But Sergey Chernenko, an associate professor of finance at Purdue University’s Krannert School of Management, who was not involved in Dr. Howell’s research, said the new paper aligned with his own findings on race-based gaps in Paycheck Protection Program lending. At an economic conference next month, he will present a paper that concluded that Black-owned businesses were disproportionately left out of the relief program.
“This fits very well with and complements our finding that minority-owned businesses were less likely to get loans because of racial bias, and to the extent that they do get them, they’re more likely to get them from fintechs than banks,” Dr. Chernenko said.
The government designed the Paycheck Protection Program to be virtually risk-free for lenders: They would advance small companies up to $10 million — the size of the loan was based on the company’s head count and payroll — and the government would then pay off the loans in full for business owners that followed the rules. If the borrower defaulted, the government would still repay the lender. In theory, any lender should have been willing to lend to any qualified applicant.
It didn’t work out that way. Many banks limited their loans to their current customers, which was a hurdle for owners who lacked business checking accounts or loans. But even Black owners who had accounts were noticeably more likely than those of other races to end up with a fintech loan, Dr. Howell and her co-authors found.
The effects were strongest in parts of the country with higher levels of racial animus, which the study measured with variables like the extent of local housing segregation and the prevalence of racially charged Google searches.
The researchers tested — and found little evidence for — other common hypotheses about the program’s racial lending disparities. Even after controlling for variables like the applicant’s ZIP code, industry, recent revenue, affinity for online lenders, and loan size and approval date, the gap persisted.
This was not the case, they found, at the nation’s biggest banks. After researchers controlled for those elements, Black-owned businesses appeared to be just as likely as any other to get a loan from Bank of America, Citibank, JPMorgan Chase and Wells Fargo.
DALLAS–(BUSINESS WIRE)–Today, HousingWire announced the winners of its annual Women of Influence award honoring 100 women shaping and propelling the mortgage, real estate and fintech industries forward. This year marks the 11th year of this award being recognized, with nominations growing and becoming more competitive every year.
The Women of Influence are selected by HousingWire’s Selection Committee based on their professional achievements within their organizations, but contributions to the overall industry, community outreach, client impact and personal success also factor into the committee’s decision.
“Another way to describe our Women of Influence honorees this year would be the women who are making an impact, which is something we saw woven into each of these amazing award winners,” Brena Nath, HW+ managing editor, said. “Congratulations to these women who are cultivating a new path forward for the housing industry and reimagining a better, more collaborative future.”
Many of this year’s winners’ mentor other women in the industry. Others coordinate volunteer programs for their employees or serve on advisory boards that inform the industry. All making a huge difference in their communities. These women are instrumental in paving the way for other women to also succeed in the housing industry.
Gretchen Pearson, President/CEO of Berkshire Hathaway HomeServices Drysdale Properties has been recognized by HousingWire as a 2021 Woman of Influence. Pearson successfully led the entire network of Drysdales through the pandemic year when business was anything but usual. Through her leadership and perseverance, clients not only received the same level of service they’d come to rely on with Berkshire Hathaway HomeServices Drysdale Properties, but were introduced to a bevy of new technology and services designed to help them reach their real estate goals despite the challenges faced by the pandemic.
“The winners of the Women of Influence award are truly remarkable! The contribution of these incredibly accomplished leaders to our industry is hard to overstate,” HousingWire Editor in Chief Sarah Wheeler said. “We’re excited to honor them and shine a spotlight on their achievements.”
Pearson believes that at its core, real estate is about the relationships we build. She draws on her experience as an industry leader, a broker, a cancer survivor, a community activist, a wife, and a mother to inspire her employees and her agents; sharing her story openly and encouraging all to pursue their goals. As she says, “What matters most is that you are true to who you are.”
