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      Biden Makes His Business Case in the State of the Union Address

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      The president took credit for strong job growth and his legislative agenda that’s boosted investment in infrastructure and clean energy projects.“I will make no apologies.”Pool photo by Jacquelyn Martin-Pool/Getty Images.Biden picks his battles President Biden delivered a State of the Union address to Congress on Tuesday night that was filled with dramatic moments, meant in part to jump start his 2024 re-election campaign.He also used the speech to press his economic priorities, from bolstering American manufacturing to extending his climate efforts. How far he advanced his causes, however, remains to be seen.Mr. Biden defended his record on the economy. He took credit for falling inflation and strong job growth, and listed promised benefits from his sweeping legislative agenda, including infrastructure, clean energy (even if he did acknowledge, “we’re still going to need oil and gas for a while”) and manufacturing laws that will pour trillions into the economy.He also urged Congress to back initiatives including raising a billionaires tax on the wealthy; expanding a measure in the Inflation Reduction Act that caps the cost of insulin at $35 a month; renewing the expanded child tax credit; and expanding Medicaid and affordable child care.He baited Republicans over social welfare programs. Mr. Biden accused some Republicans of threatening Social Security and Medicare, implying they wanted cuts in exchange for a deal to raise the debt ceiling. (That claim requires a bit of context.) Several lawmakers shouted in response; one, Representative Marjorie Taylor Greene of Georgia, yelled “Liar!”Mr. Biden responded that he had somehow gotten unanimity on the issue. “We all apparently agree, Social Security and Medicare is off the books now, right?” he said, leading a bipartisan round of applause for seniors.He kept up pressure on ripe political targets. Though Mr. Biden didn’t directly address the Chinese spy balloon incident, he pledged to make America more competitive and less reliant on China. “I will make no apologies that we are investing to make America strong,” he said. “Investing in American innovation — in industries that will define the future, and that China’s government is intent on dominating.”Mr. Biden also called out tech companies, demanding stricter limits on their collection of personal data, and oil giants, which he accused of raking in record profits from high energy prices instead of using their huge coffers to increase domestic production.How much cooperation Mr. Biden will get from Republicans and business is unclear. In Republicans’ rebuttal, Gov. Sarah Huckabee Sanders of Arkansas accused him of perpetrating a culture war. Corporate America was more circumspect: Suzanne Clark, the head of the U.S. Chamber of Commerce, reiterated her group’s support for the infrastructure law, but urged Biden to focus on striking more trade agreements and pulling back from what she said was overregulation.HERE’S WHAT’S HAPPENING The U.S. trade deficit balloons to $948 billion. The export-import gap jumped 12 percent in 2022, to a record, as Americans continued to spend more on imported goods than travel and entertainment. Trade data also showed growing deficits in goods with the likes of Mexico and South Korea, as manufacturers seek bases outside China.Microsoft announces A.I.-powered consumer internet tools. The tech giant promised versions of its Bing search engine and Edge browser that incorporate chatbots, drawing on a partnership with the ChatGPT creator OpenAI. Microsoft’s ambitions may be bigger: It’s reportedly planning to create software to let companies make their own ChatGPT-powered chatbots.Zoom plans to lay off 15 percent of its staff. The videoconferencing company acknowledged it had hired too many people during its pandemic boom, and needed to retrench as growth has slowed. Its C.E.O., Eric Yuan, said he plans to cut his salary for the coming fiscal year by roughly 98 percent and forgo a bonus.A former Coinbase employee pleads guilty to insider trading. Ishan Wahi, who was a product manager at the crypto exchange, had been accused of tipping his brother and a friend about tokens it planned to list, bringing about $1.5 million in illegal profit. He’s the first crypto insider to admit insider trading.Chobani’s founder urges U.S. companies to fund recovery efforts for the earthquake in Turkey and Syria. Hamdi Ulukaya, a Turkish immigrant, has partnered with the Turkish Philanthropy Funds to aid in recovery from the quake, which has a death toll above 11,000. He told DealBook that he has personally donated $2 million to the cause.Jay Powell sees a “bumpy” path ahead America’s red-hot labor market suggests that the world’s biggest economy may yet avoid recession. But this same dynamic has also thrust the Fed into a policy conundrum, with pressure for higher interest rates to tamp down inflation.In a question-and-answer session at the Economic Club of Washington on Tuesday, the Fed’s chair, Jay Powell, said he could see “the very early stages of disinflation,” but added that the easing in prices was likely to follow a “bumpy” path, particularly with hiring and wage growth proving strong.January’s jobs data surpassed the Fed’s forecasts. Mr. Powell said last Friday’s knockout nonfarm payroll report, which announced that employers added 517,000 new jobs last month, was “certainly strong — stronger than anyone I know expected.”Other data offered more encouraging signs for the U.S. economy. The Atlanta Fed’s GDPNow tracker forecasts that the U.S. will grow by 2.1 percent in the first quarter; it was predicting 0.7 percent a week ago. And even bearish economists are dialing down their gloomy expectations: “A potential recession in 2023 will likely be short and shallow,” Jeffrey Roach, the chief economist for LPL Financial, wrote to investors on Tuesday, while Goldman Sachs economists this week lowered their estimate of the likelihood of a U.S. recession to 25 percent.Investors were relieved that Mr. Powell gave no hint of a sudden shift in the Fed’s strategy. He reiterated that the central bank planned to keep raising borrowing costs to rein in consumer spending. That was enough to reassure investors that no big policy changes were coming soon: The S&P 500 rallied after his comments, snapping a two-day losing streak.A hedge fund catches meme fever Hudson Bay Capital Management has emerged as the mystery backer of Bed Bath & Beyond’s bold plan to cash in on its meme-stock cachet to raise $1 billion in emergency funds and avert bankruptcy.The hedge fund’s involvement in the deal highlights the meme-stock frenzy’s pull on big institutions. Shares in the struggling retailer, which has closed 400 stores in the past year as revenues slide, are up nearly 86 percent in the past month in extremely volatile trading that’s been largely influenced by day-traders betting on its survival. But the stock nearly halved on Tuesday, after the company announced it would sell a flood of new shares, which will dilute existing shareholders.Hudson Bay has underwritten the initial $225 million worth of shares that Bed Bath & Beyond is selling. It plans to underwrite another $800 million over time, if certain unspecified “conditions are met.” Hudson Bay also receives warrants to buy further stock at an advantageous price, which could prove lucrative if the retailer were to turn its business around.The deal with Hudson Bay came together within the past several weeks, two people familiar with the negotiations told DealBook. Late last month, JPMorgan Chase, which gave Bed Bath & Beyond a lifeline last summer by expanding its credit line, froze the retailer’s credit accounts after deeming the company in breach of the terms of its debt. As Bed Bath & Beyond raced to find cash to pay its debts, it had also been preparing for a bankruptcy — and possible liquidation — if the needed funds didn’t arrive.Whether this only buys Bed Bath & Beyond a temporary reprieve remains to be seen. “The fundamental story for Bed Bath & Beyond is so broken at this point,” said David Silverman, a retail analyst at Fitch Ratings. “I don’t know that a short-term cash infusion that could buy them a few months, a couple of quarters, is going to change their fate.” The Wedbush Securities analyst Seth Basham seconded that opinion, cutting the stock price target to zero.“U.S. hog farmers look at the pictures of those farms in China, and they just scratch their heads and say, ‘We would never dare do that.’” — Brett Stuart, founder of the research firm Global AgriTrends, is worried about disease risks from China’s high-density pig farms, which in some cases pack the animals into tower blocks.Adam Neumann opens up about his next act Since leaving WeWork, Adam Neumann has (largely) kept quiet about his future plans, including Flow, a venture that Andreessen Horowitz invested $350 million in last year. But he is finally revealing more about the start-up, via a talk he gave to an Andreessen Horowitz-organized conference in November.The main — if still vague — takeaway is that Flow owns and operates apartment buildings that aim to persuade tenants to stay longer by making them “feel” as if they’re owners rather than renters. (How is left unsaid.) Mr. Neumann used plumbing to illustrate the business advantages of this approach, according to Bloomberg:An important element of the business proposition is that renters who stay longer are more profitable, Neumann said. His theory is that people who feel a sense of ownership will stick around.The plunger factor would be an added benefit for Flow. “If you’re in an apartment building and you’re a renter and your toilet gets clogged, you call the super,” he said. “If you’re in your own apartment, and you bought it and you own it and your toilet gets clogged, you take the plunger.” That’s the difference, he said, “when feeling like you own something.”THE SPEED READ DealsApollo is reportedly in talks to buy a stake in CS First Boston, the investment bank that will be spun out of Credit Suisse. (WSJ)Carlyle is said to be in negotiations to buy Cotiviti, a health care tech company, from Veritas Capital for nearly $15 billion. (Bloomberg)Oaktree Capital and other hedge funds have snapped up Adani Group bonds in recent days, restoring investor confidence in the beleaguered Indian conglomerate. (Bloomberg)PolicyMarty Walsh, the U.S. labor secretary, reportedly will step down to lead the N.H.L. players’ union. (Daily Faceoff)Senator Josh Hawley, Republican of Missouri, said he wants to make 16 the minimum age to be allowed on social media in the U.S. (NBC News)Russia’s government is said to be pressuring the central bank to loosen fiscal policy as it enters the second year of its invasion of Ukraine. (Bloomberg)Best of the restAmerican start-ups laid off over 3,000 workers last month, up 1,700 percent from a year ago. Relatedly, Washington now has more tech vacancies than Silicon Valley. (Insider, WSJ)“The Secret Saudi Plan to Buy the World Cup.” (Politico)Voice actors say they’re increasingly being asked to sign away the rights to their voices — so they can be duplicated by A.I. (Vice)How Nestlé’s bet on a breakthrough treatment for peanut allergies went south. (Bloomberg Businessweek)LeBron James now owns the N.B.A.’s scoring record. (NYT)We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com. More

