Tag: WSJ

Schoolyard Justice in Federal Court

Mary Pat Campbell

Link: https://www.wsj.com/articles/schoolyard-justice-in-federal-court-11623171249

Excerpt:

 The bank administered a loan of some $1 billion, sending payments from Revlon to the lenders. Citibank mistakenly sent a wire transfer of the entire principal amount due when it only intended a single installment.

Under established law, the money that Citibank wired should be repaid because it was sent by mistake. But U.S. District Judge Jesse Furman upset settled law and allowed lenders to keep the money on the ground that the recipients did not have notice that the funds had been sent erroneously. If that became the rule, it would upset the important relationships among lenders, borrowers and trusted intermediaries.

….

Mistakes like this occur with surprising frequency. In 2017, the German bank KfW mistakenly transferred $5.4 billion to lenders. In China, the bank Rural Commercial Bank in Changsha thought that a customer’s 10-digit account number was actually the amount of money to be transferred, and mistakenly sent 1.2 billion yuan (around $190 million) to the customer. Deutsche Bank recently sent $6 billion to a U.S.-based hedge fund in error. In all these cases, the banks recovered the errant funds transfers almost immediately.

Author(s): Jonathan Macey

Publication Date: 8 June 2021

Publication Site: Wall Street Journal

The Power of Natural Immunity

Mary Pat Campbell

Link: https://www.wsj.com/articles/the-power-of-natural-immunity-11623171303?mod=opinion_lead_pos5

Excerpt:

The contribution of natural immunity should speed up the timeline for returning fully to normal. With more than 8 in 10 adults protected from either contracting or transmitting the virus, it can’t readily propagate by jumping around in the population. In public health, we call that herd immunity, defined broadly on the Johns Hopkins Covid information webpage as “when most of a population is immune.” It’s not eradication, but it’s powerful.

Without accounting for natural immunity, we are far from Anthony Fauci’s stated target of 70% to 85% of the population becoming immune through full vaccination. But the effect of natural immunity is all around us. The plummeting case numbers in late April and May weren’t the result of vaccination alone, and they came amid a loosening of both restrictions and behavior.

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Researchers from the Cleveland Clinic published a study this week of 1,359 people previously infected with Covid who were unvaccinated. None of the subjects subsequently became infected, leading the researchers to conclude that “individuals who have had SARS-CoV-2 infection are unlikely to benefit from COVID-19 vaccination.”

Author(s): Marty Makary

Publication Date: 8 June 2021

Publication Site: Wall Street Journal

A G-7 Deal on a Global Minimum Tax for Companies Faces Hurdles

Mary Pat Campbell

Link: https://www.wsj.com/articles/a-g-7-deal-on-a-global-minimum-tax-for-companies-faces-hurdles-11623016756

Excerpt:

An agreement by wealthy countries to impose minimum taxes on multinational companies faces a rocky path to implementation, with many governments likely to wait to see what others, especially a divided U.S. Congress, will do.

Treasury Secretary Janet Yellen hailed the deal, reached by finance ministers of the Group of Seven leading rich nations over the weekend in London, calling it a return to multilateralism and a sign countries can tighten the tax net on profitable firms to fund their governments.

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In countries with parliamentary systems, governments can quickly deliver on pledges, turning them into local laws and regulations. In the U.S., however, a slim Democratic majority in the House, an evenly split Senate, antitax Republicans and procedural hurdles complicate passage.

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Buy-in will also have to come from a broader group of 135 countries in what is known as the Inclusive Framework. Some countries with very low tax rates — such as Ireland, with a 12.5% charge on profit — are reluctant to sign up. The U.S. has proposed tax changes that would penalize companies from countries that don’t impose the minimum taxes.

Author(s): Richard Rubin, Paul Hannon, Sam Schechner

Publication Date: 6 June 2021

Publication Site: Wall Street Journal

The Science Suggests a Wuhan Lab Leak

Mary Pat Campbell

Link: https://www.wsj.com/articles/the-science-suggests-a-wuhan-lab-leak-11622995184

Excerpt:

In gain-of-function research, a microbiologist can increase the lethality of a coronavirus enormously by splicing a special sequence into its genome at a prime location. Doing this leaves no trace of manipulation. But it alters the virus spike protein, rendering it easier for the virus to inject genetic material into the victim cell. Since 1992 there have been at least 11 separate experiments adding a special sequence to the same location. The end result has always been supercharged viruses.

