The Wall Street Journal - 14.11.2019

A2| Thursday, November 14, 2019 ** THE WALL STREET JOURNAL.

None of the lawmakers on

the committee, which is com-

posed of 10 House members

and 10 senators, joined Mr.

Trump in criticizing the Fed.

Mr. Powell repeated his

pledge that the Fed wouldn’t

take politics into account

when it makes policy deci-

sions. He is slated to testify

Thursday before the House

Budget Committee.

Fed officials raised short-

term interest rates four times

last year to guard against un-

desirable levels of inflation or

financial bubbles, but they

have cut rates three times

since July because of a slow-

down in business investment

and global growth that the

U.S.-China trade war has am-

plified. Mr. Powell said the

economy’s baseline outlook

remains favorable, partly ow-

ing to the Fed’s recent rate

cuts.

Hopes for a trade truce

have boosted investors’ opti-

mism in recent weeks that the

economy can avoid a down-

turn.

Fed officials have expected

annual economic growth to

slow to around 2% this year

from nearly 3% last year. The

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U.S. WATCH

billion budget deficit in October,

the Treasury Department said

Wednesday. Federal outlays to-

taled $380 billion, an 8% increase

from a year earlier and a record

for the month, driven by higher

spending on the military, health

care and Social Security.

Receipts last month totaled

$246 billion, a 3% decline from

last year, which the Treasury at-

tributed in large part to a shift in

the timing of certain payments.

If not for those calendar

quirks, revenue would have

grown 2% in October from a year

earlier, and the deficit would

have widened 19% in the first

month of fiscal 2020, the Trea-

sury said.

—Kate Davidson

HOMELAND SECURITY

New Acting Secretary

Installed After Vote

Chad Wolf was sworn in as
acting secretary of Homeland
Security after being confirmed
by the Senate to an undersecre-
tary role on Wednesday, putting
him atop the agency’s line of
succession.
Mr. Wolf, who was confirmed
in the Senate in a 54-41 vote, is
expected to name Ken Cuccinelli,
the acting head of U.S. Citizen-
ship and Immigration Services, to
the No. 2 job at the department,
appointing him acting deputy
DHS secretary, according to two
people familiar with the matter.
The elevation of Mr. Cuccinelli
would give him more influence
over the department’s broad im-
migration policy agenda, includ-
ing at the border and deporta-
tion operations.
President Trump named Mr.
Wolf, former Secretary Kirstjen
Nielsen’s chief of staff, as the
next acting head of the agency
while his administration searches
for a nominee to fill the post
permanently.
The announcement of Mr.
Wolf as the pick for acting sec-
retary this month capped a
three-week period of uncertainty
after acting Secretary Kevin
McAleenan submitted his resig-
nation letter in early October.
—Michelle Hackman

U.S. BUDGET

October Deficit Grew

34% to $134 Billion

The U.S. budget gap grew
34% in the first month of the fis-
cal year as federal spending out-
paced revenue growth, pushing
the 12-month deficit past $1 tril-
lion for the first time since Feb-
ruary 2013.
The government ran a $

GRIM TASK: Tom Bull of the Worcester Fire Department in Massachusettsinvestigates the scene of a fire that killed Lt. Jason Menard.

CHRISTINE PETERSON/WORCESTER TELEGRAM & GAZETTE/ASSOCIATED PRESS

KLA Corp. , which makes
equipment for the semicon-
ductor industry, changed its
name from KLA-Tencor earlier

this year. A Nov. 6 Heard on

the Street column about chip

makers incorrectly used the

company’s old name.

Readers can alert The Wall Street Journal to any errors in news articles by

emailing [email protected] or by calling 888-410-2667.

CORRECTIONSAMPLIFICATIONS

many analysts and observers

with its ability to double sales

year after year.

With the focus internally set

on the top line, the nine-year-

old company was never able to

deliver its long-running set of

pledges that it would rein in

costs. Spending consistently

rose as well, typically as fast or

even faster than revenue, as

the New York company blan-

keted the world with glassy of-

fices marked by a hip interior

design and ample fresh cucum-

ber water. The losses kept

growing ahead of the IPO, at

the very time that startups

usually endeavor to show they

are shrinking.

In the third quarter report,

WeWork said that expenses

grew at a faster rate amid

rapid growth in areas like leas-

ing costs and “new market de-

velopment.” The latter is a

Continued from Page One

PHILANTHROPY

Universities, Hospital

Split $1 Billion Gift

Four institutions have received

windfalls of $261 million each af-

ter Lord Corp., a Cary, N.C., manu-

facturing company, closed its

$3.68 billion sale last month to

Parker Hannifin Corp.

Duke University, the Massa-

chusetts Institute of Technology,

the University of Southern Cali-

fornia and the Cleveland Clinic are

splitting evenly a surprise $1 bil-

lion-plus donation as a result of

the sale, which also yielded a

hefty payout for the closely held

firm’s shareholders.