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      Kevin McCarthy’s Business Ties Complicate His Rise to Power

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      To land the House speaker position, the California Republican will have to win over opponents who question his ties to Silicon Valley and his commitment to right wing causes.The House, divided.Michael Reynolds/EPA, via ShutterstockKevin McCarthy, Inc.Representative Kevin McCarthy, Republican of California, is still working on landing the House speaker gig after six failed attempts. It’s the first such House floor showdown in a century, and business is at the heart of his woes.Mr. McCarthy’s critics say he’s too friendly with Big Tech. The ultraconservatives who have stymied his rise to power list a number of big objections with Mr. McCarthy. They say that he isn’t sufficiently committed to right-wing causes and that he hasn’t pushed back enough against perceived anti-conservative bias on social media. Yet the would-be speaker published a policy proposal over the summer to “Stop the Bias and Check Big Tech” if Republicans took control of the House.Mr. McCarthy’s messaging has not convinced hard-line party members. His hot-and-cold ties to Silicon Valley haven’t helped his standing either. Jeff Miller, a political adviser to Mr. McCarthy, also represents Apple and Amazon, and two former staff members are now Big Tech lobbyists. Meanwhile, Mr. McCarthy has benefited from tens of thousands of dollars in donations from tech companies and executives.The Republican leader has also alienated onetime corporate allies. Lobbyists once bet big on Mr. McCarthy, but relations have soured somewhat after he embraced former President Donald Trump’s antagonistic approach to corporations with perceived ties to the left.The Chamber of Commerce endorsed 23 Democrats for the House in 2020 and 15 won. That put the speakership out of reach for Mr. McCarthy at that time and he’s reportedly been sore since. The Republican pushed for Suzanne Clark, the Chamber’s C.E.O., to be removed but the organization was unmoved, and issued a statement in support of her.Even before Mr. McCarthy’s failure this week, lobbyists were giving up on him and Washington insiders — including Paul Ryan, the former Republican House speaker now at the executive advisory firm Teneo — were telling executives to stay out of the political fray.Meanwhile, the business of the government is stuck. Until Republicans resolve their internal conflicts, the House is at a standstill. Members have not been sworn in, administrative tasks and constituent services have been delayed and legislative work is on the back burner. Mr. McCarthy and his allies held talks with the holdouts last night to find a resolution. Democrats could step in to help (members of both parties have apparently discussed it), but that doesn’t appear to be on the table right now.Mr. McCarthy has vowed to continue for as long as it takes. In 1923, it took nine ballots to elect a speaker. The House is scheduled to meet again at noon.HERE’S WHAT’S HAPPENING The Justice Department moves to seize Robinhood stock tied to Sam Bankman-Fried. Federal prosecutors argued on Wednesday that the $465 million worth of shares in the online brokerage weren’t part of the FTX bankruptcy estate. Bankman-Fried bought the shares through an investment vehicle with money borrowed from Alameda Research, FTX’s trading affiliate.Walgreens will sell abortion pills. The pharmacy giant said it would dispense mifepristone, becoming the first national chain to do so after the F.D.A. announced new rules for dispensing the drug. CVS and Rite Aid said they were still reviewing the agency’s new policy.China defends its handling of the Covid outbreak. Facing criticism from the World Health Organization and President Biden over the accuracy of its coronavirus tally, Beijing fired back on Thursday, saying the situation was “controllable.” It also plans to reopen its border with Hong Kong on Sunday after a three-year closure.The man behind the college admissions scandal is sentenced. Rick Singer, whom prosecutors accused of orchestrating a $25 million cheating scheme that involved actors, business executives, doctors and more, must serve three and a half years in prison. Singer, who had become an informant, received the longest sentence of anyone tied to the scandal.CES kicks off today. Enormous crowds are expected to return to the tech trade show in Las Vegas this year, after the pandemic clamped down on in-person attendance. Expect plenty of announcements about new televisions, smart-home gadgets, electric cars and more.The bleeding continues at Big Tech Amazon said on Wednesday that it would drastically expand its planned layoffs to a staggering 18,000 jobs as it seeks to rein in costs. Coupled with Salesforce’s plans to lay off about 8,000 employees, it’s the latest sign that tech giants are still grappling with the consequences of overhiring during the pandemic boom.Amazon’s cuts amount to around 6 percent of its corporate work force and will be focused on human resources and what the e-commerce giant calls its Stores division: its main online site, its field operations and warehouses, its physical stores and other consumer teams. (Hourly warehouse workers aren’t part of the tally.) That’s up from the roughly 10,000 the company had been weighing earlier.Salesforce is also laying off 10 percent of its employees and cutting back on office space. The move comes after a series of shake-ups at the business software giant, including the announced departures of Bret Taylor, its co-C.E.O. (reportedly after strains in his relationship with Marc Benioff, the company’s co-founder) and Stewart Butterfield, the C.E.O. of Slack, the messaging app Salesforce bought for nearly $28 billion.It’s a notable retrenchment for Salesforce, whose reputation over the past decade has become one of ever-growing ambition: The company is the largest private employer in San Francisco, and its flagship office tower is the city’s tallest.Both rounds of layoffs arose out of overexpansion. Amazon more than doubled its work force during the pandemic, to 1.5 million, as it became an indispensable seller to locked-down households. Salesforce nearly doubled its head count over the past three years, to 80,000 in October.Those hiring sprees have since run into a slowing global economy, with Amazon having warned in the fall that it could see its worst growth rate since 2001. “We hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” Benioff wrote in a letter to employees.Amazon and Salesforce aren’t alone: Meta recently laid off 13 percent of its work force, while Snap and Twitter have also resorted to huge job cuts. Overall, the tech industry laid off over 153,000 workers last year, according to Layoffs.fyi. Things may not get better this year, with analysts cautioning that tech companies’ customers may further clamp down on spending, potentially leading to yet more cost cuts.“The parallels with Russia and Ukraine are hard to ignore. We must not make the same mistakes with Xi Jinping that we did with Vladimir Putin.” — Anders Fogh Rasmussen, a former secretary general of NATO, urged a robust and unified response to deter China from attacking Taiwan. His comments, made during a visit to Taipei, highlighted worries in Europe over China’s growing assertiveness in Asia.The Fed’s big challenge: exuberant marketsInvestors got the post-Christmas “Santa Claus rally” they were hoping for, a buying spree that was fueled in part by slumping energy prices. But the big cloud hanging over markets remains: the prospect that central banks will be emboldened to tame inflation with more interest rate increases.Fed officials gave investors an unambiguous warning on Wednesday: Don’t start pricing in a dovish pivot anytime soon. Many on Wall Street are banking on the U.S. central bank to end its policy of jumbo rate increases in the first half of 2023, and to begin cutting by year-end.But the Fed sees any pivot prediction as misguided, warning that such thinking could complicate its efforts to bring prices under control. Minutes from a December Fed meeting released on Wednesday, did not mince its words. “No participants anticipated that it would be appropriate” to cut rates.As the Times’s Jeanna Smialek reported, policymakers are concerned that markets might misinterpret any decision to slow the pace of rate moves in the near term as a sign that the Fed believed it was making enough progress in bringing inflation closer to its 2 percent target. (The I.M.F. has also weighed in, saying that it doesn’t believe the U.S. has “turned the corner on inflation yet” and that the Fed should “stay the course.”)The markets still don’t seem to be getting the message. “Right now data signals are mixed — like an ink blot, investors can see what they want,” Elsa Lignos, RBC Capital Market’s global head of FX Strategy, said in a note to clients this morning. She pointed out that manufacturing prices were in decline, but that job vacancies remained elevated, suggesting wages could continue creeping higher.A late-afternoon surge on Wednesday helped the S&P 500 and Nasdaq close higher. Between the Dec. 27 open and Wednesday’s close, the S&P 500 rose 0.8 percent, capping off the seventh consecutive annual Santa rally, measured by the stock market’s performance over the seven trading days that follow Christmas. The most bullish on Wall Street see such rallies as a sign that investors will keep buying well into the new year.Investors and Fed officials will be closely watching Friday’s jobs report. The Fed is concerned that the labor market is still too tight, belying the recent headline-grabbing layoffs at tech giants. A jobs report showing big gains in wages and hiring could force the Fed to remain locked in to its “higher for longer” rates policy, adding to additional market volatility.THE SPEED READ DealsShares in GE HealthCare Technologies rose 8 percent in their debut on Wednesday, after being spun off from General Electric. (Bloomberg)Western Digital has reportedly resumed talks to buy Kioxia, a Japanese memory chip maker. (Bloomberg)A unit of Tokyo Gas is said to be in advanced talks to buy the U.S. natural gas producer Rockcliff Energy for about $4.6 billion. (Reuters)Fanatics reportedly plans to divest its 60 percent stake in Candy Digital, a sports N.F.T. company. (CNBC)PolicyEuropean regulators fined Meta 390 million euros after finding it had illegally forced users to effectively accept personalized ads. (NYT)The S.E.C. has objected to Binance.US’s $1 billion bid to purchase the bankrupt crypto lender Voyager Digital. (Reuters)Silvergate, a bank, was forced to sell assets at a steep loss to cover $8.1 billion in customer withdrawals after the collapse in November of FTX. (WSJ)Best of the restA self-described Tesla fan filed a Tesla trademark for a boat and jet without the company’s knowledge. (Bloomberg)Amazon, SiriusXM and Spotify are cutting back on their spending on new podcasts. (Bloomberg)The stars of the 1968 film “Romeo and Juliet” sued the movie’s distributor, Paramount, for $500 million over being made to film a nude scene while they were teens. (NYT)A Princeton student said he had created a program to detect whether an essay was written by the A.I. chatbot ChatGPT. Meanwhile, New York City’s education department banned the use of ChatGPT on some city devices and internet networks. (Insider, Chalkbeat New York)We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com. More

