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Coronavirus Tests the Leadership Style of Goldman Sachs’s C.E.O.

David M. Solomon started 2020 on his back foot.

Mr. Solomon had been on the job as chief executive of Goldman Sachs, perhaps Wall Street’s most storied and vilified institution, for just over a year, working to broaden the bank’s offerings by pursuing lines of business that his predecessors had long avoided.

But his Main Street push had failed to impress shareholders. After Goldman’s investor day in January, the bank analyst Mike Mayo described some of these moves, including a credit card offered in partnership with Apple, as “somewhere between a distraction and a moonshot” and added that he didn’t know of a single investor who had bought Goldman’s stock for those reasons.

If stockholders were scratching their heads at the direction of the bank under Mr. Solomon, employees weren’t much clearer on what kind of leader he was. Lloyd C. Blankfein, the previous chief executive, was seen as a coolheaded strategist who had steered Goldman through the 2008 financial crisis. Mr. Solomon, a spare-time disc jockey, had a reputation for being blunt and pragmatic, but also intuitive and flexible.

Then, as Mr. Solomon was still getting situated, the pandemic hit, presenting him with the biggest leadership challenge — and opportunity — of his short time atop the bank. The crisis has shown Mr. Solomon to be a deft navigator who quickly adapted to changes that caught some of his bank’s bigger competitors flat-footed. But it brought an unforced error by Mr. Solomon that underscored the perils of a fun-loving attitude he has viewed as an asset when dealing with Goldman’s young work force.

Other challenges remain, including investigations by U.S. prosecutors and bank regulators into Goldman’s role in helping raise billions of dollars for 1MDB, a Malaysian sovereign wealth fund that some officials used as a personal piggy bank. A framework for the settlement with the U.S. authorities has been reached but not finalized, a person familiar with the matter said. Prosecutors declined to comment.

When New York City went into lockdown in March, Mr. Solomon sent most of the bank’s 40,000 employees home immediately and blessed the firm’s procurement of thousands of monitors and landline phone systems for use in home offices. He also got on hundreds of Zoom calls with clients to reassure them that Goldman would help see them through their mounting obstacles — and not necessarily for a fee.

Credit…September Dawn Bottoms/The New York Times

Goldman’s early embrace of working from home helped traders capitalize on surging market activity in the first and second quarters. Their efforts pushed the firm’s stock and bond-trading revenues to recent records, while minimizing disruptions and encouraging worker loyalty. By contrast, JPMorgan Chase and Bank of America stumbled initially as they struggled to ready backup sites and, in some cases, created an atmosphere in which trading-floor workers felt pressured to go to the office.

“David has done a solid job navigating the Covid crisis,” said Justin Gmelich, a partner at the hedge fund King Street and longtime Goldman markets executive before that. He praised the firm’s flexible work-at-home policies and the insights that analysts and traders had provided him as a client, although he said he had concerns about the talent pool because at least a half-dozen senior traders had left the bank since Mr. Solomon’s ascension.

With nearly half the bank’s employees under the age of 30, his messaging appears attuned to the mores of a changing finance industry. Already, Mr. Solomon — a yogi and music lover — had brought a different vibe to the job, ripping up the firm’s stodgy dress code and talking about bringing one’s “whole self” to work. In managing Goldman’s response to the virus, he is also becoming an unlikely poster boy for a softer era on Wall Street, where personal well-being can take precedence over profits and displaying anxieties isn’t a matter of embarrassment.

Mr. Solomon, 58, did stumble into a minor scandal recently while indulging his favorite hobby. Last month, he took the stage to D.J. at a concert in New York’s affluent Hamptons beach community, while a large crowd partied in close quarters. The gathering drew the ire of Gov. Andrew M. Cuomo, who demanded an investigation. A spokesman for the state’s health department said the inquiry was continuing.


Credit…Kevin Mazur/Getty Images for Safe & Sound

Credit…Kevin Mazur/Getty Images for Safe & Sound

In two separate meetings with Goldman Sachs partners and members of the firm’s management committee after the event, he acknowledged that he had made a mistake, according to two people familiar with the matter.

And while he has long said that mixing and recording music is an enjoyable outlet that helps him connect with Goldman’s younger generation, some of the firm’s directors raised concerns last summer about the optics of his hobby, the people said. In side conversations, some directors have suggested that golf might be a better alternative, one of those people said.

“David admits it was a mistake to participate, and he’s told people at the firm that,” a Goldman spokesman, Jake Siewert, said of the Hamptons concert. Mr. Siewert added that Mr. Solomon had put live events on hold for the foreseeable future but planned to continue recording electronic music.

Since the earliest days of the coronavirus, Mr. Solomon had been watching it make its way from China to the United States and worried about its potential economic impact. In early February, he spoke with David Tepper, a well-known stock investor and Goldman alumnus, who had read a dire forecast for the virus in the medical journal The Lancet. The two were at a Super Bowl event in Miami, and Mr. Tepper said he had come to believe the illness could hobble the United States.

“I was struck by the fact that he was more worried than I was, and I was worried,” Mr. Solomon recalled. He began working on larger-scale contingency plans.

