TheChek News Flow

UK tech tycoon and six others killed when vessel sank at anchor in storm off Sicily

The late British tycoon Mike Lynch’s sunken superyacht Bayesian is set to be lifted from the bottom of the sea with operations starting by the end of the month, as authorities seek to gather new evidence about the accident that killed him and six other people last year.

The 56-metre vessel — whose builder described it as “unsinkable” — tipped over and sank while anchored a few hundred metres off the Sicilian coast last August, when it was hit by a violent storm — with winds of up to 110km an hour — at about 4am.

Italian authorities have recently approved a plan that will see two Dutch salvage companies lift the 540-tonne wreck, which lies 49m under the sea surface, as they attempt to gather evidence about the sinking. 

The death of Lynch, his daughter, his friends and a crew member, has led to criminal investigations against multiple crew members, and other litigation, as Italian criminal prosecutors seek to determine what went wrong and who was responsible for an accident that shocked UK tech investors and the tight-knit yachting world.  

The Italian Sea Group, the company that built the yacht, has denied that the boat had any design flaws and has sought to pin the blame on the crew, suggesting that someone left a hatch open near the waterline that may have allowed large quantities of water to enter the hull.

The prosecutor’s office of Termini Imerese on the Sicilian coast has been investigating James Cutfield, the yacht’s captain, as well as engineer Tim Parker Eaton and crew member Matthew Griffith for potential manslaughter and ‘’negligent shipwreck’’, but no formal charges have been brought against them. Those under investigation have not publicly commented on the investigation.

The lifting is set to turn into a media spectacle with the Italian press reporting that tourists and television crews from all over the world have booked out local hotels to watch the salvage.

A first barge will reach Termini Imerese on April 26 and position itself near the wreck to begin preliminary safety operations, a coastguard official said. A second barge with a crane to pull up the wreck will arrive later. 

The lifting of the hull will probably take place around mid-May, officials said. The recovery is expected to help gather additional evidence in the case and to allow local fishermen and residents to return to an area marked by a wreck whose tanks — although secured — contain 18,000 litres of diesel. 

Bayesian will be lifted by a joint venture of Dutch salvage companies HEBO Maritiemservice and Smit Salvage, according to people familiar with the matter. The companies, neither of which commented on the forthcoming operation, were chosen by British consultancy firm TMC Marine, which was appointed by Bayesian’s insurer British Marine. 

The companies involved have plenty of experience. In 2021, Smit refloated and dislodged the 200,000-tonne container vessel Ever Given, which was stuck in the Suez Canal disrupting global shipping traffic, while the following year it led the operations to recover a ship loaded with 4,000 cars — Bentleys, Audis and Porsches — on fire near the Azores. 

The plan was approved by the Termini Imerese criminal prosecutor and the Italian Coast Guard. The cost will be borne by British Marine. 

According to people familiar with the plan, the boat will be lifted with all the fuel by a crane operated from a platform, with the help of inflatable balloons. The 72m mast, for which the yacht was famous as it was reportedly considered to be the tallest in the world, will be cut beforehand by a robot equipped with a remotely controlled saw.

A barge will then transport the yacht to a warehouse nearby where investigators will finally be able to inspect the relic directly and gather any evidence that was previously difficult to recover under water.

Inspectors from the Marine Accident Investigation Branch (MAIB), a UK government organisation tasked with investigating accidents involving UK registered vessels, are also expected to land in Sicily to examine the wreck. 

The group of guests aboard the Bayesian was on holiday to celebrate Lynch’s acquittal in a US federal court after a 12-year legal battle over fraud charges for the $11bn sale of his software group Autonomy to Hewlett-Packard. The group included Lynch’s family and members of his legal team and their wives.

Of the 22 passengers and crew on board that night, fifteen people, including Lynch’s wife Angela Bacares, were rescued by a yacht anchored nearby, which was unscathed by the violent storm. 

Of the seven who died, five were recovered trapped in a single cabin, while Lynch’s 18-year-old daughter Hannah was found in another. The body of a crew member, the yacht’s chef, was recovered from the water.

Hedge funds are the new ‘shadow banks’—and some are worried they pose a systemic threat to financial stability

Economist Paul McCulley coined the term “shadow banking” in 2007, just over a year before Lehman Brothers collapsed. Soon, it became clear easy credit had helped fuel the subprime mortgage meltdown that brought the global financial system to its knees. Nearly two decades later, a bond market sell-off triggered by President Donald Trump’s chaotic tariff rollout has sparked fears of a similar liquidity crisis.

The Great Recession highlighted how various institutions besides banks engage in lending without the same level of regulatory scrutiny applied to banks, even if they are also crucial to the health of the broader financial system. This time, however, the focus has shifted from investment banks and mortgage originators to hedge funds and private-equity firms. For example, an unusual spike in U.S. Treasury yields, which rise as the price of the bonds fall, has put a spotlight on how highly leveraged hedge-fund trades help keep money markets humming—but might also pose a wider threat to the economy when they unravel.

Banks, of course, turn cash deposits from customers into long-term, illiquid assets like mortgages and other types of loans to consumers and businesses.

Shadow banking institutions essentially do the same thing, but by raising and borrowing funds from investors instead of using consumer deposits.

While the “shadow banking” descriptor might sound sinister, there is nothing inherently bad about it, said Amit Seru, a professor of finance at the Stanford Graduate School of Business and senior fellow at the university’s Hoover Institution, a conservative-leaning think tank. In fact, shifting risky lending outside traditional banking can improve the financial system’s resilience.

“That’s often a point which is lost,” he told Fortune.

Hedge funds can take much bigger risks than banks because they raise capital from investors who often agree to “lock up” their money for an extended period, helping insulate the firm from short-term losses. As Seru noted, these investors often facilitate price discovery in markets for bonds and other securities.

One example is the so-called “basis trade,” when hedge funds buy Treasuries and sell futures contracts linked to those bonds to take advantage of tiny price discrepancies between them. By profiting off the arbitrage, these firms address a fundamental imbalance in credit markets created because mutual funds, pension funds, insurance companies, and other asset managers have high demand for Treasury futures.

But hedge funds must borrow heavily to make the service worthwhile, sometimes using up to 50- to 100-times leverage, so markets for short-term debt can be hit hard when the $800 billion trade unwinds.

“That creates ripple effects,” Seru said. “You always need to worry about ripple effects.”

Filling in for Lehman Brothers

Just because hedge funds are not funded by consumer deposits doesn’t mean the government may not be forced to step in when things go south. A decade before the controversial bank bailouts in 2008, hedge fund Long-Term Capital Management was also deemed “too big to fail.”

LTCM’s business centered on making highly leveraged bets on arbitrage opportunities in bond markets. It eventually came to hold about 5% of the world’s fixed-income assets, but the firm took unsustainable losses when Russia defaulted on its debt in 1998. To prevent a broader crisis, the U.S. government orchestrated a $3.6 billion rescue package—a massive sum at the time—from Wall Street banks that allowed the firm to liquidate in an orderly fashion.

“The exposures that we are dealing with now, I think, are much bigger than that,” said Itay Goldstein, the finance department chair at the University of Pennsylvania's Wharton School.

Ten years later, Lehman Brothers and Bear Stearns failed, threatening to bring much of America’s banking system, as well as federally backed enterprises like Fannie Mae and Freddie Mac, down with them. Neither investment bank took consumer deposits, but markets for short-term debt seized anyway. Suddenly, as a broad credit crunch ensued, banks and corporations were starved of capital.

