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Axios Macro

PG&E still plans to move forward with its Chapter 11 bankruptcy protection filing, a source close to the company tells Axios.

Driving the news: California investigators ruled Thursday that PG&E was not responsible for the 2017 Tubbs fire near Santa Rosa that destroyed thousands of acres and killed more than 20 people.

The company's stock jumped 70% after the announcement.

The backdrop: PG&E is on the hook for $30 billion dollars in liability costs for fires in the past two years. Per a company filing, at least $10 billion is for the 2017 fires, but it’s unclear how much of that amount is for the Tubbs fire specifically. PG&E's equipment was linked to over a dozen fires in 2017.

PG&E still faces “significant potential liabilities and a deteriorating financial situation, which was further impaired by the recent credit agency downgrades to below investment grade," a company spokesman tells Axios.

California has not concluded its investigation into whether PG&E’s power lines sparked the 2018 Camp Fire, which eclipsed the Tubbs Fire as the worst in the state’s history.

Yes, but: BlueMountain Capital Management, the hedge fund set to launch a full-on proxy battle with PG&E, is urging the company not to file for Chapter 11.

“The news from Cal Fire ... is another example of why the company shouldn't be rushing to file for bankruptcy, which would be totally unnecessary and bad for all stakeholders,” said a spokesman for BlueMountain, which owns about a 1% equity stake in PG&E.

The hedge fund has sent a series of letters to the company (including one calling on PG&E to replace its entire board) arguing against bankruptcy.

Bottom line: The most likely reason PG&E would halt its bankruptcy filing is any indication that California legislators would be willing to step in and help.

California governor Gavin Newsom, per the Fresno Bee: PG&E's bankruptcy remains “an open-ended question, and that’s a question for them.”

PG&E still plans to file for bankruptcy

PG&E is on the hook for $30 billion dollars in liability costs for California fires in the past two years.

PG&E truck surveys damage from fallen tree

PG&E truck surveys damage from fallen tree. Photo: Justin Sullivan via Getty Images

Business

Pacific Gas and Electric Company (PG&E)

Energy & Climate

The Trump administration has asked Israel to publicly support the U.S. push to oust Venezuelan President Nicolas Maduro and recognize the leader of the opposition, Juan Guaido, as the interim president, Israeli officials told me.

Why it matters: Israel has no diplomatic relations with Venezuela. Since Guaido declared himself president and received recognition from the U.S. earlier this week, Israel has kept silent and declined to issue any public statements. Israeli officials told me there are concerns in Jerusalem that if Israel publicly supports the opposition, the Maduro regime would harm the 6000 members of the Jewish community in Venezuela.

Details: An Israeli official told me the U.S. message to Israel was conveyed on Thursday by State Department officials to diplomats in the Israeli embassy in Washington. A similar message was conveyed to several U.S. allies that still haven't issued statements of support in the U.S. push against Maduro.

The official told me that on Sunday, there will be a special meeting on the Venezuelan crisis at the foreign ministry in Jerusalem in order to draft recommendations for Prime Minister Netanyahu. "Netanyahu will have to decide whether Israel keeps mum or joins its Western allies in support of Guaido," the official said.

Go deeper: Venezuela at crossroads as world leaders split on presidential support

Trump administration asked Israel to publicly support push against Maduro

There are concerns that if Israel supports Juan Guiado, Maduro will retaliate against Venezuelan Jews.

President Trump with Israeli Prime Minister Benjamin Netanyahu. Photo: Menahem Kahana/AFP via Getty Images

World

Venezuela

Conflicts, policies and powers are intersecting and shaping the world. Breaking news and analysis of national security, foreign policy and global crises.

DAVOS, Switzerland — For two years, the global elite has fumbled for ways to defend the 7-decade-old structure of trade and diplomacy from punishing attacks. This week, they declared the system all but dead. 

The main thing now, leading thinkers said, is to ensure that what replaces the system in the coming years prevents a great-power war — as the existing one has — and delivers more for millions left behind by the current economy.

The scale of what comes next seems likely to rival key modern social, political and economic transformations, such as the post-Gilded Age of the early 1900s, the global Great Depression of the 1930s, and the Reagan-Thatcher revolution of the 1980s.

"The paradigm is shifting. Powerful people are asking questions on the record in the halls that they've never asked before," said Ben Pring, director of the Center for the Future of Work at Cognizant.