By the end of February, Mr. Solomon’s senior team was holding regular 6:30 a.m. meetings to discuss what Goldman should do to safeguard both its employees and its business if the virus spread more widely.


Credit…September Dawn Bottoms/The New York Times

Credit…September Dawn Bottoms/The New York Times

In March, after the coronavirus was declared a pandemic and most of Goldman’s workers went home, Mr. Solomon chose to go into the office daily. To lead, he said, was to show up physically.

“For me, it doesn’t seem right the C.E.O. of Goldman Sachs goes out to, you know, a country house, a suburb or some other place, and is not in charge, in the office, because that’s what we do,” he said in a phone interview in late June.

Mr. Solomon’s approach to the crisis has been a contrast to some of his peers. James Gorman, the chief executive of Morgan Stanley, worked remotely until early July, worried that returning to the office would put undue pressure on employees to follow suit. A visit to the trading floor by Bank of America’s chief executive, Brian Moynihan, early in the outbreak led some employees to question their decisions to work from home. (A bank spokeswoman said that was not the intent.)

“The message from David on down was so clear, that there were no questions asked, it didn’t matter,” said Jen Roth, 39, who runs the firm’s U.S. currencies and emerging markets business, about Goldman’s quick approval of work-from-home plans. Ms. Roth, who had never worked a single day from home until this year, set up shop in a bathroom of her parents’ suburban Philadelphia house — one of the few available rooms with a lockable door to field client calls with her spouse, children and parents nearby.

Zachary Fields, a 26-year-old associate in one of Goldman’s investing businesses, worked from his high school desk from his parents’ home in Delray Beach, Fla. “As long as I have a Wi-Fi connection, access to my computer, and Bluetooth headphones and videoconferencing, I can do my job,” he said.

But Mr. Solomon’s request this summer that some employees return to the office has led to grumbling among those who think a longer stretch of working from home is warranted. Others, however, would like to see Mr. Solomon encourage even more people to resume working from the office and have expressed those views to the C.E.O., a person familiar with the matter said.

The bank hasn’t determined when to bring all its workers back, but it won’t be this fall given the ongoing uncertainty about the virus, Mr. Siewert said.

For now, with everyone dispersed, Mr. Solomon has sought new ways to keep in touch with workers.

“Your jobs are safe during this crisis,” he said in an audio message distributed to the firm’s workers on April 2, noting that Goldman would provide additional family leave to employees. He attended an after-work “geek-out” session for employees on the topic of winemaking, and sipped the wine under discussion as he watched. All 150 participants had received the same bottle from the bank.


In late May, after a Black man, George Floyd, was killed by a white police officer, touching off nationwide protests over racial injustice, Mr. Solomon encouraged employees to speak more openly about race and intolerance. Fred Baba, a managing director in the firm’s markets division, responded with an email to a small group of colleagues discussing his experience with racism and describing the previous few months as “demoralizing.”

The email, which argued for mentoring people of color and supporting minority-owned business, soon inspired a Goldman podcast with Mr. Baba and an op-ed article on Bloomberg. Mr. Solomon also convened an emotional town-hall meeting on race, during which he choked up as Black partners shared their anguish over police violence toward Black people.

Mr. Solomon believes more openness will pay off. He recently held a virtual meeting with eight drug-industry chief executives in which they discussed race and the health crisis in a way, he said, that felt more frank than usual.

“We’re all being much more vulnerable as we’re trying to lead our people,” he said. “I think that’s effective leadership, and it’s working.”

Matthew Goldstein contributed reporting.

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TuSimple kicks off plan for a nationwide self-driving truck network with partners UPS, Xpress and McLane

Self-driving trucks startup TuSimple laid out a plan Wednesday to create a mapped network of shipping routes and terminals designed for autonomous trucking operations that will extend across the United States by 2024. UPS, which owns a minority stake in TuSimple, carrier U.S. Xpress, Penske Truck Leasing and Berkshire Hathaway’s grocery and food service supply chain company McLane Inc. are the inaugural partners in this so-called autonomous freight network (AFN).

TuSimple’s AFN involves four pieces: its self-driving trucks, digital mapped routes, freight terminals and a system that will let customers monitor autonomous trucking operations and track their shipments in real-time. For now, TuSimple will operate the trucks and carry goods for its customers, which now number 22.  TuSimple wants to eventually be able to sell its autonomous trucks so customers can choose to operate their own fleets.

The plan was made public just days after TechCrunch learned that TuSimple had hired investment bank Morgan Stanley to help it raise $250 million. Morgan Stanley recently sent potential investors an informational packet, viewed by TechCrunch, that provides a snapshot of the company and an overview of its business model, as well as a pitch on why the company is poised to succeed — all standard fare for companies seeking investors. TuSimple, which has raised $298 million to date, has also shared its plans to build its autonomous freight network with potential investors.

“Our ultimate goal is to have a nationwide transportation network consisting of mapped routes connecting hundreds of terminals to enable efficient, low-cost long-haul autonomous freight operations,” TuSimple President Cheng Lu said in a statement. “By launching the AFN with our strategic partners, we will be able to quickly scale operations and expand autonomous shipping lanes to provide users access to autonomous capacity anywhere and 24/7 on-demand.”