Since opening its doors in 2005, Drysdale Properties has grown by leaps and bounds. At present, the brokerage proudly supports 1,275+ agents in 46 offices, serving 24 counties across Northern California and Nevada. The list of accolades, awards, and recognitions for Pearson’s leadership and accomplishments is staggering and includes many “firsts” in the industry. A few recent accolades include:
Founder of the Drysdale Community Foundation
2020 QE Award Winner for Service Excellence for the fourth consecutive year
Swanepoel Power 200, recognized in the 200 Most Powerful and Influential Men and Women of Residential Real Estate Brokerage for 2021
Frequent speaker for WomenUP!, Inman Connect, and more
Led Drysdale Properties to be recognized in Berkshire Hathaway HomeServices Elite Circle. Drysdale Properties ranked 16 in our Global Network
Pearson has always had a strong commitment to giving back to the communities served. A significant part of that commitment is the Drysdale Community Foundation. In 2021 the foundation donated $68,000 to local organizations.
“It is with no surprise that Gretchen received this award,” says Joe Manning, Chief Marketing and Technology Officer. “If I had to describe Gretchen in one word, it would be wise. She has the experience of up and down markets and shifting technologies. She can see goal line way before others and cares about the future of it more than anyone I know.”
About HW Media
HW Media is the leading digital community for real estate, financial services and fintech professionals to engage, connect and gain knowledge. Founded in 2016 through the acquisition of HousingWire, HW Media is based in Dallas, TX with team members across the country. HW Media is owned by Riomar Capital.
HousingWire is the most influential source of news and information for the U.S. mortgage and housing markets. Built on a foundation of independent and original journalism, HousingWire reaches over 60,000 newsletter subscribers daily and over 1.0 million unique visitors each month. Our audience of mortgage, real estate and fintech professionals rely on us to Move Markets Forward. Visit www.housingwire.com or www.solutions.housingwire.com to learn more.
About Berkshire Hathaway HomeServices Drysdale Properties
Berkshire Hathaway HomeServices Drysdale Properties is Northern California’s and Nevada’s fastest-growing, fullservice and 100% woman-owned real estate brokerage specializing in residential, luxury, relocation, commercial and property management. It is the No. 16 brokerage in the Berkshire Hathaway HomeServices network; No. 69 for sales volume as ranked by REALTrends; and No. 67 in RISMedia’s Power Broker Top 500 Report. To learn more visit www.bhhsdrysdale.com
The government’s $788 billion relief effort for small businesses ravaged by the coronavirus pandemic, the Paycheck Protection Program, is ending as it began, with the initiative’s final days mired in chaos and confusion.
Millions of applicants are seeking money from the scant handful of lenders still making the government-backed loans. Hundreds of thousands of people are stuck in limbo, waiting to find out if their approved loans — some of which have been stalled for months because of errors or glitches — will be funded. Lenders are overwhelmed, and borrowers are panicking.
“Some of our lenders have been getting death threats,” said Toby Scammell, the chief executive of Womply, a loan facilitator that has nearly 1.6 million applications awaiting funding. “There’s a lot of angry, scared people who were really counting on this program and are afraid of being shut out.” More funding seems unlikely. Congress twice extended the program in December and March, anteing up nearly $300 billion total in new aid, but there is little indication that it will do so again.
The relief program had been scheduled to keep taking applications until May 31. But two weeks ago, its manager, the Small Business Administration, announced that the program’s $292 billion in financing for forgivable loans this year had nearly run out and that it would immediately stop processing most new applications.
reaching businesses owned by women and minorities, a priority for the Biden administration. But they are not intended to operate on a large scale — and suddenly thousands of desperate borrowers were beating down their door.
“I’m averaging 150 calls a day,” said Brooke Mirenda, the chief executive of the Sunshine State Economic Development Corporation, a Florida lender. “When you’re talking to borrowers who are crying because there’s $8,000 at stake and for them it’s months of their mortgage payment — that’s a really huge deal.”
In something akin to a game of musical chairs, banks and other lenders are now frantically trying to find community financial institutions to take over their backlog of applications. Even though most focus on underserved borrowers, they can process loans for any qualified applicant — but very few have the capacity to do that in large numbers.
contact community financial institutions to determine which ones are lending, but those who have tried said the effort was often fruitless.
