Tech CEOs Got Grilled, but New Rules Are Still a Question

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A lot of heat, but will there be regulation?

Five technology C.E.O.s endured hours of grilling by senators on both sides of the aisle about their apparent failures to make their platforms safer for children, with some lawmakers accusing them of having “blood” on their hands.

But for all of the drama, including Mark Zuckerberg of Meta apologizing to relatives of online child sex abuse victims, few observers believe that there’s much chance of concrete action.

“Your product is killing people,” Senator Josh Hawley, Republican of Missouri, flatly told Zuckerberg at Wednesday’s hearing. Over 3.5 hours, members of the Senate Judiciary Committee laid into the Meta chief and the heads of Discord, Snap, TikTok and X over their policies. (Before the hearing began, senators released internal Meta documents that showed that executives had rejected efforts to devote more resources to safeguard children.)

But tech C.E.O.s offered only qualified support for legislative efforts. Those include the Kids Online Safety Act, or KOSA, which would require tech platforms to take “reasonable measures” to prevent harm, and STOP CSAM and EARN IT, two bills that would curtail some of the liability shield given to those companies by Section 230 of the Communications Decency Act.

Both Evan Spiegel of Snap and Linda Yaccarino of X backed KOSA, and Yaccarino also became the first tech C.E.O. to back the STOP CSAM Act. But neither endorsed EARN IT.
Zuckerberg called for legislation to force Apple and Google — neither of which was asked to testify — to be held responsible for verifying app users’ ages. But he otherwise emphasized that Meta had already offered resources to keep children safe.
Shou Chew of TikTok noted only that his company expected to invest over $2 billion in trust and safety measures this year.
Jason Citron of Discord allowed that Section 230 “needs to be updated,” and his company later said that it supports “elements” of STOP CSAM.

Experts worry that we’ve seen this play out before. Tech companies have zealously sought to defend Section 230, which protects them from liability for content users post on their platforms. Some lawmakers say altering it would be crucial to holding online platforms to account.

Meanwhile, tech groups have fought efforts by states to tighten the use of their services by children. Such laws would lead to a patchwork of regulations that should instead be addressed by Congress, the industry has argued.

Congress has failed to move meaningfully on such legislation. Absent a sea change in congressional will, Wednesday’s drama may have been just that.

But some lawmakers say that this time is different: “As someone who has taken on these companies for years, it’s the first time I felt hope for movement,” Senator Amy Klobuchar, Democrat of Minnesota, said of the hearing.

HERE’S WHAT’S HAPPENING

Elon Musk says Tesla shareholders will vote on moving the company’s incorporation to Texas. The potential shift, announced by Musk on his X social network, comes after a judge in Delaware, where the carmaker is incorporated, struck down a $50 billion pay package for him. Such a move would bolster Texas’ effort to become a new home base for corporate America.

FTX is on track to repay customers in full, a lawyer says. Andrew Dietderich, who represents the fallen cryptocurrency exchange in its federal bankruptcy proceedings, said that the company believed that it could make clients and creditors whole. The declaration is a change from early on in FTX’s Chapter 11 case, when executives cast doubt on the possibility of fully repaying customers.

A federal judge dismisses Disney’s lawsuit against Ron DeSantis. The media giant lacked standing to sue the Florida governor for retaliation over its opposition to what critics call his “Don’t Say Gay” education bill, the judge found. Disney, which had accused DeSantis of violating its First Amendment rights, said it would appeal.

Donald Trump promises to block Nippon Steel’s takeover of U.S. Steel if he’s re-elected. “I would block it instantaneously. Absolutely,” the former president said on Wednesday after meeting with members of the Teamsters union. The statement raises questions about whether Trump’s economic nationalism would impede foreign investment in the U.S., and how much he would let politics influence regulatory decisions.

Fed speak

Investors hoped to get an answer — or at least a hint — about where Jay Powell, the Fed chair, stood on rate cuts after the central bank’s latest meeting wrapped up on Wednesday.

Instead, he tamped down expectations of an imminent move, renewing criticism from some quarters that his communication isn’t helping the economy.

The Fed left rates unchanged, in a range of 5.25 to 5.5 percent, at their highest level in more than two decades. What surprised Wall Street was Powell’s reluctance to indicate that borrowing costs would be coming down as soon as March, leading to markets’ worst day in months.

“I don’t think it’s likely the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that,” Powell said at a news conference on Wednesday.

The Fed is worried that inflation isn’t fully under control. Price increases have been slowing in recent months and the job market remains strong, raising hopes that the economy is headed for a soft landing.

