Tag: iab-business banking & finance

One news publication had an AI tool write articles. It didn’t go well | CNN Business

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CNN
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News outlet CNET said Wednesday it has issued corrections on a number of articles, including some that it described as “substantial,” after using an artificial intelligence-powered tool to help write dozens of stories.

The outlet has since hit pause on using the AI tool to generate stories, CNET’s editor-in-chief Connie Guglielmo said in an editorial on Wednesday.

The disclosure comes after CNET was previously called out publicly for quietly using AI to write articles and later for errors. While using AI to automate news stories is not new – the Associated Press began doing so nearly a decade ago – the issue has gained new attention amid the rise of ChatGPT, a viral new AI chatbot tool that can quickly generate essays, stories and song lyrics in response to user prompts.

Guglielmo said CNET used an “internally designed AI engine,” not ChatGPT, to help write 77 published stories since November. She said this amounted to about 1% of the total content published on CNET during the same period, and was done as part of a “test” project for the CNET Money team “to help editors create a set of basic explainers around financial services topics.”

Some headlines from stories written using the AI tool include, “Does a Home Equity Loan Affect Private Mortgage Insurance?” and “How to Close A Bank Account.”

“Editors generated the outlines for the stories first, then expanded, added to and edited the AI drafts before publishing,” Guglielmo wrote. “After one of the AI-assisted stories was cited, rightly, for factual errors, the CNET Money editorial team did a full audit.”

The result of the audit, she said, was that CNET identified additional stories that required correction, “with a small number requiring substantial correction.” CNET also identified several other stories with “minor issues such as incomplete company names, transposed numbers, or language that our senior editors viewed as vague.”

One correction, which was added to the end of an article titled “What Is Compound Interest?” states that the story initially gave some wildly inaccurate personal finance advice. “An earlier version of this article suggested a saver would earn $10,300 after a year by depositing $10,000 into a savings account that earns 3% interest compounding annually. The article has been corrected to clarify that the saver would earn $300 on top of their $10,000 principal amount,” the correction states.

Another correction suggests the AI tool plagiarized. “We’ve replaced phrases that were not entirely original,” according to the correction added to an article on how to close a bank account.

Guglielmo did not state how many of the 77 published stories required corrections, nor did she break down how many required “substantial” fixes versus more “minor issues.” Guglielmo said the stories that have been corrected include an editors’ note explaining what was changed.

CNET did not immediately respond to CNN’s request for comment.

Despite the issues, Guglielmo left the door open to resuming use of the AI tool. “We’ve paused and will restart using the AI tool when we feel confident the tool and our editorial processes will prevent both human and AI errors,” she said.

Guglielmo also said that CNET has more clearly disclosed to readers which stories were compiled using the AI engine. The outlet took some heat from critics on social media for not making overtly clear to its audience that “By CNET Money Staff” meant it was written using AI tools. The new byline is just: “By CNET Money.”

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January 25, 2023
Ticketmaster gets grilled: 6 takeaways from hearing over Taylor Swift concert fiasco | CNN Business

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CNN
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Lawmakers grilled a top executive of Ticketmaster’s parent company, Live Nation Entertainment, on Tuesday after the service’s inability to process orders for Taylor Swift’s upcoming tour left millions of people unable to buy tickets late last year.

During the three-hour hearing, senators pressed Live Nation president and CFO Joe Berchtold and some other witnesses on whether his company was too dominant in the industry, thereby harming rivals, musicians and fans.

“I want to congratulate and thank you for an absolutely stunning achievement,” Sen. Richard Blumenthal said to Berthtold. “You have brought together Republicans and Democrats in an absolutely unified cause.”

Here’s a look at the big takeaways from the hearing:

When tickets for Swift’s new five-month Eras Tour went on sale on Ticketmaster in mid November, heavy demand snarled the ticketing site, infuriating fans who couldn’t snag tickets. Unable to resolve the problems, Ticketmaster subsequently canceled Swift’s concert ticket sales to the general public, citing “extraordinarily high demands on ticketing systems and insufficient remaining ticket inventory to meet that demand.”

In his testimony Tuesday, Berchtold partly blamed the Swift ticketing incident on the bots.

Ticketmaster, he said, was “hit with three times the amount of bot traffic than we had ever experienced” amid the “unprecedented demand for Taylor Swift tickets.” The bot activity “required us to slow down and even pause our sales. This is what led to a terrible consumer experience that we deeply regret.”

Berchtold also went on defense more broadly about his company. He emphasized that Ticketmaster does not set ticket prices, does not determine the number of tickets put up for sale and that “in most cases, venues set service and ticketing fees,” not Ticketmaster.

He also rejected suggestions that its dominance has allowed for soaring fees, citing data from the market intelligence firm Pollstar showing that Live Nation controls about 200 out of approximately 4,000 venues in the United States, or about 5%.

The venues controlled by Live Nation set fees that are “consistent with the other venues in the marketplace,” he said.

Members of the entertainment industry and one rival spoke out against Ticketmaster’s dominance in the industry.

Jack Groetzinger, CEO of SeatGeek, alleged that many venue owners “fear losing Live Nation concerts if they don’t use Ticketmaster” and its services, and argued the company must be broken up.

“Live Nation controls the most popular entertainers in the world, routes most of the large tours, operates the ticketing systems and even owns many of the venues,” he told lawmakers. “This power over the entire live entertainment industry allows Live Nation to maintain its monopolistic influence over the primary ticketing market.”

He continued: “As long as Live Nation remains both the dominant concert promoter and ticketer of major venues in the US, the industry will continue to lack competition and struggle,” he said.

Clyde Lawrence, a singer-songwriter on the witness panel, explained how the company acts as a promoter, a venue and the ticketing company, which eats into performing artists’ revenues. Artists, he said, have no leverage over Live Nation.

“Since both our pay and theirs is a share of the show’s profits, we should be true partners aligned in our incentives — keep costs low while ensuring the best fan experience,” he said. “But with Live Nation not only acting as the promoter but also the owner and operator of the venue, it seriously complicates these incentives.”

Lawrence also said with Ticketmaster, “we’ll see a 40%-ish or closer to 50% fee added on top” of the base ticket price.

The fallout from the ticketing fiasco once again cast a harsh spotlight on Ticketmaster and its power in the industry, more than a decade after it completed its merger with Live Nation despite concerns the deal would create a near monopoly in the ticketing sector.

“To have a strong capitalist system, you have to have competition,” Sen. Amy Klobuchar, a Democrat from Minnesota, said during her opening remarks. “You can’t have too much consolidation — something that, unfortunately for this country, as an ode to Taylor Swift, I will say, we know ‘all too well.’”

Kathleen Bradish, vice president for legal advocacy at the American Antitrust Institute, called Ticketmaster “a very traditional monopoly” and told lawmakers the lack of competition in the live entertainment industry results in consumers having to pay higher prices.

“Its dominance in markets up and down the live entertainment supply chain creates the incentive and the ability to limit competition and protect its market position,” she explained. “Customers pay the price for these monopolistic acts with higher ticket prices and fees, lower quality, less choice and less innovation.”

On the concert side, the company excludes “smaller or independent concert promoters and venues. In digital ticketing, it includes excluding ticket resellers and brokers who provide important competition via the secondary ticketing market,” she said.

Lawmakers repeatedly questioned the US government’s past handling of the Live Nation merger with Ticketmaster. It involved a legally binding consent agreement that allowed the company to merge with Ticketmaster so long as the combined company abided by a number of behavioral conditions.

A 2019 Justice Department review found that Live Nation was not meeting its commitments under the order, but instead of suing, the Department modified the agreement and extended it for another five years, according to Bradish at the American Antitrust Institute.

“DOJ should pursue new enforcement action to obtain effective structural relief,” said Bradish, calling for a breakup of Live Nation under either Section 7 of the Clayton Act or Section 2 of the Sherman Act.

Sen. Mike Lee said the way that history has unfolded since the Live Nation merger raises “very serious doubts” about the usefulness of consent agreements imposed by the federal government.

If the current Justice Department concludes that the consent decree has been violated, “unwinding the merger ought to be on the table,” Blumenthal said.

In response to Berchtold’s explanation about the bot problem, some lawmakers questioned the company’s security practices, noting many small businesses can determine when bad actors are infiltrating their systems.

Republican Senator Marsha Blackburn suggested Berchtold strengthen its cyberprotections, get better advice and hire new IT workers to better protect its systems. (Berchtold said the company has poured billions of dollars into security to protect its systems over the years.)

Another Republican, Sen. John Kennedy, went further in criticizing the company over the Swift ticketing issue. He said whoever at Live Nation was in charge of the incident “ought to be fired.”

In the back half of the hearing, some of the focus shifted to possible solutions – but there were no easy answers.

Some lawmakers focused on the ability to resell tickets. While this option can be useful for customers who need to change plans, it can also help prop up the scalping market.

When senators discussed whether restricting the ability to transfer tickets would help, Live Nation’s exec was in favor of it. But the SeatGeek CEO said this might only entrench Live Nation’s dominance, as it holds the kind of market share that would force consumers to solely transact there in the absence of other resale market options.

– CNN’s Brian Fung and Aditi Sangal contributed to this report

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January 25, 2023
Europe could dodge a recession. But the UK is in a mess | CNN Business

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London
CNN
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Business activity across the 20 countries that use the euro expanded in January for the first time in six months, according to data published Tuesday, providing fresh evidence that Europe’s economy could confound expectations and dodge a recession this year.