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      FTX Founder Sam Bankman-Fried’s “House of Cards” Teeters

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      Now under arrest, the fallen crypto mogul faces a barrage of charges, including defrauding investors out of billions.Sam Bankman-Fried faces multiple charges, including defrauding investors.Saul Loeb/Agence France-Presse — Getty ImagesS.B.F. in custody The spectacular rise and fall of Sam Bankman-Fried, the founder of the failed crypto exchange FTX, came full circle on Monday, with his arrest in the Bahamas at the request of U.S. authorities, followed by the S.E.C. filing its own charges on Tuesday.The Times reports that federal prosecutors in Manhattan, who are seeking his extradition, will charge Mr. Bankman-Fried with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. A trial could start late next year.“Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” Gary Gensler, the S.E.C.’s chair, said in a statement. His agency has charged S.B.F., as the entrepreneur is known, with defrauding investors in FTX out of $1.8 billion, including $1.1 billion from U.S. entities. A big part of the fraud, it alleges, was keeping backers in the dark about “the undisclosed diversion of FTX customers’ funds” to the exchange’s trading affiliate, Alameda Research.The S.E.C. now asserts that S.B.F. was more involved in Alameda’s operations than he let on. In a major revelation, the agency says he directed $8 billion worth of customer deposits from an Alameda-controlled bank into a separate account, labeled “fiat @ftx.com,” in part to avoid getting charged interest, a move that could suggest intent. From the complaint:“In 2022, FTX began trying to separate Alameda’s portion of the liability in the “fiat @ftx.com” account from the portion that was attributable to FTX (i.e., to separate out customer deposits sent to Alameda-controlled bank accounts from deposits sent to FTX-controlled bank accounts). Alameda’s portion — which amounted to more than $8 billion in FTX customer assets that had been deposited into Alameda-controlled bank accounts — was initially moved to a different account in the FTX database. However, because this change caused FTX’s internal systems to automatically charge Alameda interest on the more than $8 billion liability, Bankman-Fried directed that the Alameda liability be moved to an account that would not be charged interest.”The arrest took many by surprise. S.B.F. had been scheduled to testify on Tuesday before the House Financial Services Committee. The committee’s Democratic chair, Representative Maxine Waters of California, didn’t see this coming: “The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity,” she said. (S.B.F. himself also said he did not expect to be arrested.)“I have never seen a case approaching this scope proceed this quickly,” Renato Mariotti, a partner at Bryan Cave Leighton Paisner and a former federal prosecutor, told DealBook. Given FTX’s scale — with more than 100 companies based around the world — and the lengthy list of creditors, lawyers and extradition experts said the government had moved faster than expected.S.B.F.’s media tour may have played a role: While most executives under criminal investigation clam up, the crypto entrepreneur has spoken out over and over again. That may have pushed prosecutors to act fast, according to Mariotti, to avoid S.B.F. “muddying the waters” of a potential case through repeated assertions that he was misguided and had made mistakes.But has S.B.F. also admitted wrongdoing? On the Unusual Whales podcast on Monday, he initially denied knowing that customer funds had moved from FTX to Alameda without permission, but then professed less certainty: “Like I, like, kind of vaguely knew, kind of, sort of maybe, um, on a qualitative level what was going on.”What could have been: News outlets including Forbes have obtained S.B.F.’s written testimony for Tuesday. It sets the ground for his claim to have simply made mistakes by professing he messed up with a profanity — which he stresses he is using “formally, under oath” — in the first sentence.HERE’S WHAT’S HAPPENING The E.U. plans to tax imports based on carbon emissions. The bloc has reached an agreement meant both to protect European products made using fewer greenhouse-gas emissions and to effectively set an international price for carbon. It would also probably irritate trading partners.China begins a W.T.O. dispute over American chip export controls. Beijing accused the United States of trade protectionism by effectively blocking tech companies from selling advanced chips to China, hampering the Chinese tech industry. At the same time, Japan and the Netherlands are in talks to join the U.S. in tightening export controls on chipmaking machinery. More on Elon Musk’s Twitter TakeoverAn Established Pattern: Firing people. Talking of bankruptcy. Telling workers to be “hard core.” Twitter isn’t the first company that witnessed Elon Musk use those tactics.Rivals Emerge: Sensing an opportunity, new start-ups and other social platforms are racing to dethrone Twitter and capitalize on the chaos of its new ownership under Mr. Musk.The ‘Twitter Files’: Mr. Musk and Matt Taibbi, an independent journalist, set off an intense debate with a release of internal Twitter documents regarding a 2020 decision to restrict posts linking to a report in the New York Post about Hunter Biden.Hard Fork: The Times podcast looks at Mr. Musk’s two-day clash with Apple, which he had accused of trying to sabotage Twitter before saying the “misunderstanding” had been resolved.Congress scrambles to avert a government shutdown. Senator Chuck Schumer of New York, the Senate majority leader, proposed a one-week spending bill to give negotiators more time for a broader government spending deal. Without that, the federal government will begin partially shutting down this weekend.The former C.E.O. of Wirecard moves to suspend his criminal fraud trial. A lawyer for Markus Braun told a Munich court that prosecutors had ignored crucial evidence and relied on an untrustworthy witness. The move is aimed at forestalling one of Germany’s biggest-ever fraud trials; the court is expected to rule on the motion in the coming weeks.U.S. researchers are set to unveil a breakthrough in nuclear fusion. Scientists at the Lawrence Livermore National Laboratory in California are expected to announce on Tuesday that they have successfully used lasers to achieve nuclear fusion whose output exceeded the input from the lasers. It’s a significant step toward making fusion a plausible energy source — someday.What FTX’s new C.E.O. will