DealBook Briefing: The New Fault Lines in the Tax Overhaul


The White House may be open to compromise: Mick Mulvaney, the head of the Office of Management and Budget, said the administration would be “O.K.” with excluding the individual mandate if that would help Congress pass the tax legislation.

Extra credit: Ron Johnson of Wisconsin became the first Republican senator to publicly oppose his party’s tax change plans because he wanted more favorable treatment of small businesses, according to the NYT.


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



If You Read Nothing Else About Corporate Tax Reform …

David Mendels, who until a few months ago was the C.E.O. of the video company Brightcove, wrote a LinkedIn post this month that has become the talk of the business world. Here are some of his main points:

• “It is a simple but true concept, customers drive business growth, not tax rates, not mythical ‘job creators.’ Tax rates impact profitability, but are only very indirectly tied to hiring.”

• “Labor markets determine salaries, not tax rates.”

• “As a C.E.O. and member of the board of directors at a public company, I can tell you that if we had an increase in profitability we would have been delighted but it would not lead in and of itself to more hiring or an increase in wages.”

Other executives responded with their experiences and opinions.


Credit Odd Andersen/Agence France-Presse — Getty Images

Will Angela Merkel’s setback hurt the E.U.?

The euro has recovered from its initial decline after the news that Germans might have to go to the polls. But that hasn’t eased the anxiousness of some market commentators.

Here’s what Tilmann Galler, a global market strategist at JPMorgan Chase, told the FT:

“Angela Merkel’s position seems to be significantly weakened. This could leave Europe’s largest economy politically paralyzed for the time being, reducing the chances for any breakthrough in the E.U. reform agenda or the Brexit negotiations.”

But Hartmut Issel, head of equity and credit for Asia Pacific at UBS Wealth Management, told Bloomberg:

“Even if there are re-elections, that is very unlikely to be populist. That’s why it’s going to be a limited down reaction.”


What are unicorns really worth?

A growing number of start-ups are attracting plenty of money without the need for an initial public offering. (That includes letting shareholders sell their stakes to other investors in the private markets, a practice that’s growing more popular, as the WSJ points out.) But something doesn’t add up.

Barrons looks at how private companies have started to face questions about their workplace cultures, valuations and business models. Could the lesson be that public markets remain the best place to achieve long-term corporate success?

Extra credit: Uber’s Dara Khosrowshahi said at our conference this month that the ride-hailing giant has all the downside of being a public company, but none of the upside.


Philip Baker. “I’m a criminal,” he said recently. Credit Aaron Vincent Elkaim for The New York Times

The hedge fund manager who pleaded guilty and wanted the U.S. to let him go.

After the financial crisis, the federal government was expected to aggressively pursue criminal cases against top financiers. Prosecutions were rare, except with obscure, or relatively junior, industry players against whom it was easy to build cases, because prosecutors were under pressure to move quickly and win cases.

Philip Baker became one of those targets.

He was not a big fish. But the desire to resolve the case swiftly led a powerful United States attorney to insert a transfer-to-Canada clause into an otherwise airtight plea agreement.

David Enrich of the NYT recounts Mr. Baker’s efforts to leave the United States while serving a 20-year sentence for fraud.

Media Industry Flyaround

The Weinstein Company has a surprise bidder: Maria Contreras-Sweet, who led the Small Business Administration under President Barack Obama, wants to name women to a majority of the studio’s board seats, according to the WSJ. She also wants to set up a fund for women who said they were victims of Harvey Weinstein, as well as a mediation process to reach settlements with them.

The auction for Rolling Stone is down to a handful of bidders: According to Peter Kafka at Recode, they include Jay Penske of Penske Media; Bryan Goldberg, the co-founder of Bleacher Report and now the founder and C.E.O. of Bustle; and Irving Azoff, the longtime music industry executive.

