Two Fed officials who came under fire for trading securities in 2020 will leave.
Robert S. Kaplan will exit his role as head of the Federal Reserve Bank of Dallas next month. Eric S. Rosengren, the head of the Federal Reserve Bank of Boston, is also retiring earlier than planned.
Two Federal Reserve officials who recently came under fire for securities trading in 2020, when the central bank was active in rescuing financial markets from the pandemic crisis, announced on Monday that they would leave their positions.
Robert S. Kaplan, who heads the Federal Reserve Bank of Dallas, will retire on Oct. 8, according to a statement released Monday afternoon. Mr. Kaplan gained attention for buying and selling millions of dollars in individual stocks, among other investments, last year.
Mr. Kaplan directly referenced the controversy in his decision to retire.
“Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of” its “vital work,” he said in the statement. He also noted that his “securities investing activities and disclosures met bank compliance rules and standards.”
Eric S. Rosengren, who is the president of the Federal Reserve Bank of Boston, will retire on Thursday, he said in a news release earlier on Monday. He said he was retiring earlier than planned to try to prevent a kidney condition from worsening, to stave off dialysis.
Mr. Rosengren held stakes in real estate investment trusts and listed purchases and sales in those, at a time when he was warning publicly about risks in the commercial real estate market and helping to set policy on mortgage backed security purchases.
Both presidents had previously announced that they would convert their financial holdings into broad-based indexes and cash by Sept. 30.
Jerome H. Powell, the Fed chair, offered statements of support for both officials in the releases announcing their exit. Nevertheless, he had been clear during a news conference last week that the Fed took the financial activity last year seriously, and he ordered a review of the central bank’s ethics rules shortly after news of the financial activity broke.
“No one on the F.O.M.C. is happy to be in this situation, to be having these questions raised,” Mr. Powell said, referencing the policy-setting Federal Open Market Committee. “This is an important moment for the Fed and I’m determined that we will rise to the moment.”
The watchdog group Better Markets had been calling for the Fed to fire both presidents if they do not resign.
Mr. Rosengren has been president of the Boston Fed since 2007, and his retirement was previously planned for June. The Fed’s 12 regional members rotate in and out of voting seats, and Mr. Rosengren would have had a vote on monetary policy next year. Mr. Kaplan would have voted in 2023.
Kenneth C. Montgomery, the Boston Fed’s first vice president, will serve as interim president at that bank. The Boston Fed’s board members — excluding bank representatives — will need to select a permanent pick for president, subject to approval from the Fed’s Board of Governors in Washington.
A longtime Fed employee who worked in research and bank supervision before becoming president, Mr. Rosengren played a key role in the 2020 crisis response. His regional Fed ran both the money market mutual fund and Main Street lending backstop programs that the Fed rolled out last year.
The Boston Fed noted in the release that Mr. Rosengren hoped that his health condition would improve, and that he would be able to “explore areas of professional interest” in the future.
In Dallas, Meredith Black, that bank’s first vice president, will serve as interim president until a successor is named.
Top Federal Reserve officials emphasized on Monday that the labor market was far from completely healed, underlining that the central bank will need to see considerably more progress before it will feel ready to raise interest rates.
“We still have a long way to go until we achieve the Federal Reserve’s maximum employment goal,” John C. Williams, the president of the Federal Reserve Bank of New York, said in a speech Monday afternoon.
Leading Fed officials — including Mr. Williams, Lael Brainard and Jerome H. Powell, the Fed chair — have given similar assessments of the outlook in recent days and weeks. They have pointed out that the economy is swiftly healing, bringing back jobs and normal business activity, and that existing disruptions to supply chains and hiring issues will not last forever.
But they say that the recovery is incomplete and that it’s worth being modest about the path ahead, especially as the Delta variant demonstrates the coronavirus’s ability to disrupt progress.
“Delta highlights the importance of being attentive to economic outcomes and not getting too attached to an outlook that may get buffeted by evolving virus conditions,” Ms. Brainard, a Fed governor, said on Monday.
Those comments came on the heels of the Fed’s September meeting, at which the central bank’s policy-setting committee clearly signaled that officials could begin to pare back their vast asset-purchase program as soon as November. They have been buying $120 billion in government and government-backed securities each month.