say about the exchange’s “utter failure” Even with Sam Bankman-Fried in custody, the House Financial Services Committee hearing into the collapse of FTX will go on as scheduled this morning, and its star witness will now be the exchange’s new C.E.O., John Ray III.Though Mr. Ray’s written testimony never calls FTX an outright fraud, the corporate restructuring expert will reiterate that he’s never seen “such an utter failure of corporate controls at every level of an organization.”Mr. Ray will detail eight “unacceptable management practices” that he believes led to the downfall of Bankman-Fried’s crypto empire. They include:Evidence that “customer assets from FTX.com were commingled with assets from the Alameda trading platform.”Alameda, FTX’s trading arm, being able to borrow funds held at the non-U.S. business unit, FTX.com, for its trading and investing “without any effective limits.”Shoddy recordkeeping and lax fiscal controls, including no audits and no documentation for “nearly 500 investments made with FTX Group funds and assets.”Evidence that loans and payments in excess of $1 billion were made to company insiders, and that the company went on a roughly $5 billion spending spree beginning in late 2021.Wall Street will be closely watching today’s inflation number U.S. futures have been edging higher on Tuesday and global stock markets are up ahead of a consequential Consumer Price Index report due out at 8:30 a.m. Eastern.An elevated C.P.I. would probably put the chill back into stock markets. If the inflation measure shows an annual rise above economists’ consensus estimate of a 7.3 percent, that could signal that the Fed’s interest-rate rises aren’t doing enough to slow the pace of inflation — and that more jumbo increases are needed. (Reminder: The Fed’s rate-decision day comes tomorrow.)A tepid C.P.I. could do the opposite. JPMorgan Chase traders have gamed out a few scenarios. They believe a reading of 6.9 percent would lead to a healthy rally in the S&P 500, with the benchmark index jumping 8 to 10 percent. They put the odds of such a low number at about one in 20.Central bankers and Wall Street pros have consistently forecast inflation wrong over the past year. In late 2021, many thought high inflation was a temporary phenomenon. It persisted. But then last month’s reading, which showed prices moderating, surprised many and triggered a rally in risky assets. “The inflation report is arguably the most uncertain of this week’s big macro event risks,” Alvin Tan, a foreign-exchange strategist at Royal Bank of Canada, said in an investor note on Tuesday.“The bet was that free money would last indefinitely, and there doesn’t seem to have been a risk-management game plan.” — Jon Burckett-St. Laurent, a senior portfolio manager at Exencial Wealth Advisors, on the financier Cathie Wood, who shot to prominence by investing heavily in money-losing tech companies. Wood’s flagship fund is trading at a five-year low as investors appear to have lost faith in her strategy.Twitter dissolves its trust and safety council Elon Musk has said that maintaining safety on Twitter is one of his highest priorities, and yet the social network just made a puzzling decision toward that end: On Monday night it disbanded an outside panel of experts that had advised it on matters of hate speech and safety.“Thank you,” began an email sent to members of the council — made up of civil rights groups, academics and others, formed in 2016 — an hour before they were to meet on Monday. The message said the group wasn’t “the best structure” to advise on product and policy any longer; it was signed “Twitter.”The dissolution of the board may have been inevitable, as three members had already quit last week over changes to Twitter’s content moderation. But it suggests Musk may ultimately centralize content policy in the interest of, as the email put it, “moving faster and more aggressively than ever before.”The move adds to critics’ worries that Twitter is becoming less safe. The advisers who quit last week cited the company relying more on automated content moderation: “It is clear from research evidence that, contrary to claims by Elon Musk, the safety and wellbeing of Twitter’s users are on the decline,” they wrote in their resignation statement.Meanwhile, Twitter’s former head of trust and safety, Yoel Roth, and his family reportedly went into hiding after Mr. Musk misrepresented his academic thesis about gay social networks online to falsely imply that it supported sexualizing children. (Professors who reviewed Mr. Roth’s thesis also received online abuse.)In other Elon Musk news:The Twitter account that shows the movements of Mr. Musk’s private jet has been “shadowbanned,” according to its owner.The $5.7 billion worth of Tesla shares that Mr. Musk donated to charity last year went to his personal charitable foundation.Mr. Musk has lost his crown as the world’s richest person, at least by one measure, to Bernard Arnault of LVMH.THE SPEED READ DealsThe private equity firm Thoma Bravo agreed to buy Coupa Software, which makes software to manage corporate expenses, for $8 billion, as it seeks to capitalize on declining valuations of tech companies. (FT)Speaking of which, Checkout.com, one of Europe’s biggest privately held tech companies, recently slashed its internal valuation by 72 percent, to $11 billion. (FT)Goldman Sachs reportedly plans to cut hundreds of retail banking jobs. (Bloomberg)Investors’ rush to withdraw from a big Blackstone real-estate fund may have broader fallout. (WSJ)PolicyThe Supreme Court rejected a bid by British American Tobacco to halt California’s ban on flavored tobacco products. (Bloomberg)Chinese authorities arrested 63 people whom they accused of laundering $1.7 billion with the crypto token Tether. (Insider)Hong Kong has lifted more of its bar and restaurant Covid restrictions, as China continues easing pandemic rules. (FT)Best of the restThe Wall Street Journal named Emma Tucker, the editor of London’s Sunday Times, to lead its newsroom, the first woman to hold that role. (NYT)“How Sexism Influenced Corporate Governance” (NYT)Amazon has delayed hiring college graduates to help cut costs. (FT)The back story on Taylor Swift choosing Searchlight, the art-house movie studio, over major streaming services for her debut as a feature-film director. (Puck)The hedge-fund mogul Ray Dalio and the director James Cameron are teaming up to make submarines for the ultrawealthy. (FT)We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com. More

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      Biden Warns Inflation Will Worsen if Republicans Retake Congress

