Axios - Business
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Fed: U.S. banks could withstand global recession

Matt Rourke / AP

The Federal Reserve's stress test results are in and, according to their calculations, the 34 largest U.S. banks would be strong enough to withstand a global or U.S. recession if one were to hit right now.

Why we care: The banks weren't prepared for the 2008 financial crisis. Right now they are, according to the Fed. Plus, the stress test will reassure investors.

The test: To see if banks with more than $50 billion in assets have a large enough capital buffer to keep lending in the case of "severely adverse" scenarios resulting in billions of dollars in losses. The next part of the stress testing will be out June 28, and will reveal which banks have "passed" and "failed" their tests.

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Carrier moving Trump jobs to Mexico

Carrier, the heating and air-conditioning manufacturer, is laying off more than 600 employees from its Indianapolis plant next month, the same plant Trump vowed to keep on American soil, per CNBC. Those manufacturing jobs will go to Mexico, where labor is significantly cheaper.

Why it matters: Trump heralded the November deal as proof he'd live up to his pledge to protect U.S. jobs. And this comes just a day after Ford announced that it will move production of its Focus model to China, just months after pressure from the Trump administration resulted in its cancelling plans to make it in Mexico; this was instead of keeping the jobs in the U.S., where the car is currently made.

Refresher on the deal: Trump agreed to give Carrier, a unit of United Technologies, up to $7 million if it continued to employ at least 1,069 people at the facility for 10 years, rather than moving it abroad in search of cheaper labor, as originally planned. Carrier also vowed to invest $16 million into the plant. But just a month after the deal was made, CEO Greg Hayes said the $16 million would be invested in automation.

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More than 1,000 Uber employees ask for Travis Kalanick to return

Lazaro Gamio / Axios

More than one thousand current Uber employees have signed a letter to the company's board of directors, asking for the return of deposed CEO Travis Kalanick "in an operational role." One of its venture capital investors also is chiming in, with a similar message.

The letter is the result of a petition that has been circulating since yesterday, through which employees could add their name and comments on the situation. Rather than technically "signing," they logged into a Google Doc by using their Uber identification credentials. So far, the signatories represent nearly 10% of the company's estimated employee base (which does not include drivers).

Below is the full text of the letter to the board, which was provided to Axios by a source under the condition that we not include the names of signatories.

Board of Directors --

I'm writing to you today ahead of your scheduled meeting to share the thoughts of over 1,100 full-time Uber employees (and counting) who vehemently disagree with Travis' resignation as CEO and the associated pressure placed on him to do so by investors and board members alike.

In less than 12 hours, these employees have expressed their belief that Travis should return to Uber in an operational role. This magnitude of a response was unexpected and should not be ignored. What started as simple note to my closest co-workers turned into a petition spanning hundreds of offices and teams, and has yet to be seen by a majority of employees.

As the folks who've actually worked alongside Travis for years to help create Uber from nothing, we are extremely disappointed by the short-sightedness and pure self-interest demonstrated by those who are supposed to protect the long-term interests of our company.

Yes, Travis is flawed, as we all are. But his passion, vision, and dedication to Uber are simply unmatched. We would not be here today without him, and believe he can evolve into the leader we need. He is critical to our future success.

We await your response and look forward to Travis' return in an operational role.

There also have been several public Facebook posts in support of Kalanick, including from current Uber employees like Margaret-Ann Seger and former ones like Frederique Dame.

Finally, Axios has received a statement from Mood Rowghani, a partner with venture capital firm Kleiner Perkins Caufield & Byers, which is an Uber investor. He appears to agree with the idea of Kalanick retaining an operational role at the company, in addition to just a board seat. It reads:

"It would be wrong to conclude from Uber that founder involvement in the companies they create is a mistake. While founders should be held accountable to strong, independent boards and need the support of experienced leadership teams, founder DNA is a precious asset and cannot be under-estimated. It is a founder's passion, strategic clairvoyance, ability to inspire and motivate employees and relentless pursuit of the mission that enables start-ups to achieve seismic changes against the odds. Founders may not always play the role of CEO but several great companies -- most notably Apple and Twitter -- that severed all ties to their founders eventually came to regret it."

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Wall Street loves Senate GOP health care bill

Richard Drew / AP

Health care companies' stocks soared Thursday after Senate Republicans released the text of their bill to repeal portions of the Affordable Care Act and overhaul Medicaid.