A genome is a blueprint for the factory of a cell to make proteins. The language is made up of three-letter “words,” 64 in total, that represent the 20 different amino acids. For example, there are six different words for the amino acid arginine, the one that is often used in supercharging viruses. Every cell has a different preference for which word it likes to use most.

In the case of the gain-of-function supercharge, other sequences could have been spliced into this same site. Instead of a CGG-CGG (known as “double CGG”) that tells the protein factory to make two arginine amino acids in a row, you’ll obtain equal lethality by splicing any one of 35 of the other two-word combinations for double arginine. If the insertion takes place naturally, say through recombination, then one of those 35 other sequences is far more likely to appear; CGG is rarely used in the class of coronaviruses that can recombine with CoV-2.

In fact, in the entire class of coronaviruses that includes CoV-2, the CGG-CGG combination has never been found naturally. That means the common method of viruses picking up new skills, called recombination, cannot operate here. A virus simply cannot pick up a sequence from another virus if that sequence isn’t present in any other virus.

Author(s): Steven Quay, Richard Muller

Publication Date: 6 June 2021

Publication Site: Wall Street Journal

Labor Shortage Draws Attention of U.S. Lawmakers

Mary Pat Campbell

Link: https://www.wsj.com/articles/labor-shortage-draws-attention-of-u-s-lawmakers-11622712602

Excerpt:

Congressional lawmakers from both parties are considering incentives such as providing federal funding to pay for hiring bonuses for workers and expanded tax credits for employers. A handful of states are moving to implement such programs on their own, without waiting for Washington.

Some economists, Republican lawmakers and business owners say enhanced federal unemployment benefits are contributing to the labor shortage, because many workers receive more in government aid than they would get on the job. Those benefits — $300 a week on top of regular state payments — are due to expire after Labor Day.

Other economists say the payments have provided a boost to many lower-income families, who have disproportionately lost jobs in the coronavirus pandemic, while in turn pushing money back into the broader economy.

Author(s): Kate Davidson

Publication Date: 3 June 2021

Publication Site: Wall Street Journal

Meat Supplies Tighten as Cyberattack on JBS Snarls Food Chain

Mary Pat Campbell

Link: https://www.wsj.com/articles/jbs-meat-plants-face-slow-restart-after-cyberattack-11622633982

Graphic:

Excerpt:

A ransomware attack against JBS SA sent shock waves throughout the U.S. food industry and exacerbated tension between Washington and Moscow, even as the meatpacker restarted plant operations.

JBS said most of its plants resumed operations Wednesday, though some shifts and processing operations remained suspended, according to individual plants’ social-media posts.

….

Meat supplies were already tight before the cyberattack. Surging demand from reopening restaurants, along with production problems at meat plants, are driving up costs of bacon, chicken wings and other products as people continue to make big grocery purchases. Some restaurants and supermarkets have raised prices for consumers as a result.

Distributor Gordon Food Service Inc. bought meat from other suppliers Tuesday while JBS plants were offline, said Jagtar Nijjar, Gordon’s director of imports and commodities. Mr. Nijjar said he expected it to take four business days for its normal order flow from JBS to resume. Normally, he said, Gordon gets more than half of its pork from JBS, at least half a million pounds every week.

U.S. cattle producers, meanwhile, said they were waiting to learn whether they would be able to deliver animals to JBS plants on schedule this week. U.S. meat companies slaughtered 105,000 cattle and 439,000 hogs on Wednesday, down 13% and 9%, respectively, from a week prior, according to USDA data.

Author(s): Jesse Newman, Jacob Bunge

Publication Date: 2 June 2021

Publication Site: WSJ

Populists May Kill Chile’s Pension Success

Mary Pat Campbell

Link: https://www.wsj.com/articles/populists-may-kill-chiles-pension-success-11622670275

Excerpt:

Populist politicians are destroying Chile’s revolutionary pension system. In 1981 Chile became the first country to privatize social security, ending the pay-as-you-go system that had been in place since 1924 and had collapsed. Now Chile’s left wants to resurrect it.

