percent of such requests.
Supporters say the right to be forgotten is an important online privacy tool. The concept has inspired similar legislation in jurisdictions like California, Brazil, Canada and India.
Others say that it has started to infringe on journalists’ work. A small Italian news site, for example, had to fold after a legal battle about its reporting of a stabbing. “There has been real mission creep with the right to be forgotten,” Daphne Keller, a lawyer at Stanford University’s Center for Internet and Society, told the NYT.
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CreditSeth Wenig/Associated Press
The vaping company has tried over the past year to clean up its image amid growing scrutiny about teenage use of its products. That has failed, badly, Jennifer Maloney and Stephanie Armour of the WSJ write.
• “The company flooded the White House with lobbyists and other advocates, making it appear that it was bypassing the F.D.A., which irked officials in the agency and some in the administration, according to people familiar with the discussions,” the WSJ reports.
• “Juul launched an anti-vaping program for schools despite warnings that the effort was reminiscent of one by major tobacco companies years ago that seemed aimed more at luring new smokers than dissuading them.”
• “And it made unauthorized claims to children and adults that its products were safer than cigarettes, the F.D.A. concluded, prompting a formal rebuke from the agency.”
• “ ‘I think Juul put the entire category at risk by pursuing top-line growth and market share without a real eye toward what was going on and who was using them,’ said Scott Gottlieb, who as federal Food and Drug Administration commissioner clashed with the start-up last year.”
More: Walmart announced Friday that it will no longer sell e-cigarettes.
As Beijing builds out enormous databases meant to control its 1.4 billion citizens — including a system known as “social credit” that grades compliance with Chinese laws and policies — it is putting pressure on companies, too, Alex Stevenson and Paul Mozur of the NYT write.
• “Social credit is one aspect of the Communist Party’s efforts under Xi Jinping, its top leader, to strengthen its hold over the country,” Ms. Stevenson and Mr. Mozur write. It’s being coupled with facial-recognition technology and other monitoring systems.
• For many companies, “social credit has become a fact of life. In September, China’s central economic planning agency announced that it had completed a first evaluation of 33 million businesses, giving them ratings from 1 for excellent to 4 for poor.”
• “It’s supposed to affect the decision making of businesses to conform to what the party wants,” Samantha Hoffman, a fellow at the Australian Strategic Policy Institute, told the NYT.
• The idea is to pressure businesses, many of which have openly flouted regulations for years. Such violations have led to “widespread pollution, rampant violations of labor laws and other problems.”
• China is also using the ratings to pressure foreign companies. American Airlines, Delta and United Airlines were told that their social credit score could be hit unless their websites labeled Hong Kong, Macau and Taiwan as part of China.
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CreditLindsey Wasson/Reuters
Indonesian investigators have reportedly concluded that problems in the design and oversight of the 737 Max played key roles in the crash of a Lion Air flight last year, the WSJ reports, citing unnamed sources.
It’s the first formal government finding of fault in two fatal crashes involving the 737 Max, the WSJ notes. Together, the incidents killed 346 people and forced a monthslong grounding of the Boeing jets.
The draft report comes as Boeing strives to get the 737 Max airborne again. Though the company continues to work on updates to the plane — including to automated pilot software suspected of playing a crucial role in the crashes — it appears that global airline regulators are unlikely to let the plane fly again before the end of the year.
And it comes amid increased scrutiny on the F.A.A. for how it oversaw the plane’s development. Both the National Transportation Safety Board and Congress have proposed changes to the agency’s airplane certification process.
The final report is due in November, the WSJ reports.
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CreditEnrique Calvo/Reuters
Thomas Cook, the world’s oldest travel firm, collapsed early this morning after last-minute negotiations to save the company failed. That left hundreds of thousands of customers stuck overseas.