Along with dramatically increasing regulation and oversight on the country’s biggest banks, the subsequent Dodd-Frank reform legislation also addressed nonbank lenders.

Still, the shadow sector has exploded since the financial crisis. It now accounts for $250 trillion, or 49% of the world’s financial assets, according to the Financial Stability Board, more than doubling the growth rate of traditional banking in 2023. Hedge funds, in particular, manage 15 times more assets combined than they did in 2008, per Bloomberg.

The Volcker Rule, part of Dodd-Frank, banned investment banks from proprietary trading and, therefore, serving as market makers by aggressively pursuing arbitrage opportunities. Hedge funds have stepped in to fill the void. Their reliance on short-term debt and relative lack of oversight, however, poses similar concerns to 2008: They are now very big, and they may be “too big to fail.”

“If they blow up, this is going to affect other parts of the financial system, including banks, and then spill over to the real economy,” Goldstein said.

In fact, lending to institutions like hedge funds, private equity and credit firms, and buy-now, pay-later companies is the fastest-growing part of the U.S. banking system, noted Michael Green, portfolio manager and chief strategist at Simplify Asset Management, an ETF provider. Loans to the shadow banking sector have surpassed $1.2 trillion, according to weekly data from the Federal Reserve. Green, who founded a hedge fund seeded by George Soros and managed the personal capital of Peter Thiel, sees clear risk of a 2008-style calamity.

“It’s dramatically more likely,” he said, “like not even close.”

For example, when it comes to the basis trade, periods of market stress can leave hedge funds vulnerable to margin calls and other pressures to liquidate their positions. When hedge funds dump massive amounts of Treasuries, however, the market may struggle to absorb them. Concerns about illiquidity risks can then spill over into repo markets, a cornerstone of short-term lending, where U.S. debt is the dominant form of collateral.

This scenario played out during the early days of the COVID-19 pandemic, compelling the Federal Reserve to purchase $1.6 trillion in Treasuries over a few weeks. During the recent sell-off, economists and other market watchers have looked closely for signs the central bank would again need to intervene. Over the last two years, America’s 10 largest hedge funds have more than doubled their repo borrowing to $1.43 trillion, according to the Office of Financial Research.

Regulating hedge funds

Some academics say this arrangement is not ideal and have proposed the Fed set up a lending facility for hedge funds to address these types of crises in the Treasury market. But that’s a far less realistic scenario if Congressional Republicans convince Treasury Secretary Scott Bessent to curtail the government’s ability to designate major investment firms as systemically important, or “too big to fail.”

There are persistent trade-offs in regulating these types of shadow-banking institutions, Seru said. Treat them more like traditional banks, and you inhibit price discovery and the efficient movement of funds from savers to users. But the threat of contagion looms, even if firms are just risking their own capital.

“You can’t have it both ways,” Seru said.

Also, tightening the screws on just hedge funds likely won’t help if it enables another type of institution to step in and essentially do the same thing. After all, that’s what happened when hedge funds took advantage of the increased scrutiny on investment banks.

“I’m not seeing how this is making the financial system safer,” Goldstein said.

While Seru worries about heavy-handed oversight, he said regulators need to focus on transparency in both public and private markets. For example, if hedge funds are taking on lots of risk, it’s important to know if they are linked to lenders who are backstopped by the government, like the big Wall Street banks.

If exposure to the broader system is significant, he said, that’s when measures like capital requirements should be applied to shadow-banking institutions. But Seru warns a brewing crisis—even when it involves traditional, highly regulated lenders and is seemingly obvious in hindsight—can be hard to spot, citing the collapse of Silicon Valley Bank in 2023.

“One’s got to be a bit humble on what the regulators can catch and what the markets can catch,” Seru said, “and realize that there [are] going to be issues in both sectors.”

Especially when complex risks lurk in the shadows.

Under attack from Washington, Harvard and other elite schools are facing unprecedented pressures. What the future holds.

Managing a large university endowment used to be a plum sort of job—stressful at times, but with all of the trappings that accompany a top position at the academy and yet mostly free of the klieg-light glare that shines on the school president’s office.

Now, though, like so many facets of academia, the business of overseeing an endowment has changed markedly. What used to be a complex enough job of managing millions—or even tens of billions—of dollars across the vast game board of the capital markets has recently become a match of three-dimensional chess waged against a shifting cast of adversaries.

Consider the case of N.P. “Narv” Narvekar, CEO of Harvard Management Co., who looks after Harvard University’s $53 billion or so endowment. Narvekar, who came over to Harvard in 2016 after successfully running Columbia University’s multibillion-dollar endowment, already had his hands full reconfiguring HMC’s portfolio—reducing its allocations to real estate and natural resources and increasing its stakes in private equity—in an attempt to revive the endowment’s sub-peer performance, when all of a sudden, politics hit.

Let us count the ways. For starters, Harvard, and by extension Narvekar, have been assailed by Students for Justice in Palestine and their allies who have called on the university to divest from investments in Israel, while at the same time they’ve been besieged by conservative activists like Christopher Rufo who accuse universities like Harvard of padding their endowments with federal grants while spreading what they call far-left ideology.

In February 2024, Narvekar, along with Harvard Corp. senior fellow Penny Pritzker and President Alan Garber, received a subpoena from the House Committee on Education and the Workforce related to “an investigation into Harvard’s handling of on-campus antisemitism,” which is still outstanding. Harvard’s endowment has seen a plunge in fund-raising, with the Harvard Crimson reporting last fall that “philanthropic contributions fell by 14% in fiscal year 2024 as several billionaire donors publicly severed ties with Harvard over its response to campus antisemitism.”

But all of that pales in comparison to what unfolded this past week, with Harvard refusing to accept demands by the Trump administration that it be allowed to wade into the management of the university, and in response, the administration freezing some $2.2 billion in multiyear grants to Harvard. The federal government grants billions more in funding to the school, which it might also hold back. Then there are also tens of millions of dollars that Harvard receives from other government agencies, including the Education Department and the National Institutes of Health, that have already been cut and/or are at risk.

And as if that weren’t enough, there is also a proposed hike in the federal tax that Harvard’s and other large endowments pay, which is likely to be jacked up significantly. In addition, the Trump administration has requested that the Internal Revenue Service start the process of revoking Harvard’s tax-exempt status, according to The Wall Street Journal. Beyond that, there are any number of tertiary effects buffeting colleges and universities right now.

All of this slashing and burning is dramatically altering Harvard’s profit and loss statement, and it raises questions about the investment strategy at the endowment. One idea floated by no less than former President Barack Obama and former Harvard president and current faculty member Larry Summers is for universities to shore up their budgets by dipping into their endowments. HMC suggests that some $15 billion is available for that purpose.

While Harvard’s and Narvekar’s circumstances may be more complicated than what other schools are facing, endowments and economic models are under pressure from these same forces at universities across the country. A swath of private institutions as diverse as the University of Notre Dame, Rice University, and Washington and Lee University face tens of millions of dollars of tax increases on their endowments. Public schools like the University of Texas, Michigan State University, and the University of Utah, though their multibillion endowments are shielded from taxes, might be hit by tens of millions in federal funding cuts, according to a new report in the Chronicle of Higher Education that analyzed 77 potentially affected colleges and universities. The study’s startling conclusion is that these schools “collectively…are on the hook for almost $10 billion in additional annual costs.”