Since Brexit and the election of President Trump, elite politicians, executives and scholars who meet here every year have wrung their hands over the wave of shocks to a global power system whose permanence most had taken for granted. Those shocks include needling and threats from Trump and throw-out-the-scoundrel elections across Europe and in Brazil. 

But these elites told Axios that, while the current system is still functioning in place, a transition is already underway to a likely very different global political and economic order, one that is now at best faintly visible.

Klaus Schwab, founder of the World Economic Forum, told attendees that they must make dramatic changes to the global system, and not merely tinker.

And executives seemed to agree, voicing a new readiness to fundamentally change course in order to avert the worst, such as social unrest and violence, said Brian Gallagher, CEO of United Way Worldwide. 

One thing all of them told us: The speed of advanced technologies, in particular artificial intelligence and automation, is already making the transition more disruptive than prior epochal shifts — and may prolong it.  

Wild card: The global system has already buckled under these pressures — and this has been amid strong economic growth. But now, a number of economists forecast global recession and, in the U.S., the possibility of zero growth — and populations may become even angrier under these more stressful conditions.

The new order could enable authoritarian-style governments that undermine counterweight institutions, said Adam Tooze, an economic historian at Columbia University. "You could have a liberal trading system with a majority of authoritarian regimes."   

Many assume Beijing will sooner or later dominate the new order. That is not preordained, but even if power is dispersed regionally, China, India and Brazil all stand differently politically, which could cause tensions of their own. 

Deep Dive: A new — unknown — world

An Axios Special Report from the World Economic Forum in Davos.

Future

Deep Dive: Davos

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Top stories & latest news on the Federal Reserve, real-time data, plus the biggest shifts happening in the U.S. and global economy.

Economy

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

DAVOS, Switzerland — If a single theme ran through this week, it was acceptance that the capitalist system, of which the attending elites are the masters, is broken. And if they don't take charge, changes may come that they won't like. 

What brought them to this point is a growing threat of trust-busting, regulation and public opprobrium in both the U.S. and Europe, on top of the residual shock of Brexit and the election of President Trump. 

In interviews and speeches, many of them described what is fueling the push for dramatic action:

Three-quarters of people living in developed countries feel they are not getting a fair shake, according to the Edelman Trust Barometer. 

Real pay for all but the richest people has been almost flat for at least three decades. And when Americans have lost a job, almost half have moved to a lower-paying one, jeopardizing their place in the middle class.  

Home prices in U.S. and European cities are often unaffordable, again for almost anyone but the wealthiest.

"Only 1 in 5 people say the system is working for them. One in 3 say their children will be worse off. That is really scary," Richard Edelman, CEO of the eponymous public relations firm, told Axios on Thursday in Davos. 

In reporting this story, I came to know that this is not an easy discussion to have — executives, economists and others here were often angered at the mere juxtaposition of the words "capitalism" and "challenge," as though change meant a Soviet-style economy. But in public and private sessions, the CEOs came to acknowledge that few are talking about overturning capitalism itself, and determined that they must do something.  

As a hedge fund CEO described the zeitgeist: "We need to get in front of this problem or it's going to get in front of us." 

"Whether they're concerned about their business and profitability and shareholder value and so forth, or they're concerned about society overall, they understand that they may have to slow down the integration of the global economy in order to let the rest of society catch up," said Brian Gallagher, chairman of United Way Worldwide, who has attended Davos 10 other times. "That's the first time I've heard it here.”

The main flaw with capitalism, critics here and elsewhere argue, is that nowhere is it practiced as it is meant to be: capitalism is supposed to be hellishly competitive; and, in addition to featuring an invisible hand, it's supposed to have a heart.

Instead, say increasing numbers of critics, market power is concentrated across industries. In the U.S., four airlines control more than 65% of the market; in cellphone service, the top four have 80%; and in drug stores it's about 70%, according to "The Myth of Capitalism," a new book by Jonathan Tepper. This is not to mention the market power exerted by Big Tech.

As to empathy, the problem goes back to Adam Smith, the father of capitalism. Mainstream economists tend to ignore Smith's appeal to the better nature of the human race — for "following our conscience [and] ... promoting the happiness of mankind," according to the Adam Smith Institute. 

The neglect of this dimension is a culprit in the grievances of the world's down-on-their-luck rust belts, coal towns, and factory centers. 

"The way [capitalism] has been practiced has been corrosive to some of the conditions that made it an attractive system," Christopher Eisgruber, president of Princeton University, tells Axios. "The practice has undermined some of the cultural supports that made it successful." 

