Andrew here. A lot has happened in the past week, but let’s focus on an especially serious situation: the fight between President Trump and Lisa Cook, the Fed governor. What many fail to recognize is that this isn’t just a skirmish over one person, but a broader effort to fundamentally reshape the central bank.
Trump said that he was seeking a “majority” on the Fed’s board. This suggests an explicit desire for more control over the central bank’s policy decisions than ever before. There may be an even bigger issue at play: The regional Fed presidents need to be reappointed in February, but if the president gains control of the Fed’s board, he could influence the selection of these regional leaders (who become rotating voting members every several years). That could install an entire generation of ideologically aligned policymakers.
Also, please take a listen to Tuesday’s episode of “The Daily.” I was invited on to speak about one of the other major stories of the moment: Trump’s decision to take a 10 percent stake in Intel and what it means for corporate America and the state of capitalism.
The Fed paradox
More prominent voices, including Christine Lagarde of the European Central Bank and the billionaire financier Ray Dalio, have warned about the dangers from President Trump’s all-out assault on the Fed.
And yet as U.S. stocks hover near a new high, equity investors seem unperturbed.
The S&P 500 notched its fourth-straight month of gains in August despite worries about tariffs’ effects on inflation and consumer spending — and concerns that Trump could bulldoze the sanctity of Fed independence.
What to watch:
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Trump is a step closer to putting an ally, his economic adviser Stephen Miran, on the Fed. A Senate hearing on Miran’s nomination as a governor is scheduled for Thursday, as the White House aims to get him confirmed in time for the Fed’s rate-setting meeting in two weeks.
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A federal judge has asked lawyers for Lisa Cook, the Fed governor whom Trump is trying to fire, to file more briefs on Tuesday as she pushes back against the president. The case, which hinges on the question of presidential authority over the central bank, is expected to end up in the Supreme Court.
Are stock investors missing the forest for the trees? Dalio told The Financial Times that with Washington running huge budget deficits, a strong and independent Fed was hugely important.
A politically weakened central bank, he argued, “would weaken the monetary order as we know it” and destabilize debt markets.
The dollar has plummeted in value against a basket of currencies since Trump imposed tariffs on trading partners. Separately, 10-year Treasury notes and 30 year-bonds have badly underperformed stocks.
Will bondholders ultimately check Trump? Even if the president succeeds in gaining, as he said, “a majority very shortly” on the Fed’s board, that wouldn’t necessarily translate to lower borrowing costs for Americans.
Rates for mortgages and other commercial loans are closely tied to the yield on the 10-year Treasury notes — where the market, not the Fed, holds the cards.
HERE’S WHAT’S HAPPENING
Kraft Heinz announces a breakup plan. The company said it would separate itself into two publicly traded businesses: a global one focused largely on sauces and seasonings and a North American-focused one with products like Oscar Mayer hot dogs and Lunchables meals. The move is meant to alleviate Kraft Heinz’s moribund stock price and essentially unwinds the mega-merger that created the business.
Nestlé fires its C.E.O. over an undisclosed relationship with a subordinate. The dismissal of Laurent Freixe followed a board investigation into the romantic relationship, which ultimately was deemed a breach of the company’s code of conduct. Freixe will be replaced by Philipp Navratil, a longtime Nestlé executive who led its Nespresso division.
The Trump family makes billions on paper from its new cryptocurrency. World Liberty Financial, the Trumps’ flagship crypto venture, opened trading of its WLFI token on Monday, allowing the digital currency to be publicly bought and sold. The move valued the Trump family’s holdings at about $5 billion.
Tech giants’ earnings will be in focus in a holiday-shortened week. On deck are quarterly results from Salesforce, Hewlett Packard Enterprise, and the newly public design software maker Figma on Wednesday and Broadcom on Thursday. A crucial August jobs report will be published on Friday, the first since President Trump fired the head of the Bureau of Labor Statistics.
Are tariffs undercutting Trump’s geopolitical goals?
The U.S. has sought for years to foster closer ties to India, hoping to build up a counterweight to China. But the Trump administration’s punitive tariffs on its ally, meant to drive New Delhi away from Moscow, appear to be having the opposite effect.
The latest: Prime Minister Narendra Modi of India, President Xi Jinping of China and President Vladimir Putin of Russia pledged greater cooperation at a regional meeting on Monday.
That drew a rebuke from President Trump, who claimed that the U.S. did “very little business” with India.
India getting closer to China could have big consequences. Companies like Apple had invested billions in the subcontinent to diversify their supply chains and escape Washington’s efforts to constrain Beijing. But Trump’s actions are increasingly undermining those efforts.
There’s still plenty of geopolitical bad blood between New Delhi and Beijing, analysts say. But China doesn’t exactly look isolated right now.
Neither does Russia, despite Trump’s threats against Moscow for slow-walking moves toward peace with Ukraine. Gazprom said that it planned to build a pipeline to provide gas to China.
All this suggests that the Trump administration’s grand strategy isn’t working. “India’s alignment with the Russia-China dynamic, even partially or pragmatically, would signify the strengthening of a new world order led by China, and a narrowing of the strategic room for maneuver available to the United States and its allies in Asia,” Marko Mihkelson, chairman of the foreign affairs committee of the Estonian Parliament, told The Wall Street Journal.
Europe’s tech enforcement is in focus
The European Union’s role as a global tech enforcer faces a pivotal moment as Brussels stares down a long-anticipated summer deadline for deciding whether to hit Elon Musk’s X with a major fine for violating its 2022 Digital Services Act.