An initial reading of the eurozone’s Purchasing Managers’ Index, which tracks activity in the manufacturing and service sectors, rose to 50.2 in January from 49.3 in December, indicating the first expansion since June. A reading above 50 represents growth.

The return to modest growth was helped by falling energy prices and an easing of supply chain stress, which helped temper rising input costs for producers.

The uptick was accompanied by a sharp improvement in optimism about the year ahead, as the recent reopening of China’s economy following the lifting of Covid restrictions helped push confidence to its highest level since last May. Growing optimism in Europe that China’s consumers will start spending again was reflected in Swiss watch maker Swatch

(SWGAF)’s prediction Tuesday of record sales for 2023.

“A steadying of the eurozone economy at the start of the year adds to evidence that the region might escape recession,” said Chris Williamson, chief business economist at S&P Global Market Intelligence, the company that publishes the survey of executives at private sector companies.

Williamson added, however, that a “renewed slide into contraction” should not be ruled out as borrowing costs rise off the back of interest rate hikes by the European Central Bank. But any downturn “is likely to be far less severe than previously feared,” he said.

Berenberg chief economist Holger Schmieding said in a research note that “the still-low level of consumer confidence and the lagged impact of ECB rate hikes still point to a slight contraction in eurozone GDP near-term before the recovery can start to take hold.”

Consumer sentiment in Germany, the region’s biggest economy, looks set to improve for a fourth consecutive month in February from a very low base, according to a separate survey published by GfK Tuesday.

The picture looks far less promising in the United Kingdom, however, where January’s PMI survey showed the steepest decline in business activity since the national Covid lockdown two years ago, as higher interest rates and low consumer confidence depressed activity in the dominant services sector.

The initial reading fell to 47.8 in January, from 49 in December, to remain in a state of contraction for the sixth consecutive month. The UK survey is conducted in conjunction with the Chartered Institute of Procurement & Supply.

“Weaker-than-expected PMI numbers in January underscore the risk of the UK slipping into recession,” Williamson said. “Industrial disputes, staff shortages, export losses, the rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year,” he added.

The UK economy lost more working days to strikes between June and November 2022 than in any six-month period over the previous 30 years, according to data published last week by Britain’s Office for National Statistics.

Williamson said Tuesday’s data reflected not only short-term hits to growth, such as strike action, but “ongoing damage to the economy from longer-term structural issues such as labor shortages and trade woes linked to Brexit.”

Despite the gloomy start to the year, UK business expectations for the year ahead hit their highest level for eight months, driven by hopes of an improving global economic backdrop and cooling inflation.

Separate data published by the ONS on Tuesday showed that UK government borrowing hit £27.4 billion ($33.7 billion) in December, the highest figure for that month since records began in 1993. This was driven by a sharp increase in spending on support for household energy bills, as well as the soaring cost of paying interest on government debt.

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January 24, 2023
Asia’s richest man Gautam Adani is addicted to ChatGPT | CNN Business

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Asia’s richest man Gautam Adani says he is addicted to ChatGPT, the powerful new AI tool that interacts with users in an eerily convincing and conversational way.

In a LinkedIn post last week, the 60-year-old India tycoon said that the release of ChatGPT was a “transformational moment in the democratization of AI given its astounding capabilities as well as comical failures.”

The billionaire admitted to “some addiction” to ChatGPT since he has started using it.

The tool, which artificial intelligence research company OpenAI made available to the general public late last year, has sparked conversations about how “generative AI” services — which can turn prompts into original essays, stories, songs and images after training on massive online datasets — could radically transform how we live and work.

Some claim it will put artists, tutors, coders, and writers out of a job. Others are more optimistic, postulating that it will allow employees to tackle to-do lists with greater efficiency.

“But there can be no doubt that generative AI will have massive ramifications,” Adani wrote in his post, adding that generative AI holds the “same potential and danger” as silicon chips.

“Nearly five decades ago, the pioneering of chip design and large-scale chip production put the US ahead of rest of the world and led to the rise of many partner countries and tech behemoths like Intel, Qualcomm, TSMC, etc,” Adani, who has businesses in sectors ranging from ports to power stations, wrote.

“It also paved the way for precision and guided weapons used in modern warfare with more chips mounted than ever before,” he added. The race in the field of generative AI will quickly get as “complex and as entangled as the ongoing silicon chip war,” he said.

Chipmaking has emerged recently as a new flashpoint in US-China tensions, with Washington blocking sales of advanced computer chips and chip-making equipment to Chinese companies. Some Chinese investments in European chipmaking have also been blocked.

The Indian infrastructure magnate believes that China has an edge over the United States in the AI race because Chinese researchers published twice as many academic papers on the subject as their American counterparts in 2021, he wrote in the post published on Friday after attending the World Economic Forum in Davos.

Back home, Adani is also considering taking five new businesses to the stock market in the next five years, according to his conglomerate’s chief financial officer Jugeshinder Singh.

Speaking to reporters on Saturday in the western Indian city of Ahmedabad — where the Adani empire is headquartered — Singh said the group’s metals and mining, energy, data center, airports, and roads businesses will likely be spun off between 2025 to 2028.

Adani Enterprises, the conglomerate’s flagship company, functions as an incubator for Adani’s businesses. Once they have matured, they are often given their independence via a stock market listing. Many of Adani companies have become leading players in their respective sectors.

Later this month, Adani Enterprises is also raising 200 billion rupees ($2.5 billion) by issuing new shares. It would be India’s biggest ever follow-on public share offering.

A college dropout and a self-made industrialist, Adani is worth over $120 billion, making him the world’s third richest man, ahead of Jeff Bezos and Bill Gates.

Shares of Adani’s seven listed companies — in sectors ranging from ports to power stations — have seen turbocharged growth in the last few years. But some analysts fear that this growth comes at a huge risk as Adani’s $206 billion juggernaut has been fueled by a $30 billion borrowing binge, making his business one of the most indebted in the country.

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January 23, 2023
Here’s what will happen to the economy as the debt ceiling drama deepens | CNN Business

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Minneapolis
CNN
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After the United States hit its debt ceiling on Thursday, the Treasury Department is now undertaking “extraordinary measures” to keep paying the government’s bills.

A default could be catastrophic, causing “irreparable harm to the US economy, the livelihoods of all Americans and global financial stability,” Treasury Secretary Janet Yellen has warned.

Yellen on Friday told CNN’s Christiane Amanpour that the impacts would be felt by every American.

“If that happened, our borrowing costs would increase and every American would see that their borrowing costs would increase as well,” Yellen said. “On top of that, a failure to make payments that are due, whether it’s the bondholders or to Social Security recipients or to our military, would undoubtedly cause a recession in the US economy and could cause a global financial crisis.”

She added: “It would certainly undermine the role of the dollar as a reserve currency that is used in transactions all over the world. And Americans — many people — would lose their jobs and certainly their borrowing costs would rise.”

Dire warnings of debt ceiling trouble aren’t new. Federal lawmakers have reached agreements in the past, and this Congress has some time — until at least early June, according to Yellen’s public estimates — to reach an agreement on whether to raise or suspend the debt limit.

Many economists say they expect an agreement will be reached. However, given the current “extremely fractious political environment,” it could be a long process that would contribute to “flare-ups” in financial market volatility, Moody’s Investors Service said in a note Thursday.

Such volatility is coming at a time when the Federal Reserve is trying to bring down inflation while navigating a soft (or softish) landing with minimal harm to the economy.

So what happens to the economy in a worst-case scenario of default?

It’s an understandable question with an unsatisfying answer, said Michael Pugliese, vice president and economist with Wells Fargo’s corporate and investment bank.

“The honest truth is, no one knows,” he said. “A widespread default by the US government is not something we’ve ever experienced and not something we’ve ever even come close to experiencing.”

While a default isn’t something that can be modeled in the way a more historically common economic event such as a recession can be, the events of 2011 could lend some perspective as to what would happen if the debt ceiling drama turns into a debacle, said Gregory Daco, chief economist at EY-Parthenon.

“2011 was the first time in a long time that we came close to a debt ceiling breach,” he said. “And that was a time when there was a lot of political fragmentation and there was a strong desire to essentially attach spending cuts to any debt ceiling increase.”

The current environment includes similar brinksmanship and desires to attach spending cuts, he said.

But some fear this fight may be tougher than those in the past, a concern reinforced by the fact it took 15 ballots to elect the Speaker of the House in what is normally the easiest vote taken by a new Congress.

The economy nearly 13 years ago was different, as well.

At the time, the Fed was in an easy monetary policy mode and the economy in a weaker position, as it was still recovering from the Great Recession of 2008, Pugliese said. Unemployment was north of 9% in July 2011.

That same year, Treasury projected the “X date” — the date on which it would be unable to pay its obligations on time — would fall on August 2, 2011. That ultimately was the date when Congress passed, and President Barack Obama enacted, a law increasing the ceiling.

The actual economic impact of the debt ceiling run-up in 2011 is hard to isolate and quantify, Pugliese said, noting how the sluggish US economic recovery also experienced spillover effects from global events, notably Europe’s sovereign debt crisis.

Still, there were some indications that the protracted congressional battle contributed to a shake-up in the economy then, he said. Real GDP growth was a weak -0.1% on a quarter-over-quarter annualized basis in the third quarter of 2011. Financial markets were roiled, consumer confidence weakened, the US economic policy uncertainty index set a new high and Standard & Poor’s credit rating agency downgraded the United States to AA+ from AAA.