TuSimple already carries freight in its autonomous trucks (always with human safety operators on board) along seven different routes between Phoenix, Tucson, El Paso and Dallas. TuSimple said it will expand its service area with existing customers UPS and McLane. U.S. Xpress is a new partner. Penske will help TuSimple scale its fleet operations nationwide and provide preventative maintenance for the self-driving trucks, the company said. 

TuSimple said the network will be rolled out in three phases, starting with a focus on a service area in the Southwest where it already operates. Phase 1, which will launch in 2020 and into 2021, will cover service between cities Phoenix, Tucson, El Paso, Dallas, Houston and San Antonio. TuSimple plans to open this fall a new shipping terminal in Dallas. TuSimple said these terminals are designed to be shared by mid-sized customers. TuSimple will carry freight directly to a company’s distribution center if it is a high-volume customer.

The second phase will begin in 2022 and expand service from Los Angeles to Jacksonville and connect the east coast with the west, the company said.

The final phase will expand across the lower 48 states, beginning in 2023. The company said it will replicate the strategy in Europe and Asia after the AFN rolls out nationwide.

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TuSimple seeking $250 million in new funding to scale self-driving trucks

TuSimple, the self-driving truck startup backed by Sina, Nvidia, UPS and Tier 1 supplier Mando Corporation, is headed back into the marketplace in search of new capital from investors. The company has hired investment bank Morgan Stanley to help it raise $250 million, according to multiple sources familiar with the effort.

Morgan Stanley recently sent potential investors an informational packet, viewed by TechCrunch, that provides a snapshot of the company and an overview of its business model, as well as a pitch on why the company is poised to succeed — all standard fare for companies seeking investors.

TuSimple declined to comment.

The search for new capital comes as TuSimple pushes to ramp up amid an increasingly crowded pool of potential rivals.

TuSimple is a unique animal in the niche category of self-driving trucks. It was founded in 2015 at a time when most of the attention and capital in the autonomous vehicle industry was focused on passenger cars, and more specifically robotaxis.

Autonomous trucking existed in relative obscurity until high-profile engineers from Google launched Otto, a self-driving truck startup that was quickly acquired by Uber in August 2016. Startups Embark and the now defunct Starsky Robotics also launched in 2016. Meanwhile, TuSimple quietly scaled. In late 2017, TuSimple raised $55 million with plans to use those funds to scale up testing to two full truck fleets in China and the U.S. By 2018, TuSimple started testing on public roads, beginning with a 120-mile highway stretch between Tucson and Phoenix in Arizona and another segment in Shanghai.

Others have emerged in the past two years, including Ike and Kodiak Robotics. Even Waymo is pursuing self-driving trucks. Waymo has talked about trucks since at least 2017, but its self-driving trucks division began noticeably ramping up operations after April 2019, when it hired more than a dozen engineers and the former CEO of failed consumer robotics startup Anki Robotics. More recently, Amazon-backed Aurora has stepped into trucks.

TuSimple stands out for a number of reasons. It has managed to raise $298 million with a valuation of more than $1 billion, putting it into unicorn status. It has a large workforce and well-known partners like UPS. It also has R&D centers and testing operations in China and the United States. TuSimple’s research and development occurs in Beijing and San Diego. It has test centers in Shanghai and Tucson, Arizona.

Its ties to, and operations in China can be viewed as a benefit or a potential risk due to the current tensions with the U.S. Some of TuSimple’s earliest investors are from China, as well as its founding team. Sina, operator of China’s biggest microblogging site Weibo, is one of TuSimple’s earliest investors. Composite Capital, a Hong Kong-based investment firm and previous investor, is also an investor.

In recent years, the company has worked to diversify its investor base, bringing in established North American players. UPS, which is a customer, took a minority stake in TuSimple in 2019. The company announced it added about $120 million to a Series D funding round led by Sina. The round included new participants, such as CDH Investments, Lavender Capital and Tier 1 supplier Mando Corporation.

TuSimple has continued to scale its operations. As of March 2020, the company was making about 20 autonomous trips between Arizona and Texas each week with a fleet of more than 40 autonomous trucks. All of the trucks have a human safety operator behind the wheel.

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Here’s what is driving GM’s reported plans to develop a commercial electric van

GM’s electric offensive to bring at least 20 new EVs to market by 2023 reportedly includes a commercial van.

Reuters reported Thursday that the company is developing an electric van for the commercial market code named BV1. The vehicle is expected to start production in late 2021 and will use the Ultium battery system that was revealed in March, according to the report.

When, and if, GM delivers on that goal in 2021 it will join an increasingly crowded pool. Amazon ordered 100,000 electric delivery vans from Rivian, the first of which are expected to be on the road in 2021. Ford has announced an electric Transit van that’s expected to launch in 2021. Startups such as Arrival, Chanje, Enirde, and XoS have received orders for electric vans from package delivery companies such as Ryder and UPS.

Tesla is one outlier that hasn’t revealed plans to produce commercial electric vans. GM’s move has been cast as a strategy to get ahead of Tesla in the commercial marketplace.

But there are likely other reasons driving GM’s decision, including high margins that can be achieved selling commercial trucks and vans as well as governments enacting increasingly strict emissions laws, particularly in urban centers.

