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    Fintech giants Klarna and Block slam ‘outdated’ UK buy now, pay later regulation proposals

    Executives at Klarna and Block say that proposed U.K. buy now, pay later rules, while well-meaning, are likely to do more harm than good.
    The proposals would dramatically extend the time taken to make a BNPL purchase, resulting in disproportionate friction for consumers, they said.
    The fintechs also believe regulation in its current form would create an unlevel playing field by excluding merchants and Big Tech firms from the scope of the laws.

    Alex Marsh, Klarna’s head of U.K., said the proposals would lead to lengthened application times and result in “disproportionate friction” for consumers.
    Daniel Harvey Gonzalez | In Pictures via Getty Images

    The U.K.’s plan to regulate the buy now, pay later industry is “outdated” and will lead to worse consumer outcomes, executives at two of the industry’s giants said, vowing to fight tooth and nail to relax the proposed rules.
    Bosses at Klarna and Block laid into the proposals at an event hosted by U.K. fintech industry body Innovate Finance last week, saying that the rules, while well-meaning, were likely to drive people toward more expensive credit options, such as credit cards and car financing plans.

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    In a consultation paper published in February, the U.K. government suggested applying parts of existing regulation – namely, the Consumer Credit Act – to buy now, pay later plans. The currently unregulated buy now, pay later model would be supervised by the Financial Conduct Authority.
    The CCA calls for a much greater level of information disclosure in the fine print of lending agreements. BNPL firms say this requirement would lead to “disproportionate friction” for people seeking short-term forms of credit.
    Buy now, pay later loans allow shoppers to defer payment by a month or to split the cost of their purchases over a period of equal monthly instalments. What makes them attractive is the ease with which someone can apply for a loan, and the fact that they are often interest-free – so long as you pay on time.
    If someone currently uses buy now, pay later at an online checkout page, they can expect to complete the purchase in a minute and a half, versus 30 seconds for credit cards, Alex Marsh, Klarna’s head of U.K., said on a panel at Innovate Finance Global Summit. Based on Klarna modelling, that could increase to five minutes under the new U.K. rules, Marsh said.
    Another disagreement BNPL firms have is that the present framework excludes certain firms from the scope of the laws. Merchants, for example, “would be exempt from FCA regulation (as credit brokers) where they offer newly regulated agreements as a payment option.”

    Some firms might choose to withdraw from the U.K. market once they work through the costing. There is a risk of it being too expensive. I think it is a risk. It’s not like red alert – probably amber.

    Adam Jackson
    head of public policy, Innovate Finance

    The government takes that view because it doesn’t want to subject individual traders and small businesses to the same treatment as large fintechs. BNPL firms say that risks creating an unlevel playing field.
    “We know there are some very large retailers and very large tech businesses that have the capacity to offer buy now, pay later services to their customers directly. And we just don’t think it makes sense to exclude those from the scope of regulation,” Michael Saadat, international head of public policy at payments company Block, said on the panel.
    Formerly known as Square, Block acquired Australian BNPL firm Afterpay — known as Clearpay in the U.K. — in a $29 billion deal in 2020.
    Speaking on the sidelines of IFGS last week, Adam Jackson, head of public policy for Innovate Finance, told CNBC there was a risk that some BNPL firms would leave the U.K. market, if the current rules continue.
    “Some firms might choose to withdraw from the U.K. market once they work through the costing. There is a risk of it being too expensive” to operate in the U.K., Jackson said in an interview. 
    “I think it is a risk. It’s not like red alert – probably amber,” he added.
    “The current proposals do not reflect the simple and transparent nature of BNPL products, and will create an unlevel playing field,” a Block spokesperson told CNBC.
    “The U.K. has an opportunity to take a leadership role in developing BNPL regulation that supports innovation, competition and good consumer outcomes,” the spokesperson added.
    A spokesperson for the U.K. Treasury department said: “These products can help consumers manage their finances when used appropriately, but we want to strike a balance to protect borrowers from falling into problem debt.”
    “We’re proposing a tailored approach to the information lenders need to give consumers so that terms are clear and consistent, without causing delays,” the Treasury spokesperson added. .
    The Treasury opened its consultation on the draft of buy now, pay later legislation in February. The deadline for firms to submit their responses was April 11.
    The prevalence of BNPL during the pandemic led to a rush among big companies to offer their own services for consumers. A host of big names in banking and tech — from Apple to Barclays — now offer their own interest-free installment products. 
    The payment method is particularly popular with younger people. Consumer rights activists have tried to highlight the risks of BNPL to consumers, saying it encourages people to spend more than they can afford. They believe the sector urgently needs regulation. 
    For their part, BNPL firms say that they would welcome regulation. Klarna made a number of changes to its business in anticipation of the looming regulation, including formal credit checks on clients.
    It’s worth noting that any regulation is unlikely to arrive for some time yet. The government is expected to review consultation responses before finalizing the proposals. The rules then need to be voted by U.K. lawmakers. Innovate Finance’s Jackson said he expects they will come into effect within 12 months. More