“I think you would be hard pressed to say [the debt ceiling debacle] was a positive thing,” he said. “I think of it more as one other hurdle among a lot of other hurdles for the economy as it emerged from 9% unemployment at the time.”

This time, if the X date were to come without a resolution, there is speculation that the Treasury could prioritize principal and interest payments to prevent a technical default, Pugliese said. There are potentially other “break the glass” options from the Treasury and Federal Reserve, but those are untested and short-term solutions, he added.

“Someone, somewhere is going to get shortchanged if the government doesn’t have all of its money, whether that’s Social Security beneficiaries, defense contractors, civil service employees, veterans, [etc.],” he said.

Adding to the uncertainty is the current economic climate, Daco said.

“We are going into this delicate period at a time when the US economy is clearly slowing down and at a time when the global economic backdrop is also weakening … so the economic environment against which this debt ceiling debacle is unfolding is one of increased economic softening.”

While a self-inflicted recession would be likely after the point when an X date is hit, some upheaval could come sooner, Daco said.

“Financial markets and private sector actors tend to react ahead of that date,” he said. “If there is the anticipation that we will get very close to that drop-dead date, then financial market volatility generally tends to increase, stock prices tend to react adversely.”

A Treasury default would undermine the global financial system, said Louise Sheiner, policy director at the Hutchins Center on Fiscal and Monetary Policy and former senior economist with the Fed and the Council of Economic Advisers.

“If Treasuries become something that people are worried about holding, then that has ripple effects throughout capital markets throughout the world, in ways that are really difficult to predict,” she said.

Considering the potential consequences in the United States and abroad, Sheiner believes the debt ceiling will be lifted or suspended — eventually.

“There’s no other way around it,” she said. “There’s no way that Congress is going to cut spending 20% in the middle of the year. It would plunge the economy into a recession. It would be a terrible policy.”

She added: “If you care about the long-term debt, you have to actually change different laws, Social Security law, Medicare, or the tax law … you want to do that in the appropriate process, you want to do it well thought out. It’s not the kind of thing that should be done under duress.”

CNN’s Maegan Vazquez, Matt Egan and Tami Luhby contributed to this report.

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January 22, 2023
What we learned at Davos: The economy is a mess, but there’s still hope | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN
—

Friday marks the end of the annual World Economic Forum meeting in Davos, Switzerland, an elite gathering of some of the wealthiest people and world leaders.

The glitzy retreat into the Swiss Alps looks increasingly out of date as the biggest war in Europe since 1945 deepens splits in the world economy. But that doesn’t mean it’s not important.

The meetings between CEOs, politicians, and global figures at Davos can help set the tone for the year ahead. Here are some of the key talking points from this week.

It’s a mess: The big stories coming out of Davos this year are full of phrases like “fragmenting global economy,” “economic uncertainty” and “the year of inflation.”

While many executives and economists are now striking a more optimistic tone, global leaders are still fretting about the economic outlook. That’s not surprising since they’re contending with worrisome uncertainties — Russia’s war in Ukraine is still raging, inflation and interest rates remain elevated, there are looming energy and food crises, supply chain kinks and the debt limit standoff in the United States, not to mention the threat of global recession.

The meeting began with a new report by the WEF that dubbed this decade the “turbulent 20s” and the “age of the polycrisis.” Business executives, politicians and academics, the report said, are bracing for a gloomy world battered by intersecting crises, as rising volatility and depleted resilience boost the odds of painful simultaneous shocks.

Gita Gopinath, the number two official at the International Monetary Fund, said in an interview with the Wall Street Journal that the IMF is worried globalization is in retreat. “We’re very concerned about geoeconomic fragmentation,” she said. The issue had come up a lot in meetings with member countries at the conference, she added.

CEOs and political officials are also worried about the United States hitting its borrowing cap on Thursday, forcing the Treasury Department to start taking “extraordinary measures” to keep the government open.

If an agreement isn’t reached, markets could plunge (like they did the last time this happened in 2011) and the United States risks having its credit rating downgraded again. The situation is a “mess,” said Peter Orszag, CEO of financial advisory at Lazard.

JP Morgan CEO Jamie Dimon told CNBC from Davos on Thursday that the reputation of the United States as creditworthy is “sacrosanct.” To even question it, he said, is the wrong thing to do. “That is just a part of the financial structure of the world. This is not something you should be playing games with at all.”

But it may not be that bad: Many leaders’ economic forecasts actually struck a semi-positive tone, even as they factored in strong headwinds.

So far, energy supplies have held up in Europe, and the US and China are engaging in diplomatic relations — Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He met in Zurich on Wednesday.

China’s removal of strict coronavirus restrictions late last year is also expected to unleash a wave of spending that may offset economic weakness in the United States and Europe.

Climate change was a hot topic: The rich and powerful do love to flock to Davos in their carbon-emitting private jets to discuss climate change. But this year, severe warnings were issued to global leaders.

The UN Secretary General accused fossil fuel producers and their financial backers of “racing to expand production, knowing full well that their business model is inconsistent with human survival.”

Speaking at Davos on Wednesday, António Guterres said the commitment to limit global warming to 1.5 degrees above pre-industrial levels is “going up in smoke.”

“We are flirting with climate disaster. Every week brings a new climate horror story,” he said.

Swedish activist Greta Thunberg also made her way to Switzerland and delivered a “cease and desist letter” to fossil fuel CEOs — signed by more than 800,000 people.

The AI revolution is here: Some CEOs at Davos admitted that they’re using the revolutionary new AI bot, ChatGPT, to do their work for them, reports my colleague Julia Horowitz.

Jeff Maggioncalda, the CEO of online learning provider Coursera, said that he uses the tool to bang out emails.

“I use it as a writing assistant and as a thought partner,” Maggioncalda told CNN from Davos.

Christian Lanng, CEO of digital supply chain platform Tradeshift, said he uses the ChatGPT to write emails and claims no one has noticed the difference. He even had it perform some accounting work, a service for which Tradeshift currently employs an expensive professional services firm.

“I see these technologies acting as a copilot, helping people do more with less,” Microsoft CEO Satya Nadella told an audience in Davos this week.

There’s a saying on Wall Street that bad news for the economy is actually good news for the stock market and vice versa, reports my colleague Paul R. La Monica.

That’s because investors often bet that dismal headlines will eventually prompt the Federal Reserve and other central banks to cut interest rates and provide more stimulus that can help boost corporate profits…and stock prices.

But the debt ceiling debate in Washington is changing all of that.

Wednesday’s big market sell-off and the continued slide Thursday might represent a turning point for market sentiment. Still, after a promising start to the year, stocks have seemingly taken a turn for the worse. Bad news actually might be bad news.

“We’ve been snuggled up in expectations of a soft landing for the US economy,” said Kit Juckes, chief global foreign exchange strategist at Societe Generale, in a report Thursday. “Take away the blanket and it feels chilly.”

Netflix announced Thursday that its founder Reed Hastings is stepping down as co-CEO at the company and will serve as executive chairman. Hastings will be replaced by co-CEOs Ted Sarandos and Greg Peters, reports my colleague Clare Duffy.

Under Hastings’ leadership, Netflix disrupted legacy movie rental companies like Blockbuster and helped shake up Hollywood by kicking off an arms race investing in original content.

Last year, however, Netflix saw its stock and reputation take a hit after losing subscribers amid heightened competition from rival streaming services. In response, Netflix introduced a lower-priced, ad-supported tier for the first time in its history.

Those changes may be paying off. In its earnings report on Thursday, the streamer said it added more than 7.6 million subscribers during the final three months of last year, well above the 4.5 million additions it had projected, for a total of more than 230 million paying subscribers worldwide.

“Reed Hastings stepping down from his current role raises a lot of questions about Netflix’s future strategy,” Jamie Lumbley, analyst at investment firm Third Bridge, said in a statement. “While the subscriber growth numbers are encouraging, revenue growth is sluggish with the backdrop of a potential recession looming on everyone’s mind.”

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January 20, 2023
The Federal Reserve is testing how climate change could hurt big banks | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN
—

The largest six banks in the United States have been given until July to show the Federal Reserve what effects disastrous climate change scenarios could have on their bottom lines.

Noting the risks could be “material,” the Fed said the banks will have to show how their finances fare under a number of climate stress tests, including heat waves, wildfires, floods and droughts, according to details of a new Fed pilot program released on Tuesday.

“The pilot exercise includes physical risk scenarios with different levels of severity affecting residential and commercial real estate portfolios in the Northeastern United States and directs each bank to consider the impact of additional physical risk shocks for their real estate portfolios in another region of the country,” wrote the Fed.

The Federal Reserve first announced the pilot program in September, noting that Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo would participate.

Climate activists said that the project was long overdue (Federal Reserve Chair Jerome Powell has been questioned about it multiple times over the last year), and that other central banks are far ahead of the Fed on climate risk assessments. The Bank of England ran a similar exercise in 2021.

They also said the proposal lacked any real teeth. In its announcement the Federal Reserve stressed that the exercise “is exploratory in nature and does not have capital consequences.” It also said that it would not publish individual banks’ results.

San Francisco Federal Reserve President Mary Daly told CNN in October Thursday that this was a learning and exploratory exercise for the Federal Reserve. It would be “incredibly premature to jump to the conclusion that any new policies or programs would come out of it,” she said.

The other side: Critics of the pilot program have argued that the Federal Reserve was overstepping its boundaries and that they might soon begin to enforce financial penalties.

