WEBVTT - Bausch, GBTC, Merck, Meta & Other Catalysts 0:00:14.560 --> 0:00:18.240 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:18.640 --> 0:00:21.639 by the Litigation and Policy team at Bloomberg Intelligence, the 0:00:21.720 --> 0:00:27.040 investment research platform of Bloomberg LP. This podcast series examines 0:00:27.120 --> 0:00:30.840 the intersection of business policy and law, and today we'll 0:00:30.880 --> 0:00:33.920 be looking at the litigation and policy catalysts that we're 0:00:33.960 --> 0:00:37.279 watching in October twenty twenty three and that we think 0:00:37.320 --> 0:00:41.159 will impact companies across a number of different sectors. My 0:00:41.240 --> 0:00:45.040 name's Elliott Stein. I'm a senior litigation analyst covering litigation 0:00:45.159 --> 0:00:48.360 in the financial sector, and I'll be your host for today, 0:00:48.560 --> 0:00:52.159 September twenty ninth, twenty twenty three. If you have any 0:00:52.200 --> 0:00:54.800 questions about any of the matters that we'll be discussing 0:00:54.840 --> 0:00:58.160 on this episode, please don't hesitate to reach out to 0:00:58.240 --> 0:01:02.720 us at your convenience with question. So we'll be discussing 0:01:02.720 --> 0:01:07.040 a handful of sectors today. First, Holly Frome will discuss 0:01:07.120 --> 0:01:11.280 litigation by Merk and other drug makers challenging Medicare drug 0:01:11.360 --> 0:01:16.080 negotiation provisions of the Inflation Reduction Act the IRA, as 0:01:16.080 --> 0:01:20.280 it's known. She'll also preview a Bellweather trial against Buyer 0:01:20.440 --> 0:01:25.800 concerning claims that its roundup weed killer causes cancer. After that, 0:01:26.000 --> 0:01:30.200 Tish Walker, who covers healthcare patent litigation for US, we'll 0:01:30.240 --> 0:01:33.279 preview a hearing where Bousch Health will try to stop 0:01:33.440 --> 0:01:37.840 Norwich's bid for approval of its si faxin copy, and 0:01:37.920 --> 0:01:41.600 she'll also discuss an upcoming trial in Exelixis's bid to 0:01:41.680 --> 0:01:46.959 keep Cabometics Generics off the market. After that, Matt Shettenhelm, 0:01:47.080 --> 0:01:50.800 our TMT litigation and policy analyst, will preview a hearing 0:01:50.920 --> 0:01:54.120 on a motion by Meta to stop the FTC from 0:01:54.160 --> 0:01:59.480 blocking the company's use of teen data. After that, Nathan 0:01:59.520 --> 0:02:03.120 dean Or, a senior financials policy analyst, we'll talk about 0:02:03.160 --> 0:02:07.640 marijuana banking legislation. He'll also talk about regional bank long 0:02:07.720 --> 0:02:12.760 term debt requirements and the impending government shutdown. And last 0:02:12.760 --> 0:02:15.320 but not least, I'll wrap up by talking about an 0:02:15.400 --> 0:02:21.440 upcoming Supreme Court argument in a case challenging the CFPB's constitutionality, 0:02:21.919 --> 0:02:25.680 and also talk about upcoming dates in the SEC's recent 0:02:25.800 --> 0:02:31.000 lawsuit against marketmaker Virtue, as well as Grayscales lawsuit against 0:02:31.040 --> 0:02:36.480 the SEC concerning the spot bitcoin etf. Let me also 0:02:36.639 --> 0:02:39.440 just add that our colleague Jen Ree, who covers all 0:02:39.520 --> 0:02:43.640 things antitrust for US, couldn't be on today's episode, But 0:02:43.800 --> 0:02:47.760 if you're interested in the FTC's recent lawsuit against Amazon, 0:02:48.480 --> 0:02:52.200 or in October trial that's upcoming in the Justice Department's 0:02:52.320 --> 0:02:56.360 case against the Jet Blue Spirit tie up, or anything 0:02:56.400 --> 0:02:59.960 else anti trust related, I highly recommend that you can 0:03:00.760 --> 0:03:05.080 see her research on the Bloomberg terminal. All of our research, 0:03:05.120 --> 0:03:08.560 of course, is available on the Bloomberg terminal at bi go. 0:03:09.240 --> 0:03:12.080 And just a quick word about Bloomberg Intelligence for those 0:03:12.120 --> 0:03:15.960 who are unfamiliar. We are the investment research platform on 0:03:16.000 --> 0:03:20.440 the Bloomberg Terminal, providing in depth research on industries, companies, 0:03:20.480 --> 0:03:24.320 and markets and delivering key data from BI analysts in 0:03:24.400 --> 0:03:28.480 their respective industries. All right, so with all that out 0:03:28.520 --> 0:03:31.760 of the way, let's get started with the content. Holly. 