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    Tucker Carlson breaks his silence without addressing why Fox News fired him

    Tucker Carlson broke his silence in a video posted to his Twitter feed.
    Carlson discusses his view on the state of U.S. politics and media, without addressing why Fox News fired him earlier this week.
    The video comes after recent reports that Carlson was fired due to vulgar, behind-the-scenes messages that were unearthed during the Dominion Voting Systems lawsuit.

    Tucker Carlson speaks during the Politicon conference in Los Angeles, October 21, 2018
    Rich Polk | Getty Images

    Tucker Carlson broke his silence on Wednesday night, two days after his unceremonious exit from Fox News.
    The right wing former primetime TV host, however, did not address his firing or what is next for him. Instead, in a video posted on Twitter, Carlson discusses his view on U.S. politics and the conversation taking place on cable news.

    “When you take a little time off, you realize how unbelievably stupid the debates you see on television are, they’re completely irrelevant. They mean nothing. In five years, we won’t even remember that we had them. Trust me as someone who participated,” Carlson said in his video message on Wednesday.
    On Monday, Fox News fired Carlson, noting his last show aired on Friday. Neither Carlson, nor his recently hired attorney Bryan Freedman, have responded to requests for comment since then.
    “FOX News Media and Tucker Carlson have agreed to part ways,” the company said in a statement Monday. “We thank him for his service to the network as a host and prior to that as a contributor.” Fox News representatives, which haven’t commented past their Monday announcement, didn’t immediately respond to comment Wednesday.
    His departure from Fox Corp.’s cable-TV network – which carries the highest cable news ratings – came in the wake of the company’s $787.5 million settlement with Dominion Voting Systems. Fox and Dominion settled the defamation lawsuit just as it was about to go to a six-week trial that would have seen Carlson, some of his fellow anchors and top brass including Rupert Murdoch testify on the stand. Dominion sued Fox and its cable networks for airing false claims that the voting machine maker helped rig the 2020 election in favor of Joe Biden.
    Although the Dominion lawsuit was unlikely to affect Fox’s bottom line too much – its stock price remained stable until Carlson’s departure on Monday, when it took a slight dip – the implications of what was already unveiled in discovery, and what could be later revealed, were likely a bigger concern. Carlson was a huge ratings draw for the network.
    Since Monday, media reports have emerged that private messages from Carlson that were unearthed during the discovery process for the Dominion lawsuit helped seal his fate at Fox News. Vulgar private messages about his colleagues pushed Fox leadership toward letting go Carlson, The Wall Street Journal reported. Executives at Fox found out about the messages on the eve of the trial, according to The New York Times. More

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    Illumina CEO touts Grail’s 100% revenue growth amid proxy fight with Icahn

    Illumina CEO Francis deSouza touted the company’s controversial acquisition of Grail after revenue from the cancer test developer doubled in the past year. 
    The executive added the deal “makes sense” for San Diego-based Illumina, citing the prospect of significantly expanding the market for Grail’s early cancer screening test.
    The Grail deal is the focus of a heated proxy fight between Illumina and activist investor Carl Icahn, while it continues to face heavy opposition from the FTC and European regulators.

    Illumina CEO Francis deSouza on Wednesday touted the company’s controversial acquisition of Grail after revenue from the cancer test developer doubled in the past year. 
    The Grail deal is the focus of a heated proxy fight between Illumina and activist investor Carl Icahn. Antitrust regulators in the U.S. and Europe also have ordered Illumina to divest the $7.1 billion acquisition Illumina completed in 2021.