Electric vans are logical fit for delivery companies, which tend to have predictable routes, a specific geographic area and operate a high utilization all of which fits with the EV infrastructure and charging ecosystems that enables their full economic use, a research note released Thursday from Morgan Stanley argues.

Morgan Stanley notes it hasn’t been “smooth sailing” for all EV vans. For instance, DHL’s StreetScooter program was recently shut down.

Prior to Reuters’ report, it appeared GM’s EV strategy was pinned to passenger vehicles. In March, GM revealed an electric architecture that will be the foundation of its future EV plans and support a wide range of products across its brands, including compact cars, work trucks, large premium SUVs, performance vehicles and a new Bolt EUV crossover expected to come to market next summer.

GM said the modular architecture, called “Ultium,” will be capable of 19 different battery and drive unit configurations, 400-volt and 800-volt packs with storage ranging from 50 kWh to 200 kWh, and front-, rear- and all-wheel drive configurations.

GM’s focus on making this EV architecture modular underlines the automaker’s desire to electrify a wide variety of its business lines, from the Cruise Origin autonomous taxi and compact Chevrolet  Bolt EUV to the GMC HUMMER electric truck and SUV and the newly-announced Cadillac Lyriq SUV. GM also showed a variety of electric vehicles that had not yet been announced, to show how this modularity will be exploited further out in their product plan, including a massive Cadillac flagship sedan called Celestiq.

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During coronavirus, CEOs David Solomon and Brian Moynihan stand alone on Wall Street—literally

During coronavirus, CEOs David Solomon and Brian Moynihan stand alone on Wall Street—literally | Fortune

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Alternative Investing Startup iCapital Network Closes On $146M Amid Skyrocketing Growth

iCapital Network, a fintech startup which has developed a platform for investing in alternative assets, announced this morning it has raised $146 million in a funding round led by Hong Kong-based Ping An Global Voyager Fund.
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M&A wrap: Morgan Stanley, E*Trade, Sycamore, Victoria’s Secret, Forever 21, TA, Thompson Street

Morgan Stanley (NYSE: MS) agreed to buy discount brokerage E*Trade Financial Corp. (Nasdaq: ETFC) for $13 billion, pushing further into the retail market with its biggest acquisition since the financial crisis. The all-stock takeover adds E*Trade’s $360 billion of client assets to Morgan Stanley’s $2.7 trillion, the companies said in a statement. Morgan Stanley also gets E*Trade’s direct-to-consumer and digital capabilities to complement its full-service, advisory-focused brokerage, reports Bloomberg News. “E*Trade represents an extraordinary growth opportunity for our wealth-management business and a leap forward in our wealth-management strategy,” says Morgan Stanley CEO James Gorman. “This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue.” The retail-brokerage industry is being reshaped by price wars and consolidation. In early October, Charles Schwab Corp. eliminated commissions for U.S. stock trading, forcing other brokerages to follow suit and sweeping away an important revenue stream. The following month, Schwab agreed to buy rival TD Ameritrade Holding Corp. for about $26 billion and create a mega-firm with $5 trillion in assets, forcing smaller brokerages like E*Trade to contend with a much more formidable competitor. Read the full story by Bloomberg: Morgan Stanley adds discount broker in $13 billion E*Trade deal.

Manufacturing in the U.S. has contracted to its lowest level in more than a decade. The Institute for Supply Management said that its manufacturing index fell in December 2019 to 47.2. That’s its lowest level since June 2009, when it hit 46.3. This, in addition to a tight labor market, China’s retaliatory tariffs and the upcoming presidential election, has made manufacturing a tricky sector to do business in these days. Still, despite some of the headwinds facing the manufacturing industry, the M&A deal market remains active. Interest rates are low, and companies as well as investors have cash to invest. Additional factors come into play, including the need for consolidation and globalization in the manufacturing industry. Robots are playing a role as well, and manufacturing automation has become appealing. “The tight labor market and increasing wages have led us to pursue a number of different initiatives at our companies to counteract the resulting pressures created,” says Brad Roberts, a partner with the Riverside Co. “Where economical, we are investing in increased automation to enable us to meet growing sales volume amidst this difficult hiring environment.” Read our full coverage: 5 trends driving manufacturing M&A.

Sycamore Partners is buying a controlling stake in Victoria’s Secret from L Brands in a deal that values the target at $1.1 billion. Victoria’s Secret, still tied to the push-up bra aesthetic the company projected for many years, has lost ground to competitors that market their products as comfortable and body-positive. A broader retail shift to e-commerce and away from shopping malls has also dealt a blow. Read the full story by Bloomberg News: Sycamore takes control of Victoria’s Secret.

TA Associates, Genstar Capital and ST6 Partners-backed have purchased financial planning and tax software provider Longview Solutions.

Thompson Street Capital Partners has acquired residential plumbling contractor Len the Plumber.

B&G Foods Inc. (NYSE: BGS) has bought Farmwise, the owner of the Veggie Fries, Veggie Tots and Veggie Rings brands.

Hormel Foods Corp. (NYSE: HRL) is buying Sadler’s Smokehouse, a maker of smoked meats for retailers and foodservice providers.