But Powell wants more evidence that inflation is definitively moving toward the Fed’s 2 percent target. “We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation,” he said.

Some observers say Powell’s messaging isn’t helping. Mohamed El-Erian, the chief economic adviser at Allianz and a critic of the Fed’s approach to inflation, said the latest news conference added to those worries. “This is fueling more questions about the risks of the #Fed being late again, albeit in a different direction,” El-Erian wrote on the social media platform X. “Unsurprisingly, the outcome is yet another press conference resulting in significant market volatility.”

November’s elections are complicating Powell’s task. Allies of Donald Trump argue, without evidence, that the Fed is seeking to help President Biden by signaling that cuts are coming. And Trump has said that if he becomes president, he wouldn’t reappoint Powell.

A merger that might have saved The Messenger

In the final days before The Messenger shut down on Wednesday, less than a year after it began, the online news start-up was courting an unlikely white knight to make a last-minute rescue: The Los Angeles Times and its owner, the biotechnology billionaire Patrick Soon-Shiong, Ben Mullin reports for DealBook.

The Messenger’s founder, Jimmy Finkelstein, told the company’s board this week that he had discussed a deal to merge with The Los Angeles Times to keep the start-up afloat, according to two people with knowledge of the matter, who weren’t authorized to speak publicly about the talks.

The logic of the proposed merger: The Messenger, which said it had recently drawn tens of millions of monthly visitors with its clickable content, could drive readership to The Los Angeles Times. Soon-Shiong, in turn, could cover The Messenger’s payroll with a cash injection to keep the company afloat.

Ultimately, a deal never materialized. Finkelstein told the board that the negotiations fell apart, the people said, leaving The Messenger with a cash crunch and no alternatives to shutting down. Finkelstein alluded to his last-ditch attempts to salvage the website in a memo to employees Wednesday night: “Over the past few weeks, literally until earlier today, we exhausted every option available and have endeavored to raise sufficient capital to reach profitability,” he wrote.

Finkelstein and a spokeswoman for The Los Angeles Times did not respond to requests for comment.

Soon-Shiong was one of many potential rescuers The Messenger approached, one of the people said. Another was Omeed Malik, the financier who backed Tucker Carlson’s media start-up, the person added.

The Messenger’s demise was messy. Employees told The Times that they were not offered any severance pay or health insurance, and the abrupt disappearance of its archive made it difficult for them to save copies of their work.

“The bridge has never been burned. … It’s up to them whether they want to cross it.”

— Chris LaCivita, a senior adviser to Donald Trump, on Republican donors like Ken Griffin and Paul Singer who have resisted supporting the former president.

A.I. has big banks in its sights

A big question looming over the advances in artificial intelligence is which jobs it will replace. The technology’s backers say it will bolster productivity and save time by automating functions, suggesting that blue-collar workers on factory floors and in fast-food restaurants that perform routine tasks could be hit the hardest.

But a new report from the Burning Glass Institute, a nonprofit research center, in collaboration with SHRM, a professional organization for human resources professionals, suggests that the finance and the tech sectors are most likely to be affected by the technology.

The research estimates that banks and some tech companies spend 60 to 80 percent of their payrolls, or more, on workers in occupations that will probablybe affected, The Times’s Steve Lohr writes:

The retail, restaurant and transportation industries are least likely to be affected by generative A.I., the report found. Companies like Walmart, McDonald’s and Delta Air Lines mostly employ workers without college degrees who perform roles like helping customers, stocking shelves, cooking food and handling baggage. They spend less than 20 percent of their payrolls on employees in occupations most likely to be affected by generative A.I.

The report doesn’t predict potential job losses related to generative A.I. That will be up to employers, the report said, and whether they want to bank the savings from A.I. automation or use that money to invest and grow, adding more workers. Most experts expect that A.I. will mostly change jobs for the next few years rather than eliminate them — though that could change if the technology improves sharply.

THE SPEED READ

Deals

Investors led by Ancora Holdings have reportedly built a roughly $1 billion stake in Norfolk Southern, with plans to seek the ouster of the railroad operator’s C.E.O. (WSJ)
Amer, the owner of sportswear brands Arc’teryx and Wilson, raised $1.37 billion in its I.P.O., below its expected range. (Bloomberg)

Policy

The E.U. reached a 50-billion-euro funding deal for Ukraine, worth about $54 billion, overcoming objections from Hungary. (NYT)
The House passed a $78 billion tax bill with bipartisan support, but its prospects in the Senate are unclear. (NYT)

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