0:03:32.160 --> 0:03:36.720 Let's start with you. This litigation by drug makers challenging 0:03:36.760 --> 0:03:41.000 the Medicare drug negotiation provisions of the Inflation Reduction Act 0:03:41.280 --> 0:03:44.240 is really interesting. I know there's a lot of litigation 0:03:44.320 --> 0:03:47.680 around it, and you're expecting an important court ruling by 0:03:47.680 --> 0:03:51.720 October first, and then separately you're also watching an upcoming 0:03:51.760 --> 0:03:55.320 trial over buyers Roundup. We'd killer why don't you come 0:03:55.360 --> 0:03:56.960 in and tell us more about these cases? 0:03:57.000 --> 0:04:02.240 And what investors. Jane Day and other drug makers and 0:04:02.280 --> 0:04:04.920 trade groups have sued the Department of Health and Human 0:04:04.960 --> 0:04:09.640 Services and Centers for Medicare and Medicaid, the agencies that 0:04:09.720 --> 0:04:13.680 administer Medicare and Medicaid, challenging a negotiation program that the 0:04:13.760 --> 0:04:16.640 drug companies say force them to agree to a twenty 0:04:16.680 --> 0:04:21.280 five to sixty percent discount on drugs selected for the program. 0:04:21.920 --> 0:04:25.719 Drug makers don't who are selected for the program, don't 0:04:25.760 --> 0:04:28.400 agree to negotiate, and don't withdraw from Medicare, they are 0:04:28.440 --> 0:04:31.599 subject to attacks which could amount to ninety five percent 0:04:31.920 --> 0:04:34.760 of the selected drugs gross US revenue on the drug 0:04:34.960 --> 0:04:38.640 including non Medicare sales. So drug makers have filed several 0:04:38.720 --> 0:04:42.839 lawsuits in various districts nationwide arguing that the drug program 0:04:42.880 --> 0:04:46.680 is unconstitutional. They've made several arguments, including that it's an 0:04:46.720 --> 0:04:51.280 unconstitutional taking, that it violates the First Amendment, that it 0:04:51.360 --> 0:04:56.279 imposes excessive fines, violates to process, and violates separation of powers. 0:04:56.800 --> 0:04:59.680 The cases are at various stages, but one case we 0:04:59.720 --> 0:05:03.520 are watching, but the possible ruling on the horizon, was 0:05:03.520 --> 0:05:06.400 brought by a trade group for drug makers in federal 0:05:06.400 --> 0:05:09.719 court in Ohio. The trade group filed a motion for 0:05:09.760 --> 0:05:13.720 a preliminary injunction seeking to enjoying implementation of the program. 0:05:13.960 --> 0:05:15.960 We said we don't think the motion will be granted 0:05:16.000 --> 0:05:18.440 because we think the case fails on the merits. The 0:05:18.480 --> 0:05:22.000 trade group has argued that the negotiation program violates their 0:05:22.120 --> 0:05:25.480 due process rights because it deprives them of a property 0:05:25.520 --> 0:05:30.120 interest without procedural protections. We think this argument fails because 0:05:30.200 --> 0:05:32.520 drug makers rely on a case where a utility was 0:05:32.520 --> 0:05:35.440 forced to provide services at a certain rate, allegedly without 0:05:35.440 --> 0:05:38.880 a fair process to determine the rate. The difference here 0:05:38.960 --> 0:05:41.919 is that drugmakers can withdraw from Medicare. The utility was 0:05:41.960 --> 0:05:45.680 required by Lawn to provide services, so that motion. The 0:05:45.720 --> 0:05:49.520 preliminary injunction motion was argued September fifteenth. We think a 0:05:49.600 --> 0:05:52.760 ruling could come by the October first deadline for manufacturers 0:05:52.800 --> 0:05:56.359 to agree to negotiate. If they lose, we expect the 0:05:56.400 --> 0:05:58.840 Trade group to file or requests for a media to appeal, 0:05:59.240 --> 0:06:01.920 and if accept an appellate ruling could come in one age. 0:06:02.720 --> 0:06:06.640 Shifting gears. Beayor mon Santo faces a trial in Philadelphia 0:06:06.680 --> 0:06:12.320 State Court in October. The plaintiff claims in October fifth 0:06:12.360 --> 0:06:15.880 the plaintiff claims its weed killer roundup causes cancer. Bear 0:06:15.920 --> 0:06:19.400 faced over one hundred thousand cases alleging injury from its 0:06:19.520 --> 0:06:21.800 weak killer. Most of the case is settled, but there's 