IQ-EQ has acquired Blue River Partners an investor services provider with $1.3 trillion in assets under management. The deal will allow Blue River Partners to offer their U.S. clients free and immediate access into European investment opportunities for the first time, and will give IQ-EQ a stronger presence in the U.S. alternatives market.

Enterprise software company Betterworks has acquired Hyphen, an employee listening and engagement platform.

Forever 21 Inc.’s new owners plan to keep most of the fast-fashion chain’s U.S. stores open under a new chief executive officer in the coming weeks when it emerges from bankruptcy. Owners Authentic Brands Group, Simon Property Group Inc. and Brookfield Property Partners LP are talking with other landlords about keeping as many of its 448 U.S. stores in business as possible, Authentic CEO Jamie Salter said tells Bloomberg News. Forever 21 filed for bankruptcy in September after struggling with large, expensive locations and losses in some international markets, while suffering from the same online competition that has forced U.S. retailers to close thousands of stores in recent years. The new owners agreed to pay $81 million and assume certain liabilities as part of the purchase. Read the full story by Bloomberg: Forever 21’s new owners in talks to keep most stores open.

Kieran Farrelly, Sheila Gibson, Adam Johnston and Suanne Tavill were promoted to partners at private markets investment firm StepStone Group.

Justin Rawlins was hired by law firm Paul Hastings as a partner where he is focusing on restructuring. Rawlins was previously with Winston & Strawn.

Artificial intelligence in healthcare saw about $4 billion in funding across 367 deals in 2019, according to data and research firm CB Insights. Inc. (Nasdaq; AMZN) is no exception. The tech conglomerate is using its recent deals for Health Navigator and PillPack to launch new software services in healthcare. Health Navigator works with companies like Microsoft Corp. (Nasdaq: MSFT) in offering services such as remote diagnoses, and with triage to help patients figure out whether to stay at home, see a doctor or go straight to the emergency room. Read our full coverage: How Amazon is using M&A to revolutionize healthcare.

Pushed by a groundbreaking California law mandating it, more companies are putting women on their public corporate boards. The law faces pressure in court and may not stand, but its rippling effect has already started to increase the visibility and awareness of the important benefits of board diversity. Investors are taking notice and trying to get ahead of the curve. According to a study published by MSCI in March 2018, having three or more women on a company’s board of directors translates to a 1.2 percent median productivity above competitors. Read the full guest article by Venable’s Belinda Martinez Vega: Why businesses are adding women to their boards.

If there’s anything M&A professionals dislike, it’s uncertainty. And heading into 2020, there’s more than enough uncertainty to go around, including questions about the economy, international trade, impeachment, domestic politics and more. The funny thing is, the lack of clarity may actually make the first half of the year a great time for M&A, as dealmakers push to close transactions before the looming uncertainty of Election Day and its outcome. We conducted interviews with 8 investment bankers and other M&A advisors. Some said the first half of the year will be robust, while others said the uncertainty may have a negative impact throughout 2020. Read the full story, What’s ahead for M&A in 2020? We ask 8 advisors.

Mergers & Acquisitions has named the 2020 Most Influential Women in Mid-Market M&A. This marks the fifth year we have produced the list, which recognizes female leaders with significant influence inside their companies and in the wider dealmaking world. It’s been gratifying to watch the project evolve over the years – and become more influential itself. This year, we received more nominations than ever before. As a result, we expanded the number honored to 42 in 2020, up from 36 in 2019. Many dealmakers are new to our list, including Rockwood Equity Partners’ Kate Faust, William Blair’s Shay Brokemond and Avante Capital Partners’ Ivelisse Simon. Read our full coverage of all the champions of change on our list, including Q&As with each individual.

To celebrate deals, dealmakers and dealmaking firms, Mergers & Acquisitions produces three special reports every year: the M&A Mid-Market Awards; the Rising Stars of Private Equity; and the Most Influenital Women in Mid-Market M&A. For an overview of what we’re looking for in each project, including timelines, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.

ACG New York is hosting the 12th annual healthcare conference and bourbon tasting at the Metropolitan Club in New York on Feb. 27.

ACG Raleigh Durham’s 18th annual capital conference is being from March 31-April 1 at the Raleigh Marriott Crabtree Hotel in Raleigh, North Carolina.

InterGrowth 2020 is taking place at the Aria Resort & Casino in Las Vegas from April 20-22.

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The Meaning of Morgan Stanley’s Move Onto Main Street

A Wells Fargo settlement with the S.E.C. over abusive sales practices could be announced as soon as today, our colleague Emily Flitter reports. (Want this in your inbox each day? Sign up here.)

The most obvious conclusion to draw from Morgan Stanley’s $13 billion purchase of E-Trade yesterday is that it blurs the boundaries between Wall Street and Main Street, with an investment banking stalwart paying a big premium for a discount retail broker. Morgan Stanley’s traditional rival, Goldman Sachs, has made similar moves via its Marcus retail unit and credit-card partnership with Apple.

The chattering class:

• Eric Hagemann of Pzena Capital Management emailed our colleague Kate Kelly: “If they’re able to take out costs, then from a purely financial perspective buying E-Trade isn’t drastically worse than buying back their own stock, which is their main alternative use of capital.”

