WSJ What’s News - Why Big-Bank CEOs Steer Clear of Presidential Politics

Episode Date: August 26, 2024

P.M. Edition for Aug. 26. Wall Street’s biggest leaders tend to avoid wading directly into presidential elections, finding other ways to wield influence in politics. WSJ senior writer Justin Baer explains why. Plus, hundreds of hospitals are pushing a new service: treating patients at home. Hospitals reporter Melanie Evans has more. And, Red Lobster has a new CEO pick as a group of lenders try to turn the bankrupt seafood chain around. Francesca Fontana hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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for info on kraken's undertaking to register in Canada. Why are big bank CEOs not getting directly involved in the presidential election? If you're a CEO and you have these employees and customers all around the country, being open in your support of one candidate another is a 50-50 proposition right or close to that. And so I think they're being particularly careful.

And hospitals are pushing a new service, taking care of their patients at home. Plus, Red Lobster has tapped a new CEO who will face a tall order, turning the bankrupt seafood chain around. It's Monday, August 26th. I'm Francesca Fontana for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Let's start off with some corporate news.

Red Lobster is cooking up a comeback with a new CEO, the former leader of the Asian restaurant brand P.F. Chang's. A group of lenders set to take over Red Lobster have chosen Demola Adama Lecun to run the bankruptcy food chain. Red Lobster filed for Chapter 11 back in May, bringing up around $2 billion in annual sales across 44 states. It's one of the biggest food service bankruptcies by assets and liabilities in decades, according to BankruptcyData.com. In July, the lenders, led by Fortress Investment Group, moved a step closer to taking over Red Lobster after no competing buyers showed up to challenge their bid. The lender group had extended roughly $300 million in loans to Red Lobster.

Adama Lekun's appointment is pending final court approval of the chain's sale, which is scheduled for next month. Today, Elliott management laid out its plans to turn Southwest Airlines around. In an open letter, the activist investor criticized two top executives, CEO Bob Jordan and Executive Chairman Gary Kelly, Jordan's predecessor. Elliott launched a proxy fight against Southwest earlier this month and has been calling for the company to get rid of both Jordan and Kelly. In today's letter, the activist said that the two execs have been empowered by Southwest's board, failing

for years to hold them accountable. Elliott owns roughly 8% of the shares outstanding and about 11% when also including derivatives. Southwest didn't immediately respond to a request for comment. In U.S. markets news, the Dow Jones Industrial Average reached a new record didn't immediately respond to a request for comment. In U.S. markets news, the Dow Jones Industrial Average reached a new record high today, while other major indexes ended lower. Stocks had just had their best two-week stretch of the year on optimism for interest rate cuts. All in all, today the Dow rose about 0.2% or roughly 65 points, the S&P 500 lost 0.3%, and the Nasdaq Composite fell about 0.9%.

Coming up, why big bank CEOs steer clear of the presidential election while still finding other ways to influence politics. That's after the break. Introducing TD Insurance for Business with customized coverage options for your business. Because at TD Insurance, we understand that your business is unique, so your business insurance should be too. Whether you're a shop owner, a pet groomer, a contractor, or a consultant, you can get customized coverage for your business.

Contact a licensed TD Insurance advisor to learn more. Wall Street's biggest leaders aren't afraid to get political. Just not when it comes to the presidential election. At least not directly. Since the 2008-2009 financial crisis transformed their relationship with Washington, big bank CEOs tend to avoid siding with one presidential candidate or the other, and almost never contribute directly to presidential campaigns. That,

they've determined, would do little good for the banks and run them the risk of alienating White House appointees, their employees, and their customers. Here to explain is WSJ senior writer Justin Bayer, who covers Wall Street. Justin, these CEOs used to be more involved. What's stopping them now? So, the big change came about in the financial crisis of 2008, 2009, and that really revamped a lot of the relationships they had with Washington. And the biggest thing that changed was the regulations got a lot more heavy handed. So fair to say that the amount of contact they would have with the regulators increased

measurably, but also the different ways in which they stepped into their businesses was definitely ratcheted up. And that caused these bank CEOs to become more guarded when it came to politics. The main thing was they just didn't want to be on the wrong side of those who were in charge. There was a greater sensitivity to the fact that they had to engage with all these folks on a much more regular basis.

And had they appeared to have supported the other presidential candidate, they were concerned that might alienate some of those folks. So how do these big bank CEOs wield their influence in politics or on policy? They do so very directly and openly and on very specific issues. You know, they're often asked to weigh in publicly and privately on various issues that matter to not only their companies, but to the economy as a whole.

