TheChek News Flow

The AI business continues to create and shift alliances between almost every leading tech firm. Companies may be incentivized to work together to fill each other’s AI or capital needs even as they compete more fiercely for consumer or enterprise dollars.

That’s what’s happening with Microsoft and Anthropic. The two firms have recently become fast friends, with Microsoft on track to spend more than $500 million annually on Anthropic models to power its AI software, Copilot, as we reported Wednesday.

Now, Microsoft is racing to sell Copilot to the same businesses Anthropic is targeting with its own products.

Anthropic this week released Cowork, which aims to automate white-collar tasks—basically anything someone would do on their computer for work. For instance, you can point Cowork to a file full of screenshots of receipts and direct it to create a spreadsheet listing the expenses shown in the photos, Anthropic says. In another example Anthropic shared, Cowork parses transcripts of a manager’s meetings from the past week, generating a summary of the most important tasks they need to complete and creating a slide deck recapping their team’s goals and objectives, which the manager can share with staff.

Cowork can execute tasks involving any applications a person uses, and it can work in the background, letting the person do other things while the AI does its thing.

After years in which every major tech and AI firm—Microsoft and Anthropic included—have touted such possibilities thanks to generative AI, will Cowork finally do the trick? We don’t know yet, but it can’t be lost on Microsoft that the name Cowork shares a couple of key letters with the name of Microsoft’s AI brand. And CEO Satya Nadella previously referred to Copilot’s ambition to be a “digital coworker.”

Part of the reason for the hype around Cowork is it’s a direct offshoot of Anthropic’s wildly popular coding tool, Claude Code, which has captured the AI attention economy much the way ChatGPT did three years ago. (To understand why, see this piece.)

Microsoft’s next challenge will be to harness Anthropic’s technology to differentiate Copilot from Cowork.

The situation heralds back to Microsoft’s prior history with OpenAI. Around the time that Microsoft invested $10 billion in OpenAI three years ago, executives thought adding the startup’s models to Bing to create a chatbot-like experience would finally give Microsoft’s search engine an edge over Google; instead, ChatGPT, released just weeks before the new Bing, stole Bing’s thunder.

And lately, Microsoft’s Office business has faced growing competition from ChatGPT, even as Nadella races to use OpenAI models to boost Copilot features in Office apps, such as making calculations in Excel or generating Powerpoint decks based on written prompts.

At the end of the day, Microsoft has many ways to win in AI—it’s still generating billions of dollars in new revenue a year from its OpenAI partnership, primarily from the startup renting Microsoft cloud servers to run its AI.

Anthropic, similarly, agreed last year to spend billions of dollars renting Microsoft servers.

The advent of Cowork means chief information and technology officers will have yet another option to choose from in the growing menu of workplace AI products. Many of those tools, offered by just about every enterprise software firm on the market, are promising to automate the same kind of work.

Unlike those traditional enterprise firms, Anthropic can boast that it created the underlying AI models powering the automation and therefore can handle more cutting-edge tasks. On the other hand, Microsoft has existing contracts with most of the largest companies in the world, and it usually harps on security as a core concern customers should have if they work directly with young startups. (See Tuesday’s column for more on lingering security concerns involving products such as Claude Code.)

So Microsoft could still have a leg up in this race. By working closely with Microsoft, Anthropic is hedging bets.

Donald Trump calls for emergency energy auction to make tech giants pay for AI power

President urges nation’s largest grid operator to have data centre companies bid for contracts to build power plants

Donald Trump and a number of state governors are pushing the US’s largest electrical grid operator to hold an emergency auction to make tech giants foot the bill for AI power infrastructure.

The administration along with governors of states including Pennsylvania, Ohio and Virginia have urged PJM — which serves more than 67mn people in the US north-east and Midwest — to hold a power auction in which big data centre operators bid for 15-year contracts to build new power plants.

Such contracts could support the construction of about $15bn worth of new power plants, with tech companies paying for them regardless of whether they use the resulting electricity, a White House official confirmed.

PJM did not respond to a request for comment. It is unclear if the grid operator will meet politicians’ demand to hold an emergency auction.

The US president is seeking to address a backlash over rising utility bills as part of his wider effort to promote affordability. The increase in power costs has been driven in part by massive demand from data centres, which the administration and tech companies view as aiding economic growth and vital to the US in its race against its AI rivals.

Residential electricity costs have risen by 13 per cent since January 2025, according to data from the US Energy Information Administration.

According to BloombergNEF, US data centre energy demand will surge from 34.7 gigawatts in 2024 to 106GW by 2035. The flood of demand will require massive investment in power plants and transmission lines, which affordability advocates fear will drive up customer bills.

Concerns about affordability have already resonated in political races across the country. Democratic governors-elect Mikie Sherrill of New Jersey and Abigail Spanberger of Virginia won their races in November after promising to keep utility rates down.

On Monday Trump took to Truth Social to demand tech companies “pay their way”, after which Microsoft pledged to pay higher electricity rates in areas it builds data centres to cover the cost of new infrastructure.

PJM, the grid operator for “data centre alley” in Virginia — which handles 70 per cent of the world’s search traffic — has come under fire for its failure to prevent runaway costs.