The geopolitical impact could be huge, David Meyer reports. The E.U. avoided making concessions on its digital rules when negotiating its recent trade agreement with the U.S., but the rules have become a major dividing point with President Trump and his Big Tech backers. The future of the preliminary trade deal could now hinge on European enforcement decisions.
The issue comes as Amnesty International released a report on Monday that suggests that X is helping to spread homophobic and transphobic content in Poland, a potential violation of the E.U. law, which threatens fines up to 6 percent of global annual revenue.
A recap: The European Commission, the bloc’s executive body, said in 2024 that X had breached the act by allowing users to deceive others about their identities and fell short of transparency requirements. The commission was expected to impose a fine in July, but action was reportedly postponed during the U.S.-E.U. tariff talks.
Progress on trade has not reduced tensions. Trump recently threatened new tariffs and export restrictions against countries that apply digital rules to U.S. tech companies. His social media post last week didn’t name Europe, but its reference to “Digital Services Legislation and Digital Markets Regulations” suggests that his targets include the D.S.A. and the Digital Markets Act, a recent E.U. antitrust law. Trump said the laws were “designed to harm, or discriminate against, American technology.”
That comes on the heels of a warning from the F.T.C. that X and other big American tech companies should not comply with the E.U. law and the U.K.’s new Online Safety Act, which covers similar ground.
The commission has responded by denying that the laws discriminated against U.S. tech and insisted that the bloc had the right to regulate companies operating on its turf.
Thomas Regnier, a commission spokesman, told DealBook that the body was aware of the Amnesty report, and added that the D.S.A. required large platforms like X to have “adequate measures” to mitigate hate speech. He declined to comment on when any ruling into X might be made.
“The Hamptons is basically in group therapy about the mayoral race.”
— Robert Zimmerman, a veteran political fund-raiser, on the despondency among the New York elite about Zohran Mamdani’s rise and the seeming inability of Mayor Eric Adams and Andrew Cuomo to stem it.
Lazard adds A.I. expertise to its board
As Wall Street firms race to figure out how artificial intelligence will reshape their industry, one major bank is bringing on an industry executive to join its highest ranks.
Lazard is adding Dmitry Shevelenko, the chief business officer at Perplexity, to its board, Lauren Hirsch is first to report. Shevelenko previously worked at Uber, LinkedIn and Meta.
A.I. is now a boardroom priority for Lazard. “Having someone who is aware of where the technology is going, knows what the beta testers are doing and also is uber-connected to the engineers and to the cutting edge of technology,” Peter Orszag, the firm’s C.E.O., told DealBook, “I think is just incredibly important.” Adding an A.I. expert could also help the firm compete better in the fierce race for talent.
The bank already uses A.I. in its firmwide “LazardGPT” chatbot as well as the Rogo platform. It is “actively exploring” both a product built on Google’s Gemini and one built on Perplexity, Orszag said.
Banking leaders have embraced A.I. in a big way. David Solomon of Goldman Sachs said in January that the technology could already draft 95 percent of an I.P.O. prospectus. Brian Moynihan of Bank of America told analysts in July that the bank had “1,400 A.I. patents” and “created over 250 A.I. and learning models.” BNY Mellon recently signed a multiyear deal with OpenAI.
“There will be no job, no process, no function that won’t be affected by A.I.,” Jamie Dimon of JPMorgan Chase said in June. He added that the bank’s head of A.I. research now reported directly to him and to JPMorgan’s president.
How will A.I. change investment banking? Orszag said that it could enable junior bankers to move on from low-level tasks faster.
That could mean leaner deal teams in the future and, ultimately, a lower ratio of associates to managing directors. Given how many bankers the firm has been adding lately — and the fact it is actively hiring junior bankers — Orszag said that it was not clear how that would play out.
There are other A.I. concerns. While many have forecast big savings by Wall Street firms from generative A.I. (as much as $340 billion a year in value, according to McKinsey), only two out of 50 banks surveyed for the research firm Evident’s 2024 index tried to estimate the total dollar impact of its A.I. investments. JPMorgan’s 2023 annual report put it at $1 billion to $1.5 billion.
Orszag also addressed questions around privacy and accountability, which given the sensitivity and implications of the data that banks manage, is a topic that he said was a big focus for the firm’s senior leaders.
“The technology is new,” he said, “and so we are hypersensitive to that set of concerns.”
THE SPEED READ
Deals
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Klarna, the payment giant, said it would pursue an I.P.O., seeking to raise as much as $1.27 billion at a valuation of up to $14 billion. (Bloomberg)
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Elliott Investment Management, the big activist investor, has reportedly amassed a $4 billion stake in PepsiCo and plans to call for changes in strategy. (WSJ)
Politics, policy and regulation
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“Trump Orders Have Stripped Nearly Half a Million Federal Workers of Union Rights” (NYT)
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President Trump tells drugmakers that they ought to “justify” the success of their Covid vaccines. (CNBC)
Best of the rest
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“Why China Is Trying to Tame Its Electric Car Frenzy” (NYT)
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Bad Bunny’s 30-show residency in San Juan is expected to give Puerto Rico’s economy a $250 million bump in direct economic impact. (NYT)
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Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.
Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.
Sarah Kessler is the weekend edition editor of the DealBook newsletter and writes features on business.
Michael J. de la Merced has covered global business and finance news for The Times since 2006.
Lauren Hirsch is a Times reporter who covers deals and dealmakers in Wall Street and Washington.
The post The Potentially Big Costs of Trump’s Fed Fight appeared first on New York Times.