The state-run pension system was plagued by corruption and rent-seeking since its earliest days. Among the 11,395 laws passed by the Chilean Congress between 1926 and 1963, 10,532 granted pension privileges to special-interest groups, many of them politically connected. In 1968, Chilean President Eduardo Frei, a center-left Christian Democrat, described the cronyism that plagued social security as an “absurd monstrosity” that the government couldn’t afford.

Pension privatization reversed this perverse dynamic. Instead of taxing active workers to pay pensioners through the bureaucracy, the new system, created by former Labor Minister Jose Pinera, established that 10% of the employee’s salary is transferred automatically to an account under his name at one of the Administradoras de Fondos de Pensiones, or AFP. These private pension funds compete to attract workers and invest their pensions for a fee.

This has restored the link between contributions and pension benefits by making workers responsible for saving the funds that will support them once they retire. This novel system also limited corruption and rent-seeking, and Chilean taxpayers are no longer on the hook for pension deficits, which in 1981 represented 3% of gross domestic product.

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Longer life expectancy is also a problem. When the AFP system was created, men retired at 65 with an average life expectancy around 67. Women retired at the age of 60 with a life expectancy around 74. Today, the retirement ages are unchanged but life expectancy has increased to 77 for men and 83 for women. This means more years of retirement have to be funded by the same years of saving.

Author(s): Axel Kaiser

Publication Date: 2 June 2021

Publication Site: WSJ

Activist Likely to Gain Third Seat on Exxon Board

Mary Pat Campbell

Link: https://www.wsj.com/articles/activist-likely-to-gain-third-seat-on-exxon-board-11622664757

Excerpt:

An activist investor is likely to pick up a third seat on the board of Exxon Mobil Corp., giving it additional leverage to press the oil giant to address investor discontent about diminished profits and its fossil-fuel focused strategy amid concerns about climate change.

Exxon said Wednesday that an updated vote count showed shareholders backed a third nominee of Engine No. 1, an upstart hedge fund that had already won two board seats at Exxon’s annual shareholder meeting last week. The final vote hasn’t been certified, Exxon said, and could take days or weeks to be finalized, according to people familiar with the matter.

Engine No. 1, which owns a tiny fraction of Exxon’s stock, had sought four seats on the board and argued the Texas oil giant should commit to carbon neutrality, effectively bringing its emissions to zero—both from the company and its products—by 2050, as some peers have. If the preliminary voting results hold, it will control a quarter of Exxon’s 12-person board.

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Shareholders representing nearly 56% of shares that were eligible to vote supported a proposal calling for Exxon to disclose more about direct and indirect lobbying spending and policies, while about 64% voted for Exxon to release a report on how its lobbying aligns with Paris climate accords.

Author(s): Christopher M. Matthews

Publication Date: 2 June 2021

Publication Site: WSJ

Pennsylvania’s Biggest Pension Racks Up Costs After Misreporting Returns

Mary Pat Campbell

Link: https://www.wsj.com/articles/pennsylvanias-biggest-pension-racks-up-costs-after-misreporting-returns-11620990002

Excerpt:

The board of trustees overseeing the $62 billion Pennsylvania School Employees Retirement System has spent more than $1 million so far to investigate and contain fallout from an inaccurate report on investment results delivered late last year. The report led to a mistaken conclusion that no increase in employee pension contributions would be needed this year.

The system’s trustees have hired batteries of lawyers since the mistake was revealed. The board said in April that it had hired law firms to conduct an investigation into the miscalculation and to respond to a federal grand jury subpoena requesting documents. It couldn’t be determined whether the subpoena relates to the miscalculation.

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However, in March the pension system said that the actual nine-year return came to 6.34%, triggering an increase in employee pension contributions reportedly affecting some 100,000 workers whose contributions will increase by 0.50% to 0.75% starting July 1. For instance, a school worker who earns about $45,000 annually would have roughly $8.65 withheld from each biweekly paycheck, the system’s website explains.