0:06:21.839 --> 0:06:26.280 still an estimated between forty to fifty thousand cases left 0:06:26.320 --> 0:06:30.440 that remain pending and unsettled. Jury selection in the Philadelphia 0:06:30.440 --> 0:06:33.040 trial begins October fifth, and this is the first case 0:06:33.080 --> 0:06:35.640 that will be tried in that jurisdiction. It's a bell 0:06:35.680 --> 0:06:39.360 Weather case for Philadelphia. Several trials are scheduled into twenty 0:06:39.400 --> 0:06:42.600 twenty four. Bear has won the last several trials in 0:06:42.600 --> 0:06:46.080 different jurisdictions, but Philadelphia is a historically plaintive friendly form, 0:06:46.600 --> 0:06:49.279 so it will be interesting to see what happens there. 0:06:49.640 --> 0:06:51.200 And with that, I'll turn it back to you. 0:06:51.200 --> 0:06:55.080 Elliott, Great, thanks so much, Holly. All right, Tish, let's 0:06:55.080 --> 0:06:58.680 bring you in to talk healthcare patent litigation. You have 0:06:58.720 --> 0:07:02.040 a couple of catalysts that you're watching as well. First, 0:07:02.440 --> 0:07:05.479 bouch Health has in October sixth tier in to stop 0:07:05.520 --> 0:07:09.200 Norwich's bid to compel approval of its si faxin copy. 0:07:09.520 --> 0:07:13.280 And you're also watching a trial that starts October twenty 0:07:13.280 --> 0:07:17.280 third in Exilexis's bid to keep Cabo Metics generics off 0:07:17.320 --> 0:07:21.480 the market. All these names make me want to ask 0:07:21.520 --> 0:07:24.240 you why so many of these names in the drug 0:07:24.240 --> 0:07:27.480 space have X in them? But you don't have to 0:07:27.520 --> 0:07:29.440 answer that if you don't know. But why don't you 0:07:29.440 --> 0:07:31.520 come in and tell us what these cases are about? Nonetheless, 0:07:33.920 --> 0:07:36.840 thanks Elliott. I have no idea why they have X 0:07:36.920 --> 0:07:39.240 in it. Maybe it's just to keep it interesting, or 0:07:39.280 --> 0:07:43.080 perhaps now it's to be cool like the former Twitter. 0:07:43.120 --> 0:07:46.240 Who knows. But for the I'm going to start with 0:07:46.280 --> 0:07:48.880 Bausch And for those of you that follow my research, 0:07:49.080 --> 0:07:52.440 and hopefully that's everyone listening, you know that Bausch has 0:07:52.480 --> 0:07:55.679 been in a drawn out patent litigation with Norwich trying 0:07:55.680 --> 0:07:59.120 to block Norwich's genericsy Fax and copy from coming to 0:07:59.200 --> 0:08:04.080 the market of key patent expirations and so coming up 0:08:04.080 --> 0:08:07.040 on October six, there's going to be a hearing in 0:08:07.080 --> 0:08:10.480 the District Court of DC and Norwich is related lawsuit 0:08:10.600 --> 0:08:13.680 against the FDA where it's seeking to compel the FDA 0:08:13.760 --> 0:08:18.920 to grant final approval to its generic sy faxin application. Now, 0:08:18.960 --> 0:08:22.160 this suit is separate from the patent litigation suit which 0:08:22.240 --> 0:08:25.800 is currently on appeal, So on October six, this court 0:08:25.880 --> 0:08:29.000 is going to hear arguments on Norwich's request for preliminary 0:08:29.000 --> 0:08:32.880 injunction to compel the FDA to grant final approval, and 0:08:32.960 --> 0:08:36.040 it's also going to hear the FDA and Bausch's arguments 0:08:36.080 --> 0:08:40.559 for summary judgment or dismissal of this case. And then Teva, 0:08:40.640 --> 0:08:43.480 who so far remains eligible for the one hundred and 0:08:43.559 --> 0:08:48.079 eighty day generic first filer exclusivity for Zyfaxine, has also 0:08:48.160 --> 0:08:51.360 sought to intervene in this case, though at least as 0:08:51.400 --> 0:08:55.160 of yesterday, there's no indication from the record that this 0:08:55.200 --> 0:08:59.680 has been granted. So in terms of the outcome, we 0:09:00.280 --> 0:09:03.440 Bousch and the FDA to prevail this hearing, as we 0:09:03.480 --> 0:09:06.640 think the court will either dismiss the case or possibly 0:09:06.720 --> 0:09:09.120 remand it back to the FDA, at least on the 0:09:09.120 --> 0:09:13.600 issue of Teva's first filer exclusivity. This is because, you know, 0:09:13.640 --> 0:09:17.000 the Delaware court order that the FDA is saying blocks 0:09:17.040 --> 0:09:21.200 it from giving Norwich. Norwich's generic final approval isn't the 0:09:21.240 --> 0:09:26.920 only thing that's blocking final approval. Teva's first filer exclusivity 0:09:27.040 --> 0:09:30.680 is also blocking it, and the FDA has yet to 0:09:30.720 --> 0:09:34.480 make any forfeiture decision as to it. And then moreover, 0:09:34.720 --> 0:09:37.800 the appeal is also ongoing at the federal circuit from 0:09:37.920 --> 0:09:42.640 the patent litigation, which also includes the issue of the 0:09:42.679 --> 0:09:47.640 Delaware court order. So why is this hearing important to Bausch? 