Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing
Credit Aaron P. Bernstein/Reuters

Good Tuesday afternoon. An analyst at Goldman Sachs just published a research note putting the odds of Republicans changing the tax code at more than 80 percent. But G.O.P. lawmakers in the Senate have added a wrinkle: repealing of the Affordable Care Act’s individual mandate at the same time. More on that in a moment.

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• Mohamed El-Erian, the chief economic adviser at Allianz, is reportedly a candidate to become the Federal Reserve’s next vice chairman. In some respects, he would represent an unusual choice for the Trump administration.

• Trian probably wants investors to forget that it had very rosy predictions for where G.E. shares would be by the end of the year. The conglomerate’s stock price has dropped significantly for the second day in a row.

• Silicon Valley is fearful of a provision in the Senate’s tax overhaul that would tax stock options and restricted stock units immediately upon vesting. Tech companies worry that the rule change would upend how the industry pays its employees and hurt start-ups the most.

Jeff Sessions doesn’t comment on the Time Warner deal.

Testifying before the House Judiciary Committee, the attorney general declined to describe discussions the Justice Department has had with AT&T over the $85.4 billion acquisition.

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Mr. Sessions was — as of this writing — twice asked about whether there was any political motive in the Justice Department’s request that AT&T sell assets to gain regulatory approval. (The New York Times has reported that the Justice Department has pushed for the sale of either Turner Broadcasting, which includes CNN, or DirecTV.)

Other than vaguely disputing the accuracy of such reports, the attorney general said only that his team always strove to act professionally. But Brian Stelter of CNN pointed out a curious instance of Mr. Sessions’s no-commenting:

"Has any W.H. employee or official, including the president, contacted the Justice Dept. regarding the AT&T-Time Warner transaction?"
Sessions: "I'm not able to comment" https://t.co/RzYTra4RFT

— Brian Stelter (@brianstelter) Nov. 14, 2017

Remember that a White House spokesman previously told the NYT, “The President did not speak with the Attorney General about this matter, and no White House official was authorized to speak with the Department of Justice on this matter.”

— Michael J. de la Merced

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Today’s DealBook briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Amie Tsang in London.

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A Goldman Sachs analyst thinks that there’s an 80% chance of a tax overhaul.

From a note just published by Alec Phillips, a political economist at the firm:

The tax reform debate is moving forward faster than we or most other observers expected. While there are a number of issues that could still slow it down, or stop it altogether, we believe the odds that tax reform will be enacted by early 2018 — already our base case — have risen to 80% (from 65% previously).

He added that there’s a one-in-three chance of a tax change becoming law by the end of the year, though the House and Senate may need time to reconcile their bills.

While Mr. Phillips thinks that Republicans’ tax efforts still face obstacles, including intense lobbying efforts and questions about whether the Senate can pass its bill, he believes that the overall campaign will succeed.

Among some of Mr. Phillips’ other predictions:

• The corporate tax rate appears likely to go down to 20 percent, but may need to be phased in.

• Limits on deductions for corporate interest payments should follow the more lenient prescription set out in the House bill.

• Fewer Republicans than expected will ultimately push back against limits on deductions for state and local taxes, or SALT in Congressional parlance.

— Michael

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing
Credit Fred Prouser/Reuters

Republican Senators target the A.C.A. as part of tax overhaul.

Senate Republicans will try to eliminate the individual mandate of the Affordable Care Act as part of their bid to enact sweeping changes to the tax system.

Republicans already took one crack this year at doing away with elements of President Barack Obama’s signature health legislation, but could not get anything to President Trump’s desk after Senator John McCain, Republican of Arizona, gave a replacement proposal a dramatic thumbs-down.

Senator Tom Cotton, Republican of Arkansas, had pushed for the mandate to be eliminated as part of the tax bill. Here’s what he had to say:

“Repealing the mandate pays for more tax cuts for working families and protects them from being fined by the I.R.S. for not being able to afford insurance that Obamacare made unaffordable in the first place.”

Mohamed El-Erian would be an unusual pick for the Fed under Trump.

The WSJ, citing an unidentified source, reports that the former Pimco chief executive is a candidate to become the Federal Reserve’s vice chairman. Suffice to say, that’s an unusual pick for the Trump administration. (Mr. El-Erian is just one possibility, and the search process to fill the spot has just begun, the newspaper warns.)

Mr. El-Erian has the qualifications: former C.E.O. of Pimco, currently chief economic adviser at Allianz. But he’s also what some of President Trump’s backers would consider a “globalist,” from his international upbringing as the son of an Egyptian diplomat to his economic views, which generally mesh well with the outgoing Fed chairwoman, Janet Yellen.

Then again, Jerome Powell, the White House’s nominee for Fed chairman, doesn’t represent a sharp break from Ms. Yellen’s policies either. And Mr. El-Erian could get along well with his prospective boss, writing in a Bloomberg View column:

President Donald Trump’s choice of Jerome Powell to lead the Federal Reserve is a very wise decision that will be welcomed by markets. It brings a highly respected, well-informed and experienced professional to the helm of the world’s most powerful central bank.

