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   DealBook: Biden vs. Congress over “woke” investing
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   Also, Salesforce soars — as does inflation.
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             March 2, 2023
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              Good morning. In today’s DealBook: The fight over E.S.G. in Washington escalates; Marc Benioff discovers the benefits of efficiency; inflation worries in Europe; crypto executives fret about a potential Congressional hearing; and New York State takes on price gouging in a crisis. (Was this newsletter forwarded to you?
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                  E.S.G. to get presidential protection?
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                  Leah Millis/Reuters
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             E.S.G. heads to a veto showdown
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             Senate Republicans, helped by two Democratic defectors, voted yesterday to
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              block a Labor Department rule
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             allowing retirement plan managers to include environmental, social and corporate governance considerations (E.S.G., for short) in their investment plans.
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             The Senate resolution — a version of which already passed the House, and which is expected to draw President Biden’s first veto — may seem focused on an obscure rule. But it’s another sign of how fights over E.S.G. are spreading through politics, with increasingly bigger stakes.
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              The Labor Department rule was meant to undo a Trump-era dictum
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             limiting investment managers to considering only purely financial factors in their decisions. Advocates of the rule have used the common E.S.G. defense that concerns about climate change and treatment of workers are legitimate financial issues for investment managers to weigh. They add that the rule is neutral, and managers are free to disregard E.S.G. issues.
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              But Republicans described the rule as “woke” overreach,
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             and were aided by the Democratic senators Joe Manchin of West Virginia and Jon Tester of Montana — both of whom are running tough re-election races in states with sizable fossil-fuel industries. (Quietly backing many of these anti-E.S.G. efforts are
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              well-funded right-wing advocacy groups
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             with ties to conservative donors.)
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              Apollo works at the forefront of retirement solutions as an experienced partner to some of the world’s largest pension and retirement funds, representing millions of retirees.
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             White House aides said Biden would veto the measure; it’s unclear that Congress, which passed the measure with only slim majorities, can muster the two-thirds vote needed to override that.
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              The battle over E.S.G. will only get wider.
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             Republicans are likely to keep making it a political punching bag. Investment firms in turn are increasingly worried that incorporating socially minded issues in their decisions will
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              cut into their profits
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             .
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             HERE’S WHAT’S HAPPENING
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              Elon Musk’s big Tesla presentation underwhelms investors.
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             Shares in the carmaker were down sharply premarket, after the company had
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              few blockbuster announcements
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             in its new “master plan.” Tesla said it would build a new plant in Mexico, but investors wanted more concrete details on Musk’s efforts to fend off competition in electric vehicles.
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              Eli Lilly unveils a limited reduction of insulin prices.
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             Responding to criticism of the drug’s cost, the drugmaker said it would
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              cut the sticker prices
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             of several insulin products and cap patients’ out-of-pocket monthly costs at $35. But the moves will have limited effect: Lilly already had a $35 monthly cap in place, and the lower prices will be only for older products.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              A missing Chinese deal maker is reportedly being detained by the government.
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             Bao Fan, whose employer, China Renaissance, disclosed last month that it hadn’t been able to reach the banker, is
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              being held by anticorruption agents
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             investigating his firm’s former president, according to The Wall Street Journal.
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              SoftBank’s Arm rules out a stock listing in London, for now.
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             The British chip designer said it was focused on
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              going public in New York
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             , despite years of entreaties by U.K. government officials; it hasn’t ruled out a dual listing down the line.
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              Silvergate shares plunge after it warns about its financial viability.
             </span>
             The
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              crypto-focused lender disclosed
             </a>
             yesterday that it lost $1 billion in the fourth quarter, wouldn’t be able to file its annual report on time, and is evaluating those setbacks’ effect on its ability to “continue as a going concern.” Silvergate’s stock was down nearly 30 percent premarket.
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            <h2 class="css-12n1aic" style="color:#000;font:700 25px/32px arial,sans-serif;margin:0 0 10px">
             Profitability is now a priority at Salesforce
            </h2>
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             Salesforce’s C.E.O., Marc Benioff, was ebullient yesterday as he announced a
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              jump in profits and up to $10 billion more in stock buybacks
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             that sent the software giant’s share price up 15 percent in post-market trading.
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             But will that be enough to stave off the half-dozen activist investors circling the company?
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Show me the money.