“The Fed’s new ‘pilot’ program is the first step toward pressuring banks into limiting loans to and investments in traditional energy companies and other disfavored carbon-emitting sectors,” wrote former Republican Senator Pat Toomey, then a ranking member of the Senate Banking Committee. “The real purpose of this program is to ultimately produce new regulatory requirements.”

Powell said last week that the central bank would not become a “climate policymaker.”

“Today, some analysts ask whether incorporating into bank supervision the perceived risks associated with climate change is appropriate, wise, and consistent with our existing mandates,” Powell said last Tuesday. “In my view, the Fed does have narrow, but important, responsibilities regarding climate-related financial risks. These responsibilities are tightly linked to our responsibilities for bank supervision. The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change.”

The discovery, movement and use of oil has played an outsized role in shaping geopolitics over the past century and a half. But over the next 50 years, global interaction and wealth are more likely to be influenced by microchips, Intel CEO Pat Gelsinger told CNN Tuesday.

“Where the technology supply chains are, and where semiconductors are built, is more important for the next five decades,” Gelsinger said in an interview with CNN’s Julia Chatterley at the World Economic Forum in Davos, Switzerland.

Intel (INTC) is betting those predictions prove true. The company announced in 2021 it would invest $20 billion to build two new US chipmaking facilities, as well as up to $90 billion in new European factories, aimed at reasserting its position as the leader of the semiconductor industry, reports my colleague Clare Duffy.

Gelsinger said the company’s investment in new manufacturing facilities in the United States, Europe and elsewhere is important not only for the company’s future, but for the “globalization of the most critical resource to the future of the world.”

“We need this geographically balanced, resilient supply chain,” he said.

The announcements also came amid concerns about the concentration of manufacturing for chips, in Asia, particularly China and Taiwan, during the Covid-19 pandemic and as geopolitical tensions grew. Issues in the chip supply chain in recent years have caused shortages and shipping delays of everything from desktop computers and iPhones to cars.

“If we’ve learned one thing from the Covid crisis and this multi-year journey that we’ve been on it’s we need resilience in our supply chains,” Gelsinger said, adding that Intel’s manufacturing investments are aimed at “leveling that playing field so that good investment decisions can be made.”

The years following the peak of the Covid pandemic have not been good for wealth equality.

The world’s wealthiest residents have been getting far richer, far faster than everyone else over the past two years, reports my colleague Tami Luhby.

The fortune of the 1% soared by $26 trillion during that period, while the bottom 99% only saw their net worth rise by $16 trillion, according to Oxfam’s annual inequality report released Sunday.

And the wealth accumulation of the super-rich accelerated during the pandemic. Looking over the past decade, they netted just half of all the new wealth created, compared to two-thirds during the last few years.

Meanwhile, many of the less fortunate are struggling. Some 1.7 billion workers live in countries where inflation is outpacing wages. And poverty reduction likely stalled last year after the number of global poor skyrocketed in 2020.

“While ordinary people are making daily sacrifices on essentials like food, the super-rich have outdone even their wildest dreams,” said Gabriela Bucher, executive director of Oxfam International.

“Just two years in, this decade is shaping up to be the best yet for billionaires — a roaring ’20s boom for the world’s richest,” she said.

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January 18, 2023
Yen falls after Bank of Japan maintains ultra-easy policy | CNN Business

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Hong Kong
CNN
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The yen plunged on Wednesday after the Bank of Japan decided to maintain its ultra-easy monetary policy, defying market expectations that rising inflation could force the central bank to move away from low interest rates.

The BOJ kept its yield curve control (YCC) targets unchanged as it concluded a two-day policy meeting on Wednesday. It left the short-term interest rate at an ultra-dovish minus 0.1% and the 10-year Japanese Government Bonds (JGB) yield around 0%.

The YCC policy is a pillar of the central bank’s effort to keep interest rates low and stimulate the economy.

“Japan’s economy, despite being affected by factors such as high commodity prices, has picked up as the resumption of economic activity has progressed while public health has been protected from Covid-19,” the central bank said in its quarterly outlook report, adding that slowdowns in overseas economies could put downward pressure on growth.

The Japanese yen tumbled against the US dollar shortly after the announcement. It last traded at 131.34 yen per dollar, down 2.5%. Last Friday, it hit a seven-month high of 127.46 against the greenback.

Last month, the BOJ shocked global markets by allowing the 10-year JGB yield to move 50 basis points on either side of its 0% target, in a move that stoked speculation the central bank may follow the same direction as other major economies by allowing rates to rise further.

The unexpectedly hawkish decision caused stocks to tumble, while sending the yen and bond yields soaring.

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January 17, 2023
Federal student loan office has lots to do but no new money to do it | CNN Politics

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Washington
CNN
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Big headaches for student loan borrowers could be on the horizon.

Their monthly payments could restart as early as this summer after a three-year pause. And the federal office that oversees the student loan system is operating under the same budget as last year – which could complicate any efforts to make sure the repayment process goes smoothly, as well as the office’s plans to overhaul the system.

When Congress passed the government’s annual budget in December, the Federal Student Aid office got about $800 million less than what the Biden administration had asked for. After granting steady increases in previous years, lawmakers left funding for the office’s operations flat at about $2 billion.

Republican lawmakers touted how Congress provided no new funding to help implement President Joe Biden’s controversial student loan forgiveness plan – which is currently tied up in the courts. If the Supreme Court allows the forgiveness program to move forward, it would also be a huge lift for the Federal Student Aid office.

“I think it’s particularly unfortunate for borrowers that the political fight over loan forgiveness has resulted in flat funding this year,” said Jonathan Fansmith, assistant vice president of government relations at the American Council on Education, an advocacy group for colleges and universities.

“Wherever the cracks start to show, borrowers are going to be impacted,” Fansmith added.

The Federal Student Aid office, which has about 1,400 employees and provides about $112 billion in grant, work-study and loan funds annually, has a lot on its plate.

The office oversees the $1.6 trillion federal student loan portfolio but has also taken on additional work to revamp the federal student aid application form, known as the FAFSA, and to overhaul some federal student loan programs. Last week, it announced a plan to start making significant changes to its income-driven repayment program this year.

“I think certainly a number of their priorities will either not get done on the timeline that they had originally hoped for, or not get done at all,” said Michele Shepard, senior director of college affordability at The Institute for College Access and Success, an advocacy group.

But the Department of Education says it can still meet the timelines it has set.

“The several hundred-million-dollar shortfall will of course have an impact on these important bipartisan priorities, but we will continue to do everything we can with the available resources to better serve students and protect taxpayer dollars,” the department said in a statement sent to CNN.

Still, that means the Federal Student Aid office would be doing more work with less money. Here are some of the tasks it is expected to tackle this year:

Federal student loan borrowers have not had to make any payments since March 2020, thanks to a pandemic-related pause that has been extended by both the Trump and Biden administrations several times.

Most recently, Biden extended the pause after his student loan forgiveness program was halted by federal courts. The administration had told borrowers debt relief would be granted before payments restarted.

The payment pause will now last until 60 days after litigation over Biden’s student loan forgiveness program is resolved. If the program has not been implemented and the litigation has not been resolved by June 30, payments will resume 60 days after that.

Bringing roughly 44 million borrowers back into repayment at one time is an unprecedented task. Many people may be confused about how much they owe, when to pay and how. Missing payments can result in monetary fees.

The government contracts with several outside organizations, such as MOHELA and Nelnet, to handle servicing the federal student loans. But it’s up to the Federal Student Aid office to communicate with the servicers about when payments restart and how.

“To be kind, the quality of student loan servicing has not been stellar,” Fansmith said.

“If you multiply all of these issues, even if small, by 44 million borrowers, it’s a massive national problem,” he added.

In late February, the Supreme Court will hear arguments in two cases concerning Biden’s student loan forgiveness program, which could deliver up to $20,000 of debt relief for millions of low- and middle-income borrowers.

A decision on whether the program is legal and can move forward is expected by June. Until then, it is on hold and no debt will be discharged under the program.

Biden’s student loan forgiveness program has faced several legal challenges since the president announced it in August. The Department of Education had received about 26 million applications for debt relief by the time a federal district court judge struck down the program on November 10.

The legal back-and-forth has created confusion for borrowers around the status of the program. Adding to the uncertainty, about 9 million people received an email from the Department of Education in the fall that mistakenly said their application for student loan forgiveness had been approved.

The Biden administration has plans to overhaul some of its student loan repayment programs and the Federal Student Aid office is charged with rolling those out.

In July, the Department of Education plans to implement permanent changes to the Public Service Loan Forgiveness program to make it easier for government and nonprofit workers to qualify for debt relief after making 10 years of payments. The program has long been plagued with loan servicing problems.

Big changes to the department’s income-driven repayment plans are also in the works, aimed at reducing monthly debt burdens as well as the total amount borrowers pay over the lifetime of their loans.

The new regulations are expected to cap payments at 5% of a borrower’s discretionary income, down from 10% that is offered under most current income-driven plans. As a result, single borrowers making less than $30,600 per year would not need to make any payments under the proposal, up from the current $24,000 threshold.

The changes would also forgive remaining balances after 10 years of repayment, instead of 20 or 25 years, as well as cover the borrower’s unpaid monthly interest.

The Department of Education said last week that it expects to start implementing some of these provisions later this year.

Each year, as part of its normal work, the Federal Student Aid office processes millions of FAFSA applications from students. Generally, the form is released in October for the following academic year.