The company ran hotels, resorts and airlines serving 19 million travelers a year, according to Reuters. But it has been hurt by online rivals, a big debt load and geopolitical tensions, and had sought to raise over 1 billion pounds, or about $1.25 billion, in emergency funding.
Negotiations failed over the weekend, however, leaving the company with “no choice but to take steps to enter into compulsory liquidation with immediate effect,” the board said.
The British government rejected a bailout request from the company, the FT reports. Prime Minister Boris Johnson confirmed that the company had requested £150 million, but added, “That’s a lot of taxpayers’ money and sets up a moral hazard.”
The collapse left 150,000 British travelers stranded abroad. The British government will work to bring them home in what it described as the largest repatriation in peacetime history. Another 350,000 travelers from outside Britain are also affected, according to the FT.
Humphrey Singer will step down as the C.F.O. of the embattled British retailer Marks and Spencer.
Deals
• Airbnb’s plans to go public reflect frustration among its 6,000 employees that they haven’t been able to cash in the stock they received as part of their compensation. (NYT)
• The hedge fund Elliott Management is reportedly planning to raise $5 billion in new funding to help it invest if the economy enters a downturn. (FT)
• Walt Disney’s C.E.O., Bob Iger, said he withdrew from a deal to buy Twitter at the last minute because the “nastiness” on the social network was “extraordinary.” (NYT)
• The I.P.O. of SmileDirectClub, a maker of teeth-straightening products, performed so badly that its C.E.O. was said to have called Jamie Dimon of JPMorgan Chase, the offering’s lead underwriter, to ask what went wrong. (Business Insider)
• Fitbit is reportedly considering selling itself. (Reuters)
Politics and policy
• The Iranian foreign minister said that President Trump had “closed the door” to talks between Tehran and Washington to resolve a crisis over attacks on Saudi oil facilities. But Mr. Trump is unlikely to get other allies to put additional pressure on Iran. (FT, WSJ)
• Democratic lawmakers are increasingly calling to begin impeachment proceedings against Mr. Trump after he confirmed discussing corruption accusations against Joe Biden with Ukraine’s leader. (NYT)
• Democratic presidential candidates like Senator Elizabeth Warren and Mr. Biden are campaigning with striking U.A.W. workers, hoping to lock up support from organized labor groups. (NYT)
• Senator Bernie Sanders has called for eliminating $81 billion of Americans’ medical debt. (NYT)
• Mr. Trump held an unusual rally with Prime Minister Narendra Modi of India, hoping to build support for his re-election campaign among Indian-Americans. (NYT)
Brexit
• British trade groups reportedly fear retribution from Prime Minister Boris Johnson if they raise warnings about the consequences of a no-deal Brexit. (FT)
• Fissures have opened up within the opposition Labour Party over whether it should openly support Britain remaining in the E.U. (BBC)
Trade
• Washington and Beijing say that trade discussions remain “productive,” even as tensions remain high. (NYT)
• Speaking of which: The U.S. Justice Department warned that Chinese theft of American trade secrets was growing. (CNBC)
• A Minnesota auto parts maker has filed more than 10,000 appeals against U.S. tariffs on Chinese imports. (WSJ)
Tech
• Uber sued the New York City Taxi and Limousine Commission over new limits on the number of ride-hailing vehicles allowed on city streets. (Bloomberg)
• The owner of the New York Stock Exchange has opened a Bitcoin exchange. (WSJ)
• The House Judiciary Committee reportedly asked more than 80 companies to explain how they had been harmed by Amazon, Apple, Facebook and Google. (NYT)
• Facebook said it suspended “tens of thousands” of apps after the Cambridge Analytics scandal, a far bigger number than it had previously reported. (NYT)
• “Across Silicon Valley, anxious tech workers are finally admitting they have a problem. And they are going to therapy.” (NYT)
Best of the rest
• Credit Suisse reportedly hired detectives to follow a former star banker after he left for its rival UBS. (Bloomberg)
• The S.E.C. brought 50 percent more Ponzi scheme prosecutions in the decade after Bernie Madoff’s arrest than in the 10 years before. (NYT)
• Is the Impossible Whopper actually better for you and for the environment than a regular one? (NYT)
• A high-profile scientific project at the M.I.T. Media Lab, the Open Agricultural Initiative, is under scrutiny after researchers who worked on the project said it had been promoted with misleading claims. (NYT)
• Errors and controversies involving several high-profile books are forcing writers and publishers to reconsider how they handle fact-checking. (NYT)