Sheri, a photographer in Brooklyn who asked that her last name not be used to protect her privacy, wrote to more than a dozen lenders. Three replied. One was not offering P.P.P. loans, one said she did not meet its qualification rules, and the other requested more information and did not confirm whether or not it could offer her a loan.
Representatives of the Small Business Administration did not directly answer questions about the challenges of finding a willing lender.
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“Community-based financial lenders play a key role in generating economic growth and opportunity in some of our most distressed communities,” Patrick Kelley, the head of the agency’s Office of Capital Access, said in a written statement.
“In just over seven days, more than 450 C.F.I.s have processed over 273,000 Paycheck Protection Program applications totaling $4.6 billion, more than 50 percent of the $9 billion remaining one week ago,” he added.
The Paycheck Protection Program has had a rocky road since its inception. Its early days, in April 2020, were plagued by technology problems and confusing rules. Big banks rebuffed many borrowers, and some prioritized bigger and wealthier businesses.
Fraud has been a constant challenge, too, and the Justice Department has charged hundreds of people with taking loans illegally. Many of the tiniest businesses were entirely shut out; a late move by the Biden administration to get more money to solo business owners wreaked havoc for lenders and contributed to the recent deluge of applications.
Now, an additional bottleneck is causing turmoil: Banks and other mainstream lenders are racing to finalize hundreds of thousands of applications that were still in progress when the Small Business Administration closed the program to new applications. Those loans could still be funded, the agency told them, but they would need to move fast.
That set off a panic, with anguished applicants besieging overwhelmed lenders — especially so-called fintechs, a group of online lenders that cranked out P.P.P. loans at a blistering pace. Many took on more customers than they could handle and are now struggling to manage irate borrowers clamoring for help and information.
George Greenfield, the owner of CreativeWell, a small literary agency and speakers’ bureau in Montclair, N.J., applied in March for a loan from Biz2Credit, a fintech lender.
But Mr. Greenfield’s application was complicated — he’s a sole proprietor, but one who, before the pandemic, had part-time employees — and Biz2Credit’s system struggled to accurately calculate his loan amount. The initial amount he was offered was less than a quarter of what he was eligible for.
Mr. Greenfield and his accountant spent more than a month trying to get the mistake fixed, with no success. Emails went unanswered. Online customer service agents could not help. And when the S.B.A. cut off new loans, his problem became urgent: If he abandoned his Biz2Credit application, he feared he would not be able to find a new lender.
“My blood is boiling,” Mr. Greenfield said last week of his stalled application. “This company has no regard for the small-business owners they said they wanted to serve.”
After a New York Times reporter contacted Biz2Credit, a company agent quickly called Mr. Greenfield and untangled his application. Within hours, he had the paperwork to finalize his loan for the correct amount. He was happy with the outcome but infuriated by the process.
Rohit Arora, the chief executive of Biz2Credit, acknowledged that Mr. Greenfield was not alone in his frustration. “We were thrown off guard by the S.B.A. shutdown,” he said. “They’re running a very chaotic program. There hasn’t been much communication.”
Biz2Credit processed more than 182,000 P.P.P. loans this year, but Mr. Arora estimated that he had tens of thousands of stranded applications that his company would be unable to fund. “For the last week, we’ve been slammed,” Mr. Arora said. “The customers have been very angry, very frustrated, very scared. I can understand.”
The Times’s David Gelles gives DealBook the backstory to his recent front-page article about rising C.E.O. pay during the pandemic.
Companies battered by the pandemic are handing out enormous pay packages to their C.E.O.s, highlighting the sharp divides in a nation on the precipice of an economic boom, but still wracked by steep income inequality.
Executive compensation has, of course, been soaring for decades now. Chief executives of big companies in the U.S. now make, on average, 320 times as much as the typical worker. In 1989, that ratio was 61 to 1.
Read the full story here.
