United front.Credit…Ludovic Marin/Agence France-Presse — Getty Images
Two different approaches to China
President Emmanuel Macron of France and Ursula von der Leyen, head of the European Commission, arrived in Beijing on Wednesday with an ambitious agenda. Top of the list: persuading the Chinese leader Xi Jinping to use his clout with President Vladimir Putin of Russia to help mediate an end to the war in Ukraine.
Expectations are limited, but the trip carries a deeper significance as Europe seeks to maintain strong economic links with an increasingly assertive China despite U.S. pressure to isolate Beijing.
The Biden administration has pushed allies to adopt its approach of isolating China by imposing tough trade restrictions on sensitive technologies, such as chipmaking, that could have military uses. Talk of economic decoupling is rife, despite the presence of big American companies like Apple in China. (Tim Cook, the iPhone maker’s C.E.O., praised the two countries’ “symbiotic” relationship at a business event in Beijing last month and said both had benefited.) The Netherlands, Japan and South Korea are the latest countries to reluctantly get on board with President Biden’s approach.
Europe wants to “de-risk” rather than decouple. In a punchy speech last week, Von der Leyen sought to lay down a marker. The invasion of Ukraine had profoundly shifted thinking in European capitals. Xi’s support for Putin “will be a determining factor for E.U.-China relations,” she said. Ms. Von der Leyen added that some trade restrictions and tighter oversight of overseas investments by European companies were needed, particularly on technologies that could be used by the Chinese military or to trample on human rights.
But economic ties remain paramount. Some analysts believe growing U.S.-China tensions offer an opening for the E.U., and fit with Mr. Macron’s push for the bloc to establish its “strategic autonomy.”
Some 50 French business leaders were set to accompany Mr. Macron, including representatives of the energy company EDF and the aerospace group Airbus, in an effort to maintain commercial links.
HERE’S WHAT’S HAPPENING
A Fed inflation hawk sees a need for higher interest rates. Loretta Mester, the Cleveland Fed president, said that the federal funds rate would likely have to move above 5 percent (it’s at 4.75 percent to 5 percent now), and that borrowing costs will need to stay higher for longer to bring down inflation. The Fed’s next decision on rates is set for May 3.
A new round of layoffs hits tech, retailing and law firms. Walmart announced cuts of more than 2,000 positions at its e-commerce fulfillment centers, and Amazon is laying off 100 at its video game unit. Meanwhile, Kirkland & Ellis, the law firm, reportedly trimmed its ranks of associates as dealmaking slumps.
Voters give liberals control of Wisconsin’s Supreme Court. Janet Protasiewicz, a liberal Milwaukee County judge, defeated her conservative rival in a race that attracted millions in donations from outside the state. Protasiewicz ran on abortion rights and called for a redrawing of the state’s electoral map, which gives Republicans a near-supermajority control of the legislature.
UBS touts its strength to shareholders
A lot of the noise at UBS’s annual shareholder meeting on Wednesday in Basel, Switzerland, was around the bank’s climate policies, with activists protesting with placards and inflatable props outside the St. Jakobshalle arena here.
But leaders of the Swiss bank have focused on a different sort of danger: the task of absorbing Credit Suisse, the rival it bought in a government-brokered fire sale last month.
“This is not in any way an easy deal to do,” Colm Kelleher, UBS’s chairman, said in his introductory remarks. Kelleher, who was Morgan Stanley’s C.F.O. during the 2008 financial crisis, noted that the takeover was the first merger of two systemically important global banks, and comes with significant risks.
Lukas Gähwiler, UBS’s vice chairman, added that the bank agreed to buy its archrival in a hurry. “We had only 48 hours to carry out our due diligence,” he said. “So many questions remain unanswered.”
Previous bank bailout takeovers have been messy. Jamie Dimon of JPMorgan Chase has made clear that he had regrets about buying Bear Stearns and Washington Mutual during the 2008 financial crisis, as his bank was forced to grapple with losses and legal fines that it inherited from those failing institutions.
Credit Suisse certainly comes with a lot of risks, given that investor fears about its years of scandals and financial missteps led to its demise. But UBS executives emphasized that their bank was strong enough to carry out the transaction — and that, unlike in previous deals, they’re planning on cleaning house, including by shutting down huge portions of Credit Suisse’s problematic investment bank. (UBS is also benefiting from billions worth of financial guarantees from the Swiss government.)
Kelleher said UBS’s priority was to grow its relatively safe wealth management business, adding, “Our strategy is clear and unchanged by the acquisition of Credit Suisse.”
What’s next for Trump?
Former President Donald Trump has survived impeachment hearings and years of investigations into his business dealings. But the list of charges leveled against him on Tuesday in a New York court poses one of his greatest challenges yet, and will hang over U.S. politics well into next year’s presidential election.
Trump pleaded not guilty to 34 felony counts of masterminding a hush money scheme in 2016 to pay off the porn star Stormy Daniels, helping to clear his path to the White House.