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      HAGERSTOWN, Md. — President Biden laced into Republicans on Friday for trying to enact policies that would make “every kitchen table cost” go up while lavishing tax cuts on big corporations, shedding his usual tone of bipartisanship a month ahead of the midterm elections.In a speech before factory workers at a Volvo manufacturing facility, Mr. Biden defended his economic record and accused Republicans of political hypocrisy for seeking to reap the benefit of federal funds made available by legislation that they had opposed. He also laid out the stakes of the upcoming elections, bluntly warning that Republicans will try to scale back Medicare and Social Security benefits if they win control of Congress. And he accused Republicans of rooting against America’s economic success.“This is a choice between two very different ways of looking at the economy,” Mr. Biden said.Mr. Biden’s comments came as Labor Department figures showed that the United States economy added 263,000 jobs in September and that the unemployment rate fell to 3.5 percent, from 3.7 percent a month earlier. The report suggests that the labor market is cooling as the Federal Reserve raises interest rates but that the central bank will likely have to take further steps to slow the economy in order to tame inflation.Mr. Biden said that the numbers were a sign that the economy was transitioning to stable growth.“Our job market continues to show resilience as we navigate through this economic transition,” he said. “The pace of job growth is cooling while still powering our recovery forward.”Despite concerns about an economic slowdown, Mr. Biden’s remarks were the latest attempt by the White House to highlight examples of America’s manufacturing resurgence with a focus on the automobile sector in the run-up to the November midterm elections.The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.Standing by Herschel Walker: After a report that the G.O.P. Senate candidate in Georgia paid for a girlfriend’s abortion in 2009, Republicans rallied behind him, fearing that a break with the former football star could hurt the party’s chances to take the Senate.Wisconsin Senate Race: Mandela Barnes, the Democratic candidate, is wobbling in his contest against Senator Ron Johnson, the Republican incumbent, as an onslaught of G.O.P. attack ads takes a toll.G.O.P. Senate Gains: After signs emerged that Republicans were making gains in the race for the Senate, the polling shift is now clear, writes Nate Cohn, The Times’s chief political analyst.Democrats’ Closing Argument: Buoyed by polls that show the end of Roe v. Wade has moved independent voters their way, vulnerable House Democrats have reoriented their campaigns around abortion rights in the final weeks before the election.The Volvo facility in Hagerstown employs more than 1,700 workers and makes parts for Mack Trucks.The visit also came with political calculations, as Representative David Trone, a Maryland Democrat, was locked in a tight re-election race with his Republican challenger, Neil Parrott. Hagerstown is also close to the border with Pennsylvania, where the senate and governor’s races are two of the most consequential political contests in the country.Mr. Biden maintained a more pointed tone with Republicans as he made claims about the benefits of the so-called Inflation Reduction Act that Congress passed in August. He called out Republicans such as Representative Paul Gosar of Arizona and Representative Andy Barr of Kentucky for seeking federal funds for local projects while criticizing his agenda, calling it “socialism.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“I didn’t know there were that many socialist Republicans,” Mr. Biden joked.Mr. Biden, who on Thursday evening attended a fund-raiser at the Manhattan home of the Democratic donor James Murdoch, said that Republicans have a “Park Avenue” view of the world that stands in stark contrast to his policies that are born out of concern for people in places like Scranton, Pa., where Mr. Biden was born, and Hagerstown.Republicans seized on signs of a cooling job market to assail Mr. Biden for economic mismanagement on Friday.“The economy is shrinking, inflation is raging, and job growth is slowing,” said Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee.While the White House has so far sounded very in line with the Fed’s push to fight the quickest inflation in four decades, that tone could shift somewhat as the economy begins to show cracks.The Biden administration has made it clear that it respects the Fed’s independence to set policy free of partisan interference, but it might be challenging for administration officials to embrace the central bank’s actions too loudly when the Fed’s policies are hurting the economy and inflicting pain on workers.Mr. Biden acknowledged that economic headwinds continued to persist, noting that gasoline prices are inching back up “because of what the Russians and the Saudis just did.”“I’m not finished with that just yet,” he added.Despite his sharper tone, Mr. Biden said that he remained hopeful that bipartisan cooperation could be possible after the election.“That’s my hope, that after this election, there will be a little return to sanity,” Mr. Biden said. “That we’ll stop this bitterness that exists between the parties and have people working together.” More

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      Blake Masters, GOP Senate Candidate, Links Fed Diversity to Economic Woes

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      Blake Masters, the Republican nominee challenging Senator Mark Kelly of Arizona, suggested in a sarcastic Twitter post late Sunday that the nation’s economic struggles were connected to increased gender and racial diversity in Federal Reserve leadership.He then dug in on Monday with a video in which he denounced “the Democrats’ diversity obsession” and described Vice President Kamala Harris as a beneficiary of an “affirmative action regime.”“Finally a compelling explanation for why our economy is doing so well,” Mr. Masters wrote on Sunday in response to an Associated Press report that found there were, according to the news agency, “more female, Black and gay officials contributing to the central bank’s interest-rate decisions than at any time in its 109-year history.”The post drew swift backlash, which Mr. Masters alluded to in a follow-up video Monday evening. “Well, this tweet made people mad,” he said, before adding that he didn’t care “if every single employee at the Fed is a Black lesbian as long as they’re hired for their competence” and that he had “never spoken to anyone who can say with a straight face that Kamala was somehow the most qualified candidate for that job.”Ms. Harris is the first woman and the first Black person to serve as vice president and had extensive political experience — including as a United States senator and the attorney general of California — before Joseph R. Biden Jr. chose her as his running mate. Her office did not immediately respond to a request for comment Monday evening.More Coverage of the 2022 Midterm ElectionsEvidence Against a Red Wave: Since the fall of Roe v. Wade, it’s hard to see the once-clear signs of a Republican advantage. A strong Democratic showing in a New York special election is the latest example.Sensing a Shift: Democrats, once beaten down by the prospect of a brutal midterm election, are daring to dream that they can maintain control of Congress, but a daunting map may still cost them the House.G.O.P.’s Dimming Hopes: Republicans are signaling concern that the midterm sweep they anticipated is complicated by attention on former President Donald J. Trump’s legal exposure.Campaign Ads: In what critics say is a dangerous gamble, Democrats are elevating far-right candidates in G.O.P. primaries, believing they’ll be easier to defeat in November. We analyzed the ads they’re using to do it.Some fellow conservatives echoed the sentiment of Mr. Masters’s initial tweet and criticized the focus on diversity at the Fed at a time of high inflation. A number of Republican candidates and elected officials have also disparaged efforts to promote diversity and combat bigotry more broadly, and Republican primary voters have rewarded some nominees who espouse racist, sexist, homophobic and transphobic views.Mr. Masters, a venture capitalist endorsed by former President Donald J. Trump, has been particularly outspoken. Among other things, he has promoted what experts in extremism describe as a sanitized version of the racist “great replacement” conspiracy theory — claiming that Democrats are trying to bring more immigrants into the country in order to dilute the political power of native-born citizens — and characterized the United States’ gun violence problem as “people in Chicago, St. Louis shooting each other — very often, you know, Black people, frankly.”Mr. Masters’s campaign did not respond to a request for comment Monday. His campaign manager said last month, in response to criticism of the candidate’s immigration views, that voters were “tired of being sorted into color boxes and prefer substance to identity pandering” — echoing how many on the right seek to paint efforts that combat racism, sexism and other forms of bias as “identity politics” and “wokeness.”Republican voters seemed unmoved by a string of revelations about Mr. Masters’s views ahead of his Aug. 2 primary, including youthful writings that his opponent, Jim Lamon, had criticized as antisemitic. Mr. Masters handily defeated Mr. Lamon.But whether Mr. Masters can appeal to voters beyond his right-wing base in November seems to be weighing on party leaders: Senate Republicans’ political action committee canceled $8 million of television, radio and digital advertising in Arizona last week, signaling increasing pessimism about Mr. Masters’s ability to win a race that Republicans once saw as a relatively easy pickup en route to retaking a Senate majority.Mr. Masters has stripped hard-line abortion policies from his website — an implicit recognition of the backlash Republicans are facing over the overturning of Roe v. Wade — and released an ad in which he sought to cast his abortion platform as “common sense.”The website changes, reported by NBC News on Thursday, removed language in which Mr. Masters described himself as “100 percent pro-life” and called for a constitutional amendment that would give fetuses the same legal rights as an infant or adult.The anti-abortion movement is pursuing such measures, known as fetal personhood laws, as a way to criminalize abortion as murder and to eliminate the exceptions included in many current abortion bans. But a growing volume of data shows the political perils of that policy. Republican candidates have underperformed in special elections held since the Supreme Court overturned Roe v. Wade in June, and voters in Kansas overwhelmingly rejected a constitutional amendment that would have allowed state legislators to ban or severely restrict abortion.More Republicans have shifted away from hard-line abortion positions in recent weeks. Mr. Masters’s ad, which focused on rare third-trimester abortions and said Mr. Kelly supported an “extreme” policy, was in line with a longtime anti-abortion strategy of centering public messaging on abortions later in pregnancy — even though more than 90 percent of abortions take place at or before 13 weeks’ gestation, and the state laws that have taken effect since June generally ban the procedure early in pregnancy, or at any point. More