0:09:48.160 --> 0:09:51.120 This is really all about timing for generic sye faxine 0:09:51.240 --> 0:09:54.640 to come to market. Norwich was a late generic filer. 0:09:55.920 --> 0:10:01.000 Bausch had settled three patent litigations with other generic filers 0:10:01.640 --> 0:10:06.400 for January first, twenty twenty eight entry date. Yet Norwich 0:10:06.440 --> 0:10:09.360 took its case all the way through trial and actually 0:10:09.520 --> 0:10:13.760 had a verdict at the trial level that could allow 0:10:14.280 --> 0:10:19.679 it to come to market earlier. But there's currently a 0:10:19.720 --> 0:10:22.559 court order from the District Court of Delaware that's blocking 0:10:22.559 --> 0:10:26.800 the FDA from granting final approval until certain hepatic and 0:10:26.840 --> 0:10:32.199 selfalopathy method of treatment patents expire in October twenty twenty nine. Now, 0:10:32.200 --> 0:10:35.800 at the time the court issued this ruling, Norwich was 0:10:35.840 --> 0:10:40.760 seeking approval for both the hepatic and selfalopathy indication and 0:10:40.880 --> 0:10:44.760 for IBSD. Then there was this split ruling in the 0:10:44.760 --> 0:10:47.560 patent case where the court found that the polymorph and 0:10:47.600 --> 0:10:51.160 IBSD patents were invalid, but the h patents remained valid, 0:10:51.880 --> 0:10:55.400 so after the final judgment was issued, Norwich amended its 0:10:55.440 --> 0:10:59.200 generic application to remove that h and the hepatic and 0:10:59.200 --> 0:11:03.360 selfalopathy indication and is now only seeking approval of its 0:11:03.400 --> 0:11:06.959 five hundred and fifty milligrams I FAX and copy for IBSD. 0:11:07.600 --> 0:11:11.360 Now that generic application was tentatively approved by the FDA, 0:11:11.600 --> 0:11:14.880 and then the tentative approval letter the FDA said that 0:11:14.960 --> 0:11:19.600 this district court order is barring approval or barring final approval. 0:11:20.120 --> 0:11:23.319 So Norwich then sued the FDA. But I think one 0:11:23.320 --> 0:11:25.880 of the key elements here, you know, which has been 0:11:25.920 --> 0:11:30.000 discussed frequently in this FDA case is Tev's eligibility for 0:11:30.080 --> 0:11:33.800 first filer status still stands in the way of an 0:11:33.840 --> 0:11:37.960 FDA approval despite the court order. So you know, I 0:11:37.960 --> 0:11:40.440 don't think this case will help clear the barriers for 0:11:40.559 --> 0:11:43.920 Norwich and its effort to get its generic copy to market, 0:11:44.520 --> 0:11:46.920 especially because the appeal of the patent case is still 0:11:46.960 --> 0:11:51.480 pending and still being briefed, and given all these litigation complexities, 0:11:51.520 --> 0:11:54.520 you know, I'm still pointing to a time somewhere between 0:11:54.600 --> 0:11:58.960 twenty twenty six but before twenty twenty eight for Norwich entry. 0:11:59.640 --> 0:12:03.200 But in the unlikely event that Norwich does prevail in 0:12:03.240 --> 0:12:06.360 this October sixth hearing, I do think that that would 0:12:06.400 --> 0:12:10.040 expose Bouch to generic competition as early as next year, 0:12:10.200 --> 0:12:14.840 in twenty twenty four. This is an extremely complicated litigation, 0:12:15.480 --> 0:12:18.160 so I encourage anyone who has any questions please feel 0:12:18.200 --> 0:12:21.200 free to reach out to me. I'm always happy to discuss. 