Every college student needs to fill out the FAFSA in order to qualify for federal student loans, grants and work-study aid. But it has long been criticized as too long and complicated.

Congress passed a law in 2021 that simplifies the FAFSA form, and the Federal Student Aid office has been working on implementing the changes – which financial aid experts hope will be done before October this year.

The office was supposed to have had the changes already done, but the effective date was pushed back by a year.

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January 16, 2023
Forget inflation, it’s all about earnings | CNN Business

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New York
CNN
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To everything there is a season and now is the time for earnings.

Over the past few weeks investors have been squarely focused on inflation and Fed policy, but now market reactions are getting bigger for earnings (especially the misses) and smaller for economic data.

What’s happening: “We expect earnings to take the center stage going forward,” wrote Bank of America strategists Savita Subramanian and Ohsung Kwon in a note on Friday. They noted that over the last three quarters, S&P 500 reactions to earnings beats and misses have soared higher and have now surpassed the one-day market reaction to both CPI inflation and Fed policy meeting decisions.

Companies that missed on both sales and earnings-per-share during the last quarter underperformed the S&P 500 by nearly six percentage points on average the next day, the largest reaction to earnings misses on record.

Shares of Disney sank 13.16% last November — their lowest level in more than two years — when they missed earnings estimates. Meta shares plummeted 24% after showing a drop in third-quarter revenue in October, the company’s second consecutive quarterly revenue decline. And shares of Palantir closed down more than 11% in November after it missed estimates only slightly.

“We see this as a narrative shift in the market from the Fed and inflation to earnings: reactions to earnings have been increasing, while reactions to inflation data and FOMC meetings have been getting smaller,” wrote Subramanian and Kwon.

So we can expect some serious volatility over the next few weeks as companies report their fourth quarter corporate earnings.

Bank of America’s predictive analytics team analyzed earnings transcripts to calculate sentiment scores and found that corporate sentiment remained flat in the third quarter, well off its highs, which points to a potential earnings decline ahead.

Similarly, companies’ references to of better business conditions (specific usage of the words “better” or “stronger” vs. “worse” or “weaker”) remained well below the historical average, and mentions of optimism dropped to the lowest level since the first quarter of 2020.

So far, swings have been to the downside. S&P 500 fourth-quarter earnings-per-share estimates have dropped by about 7% since October. Early earnings reports from some of the largest financial institutions point to a bleak quarter.

Bad news ahead: The estimated earnings decline for the S&P 500 in the fourth quarter of 2022 is -3.9%, according to a FactSet analysis. If that is indeed the actual drop, it will mark the first earnings decline reported by the index since the third quarter of 2020.

Over the past few weeks, reported FactSet, earnings expectations for the first and second quarters of 2023 switched from year-over-year growth to year-over-year declines.

The latest: JPMorgan beat estimates for fourth-quarter revenue but also increased the amount of money for expected defaults on loans. The bank added a $2.3 billion provision for credit losses in the quarter, a 49% increase from the third quarter.

The move was driven by a “modest deterioration in the Firm’s macroeconomic outlook, now reflecting a mild recession in the central case,” said the report. On a subsequent call, JPMorgan CFO Jeremy Barnum told reporters that the bank expects a recession to hit by the fourth-quarter of 2023.

Bank of America

(BAC) also beat earnings expectations but CEO Brian Moynihan said Friday that the bank is preparing for rising unemployment and a recession in 2023. “Our baseline scenario contemplates a mild recession,” he said. The bank added a $1.1 billion provision for credit losses, a sharp change from last year when that number was negative.

What’s next: Hold on to your hats. During the upcoming week, 26 S&P 500 companies are scheduled to report results for the fourth quarter.

Apple CEO Tim Cook has responded to angry shareholders by recommending that the company cut his pay this year, reports my colleague Anna Cooban.

Cook was granted $99.4 million in total compensation last year. The vast majority of his 2022 compensation — about 75% — was tied up in company shares, with half of that dependent on share price performance.

But shareholders voted against Cook’s pay package after Apple’s stock fell nearly 27% last year. The vote is nonbinding, but the board’s compensation committee said Cook himself requested the reduction.

“The compensation committee balanced shareholder feedback, Apple’s exceptional performance, and a recommendation from Mr. Cook to adjust his compensation in light of the feedback received,” the company said in its annual proxy statement released Thursday.

But don’t cry for Tim Cook just yet. This year, the executive’s share award target is $40 million. About $30 million, or three-quarters, of that is linked to share price performance. The tech boss, who has headed up Apple

(AAPL) since 2011, is estimated to have a personal wealth of $1.7 billion, according to Forbes.

The bottom line: Apple’s share price, like other tech companies, plunged last year as coronavirus lockdowns shuttered some of its factories in China. Supply chain bottlenecks and fears that a global economic slowdown would crimp demand also dragged down its stock.

Angry investors believe that the person at the helm of the company should also see a drop in pay.

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January 15, 2023
George Santos said accused ‘Ponzi scheme’ he worked at was ‘100% legitimate’ when accused of fraud in 2020 | CNN Politics

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Republican Rep. George Santos, said a company later accused of running a “Ponzi scheme” was “100% legitimate” when it was accused by a potential customer of fraud in 2020, more than a year before it was sued by the US Securities and Exchange Commission. Once the company, where he worked, came under federal scrutiny, Santos claimed publicly that he was unaware of accusations of fraud at the firm, a CNN KFile review of Santos’ social media and statements found.

Santos, the embattled freshman Republican, faces growing pressure to resign after he lied and misrepresented his educational, work and family history, including falsely claiming he was Jewish and the descendant of Holocaust survivors. Santos admitted to “embellishing” his resume, but has maintained he is “not a criminal.”

Santos worked at Harbor City Capital Corp. in 2020 and 2021, a company the SEC said was a “classic Ponzi scheme” in an April 2021 complaint against the firm. A Ponzi scheme is a type of fraud where existing investors are paid with funds from new investors, often promising artificially high rates of return with little risk. Santos was not named in the SEC complaint.

Joseph Murray, an attorney for Rep. Santos, told CNN in an email on Thursday that Santos was unaware of wrongdoing at the company.

“As to any questions about Harbor City Capital, in light of the ongoing investigation, and for the benefit of the victims, it would be inappropriate to respond other than to say that Congressman Santos was completely unaware of any illegal activity going on at Harbor City Capital,” Murray told CNN.

Santos told The Daily Beast in 2022 that he was “as distraught and disturbed as everyone else” to learn of allegations against Harbor City. But in a since-removed tweet on his since-deleted personal Twitter account, a potential customer questioned claims the company had a 100% bank guarantee on their investment in the form of a stand by line of credit (SBLC).

“The market instability is leading to sever (sic) capital erosion. @HarborCityCap offers you a strategy that mitigates loss and risk while creating cash flow, meanwhile your principle is 100% secured by an SBLC held by various major institutions. #fixedincome #alternativeinvestment #win,” Santos tweeted in April 2020 under the name George Devolder, using his mother’s family name.

In June, a potential customer responded to that tweet from Santos saying he looked into a SBLC from Harbor City and found it to be fraudulent.

“George, this SBLC I received from Harbor City was looked into, and Deutsche Bank claims is a complete fraud and not signed by the bank officer on the document. How do you explain this?,” the user said.

“I’m sorry I’m not following you. Could you please send me an email at George.devolder@harborcity.com and we can go over this together. Our SBLC is 100% legitimate and issued by their institution. I look forward to hearing from you,” responded Santos.

In fact, according to the SEC complaint, “at no point” was Harbor City Capital “ever issued a SBLC,” despite claims from the company.

Dylan Riddle, a spokesman for Deutsche Bank, told CNN on Monday that they had no affiliation with Harbor City Capital.

“Harbor City Capital was not a client of Deutsche Bank,” he said.

Attorney Katherine C. Donlon, the court-appointed receiver for Harbor City Capital told CNN in an email on Friday Santos was affiliated with Harbor City Capital from mid January 2020 through April 2021.

On Wednesday, the Nassau County GOP and several New York Republican congressmen called on Santos to resign. Santos still has the tacit support of House Speaker Kevin McCarthy, who said it was up to the voters to decide.

In other media reviewed by CNN’s KFile from 2020, Santos called himself “the head guy” at the Harbor City office in New York and the executive at the company. In one 2020 interview, Santos said he managed a $1.5 billion fund for the company with returns of 12% and 26% on investors’ money.

“Currently at Harbor City Capital, I manage a 1.5 billion fund, right?,” said Santos. “And I know how to manage it well. I give record returns to anybody who watches this, they’ll understand. I’m giving, a 12% fixed yield income return a year, which nobody in the market’s giving four and we’re giving 12. We’re also giving up to 20 to 26% in IRR return on our investors’ capital. So if there’s something I know how to do, it’s manage dollars and grow them.”

The SEC filed a complaint in April 2021 against Harbor City Capital and founder Jonathan P. Maroney, alleging that Maroney raised $17.1 million by deceiving more than 100 hundred investors through a series of unregistered fraudulent security offerings and used the money to enrich himself and his family. The SEC claimed that of the investor money collected and deposited into Harbor City Capital bank accounts “at most” only $449,000 were used for business expenses.

Neither Santos nor other Harbor City Capital employees were named in the complaint.

In October, Maroney was granted a stay in federal court for the SEC’s civil lawsuit, after Maroney noted that he “is currently the target in a related criminal investigation.” He is representing himself in the case.