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      Big Tech and the Fed

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      Some tech companies’ earnings are flagging, in what could be a positive sign for the Federal Reserve.Still big.Noah Berger/Agence France-Presse — Getty ImagesWhat tech earnings say about the economy The long-booming bottom lines of major tech companies are all of a sudden smaller than expected. That might be a good thing. Big Tech sailed through the pandemic with its profits mostly intact. The fact that some firms’ results are now flagging could be a positive sign for the Federal Reserve, which is trying to engineer a slowdown as it fights the nation’s worst bout of inflation in four decades.The big question for investors, and perhaps the Fed, is whether the profits of Apple, Alphabet, Amazon and the other tech giants, along with corporate America in general, have fallen enough.Microsoft and Alphabet, Google’s parent company, kicked off what appears to be a disappointing round of quarterly reports for the U.S.’s largest tech companies yesterday. Meta will release its results this afternoon, with Apple and Amazon rounding out Big Tech’s earnings announcements tomorrow.Microsoft’s profits, while below expectations, were still up. Sales of its signature software products, like Office, rose 13 percent. Its cloud services were up 40 percent. And LinkedIn, the professional social network Microsoft bought in 2016, grew 26 percent from a year ago, continuing to benefit from the tightest job market in decades.Alphabet’s sales rose 13 percent. In another good sign for the economy, the jump was driven by better-than-expected sales in its core Google search engine business, while results were mixed elsewhere. A jump in expenses and an exit from its Russian-related businesses caused profits to slump 14 percent.The results were positive enough for investors. Alphabet’s shares rose nearly 5 percent on the earnings news to $110. Microsoft’s shares jumped $10, or nearly 4 percent, to $262. Executives at both companies said they saw evidence of a weaker economy. “We are not immune to what is happening in the macro broadly,” Satya Nadella, Microsoft’s chief executive, said on a call with analysts. Alphabet’s chief financial officer, Ruth Porat, told analysts that a pullback in spending by some advertisers reflected “uncertainty about a number of factors.”Few are betting that the earnings reports will change the Fed’s approach. Its policymakers are meeting this week, and they are widely expected to continue raising benchmark interest rates. While central bankers “will likely acknowledge a recent weakening in economic momentum, the Fed will likely feel the need to appear resolute in battling inflation until there are clear signs that it is abating,” wrote David Kelly, the chief global strategist of J.P. Morgan Asset Management, in a note to clients earlier this week.HERE’S WHAT’S HAPPENING Kraken, the crypto exchange, is under investigation for possible sanctions violations. The Treasury Department is looking into whether Kraken illegally allowed users in Iran and elsewhere to buy and sell digital tokens. Shares of Coinbase, a larger crypto exchange, plunged yesterday after reports that the S.E.C. was investigating whether it allowed trading in unregistered securities. Cathie Wood’s Ark funds reportedly dumped Coinbase shares yesterday for the first time this year.Antitrust legislation aimed at Big Tech may be off the table for now. Chuck Schumer, the Senate majority leader, told donors at a Capitol Hill fund-raiser yesterday that the American Innovation and Choice Online Act, which he had promised to bring to a vote this summer, lacks the support needed to get it to the Senate floor, Bloomberg reported. The bill’s bipartisan backers have been pressuring Schumer to act fast, before midterm elections that could change the balance of power in Congress.One America News, once a dependable Trump promoter, is struggling to survive. The network is being dropped by major carriers and faces a wave of defamation lawsuits for its outlandish stories about the 2020 election. OAN’s most recent blow is from Verizon, which will stop carrying the network on its Fios television service this week. It is now available to only a few thousand people who subscribe to regional cable providers.Teva Pharmaceuticals reaches a tentative $4.25 billion settlement over opioids. The proposed settlement, which is with some 2,500 local governments, states and tribes, would end thousands of lawsuits against one of the largest producers of the painkillers during the height of the opioid epidemic.Florida’s largest utility secretly funded a website that attacked its critics. Florida Power & Light bankrolled and controlled The Capitolist, a news site aimed at Florida lawmakers, through intermediaries from an Alabama consulting firm, an investigation by The Miami Herald found. The site claimed to be independent, but it advocated rate hikes and legislative favors in efforts that were directed by top executives at the utility.BlackRock downshifts on E.S.G. BlackRock, the world’s largest asset manager, slashed its support for shareholder proposals on environmental and social issues this year, backing only 24 percent of such resolutions in the proxy season that ended in June, down from 43 percent in the previous period. The firm, which has long led the conscious investing movement, said this year’s proposals were “less supportable” and cited new regulatory guidance that opened the door to a broader range of policy-related proposals.The firm has criticized overly “prescriptive” resolutions. In a May memo, BlackRock signaled that Russia’s war in Ukraine was straining global energy supplies and shifting its calculations. “Many climate-related shareholder proposals sought to dictate the pace of companies’ energy transition plans despite continued consumer demand,” wrote the firm’s global head of investment stewardship, Sandy Boss. She noted that shareholders generally supported fewer environmental and social proposals this year as well, voting for 27 percent of resolutions, down from 36 percent in the previous proxy period.Opposition to E.S.G. is mounting. The environmental, social and governance investment push has been labeled “woke capitalism” by critics and is under fire from executives like Tesla’s Elon Musk, major investors like Bill Ackman and Republican politicians. In a speech yesterday, former Vice President Mike Pence, a possible 2024 hopeful, said that big government and big business were together advancing a “pernicious woke agenda.”E.S.G. supporters say critics may have a point. Andrew Behar, C.E.O. of the shareholder advocacy group As You Sow, agrees that many supposed E.S.G. investments don’t reflect true sustainability — with ever more capital directed toward the idea and many funds failing to live up to their promises. Behar argued that more corporate disclosures — which anti-E.S.G. groups oppose — would help to ensure that green investing actually works. He argues that critics also ignore a key financial incentive driving investor interest: knowing and lowering the costs of environmental issues throughout company operations, including risks from changing weather and the transition to more sustainable models. “We don’t have an E.S.G. problem,” Behar told DealBook. “We have a naming problem.”“I quit Starbucks. I had to. I just didn’t feel like that was justifiable. It’s like a small car payment.” — Fontaine Weyman, a 43-year-old songwriter from Charleston, S.C., on changing her coffee habits. Many Americans are dealing with the fastest inflation of their adult lives across a broad range of goods and services.Instagram tries to explain itself Instagram responded yesterday to criticism from some of its most popular users, including Kylie Jenner, about new features that made it more like its top rival, TikTok, the fast-growing video app owned by the Chinese company ByteDance.Adam Mosseri, Instagram’s head, said that it was experimenting with several changes, and that he knew users were unhappy. “It’s not yet good,” he said of some of the tweaks in a video post. He stressed Instagram’s commitment to photos, the app’s original focus, but said, “I’m going to be honest, I do believe that more and more of Instagram is going to become video over time.”Reels, a short-video product, is one of the six main investment priorities at Meta, which owns Facebook and Instagram, according to an internal memo last month from Chris Cox, the company’s chief product officer. Cox said that users had doubled the amount of time they spent on Reels year over year, and that Meta would prioritize boosting ads in Reels “as quickly as possible.” Last week, Instagram announced that almost all videos in the app would be posted as Reels.The changes come as Meta heads into a new phase. Mark Zuckerberg, its founder and chief executive, has cut costs, reshuffled his leadership team and made clear that low-performing employees will be let go, writes The Times’s Mike Isaac. “Realistically, there are probably a bunch of people at the company who shouldn’t be here,” Zuckerberg said on a call late last month. In recent months, profit at Meta has fallen and revenue has slowed as the company has spent lavishly on augmented and virtual reality projects, and as the economic slowdown has hurt its advertising business.The high-profile complaints about Instagram’s revamp started in recent days, when Kylie Jenner, the beauty mogul with 361 million Instagram followers, shared an image on the site that read: “Make Instagram Instagram again. (stop trying to be tiktok i just want to see cute photos of my friends.) Sincerely, everyone.”“PRETTY PLEASE,” Kim Kardashian, Jenner’s half sister and the seventh-most-followed Instagram user, echoed in a later post. Yesterday, Chrissy Teigen, a model and author with 39 million followers, responded to Mosseri in a tweet, saying, “we don’t wanna make videos Adam lol.”Companies have reason to listen when social media stars speak up, writes The Times’s Kalley Huang. In 2018, after Snapchat overhauled its interface, Jenner tweeted: “sooo does anyone else not open Snapchat anymore? Or is it just me….” Within a week, Snap, the app’s parent company, had lost $1.3 billion in market value.THE SPEED READ DealsThe activist investor Elliott Management reportedly has a stake in Paypal and is pushing it to cut costs faster. (WSJ, Bloomberg)Twitter shareholders will be asked to vote on Elon Musk’s potential acquisition in September. (Bloomberg)PolicyThe Senate advanced an industrial policy bill that includes more than $52 billion in subsidies for chip makers building U.S. plants. (NYT)The short seller Carson Block is being sued over a $14 million award from the S.E.C. that raised questions about the agency’s whistle-blower program. (Bloomberg)After Apple launched a “buy now, pay later” service, the top U.S. consumer finance regulator warned Big Tech about undermining competition in the sector. (FT)A federal judge ruled that Uber doesn’t have to offer wheelchair-accessible cars in every city. (The Verge)Best of the restCredit Suisse, which reported larger second-quarter losses than expected, replaced its C.E.O. (FT)Customers are paying billions of dollars in fees for “free” checking. (Bloomberg)The default settings in Apple, Google, Amazon and Microsoft products that you should turn off right away. (NYT)This man sells mud to Major League Baseball. (NYT)“The Case of the $5,000 Springsteen Tickets” (NYT)R.I.P., Choco Taco. (NYT)We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com. More