“I think it is literally an existential threat,” says Scott Bok, chairman of the Wall Street firm Greenhill and a former chair of the University of Pennsylvania’s board of trustees. “All of a sudden, the school needs a billion more dollars. How are you going to get that?” The Chronicle of Higher Education estimates that higher taxes and funding cuts could cost Penn nearly $420 million annually, or $16,000 per student. Bok—whose new book Surviving Wall Street details the tumultuous ending to his tenure as Penn’s chair—stresses that the risks to student aid, jobs, scientific and national security research, and to the university’s giant Penn Medicine hospital system are quite real.

Healthcare and science are threatened in Alabama, too, at least according to Sen. Katie Britt (R., Ala.), who said recently that a “smart, targeted approach is needed in order to not hinder lifesaving, groundbreaking research at high-achieving institutions like those in Alabama.” Britt was referring to the fact that the University of Alabama at Birmingham, the state’s largest employer, has received over $1 billion in NIH funding, which is subject to potential reductions.

“Universities concerned about the financial effect of funding freezes, but those who are unwilling to address rising antisemitism on their campuses should consider slashing out-of-control administrative bloat,” White House spokesman Kush Desai told Barron’s.

So what are endowment heads doing right now to steel themselves for this great lowering of the boom? “Modeling and praying,” says the chief investment officer of a multibillion-dollar endowment at a school that has been targeted by Washington and faces a potential tax increase. To be clear, it isn’t this CIO, or Harvard’s Narvekar, who decides how their institutions respond to Washington or even if their endowment payout ratios would change. Those are the decisions of the school’s president and its board. The endowment head is essentially a money manager with one client. But the implementation of any strategic shifts falls squarely within their remit.

“The people who run endowments from the big universities are used to running them on a very long-term basis,” says Bok. “What has to be making them give a little more thought than usual is that this is not a market event. We’re talking about a political shift in the relationship between the government and universities. I would suspect they’re probably thinking about how we can come up with several hundreds of millions in dollars in tax next year.” Harvard, for instance, currently pays $40 million to $50 million a year in federal tax on net investment income. If the tax goes to 14% from its current 1.4%, you’re talking about $400 million to $500 million.

The nation’s 4,000 or so colleges and universities are a heterogeneous lot, from tiny community colleges to the so-called R1 research institutions with world-class research labs, hospitals, engineering schools, and hundreds of international students. Comparing them, even those with endowments, on an apples-to-apples basis is tricky. The National Association of College and University Business Officers annual survey reports that 658 institutions had a total of $873.7 billion in endowment assets, with a median endowment of $243 million.

Endowments themselves are multifarious organisms, usually not one single fund but often hundreds or even thousands of aggregated pools of money, which increasingly come with covenants governing their use. University endowment heads often farm out their investments to a collection of money managers. The industry goal is to achieve an annual average return for the overall portfolio of about 8% over time, of which the endowment typically pays out 4.5% to 5% to help fund the school’s budget. A recent study by analyst Michael Markov found that endowments at Ivy League schools, plus Stanford University and the Massachusetts Institute of Technology, sent their schools an average of 5.02% last year. (At Harvard, that amounted to $2.4 billion.) The residual 3% or so of the annual return is plowed back into the endowment to keep pace with inflation.

It’s worth noting that a recent Cambridge Associates study found that only 25% of 152 schools surveyed actually generated that 8% annual return over the past 10 years. That means if the endowments paid out 5%, 75% of those endowments are worth less today on an inflation-adjusted basis. A higher endowment tax, university advocates argue, will only further erode purchasing power.

It was President Donald Trump’s Tax Cuts and Jobs Act of 2017 that imposed the 1.4% excise tax on net investment income, which is assessed on endowments of private universities with at least 500 tuition-paying students and assets of $500,000 or greater per student. In 2023, 56 schools met those requirements and paid $380 million in tax. There have been a number of proposals to increase the levy’s size and scope, including one from then-Senator (now Vice President) JD Vance in 2023 seeking to raise the rate to 35%. More recently, Rep. Mike Lawler (R., N.Y.) has proposed the Endowment Accountability Act, which would increase the rate to 10% and lower the per student endowment threshold to $200,000. And Rep. Troy Nehls (R., Texas) has introduced the Endowment Tax Fairness Act, which would raise the tax rate to 21%, matching the federal corporate income-tax rate.

“I don’t believe that it’s fair when you look at some of these universities, [such as] Harvard with $53 billion in their endowment, that they are not paying taxes,” says Nehls. “What the hell do you need $53 billion for?” An ardent supporter of Trump, Nehls says he isn’t motivated by politics but believes that universities are acting as businesses and should be taxed accordingly. What about a higher tax hurting universities? Nehls has a one-word response: “Horseshit.”

Brian Flahaven, vice president for strategic partnerships at the Council for Advancement and Support of Education, a nonprofit that supports college and university fund-raising, counters by noting that colleges aren’t corporations and that 48% of donations to schools goes to financial aid. “Many of the institutions that are currently paying the endowment tax have some of the most generous financial aid to lower-middle-income students, because they have these endowed resources,” Flahaven says. Higher taxes, he argues, would just be reducing money that’s going to financial aid and redirecting it back to the Treasury.

Nehls and the Trump administration may also have their eye on raising tax revenue. The Tax Foundation, a conservative think tank, says that assuming a 7.5% average annual return for endowments, increasing the tax to 21% could raise anywhere from $70 billion to $112 billion in revenue over 10 years.

Part of that calculus may well be that amping up taxes on universities could help fund tax cuts. According to Joe Wall, BlackRock’s head of government affairs and public policy, increased revenue from a higher endowment tax over 10 years could be used to offset Trump’s proposal to not tax tip income, which would cost about $100 billion dollars.

“That is just sort of the game being played if he wants to meet his rhetoric on not taxing tips on hourly workers,” Wall said in a recent webcast to clients. “I think it’s almost certain that the schools will see their rates increase. What’s uncertain is where exactly the rate lands.”

It’s worth noting that schools like Grinnell College, Amherst College, and Princeton (the last of which has the highest endowment per student, some $4 million), which garner relatively little funding from Washington but rely on their endowments for more than 50% of their annual budgets, will be hurt mostly by any tax increases. Big public universities like the universities of Washington, Texas, and North Carolina will only be hit by research cuts, whereas large private universities like Harvard, Yale, and Stanford would be hit by both.

Funding cuts threatening the universities’ budgets are taking a number of forms, including reductions in direct grants from the Education Department as well as money from the NIH, the National Science Foundation, and the Department of Energy. At least seven universities have been explicitly threatened with Education Department funding cuts, though there may be others not announced and certainly more may be added.

Then there are institutions implicitly threatened on the Education Department’s list of 60 schools “that are presently under investigation for Title VI violations relating to antisemitic harassment and discrimination.” In a letter to these schools, Education Department Secretary Linda McMahon writes that “U.S. colleges and universities benefit from enormous public investments funded by U.S. taxpayers. That support is a privilege, and it is contingent on scrupulous adherence to federal antidiscrimination laws.” (The Congressional Education and Workforce Committee subsequently sent additional letters to some of the same and some additional schools asking for documentation about student protests.)