0:12:22.440 --> 0:12:27.480 So moving on to Exolexis and it's cabametics litigation, a 0:12:27.600 --> 0:12:30.680 trial is set to start on October twenty third and 0:12:30.920 --> 0:12:35.960 Xolexis's suit against generic maker MSN to block copies of 0:12:36.160 --> 0:12:42.600 MSN's generic cabametics before the expiration of certain key patents. Now, 0:12:42.640 --> 0:12:45.200 this is going to be the second trial between the parties, 0:12:45.440 --> 0:12:48.679 and we favor Xlexis here to prevail on at least 0:12:48.720 --> 0:12:52.040 one of the patents that expire in twenty thirty but 0:12:52.160 --> 0:12:55.040 to lose on the patent expiring in twenty thirty two, 0:12:55.760 --> 0:12:59.040 and this ultimately would then block Emson's entry until at 0:12:59.120 --> 0:13:03.400 least January twenty thirty. Now, besides MSN, there are two 0:13:03.440 --> 0:13:05.800 other generics that we know of looking to bring a 0:13:05.840 --> 0:13:11.520 cabamatics generic to market, Teva and Sipla. Exlicis settled its 0:13:11.600 --> 0:13:15.000 litigation with Teva in July for a January twenty thirty 0:13:15.000 --> 0:13:18.719 one generic entry date, and its litigation against Sipla has 0:13:18.760 --> 0:13:24.480 been stayed pending resolution of this suit against MSN. Back 0:13:24.600 --> 0:13:28.200 in January, there was a decision from the first trial 0:13:28.320 --> 0:13:31.520 that was held in May twenty twenty two, where the 0:13:31.600 --> 0:13:37.880 court found that Exolexis's twenty twenty six expiring patent was valid, 0:13:38.800 --> 0:13:42.120 but that EMSN did not infringe to twenty thirty expiring 0:13:42.240 --> 0:13:46.600 polymorph patent. So that decision in the first trial blocks 0:13:46.600 --> 0:13:50.040 any at risk launch by MSN while this second trial 0:13:50.200 --> 0:13:54.040 plays out, and in this October trial, we think Exlexis 0:13:54.080 --> 0:13:56.960 again has the advantage to prevail on the twenty thirty 0:13:57.000 --> 0:14:00.200 expiring patent but not the twenty thirty two expiring one. 0:14:01.320 --> 0:14:04.760 A pre trial conference is set for October sixth, and 0:14:04.840 --> 0:14:07.240 the pre trial order is due next week, which will 0:14:07.280 --> 0:14:10.520 likely give a closer look at the specific arguments that 0:14:10.600 --> 0:14:12.720 each of the parties are going to be set forth 0:14:13.559 --> 0:14:16.240 we're going to be setting for at that trial. And 0:14:16.320 --> 0:14:18.080 with that, back to you, Elliott. 0:14:18.120 --> 0:14:21.720 Great, thanks Tish. All right, Matt, let's turn to tech 0:14:21.880 --> 0:14:25.840 and bring you in. You'll be watching in October seventeenth 0:14:25.960 --> 0:14:32.160 hearing involving Meta, the FTC and Meta's use of team data. 0:14:33.560 --> 0:14:34.520 What's this case all about? 0:14:34.840 --> 0:14:38.320 Yeah, so, thanks Elliott. Meta makes tens of billions of 0:14:38.360 --> 0:14:42.120 dollars a year from its AD business, and reaching young 0:14:42.240 --> 0:14:48.000 people with ads is a particularly important piece of that market, 0:14:48.000 --> 0:14:50.760 and this case is about that. In May of this year, 0:14:51.440 --> 0:14:56.400 the Federal Trade Commission unilaterally proposed to change the terms 0:14:56.520 --> 0:15:00.360 of Meta's twenty twenty settlement agreement with the agency to 0:15:00.760 --> 0:15:07.800 bar Meta from using data from users who are thirteen, fourteen, fifteen, sixteen, 0:15:07.840 --> 0:15:11.800 or seventeen years of age. And this case is about 0:15:11.960 --> 0:15:15.840 can the FTC do that? Can it take aim at 0:15:16.000 --> 0:15:20.920 Meta's business model by changing this settlement? So some background here, 0:15:20.960 --> 0:15:24.520 there's no US federal law banning the use of kids data. 0:15:24.640 --> 0:15:28.440 Congress has worked to do that, to impose strict limits 0:15:28.480 --> 0:15:31.000 on that, it hasn't been able to pass anything. The 0:15:31.040 --> 0:15:33.640 Federal Trade Commission has tried to make rules on this. 0:15:33.760 --> 0:15:37.520 It started a process to make rules about data use, 0:15:37.560 --> 0:15:41.120 but it hasn't finished that rule making, And so this 0:15:41.440 --> 0:15:45.000 case is really coming in the absence of a binding 0:15:45.120 --> 0:15:49.080 law or rule. The FTC is effectively trying to impose 0:15:49.120 --> 0:15:52.480 that limit in another way by reopening a settlement agreement. 