For all the tabloid-esque figures that make an appearance in the criminal complaint — a paid-off doorman, a Playboy model, a fixer turncoat who delivered the hush money — the case brought by the Manhattan district attorney, Alvin Bragg, centers on falsified business records. Prosecutors say Trump planned to deceive New York tax authorities. (He also faces three other investigations involving far meatier allegations, like election interference and the unlawful removal of documents from the White House after his presidency.)
Zeroing in on the state tax crimes is “a much simpler charge that avoids the potential pitfalls,” Rebecca Roiphe, a New York Law School professor and former state prosecutor, told The Times. Even still, some of Trump’s biggest critics are calling Bragg’s case a stretch and weak.
In a fiery speech to supporters at Mar-a-Lago on Tuesday evening, the former president railed against the case, the judge presiding over it, Bragg and … the two men’s wives.
The counts are low-level felonies. Conviction could mean prison time, but it’s rare for a first-time offender to end up behind bars, legal experts say. Even if convicted, Trump would not automatically be barred from running for president.
When will a trial begin — if at all? Trump’s defense team could file motions to have the case dismissed or moved to a different jurisdiction. (Both are considered long shots.) As for timing, legal experts expect the case to take a year to come to trial — which would put it smack in the middle of G.O.P. primary season.
Another start-up whiz is charged with fraud
Charlie Javice, the 31-year-old entrepreneur who became known for helping American teens afford college, is facing criminal charges over claims that she “falsely and dramatically” inflated user numbers when she sold her financial planning start-up, Frank, to JPMorgan Chase for $175 million in 2021 — a deal worth up to $45 million to her personally.
According to complaints filed by the D.O.J. and S.E.C., Javice told the bank that Frank had 4.25 million users, when it actually had around 300,000.She faces decades in prison on the criminal and securities fraud charges. She denies the allegations.
JPMorgan sued Javice in December.During negotiations for the deal, JPMorgan pressed for more information, and Javice hired a professor to create fake accounts, the complaints say. The bank eventually became suspicious when a marketing test using Frank data failed spectacularly.
Javice was once praised as a young visionary. In 2019 she was named to the Forbes “30 Under 30” list, and she did television appearances dispensing financial aid tips. Javice has now joined the ranks of fallen young founders who face or have been convicted of fraud charges:
In November, Elizabeth Holmes, the founder of the blood-testing company Theranos, was sentenced to 11 years in prison for criminal fraud. In 2014, Forbes said she was the youngest self-made woman billionaire at 30.
Holmes’s sentencing came just as Sam Bankman-Fried’s crypto empire went bankrupt, and now he faces an array of criminal charges. In 2021, when he was 28, Bankman-Fried was on Forbes’s “30 Under 30” list.
Johnson & Johnson’s Texas Two-Step
Johnson & Johnson is making another attempt to end long-running litigation over claims that its talcum powder products caused cancer, proposing to pay $8.9 billion to thousands of plaintiffs via a controversial bankruptcy maneuver called the “Texas Two-Step.” The deal announced on Tuesday would allow the company to hive off liabilities into a new business unit and use the bankruptcy system as a shield against future legal exposure.
Johnson & Johnson’s first effort to use the Texas Two-Step was blocked. It created a subsidiary called LTL Management and set aside $2 billion for payouts in 2021. But a federal appeals court ruled in January that the unit’s ties to Johnson & Johnson meant it was not facing the kind of distress that a bankruptcy was meant to address. The question now is whether significant plaintiff support for the deal could change the court’s view.
Lawyers representing the nearly 70,000 plaintiffs called the latest proposal a “significant victory.” But Jason Itkin, whose law firm is handling 10,000 cases, said the settlement was “bad for victims” and would be blocked in court.
The deal isn’t final. The court first has to accept the new bankruptcy filing by LTL and then approve the settlement itself. The deal also needs the backing of 75 percent of voting claimants. Erik Haas, Johnson & Johnson’s vice president of litigation, said on Tuesday that “resolving this matter through the proposed reorganization plan is both more equitable and more efficient.”
Shares in Johnson & Johnson, which has not admitted any wrongdoing, closed up 3 percent. A deal would rank among the largest product-liability settlements ever, according to The Wall Street Journal. Previous agreements include a $206 billion deal with tobacco companies in 1998 over the health effects of smoking and a roughly $50 billion settlement by health care companies over the opioid epidemic.
THE SPEED READ
Shares in C3.ai plunged 26 percent after a short seller accused the software firm of having “serious accounting and disclosure issues.” (Bloomberg)
KKR raises $8 billion for its largest ever European buyout fund. (Reuters)
The U.S. will commit an additional $2.6 billion in military aid to strengthen Ukraine’s air defenses. (NYT)
Doug Beck, an Apple sales executive, is leaving the iPhone maker to take a senior role at the Defense Department. (Bloomberg)
Best of the rest
“Will an Oil Racket Destroy One of Africa’s Most Sacred Places?” (Rolling Stone)
Bing Newcomb, the founder of the pioneering online brokerage E*Trade, has died at 79. (NYT)
Bernard Arnault has dethroned Elon Musk to take the top spot on Forbes’s annual billionaires list. His net worth has soared to more than $200 billion for the first time. (Forbes)
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