             </span>
             Benioff said the company’s focus was now on making money and efficiency — “we’ve never had an efficiency focus,” he declared — after years of prioritizing growth. (To some commentators, that was a
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              stunning admission
             </a>
             about how the company was managed before the activists piled in.) Salesforce also said it had
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              disbanded its M.&amp;A. board committee
             </a>
             , ending a business strategy that focused on takeovers for growth.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              How about the activists?
             </span>
             Benioff went out of his way to praise ValueAct’s Mason Morfit, who joined the Salesforce board in January, for helping drive the company’s transformation.
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              Elliott Investment Management said
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             the results and new strategic focus were in line with its recommendations — though it suggested it may persist with its proxy fight.
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             But Morfit’s presence on the board may give Salesforce a useful rejoinder to the other activists: One of their own is already on the inside.
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             Still, could Third Point and Starboard Value, who also have stakes in Salesforce, nominate their own directors? Maybe — but the nomination deadline is March 14, and notices of a proxy challenge are usually submitted about two weeks before.
            </p>
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              There’s a final possibility: the activists banding together.
             </span>
             That would be complicated from a legal perspective, and could mean a clash of egos. But several of these hedge funds might be willing to take a back seat if it meant driving further gains in Salesforce’s stock price.
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            <h2 class="css-12n1aic" style="color:#000;font:700 25px/32px arial,sans-serif;margin:0 0 10px">
             Europe’s inflation woes rattle the market
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             On both sides of the Atlantic, inflation continues to frustrate consumers and unnerve investors.
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              The latest worrisome data point:
             </span>
             The European Commission this morning reported that consumer prices
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              rose by 8.5 percent
             </a>
             on an annualized basis across the eurozone last month. Core inflation — which excludes price rises in food, alcohol and energy — in the 20 countries that use the euro jumped 5.6 percent, a record. Economists polled by Bloomberg had expected an 8.3 percent rise for the headline inflation figure.
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              That reading initially sent stocks in Frankfurt, Paris and beyond into the red
             </span>
             , and pushed yields on European sovereign debt higher, as investors sold government bonds on renewed fears that the European Central Bank will need to continue raising borrowing costs to bring inflation down closer to its 2 percent target.
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             Inflation has been running hotter in Europe than in the United States, with the region having been hit hard by Russia’s invasion of Ukraine, which pushed up food and energy prices.
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             Crypto grows wary of Congress
            </h2>
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             In a sign of just how unsettled the mood around the crypto sector has become, industry executives are fretting over a congressional hearing that hasn’t even been announced. Some crypto officials fear that a fragile bipartisan consensus over the need for digital asset legislation is looking increasingly fraught.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The concern is centered on the House Financial Services Committee.
             </span>
             Chaired by Patrick McHenry of North Carolina, the committee has been reaching out to executives to participate in an event, tentatively slated for next Thursday, entitled “Coincidence or coordinated? The administration’s attack on the digital asset ecosystem.” As the name suggests, the committee is expected to focus the hearing on the recent parade of enforcement actions by banking regulators, the S.E.C. and others against crypto firms, asking whether the moves amount to a political attack on the sector. That approach isn’t likely to generate good bipartisan vibes. (The committee declined to comment.)
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The financial services committee had been collaborative on crypto.
             </span>
             Its former chair Maxine Waters, Democrat of California, worked closely with her Republican counterpart on a crypto bill last year, and that spirit appeared to live on under McHenry. One area of bipartisan focus: a bill on stablecoins, cryptocurrencies ostensibly backed by liquid assets like dollars and Treasuries. The crypto industry hopes it can make stablecoins more widespread as a payment system by establishing needed legal oversight.
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             Dante Disparte, head of global policy at the stablecoin issuer Circle, said legislation was needed to restore confidence in the embattled crypto market. The delay in Washington, he said, “starts to amount to a bit of a dereliction of duty.” Some big players now warn that it’s
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              not worth doing business in the U.S. market
             </a>
             .
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The committee is having trouble getting companies to agree to participate in the hearing, DealBook hears.
             </span>
             Even with crypto executives calling for legislative action, few seem eager to engage in a highly political forum.
            </p>
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            <h2 class="css-12n1aic" style="color:#000;font:700 25px/32px arial,sans-serif;margin:0 0 10px">
             “One day, peace will arrive, and it will be important to still be at their side.”