0:15:52.560 --> 0:15:56.760 That settlement was in twenty eighteen. Twenty nineteen, FTC investigated 0:15:57.080 --> 0:16:02.480 then Facebook about the Cambridge Analytics matter, whether engaged in 0:16:02.600 --> 0:16:06.400 unfair or deceptive practices. META and the FTC settled that 0:16:06.560 --> 0:16:10.560 for five billion dollars, and a court approved that in 0:16:10.600 --> 0:16:14.560 twenty twenty. It had some terms attached to it. Now, 0:16:14.640 --> 0:16:19.120 the FDC says META hasn't adequately complied with the terms 0:16:19.320 --> 0:16:22.640 of that twenty twenty settlement, and the FTC claims the 0:16:22.680 --> 0:16:28.040 statutory authority to modify that settlement and now add this 0:16:28.160 --> 0:16:32.320 term beginning the use of advertising of data to advertise 0:16:32.360 --> 0:16:36.800 the kids. META has run to federal court, the same 0:16:36.840 --> 0:16:40.680 federal court that approved the twenty twenty settlement, to try 0:16:40.720 --> 0:16:44.840 to stop the FDC's modification process before it can start. 0:16:45.360 --> 0:16:49.120 That's where we are now. That's what happens. In two 0:16:49.200 --> 0:16:53.120 or three weeks October seventeenth. This judge will say, can 0:16:53.160 --> 0:16:57.200 the FDC even start the process to modify the order 0:16:57.280 --> 0:16:59.960 in this way? So META has two chances to stop 0:17:00.120 --> 0:17:04.800 this now before the process starts, or after the FDC 0:17:05.080 --> 0:17:09.000 modifies the order, Medican challenge it again. Either way, I 0:17:09.040 --> 0:17:12.160 think this is going to be good news for the company. 0:17:12.720 --> 0:17:16.080 I think this judge at the October seventeenth tiering is 0:17:16.119 --> 0:17:19.280 going to have a lot of sympathy with Meta to 0:17:19.359 --> 0:17:25.040 the idea that the FTC you really shouldn't be unilaterally 0:17:25.119 --> 0:17:28.000 changing the terms of the settlement deal. The FDC has 0:17:28.040 --> 0:17:31.520 a hyper technical argument that it can do this that 0:17:31.640 --> 0:17:35.000 might let it eke by past this first hurtle. I 0:17:35.000 --> 0:17:37.280 give Meta about a forty percent chance to succeed. 0:17:37.400 --> 0:17:37.680 Now. 0:17:38.119 --> 0:17:40.920 Even if that fails, though, Meta is going to do 0:17:41.040 --> 0:17:44.919 well challenging this After the fact, even democrats at the 0:17:45.000 --> 0:17:49.840 FTC raise concerns about the agency's power to do this. Ultimately, 0:17:50.040 --> 0:17:52.800 that's going to sync this effort. In my view, one 0:17:52.800 --> 0:17:55.280 way or the other, this should be good news for 0:17:55.400 --> 0:17:59.320 Meta to dodge this attack on its business model. Back 0:17:59.359 --> 0:18:02.000 to you, Elliott, Great. 0:18:01.760 --> 0:18:06.240 Thanks Matt. So many really interesting and novel issues around 0:18:07.400 --> 0:18:12.120 social media companies and use of data. All right, let's 0:18:12.119 --> 0:18:15.200 turn to financials Now and bring in Nathan Dean, our 0:18:15.320 --> 0:18:19.600 senior policy analyst down in Washington. Nathan, what's going on 0:18:19.720 --> 0:18:23.320 with the anticipated government shutdown and should we be concerned 0:18:23.359 --> 0:18:26.679 about it? And I should probably just mention again that 0:18:26.720 --> 0:18:30.000 We're recording this on September twenty ninth, so by the 0:18:30.080 --> 0:18:34.000 time you know, you the listener are hearing this, we 0:18:34.040 --> 0:18:36.800 may be in the middle of the shutdown already. But Nathan, 0:18:36.800 --> 0:18:39.440 you've also written about a marijuana banking bill that made 0:18:39.440 --> 0:18:43.800 some progress this past week, and also regional bank long 0:18:43.920 --> 0:18:46.480 term debt requirements. So a lot to discuss. But why 0:18:46.480 --> 0:18:48.640 don't you come in and lay the knowledge on us. 0:18:48.960 --> 0:18:50.679 Yep, no, it sounds good. So let me start with 0:18:50.720 --> 0:18:54.240 the rule on the regional bank debt. So this was 0:18:54.280 --> 0:18:58.080 something that was anticipated. There was actually coming out prior 0:18:58.119 --> 0:19:02.040 to the Silicon Valley Bank a default if you call that, 0:19:02.280 --> 0:19:05.600 the signature bank issues and so forth like that. Regulators 0:19:05.720 --> 0:19:10.320 had talked about this, about requiring banks that are above 0:19:10.359 --> 0:19:13.280 