Who pays?
The ferocious wildfires that have burned throughout the Los Angeles area continued to rage overnight, consuming an area twice the size of Manhattan. Forecasters expected “critical red flag” conditions to continue on Friday before the hurricane-force winds that have fueled the blazes subside in the afternoon.
The devastation has more people asking one hard question: Has this part of California become uninsurable?
The latest: At least 10 people have died and roughly 180,000 have been forced to evacuate, as firefighters take on six major blazes and remain on high alert for others. Thousands of homes and businesses, including whole neighborhoods in affluent communities such as Pacific Palisades and Malibu, have burned to the ground.
AccuWeather, the private forecaster, tripled its estimates of the fires’ total economic damage and losses to as much as $150 billion.
“We are absolutely not out of this extreme weather event,” Kristin Crowley, the Los Angeles fire chief, said last night. Even for a region accustomed to destructive natural calamities, this one seems seared in the collective conscience. The Pacific Palisades area has been described as “a ghost town.” Across the region, the afflicted include everyday Angelenos and Hollywood celebrities.
“We think these could be among the most expensive wildfires in U.S. history,” Scott Heleniak, an analyst at RBC Capital Markets, wrote in a research note on Thursday, estimating that insured losses could top $20 billion. The previous record was the 2018 Camp fire in Northern California, where losses hit $12.5 billion.
One group that appears to have been spared so far: holders of catastrophe bonds, which have largely held their value even as local insurance losses mount. With climate disasters on the rise, insurers have increasingly sold these instruments to investors to manage risk.
Insurers, homeowners and businesses aren’t so lucky. Even before this winter’s wildfire season arrived, officials in the region had warned that the California FAIR plan, a state-run insurer of last resort that has increasingly become a main source of coverage for residents, was “one bad fire season away from complete insolvency.”
The FAIR plan’s exposure soared by 61 percent year-on-year to $458 billion by the end of September, according to RBC’s Heleniak. Driving that is the flight of insurers from the California market: Between 2020 through 2022 — during which more than 23,000 wildfires raged across the state, according to data from state officials — private insurers dropped coverage for 2.8 million home insurance customers, Heleniak wrote.
One problem for insurers and Californians: Unlike hurricanes, wildfires are harder to model, ratcheting up the risk. (That said, losses from hurricanes tend to outstrip those of wildfires, analysts note.)
California is hardly alone. Climate-related extreme weather events, including hurricanes and tornadoes, are pushing up premiums around the country and insurers are still losing money in many states.
As Dave Jones, a former insurance commissioner of California, told Time: “We are marching steadily towards an uninsurable future in this country.”
HERE’S WHAT’S HAPPENING
Markets brace for Friday’s jobs report. Economists forecast that employers added about 165,000 jobs last month, down slightly from the average for the previous three months, and that the unemployment rate remained at 4.2 percent. Anything hotter than that could add volatility to trading on Friday as rising inflation and elevated interest rates weigh on investors. The report is due at 8:30 a.m. Eastern.
The Supreme Court denies Donald Trump a reprieve in his hush-money case. A five-justice majority rejected the president-elect’s last-minute bid to halt his sentencing in the New York case, noting that he doesn’t face jail time and he could appeal his conviction. The proceeding is set to take place this morning and will formalize Trump’s status as the first felon to occupy the Oval Office.
China’s central bank pauses purchases of government bonds. The unexpected move is intended to slow a wave of buying of sovereign debt, which has helped drive down interest rates, at the expense of riskier assets such as real estate and stock. It comes just days after the People’s Bank of China said it would adopt a looser monetary policy to stimulate growth.
BlackRock leaves a climate change advocacy group for financial institutions. The exit of the world’s biggest money manager from the Net Zero Asset Managers Initiative followed years of attacks from Republican officials. (The firm has adopted what it calls a more pragmatic approach.) BlackRock’s decision coincided with news that global temperatures crept above a key threshold set by governments and climate scientists.
Gaming out TikTok’s deal odds
TikTok’s big day in court is here: The Supreme Court is set to hear oral arguments on Friday on a law, enacted by President Biden with wide bipartisan support, requiring ByteDance to sell the video app to non-Chinese buyers — or face a ban.
TikTok is seeking to block the law. And President-elect Donald Trump has asked the high court to delay the ban, set to take place the day before his inauguration, arguing that he alone “possesses the consummate deal-making expertise” to resolve the matter. It’s not clear that he’ll get that chance — but DealBook’s Lauren Hirsch breaks down the likelihood of a sale if he does.
ByteDance has pointed to the significant challenges in selling TikTok. Beijing has indicated its unwillingness to part with the algorithm that made TikTok a multibillion-dollar business.
Any deal for TikTok that includes its algorithm would be expensive. The research firm CB Insights recently estimated ByteDance’s valuation was $225 billion, though it’s unclear how much the U.S. version of TikTok would cost on its own.
At least one suitor is interested in buying TikTok without its algorithm: the billionaire Frank McCourt, who is leading an investor group that includes the Canadian entrepreneur Kevin O’Leary. McCourt told DealBook that he’s valuing TikTok without its algorithm at around $20 billion, or roughly the market value of Snap, the parent company of Snapchat.