Sep 18, 2019

DealBook Briefing: Facebook Has a ‘Supreme Court’ Now

12-15 minutes - Source: NYT



CreditCreditJosh Edelson/Agence France-Presse — Getty Images
Good Wednesday morning. On the agenda: The Fed will conduct another market operation today to control short-term interest rates, and it is expected to announce another cut to its benchmark rate. More below. (Was this email forwarded to you? Sign up here.)
Facebook announced several efforts to limit hate speech and extremism on its site, Davey Alba, Catie Edmonson, and Mike Issac of the NYT report. The moves were announced before a hearing today in the Senate Commerce Committee on how Big Tech is handling violent content.
Facebook plans to expand its definition of terrorist organizations, which could include people and groups that attempt violence toward civilians, and not just those who intend to achieve political or ideological goals.
It also plans to update its A.I. to better identify and remove live videos of shootings. And it will block the sharing of links from 8chan and 4chan, two websites criticized for hosting extreme content.
Facebook will also create a new oversight board that will monitor and interpret how the company’s community standards are being enforced. (Outsiders have dubbed it a “Supreme Court.”) The panel can order Facebook to allow or remove content, reverse designations on content removals and issue “prompt” written explanations for its decisions.
Lawmakers will be sure to pepper Facebook with questions about the moves at today’s hearing, which is to start at 10 a.m. Eastern.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced, Lindsey Underwood and Stephen Grocer.
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CreditT.J. Kirkpatrick for The New York Times
The central bank is expected to lower interest rates at its policy meeting today to keep the economy stable. But an unexpected need to intervene in a crucial lending market suggests that it might need to overhaul the way it operates, Jeanna Smialek and Matt Phillips of the NYT write.
The New York Fed jumped into the market for “repos” yesterday to keep short-term lending rates from rising. A shortage of cash helped contribute to a surge in the costs of repos, which are a kind of short-term loan used by companies and investors. (Borrowers in the repo market paid as much as 10 percent yesterday, compared to recent rates of 2 percent.)
That surge pushed up the effective fed funds rate to 2.25 percent, which if left unchecked could cause damage throughout the U.S. economy, according to Bloomberg.
But the operation to calm the market ran into technical difficulties, which caused a 25-minute delay. Ultimately, the Fed injected $53 billion into the financial system.
Some analysts think that shows the Fed needs to be more aggressive in how it controls interest rates, saying that letting the supply of excess reserves shrink too much amplified short-term stresses in the repo market. Others said that the Fed should conduct market operations more regularly to prevent this from happening again.
The Fed is expected to do another market operation today, and it will announce whether it will cut interest rates. Expect the markets to pay close attention.
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CreditWaleed Ali/Reuters
The Saudi energy minister, Prince Abdulaziz bin Salman, said yesterday that his country would return to normal oil production levels within weeks, after devastating attacks on a crucial processing plant and oil field. But what that means is unclear.
Half of the production lost to the attacks has been restored, Prince Abdulaziz said, though that has required dipping into the kingdom’s oil reserves. Normal production, which amounts to 9.8 million barrels a day, is to resume by late September.
He also said that planning for Aramco’s I.P.O. was back on track, and that it would happen within the next 12 months. The deal’s fate was clouded by the drone attacks, as prospective investors may have become spooked.
However, unnamed Saudi officials seemed more pessimistic in private. “The damage is severe,” one told the WSJ, suggesting that Prince Abdulaziz’s estimates are too rosy.
Any recovery could be affected by a rejoinder to Iran, which Saudi and U.S. officials say had a role in the attack. The Saudi government is expected to reveal today what it says is evidence of Tehran’s role. But it’s unclear how aggressive a response will be from the Saudis and the Trump administration — especially since other countries don’t yet appear willing to trust their assertions about Iranian responsibility.
More: The attacks represent a big test for Prince Abdulaziz only weeks into his tenure as energy minister. And a surge in oil prices could hurt the U.S. economy.
Now that the co-working company has delayed its I.P.O. — perhaps for good — it faces some difficult questions. Will it try to go public again? Will it change its business model? And how will it find money to keep the lights on?
WeWork’s C.E.O., Adam Neumann, said yesterday that he had been “humbled” by the I.P.O. process, according to the FT. He told employees on a company webcast that he needed to learn how to be a leader of a public company, but pledged that the stock sale would happen this year.
Yet there’s little sign of investor appetite for that deal. Mr. Neumann called off the listing plans after prospective investors balked at WeWork’s business model and corporate governance — even after the company reduced his power over the business.
WeWork may need to rethink its business. The company, which made breakneck growth one of its most prominent business goals, may have to slow or stop its expansion, the NYT notes. And its ventures beyond office space, including apartment buildings, education and an indoor wave pool, haven’t been successful, according to the WSJ.
But it will have to find another way to finance itself. In a signal of investor pessimism, the company’s bonds sunk to 95 cents on the dollar, while their yield rose to 8.5 percent. That makes any plan to raise money through junk bonds look unrealistic, meaning that WeWork might have to turn to an existing backer like SoftBank or renegotiate financing from its banks to get extra cash.