While the NIH has already cut some direct funding, more may come from capping the amount of indirect costs that universities can pay for government grants. Typically, schools are allowed to allocate some 28% of these costs, while some institutions negotiate rates exceeding 50% of grants to pay essential expenses such as laboratory maintenance, utilities, and administrative support, according to BDO, an accounting and consulting firm. The cap that the NIH proposed in early February would be 15%. Earlier this month a judge issued a permanent injunction against that cap, but the NIH is appealing.

There are also a number of second-order effects raining down on colleges, with implications for their business models and, ergo, their endowments. The number of foreign students in the U.S. has dropped recently, which hurts colleges more than a decrease in domestic students. “At peak, there were one million international students, 75% from Asia, mostly China, a lot of whom were full-paying students,” says Tim Yates, president and CEO of Commonfund Outsourced CIO, a unit of asset management firm Commonfund. The current crackdown on foreign students and immigration could further chill foreign enrollment. “If you shut that pipe off of international students, is it something that you can reopen?” asks Yates. On Wednesday, the Department of Homeland Security said Harvard will be prohibited from enrolling foreign students unless it shares student visa information with the government.

Another potential headache is a potential drop in philanthropy if endowments are more heavily taxed. “If you’re being asked as a significant potential donor to make a big gift to the endowment, and your money is going to suffer more tax if it’s held by the university than if it is held by you, why would you do that?” asks Greenhill’s Bok. “You could dole out the money annually from your own fund.”

Even leaving aside the trouble posed by the turbulent markets this year, some Ivy League schools in particular have additional issues because they have become followers of what is known as the Yale model, developed by the late David Swensen, the highly successful head of Yale’s endowment from 1985 to 2019. Swensen argued for broad diversification, eschewing low-returning asset classes like bonds and cash, and in particular investing in private markets.

Swensen’s recommendation of loading up on relatively illiquid but high-returning private equity—which, at that time, seemed to carry the same risk as more-liquid investments—worked wonders for years and was widely copied. The problem now is summed up succinctly by a leading Wall Street financier with deep ties to Harvard: “Private equity is the most crowded trade in the world,” he says. Consequently, prices for deals have been high—and that, along with higher interest rates, have crimped returns, which has hurt many Yale-model-loving Ivy endowments (while in some cases non-Ivies have made out).

Not only are universities now being asked to pony up for their private-equity commitments, but because of the uncertainty in the capital markets, initial public offerings, and mergers and acquisitions, which would provide exits for these deals and cash to endowments, have ground to a halt. Plus, the schools can’t sell their private-equity investments without significant losses. All of this puts some Ivy League endowments in a bit of a bind because with higher taxes looming, private equity, without its realized income, might be a good place to double down, but at the same time they need the cash.

So what do universities do to make up the funding? For schools that face hundreds of millions or even billions in shortfalls, there is no single answer. It is likely that schools will have to cut their budgets. A person close to Yale told us that the university was engaged in an exercise to see what an across-the-board 15% budget cut would look like. Yale didn’t respond to requests for comment.

Another tack might be for schools to band together. David Salas-de la Cruz, an associate professor of chemistry and director of the chemistry graduate program at Rutgers University-Camden, is co-sponsor of the Mutual Defense Compact for the Big Ten universities, which he describes as a “NATO-like agreement where universities would pledge to support one another should any one of them get attacked by the government.”

Raising tuition willy-nilly in this environment appears unlikely, though charging wealthy students more is possible. Schools can issue bonds, but if the proceeds are used for anything other than construction projects, such as to replace federal funding, they must be taxable, as was the case with Princeton’s recent $320 million issuance and Harvard’s planned $750 million raise. Harvard also issued $450 million in tax-exempt bonds earlier this year, which with that $750 million deal would add significantly to its $7.1 billion in debt reported at the end of fiscal 2024. Expect more of such issuance.

What else? Universities can partner more with the private sector—say, pharma companies—for research. And they can ask donors to dig deeper, particularly those sympathetic to the universities’ fight against Trump. Or what about selling a slice of their school to the Saudis?

Which brings us back to endowments. Does it make sense for the schools to heed Obama and Summers? Speaking at Hamilton College, Obama said that universities feeling threatened should tap into their endowments during this fight. “If you are a university…being intimidated, well, you should be able to say, that’s why we got this big endowment,” he said, suggesting that they pay their “researchers for a while out of that endowment” and delay projects like gym expansions while they defend themselves.

The same day that Obama spoke at Hamilton, Summers wrote an op-ed in the New York Times arguing that “endowments are not there to simply be envied or admired” but “to be drawn down in the face of emergencies,” including “covering federal funding lapses.”

Obama and Summers aren’t alone in calling for universities to tap into their endowments. Charlie Eaton from the University of California, Merced, noted that Columbia could cover the $400 million in funding that the Trump administration has canceled by raising its endowment payout from 5% to 8%—a move that some schools made during the 2008-09 financial crisis and the Covid pandemic.

Yet squeezing more from endowments isn’t simply a matter of flipping a switch. Markov’s analysis suggests that universities such as Brown, Harvard, Yale, and Princeton—in part due to their high exposure to private equity—are already constrained to generate more liquidity. According to Harvard’s most recent financial report, the school has 39% of its endowment in private equity, 32% in hedge funds, 5% in real estate, 3% in real assets, and only 3% in cash.

And yes, increasing the payout requires resolutions, board votes, and trustee signoffs—plus most funds are legally restricted to purposes like scholarships or research. But Summers argues that “ways can be found in an emergency to deploy even parts of the endowment that have been earmarked by their donors for other uses.”

Perhaps he was referring to this bit tucked away in Harvard’s most recent financial report: “There are additional investments held by the University and the endowment that could be liquidated in the event of an unexpected disruption. While a portion of the endowment is subject to donor restrictions, there was $9.6 billion…in endowment funds without donor restrictions at June 30, 2024…and $6.1 billion of General Operating Account investments (GOA) at June 30, 2024…that could be accessed with the approval of the Corporation and subject to the redemption provisions.” Having a $15 billion cushion could prove invaluable.

Harvard didn’t respond to requests for comment on how the university would fill the funding gap.

Tapping into the endowment may invite trouble down the road. Even if a university were to implement such a strategy in hopes of waiting out the Trump administration, and even if a Democrat is elected after that, who is to say that the next administration won’t applaud the fact that institutions have successfully weaned themselves off the federal dole?

However this battle between academia and the government plays out, one thing seems certain: The sense of security an endowment once offered isn’t returning anytime soon.

Every now and then, a Silicon Valley startup launches with such an “absurdly” described mission that it’s difficult to discern if the startup is for real or just satire.

Such is the case with Mechanize, a startup whose founder – and the non-profit AI research organization he founded called Epoch – is being skewered on X after he announced it.

Complaints encompass both the startup’s mission, and the implication that it sullies the reputation of his well-respected research institute. (A director at the research institute even posted on X, “Yay just what I wanted for my bday: a comms crisis.”)

Mechanize was launched on Thursday via a post on X by its founder, famed AI researcher Tamay Besiroglu. The startup’s goal, Besiroglu wrote, is “the full automation of all work” and “the full automation of the economy.”

Does that mean Mechanize is working to replace every human worker with an AI agent bot? Essentially, yes. The startup wants to provide the data, evaluations, and digital environments to make worker automation of any job possible.

