Biden Bangs on Banks

Plus: Boutique dealmakers are all the rage ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

March 31, 2023

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TOGETHER WITH

Good morning and happy Friday.

The tech giants are fighting again. On Thursday, Google accused Microsoft of anti-competitive cloud computing practices, specifically in regard to a slew of impending deals with European-based cloud vendors.

Google’s parent company Alphabet knows better than most what it looks like when markets lack healthy competition. After all, Google controls some 94% of the search market, some 80% of the online maps market, and around a quarter of the global email provider market. Be that as it may, the company is publicly urging EU antitrust regulators to take a closer look at the deals (in rebuttal, Microsoft reminded everyone it only owns 20% of the global cloud services market). Give us a minute to Google search “What is a textbook definition of projection?” Or should we Bing?

Morning Brief

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What’s old is new again in Washington.

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Tesla’s Solar Roof casts a short shadow.

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Centerview is the real deal maker.

Banking

White House Proposes Litany of Banking Reforms

Well, that didn’t take too long.

On Thursday, about three weeks after the collapse of Silicon Valley Bank, the White House proposed reinstituting a whole host of regulations on similarly mid-sized and regional banks with between $100 billion and $250 billion in assets. Some of the rules sound awfully familiar to arguments made post-2008. You know what they say: every crisis is an opportunity to argue about the last crisis.

Biden Your Time

It’s all coming full circle for Joe Biden and Washington regulators. One key regulation the White House called for on Thursday is a provision regarding compensation packages that would work to disincentivize risk-taking among financial institutions. It’s a rule that was initially called for in the 2010 Dodd-Frank Act (you know, the last time Wall Street got in big trouble) but fell by the wayside by the end of the Obama-Biden administration.

The White House also called for regulators to play a reverse Uno card on the de-regulatory reverse Uno card played by Congress in 2018, reinstating stricter scrutiny on banks with less than $250 billion in assets.

And that’s just the start of the overall list of demands:

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Among the proposals was a call to raise liquidity requirements for mid-sized banks, turning bi-annual stress tests into an annual event, and shortening the trigger timeframe for new stress tests once a bank grows to over $100 billion in assets.

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The White House also wants to update stress tests to reflect clients’ ability to make high-speed digital withdrawals, as well as to account for novel situations, such as the impacts of rapidly rising interest on banks with a high concentration of low yield, long-term debt — a.k.a., exactly the phenomenon that many mid-sized banks just experienced.

The banks, unsurprisingly, are none too happy that they all may pay for SVB’s failure. “It would be unfortunate if the response to bad management and delinquent supervision at SVB were additional regulation on all banks that would impose meaningful costs on the U.S. economy going forward,” Greg Baer, President and CEO of large bank trade group The Bank Policy Institute, said in a statement.

Mr. Regulator Goes to Washington: The White House says regulators could enact all of the proposals without congressional action. But that doesn’t mean congress is staying silent. Two congressional hearings with banking regulators were held earlier this week, in which members of both parties accused the Fed’s financial supervisors of operating with too light a touch. Perhaps House Financial Services Chairman and Republican congressman Patrick McHenry summed it up best: “We need competent financial supervisors, but Congress can’t legislate competence.”

– Brian Boyle

Energy

Tesla Solar Roofs Aren’t Doing Nearly As Well As They’d Hoped

(Photo Credit: Erik Karits/Unsplash)

A dark cloud is hovering over Tesla’s solar business.

A study by research firm Wood Mackenzie found that Tesla has installed a total of 3,000 Solar Roofs — its stylish flagship alternative to solar panels — in the US. This puts Tesla way behind the schedule the company set for itself in 2019 of installing 1,000 per week by 2020. Sure, there was a fairly big and communicable global blip in that timeline, but we’re now four years down the line and Tesla isn’t known for sticking to its own production deadlines.

Make Roofs While The Sun Shines

Tesla first unveiled its Solar Roof product in 2016. The idea is that rather than bolting solar panels on top of your existing roof, Tesla installs a brand new roof made up of photovoltaic tiles to the top of your house. CEO Elon Musk pulled out a prototype tile at the unveiling, which The Fast Company later reported did not actually work yet, but in the intervening years, Tesla has made an actual, working product. Even Musk fakes it until he makes it.

The wider solar industry has made significant gains in that timeframe, and The Wall Street Journal reported Thursday that renewable energy consumption as a whole is driving down the price of coal. In terms of the residential solar market, however, Tesla Energy (the company’s solar division) has lost some of its power:

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Tesla Energy was born in 2016 when Tesla acquired SolarCity, a company run by Musk’s cousins, for $2.6 billion. Prior to the acquisition, SolarCity had been the top installer of residential solar panels in the US.

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It lost the top spot to rivals Sunrun and Vivint when they merged in October 2020, solidifying their combined market share.

Solar shingles remain a tiny sliver of the overall market, and it’s not a huge mystery why. “They’re difficult and expensive to make, they require more specialized labor to install, and they can cost tens of thousands more than traditional rooftop panels,” Nick Liberati, senior communication manager at price comparison site EnergySage, told The Daily Upside. “On top of that, they’re typically significantly less efficient than solar panels.”

Where We’re Going We Don’t Need Roofs: Residential buildings are far from the only place to pop in a solar panel. A paper published this month in Nature Sustainability made the case for placing floating solar panel farms in reservoirs, lovingly nicknamed “floatovoltaics.” The paper estimates floating solar cells could generate 40% of the world’s electricity. Not too shabby.

– Isobel Asher Hamilton

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Banking

Investment Bank Centerview Jumps Ahead in Deal Rankings

A Wall Street David has upstaged the Goliaths.

So far this year, boutique investment bank Centerview Partners handled nearly 20 deals with a total value that outpaced Wall Street titans like Morgan Stanley and Bank of America, the Financial Times reported.

Taking the Bronze Medal

This time last year, Centerview ranked 14th among global M&A advisors, but it now sits at 3rd. It’s the highest spot achieved by an independent investment bank in decades. The group facilitated 18 deals this past quarter – much fewer than JPMorgan’s 60 and Goldman Sachs’ 59 – but the total value of those deals was roughly $94 billion, almost 30% more than last quarter’s number two, Morgan Stanley:

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After the collapse of Silicon Valley Bank and Credit Suisse, Centerview was hired to advise on the sale of each lender’s assets.

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It was also the sole advisor on a merger that saw Pfizer purchase oncology-focused biotech company Seagen for $43 billion. It was the largest deal of the quarter.

“Independents have always been the smarter option,” Lazard CEO Kenneth Jacobs, told the FT. “The agility and the advice-focused model are what clients need in challenging times.”

Keep It Simple: Full-service investment banks tend to have multiple specialties like commercial banking, retail banking, asset management, and equity research. But a boutique bank tries to focus on just one field. In Centerview’s case, its mergers and acquisitions, and that narrow focus appears to be paying off. This is especially sweet for Centerview co-founder Blair Effron, a former UBS rainmaker who has eclipsed his beleaguered firm this year.

– Griffin Kelly

Extra Upside

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What’s real anymore?: AI image generator Midjourney ends free trials after users “abuse” service for deep fakes.

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Wicked Witch style: Fire sprinklers destroy a Cold Stone Creamery location’s entire ice cream inventory.

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