HERE’S WHAT’S HAPPENING
A deep split in pandemic fortunes highlights an uneven global recovery. On one hand: The E.U. could let vaccinated Americans visit this summer, bringing much-needed tourism revenue to the region. (One potential hangup is a rising number of people who aren’t getting their second doses.) On the other: India will receive emergency medical supplies from the U.S. as it reports half of all new Covid-19 cases worldwide.
Netflix had a big night at the Oscars. The streaming company won seven Academy Awards last night, the most of any studio, but again fell short in its quest to win Best Picture. (That went to Disney, whose Searchlight Pictures’ “Nomadland” won the big prize; Disney won five awards over all.) AT&T’s Warner Bros. won three Oscars, while Amazon took home two.
An activist investor steps up its challenge at Exxon Mobil. Engine No. 1 argues in a new presentation that the oil giant faces an “existential business risk” because it is not taking bolder steps to move away from fossil fuels, The Financial Times reports. (Exxon and other major producers are set to report earnings this week.)
Second Chance Business Coalition, which was announced today.
Elon Musk is hosting “S.N.L.” Yes, really. The Tesla chief is scheduled to host “Saturday Night Live” on May 8. (We bet S.E.C. officials will be watching.) John Authers of Bloomberg Opinion has an interesting take on it: The Tesla chief’s antics are doing more to encourage adoption of green technology than any amount of environmentalist scolding.
The ‘massive threat’ in a ‘measly’ Supreme Court case
Today the Supreme Court will hear a case that could upend American politics. It has largely escaped attention because it’s not obviously political at all. “Americans for Prosperity Foundation v. Rodriquez” involves a fight over California’s donor disclosure requirements for charities and “may seem like a measly spat over state nonprofit rules,” Senator Sheldon Whitehouse, Democrat of Rhode Island, told DealBook. “But a massive threat lurks within.”
Today in Business
Nonprofits want more donor anonymity. Americans for Prosperity Foundation is a “social welfare” nonprofit arguing that the right to anonymous assembly guaranteed by the First Amendment extends to donor data. Critics say that a ruling in favor of the Koch-funded charity would allow more untraceable money to flow through groups designed to mask the outsize role that a few wealthy players have in American politics. If A.F.P.F. wins, “special interests will have a free pass to rig our democracy from behind a veil of secrecy,” Whitehouse said.
Companies secretly influence politics with “dark money” donations that are deliberately opaque. Basically, some “social welfare” groups are quasi-political yet don’t have the same reporting requirements as explicitly political groups. Similarly, trade groups take corporate donations and pass them on, obscuring the sources.
“The importance of dark money in society, the scope of it, is something people don’t really grasp, but it impacts everyday life,” said Anna Massoglia, a researcher at the Center for Responsive Politics.
A decision is expected around late June. Notably, the court took the case on Jan. 8, two days after the Capitol riot prompted a reckoning over corporate political donations. Both the Chamber of Commerce and the National Association of Manufacturers filed briefs supporting A.F.P.F.’s case for anonymity, and Allen Dickerson of the Federal Election Commission argued the same in a Wall Street Journal op-ed yesterday.
cottage industry of scammers.
Bain is buying $1 billion worth of desserts
Bain Capital Private Equity is buying Dessert Holdings in a deal that DealBook hears values the company at about $1 billion.
Dessert Holdings makes “Insta-worthy” cheesecakes and other desserts through three brands: The Original Cakerie, Lawler’s Desserts and Atlanta Cheesecake. The company, which sells to retailers and restaurants, was created through acquisitions led by its prior owner, Gryphon Investors. The dessert conglomerate emphasizes the “wow factor” of products like tuxedo truffle mousse cake that are made to look good on social media.
A sweet deal? In-store bakeries have held up well during the pandemic, while restaurants are expected to rebound post-Covid. There could be more consolidation in the industry, with George Weston announcing in March it plans to put its bakery business — which includes Wonder Bread in Canada — up for sale. Over the years, Bain has invested in a number of food service and restaurant brands, like Dunkin’ and Domino’s Pizza. It plans to develop “new and innovative products” as well as pursue more acquisitions after the Dessert Holdings deal, said Adam Nebesar, a managing director at the private equity firm.