Besiroglu even calculated Mechanize’s total addressable market by aggregating all the wages humans are currently paid. “The market potential here is absurdly large: workers in the US are paid around $18 trillion per year in aggregate. For the entire world, the number is over three times greater, around $60 trillion per year,” he wrote.

Besiroglu did, however, clarify to TechCrunch that “our immediate focus is indeed on white-collar work” rather than manual labor jobs that would require robotics.

The response to the startup was often brutal. As X user Anthony Aguirre replied, “Huge respect for the founders’ work at Epoch, but sad to see this. The automation of most human labor is indeed a giant prize for companies, which is why many of the biggest companies on Earth are already pursuing it. I think it will be a huge loss for most humans.”

But the controversial part isn’t just this startup’s mission. Besiroglu’s AI research institute, Epoch, analyzes the economic impact of AI and produces benchmarks for AI performance. It was believed to be an impartial way to check performance claims of the SATA frontier model makers and others.

This isn’t the first time Epoch has waded into controversy. In December, Epoch revealed that OpenAI supported the creation of one of its AI benchmarks, which the ChatGPT-maker then used to unveil its new o3 model. Social media users felt Epoch should have been more up-front about the relationship.

When Besiroglu announced Mechanize, X user Oliver Habryka replied, “Alas, this seems like approximate confirmation that Epoch research was directly feeding into frontier capability work, though I had hope that it wouldn’t literally come from you.”

Besiroglu says Mechanize is backed by a who’s who: Nat Friedman and Daniel Gross, Patrick Collison, Dwarkesh Patel, Jeff Dean, Sholto Douglas, and Marcus Abramovitch. Friedman, Gross, and Dean did not return TechCrunch’s request for comment.

Marcus Abramovitch confirmed that he invested. Abramovitch is a managing Partner at crypto hedge fund AltX, and self-described “effective altruist.”

He told TechCrunch he invested because, “The team is exceptional across many dimensions and have thought deeper on AI than anyone I know.”

Good for humans, too?

Still, Besiroglu argues to the naysayers that having agents do all the work will actually enrich humans, not impoverish them, through “explosive economic growth.” He points to a paper he published on the topic.

“Completely automating labor could generate vast abundance, much higher standards of living, and new goods and services that we can’t even imagine today,” he told TechCrunch.

This might be true for whoever owns the agents. That is, if employers pay for them instead of developing them in-house (presumably, by other agents?).

On the other hand, this optimistic outlook overlooks a basic fact: if humans don’t have jobs, they won’t have the income to purchase all the things the AI agents are producing.

Still, Besiroglu says that human wages in such an AI-automated world should actually increase because such workers are “more valuable in complementary roles that AI cannot perform.”

But remember, the goal is for the agents to do all the work. When asked about that, he explained, “Even in scenarios where wages might decrease, economic well-being isn’t solely determined by wages. People typically receive income from other sources—such as rents, dividends, and government welfare.”

So perhaps we all make our living from stocks or real estate. Failing that, there’s always welfare – if the AI agents are paying taxes.

Even though Besiroglu vision and mission are clearly extreme, the technical issue he’s looking to solve is legit. If each human worker has a personal crew of agents which helps them produce more work, economic abundance could follow. And Besiroglu is unquestionably right on at least one thing: a year into the age of AI agents, they don’t work very well.

He notes that they are unreliable, don’t retain information, struggle to independently complete tasks as asked, “and can’t execute long-term plans without going off the rails.”

However, he’s hardly alone in working on fixes. Giant companies like Salesforce and Microsoft are building agentic platforms. OpenAI is, too. And agent startups abound: from tasks specialists (outbound sales, financial analysis); to those working on training data. Others are working on agent pricing economics.

In the meantime, Besiroglu wants you to know: Mechanize is hiring.

Defense cooperation between Israel and India is expanding, with joint projects by leading companies in both markets. This allows Israel to reduce its dependence on the West, which has proved problematic during the Swords of Iron War; for India, it offers a much needed toehold in the Middle East

The current Gaza war is unprecedented in Israel's history – from the horrors of October 7, which left an entire country scarred, to the domestic rift, international isolation and the warfare itself that has gone on for over a year and a half, with varying intensity. The Israeli military has been operating in several theaters and required huge amounts of shells, bullets and bombs, as well as replacement parts for systems that were hit in battle or worn out by unceasing use.

While the United States stepped up to help, the extremist government in Jerusalem meant that other friendly countries in the international arena kept their distance and limited defense exports. The international pressure resulted in the government decision to invest in the promotion of Israeli arms production. In that context, many were surprised to discover that India has become almost as important a crutch to Israel as the U.S., helping out with advanced drones, thousands of shells and countless crucial components.

In February 2024 Indian media reported that India was providing the Israeli military with Hermes 900 drones. This advanced aerial vehicle had just begun coming off the production line in a factory set up in Hyderabad, as part of the cooperation between Elbit and India's Adani Group, and rather than being delivered to the Indian military as planned, some were sent to Israel. In May 2024, Spain denied a docking permit at the port of Cartagena to a ship, the Marianne Danica, which was flying the Danish flag. The reason: it was carrying explosives from the Indian port of Chennai to Israel.

These shipments are but the tip of the iceberg. A review of records indicates dozens such shipments from Indian defense companies to Israel since the start of the war. These include thousands of 155mm shells from companies such as Kalyani Strategic Systems, to light firearms and accessories from PLR Systems and components for advanced technological systems from INDO-MIM. There is also no shortage of defense-related shipments in the opposite direction, from Israel to India.

In fact, efforts to measure the relationship using the usual indexes of imports and exports fail to grasp the entire picture. "The Israeli defense industry has become, if not a subsidiary of the Indian defense industry, at least its full partner," says a senior Israeli businessman who has been living and working in India for many years, who asked to remain anonymous.

"If you look at it in perspective, you can identify three phases in the history of the Israeli defense industry. We started out dependent on the French, switched to the Americans and now we are switching to the Indians. There is no other way to describe this," he said. Many Israelis recall the French-made Mirage 3, the star fighter jet of the Six-Day War, but the French arms embargo, imposed just before that war, forced Israel to find new partners. Ever since the 1970s, when the U.S. was engaged in the Cold War against the Soviet Union, Israel served as a testing ground for new American military technologies, and occasionally as an avenue for deals that Washington preferred to distance itself from, like the Iran-Contra affair.

Cooperation with India, which began later, developed despite the uneasy history of relations between the two countries. India has a large Muslim minority – some 15 percent of its population – and was instrumental in establishing and leading the Non-Aligned Movement beginning in the 1950s. As such, India maintained a cold, even hostile attitude toward Israel for decades. Only after the collapse of the Soviet Union and the beginning of the peace process between Israel and the Palestinians in the 1990s did the two countries initiate full diplomatic relations. This did not prevent continued vociferous criticism of Israel on the Palestinian issue, nor close relations with countries that are far from Zionist sympathizers, most notably Iran.

It was in the 1990s that defense cooperation began. However, the critical stage came in the 2000s, following India's adoption in 2005 of a policy requiring new defense contracts to include a minimum 30 percent offset contract – meaning the arms exporters would also have to purchase military goods in India.

"At this point," says the senior Israeli businessman, "all the world's defense industries became anxious, since there is nothing to buy in India. There's no defense industry."

Israeli firms, however, jumped at the opportunity, led by the three defense giants – Rafael, Elbit and Israel Aerospace Industries. "They set up huge offset contract departments to look for and develop suppliers."