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CreditJustin Sullivan/Getty Images
The Trump administration is expected today to formally revoke California’s authority to set auto emissions rules that are stricter than federal standards, Coral Davenport of the NYT writes. It’s a big step in what has become a wide-ranging attack on government efforts to fight climate change.
• “Lawyers said the action takes the administration into uncharted legal territory in its battle with the state, which has vowed to fight the change all the way to the Supreme Court,” Ms. Davenport writes.
• “A revocation of the California waiver would have national significance. Thirteen other states follow California’s tighter standards, together representing roughly a third of the national auto market.”
• “Legal experts said that if Mr. Trump’s move were ultimately held up by the Supreme Court, it could permanently block states from regulating vehicle greenhouse gas pollution. If it were rejected by the Supreme Court, it would allow states to set separate tailpipe pollution standards from those set by the federal government.”
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CreditPatrick Semansky/Associated Press
The Treasury Department introduced new rules yesterday that would give the federal government more say on transactions involving tech and real estate companies on national security grounds, Alan Rappeport of the NYT writes.
• “The rules, which would not take effect until next year, would give the Committee on Foreign Investment in the United States, or CFIUS, greater power to stop foreign investment in areas the United States deems protected.”
• “While the rules would apply to any foreign investment, the effort is primarily aimed at preventing China from gaining access to sensitive American technology and other valuable assets.”
• “The rules offer new details on the red flags that CFIUS will look for when it reviews foreign deals. These include transactions involving ‘critical’ technology and infrastructure, such as telecommunications, utilities and energy.”
• “Another category includes companies that are involved in collecting sensitive personal data, such as financial or health information, of at least a million individuals or of federal employees involved in national security matters.”
• One provision that’s likely to garner interest is an exemption from some rules for investors from certain unidentified countries. It could invite complaints that the national security review system is biased against American adversaries, Mr. Rappeport writes.
George Schweitzer is stepping down as CBS’s marketing head.
The health insurer Oscar has hired Meghan Joyce, who was the general manager for Uber’s operations on the East Coast and in Canada, as its C.O.O.
Giovanni Castellucci will step down as the C.E.O. of Atlantia, the owner of a bridge in Genoa, Italy, that collapsed last year, killing 43 people.
Sergei Frank will step down as the C.E.O. of the Russian shipping giant Sovcomflot. He’s expected to become chairman, while Igor Tonkovidov will replace him as C.E.O.
Deals
• 3G Capital, the investment firm that helped orchestrate the creation of Kraft Heinz, has sold down its stake in the embattled food company. (FT)
• The I.P.O. of the fashion brand Madewell shows how much better positioned it is than its parent company, J. Crew, for the current retail environment. (NYT)
• Amid pressure from the hedge fund Elliott Management, the AT&T C.E.O., Randall Stephenson, defended his business strategy and his likely successor. (WSJ)
• The British government will investigate the proposed sale of Cobham, an aerospace and defense contractor, to the private equity firm Advent International on national security grounds. (FT)
• JPMorgan Chase has reportedly been snatching many of the top hedge fund clients from Deutsche Bank’s prime brokerage business. (Business Insider)
Politics and policy
• Senators pushed for assurances that the F.T.C. and Justice Department would provide vigorous oversight of tech companies. (NYT)
• The Trump administration argued to the Supreme Court that the Consumer Financial Protection Bureau was unconstitutional because of congressional limits on the president’s ability to remove the agency’s director. (WSJ)
• President Trump attended a fund-raiser in Silicon Valley yesterday, which was reportedly hosted by the former Sun Microsystems C.E.O. Scott McNealy. (WSJ)
• The vaping industry has cultivated close ties to the Trump administration. It was still caught off guard by a ban on flavored e-cigarettes. (WaPo)
• Ed Buck, a Democratic donor, was arrested and charged after a third man overdosed in his West Hollywood home. (LAT)
Trade
• President Trump hopes to reach trade “minideals” with Japan and India by the end of the month, as his fight with China continues. (NYT)
• FedEx forecast lower profits for the year, citing economic uncertainty from the trade war. (WSJ)
Tech
• Streaming services have spent more than $2 billion in recent weeks to buy the rights for classic shows like “Seinfeld” and “Friends.” Meanwhile, NBC unveiled its online video offering: Peacock. (WSJ, LAT)
• Snapchat is reportedly in talks with publishers about aa dedicated news section on its platform. (Information)
• Facebook is reportedly creating smart glasses in partnership with Luxottica, the parent company of Ray-Ban. (CNBC)
• Facebook’s former policy chief, Elliot Schrage, announced his resignation last year. He’s still at the company. (Bloomberg)
• France wants to raise 5 billion euros, or $5.5 billion, to invest in tech start-ups. (Reuters)
Best of the rest
• Mary Barra, the General Motors chief, is in the hot seat as a workers’ strike drags on. (NYT)
• The S.E.C. charged the former C.E.O. of Viking Energy Group with fraud, accusing him of lying about the existence of a C.F.O. (WSJ)
• “The key to disrupting the flow of carbon into the atmosphere may lie in disrupting the flow of money to coal and oil and gas.” (New Yorker)
• The highs and lows of office life. (NYT)
• On that topic, NBC wants to reboot “The Office.” (Business Insider)

