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Andrew Ross Sorkin, Vivian Giang, Stephen Gandel, Bernhard Warner, Michael J. de la Merced, Lauren Hirsch and
Gov. Ron DeSantis of Florida yesterday advanced his campaign against environmental, social and governance investing. The State Board of Administration, on which he sits, adopted his proposal to ban the consideration of “social, political or ideological interests” when making investment decisions for the state’s pension fund.
“Corporate power has increasingly been utilized to impose an ideological agenda on the American people through the perversion of financial investment priorities under the euphemistic banners of environmental, social and corporate governance and diversity, inclusion and equity,” DeSantis, a Republican, said in a statement.
The resolution imposes broad limits on the pension fund’s investments. State administrators will be instructed to prioritize “the highest return on investment for beneficiaries, without consideration for nonpecuniary beliefs or political factors.”
But what if E.S.G. factors affect investment returns? Maine last year passed a law to divest the 200 largest publicly traded fossil fuel companies from its pension funds by 2026, citing environmental risks on potential investment performance. Red and blue states are increasingly split: In the past year, more than a dozen have introduced new initiatives, either to divest state pension funds from gun and ammunition companies, or oil and gas companies and coal companies — or, conversely, to divest from ones that boycott fossil fuel companies.
Asset managers may not be as divided as states, according to Joshua Lichtenstein, a partner at the law firm Ropes & Gray who has been tracking the battle. “Florida and Texas have a lot of money, but it’s not clear we’ll see enough money line up for the red states to change things,” he said, noting that the European Union has already adopted E.S.G. investment principles. When it comes to pensions, managers play a long game, and ignoring E.S.G. could be risky. It’s too soon to say whether the resolution will have a major effect, or if the governor is just “saber rattling,” Lichtenstein said.
Consumer advocates urge regulators to block TD Bank’s First Horizon deal. In a letter to the Philadelphia Fed and the Office of the Comptroller of Currency, groups including Americans for Financial Reform Education Fund and the Center for Responsible Lending outlined their concerns about the $13.4 billion takeover, DealBook is first to report.
Primaries reshape Manhattan’s congressional leadership. Representative Jerry Nadler defeated his longtime colleague Representative Carolyn Maloney in a bruising Democratic primary for New York’s redrawn 12th District. And Dan Goldman, a former federal prosecutor, won the Democratic primary for a district connecting Brooklyn and Lower Manhattan.
Intel strikes a $30 billion funding deal to build chip plants. The semiconductor giant is forming a partnership with Brookfield Asset Management to help finance factories in Arizona. Intel executives said the arrangement could become the first in a series of ventures to help the company expand its American manufacturing base.
More signs of economic pain ahead. Macy’s lowered its full-year sales outlook, citing a continuing glut of unsold goods as consumers pull back from shopping. Meanwhile, the White House said it expected slower economic growth and higher inflation than previously forecast, citing an Omicron-fueled coronavirus wave and Russia’s invasion of Ukraine.
Twitter’s latest headache goes beyond a sinking stock price. The company made false and misleading comments about its security practices and potentially violated its 2011 consent decree with the F.T.C., Peiter Zatko, a former head of Twitter security, said in a whistle-blower complaint. The decision to send the complaint and supporting documents to the S.E.C., the Justice Department and the F.T.C. indicates that Zatko, who goes by the nickname Mudge, is seeking a wide range of regulatory action. What does this mean for Elon Musk’s $44 billion deal to buy Twitter?
Zatko claims that Twitter is misleading consumers about the steps it takes to protect their information and honor their privacy choices, running afoul of the F.T.C. agreement. In short, Twitter never sufficiently disclosed the weakness of its security and systems, he claims. “Years of regulatory filings in multiple countries were misleading, at best,” he said. (In May, the F.T.C. and the Justice Department fined Twitter $150 million in a privacy settlement.)
Twitter will probably face new heat. “There’s a near certainty that this will provoke a careful review by the Federal Trade Commission, maybe other public agencies,” Bill Kovacic, a former F.T.C. chair, told DealBook. The agency has gotten tough on Big Tech in recent years, punishing companies for violating consent decrees — notably by lodging a $5 billion fine against Facebook in 2019. The S.E.C. is also likely to take a close look, said Howard Fischer, a former senior trial counsel at the agency. Last year, the S.E.C. fined companies over insufficient cybersecurity disclosures, including the educational publisher Pearson.
What it means for Musk. Mudge and Musk ostensibly agree on just one point: Twitter is not incentivized to police its platform for spam. Their point of disagreement is more striking when it comes to bots. In his lawsuit seeking to free him from being forced to buy the company, Musk says that Twitter’s central disclosure, which states that approximately 5 percent of its active user base, or mDAU, consists of bots, is materially misleading. In contrast, Zatko says don’t put much stock in Twitter’s bot calculation, which he says is inherently flawed. (That said, he concludes the 5 percent figure is correct.)
