Bailouts have consequences
American Airlines confirmed yesterday that it will cut nearly 1,000 flights in the first half of July, amid delays in trying to meet rising demand. Fewer flights, especially if other airlines follow its lead, will drive up ticket prices and force passengers to delay travel plans, meaning less money for passengers to their desired destinations.
With this move of the airline, the debate about labor shortage has intensified. American said it had cut flights due to a lack of pilots and airport staff. Critics said the airline should raise wages to attract more workers, especially since it received billions in government aid during the pandemic.
Companies taking bailout money may now face backlash. Back in March, Andrew wrote that the airlines – which had received tens of billions in emergency aid – would likely face criticism following the pandemic that faced banks after the financial crisis. One example: lawmakers in Philadelphia recently proposed a bill that would require airlines to pay for new health benefits for thousands of airport workers. American Airlines has tried to block the bill, saying the increased costs would force the airline to cut the number of international flights to and from the city.
As Representative Conor Lamb, Democrat of Pennsylvania, told the Philadelphia Inquirer, “We have just finished reviving this industry. When you do that, I think it tells us how their workers should be treated. “
Bailouts are unpopular, as they are generally more valuable and less productive than expected. Andrew estimated the cost of initial pandemic grants to airlines by the government at $300,000 per job saved. Given these costs, airlines should prepare themselves for similar requests in Philadelphia from lawmakers elsewhere.
Politicians feel public support in imposing additional costs on bailout beneficiaries long after the government comes to the rescue. Mechanisms for doing so include forcing airlines to keep flight schedules they say they can’t maintain or claim to pay workers wages they can’t afford.
Deborah Lucas, an MIT professor whose work on the financial crisis has exposed the high cost of bank bailouts, warned that the strategy was messy. “Congress set the conditions that airlines had to meet when they enacted bailouts,” he said. “It seems unfair and impractical to try to change the rules now.”
What’s going on over here
The Supreme Court favored paying student-athletes. The High Court unanimously ruled that players could receive modest education-related payments, opening the door to a more comprehensive challenge to the NCAA’s ban on compensation for athletes whose sports generate billions for their schools. Huh.
Lordstown tries to prove it’s back on track. The embattled electric-truck start-up opened its Ohio factory to investors and analysts for a look at its vehicle prototypes, following a series of conflicting statements about its financial health. The company also faced criticism for one Wall Street Journal article About officers selling stock.
The European Union has launched an investigation into Google’s online advertising business. The Block’s antitrust arm will formally investigate whether the company abuses its dominance in the region. It will be one of the most comprehensive inquiries into a major Google business and will look into allegations that are not included in an antitrust lawsuit filed by several US states.
Vivendi investors overwhelmingly approved the spinoff of Universal Music. Almost all the shareholders who voted today at a special meeting of the French group supported this move – which includes an investment by Bill Ackman’s SPAC – despite opposition from two active investors.
Steven Spielberg teams up with Netflix. The renowned director’s Amblin Entertainment signed a multi-year production deal with the streaming giant. It’s something like a coup, because Spielberg has been a big supporter of watching movies in theaters.
Goldman’s deserved win
Supreme Court handed over to Goldman Sachs yesterday Victory in a securities fraud case that had the potential to be highly significant – but ultimately failed. The case, which pitted the firm against a group of pension funds, could have made it harder for investors to sue as a group, but was instead sent back to a lower court with current standards. This is a rare case in which all parties can claim some success.
“Goldman won the shortest possible battle, losing the war.” Robert Jackson, a professor of law at NYU and former SEC commissioner, told DealBook. “It failed to change the law.”
The case is a decade old, but is still getting started. Investors claim that Goldman misled them with general statements about its business practices before the bank settled its 2010 SEC case, which claimed conflicts of interest over selling subprime mortgage products, which had led to its affected the share price. Lower courts substantiated the position of the class of investors based on the presumption that all shareholders rely indirectly on the company’s statements when purchasing stock. Goldman has challenged that finding twice.
daily business briefing
June 22, 2021 at 10:22 am ET
Goldman claimed that general details should not be considered a factor in a bank’s share price. It added that statements like “interests of our customers always come first” cannot be held against the bank. Investor advocates countered that Goldman was hoping to create an “anything goes” loophole that allows companies to issue meaningless assurances without risking liability. In the end, Supreme Court justices and all of the dueling parties agreed in a brief in oral debate to the federal government that the general statements are relevant and should be weighed among other facts.