• Roger Altman of Evercore told CNBC: “Morgan Stanley has been leading the transformation from the wholesale side to the retail side, and this takes them further in that regard.”

• But Mike Mayo, a banking analyst at Wells Fargo, told Bloomberg, “After seeing so many of these marriages go afoul, we have more of a skeptical hat on.”

Who’s next? The deal is expected to stoke the urge to merge among other asset managers. After all, when commissions fall to zero, the only obvious ways to eke out a profit are via scale or cross-selling customers with a suite of fee-charging services.

Interactive Brokers’ C.E.O., Tom Peterffy, told MarketWatch that his company held merger talks with E-Trade in November, suggesting that his brokerage could be up for sale.

• Wall Street players may also consider buying younger upstarts like Robinhood, the online brokerage that made its name with zero-commission trading, or Wealthfront and Betterment.

What about the regulators? Morgan Stanley’s takeover of E-Trade isn’t final until the Fed gives its blessing. The bank is betting that the Fed under the Trump administration is friendlier to post-crisis mergers than it was during the Obama years, when then-Fed governor Daniel Tarullo said in 2012 that there should be a “strong but not irrebuttable presumption of denial” for takeovers by big banks. Our colleague Jeanna Smialek caught up with Mr. Tarullo, now at Harvard, who he said his thinking remained the same. She sent us this snippet:

Mr. Tarullo said regulators needed to take into account the managerial capabilities of both firms, antitrust concerns and financial stability considerations. When it comes to stability, it matters both whether the merged company is more likely to run into trouble and whether such a stumble would cause broader problems because of the bank’s increased size.

“I’m sure people will make the argument that this is actually financial stability enhancing for Morgan Stanley,” he said, but it’s also a “big addition” to the banks’ balance sheet. So the challenge is combining both the arguable increase in resilience and any added systemwide costs of failure.

Critics of the social network say that the company has repeatedly made decisions that appease Republicans. Craig Timberg of the WaPo attributes that in part to Facebook senior executives with ties to conservatives who have the ear of company leaders like Mark Zuckerberg.

Those executives include Joel Kaplan, the head of Facebook’s Washington office; Kevin Martin, the Republican former chairman of the F.C.C. who is Mr. Kaplan’s deputy; and Katie Harbath, the company’s head of elections public policy.

“The Republicans in the D.C. office see themselves as a bulwark against the liberals in California,” Alex Stamos, Facebook’s former chief security officer, told the WaPo.

The fitness company Peloton recently settled a lawsuit in which it accused a rival, Flywheel, of trying to copy its at-home biking technology. Vice combed through court filings — including “improperly redacted documents,” a phrase that sends reporters’ hearts racing — that reveal various alleged attempts by Flywheel to obtain Peloton’s trade secrets. Improbably, the recently pardoned former financier Michael Milken makes an appearance in the saga:

Peloton began the patent lawsuit process by claiming Flywheel had specifically sent one of its major investors, twice-pardoned “junk bond king” Michael Milken, to obtain proprietary information from [the Peloton C.E.O. John] Foley under false pretenses. Milken met Foley at a J.P. Morgan investors summit in February 2017, three months before the FLY Anywhere was announced.

“Milken held himself out to Foley as an interested, potential investor in Peloton and pushed for information on topics including Peloton’s future business plans and strategy, and how or whether Peloton could protect its intellectual property and exclude others from the at-home cycling business,” the complaint alleged. “At no time before, during or after the meeting did Milken disclose that he had any financial interest whatsoever in Flywheel.”

A new report from PitchBook runs the numbers on the bumper year in private capital fund-raising in 2019, with a record $888 billion committed to managers in private equity, venture capital, infrastructure, real estate and funds raised solely to buy stakes in other funds.

One number caught our eye. Just over $100 billion in capital remains unspent in funds that are six years or older. Typically, funds have five years to deploy the funds committed by investors, or lose the ability to spend it (and burn bridges when the time comes to raise a new fund), unless they work out alternative arrangements. That’s quite an overhang, and it only grows as investors pledge hundreds of billions to new funds each year.

“Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction” by David Enrich. Out this week, the book by our colleague makes for uncomfortable reading in Frankfurt, Washington and beyond — read an excerpt and the NYT’s review.

“Whistleblower: My Journey to Silicon Valley and Fight for Justice at Uber” by Susan Fowler. Also out this week, by another colleague, this book is a “powerful illustration of the obstacles our society continues to throw up in the paths of ambitious young women,” according to the review. And read her op-ed about the blog post that started it all.

Warren Buffett’s annual shareholder letter. It’s always worth reading the folksy wisdom on investing, politics and more from the “Oracle of Omaha,” which comes out on Saturday.

HSBC has reportedly identified Jean Pierre Mustier, the C.E.O. of the Italian bank UniCredit, as the lead external choice to become its next chief. He’d be up against Noel Quinn, HSBC’s current interim C.E.O.

Volkswagen’s C.F.O., Frank Witter, plans to step down at the end of June 2021 for unspecified personal reasons.

Alexander Klabin, a founder of the $6.9 billion hedge fund Senator Investment Group, is leaving the firm. His co-founder, Douglas Silverman, is staying on.