May 30, 2019

DealBook Briefing I A U.S.-Europe Trade War Looms

10-13 minutes




Cecilia Malmstrom, the European trade commissionerCreditOlivier Hoslet/EPA, via Shutterstock

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Cecilia Malmstrom, the European trade commissionerCreditCreditOlivier Hoslet/EPA, via Shutterstock
Good Thursday. (Want this by email? Sign up here.)
President Trump’s attention on trade has largely been focused on China in recent weeks. But there’s a growing sense that he could soon turn his fight to Europe.
• The European trade commissioner, Cecilia Malmstrom, reportedly warned E.U. trade ministers that they “should brace” for U.S. tariffs on billions of euros worth of European goods over a dispute about Airbus subsidies, Politico reports.
• A 180-day deadline that Mr. Trump had set for negotiations with the E.U. and Japan over car exports “holds to the president’s pattern of steadily increasing pressure on trading partners to cut a deal more to his liking,” Bloomberg argues.
Mr. Trump may have spotted an opportunity to take advantage of Europe while it’s in disarray.
• The results of the recent European Parliament elections show that the Continent is increasingly polarized and fragmented, and that Brexit continues to be a distraction.
• An inverted yield curve is when longer-term bond yields fall below those of shorter-term ones. For instance, the 10-year Treasury’s yield was 2.26 percent yesterday, while the 30-day Treasury’s was 2.35 percent.
• “Historically it has been viewed as a sign of a recession in the offing,” Mr. Irwin writes. “At a minimum, it indicates that bond investors believe the Federal Reserve will soon need to cut interest rates — in effect, that it overshot with those four rate increases last year.”
• So far, the stock markets have held up, given the specter of long-term tariffs. But, Mr. Irwin writes, “Economists may have been analyzing the trade war too narrowly, merely by calculating the cost of tariffs and where those costs may show up.”
• “The potential long-lasting consequences are harder to model,” he adds, which explains why bond investors are more pessimistic than recent economics and earnings data might suggest.
Fiat’s headquarters in Turin, Italy.CreditGianni Cipriano for The New York Times