The bottom line: "Large segments of society are excluded from the fruits of economic growth," said Adam Tooze, an economic historian at Columbia University. "And the corporate world is deeply worried about legitimacy."

Go deeper: Read the full Davos Special Report

At Davos, a reckoning for capitalism as practiced

CEOs at Davos acknowledged they must do something to reform a model that has left so many behind.

Axios AM

Roger Stone, the longtime Trump adviser indicted Friday in the Mueller investigation, texted me before going to bed: "I will prevail."

Stone had hit the cable news circuit after being released on bond from a Florida courthouse, telling Fox News' Tucker Carlson: "No matter how much pressure they put on me, no matter what they say, I will not bear false witness against Donald Trump. I will not do what Michael Cohen has done and make up lies to ease the pressure on myself."

On CNN, Chris Cuomo asked Stone if he was making the unusual move of going on the air to defend himself because he thinks Trump will pardon him.

Stone said: "I've never had any discussion with him or communication with him regarding that."

Asked if he would accept one, Stone said: "I don't expect to be convicted, so I'm not going to address it. I don't address hypothetical questions, as you know."

Asked if he would cut a deal to avoid a trial: "I know that I am innocent. My intention is to plead not guilty and to fight the charges, and I have had no discussion with anyone regarding a pardon."

"I believe in God. I know what I have and have not done."

"I have to raise $2 million through stonedefensefund.com because I’m not a wealthy man, and the legal expenses so far have been very damaging, very devastating."

What's next: Stone will be arraigned Tuesday in D.C.

Roger Stone's media blitz

It was an unusual step that prompted questions about whether Stone was appealing for a Trump pardon.

Roger Stone speaking to reporters outside his court hearing. Photo: Joe Raedle via Getty Images

Politics

Roger Stone

Yesterday was a devastating day for President Trump as he heads into his reelection campaign and an era of divided government.

Why it matters: He blinks; he disappoints the people who still love him; he gets no credit for reopening the government, given he already took credit for the shutdown; and we’re back where we started after 35 days of pointlessness.

The big picture: The shutdown not only wasted a month of Trump's presidency, but it accelerates a months-long losing streak:

Trump is being outfoxed and outplayed by Speaker Pelosi: 

He ended the shutdown without getting anything obvious in return, after caving earlier in the week to her refusal to hold the State of the Union address in the House chamber.

"Pelosi 2, Trump 0," a senior administration official instantly texted me. 

Drudge's banner, with a Trump pic: "WALLED IN."

Swan tweeted: "A former White House official texts me, unsolicited: 'Trump looks pathetic...he just ceded his presidency to Nancy Pelosi.'"

Maggie Haberman tweeted: "Not only did Trump alienate moderates with a shutdown, he upset his core 35 percent by caving — and, most significantly for 2020, did it all as Democrats held together on a major issue fight."

Yesterday's indictment of Roger Stone references "senior Trump Campaign officials," "a senior Trump campaign official" and "a high-ranking member of the Trump Campaign": 

A "senior Trump Campaign official was directed to contact STONE about any additional [WikiLeaks] releases and what other damaging information [WikiLeaks] had regarding the Clinton Campaign."

The midterm results left Trump weaker in battleground states than many people in his orbit seem to realize. 

As Jim VandeHei and I pointed out in November: "[A]ll the big trends are working against Trump and the GOP."

Trump's election and Year 1 juiced the record bull run, but the stock market wobbled and dipped in Year 2:

Data: Money.Net, Yahoo! Finance. Chart: Harry Stevens/Axios

Be smart: An adviser to top Republicans told me this week's debacle "rendered Trump impotent."

"Total surrender," the adviser said. "Disorganized, disoriented and now disrespected."

"The Senate Rs were about to cut and run. He had no exit ramp."

"At least it got Stone off the top of the news."

Trump's self-inflicted slump

In addition to wasting a month of Trump's presidency, the shutdown accelerates a months-long losing streak.

Axios

Saturday's top stories

PG&E still plans to file for bankruptcy

Trump administration asked Israel to publicly support push against Maduro

Deep Dive: A new — unknown — world

At Davos, a reckoning for capitalism as practiced

Roger Stone's media blitz

Trump's self-inflicted slump

Hard times bring a huge political shift for both parties

Sorry, Millennials didn't kill your mall

Trump signs bill to officially reopen government

Pelosi questions Trump's ties to Putin in wake of Stone arrest