CNN reached out to Maroney for comment but did not receive a response.

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January 14, 2023
Bank earnings fail to impress investors as recession worries rise | CNN Business

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New York
CNN
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JPMorgan Chase, Bank of America, Citigroup and asset management giant BlackRock posted results that topped Wall Street’s forecasts Friday, but investors were nonetheless a little disappointed at first.

Trading was choppy, with most bank stocks falling at the open before rebounding. Shares of JPMorgan Chase

(JPM) were up about 2.5% in late afternoon trading while BofA

(BAC) was up 2%. Wells Fargo

(WFC), which reported earnings that missed Wall Street’s targets, reversed earlier losses and was up 3%. Citi

(C) was up 2% while BlackRock

(BLK) was flat.

“The earnings were solid, but the market is concerned with recession fears,” said John Curran, managing director and head of North American bank coverage at MUFG.

Investors might have been concerned by the downbeat tone of the big banks. Executives are clearly still worried about inflation and the threat of a recession this year following several big interest rate hikes by the Federal Reserve.

JPMorgan Chase CEO Jamie Dimon said in the bank’s earnings statement that although the economy is still strong and that consumers and businesses are spending and healthy, “we still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that is eroding purchasing power and has pushed interest rates higher.”

The bank added in the earnings release that it now expects a “mild recession” as a base economic case. CFO Jeremy Barnum added during a conference call with reporters that in addition to the slowdown that has already started in its home lending unit, it is starting to see “headwinds” in auto lending.

Meanwhile, BofA CEO Brian Moynihan noted that this is “an increasingly slowing economic environment” and Wells Fargo CEO Charlie Scharf said “we are carefully watching the impact of higher rates on our customers.” Wells Fargo recently announced plans to pull back on its massive mortgage business.

Banks are clearly worried about a looming recession, and Wall Street has taken notice.

Moody’s Investors Service analyst Peter Nerby noted in a report that “credit provisions are rising” at JPMorgan Chase and that Citi “built capital and reserves in anticipation of a slowdown in core markets.”

The Fed’s rate hikes aren’t helping either.

“Higher than expected interest rates pose a significant risk to the outlook for credit quality, loan growth and net interest margins,” said David Wagner, a portfolio manager at Aptus Capital Advisors, in an email.

Concerns about the economy were one reason why stocks plunged in 2022, suffering their worst year since 2008. As a result of the Wall Street slump, there was a major slowdown in merger activity and initial public offerings.

That hurt the investment banking businesses for the top banks. JPMorgan Chase and Citi each said that advisory fees plummeted nearly 60% in the quarter.

Goldman Sachs

(GS) and Morgan Stanley

(MS) will give more color about the health of Wall Street next Tuesday when they both report their fourth quarter results.

Goldman Sachs, which has aggressively built up a consumer banking unit over the past few years, has struggled to make money in that division. Goldman Sachs disclosed in a regulatory filing Friday that it has lost more than $3 billion in its consumer business since 2020.

There were some signs of optimism though. BlackRock, which owns the massive iShares family of exchange-traded funds, reported a rebound in assets under management from the third quarter to the fourth quarter as stocks soared in October and November.

“The current environment offers incredible opportunities for long-term investors,” said BlackRock CEO Larry Fink in the earnings release.

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January 13, 2023
Tim Cook agrees to a massive pay cut | CNN Business

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London
CNN
—

Apple CEO Tim Cook has agreed to cut his pay this year after shareholders rebelled.

The world’s largest tech company said it would reduce Cook’s target pay package to $49 million, 40% lower than his target pay for 2022 and about half Cook’s $99.4 million total compensation that he was granted last year.

The vast majority of Cook’s 2022 compensation — about 75% — was tied up in company shares, with half of that dependent on share price performance.

But shareholders voted against Cook’s pay package after Apple’s stock fell nearly 27% last year. The vote is nonbinding, but the board’s compensation committee said it took the vote into consideration.

“The compensation committee balanced shareholder feedback, Apple’s exceptional performance, and a recommendation from Mr. Cook to adjust his compensation in light of the feedback received,” the company said in its annual proxy statement released Thursday.

This year, the executive’s share award target has been cut to $40 million. About $30 million, or three-quarters, of that is linked to share price performance.

Cook’s base salary of $3 million will stay the same, the company said, as well as a $6 million bonus.

The board said it believes Cook’s new pay package is “responsive to shareholder feedback, while continuing both to align pay with performance and to recognize Mr. Cook’s outstanding leadership.”

The tech boss, who has headed up Apple since 2011, is estimated to have a personal wealth of $1.7 billion, according to Forbes.

Apple’s share price, like other tech companies, plunged last year as coronavirus lockdowns shuttered some of its factories in China. Supply chain bottlenecks and fears that a global economic slowdown would crimp demand also dragged down its stock.

In January last year, the tech giant became the first publicly traded company to notch a $3 trillion market capitalization, yet has has shed nearly $1 billion of that value since.

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January 13, 2023
Egg prices exploded 60% higher last year. These food prices surged too | CNN Business

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Minneapolis
CNN
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Eggs, milk, butter, flour … if you were making pancakes last year, it would have cost you. Food prices surged in 2022.

Grocery prices remain stubbornly high (and nearly double the rate of overall inflation) at 11.8% year over year, according to data released Thursday by the Bureau of Labor Statistics.

Blame Russia, the weather, disease and a host of other factors.

“Even though we’re seeing inflationary pressures ease, we still have a war in Ukraine,” said Tom Bailey, senior consumer foods analyst with Rabobank. “Fertilizer costs have improved, but they still remain very high. Energy costs have improved, but they still remain relatively high. Labor costs still remain a problem — and the list goes on.”

Weather and disease are heavily affecting certain products’ prices, too – and none have been more rotten than egg prices: They’re up 59.9% year over year, a rate not seen since 1973, when high feed costs, shortages and price freezes caused certain agricultural products to soar in price. Since early last year, a deadly avian flu has devastated poultry flocks, especially turkeys and egg-laying hens. That was compounded by increasing demand and higher input costs, such as feed.

As a result, people like Jim Quinn are shelling out upwards of $6 and $7 for a dozen eggs.

Quinn has run daytime eatery The Hungry Monkey Café in Newport, Rhode Island, with his wife, Kate, since 2009. As a breakfast and lunch joint, it leans heavily on eggs for the majority of dishes on its menu — and especially for the 15-egg King Kong omelet novelty food challenge at the restaurant.

Even though eggs and seemingly every other ingredient have risen in price during the past year, Quinn and The Hungry Monkey have chosen to eat the cost.

“I’m trying to hold the line on the prices without having to increase them,” Quinn said. “It makes it extremely challenging for a mom-and-pop [business].”

He added: “We’re just trying to stay alive and hope that things will come down.”

But there’s good news on the horizon. The cost of food is still hard to swallow, but the latest Consumer Price Index shows that those price increases — by and large — are at least growing at slower rates.

In December, “food at home” prices increased 0.2% from the month before. That’s the smallest monthly increase since March 2021.

The expectations are for food price increases to continue to moderate, Bailey said.

“I suspect over the next 12 months we will see improvements in supply, improvements in the conditions that have been challenging across most of our food categories,” he said, “and we’ll finally start to see prices, at least upstream, really starting to come off. And then maybe it’s 2024 where we could eventually see some deflation for food.”

Here’s a look at how prices are trending across certain food categories in December, according to BLS data:

Eggs: +59.9% annually; +11.1% from November

Butter and margarine: +35.3% annually; +1.7% from November

Lettuce: +24.9% annually; +4% from November

Flour and prepared flour mixes: +23.4% annually; -1% from November

Canned fruits and vegetables: +18.4% annually; +0.3% from November

Bread: +15.9% annually; +0.2% from November

Cereals and cereal products: +15.6% annually; -0.3% from November

Coffee: +14.3% annually; +0% from November

Milk: +12.5% annually; -1% from November

Chicken: +10.9% annually; -0.6% from November

Baby food: +10.7% annually; -0.2% from November

Fresh fruits: +3.4% annually; -1.9% from November

Uncooked ground beef: +0.7% annually; -0.1% from November

Bacon and related products: -3.7% annually; -2.9% from November

Uncooked beef steaks: -5.4% annually; +0.9% from November

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January 13, 2023
House Oversight chairman seeks Biden family financial transaction data | CNN Politics

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Rep. James Comer, in one of his first moves as House Oversight Chairman, is seeking information from the Treasury Department about the Biden family’s financial transactions and calling on a handful of former Twitter executives to testify at a public hearing.

The new round of letters from the committee come as House Republicans are looking to flex their investigative might and make good on promises to delve into the Biden family finances and alleged political influence over technology companies after Twitter temporarily suppressed a 2020 story about Hunter Biden and his laptop.

“Now that Democrats no longer have one-party rule in Washington, oversight and accountability are coming,” Comer said of his panel’s investigation into Hunter Biden and the Biden family’s business dealings. “This investigation is a top priority for House Republicans during the 118th Congress.”

Comer requested Treasury Secretary Janet Yellen provide his panel with bank activity reports for Hunter Biden, President Biden’s brother James Biden and several Biden family associates and their related companies.

“The Committee on Oversight and Accountability is investigating President Biden’s involvement in his family’s foreign business practices and international influence peddling schemes,” Comer wrote to Yellen.