Trevor Lawrence is getting paid in Bitcoin
As cryptocurrency goes more mainstream — thanks in part to the recent public listing of Coinbase — blockchain businesses are hustling for brand recognition. “We’re really trying to get our name out a lot,” said Sam Bankman-Fried, the C.E.O. of FTX, a crypto exchange that competes with Coinbase. One of FTX’s companies, the investment app Blockfolio, has signed an endorsement deal with Trevor Lawrence, the former Clemson quarterback and presumptive number-one pick in this week’s N.F.L. draft, DealBook is first to report.
29-year-old billionaire founded FTX in 2019, and said he regrets spending his early years “playing video games.” Now, he’s trying to make up for lost time and the “low name recognition” of his crypto brands by hitching their wagon to bigger brands. FTX recently agreed to pay $135 million for the naming rights to the N.B.A.’s Miami Heat arena for 19 years.
THE SPEED READ
ByteDance, the Chinese parent of TikTok, has reportedly delayed plans to go public because it hasn’t devised a corporate structure that would win approval from Washington and Beijing. (South China Morning Post)
A close look at the efforts by the Carlyle Group’s C.E.O., Kewsong Lee, to catch up to his private equity rivals. (WSJ)
Politics and policy
The law firm Jones Day has rehired at least seven lawyers who worked in the Trump administration, cementing its status as a top outpost for Republican legal experts. (FT)
Advisers to wealthy Americans are studying various strategies to minimize the hit from the Biden administration’s proposed tax hikes. (Bloomberg)
Ant Group, the Chinese fintech giant, reportedly plans to offer employees zero-interest loans backed by their stock options to bolster morale. (Bloomberg)
The culture of Travis Kalanick’s food-delivery start-up, CloudKitchens, is said to closely resemble the “bro-y” early days of Uber — and it’s losing workers as a result. (Insider)
Best of the rest
Honda said it expects all cars it sells will be electric by 2040. (Bloomberg)
One of the men who created the “Yale model” of endowment investing says the strategy is past its prime. (FT)
An eye-opening look inside the “slander industry.” (NYT)
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Sun Dawu, an outspoken rural businessman who has been a thorn in the side of China’s ruling Communist Party, has been formally arrested on a number of charges, months after being taken into detention.
Mr. Sun, who has been held in the northern province of Hebei since November, faces charges of illegal fund-raising and obstructing public service, among other offenses. He was formally arrested on Wednesday, according to an arrest notice provided on Saturday by one of his lawyers.
The arrest of Mr. Sun — a vocal critic of the Communist Party’s top leader, Xi Jinping, and his crackdown on civil society — comes amid broader efforts by Mr. Xi to muzzle business leaders and bring China’s private sector to heel.
Beijing has punished a number of high-profile tycoons recently. Ren Zhiqiang, a retired real-estate mogul who had called Mr. Xi a clown, was given an 18-year prison sentence last year. After Jack Ma, China’s most famous business leader, criticized Chinese regulators in October, his e-commerce empire Alibaba and fintech giant Ant Group became targets, and Mr. Ma has since kept an uncharacteristically low profile.
The fates of the other people detained are not known. The authorities in Gaobeidian, the city in Hebei where Mr. Sun is being held in a detention center, did not respond to a request for comment.
Mr. Sun, a veteran of the People’s Liberation Army, worked at China’s state-owned Agricultural Bank of China before starting his own business, called Dawu Agricultural and Animal Husbandry Group, which now employs thousands of people.
He built a town in Hebei called Dawu City, complete with services like a 1,000-bed hospital, and cultivated the image of a benevolent corporate leader. His sayings, such as “I’d be honored if my hospital loses money,” were posted around his company’s campus.
Mr. Sun also provided venues for conferences held by liberal and reform-minded groups. He maintained friendships with dissidents long after they became politically toxic. When human rights lawyers were arrested, he offered to pay for their defense.
wrote, “will definitely go after him with murky laws.”