— Michael

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing

Enforcement report signals a less aggressive S.E.C.

Enforcement actions brought against public companies by the Securities and Exchange Commission declined 33 percent in fiscal year 2017, with much of that decrease happening after President Trump entered office, according to a report from Cornerstone Research and the New York University Pollack Center for Law & Business.

The S.E.C. filed a total of 62 new enforcement actions against public companies and their subsidiaries in the fiscal year, down from 92 the previous fiscal year.

Of the 62 actions, only 17 were brought in the second half of the year.

Remember this prediction about G.E.’s stock price?

Trian Partners probably wishes you didn’t.

It’s from the activist investor’s October 2015 white paper about how to fix the embattled conglomerate. The document was part of a running dialogue with G.E. that eventually led to the firm getting a seat on the company’s board.

At the time Trian published its analysis, G.E. was trading at $25.47. It predicted that by around this time, the conglomerate could get up to $40 to $45 a share. (To be fair, the activist had a laundry list of recommendations that G.E. follow, and the company hasn’t implemented all of them. Who knows whether sticking to Trian’s plan would have avoided this?)

As of early this afternoon, the company’s stock price was at $17.50, down 8 percent for the day.

What could Lloyd Blankfein possible be talking about?

Struck by the positive energy here in Paris. Strong govt and biz leaders are committed to economic reform and are well thru the first steps. And the food's good too!

— Lloyd Blankfein (@lloydblankfein) Nov. 14, 2017

Well, one thing comes to mind.

— Michael

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing
Uber’s headquarters in San Francisco. It has shown one way start-ups could help their employees cope with tax changes. Credit Justin Sullivan/Getty Images

Now it’s Silicon Valley’s turn to panic about the tax overhaul.

Tech companies’ angst comes from a provision in the Senate tax plan that would tax stock options and restricted stock units, which comprise a big part of their employees’ compensation, at vesting, rather than when they’re exercised.

Some start-up employees could owe big tax bills without being able to pay, since privately held companies’ shares are generally harder to sell. Bigger unicorns could draw money from outside investors to let employees cash out — Uber already has — but younger start-ups have no such recourse.

Companies could pay more cash compensation, using up precious cash flow. Or they could go public — if they make it that far. Tech employees might forego working at younger companies because they couldn’t pay as much. “We legitimately can’t figure out how this is going to work,” one start-up adviser told DealBook’s Michael J. de la Merced.

Here’s one founder’s perspective, as given to Reuters:

“It would mean that I would have to sell the company,” said Shoaib Makani, founder and chief executive of long-haul trucking start-up KeepTruckin. “I have zero net worth aside from the common stock I hold in the company. It would be impossible. I would be in default.”

Companies like Airbnb, Lyft and Uber, as well as investors like Sam Altman and Max Levchin, signed a letter to Congress demanding the provision be dropped. And Fred Wilson of Union Square Ventures is urging tech employees to call their senators.

It may not be so bad: Some critics of Silicon Valley’s current pay system say that the stock-heavy model hurts some employees, like those diluted by down rounds, or wiped out if a start-up fails. Anand Sandwal of CB Insights said to Wired of the potential change: “That means the types of start-ups getting built would change as well. Depending on your perspective, that may be a good or bad thing.”

The DealBook special section: navigating an uncertain world.

Tying into themes touched on in our conference last week, here are some of the ways businesses are trying to future-proof themselves:

• Target and other big retailers haven’t given up on brick-and-mortar stores just yet.

• The airline industry’s response to consumers using cameras on flights might be for flight attendants to use cameras too.

• Is it time for companies paid us for using our personal data?

• Five technologies that could change the world.

Read all of our special section coverage on DealBook.

How much time will investors give G.E.’s new chief?

Just look at G.E.’s stock performance yesterday, after the company unveiled its big turnaround plan and dividend cut:

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing

Here’s what Janna Sampson of OakBrook Investments told the WSJ:

“If that is all you were going to say, why did we have to wait from July until November?”

G.E.’s chief executive, John Flannery, said that he wasn’t surprised by the price move. But he asked for more time to turn around a company whose shares have fallen 38 percent over the past 12 months. “This is the opportunity of a lifetime to reinvent an iconic company,” he told investors at a presentation yesterday.

Who might have even more say now: Ed Garden of Trian Fund Management, who took a board seat at the conglomerate after pushing for change. He will stay put throughout a planned culling in which the number of board seats will be reduced by a third, to 12.