A survey posted on the Indian defense ministry website indicates that out of 56 offset deals since 2005, 23 (41 percent) are with Israeli companies – more than the U.S. or all European countries. In retrospect, this decision evidently paid off for India. Smaller Indian companies, such as Rangsons Electronics (purchased in 2015 by Cyient) and INDO-MIM, which specializes in metal injection molding, grew within a few years by hundreds of percentage points, thanks to cooperation with foreign companies – mainly Israeli ones.

"You cannot tell where Indian industry ends and Israeli industry begins," points out the businessman. "Every company that manufactures physical parts, regardless of composite materials, metal or plastic – they all have ties of one type or another with Israeli companies."

Diplomatic relations between the two countries have grown even warmer under the government of Prime Minister Narendra Modi, elected to office in 2014. In 2015, his new government announced its Make in India initiative, which called for more local production lines and companies. Israeli companies continued to lead cooperation efforts. In fact, it proved virtually impossible to track the full and dizzying range of cooperation between giant Indian companies, both government-owned and private, such as Bharat Electronics and Adani Group, and such Israeli companies as Elbit, IAI and Rafael.

To name but a few, in addition to the Elbit-Adani Hermes 900 joint venture: Elbit and Kalyani's Bharat Forge have set up BF Elbit for cooperation in the field of artillery; the Kalyani Group has established KRAS, a joint venture with Rafael, specializing in integration and manufacture of components for Spike missiles, Barak 8 missiles in cooperation with IAI, and guidance kits. In 2023, Elta, a subsidiary of IAI, acquired the Indian firm HELA, which provides maintenance, repair and overhaul product support for advanced radar systems.

The Russian invasion of Ukraine in 2022 brought about even tighter cooperation. Israeli companies benefited from the Indian military's continuing use of Russian technology, while the Russians were suddenly unable to provide support services. "The Russians turned all at once from arms exporter to arms importer," says the businessman, explaining that this made them unable to service Russian arms purchased by clients like India.

Ever since the 1973 Yom Kippur War, when Israel captured numerous Soviet arms used by its enemies, Israel has acquired extensive experience in maintaining and upgrading Russian systems. "If you want an advanced night vision sight for a T72 [Soviet] tank – you turn to Elbit or Rafael. If you want pods for Sukhoi aircraft, you turn to Elta." The Israeli companies stepped up to fill the void for India.

Israel's help in servicing India's Russian-made arms is one of the reasons India has sided with Israel over the last year and a half. Despite harsh criticism at home for providing arms to Israel, the government has remained firm. Israel "is a country that has stood by us at different moments when our national security was under threat," Indian External Affairs Minister Subrahmanyam Jaishankar told parliament in December 2024, adding that India is pursuing its interests.

This has not prevented India from continuing to enjoy warm relations with Iran. In fact, just a month after the first Iranian missile attack on Israel, in April 2024, India signed a first-of-its-kind agreement with Tehran. Under the agreement, Indian government-owned company Indian Ports Global is to manage the Iranian port of Chabahar for 10 years. At the time, the U.S. threatened that business with Iran may constitute a violation of the sanctions against Tehran. India, for its part, dismissed those threats.

"India conducts itself differently than the West. It does not see international relations as a zero sum game," says Lauren Dagan Amoss, a researcher of India's foreign and security policy at the Begin-Sadat Center for Strategic Studies. "It can work with Iran and Russia as well as with the U.S. and Israel. This has made it a very flexible player in the international arena. While to Western eyes such a plurality of ties could be perceived as a disadvantage, to Asian eyes it's an advantage. India is simply maximizing its value as an international player. For example, the port it is constructing in Iran serves a purely financial interest – there is no ideological connection with Iran here."

The Israeli government is one of the few to have benefited to some degree from the election of Donald Trump – at least in the initial days of his presidency. Joe Biden's red lines have been erased, and the new president managed to bring about the first stage of a hostage deal. On the other hand, the president's unpredictability, the new administration's isolationist tendencies, and the zeal with which it is abandoning all components of soft power are a clear warning sign to anyone who relies on America's broad shoulders. Israel already felt the sting with Netanyahu's latest visit to the White House, which turned into a humiliation at the hands of the president.

According to Dagan Amoss, one should not expect India to provide the same kind of patronage that Israel has enjoyed with the U.S., but Indian flexibility offers some significant advantages. "Here is an international player capable of talking to both Iran and Israel, to Russia and China as well as the U.S., to both the Middle East and Africa. This is a country that Israel could use to develop economic and diplomatic ties in the region.

"Today, India is far more reliable than many other countries," Dagan Amoss points out. "It is an important power both in the Indo-Pacific as well as worldwide, and it wants a foothold in the Middle East, too. It's in Israel's interest that this happens."

Israel, however, holds an outdated view of India, she says, and this underestimation of the country could be to Israel's disadvantage. "The more relations between the U.S. and China deteriorate, the more India's importance is expected to increase. As of now, Americans are best served by nurturing India and its relations with the country."

Not that there aren't difficulties in working with India, from complex regulation to cultural discrepancies, she says. "But Israel has yet to exhaust the potential of ties with India. For all the cooperation, we are still not like the French, not like the Australians in terms of our level of cooperation. When India decides to go for mega-projects, it is uncertain whether we will be there."

"Israel needs to make a decision to roll up its sleeves and make an effort, but we are still in a mindset that we know better and we will teach those Indians. This will not get us anywhere."

Slash the trade deficit and the net inflow of foreign money dries up; this will hit share prices and raise the cost of borrowing for companies

Explaining what President Trump really wants has become a thriving industry in its own right, often proved wrong as soon as it is published. Two things are clear about his tariff policy, however: He wants a lower trade deficit and he wants investment to rebuild U.S. manufacturing. True believers who think he might achieve those goals should think through what else has to happen as a result.

The starting point is the balance of payments, the broadest measure of trade and investment in and out of the economy. Its two sides have to balance: the current account, which tallies up trade flows and some other stuff not worth getting into; and the capital and financial accounts, which measure, well, capital and money flowing in and out to buy things such as stocks and bonds and investments in factories.

For years, Americans have imported way more than they exported, thus the trade deficit in the current-account part of the equation. For the balance of payments to balance, there needs to be a corresponding inflow of capital. That has largely come from foreigners buying assets, most prominently stocks and government debt in the form of Treasurys.

Trump’s plan will disrupt that dynamic. Smaller trade deficits mean smaller inflows of capital.

Trump’s obsession is the goods deficit—and there are two ways it can come down.

The first is that the overall goods-and-services deficit remains unchanged, but services—about which Trump doesn’t seem to care and in which the U.S. runs a surplus—are sacrificed for manufacturing. To wit: hurt Wall Street and Silicon Valley to benefit Main Street. This, though, would need shifts in domestic tax and regulation.

The second way for the goods deficit to shrink is to reduce the overall trade deficit. That will mean less foreign money coming in (remember, the balance has to balance). Combine that with more investment in manufacturing—because imported goods are made less competitive by tariffs—and it will mean America has to provide more of the savings to finance new assembly plants, clean rooms and sweatshops.

But domestically things have to balance, too. More savings means less consumption. The flip side of America relying on foreign savings all these years is that it has been able to consume far more. The rest of the world has to work for a living, while America gets stuff in return for promising its full faith and credit.