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      If You Must Point Fingers on Inflation, Here’s Where to Point Them

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      As the midterm elections draw nearer, a central conservative narrative is coming into sharp focus: President Joe Biden and the Democratic-controlled Congress have a made a mess of the American economy. Republicans see pure political gold in this year’s slow-motion stock market crash, which seems to be accelerating at the perfect time for a party seeking to regain control of Congress in the fall.The National Republican Congressional Committee in a tweet last month quipped that the Democratic House agenda includes a “tanking stock market.” Conservatives have been highlighting a video clip from 2020 when then-president Donald Trump warned about a Joe Biden presidency: “If he’s elected, the stock market will crash.” Right wing pundit Sean Hannity’s blog featured the clip under the headline: “TRUMP WAS RIGHT.”But the narrative pinning blame for the economy’s woes squarely on Democrats’ shoulders elides the true culprit: the Federal Reserve. The financial earthquakes of 2022 trace their origin to underground pressures the Fed has been steadily creating for a over a decade.It started back in 2010, when the Fed embarked on the unprecedented and experimental path of using its power to create money as a primary engine of American economic growth. To put it simply, the Fed created years of super-easy money, with short-term interest rates held near zero while it pumped trillions of dollars into the banking system. One way to understand the scale of these programs is to measure the size of the Fed’s balance sheet. The balance sheet was about $900 billion in mid-2008, before the financial market crash. It rose to $4.5 trillion in 2015 and is just short of $9 trillion today.All of this easy money had a distinct impact on our financial system — it incentivized investors to push their money into ever riskier bets. Wall Street-types coined a term for this effect: “search for yield.” What that means is the Fed pushed a lot of money into a system that was searching for assets to buy that might, in return, provide a decent profit, or yield. So money poured into relatively risky assets like technology stocks, corporate junk debt, commercial real estate bonds, and even cryptocurrencies and nonfungible tokens, known as NFTs. This drove the prices of those risky assets higher, drawing in yet more investment.The Fed has steadily inflated stock prices over the last decade by keeping interest rates extremely low and buying up bonds — through a program called quantitative easing — which has the effect of pushing new cash into asset markets and driving up prices. The Fed then supercharged those stock prices after the pandemic meltdown of 2020 by pumping trillions into the banking system. It was the Fed that primarily dropped the ball on addressing inflation in 2021, missing the opportunity to act quickly and effectively as the Fed chairman, Jerome Powell, reassured the public that inflation was likely to be merely transitory even as it gained steam. And it’s the Fed that is playing a frantic game of financial catch-up, hiking rates quickly and precipitating a wrenching market correction.So, now the bill is coming due. Unexpectedly high inflation — running at the hottest levels in four decades — is forcing the Fed to do what it has avoided doing for years: tighten the money supply quickly and forcefully. Last month, the Fed raised short-term rates by half-a-percentage point, the single largest rate hike since 2000. The aggressiveness of the move signaled that the Fed could take similarly dramatic measures again this year.A sobering realization is now unfolding on Wall Street. The decade of super-easy money is likely over. Because of inflation’s impact, the Fed likely won’t be able to turn on the money spigots at will if asset prices collapse. This is the driving force behind falling stock prices, and why the end of the collapse is probably not yet in sight. The reality of a higher-interest-rate world is working its way through the corridors of Wall Street and will likely topple more fragile structures before it’s all over.After the stock and bond markets adjust downward, for example, investors must evaluate the true value of other fragile towers of risky assets, like corporate junk debt. The enormous market for corporate debt began to collapse in 2020, but the Fed stopped the carnage by directly bailing out junk debt for the first time. This didn’t just save the corporate debt market, but added fuel to it, helping since 2021 to inflate bond prices. Now those bonds will have to be re-priced in light of higher interest rates, and history indicates that their prices will not go up.And while the Fed is a prime driver of this year’s volatility, the central bank continues to evade public accountability for it.Just last month, for instance, the Senate confirmed Mr. Powell to serve another four-year term as Fed chairman. The vote — more than four to one in favor — reflects the amazingly high level of bipartisan support that Mr. Powell enjoys. The president, at a White House meeting in May, presented Mr. Powell as an ally in the fight against inflation rather than the culprit for much of this year’s financial market volatility. “My plan is to address inflation. It starts with a simple proposition: Respect the Fed and respect the Fed’s independence,” the president said.This leaves the field open for the Republican Party to pin the blame for Wall Street’s woes on the Democratic Party’s inaction. As Jim Jordan, the Republican congressman from Ohio, phrased it on Twitter recently, “Your 401k misses President Trump.” This almost certainly presages a Republican line of attack over the summer and fall. It won’t matter that this rhetoric is the opposite of Mr. Trump’s back in 2018 and 2019, when the Fed was tightening and causing markets to teeter. Back then, Mr. Trump attacked Mr. Powell on Twitter and pressured the Fed chairman to cut interest rates even though the economy was growing. (The Fed complied in the summer of 2019.) But things are different now. Mr. Biden is in office, and the Fed’s tightening paves a clear pathway for the Republican Party to claim majorities in the House and Senate.Republicans have also honed in on Mr. Biden’s $1.9 trillion American Rescue Plan, meant to mitigate the impact of the Covid-19 pandemic, as a cause for runaway inflation. Treasury Secretary Janet Yellen rejected that, noting in testimony before members of Congress: “We’re seeing high inflation in almost all of the developed countries around the world. And they have very different fiscal policies. So it can’t be the case that the bulk of the inflation that we’re experiencing reflects the impact” of the American Rescue Plan.Democrats would be wise to point to the source of the problem: a decade of easy money policies at the Fed, not from anything done at the White House or in Congress over the past year and a half.The real tragedy is that this fall’s election might reinforce the very dynamics that created the problem in the first place. During the 2010s, Congress fell into a state of dysfunction and paralysis at the very moment when its economic policymaking power was needed most. It should be viewed as no coincidence that the Fed announced that it would intensify its experiments in quantitative easing on Nov. 3, 2010, the day after members of the Tea Party movement were swept into power in the House. The Fed was seen as the only federal agency equipped to forcefully drive economic growth as Congress relegated itself to the sidelines.With prices for gas, food and other goods still on the rise and the stock market in a state of flux, there may still be considerable pain ahead for consumers. But Americans shouldn’t fall for simplistic rhetoric that blames this all on Mr. Biden. More than a decade of monetary policy brought us to this moment, not 17 months of Democratic control in Washington. Voters should be clear-eyed about the cause of this economic chaos, and vote for the party they think can best lead us out of it.Christopher Leonard (@CLeonardNews) is the author, most recently, of “The Lords of Easy Money: How the Federal Reserve Broke the American Economy” and executive director of the Watchdog Writers Group at the Missouri School of Journalism.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram. More

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      Money Market Funds Melted in Pandemic Panic. Now They’re Under Scrutiny.