McCourt said he had spoken with nearly “all the investors” in ByteDance about the bid (though he declined to specify which ones): “They’re as in the dark as we are” about ByteDance’s plans. Among ByteDance’s largest U.S. backers are the investment firms General Atlantic, Susquehanna and Sequoia Capital.
Things will get interesting if China does allow ByteDance to sell TikTok’s algorithm. During the first Trump administration, ByteDance nearly finalized a deal to sell the app to Oracle and Walmart.
TikTok continues to store U.S. data on Oracle’s servers as a way to address national security concerns. The software giant’s co-founder, Larry Ellison, is a longtime supporter of Mr. Trump, potentially bolstering any sale talks.
Other large technology and media companies may want to take a swing. Historically, such deals raised eyebrows from regulators on antitrust grounds — but any suitors could appeal to Trump’s desire to get a deal done.
Exclusive: A new home for Manhattan’s former top federal prosecutor
Damian Williams, the former U.S. attorney for the Southern District of New York during the Biden administration, is joining the prominent law firm Paul, Weiss, Rifkind, Wharton & Garrison.
Williams will be a partner in the litigation department, The Times’s Benjamin Weiser is first to report for DealBook.
Williams oversaw a slew of high-profile cases since taking office. Among them were the convictions of cryptocurrency executives including Sam Bankman-Fried, the disgraced founder of the crypto exchange FTX; Bill Hwang, a financier accused of masterminding a multibillion-dollar stock-manipulation scheme; and Robert Menendez, the former Democratic senator from New Jersey.
The Southern District has also been prosecuting Mayor Eric Adams of New York, also a Democrat, and the hip-hop mogul Sean Combs, known as Diddy. Both men have pleaded not guilty.
Williams, appointed by President Biden in October 2021, was the first Black U.S. attorney in the Southern District, one of the most prominent and powerful Justice Department offices. It oversees major Wall Street cases, and has earned the nickname the “Sovereign District” because of its history of independence from Washington.
It will be the second time Paul, Weiss has hired Williams. He was a litigation associate at the firm from 2009 to 2012. “It does feel like a full-circle moment,” Williams told DealBook in an interview.
The firm said Williams will represent clients “in high-stakes federal and state government investigations, white-collar matters and sensitive internal investigations.”
In a statement, the Paul, Weiss chairman Brad Karp called Williams “a transcendently talented lawyer who has led many of the government’s highest-profile prosecutions and investigations.”
Paul, Weiss has recruited a number of former government officials, including Loretta Lynch, who served two stints as U.S. attorney in Brooklyn and later was attorney general under President Barack Obama; and Jeh Johnson, a former secretary of homeland security.
In November, President Trump said he would select Jay Clayton to replace Williams as the new top Southern District prosecutor. Clayton, a corporate lawyer, was chairman of the Securities and Exchange Commission during the first Trump administration.
“I can see tipping culture in the U.S. cracking.”
— Jenni Emmons, a server at an upscale Chicago restaurant. Tipping at restaurants hit a six-year low last year, according to The Wall Street Journal, with rising menu prices and increasing demands for gratuities being blamed.
Work-from-home is far from dead
JPMorgan Chase is expected to join Amazon and AT&T in ordering employees back to the office five days a week.
Such mandates, combined with prominent executives voicing their displeasure with workplace flexibility, have led some to conclude that this will be the year that the work-from-home movement, which began in the early days of the Covid pandemic, will come to an end.
Researchers who study the issue aren’t so convinced. Economists at Stanford, the University of Chicago Booth School of Business and the Instituto Tecnológico Autónomo de México business school have been polling workers about their work-site routine since 2020.
The survey asks: how many days per week they work from home and how many days their employers plan for them to do so. About two years ago, both sets of responses converged at about two days.
Despite signs of a “a slight downward trend,” that convergence looks like it largely will continue, the researchers wrote this week. “Absent a huge, unexpected event (another pandemic?) work from home rates in early 2026 will likely be close to what we see now,” they concluded.
THE SPEED READ
Deals
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Constellation Energy agreed to buy Calpine, another major generator of electricity, for $16.4 billion, in a bet on increased demand for power by tech companies. (NYT)
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Bonuses for top-performing investment bankers and traders at Bank of America and JPMorgan Chase are said to average at least 10 percent, as Wall Street seeks to reward its rainmakers after years of restraint. (Bloomberg)
Politics and policy
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UBS is said to be near a deal to pay hundreds of millions of dollars in penalties to settle U.S. charges that Credit Suisse, which it bought in 2023, helped thousands of Americans cheat on their taxes. (WSJ)
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“Inside Trump’s Search for a Health Threat to Justify His Immigration Crackdown” (NYT)
Best of the rest
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“Economists Are in the Wilderness. Can They Find a Way Back to Influence?” (NYT)
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Now that student athletes can be paid, the hottest job in college sports is general manager. (NYT)
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Connor Gaydos, the prankster behind the satirical conspiracy theory “Birds Aren’t Real,” is back with a new venture: reviving the Enron brand. (NYT)
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