In the early 1980s, Lord

Corp.’s then-chairman, Thomas

Lord, established the Lord Foun-

dations of North Carolina, Mas-

sachusetts, California and Ohio

to benefit the institutions.

—Melissa Korn

and Valerie Bauerlein

CALIFORNIA

Edison Unit Settles

For $360 Million

Southern California Edison

agreed to pay $360 million to

compensate about two dozen lo-

cal governmental entities for

damages and other costs related

to a series of fires and resulting

mudslides that hit the region in

2017 and 2018.

The settlements show that

Southern California Edison, an

arm of Edison International ,

faces liability problems similar to

those of PG&E Corp, which has

filed for bankruptcy protection.

Southern California Edison

has conceded its equipment was

the likely spark of the Woolsey

Fire in and around Malibu last

year, and Ventura County fire in-

vestigators have determined the

company’s power lines sparked

the Thomas Fire in 2017.

Company officials said

Wednesday’s agreements were a

compromise between the utility

and the local agencies and it

made no admissions of wrong-

doing or liability.

—Jim Carlton

wide-ranging category that in-

cluded numerous areas of ex-

pansion pushed by Mr. Neu-

mann, including a slew of tech

companies WeWork acquired.

The company also reported

a $197 million charge related to

asset impairments as it wrote

down the costs of businesses it

acquired over the past couple

of years, according to a person

familiar with the charge. Costs

related to its attempted IPO,

other deals and its restructur-

ing totaled $83 million.

The attempted IPO and sub-

sequent two months have been

a tremendously tumultuous pe-

riod for WeWork.

The IPO was supposed to

raise as much as $10 billion in

equity and debt, giving the

company cash to keep expand-

ing. But without the listing,

WeWork nearly ran out of cash

amid the rapid increases in

spending.

That led it to take a rescue

package from SoftBank. The

Japanese conglomerate com-

mitted $6.5 billion in debt and

equity to give it nearly 80%

ownership in WeWork.

Since Mr. Neumann left in

late September, the company

has pivoted rapidly to try to

cut costs. SoftBank installed a

new executive chairman, Mar-

celo Claure, and it has begun to

search for a new chief execu-

tive, holding talks with T-Mo-

bile U.S. Inc. CEO John Legere,

people familiar with the matter

have said.

Layoffs of thousands of the

company’s more than 13,

employees are expected soon,

and company executives have

said they are trying to sell

most every company WeWork

acquired in the past two years.

In a presentation to investors

that WeWork posted on its

website last week, it described

its business model as “decen-

tralized” in the past two years

and said it now hopes to be

“centralized.”

The quarter’s numbers also

epitomize the growing scale of

losses among many large start-

ups, where executives and ven-

ture-capitalist investors fo-

cused for years on increasing

revenue, with less attention to

costs.

Uber Technologies Inc. re-

ported a loss of $3.7 billion for

the 12 months before its May

IPO—the largest ever for a U.S.

startup before a public offer-

ing—while Lyft Inc. reported

$911 million in losses in the

year before its listing.

WeWork

Loss Tops

$1 Billion

U.S. NEWS

After an especially active

few months for monetary pol-

icy, Mr. Powell indicated on

Oct. 30 that the central bank

was comfortable entering a

wait-and-see phase. He largely

repeated that message

Wednesday, stressing that Fed

policy wasn’t on a preset

course. Asked if his state-

ments meant that the Fed

wouldn’t change interest rates

over the next year, he said, “I

wouldn’t say that at all.”

Investors don’t expect the

Fed to cut rates at its final

meeting of the year, on Dec.

10-11, and futures markets see

a roughly 50% probability of

one more rate cut by the mid-

dle of next year, according to

CME Group.

In a speech Tuesday, Presi-

dent Trump criticized the Fed

for keeping rates too high and

said he envied nations in Eu-

rope that have rates below

zero. “I want some of that

money,” said Mr. Trump.

Pressed by lawmakers to

respond Wednesday, Mr. Pow-

ell said, “The very, very low

and even negative rates that

we see around the world

would not be appropriate for

our economy.” Negative rates

abroad occur when “growth is

quite low and inflation is

quite low.”

question now is whether a

contraction in business in-

vestment, which fell in the

past two quarters, prompts

deeper cutbacks in hiring and

a downturn in consumer con-

fidence and spending, which

has buoyed output this year.

Fed officials have high-

lighted the risk that monetary

policy will have less ability to

counteract a future downturn

because short-term interest

rates and long-term bond

yields are much lower than in

past economic expansions.

In recent downturns, the

Fed has cut its benchmark rate

by around 5 percentage points.

“We don’t have that kind of

room” today, said Mr. Powell.

“We’re too close—closer than

we would like—to zero.”

As a result, Mr. Powell said

lawmakers should be ready for

fiscal policy to support the

economy in a downturn.

At the same time, he

warned that the long-term

path of growing federal budget

deficits and a higher debt load

are unsustainable, which could

“restrain fiscal policy makers’

willingness or ability to sup-

port economic activity during

a downturn.”