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      In March 2020, the Federal Reserve had to step in to save the mutual funds, which seem safe until there’s a crisis. Regulation may be coming.The Federal Reserve swooped in to save money market mutual funds for the second time in 12 years in March 2020, exposing regulatory shortfalls that persisted even after the 2008 financial crisis. Now, the savings vehicles could be headed for a more serious overhaul.The Securities and Exchange Commission in February requested comment on a government report that singled out money market funds as a financial vulnerability — an important first step toward revamping the investment vehicles, which households and corporations alike use to eke out higher returns on their cashlike savings.Treasury Secretary Janet L. Yellen has repeatedly suggested that the funds need to be fixed, and authorities in the United States and around the world have agreed that they were an important part of what went wrong when markets melted down a year ago.The reason: The funds, which contain a wide variety of holdings like short-term corporate debt and municipal debt, are deeply interlinked with the broader financial system. Consumers expect to get their cash back rapidly in times of trouble. In March last year, the funds helped push the financial system closer to a collapse as they dumped their holdings in an effort to return cash to nervous investors.“Last March, we saw evidence of how these vulnerabilities” in financial players that aren’t traditional banks “can take the existing stress in the financial system and amplify it,” Ms. Yellen said last month at her first Financial Stability Oversight Council meeting as Treasury secretary. “It is encouraging that regulators are considering substantive reform options for money market mutual funds, and I support the S.E.C.’s efforts to strengthen short-term funding markets.”But there are questions about whether the political will to overhaul the fragile investments will be up to the complicated task. Regulators were aware that efforts to fix vulnerabilities in money funds had fallen short after the 2008 financial crisis, but industry lobbying prevented more aggressive action. And this time, the push will not be riding on a wave of popular anger toward Wall Street. Much of the public may be unaware that the financial system tiptoed on the brink of disaster in 2020, because swift Fed actions averted protracted pain.Division lines are already forming, based on comments provided to the S.E.C. The industry used its submissions to dispute the depth of problems and warn against hasty action. At least one firm argued that the money market funds in question didn’t actually experience runs in March 2020. Those in favor of changes argued that something must be done to prevent an inevitable and costly repeat.“Short-term financing markets have been driven by a widespread perception that money funds are safe, making it almost inevitable the federal government provides rescue facilities when trouble hits,” said Paul Tucker, chair of the Systemic Risk Council, a group focused on global financial stability, in a statement accompanying the council’s comment letter this month. “Something has to change.”Ian Katz, an analyst at Capital Alpha, predicted that an S.E.C. rule proposal might be out by the end of the year but said, “There’s a real chance that this gets bogged down in debate.”While the potential scope for a regulatory overhaul is uncertain, there is bipartisan agreement that something needs to change. As the coronavirus pandemic began to cause panic, investors in money market funds that hold private-sector debt started trying to pull their cash out, even as funds that hold short-term government debt saw historic inflows of money.That March, $125 billion was taken out of U.S. prime money market funds — which invest in short-term company debt, called commercial paper, among other things — or 11 percent of their assets under management, according to the Financial Stability Board, which is led by the Fed’s vice chair for supervision, Randal K. Quarles.One type of fund in particular drove the retreat. Redemptions from publicly offered prime funds aimed at institutional investors (think hedge funds, insurance companies and pension funds) were huge, totaling 30 percent of managed assets.The reason seems to have its roots, paradoxically, in rules that were imposed after the 2008 financial crisis with the aim of preventing investors from withdrawing money from a struggling fund en masse. Regulators let funds impose restrictions, known as gates, which can temporarily prohibit redemptions once a fund’s easy-to-sell assets fall below a certain threshold.Investors, possibly hoping to get their money out before the gates clamped down, rushed to redeem shares.The fallout was immense, according to several regulatory body reviews. As money funds tried to free up cash to return to investors, they stopped lending the money that companies needed to keep up with payroll and pay their utility bills. According to a working group report completed under former Treasury Secretary Steven Mnuchin, money funds cut their commercial paper holdings by enough to account for 74 percent of the $48 billion decline in paper outstanding between March 10 and March 24, 2020.As the funds pulled back from various markets, short-term borrowing costs jumped across the board, both in America and abroad.“The disruptions reverberated globally, given that non-U.S. firms and banks rely heavily on these markets, contributing to a global shortage of U.S. dollar liquidity,” according to an assessment by the Bank for International Settlements.The Fed jumped in to fix things before they turned disastrous.It rolled out huge infusions of short-term funding for financial institutions, set up a program to buy up commercial paper and re-established a program to backstop money market funds. It tried out new backstops for municipal debt, and set up programs to funnel dollars to foreign central banks. Conditions calmed.A primary concern is that investors will expect the Federal Reserve to save money market funds in the future, as it has in the past.Stefani Reynolds for The New York TimesBut Ms. Yellen is among the many officials to voice dismay over money market funds’ role in the risky financial drama.“That was top of F.S.O.C.’s to-do list when it was formed in 2010,” Ms. Yellen said on a panel in June, referring to the Financial Stability Oversight Council, a cross-agency body that was set up to try to fill in regulatory cracks. But, she noted, “it was incredibly difficult” for the council to persuade the Securities and Exchange Commission “to address systemic risks in these funds.”Ms. Yellen, who is chair of the council as Treasury secretary, said the problem was that it did not have activity regulation powers of its own. She noted that many economists thought the gates would cause problems — just as they seem to have done.Of particular concern is whether investors and fund sponsors may become convinced that, since the government has saved floundering money market funds twice, it will do so again in the future.The Trump-era working group suggested a variety of fixes. Some would revise when gates and fees kicked in, while another would create a private-sector backstop. That would essentially admit that the funds might encounter problems, but try to ensure that government money wasn’t at stake.If history is any guide, pushing through changes is not likely to be an easy task.Back in 2012, the effort included a President’s Working Group report, a comment process, a round table and S.E.C. staff proposals. But those plans were scrapped after three of five S.E.C. commissioners signaled that they would not support them.“The issue is too important to investors, to our economy and to taxpayers to put our head in the sand and wish it away,” Mary Schapiro, then the chair of the S.E.C., said in August 2012, after her fellow commissioners made their opposition known.In 2014, rules that instituted fees, gates and floating values for institutional funds invested in corporate paper were approved in a narrow vote under a new S.E.C. head, Mary Jo White.Kara M. Stein, a commissioner who took issue with the final version, argued in 2014 that sophisticated investors would be able to sense trouble brewing and move to withdraw their money before the delays were imposed — exactly what seems to have happened in March 2020.“Those reforms were known to be insufficient,” Ben S. Bernanke, a former Fed chair, said at an event on Jan. 3.The question now is whether better changes are possible, or whether the industry will fight back again. While asking a question at a hearing this year, Senator Patrick J. Toomey, Republican from Pennsylvania and chair of the Banking Committee, volunteered a statement minimizing the funds’ role.“I would point out that money market funds have been remarkably stable and successful,” Mr. Toomey said.Alan Rappeport More