Former F.C.C. commissioner recommends blocking the AT&T-Time Warner deal: Michael Copps, who served on the commission from 2001 to 2011, writes in a USA Today op-ed:

In 2011, the government allowed Comcast to absorb NBCUniversal in another “harmless” vertical merger (a deal that I opposed). Afterwards, Comcast was caught discriminating against rival cable channels and slowing down rival online video services. All the while, America tumbled down global broadband rankings. So much for “synergies.”


Credit Erika P. Rodriguez for The New York Times

Another former Treasury secretary heads to private equity.

This time it’s Jack Lew, who is joining the firm Lindsay Goldberg as a partner. His predecessor, Tim Geithner, previously joined Warburg Pincus as president.

Unlike Mr. Geithner, however, Mr. Lew already had a background in finance, having worked at Citigroup. The current Treasury secretary, Steven Mnuchin, was a partner at Goldman Sachs and a hedge fund founder before joining the Trump administration.


Apple Park, the company’s new headquarters in Cupertino, Calif. Credit Peter Bittner for The New York Times

What’s next for Apple’s diversity efforts?

The iPhone maker’s vice president of diversity and inclusion, Denise Young Smith, is leaving after only six months in the role — and after she made controversial remarks about how she thinks of diversity extending beyond race and gender.

Speaking at a Quartz event in Bogotá, Colombia in October, Ms. Young Smith said: “There can be 12 white, blue-eyed, blond men in a room and they’re going to be diverse too because they’re going to bring a different life experience and life perspective to the conversation.” She later apologized for the remarks.

But according to TechCrunch, citing an unidentified person, Ms. Young Smith apparently began talking with Tim Cook about changing her role before the Bogotá conference. And a search for her replacement began months ago.

Extra credit: The news of her departure came just days after Apple released its latest diversity report: 32 percent of its employees were women, up 2 percentage points from 2014, while 56 percent of its work force was nonwhite, little changed from three years ago.

Jim Comey is really into subtweeting.


The latest piece of evidence.


Credit Jacquelyn Martin/Associated Press

Quote of the Day

“I should take that as a compliment that I look like a villain in a great, successful James Bond movie.”

— Steven Mnuchin, on that now-famous photo, to Chris Wallace of Fox News.

The Speed Read

• Money managers are sometimes misrepresenting ratings from Morningstar in advertisements aimed at investors, a Wall Street Journal review found.

• Elon Musk “figured out a way to avoid banker fees for a several-hundred- million-dollar capital raise,” with the help of customers willing to wait years for Tesla to deliver shiny new cars. (Bloomberg)

• The Amazon effect: Whole Foods said sales in its fourth quarter rose at their fastest pace in two years. (Bloomberg)

• HNA, and big Chinese conglomerates like it, electrified the investment world with a mergers-and-acquisitions bonanza. Now, their heavy debt is raising fears that they could pose a systemic risk to China’s economy and casting doubt on the future of cross-border investment. (WSJ)

• Eight of the world’s largest banks are set to discuss settlements worth billions of euros with the European Commission over allegations that they formed a cartel to rig the $5.3 trillion global foreign exchange market. (FT)

• Global businesses operating in Britain that help finance lawsuits and take a cut of any damages have raised more than £10 billion, or $13.2 billion, with hedge funds, banks and other large investors all attracted by the potential for big returns. (FT)

• Alibaba Group has agreed to invest about $2.9 billion in one of China’s largest operators of retail megastores, according to a person familiar with the matter. (The Information)

• Steve Jurvetson was asked to leave DFJ because the firm caught him lying about what it considered serious allegations, a person familiar with the situation said. Mr. Jurvetson declined to comment. (Recode)

• Twenty states suspend people’s professional or driver’s licenses if they fall behind on student loan payments. (NYT)

• Toshiba said it would raise $5.3 billion through the sale of new shares to foreign funds, a step to avoid being delisted from the Tokyo Stock Exchange if the planned sale of its chip unit is delayed. (WSJ)

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

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