    Grail raked in $20 million in revenue during the three-month period that ended April 2, according to Illumina’s first-quarter earnings release. That’s up 100% from the $10 million it reported during the same period a year ago.
    DeSouza told CNBC’s “Squawk Box” that those sales are entirely driven by Grail’s early screening test, which can detect more than 50 types of cancers through a single blood draw. 
    Grail delivered 20,000 tests in the first quarter alone, he noted. 
    “Customer demand has been really strong,” deSouza said, calling the test a “huge breakthrough” product.
    He added that the Grail deal “makes sense” for Illumina, citing the prospect of significantly expanding the market for the test. DeSouza also noted the company operates in more than 150 countries.

    Illumina also is working to identify ways for patients to get reimbursed for the $950 test, he said. 
    “We can accelerate bringing this test to more people … than Grail can do on their own,” deSouza told CNBC. 
    But Icahn, who owns a 1.4% stake in Illumina, has called the Grail deal “disastrous” and “a new low in corporate governance.” 
    Icahn did not immediately respond to a request for comment.
    The activist investor launched a proxy fight over the Grail acquisition last month, seeking seats on Illumina’s board of directors and urging the company to unwind the deal. 
    His resistance to the deal stems from Illumina’s decision to close it without approval from antitrust regulators.
    The Federal Trade Commission earlier this month ordered Illumina to divest the acquisition, saying the deal would stifle competition and innovation. The European Commission, the executive body of the European Union, also blocked the deal last year over similar concerns.   
    Illumina is appealing both orders and expects final decisions in late 2023 or early 2024. Last week, a U.S. appeals court said it will fast track its review of Illumina’s appeal of the FTC order. More

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    Bipartisan Senate bill would push ticket sellers to disclose fees upfront

    Bipartisan lawmakers introduced the Transparency in Charges for Key Events Ticketing Act on Wednesday.
    If passed, the act would require a number of disclosures by primary and secondary market ticket sellers, including itemized fees for purchase.
    The bill is in line with the Biden administration’s crackdown on junk fees to increase economic competition.

    Price starts at: $25 Whether you have a brother who appreciates a live football game or a wife who adores Michael Bublé, places like SubHub and Ticketmaster offer gift certificates that are great for getting someone to a show. You also have the option of purchasing live tickets that can be printed directly from your computer or wireless device. Why not buy an extra ticket and share in the experience of a live show? This could be a gift even you will remember.
    Photo: Getty Images

    WASHINGTON — Swifties, the BeyHive and Cure fans may have a reason to rejoice: Senators on Wednesday are set to introduce a bipartisan bill targeting hidden ticket fees for live events.
    Dubbed the Transparency in Charges for Key Events Ticketing (TICKET) Act, the measure would require ticketing merchants to disclose upfront full ticket prices, including fees, for concerts, sporting events and other large gatherings.

    The new bill follows the reintroduction of the Junk Fee Prevention Act in the House earlier this month by Reps. Ruben Gallego, D-Ariz., and Jeff Jackson, D-N.C., and Biden administration moves to push fee transparency.
    It also comes as lawmakers wage a broader battle against ticket sellers. In December, Taylor Swift fans sued Live Nation after its Ticketmaster site crashed during presales for the artist’s “The Eras Tour.” The fiasco prompted the Senate Judiciary Committee to examine the entertainment conglomerate’s power over the industry in a January hearing. At the time some critics on Capitol Hill called Live Nation a monopoly.
    Ticketmaster also pledged to return some money to fans who purchased tickets to goth rock band The Cure’s “Shows Of A Lost World Tour” earlier this year, after group leader Robert Smith slammed the prices. The ticket vendor offered up to $10 refunded to verified fan accounts after agreeing with the band that many of the fees charged during transactions were “unduly high,” Smith tweeted on March 16.
    The new bill is co-sponsored by Sen. Maria Cantwell, D-Wash., the chamber’s Commerce Committee chair, and ranking member Sen. Ted Cruz, R-Texas.
    “The price they say should be the price you pay. This bill is one part of comprehensive legislation I plan to introduce to rein in deceptive junk fees driving up costs for consumers,” Cantwell said in a statement.