Musk’s legal team could now argue that Twitter’s business has suffered a “material adverse effect.” They could contend, for example, that Twitter’s security and privacy disclosures were misleading. The problem: no such contention is mentioned in his original claim. Could Musk amend his countersuit? Yes, but he would need court permission. He could also try to delay the trial to allow more time for discovery. It’s more likely that he could use the new claims as grounds to push for more expansive discovery.
We may get a preview today. At a hearing about discovery in Delaware, expect Musk’s lawyers to jump all over the new accusations, and potentially tip their hat on any new strategy.
President Biden is expected to announce today a long anticipated move to erase a significant portion of student loan debt that could affect millions of borrowers. The full details are unknown, but aides have said that Biden is considering wiping out $10,000 of debt relief for some borrowers, report The Times’s Jim Tankersley, Zolan Kanno-Youngs and Stacy Cowley. The president is also expected to extend, for all borrowers, a pause on loan payments, which has been in effect since the pandemic’s start.
Studies have shown that the debt load puts recent graduates off buying houses and starting a family, a point liberal Democrats cite when arguing for relief. But two well-known economists and former top advisers to President Barack Obama say providing relief now is a bad idea.
The main concern for critics of student loan forgiveness is inflation. Recently, Jason Furman, a Harvard professor who headed the Council of Economic Advisers in Obama’s second term, tweeted that he sees a debt-cancellation move nullifying the deflationary powers of the Inflation Reduction Act. Larry Summers, a Treasury secretary under President Bill Clinton and former Obama economic adviser, tweeted, “Student loan debt relief is spending that raises demand and increases inflation.”
But inflationary fears might be overblown. Kent Smetters, a professor at the University of Pennsylvania’s Wharton School and head of the Penn Wharton Budget Model, told DealBook that the effect of such relief on inflation “would be small, probably one-tenth of 1 percent.” Dean Baker, a founder of the left-leaning Center for Economic and Policy Research think tank, said the move would bring inflation down, even in the event of a $10,000 reduction in everyone’s loan balance.
Look for this argument to get more divisive. Furman has run the debt-relief numbers for the typical American family and for higher net-worth recipients, and he doesn’t like what he sees. “I think that is not worth it,” he told DealBook.
— Zeve Sanderson, the founding executive director at New York University’s Center for Social Media and Politics, on the proliferation of election falsehoods and disinformation on TikTok.
Julian Robertson, who gained fame and wealth as one of Wall Street’s top investors — and just as notably, as the backer of a constellation of hedge fund moguls — died yesterday at age 90.
Robertson regularly beat the stock market at his Tiger Management hedge fund, reporting average annual returns that exceeded 25 percent.
He also spawned a hedge fund dynasty. Many top firms today were started by Robertson protégés known as “cubs.” He also seeded a host of others. (The Financial Times counts nearly 200 funds that trace their origins back to Tiger Management.)
Robertson was also a prolific philanthropist who gave away over $2 billion to charity. Explaining his motivation, Robertson said in 2013, “I didn’t want my obituary to read, ‘He died getting a quote on the yen.’”
What Wall Street had to say:
Steve Schwarzman of Blackstone called Robertson “one of the few people in the hedge fund history who created a dynasty.”
Chase Coleman of Tiger Global, one of the pre-eminent cubs, said Robertson was “a pioneer and a giant in our industry.”
Jim Chanos, a notable short seller who managed money for top financiers like Robertson and George Soros, said if he were to “give my own money to any of them, I would have given it to Robertson.”
The embattled retailer Bed Bath & Beyond has reportedly found a lender to shore up its finances. (WSJ)
Richemont sold control of Yoox Net-a-Porter, the struggling e-commerce business, to a rival, Farfetch, and an Emirati investment fund. (FT)
Paramount beat out Amazon for the U.S. media rights for Champions League soccer with a $1.5 billion six-year deal. (Bloomberg)
The I.R.S. is reviewing its security amid threats to its staff and criticism by Republicans. (NYT)
The F.T.C. will drop Mark Zuckerberg as a defendant in a lawsuit to block Meta from buying an A.I. start-up. (NYT)
Paul Pelosi, the husband of Speaker Nancy Pelosi, pleaded guilty to driving under the influence of alcohol in connection with a car accident in May. (NYT)
Best of the rest
The University of Alabama extended the contract of Nick Saban, its star football coach, by one season, in an agreement valued at $93.6 million. (Bloomberg)
C.E.O.s are learning — and often struggling — with how to be emotionally open at work. (NYT)
Why “quiet quitting” is trending. (NYT)
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