Could Donald Trump Save TikTok?

Trump’s TikTok U-turn

TikTok users have continued to flood the social media platform — and lawmakers’ inboxes — with pleas to halt a bill that would force its Chinese owners to divest or face a ban in the U.S.

That effort to keep TikTok online has now attracted some unlikely backers, including Donald Trump.

A recap: Last week, a powerful House committee voted 50-0 to remove TikTok from U.S. app stores by Sept. 30 unless its Beijing-based parent company, ByteDance, sold its stake. A large contingent of Republicans and moderate Democrats see the app as a national security risk.

President Biden said on Friday that he’d sign the bill if it reaches his desk — even as his campaign has embraced the platform.

But Trump has potentially scrambled the political calculus in Washington. Starting last week, the former president has pushed back against a TikTok ban, arguing that such a move would strengthen Meta’s Facebook — the “true Enemy of the People!” (Remember that as president, Trump issued an executive order ordering ByteDance to divest its American assets.)

Trump’s 180 may have already weakened support for the bill. Senator Lindsey Graham, Republican of South Carolina and a prominent China hawk, said on Sunday that he was “deeply conflicted” about the bill and was unsure how he’d vote on it.

There are a few reasons Trump may have changed his mind. Pro-Trump MAGA content “does very well on TikTok,” Alex Bruesewitz, a Republican strategist, told Axios. He added, without citing evidence, that “Meta is suppressing MAGA content on both Facebook and Instagram.”

And needling Biden on an issue dear to younger voters could be politically advantageous to Trump.

TikTok is also gaining powerful connections. The Club for Growth, the anti-tax lobbying group, has hired the former Trump adviser Kellyanne Conway to advocate for the social media platform, according to Politico. (Trump has recently declared that he and the Club for Growth are “back in love” after it supported other candidates in the Republican primaries.)

Meanwhile, the billionaire investor Jeff Yass, who holds a 15 percent stake in ByteDance, is also a major donor to the Club for Growth. Yass, who backed several Trump rivals for the G.O.P. nomination, is also striking a rapprochement with the former president, having invited him to speak at the group’s recent retreat.

HERE’S WHAT’S HAPPENING

Reddit seeks a valuation of up to $6.4 billion for its I.P.O. The social media company said this morning that it would look to raise up to $748 million as it kicked off its roadshow ahead of a New York Stock Exchange listing. The company also announced that it would create a subreddit dedicated to its I.P.O. and would host an “ask me anything” session for potential investors.

“Oppenheimer” is the big Oscars winner. The biopic about the creator of the atomic bomb took home seven awards, including best picture, best director for Christopher Nolan and best actor for Cillian Murphy. Among the studios that came out on top this year are Comcast’s NBCUniversal (“Oppenheimer” and “The Holdovers”), Disney (“Poor Things”) and A24 (“The Zone of Interest”).

Wall Street this week will be watching inflation. The Commerce Department is set to release the February Consumer Price Index report on Tuesday, data that could be crucial to the Fed’s thinking on cutting interest rates. On the earnings front, the carmakers Volkswagen, Porsche and Mercedes-Benz report this week as Western brands worry about the growing threat of Chinese electric vehicles.

Do capital requirements need a rethink?

Andrew here. A year on since the collapse of Silicon Valley Bank renewed fears about the strength of the banking system, the debate about what should happen next continues.

But there is a more important, if perhaps prosaic, point that I want to address this morning: We’re thinking about “capital requirements” — regulatory standards meant to protect banks against losses and runs on deposits, and whose levels have been a subject of discussion since the 2008 financial crisis — all wrong.

And, the truth is, some journalists — including myself — have not helped. (In fact, we may have made it more confusing.)

We often refer to “capital requirements” as a “rainy-day fund,” or cash-like instruments that need to be “held” so that banks can withstand a shock to the system. But that’s not exactly right.

My friend Jesse Eisinger, the Pulitzer Prize-winning journalist, and Anat Admati, a professor at Stanford, separately emailed me and other colleagues recently, pointing out the misunderstanding about how the rules around “capital requirements” are described.

“Capital is not cash or other assets,” Eisinger wrote. “Bankers always conflate liquidity and capital on purpose to make it seem like they have to ‘hold’ it and can’t lend it out.”

Admati made the point this way: “In reality, the rules are about how banks FUND their investments, which has to do with the liabilities and shareholder equity, not at all with the ASSETS they may ‘hold’ on the other side of the balance sheet,” she wrote. “The insidious confusion plays right into the hands of bank lobbies because they find it easy to claim that the ‘capital’ is somehow ‘on the sidelines’ and not used for investment vs funding.”