At the risk of joining the Trumpsplainers, I’ve long thought of Trump as focused on people as workers rather than as consumers. The existing system is focused on delivering stuff to satisfy consumer wants, and let jobs fall where they will, even if that is outside the U.S., rather than delivering jobs and supplying only the stuff that ends up being produced.

Markets are trying to figure out the implications of upending this system. Here are four:

More expensive stuff, and less choice of stuff. Increasing saving means reducing consumption. The tariffs amount to the largest tax increase in decades, which counts as government “saving”—as well as pushing up the price for almost everything imported.

Higher interest rates. The capital inflows that offset the trade deficit help fund a big chunk of federal government borrowing. Slash the trade deficit and the net inflow of foreign money dries up. Bond yields will need to rise to attract domestic savers to buy Treasurys instead of stocks or corporate bonds, which will hit share prices and raise the cost of borrowing for companies.

Lower stock prices. Only a small chunk of foreign investments goes into building factories. If there were more foreign direct investment, it could finance at least some of the reconstruction of manufacturing. But we’ve assumed Trump succeeds in shrinking the trade and current-account deficits, so there will be less foreign money coming in (remember: balance). So more foreign factory building means less foreign buying of stocks and bonds, so lower stock prices.

A weaker dollar. In economic theory the dollar is the variable that moves when savings and investment don’t balance. If the U.S. saves too little to cover its investment, the dollar should weaken to make U.S. investments more attractive to foreigners.

In practice the dollar has been in demand for foreign reserves and for use in trade, as well as a safe place to stash the world’s savings. All three are now being questioned: reserve holders worry they could be cut off from their reserves the way Russia was, trade is likely to shrink thanks to tariffs, and investors are worried that U.S. law might no longer be the reliable protector of their assets.

Questions over the independence of the Federal Reserve, and Trump’s personal attacks on its chairman, Jerome Powell, have the potential to scare off buyers of both the dollar and Treasurys.

The dollar should also be weaker because the U.S. economy should be weaker. America spent a century at the forefront of technology, gradually abandoning low-wage, low-productivity industries in favor of increasingly complex production and high-value-added services such as chip design.

Bringing back those low-productivity jobs is possible if tariffs are high enough, but will reduce America’s economic lead over the rest of the world. Does America really want to bring back sewing jobs from Bangladesh or Cambodia? It looks like it, with the “reciprocal” tariffs set for those nations at 37% and 49%, respectively. Lower productivity, though, should mean a weaker currency, all else equal.

This simplifies somewhat. Interest rates, the dollar and the economy interact, so we get higher rates for any given level of the dollar and growth—with complex interactions as all three move.

Before Trump’s economists start spluttering into their coffee, a really good outcome is also imaginable—but seems to me highly unlikely. The deficit could drop because exports rise as demand in other countries rises, especially countries that have suppressed demand. Trump’s extreme approach on tariffs and defense shocked Germany into abandoning austerity, and part of China’s response to tariffs is to try to boost domestic consumption.

I’m skeptical that Germany and China will quickly welcome consumerism. But even if they did, there is no reason to think they would want to buy American manufactured goods, rather than the U.S.’s highly competitive services, energy and agricultural exports—and that is if they were willing to buy anything American at all, after the insults and unreliability of the past three months.

I doubt that Trump’s tariffs will bring much manufacturing back to America. If they do, investors and consumers will suffer.

Egypt’s Abdel Fattah al-Sisi has sought to kill proposal to expel population while preserving good relations with US president

When Donald Trump took office, Egypt’s Abdel Fattah al-Sisi — a man the US president once described as his “favourite dictator” — might have expected better relations with Washington.

Trump’s return helped spur a ceasefire in Gaza between Israel and Hamas, briefly halting more than a year of conflict on Egypt’s border. Houthi militants said they would limit attacks on Red Sea shipping, raising the prospect that vessels would return to the Suez Canal and ease disruption that cost Egypt an estimated $7bn in revenue last year.

It has gone downhill since. Israel last month restarted fighting in Gaza, scuppering hopes of an imminent end to the war. The Houthis and US resumed strikes, reigniting tensions across the Red Sea. And Trump has repeatedly proposed expelling Gaza’s 2.2mn population into Jordan and Egypt, which would pose a severe, destabilising threat.

All this has left the Egyptian president in an especially difficult position as he tries not to anger the unpredictable, transactional US president while leading diplomatic efforts to find an alternative peace plan for Gaza.

“He has been playing his hand very, very carefully,” said Mirette Mabrouk, senior fellow at the Middle East Institute in Washington. “At the end of the day, President Trump has a way of upending the normal rules.”

Egypt has long relied on US support, with Washington providing an annual $1.3bn in military aid and helping it secure an $8bn IMF loan last year and stave off economic meltdown. This was partly in recognition of Egypt’s mediating role to secure a Gaza ceasefire, but also to stabilise the economy of the most populous Arab nation.

While relations were frosty under Barack Obama, Trump’s first term brought a welcome improvement for Sisi, a former general who took power in a popularly backed coup in 2013 against an elected Islamist president. Trump invited the Egyptian president twice to the White House, describing him as “my favourite dictator” at a 2019 summit.

But facilitating Trump’s explosive plan to depopulate and take over Gaza — turning it into the “Riviera of the Middle East” — is an impossible proposition for any Arab leader.

Analysts say Egyptian and Arab public opinion would consider Sisi a traitor to the Palestinian cause, galvanising opposition and fuelling instability. Former Egyptian president Anwar Sadat was assassinated by Islamist militants in 1981 in part over anger at having normalised relations with Israel.

Yet Trump and Israel’s Prime Minister Benjamin Netanyahu have doubled down. At a meeting in the White House last week, Trump repeated his claim that Gaza, an “incredible piece of important real estate”, should be under US control.

Since the start of the war in October 2023, Egypt has feared Israel’s ultimate goal was to drive Palestinians across the border into its Sinai desert.

More than two-thirds of Gaza is under evacuation orders, while Israel has blocked all aid from entering since the beginning of March and announced a new directorate to oversee the “voluntary” emigration of Gazans. Cairo has accused it of using “hunger as a weapon”.

Netanyahu said at the White House that Gazans “should be given a choice” to leave and that it was not Israel locking them in, a reference to Egypt’s refusal to allow the population transfer.

The deteriorating conditions in Gaza under Israel’s onslaught and blockade appear to be a prelude to moving its people out altogether, said Michael Wahid Hanna at the International Crisis Group.

“If you look at the discourse [in Washington] and you see what’s happening on the ground in Gaza and what the Israelis are saying, it’s hard to think that transfer and depopulation aren’t at the core of this,” he said.

Sisi has refrained from criticising the US president, saying only that he would not “participate in an injustice towards the Palestinians”.

He has even sought to flatter Trump. The US president was “capable of achieving the long-awaited objective of bringing a fair and lasting peace to the Middle East”, he said in January when Trump first spoke of the transfer plan, which has been widely condemned around the world as ethnic cleansing. 

Sisi has instead tried to mobilise international support for an alternative plan to rebuild Gaza and ensure Palestinians could stay on their land, with limited success.

He gained the support of the Arab League and, with caveats, the EU for a proposal to rebuild Gaza via a committee of Palestinian technocrats that would exclude Hamas and eventually hand government to the Palestinian Authority, which runs parts of the occupied West Bank.

But the US and Israel rejected this, saying it does not address disarming Hamas militants or ensure their departure, something Arab public opinion would condemn as collaborating with the occupation.