Author(s): Preeti Singh

Publication Date: 14 May 2021

Publication Site: Wall Street Journal

Intelligence on Sick Staff at Wuhan Lab Fuels Debate on Covid-19 Origin

Mary Pat Campbell

Link: https://www.wsj.com/articles/intelligence-on-sick-staff-at-wuhan-lab-fuels-debate-on-covid-19-origin-11621796228?mod=djemalertNEWS

Excerpt:

Three researchers from China’s Wuhan Institute of Virology became sick enough in November 2019 that they sought hospital care, according to a previously undisclosed U.S. intelligence report that could add weight to growing calls for a fuller probe of whether the Covid-19 virus may have escaped from the laboratory.

The details of the reporting go beyond a State Department fact sheet, issued during the final days of the Trump administration, which said that several researchers at the lab, a center for the study of coronaviruses and other pathogens, became sick in autumn 2019 “with symptoms consistent with both Covid-19 and common seasonal illness.”

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China’s National Health Commission and the WIV didn’t respond to requests for comment. Shi Zhengli, the top bat coronavirus expert at WIV, has said the virus didn’t leak from her laboratories. She told the WHO-led team that traveled to Wuhan earlier this year to investigate the origins of the virus that all staff had tested negative for Covid-19 antibodies and there had been no turnover of staff on the coronavirus team.

Marion Koopmans, a Dutch virologist on that team told NBC News in March that some WIV staff did fall sick in the autumn of 2019, but she attributed that to regular, seasonal sickness.

…..

It isn’t unusual for people in China to go straight to the hospital when they fall sick, either because they get better care there or lack access to a general practitioner. Covid-19 and the flu, while very different illnesses, share some of the same symptoms, such as fever, aches and a cough. Still, it could be significant if members of the same team working with coronaviruses went to hospital with similar symptoms shortly before the pandemic was first identified.

Author(s): Michael R. Gordon, Warren P. Strobel, Drew Hinshaw

Publication Date: 23 May 2021

Publication Site: WSJ

China’s People Problem Swings From Too Many to a ‘Decline That Sees No End’

Mary Pat Campbell

Link: https://www.wsj.com/articles/chinas-people-problem-swings-from-too-many-to-a-decline-that-sees-no-end-11620903602

Graphic:

Excerpt:

Births in China plunged 18% in 2020, though Covid-19 may have played a part, and, if so, fewer newborns might arrive in 2021 as well.

China will remain enormous, but the figures signal a waning of the demographic trends that came to define its modern era, with its huge working-age population spurring 40-plus straight years of economic expansion. A drop in household size, for example, to 2.6 last year from 3.1 a decade earlier, highlights the effects of the birth restrictions since about 1980.

The challenge for China now is its shrinking working-age population versus its growing elderly one, represented by only 12 million annual births, a fractional number for such a populous country.

In the latest census, 63% of Chinese were ages 15 to 59, compared with 70% in 2010, while nearly 19% in 2020 were 60 years old or above, versus 13% a decade earlier.

Author(s): James T. Areddy, Liyan Qi

Publication Date: 13 May 2021

Publication Site: Wall Street Journal

Who Really Pays for ESG Investing?

Mary Pat Campbell

Link: https://www.wsj.com/articles/who-really-pays-for-esg-investing-11620858462

Excerpt:

A recent analysis by Scientific Beta disputes “claims that ESG funds have tended to outperform the wider market.” Sony Kapoor, managing director of the Nordic Institute for Finance, Technology and Sustainability, a think tank, told the Financial Times that the research “puts in black and white what is only whispered in the corridors of finance — most ESG investing is a ruse to launder reputations, maximize fees and assuage guilt.”

BlackRock’s former chief investment officer for sustainable investing, Tariq Fancy, appears to understand this. He recently wrote in USA Today that he was concerned about portfolio managers exploiting the “E” of ESG investing because “claiming to be environmentally responsible is profitable” but advancing “real change in the environment simply doesn’t yield the same return.” Mr. Fancy criticized “stalling and greenwashing” in “the name of profits.”

This is a tacit admission that ESG investing upends the fiduciary duties portfolio managers owe their clients. As Mr. Fancy acknowledged, “no matter what they tout as green investing, portfolio managers are legally bound” to “do nothing that compromises profits.” As former Labor Secretary Eugene Scalia wrote on these pages last year, under the federal law that protects retirement assets, known as Erisa, “one ‘social’ goal trumps all others — retirement security for American workers.”

Author(s): Andy Puzder, Diane Black

Publication Date: 12 May 2021

Publication Site: Wall Street Journal