two hundred and fifty billion in assets to issue what 0:19:13.400 --> 0:19:16.919 is known as te lack det total loss absorbing capacity 0:19:17.000 --> 0:19:20.000 debt as a way to safeguard against systemic risk. This 0:19:20.080 --> 0:19:22.760 is a long term debt. Now Silicon Valley Bank and 0:19:22.800 --> 0:19:26.360 Signature Bank happen, and the regulators are like, well, now 0:19:26.400 --> 0:19:29.639 we actually have to really look at this proposal, and 0:19:29.680 --> 0:19:31.480 we're going to push that threshold from two hundred and 0:19:31.480 --> 0:19:34.680 fifty billion down to one hundred billion. So this proposal 0:19:35.119 --> 0:19:37.840 impacts all nineteen banks that are one hundred billion in 0:19:37.920 --> 0:19:40.440 assets in up and what it does is it requires 0:19:40.440 --> 0:19:43.080 in the issue this long term debt. Now, the regulators 0:19:43.080 --> 0:19:45.440 decided not to go with tea lacked debt. Tea lack 0:19:45.520 --> 0:19:47.200 debt is something that the big banks, the Bank of 0:19:47.200 --> 0:19:51.119 Americas and the GP Morgans have to adhere to. They 0:19:51.119 --> 0:19:54.480 decided to go with the less onerous version of long 0:19:54.560 --> 0:19:57.920 term debt. And based upon our calculations, you're looking around 0:19:57.920 --> 0:20:01.600 for these nineteen banks or so around found sixty to 0:20:01.600 --> 0:20:05.040 seventy billion dollars in new debt. That's based off of 0:20:05.040 --> 0:20:07.360 the twenty twenty two bounds sheet data. Maybe a little 0:20:07.359 --> 0:20:09.239 bit less today once you take to twenty twenty three 0:20:09.320 --> 0:20:12.560 data into account. But essentially, these large regionals have to 0:20:12.600 --> 0:20:15.879 equate six percent of risquated assets, three point five percent 0:20:15.920 --> 0:20:19.119 of average total consolidation assets, and for banks that are 0:20:19.160 --> 0:20:22.320 subject to the supplementary leverage ratio, two point five percent 0:20:22.400 --> 0:20:25.440 of the total leverage ratio. Now, this proposal is likely 0:20:25.480 --> 0:20:27.879 going to be finalized about one year from now, and 0:20:27.920 --> 0:20:30.920 then it will start going into effect over a three 0:20:31.040 --> 0:20:35.919 year transition period. Starting on July first, twenty twenty five. 0:20:36.480 --> 0:20:39.560 So that's the regional bank t. Like Ish debt when 0:20:39.600 --> 0:20:41.960 it comes to marijuana banking. We have this big hearing 0:20:42.000 --> 0:20:44.480 over in the Senate Banking Committee today, I'm sorry, this 0:20:44.560 --> 0:20:47.800 week on what's known as the Safer Banking Act. If 0:20:47.840 --> 0:20:49.280 you're in this space, you know it used to be 0:20:49.320 --> 0:20:52.640 called the Safe Banking Act. The only difference between Safer 0:20:52.880 --> 0:20:55.800 and Safe is language regarding what's known as Section ten 0:20:56.280 --> 0:20:59.439 over the power of law enforcement agencies. Actually has nothing 0:20:59.440 --> 0:21:03.560 to do with if actual marijuana being used in the 0:21:03.600 --> 0:21:05.680 banking sector. But you know, there was a lot of 0:21:05.720 --> 0:21:09.760 disagreement a both parties. Now this went through committee fourteen 0:21:09.800 --> 0:21:12.240 to nine. You would think it's bipartisan. It is, But 0:21:12.960 --> 0:21:15.600 there were two main takeaways that I took from that hearing. 0:21:15.640 --> 0:21:19.200 One is is that this Section ten language is nowhere 0:21:19.240 --> 0:21:22.040 near close to final in order to get this to 0:21:22.200 --> 0:21:25.280 become law. There's a lot of Republicans out there that 0:21:25.320 --> 0:21:27.879 are concerned with this language, and if they were to 0:21:27.920 --> 0:21:30.000 try and pass this as is, I don't think you're 0:21:30.040 --> 0:21:32.439 going to get the Republicans support, at least in the 0:21:32.480 --> 0:21:34.240 House to put this into law. 0:21:34.600 --> 0:21:35.760 And the second thing is is that. 0:21:36.320 --> 0:21:39.800 Senator Warnock out of Georgia, the Democrat, voted no against 0:21:39.840 --> 0:21:42.240 the bill because it didn't go far enough in terms 0:21:42.280 --> 0:21:45.320 of criminal justice reform. So it did pass. Senator Schumer 0:21:45.359 --> 0:21:46.919 said that he was going to put it onto the 0:21:46.960 --> 0:21:49.679 floor as soon as possible, but he also said that 0:21:49.720 --> 0:21:52.359 he's going to tie it with criminal justice reform, and 0:21:52.440 --> 0:21:56.320 by expanding this bill, he's essentially dooming its chances in 0:21:56.359 --> 0:21:58.439 the Senate. This is the same thing that happened in 0:21:58.440 --> 0:22:01.680 twenty twenty two. To have a specific vote on this 0:22:01.760 --> 0:22:04.720 bill without the criminal justice reform, he could probably pass. 0:22:04.760 --> 0:22:06.879 And I think as eventually that's going to be the 0:22:06.920 --> 0:22:10.639 scenario here. But I think the Washington's gonna have to 0:22:10.640 --> 0:22:12.600 play its games and so forth like that. They're gonna 0:22:12.600 --> 0:22:16.080 have to try first with criminal justice reform that will fail. 0:22:16.400 --> 0:22:18.760 I think this passes the Senate sometime in the first 0:22:18.880 --> 0:22:21.080 four or five months of next year, then it goes 0:22:21.119 --> 0:22:23.480 to the House. I don't think the House has any 0:22:23.480 --> 0:22:26.199 desire whatsoever to take this up at the moment, but 0:22:26.240 --> 0:22:29.399 I do think that if you know, the regulatory gaps 0:22:29.400 --> 0:22:32.959 that exist for marijuana banking is a bipartisan issue, there 0:22:33.000 --> 0:22:35.879 is bipartisan support. I think towards the end of twenty 0:22:35.960 --> 0:22:38.680 twenty four, maybe even after the elections during the lame 0:22:38.760 --> 0:22:41.879 duck period. This has a decent chance of passage. So 0:22:42.640 --> 0:22:45.360 not the story that the marijuana companies want to sing 0:22:45.400 --> 0:22:47.719 at the moment, but at least it was some good 0:22:47.800 --> 0:22:50.760 momentum for the least to get it out of committee. 0:22:50.840 --> 0:22:52.760 And then finally when it comes to the government shutdown, 0:22:52.760 --> 0:22:54.679 obviously when you're listening to this, we could be in 0:22:54.680 --> 0:22:58.119 a government shutdown. The status is is that, you know, 0:22:58.200 --> 0:23:00.440 the Senate is trying to pass a CRT the moment, 0:23:00.760 --> 0:23:02.600 they're not going to get it done before the Saturday 0:23:02.640 --> 0:23:05.160 at midday deadline. You'll probably see them on Sunday try 0:23:05.200 --> 0:23:07.400 and vote on this. The House is pursuing its own 0:23:07.400 --> 0:23:10.120 packages at the moment, none of which actually have any 0:23:10.200 --> 0:23:14.720 chance of passing into the in the Senate. So yes, 0:23:14.800 --> 0:23:16.600 we are most likely going to have a shutdown. Now, 0:23:16.640 --> 0:23:20.000 what are the impacts, Well, minimal impact when it comes 0:23:20.000 --> 0:23:23.600 to equity stocks. I mean we've looked at the thirty 0:23:23.600 --> 0:23:25.240 five days shutdown that happened at the end of the 0:23:25.280 --> 0:23:28.640 Trump administration. You know, stocks were a little bit if 0:23:28.720 --> 0:23:31.320 he you know, there was some uncertainty once people realized, 0:23:31.320 --> 0:23:33.320 oh my god, this could actually last for a while. 0:23:33.800 --> 0:23:37.960 But ultimately stocks started acting normally once people realized that 0:23:38.040 --> 0:23:41.879 the economic impact wasn't all that big. We've seen certain 0:23:41.920 --> 0:23:44.120 statements from like Delta Airlines who said they lost twenty 0:23:44.119 --> 0:23:46.800 five million dollars and in the last shutdown. You know, I 0:23:46.800 --> 0:23:48.760 certainly don't want to say twenty five million dollars isn't 0:23:48.760 --> 0:23:50.639 a lot. I would love to have twenty five million dollars, 0:23:50.680 --> 0:23:53.040 but for a company like Delta Airlines, it's something that 0:23:53.119 --> 0:23:55.800 can work around. When it comes to contractors, you would 0:23:55.800 --> 0:23:59.359 think contractors don't get paid well. Most large publicly traded 0:23:59.400 --> 0:24:02.919 contractors are pre funded. These contracts are long term in nature, 0:24:03.000 --> 0:24:07.480 so you know, yes, their workers may may be furlough themselves, 0:24:08.160 --> 0:24:10.440 but at least when it comes to the revenue perspective 0:24:10.520 --> 0:24:14.600