The speeches on Monday emphasized that as officials prepare to make that first step away from full-fledged economic support, they are trying to separate the decision from the Fed’s path for its main policy interest rate, which is set to zero.
Central bankers have said they want to see the economy return to full employment and inflation on track to average 2 percent over time before lifting rates away from rock bottom.
That makes the debate over the labor market’s potential a critical part of the Fed’s policy discussion.
Some regional Fed presidents, including James Bullard at the Federal Reserve Bank of St. Louis and Robert S. Kaplan at the Federal Reserve Bank of Dallas, have suggested that the labor market may be tighter than it appears, citing data including job openings and retirements.
But Mr. Williams said on Monday that the job market still had substantial room to improve. While the unemployment rate has fallen from its pandemic high, he said the Fed was looking at more than just that number, which tracks only people who are actively looking for work. The Fed also wants the employment rate to rebound. He pointed out that a high level of job openings is not a clear signal that the job market has healed.
“Even if job postings are at a record high, job postings are not jobs,” Mr. Williams said. “These vacancies won’t be filled instantly.”
Although Mr. Williams said he had been watching the impact of school reopenings on the labor market, he said he did not think they would cause a huge surge in people returning to work this month or in October.
“It may take quite a bit longer for the labor supply to come fully back,” he said.
Ms. Brainard batted back the idea that labor force participation — the share of adults who are working or looking for jobs — might not return to its prepandemic level.
“The assertion that labor force participation has moved permanently lower as a result of a downturn is not new,” she said. A similar debate played out following the 2008 financial crisis and labor force participation ultimately rebounded, especially for people in their prime working years.
Ms. Brainard warned that Delta was slowing job market progress. Last week there were more than 2,000 virus-tied school closures across nearly 470 school districts, she said, and “the possibility of further unpredictable disruptions could cause some parents to delay their plans to return to the labor force.”
LOS ANGELES — Creative Artists Agency announced Monday that it was buying its smaller rival ICM Partners for an undisclosed amount, the largest industry consolidation in more than a decade and one that could have significant ripple effects in the entertainment and sports worlds.
The agencies’ top executives — Bryan Lourd at CAA and Chris Silbermann at ICM — positioned the deal as a supercharging of the representation business and an opportunity for CAA to expand in both publishing and sports. ICM has a substantial books division and sports assets that include the recently acquired N.F.L. agency Select Sports Group and the London-based soccer agency Stellar Group.
“We realized that the timing was right for us to join forces, and to not compete against each other, to build a company with resources that could serve clients in a much broader, and hopefully, more effective way,” Mr. Lourd said in an interview. “It’s us thinking about what an agency of the future should look like.”
To some degree, consolidation among talent agencies was inevitable. As tech giants have aggressively colonized Hollywood, spending billions of dollars to build streaming services like Apple TV+ and Amazon Prime Video, big traditional media companies like Disney, Discovery and Warner Media have sought to compete by getting even bigger. Smaller companies — Metro-Goldwyn-Mayer, which sold itself to Amazon in July, and now ICM Partners — have found themselves vulnerable.
“ICM lacks those big, franchisable names,” said Stephen Galloway, dean of Chapman University’s film school and a former executive editor of The Hollywood Reporter. CAA’s client roster includes Tom Hanks, Steven Spielberg, Zendaya, Ava DuVernay, Ryan Murphy and Reese Witherspoon, while Shonda Rhimes, Ellen DeGeneres, Samuel L. Jackson and Pete Davidson are among ICM’s marquee clients.
For the heavyweight Creative Artists, the acquisition adds muscle as actors, directors, writers and producers spar with studios over compensation in the streaming age. If studios are no longer trying to maximize the box office for each film but instead shifting to a hybrid model where success is judged partly by ticket sales and partly by streaming subscriptions sold, what does that mean for how stars are paid — and where they make their movies?
Scarlett Johansson, a Creative Artists client, is suing the Walt Disney Company over pay, for instance. She contends that Disney’s decision to simultaneously release “Black Widow” in theaters and on Disney+ gutted her compensation for starring in the film — at the same time bolstering Disney+ and thus the company’s standing on Wall Street. “They have very deliberately moved the revenue stream and profits to the Disney+ side of the company, leaving artistic and financial partners out of their new equation,” Mr. Lourd, her agent, said over the summer.
