Good morning.
Wells Fargo CEO Tim Sloan got his rear end chewed up by Elizabeth Warren’s whirring blades yesterday. “You should be fired,” the Senator told him, after accusing him of enabling the scam in which the bank created millions of unwanted accounts, “getting rich off it,” and then “lying” to “cover it up.”
The attack was wildly unfair. There’s no evidence Sloan was involved in the creation of false accounts, or in creating the overhyped sales culture that led to the practice. And attacking him for owning stock in his own company is like accusing a baker of kneading dough. Moreover, Sloan deserves credit for taking big steps to address the bank’s problems since the scandal broke, as my colleague Geoff Colvin showed in this Fortune story in June.
But yesterday’s spectacle once again raises the question of whether a company lifer, insulated by an insular board, can dig the bank out of the very deep political and reputational hole it has dug for itself. GM CEO Mary Barra is the rare example of an insider who transcended the culture that created her. But she’s the exception, not the rule. Whether Sloan can pull off the same trick is still an open question, as yesterday’s hearing demonstrated.
Sloan is also the wrong advocate for the increasingly common business practice of forcing customers to use arbitration to settle their grievances, rather than the courts—which became a hot topic in yesterday’s hearing. There may be merit to the business case for arbitration. And there is certainly big trial lawyer money behind the Democrats’ opposition. But with revelations showing Wells employees created 70% more fake accounts than previously thought, Sloan makes a frail flag carrier for the business case.
You can see Sloan in action in this video from Fortune Brainstorm Tech.
Top News
• Antitrust Amazon Takes on Amazon.com
EU antitrust authorities concluded that Amazon had received €250 million in illegal tax benefits through to a sweetheart deal with Luxembourg and ordered the Grand Duchy to claw the money back. EU Commissioner Margrethe Vestager said the deal allowed Amazon to avoid tax on three quarters of all the profits it made in the EU. Separately, Vestager also announced the EU will sue Ireland for failing to recover €13 billion in tax from Apple as ordered last year. The EU’s crackdown on U.S. tech giants is gathering momentum: it is also expected to announce later today changes to the way sales taxes are levied in an attempt to neutralize sweetheart deals with countries such as Luxembourg and Ireland. Fortune
• Hackett and the Fitter Ford Future
Ford CEO Jim Hackett unveiled a sweeping new strategy for the company: he promised a much simplified manufacturing process (in which 3D printing robotics feature heavily) to cut $14 billion from operating costs within five years. In addition, all new U.S. vehicles will come with Internet connectivity. It will also cut investment on combustion engines by one-third and redirect the funds to increasing its suite of electric vehicles. And it will downgrade sedans and compacts in favor of trucks and SUVs, moving production of the Focus from North America to China, in order to save money. Investors liked it, pushing the stock up 2.1% to a seven-month high. Fortune
• Uber Board Rolls out the Red Carpet for Softbank
Uber’s board stripped all “super-voting” shareholders of their extra voting rights, curtailing the privileges of co-founder and ex-CEO Travis Kalanick but not permanently barring him from returning to the company. The deal smoothes the way for a major investment from Softbank. The Japanese conglomerate will inject up to $1.25 billion at a valuation of $68 billion, but will spend another $9 billion buying out employees and investors at a lower valuation. Softbank had not wanted to give early backers an exit without getting a proportionate degree of control in return. Fortune
• Markets Are Hostage to Catalonia
World stocks paused for breath as the October employment report loomed over the horizon, and the Catalan crisis continued to deepen. Spain’s stock market hit a seven-month low and the sovereign yield spread over Germany, a benchmark of political risk, hit a six-month high after King Felipe denounced the Catalan regional government for destabilizing the country with its illegal referendum on independence. Mass protests passed off peacefully in the region Tuesday. The likeliest outcome still remains a compromise, given the financial disruption that would come from the Bank of Spain and ECB refusing to refinance the region’s banks in the event of independence. Fortune
Around the Water Cooler
• Buffett Bets on Trucking
Berkshire Hathaway agreed to take control of Pilot Travel Centers, owner of the truck stop chain Pilot Flying J, over a six-year period. It’ll buy a 38.6% stake to start with. Terms of the deal weren’t disclosed. Warren Buffett praised the company’s “long-standing tradition of excellence” and “smart growth strategy.” Fortune
• When Vladi Met Sali
Saudi Arabia’s King Salman is packing his bags for Moscow, on his way to meet Vladimir Putin in what will be the first top-level state visit between the two countries. They’re expected to sign terms for the biggest-ever Saudi purchase of Russian arms after tomorrow’s talks. The visit illustrates the rapprochement of two countries that have clashed badly over Syria, but which have a common interest in propping up oil prices—at least until Saudi Aramco’s IPO and presidential elections in Russia are out of the way, at which point the need for cooperation will become less pressing. Reuters
• The EPA Prepares to Scrap the Clean Power Plan
The Environmental Protection Agency is preparing to propose a repeal of the Clean Power Plan, the cornerstone of the Obama administration’s Climate Change policy, Reuters reported. The CPP is currently suspended because of an appeal court ruling. Elsewhere, the International Energy Agency said renewables accounted for two thirds of net new power generation capacity last year, and that more new capacity was installed in the form of solar than coal for the first time (thanks to a radical policy shift in China). The IEA raised its total for this year’s new installed renewable capacity by 12%. ”Fortune”
• Yahoo Breach Hit All 3 Billion User Accounts
Verizon said that the data breach at Yahoo in 2013 was much worse than estimated, and effectively compromised all 3 billion of the company’s user accounts. Verizon had assumed this was the case when it amended the terms of its acquisition of Yahoo back in June, so it won’t be seeking further redress. The Justice Department indicted four people, including two Russian intelligence officers, for the breach, saying that they paid hackers for the information to enable Russian spying on diplomats, executives, and journalists. Fortune
Summaries by Geoffrey Smith; geoffrey.smith@fortune.com
@geoffreytsmith