Admati insists that the capital “is actually something banks can use to invest.”

To some degree, the argument is a slightly semantic one, because the amount of capital a bank has determines how much risk it takes in its lending decisions.

And capital requirements can influence banks’ lending and trading. When regulators require that more capital be used to finance riskier loans, banks may make fewer of such loans. Bankers can therefore legitimately argue that capital requirements restrict some lending.

But regulators would respond that they want to make sure lenders are safe, avoiding bailouts, and the more devastating consequences of bank failures.

Does this make the debate clearer? Please let us know at [email protected].

Where Musk’s charity has fallen short

In a close examination of Elon Musk’s philanthropy, through which the world’s second-wealthiest man has slimmed his tax bill by giving away billions, The Times has uncovered a haphazard history of giving.

The big question the investigation raises is whether the Musk Foundation — listed as having $7 billion in assets as of 2022 — has done enough to comply with federal tax laws.

The organization appears to have fallen short, when it comes to the law requiring foundations to give away at least 5 percent of their assets each year, The Times reports. By the end of 2022, the foundation was shy of that by $234 million after also failing to meet the threshold two years in a row.

More from The Times:

“It tells you it’s not yet ready for prime time,” said Brian Galle, a professor who studies nonprofit law at Georgetown University, referring to the minimal giveaways by the foundation. “It’s not yet a professional organization.”

The Musk Foundation has not released details of what it gave away in 2023, or whether it made up its shortfall from the year before. If it did not, it could owe a penalty tax equal to 30 percent of the remaining shortfall from 2022.

There are ways to avoid that penalty. A foundation can prove that it had relied on a good-faith appraisal of its assets that was nevertheless wrong, so long as it makes a qualified distribution within 90 days of receiving a penalty notice from the I.R.S.

Why it matters: The foundation may have helped Musk whittle down a huge tax bill. After receiving a roughly $50 billion payday from Tesla in 2021, Musk noted that he faced a potential $11 billion tax bill. But a big donation to his foundation saved him an estimated $2 billion, experts told The Times.

Debating the state of Delaware

At the Tulane Corporate Law Institute conference in New Orleans last week — probably the premier M.&A. conference in the country — one topic dominated conversation: the future of Delaware as America’s corporate capital.

A blockbuster court ruling on Elon Musk’s pay package is the latest to spark concerns. Kathaleen McCormick of the Delaware Court of Chancery voided Musk’s roughly $50 billion pay package at Tesla in January. She said that the carmaker’s board hadn’t exercised independent oversight to approve it, meaning that the Tesla C.E.O. essentially decided his own compensation as the de facto controlling shareholder. Now, Musk is urging companies to move their incorporations out of Delaware.

Many attendees said the ruling challenges the state’s reputation. “The decisions that are coming out of the courts are making them question the predictability of Delaware law,” said Catherine Dearlove, a partner at the Delaware-based firm Richards, Layton & Finger.

Scott Barshay, a New York-based partner at Paul, Weiss, Rifkind, Wharton & Garrison and one of the country’s top corporate advisers, said that companies looking to go public within the next year may choose to incorporate in states like Nevada that are pitching themselves as friendlier to corporate management. “I think the cases are going to give you some pause about incorporating in Delaware,” he said.

Leo Strine Jr., the outspoken former chief justice of Delaware’s Supreme Court who is now at the corporate law firm Wachtell, Lipton, Rosen & Katz, acknowledged the risks. “I still think Delaware, by far, is the best choice, but there is a lot in play,” he said.

The state still has defenders. “We’ve seen this before,” said Joel Friedlander, a partner at the Delaware-based Friedlander & Gorris. He reminded attendees of previous calls to abandon the state, including by the anti-Delaware activist group now known as Citizens for Judicial Fairness which he said had harassed judges. The anti-Delaware movement, Friedlander added, “couldn’t be led by a worse group of people.”

Attendees advised patience. Some, like Strine, suggested things would work out, while Collins Seitz Jr., the chief justice of the Delaware Supreme Court, cited an unexpected source in describing the state of affairs: “You need to calm down,” he said, quoting a Taylor Swift song.

THE SPEED READ

Deals

Policy

• President Biden will propose a budget on Monday that raises taxes on businesses and the rich, and includes a raft of measures to combat high consumer costs. (NYT)

• “America’s election chiefs are worried AI is coming for them” (Politico)

Best of the rest

• “A Mistake in a Tesla and a Panicked Final Call: The Death of Angela Chao” (WSJ)

• Americans have just moved their clocks ahead for daylight saving time, but here’s a reminder that almost every state has tried to abolish it. (Business Insider)

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