Jack Ma, the most famous businessman China has ever produced, is avoiding the spotlight. Friends say he is painting and practicing tai chi. Sometimes, he shares drawings with Masayoshi Son, the billionaire head of the Japanese conglomerate SoftBank.
The wider world glimpsed Mr. Ma for the first time in months last week, during a virtual board meeting of the Russian Geographical Society. As President Vladimir V. Putin and others discussed Arctic affairs and leopard conservation, Mr. Ma could be seen resting his head on one hand, looking deeply bored.
For Mr. Ma — the charismatic entrepreneur who first showed, two decades ago, how China would shake the world in the internet age; whose face adorns shelves of admiring business books; who never met a crowd he couldn’t razzle-dazzle — it is a stark change of pace.
Beijing’s biggest targets yet, as officials start regulating the country’s powerful internet industry like never before.
snatched from a luxury Hong Kong hotel in 2017. Ye Jianming, an oil tycoon who sought connections in Washington, was detained, as was Wu Xiaohui, whose insurance company bought the Waldorf Astoria Hotel in Manhattan. Mr. Wu later went to prison. Lai Xiaomin, the former chairman of a financial firm, was executed this year.
“The general iron rule is that there should be no individual centers of power outside of the party,” said Richard McGregor, a senior fellow at the Lowy Institute and author of “The Party: The Secret World of China’s Communist Rulers.”
Beijing’s clampdown on tech is already rippling through boardrooms beyond Alibaba’s.
Ant Group’s chief executive, Simon Hu, resigned in March. A few days later, Colin Huang stepped down as chairman of Pinduoduo, the mobile bazaar he founded and took public within a few short years. Pinduoduo announced his resignation the same day it said it had attracted 788 million shoppers over the previous 12 months — a bigger number than Alibaba.
proposed tougher rules for internet companies — or, as an official newspaper put it, “innovative methods of regulation and governance.”
China’s antitrust authority summoned 34 top internet companies to talk about new fair-competition rules. Within hours, they were discussing business changes and publicly pledging to stay in line.
“These new regulations are going to require internet platforms to look at how they innovate going forward, and the result is potentially less innovation,” said Gordon Orr, a nonexecutive board member at Meituan, the Chinese food delivery giant.
Even so, Alibaba and other internet titans have a status in China that could protect them from the most heavy-handed treatment. Officials have praised the titans’ economic contributions even as they tighten supervision. Mr. Xi wants China’s economy to be driven more by its own innovations than by those of fickle foreign powers.
That means it might be too soon to declare Jack Ma down for the count.
“His company is much more important to the success and functioning of the Chinese economy than any of the other entrepreneurs’,” Mr. McGregor said. “The government wants to continue to reap the benefits of his company — but on their terms. The government isn’t nationalizing Alibaba. It isn’t confiscating its assets. It’s simply narrowing the field in which it operates.”
Alibaba declined to comment.
Mr. Ma is no neophyte at dealing with the authorities in China.
He worked briefly and unhappily at a government-run advertising agency before founding Alibaba in 1999. At the time, China was still getting used to the idea of powerful private entrepreneurs, and Mr. Ma proved adept at charming government officials.
in the 2000s. “What a world-class company needs most is a soul, a commander, a world-class businessman. Jack Ma, I believe, meets this standard.”
Mr. Ma saw early on what success might bring with it in China, said Porter Erisman, an early Alibaba executive.
“There was only one person in the company who brought to our attention that one day we might face issues of being so big that we would come under pressure for having too much market power,” Mr. Erisman said. “And that was Jack.”
one of Alibaba’s biggest investors, Yahoo. Mr. Ma said the move had been necessary under new Chinese regulations. Alipay later became Ant Group.
“The Alipay transfer emboldened him,” said Duncan Clark, who has known Mr. Ma since 1999 and is chairman of BDA China, a consulting firm. “He kind of got away with it.”
work more closely with the state.