“The contention of the parties has largely evaporated,” Justice Amy Connie Barrett wrote, sending the case back for further review but correcting Goldman on one point: The defendant bears the burden of persuasion if it wants to prevent investors from suing as a group. Tulane Law’s Ann Lipton, a securities law expert and former litigant, said the “incredibly technical” Supreme Court ruling was important in what it avoids — accepting the bank’s boldest claims would have dealt a serious blow to investors’ interests.
“It is insane that our financial regulatory system has allowed these banks to operate with this business model.”
– Aaron Klein, a senior fellow at the Brookings Institution, explained how some banks rely on overdraft fees as their main source of profit. there are many banks reducing or eliminating fees In response to customer complaints and regulatory investigations.
Crypto supporters look for long-term gains after short-term pain
After a few days for bitcoin, which has lost nearly 20 percent of its value over the past week, traders are grumbling about the death cross, hashrate, and the Chinese province of Sichuan. Let’s explain:
“death cross“One is technical pattern in which the 50-day moving average moves below the 200-day average. Some chart watchers think it portends trouble – why would it have such an ominous name?
of bitcoin hash rate It is a measure of the computing power devoted to processing the cryptocurrency. It also fell sharply, which many believe is related to the Chinese authorities’ cracking down On giant computer farms, the currency is “mine” in areas such as sichuan.
Still, it’s not all bad for cryptocurrencies. The more important long-term trend, said Matthew Siegel, head of digital asset research at investment manager VanEck, is the gradual mainstream adoption of cryptocurrencies. And that’s where you hear about ETFs and El Salvador as well:
Regulatory barriers are critical for widespread crypto adoption; VanEck’s application for bitcoin etf was in america second time delayed Last week. (Siegel declined to comment on the application.) These vehicles, which already do business in Canada and parts of Europe, will expand the scope of potential investors’ exposure to crypto.
Beyond financial institutions, sovereign adoption by bitcoin el salvador It may finally prove that crypto is exactly what its proponents have long proposed: a tool to democratize finance. Siegel said it gave the country’s mostly unbanked population a new alternative and spurred technological innovation, like other countries encouraging green energy with subsidies.
Pain of Succession at Google
Sundar Pichai faced internal criticism for his leadership at Google, Daisuke Wakabayashi Reports in the Times. Part of Pichai’s challenge, Daisuke writes here for DealBook, compares him to his predecessor, Larry Page.
It’s not uncommon for longtime employees to look back and lament how things have changed. This is especially true when there is a change of guard, such as when a trusted deputy takes over for a respected founder. When Steve Jobs died and Tim Cook became the CEO of Apple, many executives wondered whether the company would lose what made it so special. Google’s friendly and low-key CEO, Sundar Pichai, faces a similar challenge replacing Larry Page, one of Google’s co-founders.
By almost every measure, Google is riding high. Yet a group of current and former executives told me that the cracks were visible, and they stem partly from the leadership of Pichai, who took over Alphabet, Google’s parent company, in 2019.
Pichai and Paige differ in their leadership styles. Page would often scold engineers for not thinking too big. Some executives who have been at Google since the early days said Pichai stressed the importance of collaboration and working well together, but he was risk averse and indecisive.
Page cared little for public perception, Current and former officials said. He had not spoken to the press, analysts or shareholders for the past few years before leaving Alphabet. He said Pichai was more sensitive, spending a lot of time on Twitter, monitoring what people were saying about him and the company.
Pichai’s defenders say Google is booming And that Pichai has worked to ease growing pains – for example, by cutting the number of decisions that require his signature. He said that he emphasized on the management team rather than his ego. Alphabet’s market cap is growing to nearly $1.7 trillion.
Read Daisuke’s full article on Pichai’s leadership.
Soho House’s parent company, the upscale members-only club, filed to go public on the New York Stock Exchange. (NYT)
Eyewear giant EssilorLuxottica is considering walking away from its $8.6 billion acquisition of eyewear store operator Grandvision. (Reuters)
US poultry giant Sanderson Farms is reportedly weighing up sales, drawing interest from the likes of Continental Grains. (WSJ)
politics and policy
Bermuda is pushing against the international push for a global tax overhaul: “It is a sovereignty issue,” said its finance minister. (foot)
The Supreme Court ruled that more than 200 patent judges were improperly appointed, but stopped short of overhauling the patent review process. (NYT)
the best of the rest
Activision Blizzard shareholders barely approved a $155 million pay package for the video game developer’s CEO Bobby Kotick after the vote was delayed. (foot)
Goodbye, Bill & Melinda Gates Investing. Hello, Cascade Asset Management. (bloomberg)
Karl Nasib of the Las Vegas Raiders became the first active NFL player to publicly announce that he is gay. (NYT)
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