    In his statement, Cruz said, “The TICKET Act brings transparency to the whole ticketing industry, which is dominated by a few large players that can capitalize on these hidden fees.”
    Ticket fees can comprise 21% to as much as 58% of the total cost of tickets, according to a statement from the committee. The bill aims to promote competition “by delivering ticket fee and speculative ticket transparency for the benefit of all consumers,” the committee said.
    If the measure passes, primary and secondary market ticket sellers — such as Live Nation-owned Ticketmaster and SeatGeek — would be required to disclose the entire ticket price, including itemized fees, at the beginning of a transaction and prior to ticket selection. Total ticket prices must also be clearly displayed during event marketing.
    Secondary market sellers would be obligated to fully disclose speculative ticket status, meaning that the seller does not have actual possession of the ticket.
    President Joe Biden emphasized the administration’s effort to crack down on junk fees during his State of the Union address in February. In addition to other areas, he called for action on excessive fees for concerts, sporting events and other forms of entertainment. Sens. Richard Blumenthal, D-Conn., and Sheldon Whitehouse, D-R.I., introduced the Senate companion bill to Biden’s plan in March.
    In tandem with the administration’s goals, the Federal Trade Commission also released a rule-making proceeding on Nov. 8, 2022 — the day of the midterm elections — to probe unfair acts or practices related to ticketing and other various fees.
    Ticketmaster has said it does not control fees but does retain a portion for operating costs, according to a Feb. 7 blog post. The vendor also said it already supports “all-in” pricing in New York state, and advocates for nationwide adoption of the policy.
    “We continue to advocate for an industry wide mandate of upfront pricing, so fans see the full face value and fee cost upfront. This only works if all ticketing marketplaces go all-in together so that consumers truly have accurate comparisons as they shop for tickets,” Ticketmaster said in the blog post. More

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    Stocks making the biggest moves after hours: Meta, Roku, Ebay and more

    Visitors take photos in front of the Meta (Facebook) sign at its headquarters in Menlo Park, California, on December 29, 2022.
    Tayfun Coskun | Anadolu Agency | Getty Images

    Check out the companies making headlines in extended trading.
    Meta Platforms — The Facebook parent popped 9% after announcing better-than-expected top-line results. Meta posted $28.65 billion in revenue, topping analysts’ $27.66 billion estimate, according to Refinitiv data. Meanwhile, the company’s metaverse venture Reality Lab recorded almost $4 billion in operating losses. 

    Roku — The TV streaming platform rose 2% after mixed first-quarter earnings. Roku lost $1.38 per share, while analysts had expected per-share losses of $1.37. Revenue topped estimates, coming in at $741 million versus analysts’ estimate of $708.5 million. Roku also raised its outlook for its current-quarter revenue to $770 million, coming in higher than Wall Street’s estimate of $768 million. 
    Ebay — The e-commerce platform jumped 5.1% after first-quarter earnings and revenue beat estimates. Ebay earned an adjusted $1.11 per share, better than $1.07 estimate, and revenue of $2.51 billion, against a $2.48 billion estimate, according to Refinitiv data. Ebay said it sees second-quarter per share earnings between 96 cents to $1.01, while analysts had estimated 99 cents per share. Ebay’s estimated current-quarter revenue of $2.47 billion to $2.54 billion topped analysts’ consensus projection of $2.43 billion. 
    Align Technologies — The orthodontics stock lost 5% Wednesday in after hours trading. The company’s first-quarter earnings and revenue came above analysts’ estimates, according to Refinitiv data. Align shares have already climbed 68% year to date going into the report.
    ServiceNow — The digital workflow company rose 1.2% after first quarter earnings came in above Wall Street’s expectations. EPS of $2.37 topped analysts’ estimates by 33 cents, according to Refinitiv. The company posted $2.1 billion in revenue, against an estimate of $2.08 billion, and second-quarter and full year subscription revenue guidance was higher-than-expected.
    First Republic Bank — Shares fell 1.6% Wednesday postmarket, after sliding almost 30% during regular trading. The selloff in the troubled regional lender has gained steam since Monday, when it reported significant deposit flight in the latest quarter.KLA — The semiconductor equipment manufacturer dropped 2.4%. While the company’s quarterly earnings and revenue came in above analysts’ estimates, fiscal fourth fiscal quarter earnings and revenue guidance missed expectations, according to FactSet data.  
    Pioneer Natural Resources — The oil and gas company fell 2.2% after first-quarter earnings topped estimates while revenue missed. Pioneer posted per share earnings of $5.21 versus analysts’ $4.86 estimate, while revenue of $4.54 billion compared with an estimate of $4.89 billion, according to FactSet data. Total cash flow and cash flow per share was a little light of estimates. Pioneer also announced plans for a new CEO to lead the company by the end of 2023. More

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    Stocks making the biggest moves midday: Microsoft, Chipotle, Boeing, First Republic Bank and more

    The Microsoft logo displayed on their stand during the Mobile World Congress 2023 on March 2, 2023, in Barcelona, Spain.
    Joan Cros | Nurphoto | Getty Images

    Check out the companies making the biggest moves midday:
    Microsoft — Shares of tech giant Microsoft gained 7.24% Wednesday after a better-than-expected earnings report a day earlier. Analysts have added to bullish sentiment on the stock as Microsoft delves deeper into artificial intelligence investments and integration with Azure.

