This is the last CEO Daily for 2016. We’ll be dark until January 3. But then we will be back, tracking developments on three mega-stories:
-Trump’s victory has created the best opportunity for major policy action in Washington since 2009, and he has filled his administration with people who understand the needs of business. That, plus the President-elect’s unpredictability, will make for a very interesting year.
– Digital technologies continue to alter the fundamentals of virtually every business and disrupt long-established business models, creating the equivalent of a new industrial revolution. Those trends will only accelerate in the New Year.
-Global capitalism is being challenged by rising inequality and a political backlash in the developed world. The most forward-thinking business leaders understand this, and are searching for ways to make the system work better for all. We’ll be watching – and encouraging – this effort.
In the meantime, I wish you all a happy holiday, a Merry Christmas, and the very best of fortune – and Fortune – in the New Year.
More news below.
• A Decree Went Out That All the World Should Settle for Subprime Fraud
That’s what you call clearing your desk for Christmas. The Department of Justice agreed a total of $12.5 billion in settlements from Deutsche Bank ($7.2 billion) and Credit Suisse ($5.3 billion) for the fraudulent sale of mortgage-backed securities leading up to the financial crisis. In both cases, customer redress accounts for roughly half of the total. However, just to make sure they weren’t left twiddling their thumbs on Jan. 3, DoJ officials also slapped Barclays with a lawsuit over the same issue. The DoJ is believed to be seeking $5 billion, while Barclays estimates its liability at between $1-$2 billion. The fact that Deutsche’s final settlement was only half what the DoJ had sought drove its share price up 5% in Frankfurt. Fortune
• Trump Pressures Lockheed (for There Was No Room in the Budget)
President-elect Donald Trump upped the pressure on Lockheed Martin over cost overruns for the F-35 project by saying he had invited Boeing to quote on providing a modernized version of the F-18 Super Hornet as an alternative. Quite how defense chiefs will feel about getting a makeover of a 20 year-old product – without stealth capabilities – we can only guess. The F-35’s flaws must be more serious than we know if this represents an acceptable alternative. Lockheed’s shares fell 2% in after-hours trading on the news. The market seems to feel more relaxed about it after a good night’s sleep, as BAe Systems, another key contractor in the F-35 project, was little changed. Fortune
• Italian Police End Berlin Killer’s Flight Into Egypt (or Tunisia)
Finita la commedia. According to Italian Interior Minister Marco Minitti, Milan police have shot dead Anis Amri, the Tunisian man suspected of committing the attack on a Berlin Christmas market on Monday. Amri had fled back to Italy (where he had spent the best part of four years in jail), after police launched a Europe-wide manhunt for him. The catalogue of errors that, it seems, allowed Amri to commit the attack thus closed with him being able to drive 700 miles back to the only country where he had previously lived in Europe. Germany’s respite is likely to be brief. Separately, German police arrested two Albanian migrants on suspicion of planning an attack on a shopping mall in Oberhausen in western Germany. Time
• Peace on Earth and Goodwill to Junior Bondholders
By a curious coincidence, just around the time Milan police were shooting Amri, the government in Rome was approving a third bailout in five years for Banca Monte dei Paschi, Italy’s third-largest lender. The bank had asked for support from a newly-approved 20 billion euro ($21 billion) rescue facility earlier in the day after failing to find private investors to back a complex three-pronged plan under which it would have shed billions in bad loans and raised 5 billion in new equity. The amount of support needed isn’t yet clear, but the government has pledged not to burn 40,000 (mostly well-off) retail investors in the bank’s junior bonds. Financial stability, and domestic political peace, are thus assured in the short term. Nonetheless, the deal is a fine illustration of why the Italian state is near bankrupt while its households are (by some measures) the richest in Europe. Fortune
Around the Water Cooler
• Icahn’s Glad Tidings of Great Joy for Banks, Refiners
Carl Icahn said he would focus on pruning banking and environmental rules in his role as adviser to the incoming president. Icahn told CNBC that the level of regulation had become “absurd” in some areas. Which is a point that Fortune would largely agree with. Indeed, the very importance of reform means that the administration can’t afford to let it fall foul of glaring potential conflicts of interests that arise when an active, large-scale investor advises the executive on rules that govern some of his investments. Icahn didn’t help his cause yesterday by claiming innocence and dismissing such concerns as “crazy,” and by singling out the sector of “obligated refineries” for urgent attention. CVR Energy, a refiner in which he is directly invested, rose 12% on the news. To paraphrase Manchester United soccer coach Jose Mourinho, anyone can be clever; the trick is not to think that everyone else is stupid. Fortune
• And Lo! There Appeared a Host of Investors Praising Weight Watchers
It’s not just Carl Icahn who can move stocks. Shares in Weight Watchers surged over 5% (they were up 15% at one point) after talk show superstar Oprah Winfrey said she’d lost more than 40 pounds using the company’s weight loss regimen. “I’m eating everything I love — tacos, pasta. I’ve never felt deprived,” Winfrey said in a new ad for Weight Watchers that came out yesterday. Winfrey had bought a 10% stake in the company and secured herself a board seat in November last year, but the immediate boost to the share price had all but dissipated since then. It goes without saying that, with the holidays on the doorstep, the ad is being pitched at an audience that should be highly receptive within a fortnight. Fortune
• Kalanick Takes the High Road out of Nazareth
Having discovered that it’s still as hard as ever for a prophet to be honored in his own country, and among his own people, Uber CEO Travis Kalanick is taking the company’s latest experiment with self-driving cars to Phoenix, Arizona. “We’re excited to have the support of Governor Ducey,” the company said. Ducey had signed an executive order allowing the testing of autonomous vehicles on public roads last year, around the time that Uber announced a partnership with the University of Arizona’s College of Optical Science to focus on research and development in the optics space for mapping and safety. Fortune
• It’s a Wonderful Life, Says Herod
Of course, Christmas wouldn’t be Christmas without a four-hour press conference from the Democratic Party’s bete noire. Vladimir Putin used his tightly-orchestrated annual event to troll the Dems for being out of touch with both the people and their roots. Answering a question about supposed hacking in the Presidential election, Putin asked archly whether he was also to blame for them losing the House as well. The press conference comes a day after President-elect Donald Trump called for a major expansion of U.S. nuclear capabilities (Putin was telling his generals at the same time that their country was ‘superior to any potential aggressor’). Putin tried to allay fears of an arms race that his country can’t afford – as well he might, given that per-capita GDP has shrunk by some 40% since he invaded Ukraine in 2014. As for the rest, it boiled down to -never mind the corruption, feel the grain harvest. Bloomberg
Summaries by Geoffrey Smith Geoffrey.email@example.com;