• T-Mobile and Sprint agreed to tweak their proposed merger, giving T-Mobile’s parent company, Deutsche Telekom, slightly more control of the combined group. (Reuters)

• The Japanese owner of 7-Eleven is reportedly in talks to buy Marathon Petroleum’s Speedway gas-station chain for about $22 billion. (FT)

• Two big corporate software makers, Kronos and Ultimate Software, plan to merge, creating a new business valued at $22 billion — a popular number, it seems. (WSJ)

• The Deal Makers of the Week Award goes to Davis Polk & Wardwell, the law firm that advised on the E-Trade and Victoria’s Secret deals, as well as transactions involving Dell and Dean Foods. (@lizrhoffman)

Politics and policy

• Advisers to Mike Bloomberg said that he had prepped for Wednesday’s Democratic debate, but that they were aghast at how poorly he performed. (NYT)

• Mick Mulvaney, the acting White House chief of staff, said Republicans were being hypocritical on the federal deficit. (WaPo)

• President Trump’s annoyance with a South Korean trade agreement clouded his review of the Oscar-winning movie “Parasite.” (Time)


• New Mexico’s attorney general sued Google, accusing the tech giant of using its educational products to spy on children and their families. (NYT)

• About 300 Oracle employees staged a virtual walkout yesterday to protest a fund-raiser that their C.E.O., Larry Ellison, held for President Trump. (Protocol)

• How Amazon is trying to avoid disruptions from the coronavirus outbreak. (NYT)

• The House subcommittee on economic and consumer policy requested documents from Amazon’s Ring home-security division about its security practices and work with law enforcement. (Nextgov)

Best of the rest

• Why the stock market has shrugged off the coronavirus outbreak. (Upshot)

• Inside the Washington bureaucratic battle over whether to let Americans infected with the coronavirus fly home from Japan. (WaPo)

• California is back in a drought. (WaPo)

We’d love your feedback. Please email thoughts and suggestions to


NYT > Business > DealBook

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Morgan Stanley to Buy E-Trade, Linking Wall Street and Main Street

Morgan Stanley is betting its future on Main Street.

The Wall Street giant moved further from its investment banking origins on Thursday with an agreement to buy the discount brokerage firm E-Trade for about $13 billion, the biggest takeover by a major American lender since the 2008 global financial crisis.

The addition of E-Trade would allow Morgan Stanley to tap into a new source of revenue: the smaller-volume trades of the country’s so-called mass affluent, people who are wealthy enough to have some savings but not rich enough to buy into hedge funds or seek out a money manager. If it goes through, the deal will put Morgan Stanley, which does not have retail bank branches to draw in new asset-management customers, on firmer footing with competitors like Bank of America and Wells Fargo.

It would also give Morgan Stanley a big share of the market for online trading, an additional 5.2 million customer accounts and $360 billion in assets.

Morgan Stanley’s chief executive, James P. Gorman, said the merger would disrupt neither E-Trade clients nor Morgan Stanley customers, but ultimately result in more services for all.

The deal highlights the increasing convergence of Wall Street and Main Street: Elite bastions of corporate finance are seeking to cater to customers with smaller pocketbooks, and online brokerage firms that once hoped to overthrow traditional trading houses are instead suffering from a price war that has slashed their profits.

It also reflects a continuing shift in strategy for Morgan Stanley, which long relied on fees from high-finance services like mergers, stock offerings and massive trading desks but has lately embraced steady fees over bigger paydays and bigger risks.

Under Mr. Gorman, who has led the bank for a decade, Morgan Stanley has de-emphasized the businesses of jet-setting investment bankers and aggressive Manhattan traders, preferring the predictable and less costly realm of wealth management. It’s a strategy playing out all along Wall Street: In the dozen years since the start of the financial crisis, major financial firms from Credit Suisse to Goldman Sachs have embraced what are considered lower-risk business lines.

“This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue,” said Mr. Gorman, whose most transformative deal at Morgan Stanley before Thursday was its acquisition of Smith Barney’s retail brokerage firm in 2012.

E-Trade was an enticing target: It has struggled as brokerage firms slashed fees in a fight that peaked last fall when Charles Schwab eliminated fees for the trading of stocks and exchange-trade funds, and later agreed to buy TD Ameritrade for $26 billion.

Michael McTamney, who researches banks for the ratings agency DBRS Morningstar, said the deal accelerated Morgan Stanley’s growth plans. The bank already had a strong high-net-worth client base, he said, and now “they’ll be able to bring in this next generation of wealth via the E-Trade platform.”

If the deal goes through — it needs the approval of E-Trade shareholders and regulators — more than half of Morgan Stanley’s pretax profits will come from wealth and investment management, compared with 26 percent a decade ago.

Morgan Stanley’s $2.7 trillion in assets are largely tied to big companies and wealthy individuals. The E-Trade deal would expand its access to the comparatively well heeled, a group that encompasses more than 20 million households in the United States.

But Morgan Stanley could face a challenge luring this sort of investor toward its higher-touch investment management services.