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Fiat’s headquarters in Turin, Italy.CreditGianni Cipriano for The New York Times
The two carmakers have promised that combining would create a company that is better equipped to survive the industry’s transition to electrification and autonomy. A merger might fix some problems, but it probably won’t solve all of them.
It would help with electric cars and global distribution. Fiat would provide profitable S.U.V. and high-end car models, and a beachhead in America. Renault would bring electric-vehicle technology and a stronger European presence.
And Nissan could help them become a global powerhouse. The Japanese carmaker is already in an alliance with Renault, and is warily studying the merger. Though worried about its independence, Nissan may have little choice but to link with Renault and Fiat in order to shore up its own declining operations. Such a move would give the new group a powerful reach.
But the cost savings appear dicey. Renault and Fiat say they can save $5.6 billion by combining supply chains and sharing R.&D. costs. But that would happen over six years, during which the companies have pledged not to lay off employees. So the benefits may be harder to extract in practice.
And auto mergers have a spotty record. Take Renault and Nissan: Despite teaming up in 1999, they use shared parts in only 35 percent of Nissan cars, far below an original target of 70 percent. Other alliances — Daimler and Chrysler, BMW and Rover — failed. That’s often partly because of clashes between management teams and cultures.
There’s still reason to be hopeful. Fiat bought Chrysler years ago, and it has proved to be one of the few auto mergers that has succeeded.
Facial recognition technology increasingly faces pushback around the world, most recently in San Francisco. But some companies are doubling down on sales across the United Arab Emirates, BuzzFeed News reports.
• IBM is marketing biometric surveillance systems in the region, as are the Chinese giants Hikvision and Huawei.
• At a recent government-organized conference in Dubai, representatives from those companies said they saw countries in the Persian Gulf “as an exciting market to sell their video analysis platforms, which they say can do everything from analyzing the behavior of groups to automatically blacklisting individuals based on their faces.”
• “Police in Dubai have begun rolling out an ambitious program, dubbed Oyoon, the Arabic word for ‘eyes,’ that will implement facial recognition and analysis driven by artificial intelligence across the city,” though it isn’t clear what technology powers the tool.
Critics of facial recognition are dismayed. “In a place like Dubai, where there is not much freedom of expression and people are being jailed for what they say, when you introduce artificial intelligence, it’s used by systems of power to reinforce their control over the population,” Sarah Aoun, a digital rights technologist who works with rights activists, told BuzzFeed.
President Trump signing the tax cuts into law in 2017.CreditDoug Mills/The New York Times