            </h2>
           </td>
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         </tbody>
        </table>
       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
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             <span style="font-style:italic;font-size:inherit">
              — A spokesman for the French retailer Auchan, which has been criticized for keeping its stores in Russia open after the invasion of Ukraine. Many Western companies say that exiting Russia has been
             </span>
             <span style="font-style:italic;font-size:inherit">
              <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
               trickier than anticipated
              </a>
             </span>
             <span style="font-style:italic;font-size:inherit">
              .
             </span>
            </p>
           </td>
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         </tbody>
        </table>
       </div>
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           <td align="left">
            <h2 class="css-12n1aic" style="color:#000;font:700 25px/32px arial,sans-serif;margin:0 0 10px">
             New York gets tough on price gouging
            </h2>
           </td>
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         </tbody>
        </table>
       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             Letitia James, New York’s attorney general, is the latest official vowing to crack down on price spikes for things like eggs, hand sanitizer and Uber rides — the kind that tend to upend consumers during exceptional events, like a blizzard or other emergency.
            </p>
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              DealBook got a first look at new anti-price gouging rules
             </span>
             that James will propose today. They would make it easier for enforcers to fight excessive price increases, and make it harder for companies to take advantage of consumers in dire situations.
            </p>
           </td>
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         </tbody>
        </table>
       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              New York could have the strictest rules in the U.S.
             </span>
             Other states consider a 15 to 25 percent spike in an emergency potentially excessive, but James will propose a 10 percent standard — the toughest in the country — to deter price gouging during “abnormal market disruptions.” The A.G. also wants to make it easier for consumers to spot and report potential violations, a spokeswoman for James said.
            </p>
           </td>
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       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The proposal would address excess pricing for products across the supply chain
             </span>
             . They would also target companies that use dynamic pricing models — the kind often deployed by Uber and Lyft — which change continually depending on supply and demand. Any large fluctuations would be measured against the average price from the previous week.
            </p>
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Expect resistance from business.
             </span>
             Industry groups like the New York Association of Convenience Stores, the National Supermarket Association and the Consumer Brands Association have said that they want clarity on terms like “unconscionably excessive” and “unfair leverage,” and recognition of their struggles with rising costs amid inflation. Up next: a 60-day public comment period.
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             We hope you’ve enjoyed this newsletter, which is made possible through subscriber support.
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             THE SPEED READ
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              Deals
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            <ul class="css-27qc8p" style="color:#000;font:20px georgia,serif;text-align:left;padding-left:50px;list-style-type:square;margin-bottom:10px">
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Carlyle’s deal to
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                raise cash for its latest buyout fund
               </a>
               has reportedly fallen flat with investors, adding to the challenges facing its new C.E.O., Harvey Schwartz. (FT)
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             </li>
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                More office landlords are defaulting
               </a>
               , raising concerns about the commercial real estate market. (Bloomberg)
              </span>
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              Policy
             </span>
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             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               An administrative judge ruled that
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                Starbucks violated federal labor law
               </a>
               in its efforts to oppose a unionization drive in Buffalo. (NYT)
              </span>
             </li>
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               India’s Supreme Court formed an expert panel to examine whether the country’s securities regulator failed to investigate
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                allegations against the Adani Group
               </a>
               raised by a short seller. (FT)
              </span>
             </li>
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Swiss prosecutors charged four bankers with aiding efforts to
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                hide money tied to President Vladimir Putin
               </a>
               in the country. (Reuters)
              </span>
             </li>
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              Best of the rest
             </span>
            </p>
           </td>
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       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
        <table cellpadding="0" width="100%">
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            <ul class="css-27qc8p" style="color:#000;font:20px georgia,serif;text-align:left;padding-left:50px;list-style-type:square;margin-bottom:10px">
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               How Warren Buffett’s Berkshire Hathaway made an
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                $8.2 billion bet on the electric vehicle boom
               </a>
               . (Insider)
              </span>
             </li>
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Speaking of electric vehicles,
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                Rivian’s $6.4 billion cash burn
               </a>
               last year may have set a record for start-ups. (WSJ)
              </span>
             </li>
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               “
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                Whiskey Fungus Fed by Jack Daniel’s
               </a>
               Encrusts a Tennessee Town” (NYT)
              </span>
             </li>
            </ul>
           </td>
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             , Managing Editor,
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             , Reporter,
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