Disney has said her complaint had “no merit.”
Creative Artists, bolstered by ICM’s client roster, may now be even better equipped to chart how stars’ compensation will be determined. “CAA already had very effective leadership and strength, but this creates a talent agency of historic scale and scope,” Mr. Galloway said. “Studios had better play nice, because the domino effect of not being nice could affect so much of their business.”
SAG-AFTRA, the powerful actors union, said in a statement that it welcomed “any change that results in increased negotiating power for talent as they bargain individual deals with the multibillion-dollar corporations that produce content. We will carefully scrutinize this combination of two storied talent agencies to ensure that performers will benefit from, and are not disadvantaged by, the deal.”
This deal is the industry’s largest since the William Morris Agency merged with Endeavor in 2009, essentially turning Hollywood into a two-agency town. (The mini-major United Talent is the next biggest agency behind Endeavor and CAA. ICM was behind UTA, having atrophied from its heyday in the 1990s, when it represented Julia Roberts — long since a CAA client.) In the years since, the major agencies have expanded into fresh lines of business involving finance, podcasting, sports and even content production as a way to keep growing and maintain a grip on forms of entertainment that are still taking shape.
Endeavor made its public trading debut in April. Even without ICM’s assets, CAA has built itself into a top sports agency, representing more than 2,000 athletes including Dwyane Wade, Aaron Rodgers, Chris Paul and Cristiano Ronaldo.
CAA and Endeavor recently had a setback in the fast-growing content-production business, however. In negotiating a new agreement with agencies, the Writers Guild of America succeeded in forcing CAA, Endeavor and other agencies to cap their ownership in content-production divisions to 20 percent. In July, CAA sold most of its upstart content studio Wiip to the South Korea-based JTBC Studios.
Mr. Lourd insisted that the forced divestiture played no role in CAA’s decision to buy ICM. He also poured cold water on one of Hollywood’s immediate assumptions about the ICM deal — that CAA was bulking up to prepare for a public offering of its own. “Does this make that more possible? Sure,” Mr. Lourd said. “But going public — or not — has not driven any of this.”
CAA and ICM have flirted with linking arms for some time, according to Mr. Lourd, noting that he and Mr. Silbermann, ICM’s chief executive, have long met for lunch three or four times a year and that Mr. Silbermann’s children and those of Richard Lovett, CAA’s president, attend the same school. Acquisition talks became serious in July at Allen & Company’s annual media retreat in Sun Valley, Idaho.
As part of the deal, the ICM name will cease to exist, a decision Mr. Lourd called “not easy.” ICM was founded in 1975 through the merger of Creative Management Associates and the International Famous Agency. “It was an obvious decision from the beginning,” Mr. Silbermann, ICM’s chief executive, said by phone. CAA is “the right thing to call the company.”
Mr. Silbermann will join the CAA board upon completion of the deal, which the agencies said they expected before the end of the year. CAA is majority-owned by the private equity firm TPG Capital, which also has stakes in Univision, Spotify and STX Entertainment, among other companies.
In the near term, the combined agencies must deal with a melding of disparate internal cultures and the attention of competitors hungry to pick off prime agents and clients. Mr. Lourd and Mr. Silbermann declined to discuss the inevitable layoffs that will come from the merger. The two agencies are a few blocks from each other in the Century City area of Los Angeles.
Polestar, the Swedish high-end electric vehicle company, has signed a deal to go public at a $20 billion valuation, via a merger with a SPAC backed by the Gores Group and Guggenheim Capital, the company said on Monday.
Polestar is owned by Volvo Cars and Volvo’s Chinese parent, Geely, with other investors including Leonardo DiCaprio. Polestar’s equity owners will roll over all of their interest in the deal and retain a 94 percent stake in the company.
Shares of the SPAC climbed above its I.P.O. price on Monday, a rarity among pre-merger SPACs these days.
Polestar has two models on the road, and it wants to offer three more by 2024. It delivered approximately 10,000 vehicles in 2020, but lags far behind the market leader, Tesla.
