Good morning. Tom Friedman, Times Opinion columnist, will join us on our next DealBook Debrief call, tomorrow at 11 a.m. Eastern. He will discuss his plan for making the American economy more resilient after the pandemic — make sure to read his latest column about it — and take your questions. For information about how to join this and future DealBook calls, sign up here. (Was this email forwarded to you? Sign up here.)
Who is, and isn’t, on the list
President Trump revealed yesterday who will advise him on reopening the economy. Sort of.
He read out the names of nearly 200 corporate chiefs and other notable figures during a news conference at the White House, implying they would act as consultants of sorts. (At least one of them told The Times that no such request had been made before the announcement.) The White House later published a list of leaders who would serve on “Great American Economic Revival Industry Groups” and take part in conference calls.
Who made the cut: Tim Cook of Apple, Mark Zuckerberg of Facebook, Jamie Dimon of JPMorgan Chase, Sheldon Adelson of Las Vegas Sands and Robert Kraft of the New England Patriots.
• Some companies nabbed multiple representatives. Blackstone got two, Steve Schwarzman and Jon Gray. Oracle has both Larry Ellison and Safra Catz. Home Depot has three: the C.E.O. Craig Menear and its co-founders Ken Langone and Bernie Marcus.
• Jeff Bezos of Amazon wasn’t mentioned in the news conference, but is in the release.
• Three representatives of cruise operators were tapped, but just one from an airline (Oscar Munoz of United).
Who’s missing: Randall Stephenson of AT&T — whose takeover of Time Warner was opposed by the Justice Department — isn’t on the list. Neither are Bob Iger of Disney, Dave Calhoun of Boeing or Peter Thiel, one of Mr. Trump’s biggest boosters in the tech world.
The Business Roundtable published principles for reopening the economy. Since there is a large overlap between its membership and those industry groups, consider this a sneak preview of their advice. “It is important to plan now for the gradual lifting of some restrictions on activity when policymakers, guided by public health officials, conclude the time is right,” the letter says, uncontroversially. There are also slides. Here’s one:
Today’s DealBook Briefing was written by Andrew Ross Sorkin in Connecticut and Michael J. de la Merced and Jason Karaian in London.
Fear, greed and small business loans
Many businesses desperately need the loans, grants and other assistance provided by various stimulus bills and Fed rescue plans. Others might not, but still qualify. Should they take the money?
It’s an ethically fraught question, which we discussed on our inaugural DealBook Helpline call yesterday with Stephen Amdur, a partner at the law firm Pillsbury Winthrop Shaw Pittman, and Gene Marks, the president of the small-business consultancy The Marks Group. Listen to the full conversation here.
There will be “a tremendous amount of attention and scrutiny placed on people applying for these loans after the dust settles,” said Mr. Amdur, who leads Pillsbury’s private equity team. Given that borrowers and their backers must provide plans and statements about why they need the money, “I certainly would expect that prominent hedge funds, private equity firms, venture capital firms are thinking about this, and the ones that aren’t I think are either being greedy or foolish, or both,” he added.
• “There is no easier target for a prosecutor and for a false claims act prosecution,” Mr. Amdur said, than a cash-rich company or investor needlessly applying for an emergency loan.
• “We should assume that the loan applications will eventually be discoverable by Freedom of Information Act requests,” he added. Several of his clients decided against pursuing loans “because they don’t want their name showing up.”
“Some people who don’t need the money are grabbing it and sticking it in the stock market because they’re hoping to get some gains,” said Mr. Marks.
• Like Mr. Amdur, he believes that, “Once all the smoke clears, the Department of Justice is going to be very busy next year going after fraudulent claims.” Billionaires and big business will be a target, he said, “but I also think they’ll be making some examples of small businesses who filed fraudulent applications, particularly in a time of need.”
Airlines get $25 billion, with strings attached
The Treasury Department struck an agreement with 10 major airlines over a taxpayer-financed bailout, after days of heated negotiations.
The airlines and Treasury compromised over a mix of grants and loans. Ultimately, 70 percent of the money will consist of grants and 30 percent as loans payable over 10 years. (Treasury will also receive stock warrants for 10 percent of the loan amounts over $100 million.)
• Delta, for instance, will get $5.4 billion, with $1.6 billion coming from a loan, and taxpayers will receive warrants worth a 1 percent stake in the company.
Industry executives offered praise, and criticism, of the result. JetBlue’s C.E.O., Robin Hayes, appreciated the bailout — but noted that “it adds to the significant debt we are taking on as we burn through our cash reserves.”
Airlines badly need the money. Global passenger revenue is expected to fall 55 percent from last year, according to an industry lobbying group.
Cover your eyes: Big banks open their books
JPMorgan Chase and Wells Fargo were the first big banks to report their latest earnings, and investors didn’t like what they saw: Shares in both banks were down while the market was up.
Ballooning provisions for loan losses suggest trouble ahead, with the two banks setting aside a combined $12 billion to guard against bad debt, up from $2 billion the previous quarter. Neither lender reported a scary rise in write-offs for the first quarter, but then the economic pain of lockdowns and job losses only began in earnest toward the end of March.
• Bank of America, Citigroup and Goldman Sachs report their results today.
Analysts don’t know what to think about corporate earnings anymore, if their research notes are anything to go by.
• “Our top-down models of earnings based on macro growth are essentially broken,” researchers at Deutsche Bank wrote. Using alternative methods — guesstimates, charitably — they reckon S&P 500 earnings will fall by 20 percent this year.
• An expected crash in earnings “should be discounted to some degree, as it tells us less than normal about firms’ earning potential over time,” wrote the number crunchers at Goldman Sachs. “However, treating the earnings collapse as a one-time disaster ‘tax’ also seems inappropriate.” (Emoji summary: 🤷.)
• But with the Fed “now buying everything bar your lunch,” analysts at Bank of America wrote, the markets’ so-called “animal spirits” are perkier than grim economic data might suggest.
The advertising market goes dark
The pandemic has devastated scores of industries, including advertising — and not even tech giants are immune.
Google and Facebook are likely to take a hit, as advertisers cut back to save cash while others fear placing ads next to grim news articles about death and disease. That said, analysts say smaller media platforms and publishers will fare far worse.
Speaking of which, the parent company of The Los Angeles Times announced furloughs and pay cuts. An internal memo told employees that because of the coronavirus, “our advertising revenue has nearly been eliminated.” Earlier this week, Condé Nast announced similar measures.
Ad agencies like Omnicom and Dentsu have also announced job cuts and other cost-cutting measures.
The speed read
• Airbnb raised $1 billion in a new loan, a week after securing $1 billion in financing from Silver Lake and Sixth Street Partners. (WSJ)
• J.C. Penney is reportedly considering bankruptcy protection. (Reuters)
Politics and policy
• The stimulus checks mailed to Americans starting next month will bear President Trump’s signature, a break from protocol. (NYT)
• “OK. So I suggest that Trump’s name also be put on top of tax bills.” (@NickKristof)
• Shares in Amazon hit an all-time high yesterday, giving it a market value of $1.1 trillion. (CNBC)
• Separately, several Amazon warehouse workers said they were fired for labor organization, which the company denied. And a French court has ordered Amazon to deliver only essential goods. (WSJ, France24)
• Comcast will begin rolling out its Peacock streaming service to some of its subscribers today. (NYT)
Best of the rest
• Women are treated as badly in virtual meetings as they are in real-life ones. (NYT)
• Will we still be social distancing in 2022? (Science)
Thanks for reading! We’ll see you tomorrow.
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