Comer tried to acquire these bank activity reports, known as Suspicious Activity Reports, repeatedly when Republicans were in the minority but was largely unsuccessful. Comer has said he has only seen two and did not reveal the source of those reports.

Comer has previously pointed to the bank activity reports – known as Suspicious Activity Reports – as evidence of potential wrongdoing by Joe Biden’s family members. But such reports are not conclusive and do not necessarily indicate wrongdoing. Each year, financial institutions file millions of suspicious activity reports and few lead to law enforcement inquiries.

The White House accused Republicans of engaging in “political stunts” following Comer’s request Wednesday.

“In their first week as a governing majority, House Republicans have not taken any meaningful action to address inflation and lower Americans’ costs, yet they’re jumping out of the gate with political stunts driven by the most extreme MAGA members of their caucus in an effort to get attention on Fox News,” Ian Sams, a spokesman for the White House Counsel’s office, said in a statement. “The President is going to continue focusing on the important issues the American people want their leaders to work together on, and we hope House Republicans will join him.”

Comer also is seeking communications within the Treasury Department, its financial crimes enforcement division and the White House regarding those family members and related businesses and associates, all of which he wants to be returned by January 25.

The letters to former Twitter officials offer a path to Comer’s investigative schedule ahead. The letters to former head of legal, policy and trust Vijaya Gadde; former head of trust and safety Yoel Roth; and former deputy general counsel James Baker call on the trio to appear in a public hearing the week of February 6. They come after Comer sent an earlier round of letters in December requesting their testimony.

“Your attendance is necessary because of your role in suppressing Americans’ access to information about the Biden family on Twitter shortly before the 2020 election,” each of the letters to the former Twitter employees states.

Republicans have seized on the so-called Twitter files as evidence of government censorship, although none of the messages released so far show the FBI explicitly telling Twitter to suppress a story that included material from a laptop belonging to Hunter Biden. An FBI agent at the heart of the controversy as well as several federal officials and tech executives have all denied there was any such order, CNN previously reported.

Roth, meantime, has said publicly that the Hunter Biden story appeared as though it could be the product of a hack-and-leak operation, but he has denied that he personally tried to censor the story.

“It’s widely reported that I personally directed the suppression of the Hunter Biden story. That is not true. It is absolutely, unequivocally untrue,” Roth told tech journalist Kara Swisher in a podcast interview last year.

Comer’s demands come as both he and Judiciary Chairman Jim Jordan have vowed to investigate the federal government’s influence over tech companies.

In an interview with CNN earlier this week, Comer suggested that Judiciary staff could sit in on some of his committee’s interviews if there are common areas of interest, like with Twitter.

“There is some overlap but that won’t be a problem for Jim and I,” Comer said in the interview. “He knows who we’re bringing in. We know who he’s bringing in.”

This story has been updated with additional developments Wednesday.

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January 11, 2023
A galactic merger brought a pair of supermassive black holes together | CNN

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Two supermassive black holes have been spotted feasting on cosmic materials as two galaxies in distant space merge — and are the closest to colliding black holes astronomers have ever observed.

Astronomers spotted the pair while using the Atacama Large Millimeter/Submillimeter Array of telescopes, or ALMA, in northern Chile’s Atacama Desert, to observe two merging galaxies about 500 million light-years from Earth.

The two black holes were growing in tandem near the center of the coalescing galaxy resulting from the merger. They met when their host galaxies, known as UGC 4211, collided.

One is 200 million times the mass of our sun, while the other is 125 million times the mass of our sun.

While the black holes themselves aren’t directly visible, both were surrounded by bright clusters of stars and warm, glowing gas — all of which is being tugged by the holes’ gravitational pull.

Over time, they will start circling one another in orbit, eventually crashing into one another and creating one black hole.

After observing them across multiple wavelengths of light, the black holes are located the closest together scientists have ever seen — only about 750 light-years apart, which is relatively close, astronomically speaking.

The results were shared at the 241st meeting of the American Astronomical Society being held this week in Seattle, and published Monday in The Astrophysical Journal Letters.

The distance between the black holes “is fairly close to the limit of what we can detect, which is why this is so exciting,” said study coauthor Chiara Mingarelli, an associate research scientist at the Flatiron Institute’s Center for Computational Astrophysics in New York City, in a statement.

Galactic mergers are more common in the distant universe, which makes them harder to see using Earth-based telescopes. But ALMA’s sensitivity was able to observe even their active galactic nuclei — the bright, compact regions in galaxies where matter swirls around black holes. Astronomers were surprised to find a binary pair of black holes, rather than a single black hole, dining on the gas and dust stirred up by the galactic merger.

“Our study has identified one of the closest pairs of black holes in a galaxy merger, and because we know that galaxy mergers are much more common in the distant Universe, these black hole binaries too may be much more common than previously thought,” said lead study author Michael Koss, a senior research scientist at the Eureka Scientific research institute in Oakland, California, in a statement.

“What we’ve just studied is a source in the very final stage of collision, so what we’re seeing presages that merger and also gives us insight into the connection between black holes merging and growing and eventually producing gravitational waves,” Koss said.

If pairs of black holes — as well as merging galaxies that lead to their creation — are more common in the universe than previously thought, they could have implications for future gravitational wave research. Gravitational waves, or ripples in space time, are created when black holes collide.

It will still take a few hundred million years for this particular pair of black holes to collide, but the insights gained from this observation could help scientists better estimate how many pairs of black holes are close to colliding in the universe.

“There might be many pairs of growing supermassive black holes in the centers of galaxies that we have not been able to identify so far,” said study coauthor Ezequiel Treister, an astronomer at Universidad Católica de Chile in Santiago, Chile, in a statement. “If this is the case, in the near future we will be observing frequent gravitational wave events caused by the mergers of these objects across the Universe.”

Space-based telescopes like Hubble and the Chandra X-ray Observatory and ground-based telescopes like the European Southern Observatory’s Very Large Telescope, also in the Atacama Desert, and the W.M. Keck telescope in Hawaii have also observed UGC 4211 across different wavelengths of light to provide a more detailed overview and differentiate between the two black holes.

“Each wavelength tells a different part of the story,” Treister said. “All of these data together have given us a clearer picture of how galaxies such as our own turned out to be the way they are, and what they will become in the future.”

Understanding more about the end stages of galaxy mergers could provide more insight about what will happen when our Milky Way galaxy collides with the Andromeda galaxy in about 4.5 billion years.

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January 10, 2023
Fed Chair Powell: Bringing down inflation requires ‘measures that are not popular’ | CNN Business

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CNN
—

Investors shifted their focus Tuesday from the stock market to Stockholm as Federal Reserve Chairman Jerome Powell made his first public appearance of the year.

Powell participated in a panel discussion on central bank independence at an event hosted by Sweden’s central bank, the Sveriges Riksbank.

The painful rate hikes the Fed is implementing to try to bring down inflation don’t make officials particularly popular, Powell admitted.

“Restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” he said, before adding that it’s important not to succumb to the need to liked.

“We should ‘stick to our knitting’ and not wander off to pursue perceived social benefits that are not tightly linked to our statutory goals and authorities,” Powell said.

He highlighted climate change as a prime example of this.

“Today, some analysts ask whether incorporating into bank supervision the perceived risks associated with climate change is appropriate, wise, and consistent with our existing mandates,” he said. “in my view, the Fed does have narrow, but important, responsibilities regarding climate-related financial risks. These responsibilities are tightly linked to our responsibilities for bank supervision. The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change.”

US inflation rates (as measured by the Labor Department’s Consumer Price Index) have been steadily falling for the past five months. That has enabled the Fed to start easing back on the size of its historically high rate hikes meant to cool the economy and fight rising prices.

Inflation in the Eurozone, meanwhile, remains at an eye-popping 9.2% — though it eased between November and December. ECB president Christine Lagarde said last month she expects interest rate hikes to rise “significantly further, because inflation remains far too high and is projected to stay above our target for too long.”

“If you compare with the Fed, we have more ground to cover. We have longer to go,” she added.

The Bank of England, meanwhile, has also warned that inflation, still at its highest level since the 1980s, isn’t going anywhere. The BoE’s chief economist Huw Pill said this week that inflation could persist for longer than expected despite recent falls in wholesale energy prices and an economy on the brink of recession.

These three central banks are fighting in different conditions, but they share a similar battle strategy: Keep tightening.

The central bankers defended the importance of independence and credibility for their institutions, which has come under fire as policymakers are accused of having let surging inflation go unchecked for too long.

December meeting minutes from the Fed, released last week, noted that the policymaking committee would “continue to make decisions meeting by meeting,” leaving options open for the size of rate hikes at the next monetary policy decision on February 1. No policymakers have forecast that it would be appropriate to reduce the bank’s benchmark borrowing rate this year. And while officials welcomed the recent softening in inflation, they stressed that “substantially more evidence” was required for a Fed “pivot.”

Last week’s jobs report further muddied the picture, showing that employment remained strong while wage growth eased.

Thursday’s CPI for December — which will be the new year’s first check on inflation — will also provide helpful clues to investors about whether US price hikes are sufficiently cooling.

Encouraging data could bolster consensus estimates that call for a quarter-percentage point interest rate hike in February, a shift lower from December’s half-point hike and the four prior three-quarter-point hikes.

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January 10, 2023
Why is Wall Street cheery all of a sudden? | CNN Business

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CNN
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It’s only early January, but so far in 2023 the pendulum on Wall Street has swung (to paraphrase Billy Joel) from sadness to euphoria.