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    Alphabet — Shares of the Google parent rose about 1% in midday trading after reporting earnings that beat expectations, however they closed down 0.13%. The company earned $1.17 per share on $69.79 billion in revenue, while analysts polled by Refinitiv expected it to earn $1.07 per share on revenue of $68.9 billion. The company also announced a $70 billion share buyback.
    Amazon — Positive tech earnings also helped lift Amazon shares 2.35% ahead of the e-commerce giant’s earnings report, due Thursday. Amazon also began layoffs in its cloud computing and human resources divisions Wednesday. The cuts were previously announced.
    Chipotle Mexican Grill — Shares of the Mexican fast food chain soared 12.91% to hit an all-time high after the company reported quarterly earnings and revenue that topped analysts’ expectations. The strong results were fueled by robust same-store sales growth. CEO Brian Niccol also said the chain has demonstrated its pricing power.
    Boeing — Shares rose 3% in midday trading, but closed up only 0.42%, after the company posted its latest quarterly results and said it would increase production of 737 Max planes later this year despite a production issue. Boeing reported an adjusted loss of $1.27 per share and $17.92 billion in revenue, while analysts anticipated a loss per share of $1.07 on $17.57 billion in revenue, according to Refinitiv.
    Activision Blizzard — Shares slid 11.45% after a UK regulator blocked Microsoft’s purchase of the video game publisher. Activision Blizzard has said it will work “aggressively” with Microsoft to reverse the block. The company also posted better-than-expected adjusted earnings and revenue for the first quarter. 107230585

    First Republic — Shares of the regional bank fell 29.75% on Wednesday, extending their steep losses for the week. First Republic’s advisors are pitching larger banks on a potential rescue deal, sources told CNBC, after the regional lender saw massive deposit flight during the first quarter.
    PacWest — The regional bank’s stock popped 5.56% after the regional bank reported deposit inflows have stabilized, although they were still down in the first quarter. PacWest saw a $1.8 billion increase in deposits from March 20 to April 24. However, deposits for the first quarter totaled about $28.2 billion, down from $33.9 billion from the fourth quarter of 2022.
    General Dynamics — Shares sank 3.55% despite a beat on earnings and revenue for the first quarter. However, its aerospace segment saw a decline in revenue thanks to fewer aircraft deliveries. CEO Phebe Novakovic also said the company will incur some period costs as it builds a “considerable” number of Gulfstream G700s to be delivered in the third and fourth quarters.
    Enphase Energy — Shares tanked 25.73% after its second-quarter revenue forecast came in at $700 million to $750 million, missing estimates of $765.2 million from analysts surveyed by StreetAccount. Enphase CEO Badri Kothandaraman told CNBC’s Pippa Stevens growth in the U.S. is at a standstill. Rivals SolarEdge Technologies and First Solar also sank 8.6% and 3.4%, respectively.
    Old Dominion Freight Line — The freight shipping company saw shares slide 9.97% after posting earnings and revenue for the first quarter that missed analysts’ estimates, according to FactSet. The company also reported volume declines, citing continued domestic softness and increased overhead costs.
    Teck Resources — The stock rallied 4.05% after the Canadian-based mining company announced it will not proceed with its proposed split into two companies. Instead, Teck Resources will look to come up with a “simpler and more direct” separation plan.
    — CNBC’s Yun Li, Hakyung Kim, Brian Evans, Pia Singh, Jesse Pound, Alex Harring and Tanaya Macheel contributed reporting. More

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    Disney sues Florida Gov. Ron DeSantis, alleges political effort to hurt its business

    Walt Disney Co. sued Florida Gov. Ron DeSantis, alleging the Republican governor has waged a “relentless campaign to weaponize government power” over the company.
    The suit dramatically escalates the feud between DeSantis, who is expected to become a top Republican contender in the 2024 presidential race, and Disney.
    The lawsuit was filed the same day that a DeSantis-backed board moved to undo a development deal that it says Disney struck to thwart its power.