The driving forces behind the rally: the GOP bill would repeal the ACA's taxes and change individual insurance markets. Wall Street, often focused on the short term, also appears content with ignoring large cuts to Medicaid in the long term. Here's how each sector is faring:

  • Pharmaceutical and medical device companies: Rising drug prices are not addressed at all, and medical-device companies would get a full repeal of the ACA's tax on their products. Those are clear victories for two powerful industries. Stock prices rose especially high for drug companies Gilead Sciences, Bristol-Myers Squibb, Eli Lilly and Pfizer.
  • Large health insurance companies: The Senate bill would repeal the ACA's health insurance tax, a top lobbying goal for the industry. Companies would also have a lot more leeway in charging older Americans more for coverage, leading to higher stock gains for Aetna, Anthem, Cigna, Humana and UnitedHealth Group. However, they would be negatively affected by Medicaid cuts, as states likely would cut their payments in managed-care contracts.
  • Hospitals: If the Senate bill ends up facing estimated coverage losses similar to the House version, hospitals are in trouble. But hospital companies like HCA, Tenet Healthcare and Community Health Systems traded higher because of the slight extension to the ACA's Medicaid expansion — even though there will be bigger Medicaid cuts over time in the Senate bill.
  • Medicaid insurers: Stock prices at Centene, Molina Healthcare and WellCare Health Plans rose sharply. These companies get the same benefits as the big insurers, but also could see their Medicaid payments cut more in the future.
The bottom line: Wall Street favors short-term gains, and the Senate bill would repeal the ACA's taxes almost immediately.
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George Clooney sells tequila company for $1 billion

AP Photo/Pete Muller

London-based spirits maker Diageo has agreed to acquire U.S. tequila maker Casamigos for upwards of $1 billion, including a $700 million upfront payment and upwards of $300 million in milestone payments.

Why it matters: This is a reflection of rising global demand for tequila and, in particular, high-end brands. In fact, sales for the "super-premium" category represented by Casamigos have climbed more than 700% since 2002. Plus: Casamigos was co-founded by George Clooney, and we all were hoping that guy could finally get a win.

Bottom line: "Diageo already owns the Don Julio brand. But the company's executives argued that they could take Casamigos to even greater heights by selling it beyond American shores." — Michael de la Merced

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Primack's last word on the Kalanick exit (for now)

AP Photo/Eric Gay, file

The Uber saga continued yesterday, with the resignation of Benchmark partner Bill Gurley from the company's board of directors. He'll be replaced by Matt Cohler who, alongside fellow Benchmarker Peter Fenton, actually negotiated Travis Kalanick's resignation on Tuesday night — namely because Gurley and Kalanick are no longer on speaking terms. In fact, a source says that Kalanick requested Gurley step down so that the board can be more functional going forward (remember, Travis remains a director). Here are other key points:

  • Money: Kalanick obviously isn't hurting, with sources saying that he's received multi-million dollar performance bonuses in each of the past few years. But remember that he's never sold a single share of Uber stock, so he still has a strong financial incentive to help maintain value (versus trying to burn down the house). Moreover, almost everyone I've spoken with believes that his continued board presence is vital to the company's future success.
  • Partners: Multiple sources say that the relationship between Kalanick and Arianna Huffington became problematically close, with Kalanick not really speaking to any other directors between the time he took a leave of absence and Tuesday's investor revolt. In short, Kalanick isolated himself with Huffington as buffer — and other directors were ticked off by things like this NY Times puff piece on Huffington (which they viewed as being primarily about personal brand promotion).
  • Speaking of which: There was a ridiculous NY Post story yesterday suggesting that Huffington was leading the CEO search, via her advocacy for Sheryl Sandberg. To be sure, most everyone at Uber would kill for Sandberg to take the role, but Huffington isn't in any particular charge of recruiting (a role really led by Gurley, who was expected to remain involved). Just to prove the point, that same story later suggests Huffington nemesis Tim Armstrong as a candidate. No way she's recruiting him (nor do I think he's a serious candidate, given the upcoming Yahoo integration that he spearheaded at AOL).
  • Timeline: It is important to note that Kalanick's behavior and choices in the time between taking leave and Tuesday were determinative for many of the revolting investors, although specifics remain hard to come by. But know this: Had Kalanick just taken a couple of weeks at the beach with his phone turned off, he's probably still CEO.
  • Other moves: TPG's David Trujillo will take that firm's board seat, following the resignation of David Bonderman over sexist statements made at last week's all-hands. Worth noting that TPG didn't sign the investor letter on Tuesday, although it was considered to be generally supportive of the effort (seems the letter's specific language was at issue).
  • CEO candidates? Here are some options.
  • Counterpoint: Conventional wisdom is that Kalanick's resignation is a win for Silicon Valley women, but not everyone agrees. Check out this Facebook post from Uber product manager Margaret-Ann Seger: "I'm angry, sad, flustered, confused, but mostly just heartbroken."
  • Reconsidering: Prior to Kalanick's resignation, I wrote a piece questioning whether Uber's board should have hired Eric Holder in the first place. Not whether it needed to investigate sexual harassment claims or that it needed cultural changes -- but rather if the Holder investigation structure was the best way to proceed. Read it here.
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Hugh Hewitt lands his own MSNBC show

Gage Skidmore / Wikimedia Creative Commons

Conservative radio show host Hugh Hewitt will helm his own live weekly news program on MSNBC beginning this Saturday, per TVNewser.