Stocks are off to a solid start following last year’s dismal performance. Even though the Dow fell more than 110 points, or 0.3%, to close Monday’s session it is still up more than 1% this year. The S&P 500 ended Monday down 0.1% while the Nasdaq gained 0.6%. But those two indexes are each up about 1.5% since the end of 2022.

Even the CNN Business Fear and Greed Index, which looks at seven indicators of market sentiment, is now inching closer to Greed territory — after languishing in Fear mode for the better part of the past few weeks.

But why is there such optimism on Wall Street all of a sudden? The headlines still aren’t necessarily that great.

Yes, the market cheered Friday’s jobs report because it showed slowing wage growth that could lead to a further reduction in inflation pressures and smaller rate hikes from the Federal Reserve. But it also showed the pace of job growth is slowing — and that could be a precursor to an eventual recession.

Meanwhile the Institute for Supply Management’s latest data showed the services sector, a big engine of the US economy, contracted last month. And several high-profile companies in the tech, consumer, financial services (and yes, media) industries have announced big layoffs or unveiled plans to hand out pink slips. Retailers such as Macy’s

(M) and Lululemon

(LULU) are warning about sales and profits.

Add all this up and it doesn’t sound like cause for celebration.

But Wall Street is a funny place: Good news is often viewed as a bad sign, and vice versa.

Sure, it would be a big plus if the Fed is able to pull off a proverbial soft landing, slowing the economy without leading to a full-blown recession and/or significant decline in corporate profits. But that’s a big if.

There’s another possibility that bulls are clinging to as well: that there will be a recession, but a mild one that also just so happens to be one of the most widely expected and telegraphed downturns in recent memory. This isn’t a proverbial black swan. There is no “Lehman moment” to catch everyone off guard.

As long as the Fed can get inflation under control, investors might not be too concerned by a recession anyway. At least, that’s the ‘glass is half full’ argument.

“Any recession will be perceived by investors to be less problematic if inflation is judged to be sufficiently contained, and the Fed is prepared to mount an appropriate monetary response,” said Robert Teeter, managing director of Silvercrest Asset Management, in a report.

Teeter added that falling inflation levels should boost stocks this year “even as earnings remain lackluster.”

But others see a problem with that argument.

“Our concern is that most [investors] are assuming ‘everyone is bearish’ and, therefore, the price downside in a recession is also likely to be mild,” said strategists at Morgan Stanley in a report.

Instead, the Morgan Stanley strategists think investors might be surprised by just how much lower stocks go if there is a recession. They noted that the market may not be pricing in “much weaker earnings.”

Investors may also be underestimating how far the Fed is willing to go with rate hikes in order to make sure inflation finally starts to fall.

“Many investors have been reassured by the strength of the US labor market. Yet…the Federal Reserve is determined to tighten monetary policy until that strength is eradicated — the recession clock is ticking,” said Seema Shah, chief global strategist at Principal Asset Management, in a report.

And Shah does not believe the recession will be mild. She wrote after Friday’s jobs report that “a hard landing looks to be the most likely outcome this year.”

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January 9, 2023
Bonds are back, but for how long? | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

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CNN
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Stocks soared on Friday to their best day in more than a month. The Dow gained 700 points and the S&P 500 and Nasdaq rose by 2.3% and 2.6% respectively, as traders bet that a slowdown in wage growth could mean that inflation may finally be cooling off.

But the big turnaround story during the short first week of the year isn’t just about equities, it’s also about bonds.

What’s happening: US Treasuries recorded their worst year in history in 2022, but investors are suddenly reversing course. They now appear quite optimistic about the bond market.

Last year’s bond massacre came as the Fed raised short-term interest rates at the fastest speed in about four decades, lifting the Fed funds rate to its highest level in over a decade. Bonds are particularly sensitive to those increases — as rates are hiked, the price of existing bonds falls as investors prefer the new debt that will soon be issued with those higher interest payouts.

But now investors are betting that those rate increases are mostly over and that inflationary pressures are on a downswing.

Treasuries just notched their strongest start to a year since 2001, back when investors eagerly purchased government debt under the (correct) assumption that then-Fed chair Alan Greenspan was about to slash interest rates. This time around, investors are scooping up bonds as they anticipate the pace of Fed interest rate hikes will soon ease.

That’s great news for Treasuries. Core bonds, or US investment grade debt, tend to perform well during Fed rate hike pauses. Since 1984, core bonds have been able to generate average 6-month and 1-year returns of 8% and 13%, respectively, after the Fed stopped raising rates, according to data from LPL Financial.

That anticipation could be seen at the end of last week. Treasuries tumbled following strong private jobs data earlier in the week but quickly rebounded when US payroll data showed that wage growth was weakening.

The gains are in sync with economists’ positive outlooks for falling yields and rising bond prices in 2023.

The other side: The problem is that there’s no guarantee that interest rates will actually come down, and investors could find themselves blindsided if they don’t.

“The potential for rates to go high and stay higher for longer would hit bond markets hard, especially considering weaker economies would likely force governments to borrow more,” said Chris Varrone, managing director at Strategas, a Baird Company.

Former Treasury Secretary Larry Summers issued a warning on Friday to bond investors who assume that inflation is easing and a new era of low interest rates is upon us.

“I suspect tumult” for bonds in 2023, Summers said on Bloomberg Television. “This is going to be remembered as a ‘V’ year when we recognized that we were headed into a different kind of financial era, with different kinds of interest-rate patterns.”

Persistently high inflation may have put a damper on holiday shopping.

Macy’s chair and CEO Jeff Gennette said Friday that lulls during the non-peak weeks of the fourth quarter “were deeper than anticipated” and that consumers will continue to feel pressured into 2023, reports my colleague Ramishah Maruf.

Macy’s said Friday its net sales from the holiday quarter will likely be at the low-end to mid-point of its previously issued forecast range of $8.16 billion to $8.4 billion. It reported Q4 sales of $8.67 billion in 2021.

Americans spent more this season to keep up with high prices. US retail sales increased 7.6% during the period between November 1 to December 24 compared to the same time last year, according to the Mastercard Spending Pulse. US retail sales were lower than expected in November, falling 0.6% during the month, which was the weakest performance in nearly a year.

Gennette warned that consumer sentiment is unlikely to change with the new year.

“Based on current macro-economic indicators and our proprietary credit card data, we believe the consumer will continue to be pressured in 2023, particularly in the first half, and have planned inventory mix and depth of initial buys accordingly,” the Macy’s CEO said.

The company expects to report full results for the fourth quarter and fiscal year 2022 in early March 2023.

China’s heavy-handed crackdown on tech giants is coming to an end and the country’s economic growth is expected to be back on track soon, according to a top central bank official, my colleague Laura He reports.

The crackdown on fintech operations of more than a dozen internet companies is “basically” over, said Guo Shuqing, the Communist Party boss at the People’s Bank of China, in an interview with state-run Xinhua news agency on Saturday.

“Next, we’ll promote healthy development of internet platforms,” said Guo, who is also chairman of China’s Banking and Insurance Regulatory Commission. “We’ll encourage them to come out strong in leading economic growth, creating more jobs, and competing globally.”

His remarks came on the same day Chinese billionaire Jack Ma gave up control of Ant Group after the fintech giant’s shareholders agreed to restructure the company.

Chinese tech stocks listed on US exchanges have already enjoyed a dream start to 2023.

The Nasdaq Golden Dragon China Index — a popular index tracking Chinese firms listed in the United States — soared 13% in the first two trading days of 2023. That was the index’s best yearly start on record, according to data compiled by Refinitiv dating back to 2003.

US-listed shares of Chinese e-commerce firms Alibaba

(BABA), JD.com

(JD), and Pinduoduo

(PDD) added $53 billion to their combined market value last Wednesday alone.

The sweeping regulatory crackdown since late 2020 had driven investors away. In 2021 and 2022, the Nasdaq Golden Dragon China Index plummeted 46% and 25% respectively.

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January 9, 2023
Jack Ma to relinquish control of Ant group | CNN Business

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Chinese billionaire Jack Ma will no longer control Ant Group after the fintech giant’s shareholders agreed to reshape its shareholding structure, according to a statement released by the company on Saturday.

After the adjustment, Ma’s voting rights will fall to 6.2%, according to the statement and CNN calculations.

Before the restructure, Ma possessed more than 50% of voting rights at Ant via Hangzhou Yunbo and two other entities, according to its IPO prospectus filed with the exchanges in 2020.

Ant added in the statement that the voting rights adjustment, a move to make the company’s shareholder structure “more transparent and diversified,” will not result in any change to the economic interests of any shareholders.

Ant said its 10 major shareholders, including Ma, had agreed to no longer act in concert when exercising their voting rights, and would only vote independently, and thus no shareholder would have “sole or joint control over Ant Group.”

The voting rights overhaul came after Chinese regulators pulled the plug on Ant’s $37 billion IPO in November 2020, and ordered the company to restructure its business.

As part of the company’s restructuring, Ant’s consumer finance unit applied for an expansion of its registered capital from $1.2 billion to $2.7 billion. The China Banking and Insurance Regulatory Commission recently approved the application, according to a government notice issued late last week.

After the fund-raising drive, Ant will control half of its key consumer finance unit, while an entity controlled by the Hangzhou city government will own a 10% stake. Hangzhou is where Alibaba and Ant have been headquartered since their inceptions.

Ant Group is a fintech affiliate of Alibaba, both of which were founded by Ma.

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January 7, 2023