Many E-Trade customers manage their own investments because of their intense distaste for the old-fashioned brokerage business. Others are hobbyists, trading a chunk of their retirement portfolios or some mad money. Both types have benefited greatly from decades of price wars that have made it possible for customers to pay nothing to maintain a brokerage account. Morgan Stanley will raise those fees at its peril.

But the addition of E-Trade offers another way to make money from those customers. Morgan Stanley could use the brokerage firm as the vehicle for delivering other products and services, such as shares of initial public offerings it has underwritten.

In Mr. Gorman’s words, the combination would unite Morgan Stanley’s “full-service, adviser-driven model” with E-Trade’s “direct-to-consumer and digital capabilities.”

Morgan Stanley is betting that regulators in Washington will approve what is perhaps the most consequential acquisition by a so-called systemically important American bank — the too-big-to-fail variety of financial institution — since 2008.

Under the Obama administration, officials at the Federal Reserve fretted about the nation’s biggest banks growing through mergers. Daniel Tarullo, a former Fed governor, said in a 2012 speech that the central bank should have a “strong, but not irrebuttable, presumption of denial” for takeovers by America’s banking titans.

But the Fed has become more industry friendly during the Trump administration, particularly with the addition of officials like Vice Chairman Randal K. Quarles, a former bank lawyer who is helping reassess the rules put in place after the financial crisis. The central bank recently approved the combination of BB&T and SunTrust, paving the way for the creation of the sixth-largest U.S. commercial bank.

The acquisition could look attractive to regulators from a financial stability perspective: The deal would infuse the Wall Street bank with stable deposits and reliable revenue streams. But it will also make Morgan Stanley more of a behemoth.

Morgan Stanley doubtless hopes an E-Trade deal goes more smoothly than a past effort to pull in retail clients. Its merger with Dean Witter Reynolds two decades ago foundered amid a clash between Morgan Stanley’s Wall Street aristocrats and Dean Witter’s more down-market brokers. Since then, however, the bank has been steadily shifting toward asset management — one of a number of approaches major banks have been trying to court Main Street.

Morgan Stanley’s traditional rival, Goldman Sachs, created a retail-focused lending arm, Marcus, in 2016 and teamed up with Apple last year to offer a credit card. Last month, Goldman said it intended to expand its retail deposit base to $125 billion, and its consumer loan and card balance to $20 billion, over the next five years.

Investors seem to be more taken with Morgan Stanley’s continuing shift than with Goldman’s, at least based on the Wall Street scoreboard of stock prices. Shares in Morgan Stanley have climbed nearly 33 percent over the past 12 months, while those in Goldman have risen about 19 percent.

Late last year, JPMorgan Chase — already known for its enormous banking operations in both the consumer and the institutional areas — established a new platform that is meant to combine financial advisory services within its bank branches with wealth-management and online brokerage offerings.

And Bank of America, whose acquisition of Merrill Lynch during the financial crisis made it a heavyweight in the wealth-management business, has moved to court less-wealthy clients as well.

Under the terms of the deal announced on Thursday, Morgan Stanley will buy E-Trade using its own stock. Its offer is worth about $58.74 a share as of Wednesday’s market close, a 30 percent premium on the value of the online brokerage’s shares.

E-Trade’s chief executive, Michael Pizzi, would continue to run the business upon the deal’s closing, which is expected by year’s end.

Jeanna Smialek and Ron Lieber contributed reporting.


NYT > Business

Posted on

Banks set for biggest job cull since 2015, as Morgan Stanley cuts

Banks around the world are unveiling the biggest round of job cuts in four years as they slash costs to weather a slowing economy and adapt to digital technology.

This year, more than 50 lenders have announced plans to cut a combined 77,780 jobs, the most since 91,448 in 2015, according to filings by the companies and labor unions. Banks in Europe, which face the added burden of negative interest rates for years to come, account for almost 82% of the total.

The 2019 cuts bring the total for the last six years to more than 425,000. In fact, the actual amount is probably higher because many banks eliminate staff without disclosing their plans. Morgan Stanley is the latest firm to make a year-end efficiency push, cutting about 1,500 jobs, according to people familiar with the matter. Chief Executive Officer James Gorman has said the cuts account for about 2% of the bank’s workforce.

This year’s figures also underscore the weakness of European banks as the region’s export-oriented economy confronts international trade disputes while negative interest rates eat further into lending revenue. Unlike in the U.S., where government programs and rising rates helped lenders rebound quickly after the financial crisis, banks in Europe are still struggling to regain their footing. Many are firing staff and selling businesses to shore up profitability.

Germany’s biggest lender tops the list of planned job cuts. Deutsche Bank AG is planning to get rid of 18,000 employees through 2022 as it retreats from a big part of its investment banking business. The lender’s home country is the most fragmented major banking market in Europe and among the most exposed to negative interest rates because its lenders hold more deposits than competitors abroad.

Banks will probably continue to announce further staff reduction plans next year. Swiss wealth manager Julius Baer Group Ltd. is considering cuts to reduce costs because of rising competition and tighter margins, people with knowledge of the matter said earlier this month. Spain’s Banco Bilbao Vizcaya Argentaria SA plans to cut jobs in its client solutions business and may extend that to its wider business, according to a newspaper report.

Source: The Latest