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President Trump signing the tax cuts into law in 2017.CreditDoug Mills/The New York Times
A new study by the Congressional Research Service throws cold water on the idea that the Trump administration’s 2017 tax cuts were a boon to U.S. economic growth.
The cuts had little effect on wages or investment in 2018. Economists calculated that they contributed perhaps 0.3 percent to overall economic gains, according to Jeff Cox of CNBC.
They didn’t pay for themselves, as President Trump claimed they would. To have done so, the economists write, the cuts would have had to cause a 6.7 percent increase in gross domestic product.
The biggest winners are corporations. The cuts contributed to a surge in stock buybacks, Michael Hiltzik of the LAT writes. Meanwhile, companies’ tax bills fell to 12 percent from 23 percent. That led to a $40 billion drop in revenue for the U.S. government.
“The growth effects tend to show a relatively small (if any) first-year effect on the economy,” the study’s authors wrote. “Although growth rates cannot indicate the tax cut’s effects on G.D.P., they tend to rule out very large effects particularly in the short run.”
Most news coverage about the Trump administration’s block on sales of components and software to Huawei has focused on the Chinese company. But what does it mean for the suppliers?
As many as 1,200 U.S. companies will be affected by the blacklisting, the FT reports, citing Huawei executives. Many are in two sectors: cybersecurity and semiconductors. (It’s worth noting that third-country suppliers will also be affected by the ban if U.S. components contribute more than 25 percent to the value of the goods they sell.)
The total impact is unknown. But Huawei spent about $11 billion last year buying components and services from U.S. companies.
Suppliers aren’t necessarily worried. “Even if we lose Huawei’s orders for base stations or smartphones, somebody else will have to make them and we’ll get that business,” Shoichi Tosaka, the C.E.O. of the Japanese electronics manufacturer Taiyo Yuden, told Bloomberg.
More: Prime Minister Mahathir Mohamad of Malaysia said that his country tried to use Huawei technology “as much as possible.” The company opened a 5G lab in South Korea today, to little fanfare.
Silver Lake has hired Laura Anderson, who was most recently Intel’s head of global communications, for the same role.
Bed Bath & Beyond named four independent directors to settle a fight with activist investors: John Fleming, formerly of Uniqlo; Sue Gove, the president of a retail consultancy; Jeffrey Kirwan, previously the C.E.O. of Gap’s namesake retail division; and Joshua Schechter, a financier.
Two senior female partners at KPMG, Maggie Brereton and Ina Kjaer, resigned from the professional services company in February, reportedly over the firm’s handling of bullying accusations against a male colleague.
Deals
• The C.E.O. of the German media company Axel Springer is teaming up with KKR and the publisher’s founding family to take it private. (FT)
• SoftBank’s Vision Fund reportedly plans to borrow $4 billion against its stakes in Uber and other investments. (FT)
• The British transport company First Group is seeking a buyer for its Greyhound buses division in the U.S. (BBC)
• Goya, the family-owned Latin food company, has reportedly hired Goldman Sachs to advise it on a potential sale. (CNBC)
• Chevron agreed to sell its North Sea oil assets to the Delek Group for about $2 billion. (Energy Voice)
Politics and policy
• Robert Mueller, making his first comments on his investigation, declined to clear President Trump of wrongdoing. (NYT)
• Walt Disney’s C.E.O., Bob Iger, said it would be “very difficult” for the company to film in Georgia if the state’s new abortion law goes into effect. (NYT)
• Women who had been F.B.I. recruits sued the bureau, accusing it of discrimination at the training academy. (NYT)
• The ad agency Ackerman McQueen Inc. cut ties with the N.R.A. after 38 years. (Bloomberg)
• Mervyn King, the former Bank of England governor, called for a general election in Britain to break a political impasse over Brexit. (Bloomberg Opinion)
Boeing
• The company’s C.E.O., Dennis Muilenburg, said that he had made mistakes in the handling of the 737 Max crisis — but that he didn’t plan to step down. (FT)
• The 737 Max isn’t likely to return to the air until August, according to the head of the International Air Transport Association, a global trade group. (FT)
Tech
• Speaker Nancy Pelosi accused Facebook of “lying to the public” by not taking down a distorted video that made her appear drunk. (NYT)
• Some Google contractors said that they were pressured to work unpaid overtime. (Guardian)
• Google has banned apps that help people buy marijuana. (FT)
• Apple quietly introduced a new website saying its App Store welcomes competition. (CNBC)
• Debt collectors and credit unions are fighting the F.C.C.’s push to block robocalls. (WSJ)
• Elon Musk reportedly told Tesla employees in an email: “We have a lot of vehicle deliveries to catch up to in order to have a successful quarter.” (Reuters)

Source: NYT

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