Hewitt's show will air on Saturdays at 8 am. MSNBC will also be expanding their nightly live weekend coverage by two hours until 9 pm with programming anchored by Thomas Roberts.

Why it matters: MSNBC has seen a big boost in its ratings under the Trump administration — with wins for weeknight hosts Rachel Maddow and Lawrence O'Donnell — so they're aggressively expanding their coverage, including bringing in hosts like Hewitt from across the political spectrum, to build on that success.

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Why Facebook doesn't have to reveal political ad data

Noah Berger / AP

Political researchers are frustrated that Facebook will not release aggregate data about political advertising on its platform, Reuters reports. They currently don't have any way to track political ad spend trends (frequency of ads, how they were viewed, creative that resonated with people, etc.).

Why it matters: As the law currently stands, candidates do not need to formally and publicly disclose political ad spend data on Facebook or any other digital property, like they have to with TV spending. Facebook, as they noted in an interview with Reuters, contractually guarantees its advertisers' discretion and will likely continue to honor that without a law in place to force them to act otherwise.

Digital regulation of advertising is pretty far behind TV, radio and print generally, as we noted in a piece about the digital ad landscape earlier this year. Generally speaking, the FCC's laws around media regulation are outdated. For example, the FCC still has laws in place that say you can't own TV station and a newspaper in same market. Citing this and other outdated regulations, FCC Chairman Ajit Pai declared earlier this year that the FCC will undergo a comprehensive review of all media regulations.

Political ad disclosure: The FCC requires broadcasters, cable and satellite operators to publicly disclose political ad spending, but no such requirement exists for digital ad platforms such as Google or Facebook. The FCC does not have statutory jurisdiction over these properties.

What's next? "Eventually laws will be rewritten and reconsidered," says Steve Passwaiter, Vice President of political advertising at Kantar Media, a premier advertising measurement firm. "I think it's clearly just an issue that the laws haven't caught up with the developments in political advertising. Four-five years ago, digital was a relatively small piece of puzzle, but now it's starting to ring up impressive numbers and will likely continue to grow. I would imagine as that happens, hopefully the laws that regulate this kind of stuff will catch up but clearly we're not there yet."

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Trump trade rep threatens WTO on China market status

U.S. Trade Representative Robert Lighthizer Cliff Owen/AP

U.S. Trade Representative Robert Lighthizer testified Wednesday before Congress that it would be a "cataclysmic" mistake for the WTO to grant China market economy status — as the Chinese believe it is required to do this year.

  • What's market economy status? A designation recognizing a country's commitment to free market policies. If China wins this label, it would make it more difficult for the U.S. to win cases it brings against China for violations like selling steel below cost of production.
  • Why it matters for workers: There's good evidence that allowing China's accession to the WTO fifteen years ago was the trade policy decision that most led to joblessness and stagnant incomes, specifically in the manufacturing sector.
  • The Trump Administration has taken a dismissive stand toward the WTO, even saying that it may ignore its rulings. But the Trump trade policy has been all bark and no bite, and there's no reason to believe that revoking the privileges China receives for its membership would bring back lost manufacturing jobs.

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Qatar Airways offers to buy 10% of American Airlines

Michael Probst / AP

Qatar Airways has offered to purchase a 10% stake in American Airlines, per Bloomberg. American Airlines did not solicit the offer and has yet to respond to it, though its shares climbed as markets opened today.

Why it matters: The offer comes during an intense diplomatic standoff between Qatar and its neighbors in the Middle East, which threatened to hurt the airline's business. Still, Qatar Airways is one of the fastest growing airline companies in the world. Its rapid growth has antagonized U.S.-based companies, including American, who have accused Qatar Airways of accepting government subsidies to gain an unfair advantage in the market. Qatar Airways has denied these accusations.

What's next: Qatar Airways' offer is subject to review by American Airlines' board. If Qatar is given the green light to purchase, the foreign company will have as much voting power as American's largest stakeholders.