The Morning Risk Report

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Good morning. When some of Wall Street’s most powerful executives assembled in Hong Kong this week, one topic was noticeable by its absence: China.

The chief executives of U.S. banks including Citigroup, Goldman Sachs and Morgan Stanley were in the city on Tuesday for the Global Financial Leaders’ Investment Summit, where they rubbed shoulders with local government officials and senior Chinese regulators. They spoke about broad topics such as financial stability, interest rates and capital markets.

• Bankers cautious: But U.S. bankers said almost nothing about mainland China—and even less about the geopolitical tensions that have made their jobs harder. The relationship between the U.S. and China has worsened in recent years, and Wall Street banks have come under political pressure to reduce their links to the world’s second-largest economy.
  
   
• What are the issues? Wall Street banks are being forced to tread carefully on China. They have for years considered the country an important growth market, but the costs are rising: China’s tighter control of information has made due diligence harder, a backlash by American politicians has increased reputational risks, and the shaky reopening of China’s economy has raised questions about its decadeslong growth story.
  
   
• Less lucrative market: The amount of money banks can earn from Chinese clients has also dwindled: A sharp reduction in overseas listings from mainland Chinese companies has reduced the fees available to investment banks.

Also see:

• China Deal Slump Sends Bankers’ Fees to Decade Low

Congress must aid fight against illicit use of crypto, Treasury official says.

A senior Treasury Department official said the Biden administration wants new powers from Congress to aid in a crackdown on the illicit use of cryptocurrencies, citing digital asset flows allegedly connected to Palestinian militant group Hamas.

Treasury has been in communication with Democrats and Republicans about actions that they could take, Deputy Treasury Secretary Wally Adeyemo said Tuesday in Washington at the annual meeting of the Securities Industry and Financial Markets Association, a trade group.

Adeyemo cited Hamas’s Oct. 7 attack on Israel, which he said has brought an “increased focus on the illicit financial use of digital assets.” Hamas has publicly sought to raise funds via cryptocurrency.

• Apple, Google and other tech companies that play large roles in payments would face more oversight from the Consumer Financial Protection Bureau under new rules the agency proposed on Tuesday.
  
   
• The yearslong criminal investigation into Hunter Biden has aired a lot of dirty laundry about the president’s son’s attempts at foreign business and his descent into drug addiction. A parallel congressional probe is now airing a lot of dirty laundry about the government officials investigating him.
  
   
• Supreme Court justices showed little sympathy Tuesday for a violent domestic abuser arguing he had a Second Amendment right to keep a semiautomatic rifle and a .45 caliber pistol at home.
  
   
• Switzerland wanted its big banks to be fortresses. In practice, the country’s “too big to fail” banking laws made a sand castle of Credit Suisse. The Swiss rules in question have become an object lesson in the difficulties of designing financial regulation.
  
   
• The European Union will recommend on Wednesday that the bloc begins membership talks with Ukraine soon, but many European leaders share U.S. concerns over rule of law.

Adam Neumann wounded WeWork. An office market bust finished it off.

WeWork rode the wave of the venture-capital frenzy, building a global real-estate empire worth more than any other U.S. startup before buckling and laying off thousands when funding ran dry under its turbulent co-founder and former chief executive Adam Neumann.

Ultimately, though, it was a historic office-market bust that doomed the desk-rental giant.

• The Federal Reserve’s latest survey of loan officers showed that many banks continue to tighten their lending standards, including for consumer credit cards.
  
   
• Risk appetite is coming back on Wall Street. After months of declines, investors’ risk appetite in November has turned positive for the first time since October 2022, according to S&P Global’s Investment Manager Index.
  
   
• China’s housing slump is shaking the foundation of another giant property developer—and the government is trying to prevent the problems from spiraling out of control.
  
   
• China has long been a source of stock-market optimism. Now it is turning into a reason for worry, as a stubborn lack of growth and escalating political tensions with the U.S. are fostering poor returns and uncertainty about the future.
  
   
• Uruguay, a democratic, pro-trade country in a region governed by populists, is strengthening ties with China after struggling for years to secure a free-trade deal with the U.S. 
  
   
• Struggling to compete with homegrown electric-vehicle makers in China, Japanese automakers are looking at whether to cut their losses and focus resources on warding off Chinese rivals in other stronghold markets.
  
   
• Goldman Sachs plans to begin a process to offload its General Motors credit card program in another step away from its failed foray into consumer lending.

• Democratic Gov. Andy Beshear won re-election in Kentucky, beating back a strong challenge from his Republican opponent in a deeply conservative state—despite efforts by the GOP to yoke him to President Biden’s sagging approval ratings.
  
   
• X’s Chief Executive Linda Yaccarino is drumming up deals with content partners, from NFL to Paris Hilton, seeking safe zones for jittery advertisers.
  
   
• As sales growth has slowed for battery-powered cars, automakers and dealers are slashing prices and piling on discounts to clear out unsold inventory.
  
   
• Novo Nordisk’s culture and particular structure have put constraints on it as demand for obesity drugs grows.