Each of these folks have had meetings with presidents and certainly treasury secretaries and others in Washington to sort of give the elected officials a sense of what they're seeing right across their businesses and their interactions with customers and borrowers and investment firms. How are we seeing all of this play out in this year's race? It's kind of stuck to the pattern we've seen since the crisis. There have been specific instances where bank CEOs have both engaged politically and over policy issues.

And Jamie Dimon, in fact, just wrote an op-ed not too long ago that hit what was at stake with the presidential election head-on but even in that he didn't mention either candidate didn't offer any support to either one and it was more a list of policies and ideals that any president should aspire to achieve. And as this year's race is shaping up to be another close one, does that make the tightrope that these CEOs are walking more narrow? Yes, that's definitely part of it. It does look close and if you're a CEO and you have these employees and customers all around the country, being open

in your support of one candidate another is a 50-50 proposition writer close to that, right? And so I think they're being particularly careful and it's interesting because you know When we decided to look into this issue It was at the point where you saw lots of business leaders and in different industries being very vocal and stating their support publicly or participating in fundraisers and and lining up behind one candidate or the other. Even in the broader financial services industry you had examples of that and yet these folks

have maintained their neutrality. That was WSJ senior writer Justin Bayer. Many school districts around the country are banning cell phones in classrooms. If you're a teacher, does this make your job easier or harder? What questions do you have about the new policies? Send a voice memo to wnpod at wsj.com or leave a voicemail with your name and location at 212-416-4328. We might use it on the show. Around the country, more than 300 hospitals are deploying or preparing to dispatch paramedics, nurse practitioners, and other medical staff to treat patients at home instead of in hospital

settings, a service widely referred to as Hospital at Home. The efforts are part of a nationwide experiment that began with the pandemic when hospitals were overcrowded and under financial strain. Federal regulators proposed a fix. Hospitals could temporarily take care of Medicare patients at home but still get paid the same hospital stay rate. The pandemic eased but the idea stuck around. Still policymakers, clinicians, and regulators have concerns as these programs are growing. My colleague, Anthony Bansi, spoke with Wall Street Journal's hospitals reporter, Melanie Evans, and asked her about the experience from that program so far. Hospitals have looked for patients who do need some services that are provided by a hospital. You can think of IV medication, for example, but are relatively stable.

So their conditions aren't typically those that change really quickly with a lot of risk. And they need some assistance and some medication and they need some regular check-ins from skilled medical professionals, but they probably don't need to be in a hospital bed. When I talked to patients, they were very clear about the difference in comfort. And one of the noticeable differences, at least for patients, was that they were far more comfortable at home than they would be in an acute care setting. But now, policymakers and medical professionals alike have their reservations about this program.

What have been their concerns? So the two big questions are, what does it cost? And is it effective? Is it safe? High quality care. So when it comes to research on quality, there is little difference in the risk of death or repeated hospitalizations between patients who are treated at home or in hospital settings.

But policymakers have questions about kind of other measures of quality. Do patients at home fall more often? Are patients at home getting infections more often? There's a report to Congress that's required as of later than September that seeks to answer some of policymakers' questions. The other question is, like, how much does it cost? So a hospital is a really labor-intensive and capital-intensive business. You've got a lot of expensive equipment. You have a lot of highly trained workers. You are, like around the clock and you have to do everything.

You've got to feed people. You've got to keep things super clean. So if you're taking care of somebody somewhere else, that overhead could go down. Conversely, you've got these really highly trained, highly paid workers, nurses, doctors, who now are getting in their car and driving from patient to patient instead of going from bed to bed. So it's less efficient on that score. That was Wall Street Journal Hospital's reporter Melanie Evans speaking to my colleague Anthony Bansi.

In other news, Ukrainian President Volodymyr Zelensky urged Kiev's allies to help it strike back against Russia by allowing the use of long-range Western-made weapons to strike deep inside Russian territory. Earlier today, Russia struck sites across Ukraine with one of its largest missile attacks of the war between the two countries, inflicting damage to Ukraine's already strained energy infrastructure. The attack comes three weeks after Ukraine began its ground invasion of Russia's Kursk region, where Kiev has now seized more than 400 square miles of territory.

And French President Emmanuel Macron has fired back at critics after France detained Pavel Dourav, the founder and CEO of messaging app Telegram, over the weekend. In a post on the social media platform X, Macron said politics played no role in the decision to take the executive into custody. The Paris Prosecutor's Office said that the detainment is part of a broad investigation into online criminality, raising the stakes in the struggle between governments and digital companies over their responsibility for illegal activity on their platforms. The investigation is examining 12 potential criminal violations, including complicity

in the spread of child pornography, refusal to cooperate with authorities, and complicity in fraud. And that's What's News for this Monday afternoon. Today's show was produced by Anthony Bansi with supervising producer Michael Kosmitis. I'm Francesca Fontana for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.