“Compared to us, Tesla is a very old company,” said Thomas Ingenlath, Polestar’s chief executive. Rather than spend capital building electric-charging infrastructure, as Tesla did, Polestar can take advantage of existing infrastructure, he said. (In the United States, that may still not be enough.)
Its valuation is conservative — for an electric car company. Lucid, which went public via SPAC in July, is valued at $41 billion. Rivian is expected to be valued at about $70 billion in its coming I.P.O. Tesla is worth nearly $770 billion.
“Public markets are a little bit more challenging today, especially for SPACs,” said Mark Stone, the senior managing director of Gores Group. The deal includes $250 million in financing, which the Gores Group chairman, Alec Gores, said could be adjusted as needed, as in the case of redemptions by SPAC shareholders. The deal includes a six-month lockup period.
The deal comes amid heightened tensions between the United States and China. Doubts about the future of the Chinese real estate giant Evergrande — and its impact on the Chinese economy — have dragged down stocks of other Chinese electric vehicle companies like Nio and Li Auto that trade in New York. China has also been discouraging local companies from listing abroad.
Polestar manufactures cars in China, but “we are a European company,” Mr. Ingenlath said, noting that the company’s headquarters are in Sweden.
The SPAC sponsors studied the “China issue” thoroughly, Mr. Gores said, adding that Polestar has manufacturing capabilities outside of China, like those it’s building in the United States, that can be tapped as necessary.
China’s ability to blend top-down control of politics with market-based capitalism was for years seen as a source of strength. That balancing act, though, appears to be teetering. Economic growth is slowing and the country is facing a potential financial crisis in the collapse of Evergrande, a heavily indebted property developer.
Some have called Evergrande’s troubles China’s “Lehman moment,” referring to the investment bank whose collapse precipitated the 2008 global financial crisis. Others, like The New York Times’s Paul Krugman, have said that a better analogy is Japan, where years of overinvestment and an aging population led to a long period of sputtering growth, though far from an economic collapse.
Either way, China’s reaction to its challenges is to exert greater control over its largest companies, making it clear who calls the shots in the country, the world’s second-largest economy after the United States. This has significant implications for foreign investment, geopolitics and more, as a quick tour of some of Beijing’s recent crackdowns shows:
Cryptocurrency: On Friday, China bolstered its ban on all activity linked to digital currencies, which some saw as part of a broader effort to channel citizens away from private financial services providers, which include decentralized crypto services as well as popular apps like AliPay and WeChat. The move should also be seen in the context of the Chinese central bank’s advanced development of its own digital currency, which would allow the government to track and control financial transactions.
Technology: China has been turning the screws on its largest tech companies, citing unfair competition. Officials recently ordered Alibaba to divest a recently acquired stake in one of the country’s largest broadcasters and limited online game playing to just three hours a week for anyone under 18, denting companies like Tencent. Earlier this summer, Chinese officials stopped Didi from signing up new users days after China’s largest ride-sharing app listed its shares in the United States. The government said it had to do with data privacy, but the timing cast a chill over Chinese companies listing abroad.
Electric vehicle manufacturers: China is putting the brakes on its homegrown electric vehicle industry, which has been fueled by government subsidies. This month, a minister declared that the country had “too many” EV companies. The government said it would encourage consolidation and was looking to reduce aid for the industry.
For-profit education companies: In July, China banned tutoring companies from making profits and restricted foreign investment in the $100 billion sector. It is now estimated to be worth considerably less.
Energy usage: China has pledged to cut its carbon gases by 65 percent in the next decade. In September, after two-thirds of the nation missed it emission goals for the first half of 2021, Beijing imposed stricter limits on energy usage, particularly on manufactures. Numerous factories, many of them that produce parts for such U.S. companies as Apple and Tesla, say their power supply has been substantially cut, forcing some to operate by candle light.
The financial world is watching the struggles of China Evergrande Group, one of the largest property developers on earth and certainly the most indebted. Last week, a deadline to make an $83 million payment to foreign investors came and went with no indication that Evergrande had met its obligations, raising questions about what would happen if its huge debt load went sour, Keith Bradsher reports for The New York Times.