Critics’ corner

• Brooke Sutherland of Bloomberg Gadfly argues, “General Electric Co. may have a new leader, but the pattern of over-promising and under-delivering is the same.” (Gadfly)

• Rob Cox of Breakingviews asserts, “The about-face from Mr. Immelt to Mr. Flannery has outdone the usual kitchen-sinking that accompanies the passing from one chief executive to the next.” (Breakingviews)

• Charley Grant of Heard on the Street writes, “The difference here is that Mr. Flannery has laid out a clear plan by which investors can judge his progress. He will have to proceed quickly, though, while maintaining a delicate touch.” (WSJ)

The Washington roundup

• President Trump has a suggestion to pay for a $1.5 trillion tax cut — repealing the Affordable Care Act’s mandate that most people have health insurance. (Politico)

• President Trump nominated Alex M. Azar II, the former president of Eli Lilly, to be secretary of health and human services, a role with responsibility for regulating the pharmaceutical industry. (WaPo)

• The hasty drafting of the House and Senate tax plans has led to some very interesting loopholes. (NYT)

• Some 1,500 former Capitol Hill aides have signed an open letter to House and Senate leaders demanding that Congress bring in mandatory harassment training and revamp the Office of Compliance. (NYT)

Sexual harassment claims prompt Steve Jurvetson’s exit.

In leaving Draper Fisher Jurvetson amid the firm’s investigation into his conduct with women, Mr. Jurvetson has become one of the biggest names in Silicon Valley to be caught up in tech’s self-evaluation of how women are treated. He has also taken a leave of absence from the boards of Tesla and SpaceX.

This was Mr. Jurvetson’s tweet about his move:

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing

The context: From Sheelah Kolhatkar of The New Yorker:

“I think that every major technology company has to be concerned right now. We’ve reached a tipping point,” Kelly Dermody, a lawyer who is working on the cases against Microsoft and Google, told me.

In other sexual harassment news

• Two independent directors at the Weinstein Company said they did not know that David Boies had a business relationship with the company while he was negotiating a contract on Harvey Weinstein’s behalf. (WSJ)

• Goldman Sachs has written down the value of its stake in the Weinstein Company to zero, according to a person familiar with the matter. (Reuters)

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing
Credit Ted S. Warren/Associated Press

Amazon’s China deal highlights tech’s limits.

Amazon said that it had sold the physical equipment for its Chinese cloud business to its partner there to comply with new data laws. While Jeff Bezos’s company isn’t leaving China altogether — it will still hold the intellectual property for the business — the move highlights the hurdles that Western tech companies face there.

From the WSJ:

Amazon and other U.S. companies here, including Apple Inc., have faced increased pressure in recent months in the face of the Chinese government’s desire to control cyberspace. In July, Apple said it would begin storing cloud data for its Chinese customers on a server run by a government-owned company, to comply with Chinese law.

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Sessions Avoids AT&T Talk, G.O.P. Merges Taxes and Health Insurance: DealBook Briefing
A sensor patch made by Proteus Digital Health is part of the Abilify digital pill study. Credit Proteus Digital Health

The brave new world of digital medicine.

Think about the implications — in health, in policy and in business — of the newly F.D.A.-approved digital pill, which has a sensor that can tell doctors whether, and when, patients take their medicine.

Pam Belluck of the NYT notes some possible consequences:

The technology could potentially be used to monitor whether post-surgical patients took too much opioid medication or clinical trial participants correctly took drugs being tested.

Insurers might eventually give patients incentives to use them, like discounts on co-payments, said Dr. Eric Topol, director of Scripps Translational Science Institute, adding that ethical issues could arise if the technology was “so much incentivized that it’s almost is like coercion.”

Revolving Door

• Anheuser-Busch InBev named Michael Doukeris as head of its American operations, as it struggles with slowing sales of mainstay brands like Bud Light. (WSJ)

• Apollo Global Management promoted Scott Kleinman and James Zelter to the newly created positions of co-presidents, setting them up as potential successors to the firm’s co-founders. (FT)

Irene Rosenfeld, who’s preparing to step down as Mondelez’s C.E.O. next week, reflects on a career spent building Kraft up — and then breaking it apart. (NYT)

The Speed Read

• Goldman Sachs investment bankers are targeting smaller companies often neglected by Wall Street’s white-shoe advisers. (Bloomberg)

• Missouri’s attorney general has opened an investigation into whether Google’s business practices violate the state’s consumer protection and antitrust laws. (NYT)

• A Tesla employee who is suing the company has said that its black workers suffer severe and pervasive harassment. (Bloomberg)

• Elliott Management has amassed a stake in the mall owner Taubman Centers and plans to push for changes, including a potential sale, according to people familiar with the matter. (Bloomberg)

• An investment firm backed by a Chinese tycoon, Zhongwang USA, has called off its planned acquisition of the aluminum maker Aleris after it failed to win Cfius backing. (Reuters)

• The private equity firm Roark Capital Group made a takeover bid worth more than $2.3 billion for Buffalo Wild Wings, according to people familiar with the matter. (WSJ)

Follow Andrew Ross Sorkin @andrewrsorkin, Michael J. de la Merced @m_delamerced and Amie Tsang @amietsang on Twitter.

We’d love your feedback as we experiment with the writing, format and design of this briefing. Please email thoughts and suggestions to bizday@nytimes.com.

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