President Trump’s decision to dismiss FBI director James Comey Tuesday night has pushed Washington into further partisan chaos, weakened chances for action on either health care or taxes, and made what once looked like a promising year for legislative accomplishments in Washington increasingly look like another year of partisan gridlock.
On the health care front, Aetna announced yesterday it is completing its exit from the Affordable Care Act insurance exchanges, saying financial losses and uncertainty about the marketplaces’ future were prompting its exit from two final states. The company initially entered 15 of the state marketplaces created by Obamacare, but found they attracted too few healthy young customers and too many sick and older ones, causing financial losses. Republicans say this is proof that Obamacare is failing, and they are right. Democrats say it is proof that the Republican’s House-passed bill won’t solve the problem, and they are also right. Wouldn’t it be nice if they could sit down together and try to fix the problem?
Meanwhile, the timetable for completing action on taxes is drifting further, with some savvy Washington observers – including the folks at Goldman Sachs — saying it may not happen until next year. And next year will quickly get bogged down in the mid-term elections. Any chance for a bipartisan approach to tax legislation is evaporating.
Meanwhile, Comey – who had the honor of being equally pilloried by Republicans and Democrats — got support on Twitter yesterday from his former boss, Ray Dalio, who runs hedge fund giant Bridgewater. (Comey worked at Bridgewater from 2010 to 2013.) “I have come to know and admire James as a man of integrity and a hero,” Dalio wrote. “He is a man who will sacrifice his own well being for the greater purpose. He is a man of high principles operating in a low-principles environment.”
“Heroes typically get crucified or martyred in the end.”
• Comey, Correlation and Causation
James Comey had asked Deputy Attorney General Rod Rosenstein last week for additional resources to expand the investigation into alleged collusion between Donald Trump’s campaign staff and Russia last year, various media reported. In the weeks before his firing, Comey had become “concerned” by evidence suggesting collusion and had started to receive daily briefings on the case, instead of weekly ones, the WSJ said. Elsewhere, Reuters reported that Comey’s refusal to brief the White House ahead of his Senate Testimony regarding the Hillary Clinton investigation had been a pivotal moment. Elsewhere the Senate Intelligence Committee subpoenaed documents from former National Security Advisor Michael Flynn in its investigation into the issue. The President brassed it out with a warm welcome to Russia’s Foreign Minister and ambassador to the U.S. in the White House, as well as a photo-op with Richard Nixon’s former Secretary of State Henry Kissinger.
• Snap Shares Plunge After First Earnings Report
Evan Spiegel got the roughest of introductions to the rigors of quarterly reporting, after Snapchat parent Snap Inc missed analysts’ forecasts by a wide margin in the first three months of 2017. The company lost $2.2 billion on a mere $150 million in revenue. While much of that was an accounting issue reflecting one-off stock awards, and thus not a direct concern, investors were more worried by a slowdown in user growth – it added a modest 5 million users in the period, down from 10 million and 21 million in the previous two quarters. The company’s shares fell 26%, cutting Spiegel’s net worth by around $1 billion.
• Uber Looks Like Losing Key Court Ruling in Europe
Europe’s top court dropped a heavy hint that it is preparing to rule against Uber in a case with far-reaching implications for its operations in the EU. A senior adviser to the European Court of Justice said in a statement that Uber must be classified as a transportation service rather than an ‘information society’ service. The designation exposes it to all manner of local and national regulations that it has largely avoided so far. Such regulations are at the heart of licensed taxi drivers’ complaints of unfair competition. The adviser’s statement is not a final ruling, but the ECJ’s advisers often post preliminary opinions in such cases to establish a degree of legal clarity, and its final rulings seldom differ much in substance.
• Brazil’s Trial of the Century Gears Up
Brazil’s former President Luiz Inacio Lula da Silva appeared in court as a suspect for the first time Wednesday, giving a five-hour deposition in a corruption case that implicates the Socialist former leader in the country’s long-running “Car Wash” corruption scandal. Lula allegedly received possession of a beachfront property in return for favors to construction company OAS (favors doled out by state-controlled oil company Petrobras). Lula claims he is being targeted for political reasons to stop him running in the next Presidential elections. Blanket media coverage and large-scale demonstrations both for and against Lula brought much of the country to a standstill.
Around the Water Cooler
• AIG Turns to Greenberg Protégé
Insurer AIG is turning to a protégé of former CEO Hank Greenberg to succeed the ousted Peter Hancock, according to The Wall Street Journal. Brian Duperreault, who served 20 years at AIG before leaving for spells at companies including Marsh & McLennan, is not an obvious long-term replacement, being already 70 years old. However, he arrives with the kind of record in turnarounds that AIG needs after a mixture of legacy and current problems derailed Hancock’s recovery strategy.
WSJ, subscription required
• Verizon to Pay $3.1 Billion for Straight Path
Verizon will buy Straight Path Communications for $3.1 billion, according to The Wall Street Journal. That’s almost twice the initial price that Straight Path had agreed with Verizon’s rival AT&T before somebody drew attention to the potential value of the company’s rights to use high-frequency radio waves, which some think could form the backbone of the first 5G wireless networks. It’s also eight times what the company was worth seven months ago. Neither company confirmed the news.
WSJ, subscription required
• Engine Problem Hits Key Boeing Project
Boeing temporarily halted flights of its new 737 MAX due to an issue with the engine, which is jointly made by GE and France’s Safran. The grounding comes days before Boeing was due to deliver its first 737 MAX to an airline, and is a high-profile delay in a program that Boeing had said was ahead of schedule. It could mean a costly disruption if the problem persists, as airplane-makers typically only get most of the payment for a plane when it is handed to the buyer. It also stops Boeing from making the most of Airbus’ problems in delivering its main single-aisle airliner, the A320 neo, to customers.
• Abercrombie & Fitch Is up for Sale
Shares in teen fashion chain Abercrombie & Fitch rose 12% after a report saying it had hired investment banks field takeover interest from other retailers. The company is just one of many being squeezed to death by rivals such as Zara and H&M, as well as fast-growing online rivals. Even sales at Hollister, which appears more popular with today’s teens than the original company brand, are flatlining, at best. The company’s shares were trading at a 17-year low before the news, leaving it with a market value below $1 billion, while its operating income fell 80% last year to a mere $15 million.
Summaries by Geoffrey Smith; email@example.com @geoffreytsmith