When Mr. Ma stepped down as Alibaba’s chairman in 2019, a commentary in the official Communist Party newspaper declared: “There is no so-called Jack Ma era — only Jack Ma as part of this era.”
China’s leaders need the private sector to help sustain economic growth. But they also do not want entrepreneurs to undermine the party’s dominance across society.
Last October, as Ant was preparing to go public, Mr. Ma spoke at a Shanghai conference and criticized China’s financial regulators. He had long seen Ant as a vehicle for disrupting the country’s big state-run banks. But there could scarcely have been a less opportune moment to press the point. Officials halted Ant’s share listing soon after.
In China, “it’s hard to say the emperor has no clothes these days,” said Kellee S. Tsai, a political scientist at the Hong Kong University of Science and Technology.
Mr. Ma has largely vanished from sight within his companies, too. In January, he popped up in an internal chat group to answer a business question, according to a person who saw the message but was not authorized to speak publicly. Employees later shared Mr. Ma’s message to reassure nervous colleagues.
estimated that Mr. Ma was not, for the first time in three years, one of China’s three richest people. The country’s new No. 1 was Zhong Shanshan, the low-key head of both a bottled-water giant and a pharmaceutical business.
Chinese news reports about his sudden wealth had to explain to readers how to pronounce the obscure Chinese character in his name.
Mr. Gelzinis said Mr. Gensler would probably draw on his familiarity with the subject matter — he taught classes on blockchain technology at the Massachusetts Institute of Technology — to approach regulation around digital currencies more strategically. That would be a departure from his predecessor Jay Clayton, who favored enforcement actions against initial coin offerings without providing much regulatory guidance, he added.
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Paul Grewal, chief counsel of Coinbase, the cryptocurrency exchange that went public last week, said the industry was “hopeful” about Mr. Gensler, noting that he is fluent in its language. Mr. Grewal said the industry wanted Mr. Gensler to provide clarity on how securities regulators decide when a digital asset is considered a security and subject to S.E.C. review, as opposed to a currency that is largely free from S.E.C. oversight.
The question grew in importance after the S.E.C. sued the San Francisco company Ripple Labs in December over the sale of its popular digital tokens to the public. The S.E.C. said the company was selling unregistered securities, while Ripple and others said the tokens should be classified as a digital currency. The enforcement action was one of the last brought before Mr. Clayton stepped down as chairman in the waning days of the Trump administration.
More recently, a brokerage affiliated with Sustainable Holdings, a financial technology company, asked the S.E.C. to weigh in on whether nonfungible tokens, which are being used to create digital art, are securities that require registration. The company, in its letter, asked the S.E.C. “to engage in a meaningful discussion of how to regulate fintech companies and individuals that are creating NFTs that may be deemed digital asset securities.”
Mr. Gensler, while teaching at M.I.T., acknowledged that regulators had struggled with how to treat digital assets. In a 2018 interview, he said digital assets could at times appear to be both a commodity and a security. At his Senate confirmation hearing, Mr. Gensler spoke strongly for heightened requirements for companies to disclose climate risks and diversity efforts.
“Diversity in boards and senior leadership benefits decision-making,” he said.
Mr. Gensler declined to be interviewed.
One thing the past three months have shown is that the stock and bond markets have a way of quickly writing the agenda for anyone who leads the S.E.C. That means SPACs will almost certainly be scrutinized. In particular, Mr. Gensler will have to determine whether these blank-check companies are a good market innovation for taking fledgling companies public or an investment vehicle that has the potential to harm retail investors, Mr. Hawke of Arnold & Porter said.
LONDON — Coming out of Brexit this year, Britain’s government needed a new blueprint for the future of the nation’s financial services as cities like Amsterdam and Paris vied to become Europe’s next capital of investment and banking.
For some, the answer was Deliveroo, a London-based food delivery company with 100,000 riders on motor scooters and bicycles. Although it lost more than 226 million pounds (nearly $310 million) last year, Deliveroo offered the raw promise of many fast-growing tech start-ups — and it became a symbol of Britain’s new ambitions by deciding to go public and list its shares not in New York but on the London Stock Exchange.