China has a lot riding on its ability to contain the fallout from an Evergrande collapse. After Xi Jinping, China’s most powerful leader in generations, began his second term in 2017, he identified reining in financial risk as one of the “great battles” for his administration. As he approaches a likely third term in power that would start next year, it could be politically damaging if his government were to mismanage Evergrande.
The government doesn’t want to move in yet because it hopes Evergrande’s struggles will show other Chinese companies that they need to be disciplined in their finances, say people with knowledge of its deliberations who spoke on condition of anonymity. But it has an array of financial tools that it believes are strong enough to stem a financial panic if matters worsen.
The government is “still going to provide a guarantee” for much of Evergrande’s activities, said Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance, “but the investors are going to have to sweat.”
Since January, after Britain completed the final stage of Brexit, employers have been unable to freely recruit European workers. The pandemic has also exacerbated a crisis that stems from a long-term shortage of British truck drivers.
Over the weekend, Prime Minister Boris Johnson of Britain reversed course and offered thousands of visas to foreign truckers to combat a driver shortage that has left some supermarket shelves empty and caused long lines at gas stations, Stephen Castle reports for The New York Times.
The decision, announced late Saturday, reflects the growing alarm within the government over a disruption to supplies that has prompted panic buying and, in some places, caused fuel to run out and gas stations to close.
The post-Brexit exodus of European workers is only one cause of the long-term driver shortage. The industry has had difficulties attracting workers to jobs that are traditionally lower paid and require long, grueling hours away from home. Truckers have also complained that safe parking spaces and rest stops can be hard to find.
So great is the concern that there has been speculation that the military could be called up to drive trucks. That has not yet happened, but Defense Ministry staff members will be asked to help speed up the process for truck licensing applications.
The S&P 500 ticked down 0.3 percent on Monday, while the Nasdaq composite dipped 0.5 percent.
Oil prices rose sharply. West Texas Intermediate, the U.S. crude benchmark, climbed 2 percent to $75.45 a barrel. Total domestic crude inventories decreased by 3.4 million barrels for the week ending Sept. 17, the Energy Information Administration reported Wednesday.
The Senate is expected to hold a procedural vote Monday on legislation that would raise the U.S. debt limit and provide government funding, scheduled to lapse on Oct. 1, through December. Senate Republicans are expected to block the measure. The move could roil financial markets and capsize the economy’s nascent recovery from the pandemic downturn.
The House is set to vote on a bipartisan $1 trillion infrastructure bill on Thursday, Speaker Nancy Pelosi said on Sunday, a measure that focuses spending on transportation, utilities, pollution cleanup and other components.
European indexes were lower, with the Stoxx Europe 600 down 0.2 percent.
Shares for Facebook gained 0.2 percent. Facebook said on Monday that it had paused development of an “Instagram Kids” service intended for children 13 years old or younger amid questions about the app’s effect on young people’s mental health.
Senate vote on the debt limit: The Senate is expected to vote on legislation to keep the government funded through early December and lift the limit on federal borrowing through the end of 2022 before a Thursday deadline. The United States could default on its debt sometime in October if Congress does not take action to raise or suspend the debt limit, Treasury Secretary Janet L. Yellen warned.
Consumer confidence: The Conference Board is set to report its consumer confidence index for September. The results last month showed the index’s sharpest decline since February, but preliminary data from the University of Michigan’s gauge of consumer sentiment showed a modest gain for September.
Senate Banking Committee hearing: Jerome H. Powell, the Federal Reserve chair, and Ms. Yellen will testify at the Senate Banking Committee hearing on their agencies’ oversight of the CARES Act. Economists are expecting the officials to be quizzed about inflation, a $1 trillion infrastructure bill and the debt ceiling.
NABE Conference: Ms. Yellen is set to speak at a virtual event hosted by the Los Angeles Chapter of the National Association for Business Economics. Her address will be followed by a moderated conversation with Constance Hunter, the chief economist for KMPG.
Personal Consumption Expenditures: The inflation gauge will provide insight on how much and how quickly rising prices will fade. The data comes after an update from the Fed about its plans to “taper” bond purchases that the central bank is making to support the economy.