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Goldman Grouses, Chicago Taxes, Debtors Delay (Future of Finance | Week in Review)

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation. 
Future of finance

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.  

Here’s Why Goldman Employees Hate the New Boss

What happened: Six of the 202 partners that have left Goldman Sachs since CEO David Solomon took over explain that of the reasons they departed one big one is a series of strategic blunders. 

Why it matters: In some ways, it doesn’t. If you’re a shareholder, Solomon treating the bank more like JPMorgan and less like a traditional partnership has been good for business: you’ve outperformed the S&P over the past three years. In symbolic ways, though, it might. In trying to turn America’s premiere bank into something more consumer-friendly, Solomon has inadvertently had many more public failures than his predecessors, like the rocky relationship with Apple’s branded credit card and the winding down of point-of-sale business GreenSky.

What’s next: Given how much former (and current) employees like to talk about him, many more unflattering profiles of Solomon. (By Dakin Campbell, Business Insider)

Chicago Might Tax Itself Out of a $1 Trillion Financial Industry

What happened: Chicago’s new mayor has a huge budget gap to fill and is considering roughly $800 million in new taxes on financial transactions, taking direct aim at the derivatives industry that calls the city home.

Why it matters: Super successful industries in struggling cities is a common theme, seen most prominently in the push and pull amongst San Francisco and its start-up scene. The bet is that the network effects of so many people in the same industry in close proximity will make the switching cost of moving somewhere new, like, say, Miami, too high relative to the new taxes those people will be forced to pay. If the bet doesn’t pay off, however, city officials make a bad situation that much worse.

What’s next: The financial derivatives industry is an invisible giant, by choice. If it takes its big footprint somewhere further south and more tax-friendly, its absence may do what its presence could not: make it very visible. (By Isis Almeida, Bloomberg)

If Tether Is Lending That Means Someone In Crypto Is In Trouble

What happened: After saying that it would phase out all secured loans last year, Tether is again lending its stablecoins, even though it could easily make 5% off of its considerable treasury in a risk-free fashion.

Why it matters: Smarter people like Matt Levine have already pointed this out, but the important thing is that Tether is lending not because it wants to but because it wants to help a customer. And if a customer needs it, that means their liquidity (and by extension, Tether’s to some extent) is at risk. In other words, per usual, someone, somewhere might soon be blowing up in crypto world.

What’s next: Someone’s gonna blow up, of course. (By Jonathan Weil, Wall Street Journal)

Buy Now, Pay Way, Way Later?

What happened: Someone scraping code for the new iPhone discovered a change in buy-now-pay-later company Affirm’s app indicating it will soon be testing out a subscription service.

Why it matters: There’s increased competition in the BNPL space. Including, reportedly, from Apple itself. (Though it could be argued the existence of an Apple card is already some proof of this.) That means companies like Affirm that pay to be the BNPL of choice for retailers may face added competition, including from their current partners.

What’s next: A further love affair between American consumers and not seeing a big chunk of cash immediately leave their bank accounts. (By Mark Gurman, Bloomberg)

Big Indebted Companies: They’re Just Like Us!

What happened: “With debt payments soaring, companies and their lenders are returning to an old trick: kicking the can. Payback schedules have been extended on $114 billion worth of U.S. loans this year, most of them to companies with private-equity owners and low credit ratings, according to Pitchbook LCD. That’s the highest since 2009, when the country was emerging from a recession.”

Why it matters: “Debt amendments work when they bridge a company over a choppy spell. The best example is the pandemic, when lenders waived payments and covenants for borrowers from big corporations down to students. But this could get bad quickly. Companies bring money in from selling stuff, and send some of it out to service debt. A squeeze on either side can be problematic, but a squeeze on both is likely fatal.”

What’s next: There is literally so much riding on the Federal Reserve’s plan for interest rates. Including and especially this. (By Liz Hoffman, Semafor)

A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.