Deliveroo is a “true British tech success story,” Rishi Sunak, Britain’s top finance official, said last month.
It was a false start. Deliveroo has since been called “the worst I.P.O. in London’s history.” On the first day of trading, March 31, the shares dropped 26 percent below the initial public offering price. (It has gotten worse.)
impacts from Brexit were immediate: On the first working day of 2021, trading in European shares shifted from venues in London to major cities in the bloc. Then London’s share of euro-denominated derivatives trading dropped sharply. There’s anxiety over what could go next.
Financial services are a vital component of Britain’s economy, making up 7 percent of gross domestic product — £132 billion in 2019, or some $170 billion. Exporting financial and other professional services is something Britain excels at. Membership in the European Union allowed London to serve as a financial base for the rest of the continent, and the City’s business ballooned. Four-tenths of financial services exports go to the European Union.
The government has begun hunting for ideas to bolster London’s reputation as a global finance center, in a series of reviews and consultations on a variety of issues, including I.P.O.s and trading regulations.
For many, the changes can’t come soon enough.
“The United Kingdom is not going to sit still and watch its financial services move across” to other European cities, said Alasdair Haynes, the founder of Aquis, a trading venue and stock exchange for equities in London. This will make the next three or four years exciting, he said.
But this optimism isn’t universal. The prospects of a warm and close relationship between Britain and the European Union have considerably dimmed. The two sides recently finished negotiations on a memorandum of understanding to establish a forum to discuss financial regulation, but the forum is voluntary, and the document has yet to be signed.
Duff & Phelps found that fewer see London as the world’s leading financial center but that it topped the leader board for regulatory environment.
Here are some of the plans.
Mr. Sunak told Parliament on March 3, the same day a review commissioned by the government recommended changes designed to encourage tech companies to go public in London. It proposed ideas, common in New York, that would let founders keep more control of their company after they began selling shares.
For example: allowing companies with two classes of shares and different voting rights (like Facebook) to list in the “premium” section of the London Stock Exchange, which could pave the way for them to be included in benchmark indexes. Or: allowing a company to go public while selling a smaller proportion of its shares than the current rules require.
Today in Business
The timing of Deliveroo’s I.P.O. wasn’t a coincidence. It listed with dual-class shares that give its co-founder William Shu more than half of the voting rights for three years — a structure set to “closely align” with the review’s recommendations, the company said.
But the idea may be a nonstarter among some of London’s institutional investors. Deliveroo flopped partly because they balked at the offer of shares with minimal voting rights.
the latest craze in financial markets, having taken off with investors and celebrities alike. SPACs are public shell companies that list on an exchange and then hunt for private companies to buy.
London has been left behind in the SPAC fervor. Last year, 248 SPACs listed in New York, and just four in London, according to data by Dealogic. In March, Cazoo, a British used car retailer, announced that it was going public via a SPAC in New York.
Already there are signs that Amsterdam could steal the lead in this booming business for Europe. There have been two SPACs each in London and Amsterdam this year, but the value of the listings in Amsterdam are five times that of London.
Britain’s financial regulatory agency said it would start consultations on SPACs soon and aim to have new rules in place by the summer.
regain ground lost to Germany, France and other European countries on the issuing of green bonds to finance projects to tackle climate change.
The City’s future
London’s finance industry isn’t in danger of imminent collapse, but because of Brexit a cornerstone of the British economy isn’t looking as formidable as it once did. And as London tries to keep up with New York, it is looking over its shoulders at the financial technology coming out of Asia.
The government has continuously billed Brexit as an opportunity to do more business with countries outside of the European Union. This will be essential as international companies begin to ask whether they want to base their European business in London or elsewhere.
When it comes to the future of Britain, it’s “almost a back-to-the-future approach of London as an international center as opposed to being an international and European center,” said Miles Celic, the chief executive of the CityUK, which represents the industry. “It’s doubling down on that international business.”