“Egypt recognises the limitations of the plan, but it cannot advance it further on the core issues . . . without much broader diplomatic support,” said Hanna.

Sisi is well aware that defying Trump can come at a high cost. The US president hinted in February he could cut military aid from Egypt and Jordan after their leaders refused his proposal.

Although Trump later appeared to backtrack, his patience might prove finite. In the leaked Signal chat of US officials discussing last month’s attack on the Houthis, an official said the administration should “make clear” what it expected from Egypt “in return”.

Despite all that, Mabrouk said the risks of agreeing to resettle Palestinians forced from Gaza far outweighed the rewards.

“The Egyptians are not going to knuckle under,” she said, “because there is nothing that the US can impose that is going to be worse than what is going to happen if they agree to the depopulation of Gaza.”

Steel, energy, sports cars: How China poured more than $100bn into Britain

Spending has slowed since 2017 peak, but Beijing retains significant investments across the UK

The UK government’s decision to seize control of British Steel from Chinese owner Jingye has led to demands for greater scrutiny of China’s investments in the country.

But unpicking decades of spending by Beijing and Chinese businesses across the British economy will be difficult: more than $100bn of Chinese investment has flowed into the country since 2000, according to figures from the Rhodium Group, a research outfit.

Around a third of Chinese spending on major UK projects has been in the energy, technology and transport sectors, according to the American Enterprise Institute think-tank — fuelling questions about exposure in strategically important areas.

Senior figures in the Labour party have raised concerns about vital areas including nuclear, telecoms and transport where they say Chinese ownership could jeopardise Britain’s economic security and disrupt supply chains.

Energy alone accounts for almost a fifth of all major Chinese investments since 2005, reflecting a broad spectrum of projects from wind farms off the Scottish coast to gas networks in Wales and Northern Ireland.

Derek Scissors, senior fellow at AEI, said the “size and expertise” of state-owned enterprises made them attractive partners for large energy and transport projects, such as nuclear power plants.

“The somewhat frightening downside is a role for the Chinese state in important national infrastructure,” he added.

Leading state investors include China Investment Corporation — which owns 8.7 per cent of Thames Water and 10 per cent of Heathrow airport — and China General Nuclear (CGN), which holds a minority stake in the Hinkley Point C plant in Somerset.

CGN was also slated to work alongside French energy company EDF on a proposed new nuclear power station in Bradwell, Essex, but officials advised this week that the government will block its investment, amid mounting pressure to reduce Beijing’s influence.

While state-owned enterprises have concentrated investment in energy and infrastructure, private investors have focused on real estate and strategic manufacturing sectors such as semiconductors, steel and transport.

Geely, which owns Volvo Cars, acquired the black taxi-maker LEVC and also owns sports car brand Lotus, which both have UK factories.

Both state-owned and private companies have slashed funding in recent years, with Chinese FDI into major UK projects last year just 3 per cent of its 2017 peak.

Scissors said the decline reflected a “less welcoming” attitude and Beijing’s tightening of capital controls, with private investors also deterred by the poor performance of property assets.

“Chinese private investors sent a great deal of money out of the country in 2015-16 and the easiest way to do that was to buy property. Many of those purchases then fell in value,” he added.

The UK is not alone in seeing a sharp decline in Chinese funding, with AEI data showing investment in major projects declined 97 per cent in the US and 87 per cent in Europe between the mid-2010s peak and 2023.

Armand Meyer, a senior research analyst at the Rhodium Group, said “heightened scrutiny” from British regulators had helped to curtail investment in recent years.

But he added that the UK had been one of the top destinations for Chinese funding over the past two decades, with state-owned companies accounting for a “notably high share” of funding.

“The UK has historically attracted more infrastructure investment from China than most other OECD economies, owing to its comparatively open stance towards foreign ownership in strategic sectors,” he said.

“One of the key challenges for the UK and other OECD countries lies in the legacy of acquisitions completed before investment screening regimes were tightened.”

Traders and executives warn of limited inventories and a risk of disruption to automotive production

China’s latest export controls on rare earth minerals could cause shutdowns in automotive production, with stockpiles of essential magnets set to run out within months if Beijing fully chokes off exports.

Beijing expanded its export restrictions to seven rare earth elements and magnets vital for electric vehicles, wind turbines and fighter jets in early April in retaliation for US President Donald Trump’s steep tariffs of 145 per cent on China.

Government officials, traders and auto executives said that, with inventories estimated to last between three and six months, companies would be racing to stockpile more material and find alternative supplies to avoid major disruption.

Jan Giese, a metals trader at Frankfurt-based Tradium, warned that customers had been caught off guard and most car groups and their suppliers appear to be holding only two to three months’ worth of magnets.

“If we don’t see magnet deliveries to the EU or Japan in that time or at least close to that, then I think we will see genuine problems in the automotive supply chain,” said Giese.

China’s latest controls focused on “heavy” and “medium” rare earths that enable high-performance magnets that can withstand higher temperatures, such as dysprosium, terbium and samarium. These are vital for military applications such as jets, missiles and drones, as well as rotors, motors and transmissions that feature heavily in electric and hybrid vehicles.

A senior automotive executive said the critical mineral restrictions would be “consequential” for Tesla and all other car manufacturers, describing the export controls as a “7 or 8” on a scale of 1 to 10 in terms of severity.

“It’s a form of retaliation where the Chinese government can say ‘OK, we’re not going to go tit-for-tat any more on the tariff rate but we will hurt you USA and we will incentivise companies to plead with your own home governments to change tariff policy’,” he said.

Rare earth metals are commonly found in the earth’s crust but are difficult to extract at low cost and in an environmentally friendly manner, with China commanding a near monopoly on heavy rare earths processing.

The “light” rare earths, such as neodymium and praseodymium, used in larger quantities in magnets have not been targeted, giving Beijing a “big threat vector” to expand controls if the trade war intensifies, said Cory Combs of Beijing-based Trivium, a consultancy.

Beijing’s controls require exporters to gain licences for each shipment of material overseas and have expanded their scope to ban re-exports to the US. However, application of the curbs — which have covered a gradually expanding group of critical minerals since 2023 in response to US blocks on Chinese access to chip technology — has been far from universal.

Chinese exporters have already declared force majeure on cargoes of rare earths and magnets heading overseas and have withdrawn material for sale from the market, further obscuring the price of already opaque commodities.

Japan and other nations are pinning hopes on loosening China’s grip over the heavy rare earths through Australia’s Lynas, which is set to expand its Malaysian processing site to produce dysprosium and terbium by mid-2025.

“Heavy rare earth stockpile elements do not suffice to avoid potential turbulence of automotive supply chains,” said a Japanese government official, who added that national stockpiles should provide extra relief beyond the two to three months of supply held by automakers.

“The issue is whether we can build the new, alternative supply chain in time for our stockpile to survive this,” he added.

It is not yet clear from Chinese government announcements since April 2 how Beijing plans to implement the latest export controls.

The export controls come as China faces declining feedstock for the heavy rare earths because of the civil war in Myanmar, analysts said, meaning a block on exports would shore up domestic supplies.

Experts have noted that over recent years, China has been reluctant to block shipments that would damage its own economic interests, such as gallium, but shipments have been heavily snarled up of other metals such as antimony, which is used to make bullets.

“The crucial question is how long they will take to process the export licences,” said Giese.