Business

➚ BUY: Gold. Bullion is at record highs, outperforming even US Treasury bonds, whose status as global safe harbor is in doubt after Donald Trump’s debt comments.

➘ SELL: Gucci. Sales at the luxury brand’s parent company, Kering, fell 24% after a design reboot failed to counteract flagging demand from China. Gucci parted ways with its lead designer two weeks ago.

EU readies tariff responses… Travelers expects $1.7B wildfire hit… Elliott makes twin oil bets… Deloitte and Goldman join DEI flight… China bets on elderly tourists… Priceless Pappy hits auction block…

Senior officials at the US Consumer Financial Protection Bureau were forced to resign on Tuesday after the Trump administration effectively shut down all major operations at the once-powerful agency.

Lorelei Salas, the agency’s head of supervision, and Eric Halperin, its head of enforcement, were placed on administrative leave this morning by Office of Management and Budget General Counsel Mark Paoletta, according to a CFPB spokesperson through the OMB.

Both Salas and Halperin emailed their own resignation notices to CFPB staff, saying they disagreed with the direction of the agency, according to internal memos seen by Semafor. The Trump administration’s moves throw into doubt the future of the agency — which was created in the wake of the 2008 crisis, launched Sen. Elizabeth Warren’s political career, and has been a punching bag for much of its existence.

Critics resented that its budget was set by the Federal Reserve, rather than through Congress, and Republicans saw it as an overly zealous watchdog in a field already crowded with financial regulators. (The US already had five agencies overseeing financial firms, though the CFPB is the only one with consumer protection as an explicit mandate and the power to go after nonbanks, like tech companies that offer financial services.)

The White House can defang but not legally disband the agency, though Congress has the legal authority to restructure it or dissolve it into another agency, something it has done in the past. “I don’t know whether we end up keeping it or not,” Sen. John Kennedy, R-La., told Semafor. “But if we do keep it, you won’t recognize it after we finish fixing it.”

Bank lobbyists, even those who have long criticized the CFPB, have been quiet this week, unsure of how to apply rules enforced by a kneecapped agency. And while traditional lenders have been critical of the bureau, the regulator also helped rein in fintech firms and other, newer rivals that aren’t hamstrung by banking regulations. It recently brought enforcement actions against Walmart and Apple, for example.

“You can’t just wish away an agency, and there’s been lots of consumer protections,” Sen. Mark Warner, D-Va., told Semafor. “So the question is going to be: Why don’t my Republican friends stand up?”

This story has been updated to reflect comments from the CFPB under OMB.

That’s how much of investors’ profits were eaten up by fees at one of the world’s biggest hedge funds, according to a Bloomberg analysis. Balyasny and its peers spend lavishly on talent, perks, travel, real estate, and data, and pass those costs on to investors, a few of whom have started to complain. After those fees, the fund in question returned just 2.3% in 2023.

Wall Street’s favorite tax break may be on the chopping block. Donald Trump said — not for the first time — that he wants to get rid of the special treatment that investment profits receive and instead treat that money as ordinary income, which is taxed at higher rates.

Carried interest — a holdover from the 16th-century, trans-Atlantic trade when ship captains took 20% of profits from the sale of cargo as compensation for taking the risks of the journey — is a huge part of Wall Street’s compensation machine. It’s also a perennial target of budget hawks. A similar proposal in Trump’s first term went nowhere, in part because Congressional accountants estimated that it wouldn’t raise much money: Venture capital and private equity firms would simply restructure their pay to avoid the tax, perhaps following the helpful step-by-step instructions provided by the Joint Tax Committee.

Still, Trump’s plans would strike at the heart of the venture community, home to some of his strongest supporters. (When Obama tried to get rid of carried-interest treatment, Blackstone’s CEO compared the effort to the Nazis’ invasion of Poland.)

Lobbyists are already gearing up for a fight. “We’re going to hollow out this small venture fund, and they’ll go find other things to do,” Bobby Franklin, CEO of the National Venture Capital Association, tells Semafor. The average VC fund is $21.3 million, he said, and giant funds can’t be bothered to write small checks that most startups need.

My own view: The tax system deliberately encourages people to take risks with their money, so it’s not fair to call this a “loophole.” The problem is that most people who benefit from it aren’t taking personal risk and it isn’t their money. Blackstone’s dealmakers aren’t 16th-century ship captains. “Carried interest exemption shouldn’t exist,” healthcare investor D.A. Wallach in a post unlikely to win him friends in Silicon Valley. “I’m happy to lose it because I don’t think I deserve it.”

Tesla’s Chinese rival BYD unveiled an electric vehicle priced under $10,000, potentially triggering a new price war in the world’s biggest car market, Semafor’s Tim McDonnell reports. The company’s CEO also announced a new advanced self-driving system called God’s Eye — not to be confused with Uber’s “God mode” stalker view — and said driver-assisting software is “no longer an unattainable luxury, but an essential tool” like seatbelts and airbags. The new rollouts could challenge Tesla, which relies on China for more than one-third of its sales, and has already hit regulatory hurdles and safety recalls there. One local expert compared BYD’s moves to Chinese AI startup DeepSeek, which upended global markets with its claims of building advanced technology at a fraction of the cost.

China was once the world’s lowest-cost producer of basic goods like toys and clothes before a government-directed effort pushed it more into high tech. Now, it’s becoming the low-cost producer of that, too.

Want to get smarter about financial markets? Join 200,000 investors who get Opening Bell Daily in their inbox — it’s packed with Wall Street data, charts and analysis you won’t find anywhere else. Subscribe for free.

Banks and private capital firms are usually cast as bitter rivals, but they’re looking more and more like codependent roommates. Large bank lending to private equity and credit funds has grown to $300 billion from $10 billion during the past decade ending 2023, researchers from the Boston Fed found in a new report. These loans now make up 14% of bank lending to the financial industry, up from 1% in 2013.

It’s the first semiofficial measure of how closely intertwined banks are with the private funds that have taken over the lending world, and how the risks that regulators squeezed out of the banking system after 2008 are finding their way back in.

“It’s leverage on leverage,” Advent managing partner John Maldonado said at last year’s Semafor Business Summit, noting that his firm avoids the practice. US Treasury officials warn that such linkages mean a widely predicted blowup in private markets could contaminate the broader economy.

But it’s irresistible to investment funds, whose returns are struggling with the IPO market frozen, and to banks, whose lending business has been hollowed out. “So what do they do? They come back and lend against it,” Jim Fellows, president of First Eagle Alternative Credit, told us last year in a story about this trend. “They’re always chasing that fee.”

In his first weeks in office, Donald Trump has flooded the zone with executive orders, impromptu press conferences, and boundaries-testing moves to slash government — a strategy that Steve Bannon articulated during Trump’s first term.

Bannon spoke to Semafor’s Ben Smith about why he thinks the strategy — which he’s calling Trump’s “Days of Thunder” — is working brilliantly this time around. “The media is a complete total meltdown,” he said.