    Walt Disney Co. sued Florida Gov. Ron DeSantis on Wednesday, alleging the Republican has waged a “relentless campaign to weaponize government power” against the company amid a protracted fight over a controversial classroom bill.
    The federal lawsuit alleges that DeSantis “orchestrated at every step” a campaign to punish Disney that now threatens the company’s business.

    The move dramatically escalates the drawn-out feud between DeSantis, who is expected to become a top Republican contender in the 2024 presidential race, and Disney, which is among Florida’s largest employers.
    The fight began last year, when Disney came out against a Florida bill limiting classroom discussion of sexual orientation or gender identity, dubbed “Don’t Say Gay” by critics. Soon after, the governor and his allies targeted the special tax district that has allowed Disney to essentially self-govern its Florida operations since the 1960s.

    Florida Governor Ron DeSantis speaks to a crowd at the North Charleston Coliseum on April 19, 2023 in North Charleston, South Carolina.
    Sean Rayford | Getty Images

    The lawsuit was filed on the same day that the district’s board of supervisors, which DeSantis had picked to take control over Disney’s Orlando-area parks, moved to undo a development deal that it says Disney struck to thwart its power.
    The panel unanimously voted to declare “void and unenforceable” that development deal, which was approved shortly before DeSantis replaced the Disney-approved board with his preferred supervisors.
    The lawsuit called that action the “latest strike,” saying the development contracts “laid the foundation for billions of Disney’s investment dollars and thousands of jobs.” The company noted its plans to invest $17 billion in Walt Disney World over the next decade, yielding an estimated 13,000 new jobs on top of its more than 75,000 current “cast members.”

    “The government action was patently retaliatory, patently anti-business, and patently unconstitutional,” Disney alleged in the civil complaint in U.S. District Court in Tallahassee, Florida.
    Disney is asking the court to rule that the board’s legislative step was unlawful and unenforceable.
    In a response, DeSantis’ office suggested the fight hinged on Disney’s special tax and governance privileges, not political retaliation.
    “We are unaware of any legal right that a company has to operate its own government or maintain special privileges not held by other businesses in the state,” DeSantis’ communications director, Taryn Fenske, said in a statement to CNBC.
    “This lawsuit is yet another unfortunate example of their hope to undermine the will of the Florida voters and operate outside the bounds of the law,” Fenske said.
    Disney’s lawsuit, however, argued that “this is as clear a case of retaliation as this Court is ever likely to see.”
    “There is no room for disagreement about what happened here: Disney expressed its opinion on state legislation and was then punished by the State for doing so,” the lawsuit said.
    Disney’s lawyers noted that until a year ago, DeSantis and his allies had no issue with the self-governing structure, formerly called the Reedy Creek Improvement District.

    Disney World celebrated its 50th anniversary in April 2022.
    Aaronp | Bauer-Griffin | GC Images | Getty Images

    That entity, created in 1967, gave Disney regulatory control over public services and other functions in the 25,000-acre area encompassing its Florida parks and resorts. Disney paid millions of dollars annually in taxes levied through Reedy Creek to fund those services, on top of its local tax obligations.
    DeSantis signed legislation to dissolve that special designation just weeks after Disney denounced the classroom bill.
    The move raised fears that Florida taxpayers in the two surrounding counties could be burdened with a huge tax bill. In February, the state Legislature passed new legislation keeping the district intact, but allowing DeSantis to appoint its five board members.
    In March, the newly picked board of the district — now called the Central Florida Tourism Oversight District — said their Disney-aligned predecessors had stripped them of many of their powers on the way out the door.
    “The bottom line is that Disney engaged in a caper worthy of Scrooge McDuck to try to evade Florida law. Its efforts are illegal and they will not stand,” said David Thompson, identified as trial counsel for the board, at a public meeting last week.
    On Wednesday, board Chair Martin Garcia said the new body had tried to work with Disney, but the company left them with a “legal mess.”
    “Disney picked the fight with this board,” Garcia said. He also said that taxes will have to go up to pay for lawyers hired by the board to evaluate Disney’s “eleventh-hour agreements.”
    “We’re going to have to raise taxes to pay for that,” he said.
    The board also voted for a resolution to effectively ban Disney’s Orlando-area parks from imposing future Covid-related restrictions.
    Disney’s lawsuit came as DeSantis was on an overseas trip, further stoking expectations that the governor is gearing up for a presidential run.
    DeSantis’ engagement in divisive culture issue battles, including his fight against Disney, has elevated him to national prominence. He easily won a second term as governor in the November midterms and has consistently been near the top of polls of the prospective 2024 Republican presidential primary field.
    But he has come under heavy attack from former President Donald Trump, currently the favorite for the GOP nomination. And the governor’s decision to keep up his fight with Disney has recently drawn criticism from others in his party.
    DeSantis is expected to hold off on a presidential announcement until after Florida’s current legislative session ends May 5.
    Nikki Haley, the former South Carolina governor and United Nations ambassador now running for the Republican presidential nomination, took a dig at her potential primary rival as she reacted to the lawsuit.
    “My home state will happily accept your 70,000+ jobs if you want to leave Florida,” Haley tweeted at Disney on Wednesday afternoon.
    South Carolina is “not woke, but we’re not sanctimonious about it either,” she added — an unsubtle reference to DeSantis, whom Trump has nicknamed “Ron DeSanctimonious” on the campaign trail.
    — CNBC’s Stephen Desaulniers contributed to this report. More