WASHINGTON—Federal Re-
serve Chairman Jerome Powell
told lawmakers the central
bank saw little need to cut in-
terest rates further after mak-
ing three reductions since July.
“We see the current stance
of monetary policy as likely to
remain appropriate as long as
incoming information about
the economy remains broadly
consistent with our outlook of
moderate economic growth, a
strong labor market” and sta-
ble inflation, Mr. Powell told
Congress’s Joint Economic
Committee on Wednesday.
“Of course, if developments
emerge that cause a material
reassessment of our outlook,
we would respond accord-
ingly,” he added.
The Fed cut its benchmark
interest rate to a range be-
tween 1.5% and 1.75% at its
policy meeting two weeks ago
to cushion the economy
against risks of a sharp slow-
down from weakening business
investment and global growth.

BYNICKTIMIRAOS

Powell Signals More Cuts Aren’t Needed

Federal Reserve

chairman voices

comfort with central

bank’s stance on rates

Prices at the Pump

Drive Up Inflation

Gasoline costs pushed up

prices for U.S. consumer goods

in October, while new tariffs on

imports appeared to have little

effect on what Americans paid

for clothing and household fur-

nishings.

The consumer-price index—

which measures the costs of

goods and services from food

to dental care—rose a season-

ally adjusted 0.4% in October

from the previous month, the

Labor Department said

Wednesday. Core prices, exclud-

ing often volatile food and en-

ergy categories, were up 0.2%.

The U.S. placed duties on a

range of Chinese imports in

September as part of the con-

tinuing trade war—including

clothing, tools, electronics and

other consumer goods. But a

1.8% drop in apparel prices

helped hold down overall core

inflation in October.

Consumers generally aren’t

shouldering the costs of those

levies, said Josh Nye, senior

economist at RBC. “Probably

because of competitive pres-

sures or other factors, busi-

nesses haven’t been able to

pass along much of the tariff

price increases they’re seeing

[to consumers],” he said.

The consumer-price index

increased 1.8% in October from

a year earlier, higher than the

1.7% year-over-year increase

seen in the previous two

months. Core prices were up

2.3% over the year.

“The broader story remains

the same: Inflation pressures

remain mild, and it will be

some time before inflation be-

comes a main concern for the

[Federal Reserve],” Richard

Moody, chief economist at Re-

gions Financial Corp., said in a

note to clients.

Energy prices, which rose

2.7% in October from the previ-

ous month, accounted for more

than half of the gains in the

headline consumer-price index,

according to the Labor Depart-

ment. Gas prices increased

3.7%, helping drive the advance

in the overall energy index.

Wednesday’s consumer-

price index report showed

Americans also paid more for

items such as food, used cars

and medical services.

—Amara Omeokwe

 Heard on the Street: Fed gives

a green light on risk........... B

WASHINGTON—A federal

appeals court on Wednesday

refused to reconsider a ruling

that allowed a House commit-

tee to subpoena President

Trump’s financial records from

his longtime accounting firm,

a move that gives the presi-

dent a week to seek emer-

gency intervention from the

Supreme Court.

Mr. Trump’s lawyer said the

case would be appealed to the

high court.

The president already is ex-

pected to file emergency pa-

pers with the Supreme Court

Thursday in a separate but re-

lated case in which lower

courts ruled Manhattan District

Attorney Cyrus Vance Jr. could

enforce a grand-jury subpoena

that seeks the president’s tax

returns and other records from

the same accounting firm,

Mazars USA LLP.

Wednesday’s action came in

a case where the House Over-

sight Committee issued a sub-

poena to Mazars for eight

years of financial records re-

lated to Mr. Trump, his real-

estate company, his foundation

and other entities. The sub-

poena seeks “all statements of

financial condition, annual

statements, periodic financial

reports, and independent audi-

tors’ reports” and related

notes and communications.

A three-judge panel on the

U.S. Court of Appeals for the

District of Columbia Circuit

last month held the subpoena

was valid and enforceable, in a

2-1 ruling. “Contrary to the

president’s arguments, the

committee possesses authority

under both the House rules and

the Constitution to issue the

subpoena, and Mazars must

comply,” Judge David Tatel

wrote in the Oct. 11 opinion.

The House Oversight Com-

mittee said the records were

important for its examination

of ethics and conflict-of-inter-

est issues in the executive

branch, as well as the accuracy

of Mr. Trump’s federally re-

quired financial disclosures.

Mr. Trump’s lawyers argued

the committee was seeking the

information to score political

points and had no legitimate

purpose.

The Trump legal team

asked the appeals court to re-

consider, this time with all ac-

tive judges on the court par-

ticipating. The D.C. Circuit on

Wednesday denied that re-

quest by an 8-3 vote. The ma-

jority didn’t comment on the

court’s order, but three con-

servative judges, including two

appointed by Mr. Trump, reg-

istered dissents.

The appeals court in a pre-

vious order said it would give

Mr. Trump a week after it

ruled on his reconsideration

request to seek relief from the

Supreme Court.

BYBRENTKENDALL

Trump

Fails to

Block Tax

Subpoena