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    First Republic Bank is on the edge of a precipice

    The central conceit of most zombie flicks, like “28 Days Later”, a film set in an apocalyptic London, is that a terrible disease has spread. It has turned legions of healthy humans into dangerous monsters. These walking dead now stalk the land: from afar it can be hard to discern if they are living or not. A little more than 28 days elapsed between the failure of Silicon Valley Bank (svb) and the publication of First Republic Bank’s first-quarter earnings on April 24th—45 to be exact—but the earnings made clear American banking has at least one walking-dead institution.At the end of 2022 First Republic held $213bn in assets, of which about $167bn were in loans and $32bn in bonds. It was funded by $176bn in deposits, $7bn in short-term funding and $9bn in long-term funding. The bank also had $18bn in high-quality capital. By the end of the first quarter the firm had lost $102bn of its original deposits. This has been replaced by a vast amount of short-term borrowing, which climbed to $80bn by the end of the first quarter, and by $30bn of pity deposits from six big banks, which placed money with the institution to throw it a lifeline. There are several problems with this picture. The first is that First Republic lent a lot of money when interest rates were low, including via cheap mortgages. Mark Zuckerberg is supposed to have taken out a 30-year mortgage for his $6m Palo Alto home at 1.05%. The value of such loans will have plunged as interest rates have risen. The second is that the deal with many well-heeled customers was that they would agree to move their deposits to the bank as well. But these customers, who held large balances uninsured by regulators, have now fled. Without cheap deposit funding, First Republic has turned to short-term funding—much of it lent by the Federal Reserve and the Federal Home Loan Banks, another government-backed lender, at market rates. This has probably demolished its ability to earn a profit. In the last quarter of 2022 First Republic earned a net interest margin—the difference between what it collects on loans and what it pays for funding—of 2.5%. That fell to 1.8% in the first quarter. Yet the reality could be even worse. After all, the first quarter included two months before svb imploded, implying First Republic earned next to nothing in net interest in March. In other words, the bank is paying as much for funding as it is receiving on its loans.There is no obvious escape for First Republic, unless depositors agree to return. It cannot earn its way out because net interest margins have collapsed. Selling off assets would not help either. Imagine the value of its loan book fell by, say, 10-15% in 2022, a price drop which would be less than the fall in the value of most mid-to-long-term government bonds. This would mean that if First Republic sold off such assets, all of its equity would be wiped out. Recapitalisation would be a solution, but investors do not seem keen. The bank’s share price plunged by 50% on April 25th. Its market capitalisation is now $1.2bn, down from $23bn in January. That leaves an svb-style wind-down: First Republic is reported to be in talks with regulators. How many other zombies are out there? A paper published in March by Erica Jiang of the University of Southern California and co-authors simulated what might happen if half of uninsured depositors—the type that felled svb and may soon fell First Republic—pulled their money out of the banking system. The bad news is that some 190 (unidentified) institutions were left with negative equity capital. The better news is that they are likely to have been smaller institutions, as they had combined assets of $300bn. If this figure included First Republic it suggests a bigger and more terrifying zombie is probably not lurking around the corner. Still, another jump scare hardly seems out of the question. ■ More