PJM sets costs through an auction where plants submit the minimum price they need to provide power for the year ahead. It then starts by picking the lowest bidders, but the price is set by the final, most expensive bid. Those costs are then passed on to utilities and customers. As demand for power increases, the bids of more expensive plants are accepted.

The emergency proposal would take the unusual step of making tech companies pay for the costs of the power sold from the auction.

Pennsylvania governor Josh Shapiro — a participant in the announcement — has led efforts to keep costs down, introducing a price cap in early 2025. The two subsequent auctions in July and December hit the cap.

PJM can hold extra auctions should regularly timed ones fail to procure enough capacity, as was the case in December.

SpaceX partner EchoStar struggles to reach escape velocity

Charlie Ergen’s future will probably be guided by what happens to Elon Musk’s company

Wealth and kindness do not grow in tandem. The relationship may even be inversely proportional. Consider Charlie Ergen, the US billionaire and former professional poker player who runs telecoms company EchoStar. Despite being much enriched via a stake in Elon Musk’s SpaceX — an investment that could launch his company on a new trajectory — Ergen seems more sharp-elbowed than ever.

EchoStar sold off more than $40bn of telecoms spectrum last year at the behest of the Trump administration, which felt Ergen had been too slow in building a national mobile network. The buyers in the deal, which has yet to close, included AT&T and SpaceX, which paid in its own private stock.

That wasn’t enough to give EchoStar a clean break. It retained contracts with suppliers and cell tower companies, some of which are now coming unstuck. Crown Castle this week cancelled a lease with an EchoStar subsidiary, Dish Wireless, saying Dish had defaulted on its cell tower rent, and owed $3.5bn. That is a significant amount for Crown Castle, equivalent to about a tenth of its market capitalisation.

Nor is it the only one feeling bruised by Ergen’s hasty exit from mobile telecoms. Another infrastructure vendor, American Tower, sued in federal court over halted lease payments, a figure analysts at MoffettNathanson say exceeds $3bn.

On one hand, Ergen seems to think there’s a middle ground to be struck. In November, he suggested “lawyers talking to lawyers” was less productive than “business people talking to business people”. On the other, EchoStar argues, somewhat boldly, that because it was forced by the government to sell its spectrum, “force majeure” allows it to shed its obligations. Declaring bankruptcy through a subsidiary is one possible avenue to terminate the tower leases but hold on to the cash.

It’s not obvious Ergen would need to quibble about such sums, though. SpaceX was valued at $400bn when the assets-for-stock swap with EchoStar was announced. Now, Musk’s rocket company is targeting an $800bn valuation or more. EchoStar’s own market capitalisation has quadrupled since August, to $38bn, and Ergen’s personal stake is valued at more than $9bn.

EchoStar has other loose ends to tie up, including spectrum yet to be sold, and its satellite business Dish Network. But Ergen’s future will probably be guided by what happens to SpaceX. EchoStar might even become a vessel through which Musk’s company could smoothly go public. Wherever he ends up, future counterparties should note from these latest bare-knuckle dealings that the new Charlie Ergen is very much like the old one.

Lebanon’s bonds rally on bets that Iran’s influence could be weakened

Defaulted debt jumps more than 25% as investors hope protests will reduce support for groups such as Hizbollah

Lebanon’s defaulted dollar bonds have surged in price more than 25 per cent so far this year over bets that recent nationwide protests in Iran could reduce the Islamic republic’s influence in the region.

Lebanese debts with a face value of $30bn have risen from 23 to 29 cents on the dollar this month — the highest level since its 2020 default amid an economic crisis — on optimism that Beirut is now fixing its finances and that Iran-backed groups across the region, such as Hizbollah in Lebanon, will be weakened.

International investors have been hunting for defaulted sovereign debt trading at knockdown prices, which they hope could surge in value just as Venezuela’s bonds did this month following the US capture of President Nicolás Maduro.

“Lebanon is probably trading well because of the Iranian situation . . . Money dries up for Hizbollah” if the regime is weakened further, said one fund manager who is a specialist in distressed sovereign bonds and who is monitoring the situation.

Human rights groups outside Iran estimate that thousands have been killed in the protests — the biggest anti-regime unrest since the 1979 Islamic revolution — which appeared to have subsided in the face of a fierce state crackdown.

Lebanon’s bonds had already been rallying over signs of the waning political influence of militant group Hizbollah, which has previously opposed an IMF-led debt restructuring. The group has long been one of the country’s most powerful military and political forces but has suffered a series of severe blows over the past 18 months. For instance, the bonds tripled in price from 6 cents on the dollar after Israel’s September 2024 assassination of Hizbollah leader Hassan Nasrallah.

The US’s dramatic capture of Maduro this month has driven a sharp rally in the South American country’s bonds over hopes of a restructuring, and investors are now fearful of missing out on similar rallies in other bonds previously seen as near-worthless.

“The unexpected 30 per cent rally in Venezuela [bonds] has shown [institutional investors] that being underweight can be dangerous,” said a hedge fund manager.

“They are busy reducing those underweights [against the index] in many esoteric names, Lebanon being the most obvious,” the manager added.

While Lebanon remains a long way from securing an IMF-backed debt restructuring, the bonds have also rallied due to progress being made on a so-called gap law to sort out tens of billions of dollars of losses on deposits from a 2019 financial crisis and banking sector collapse. While at an early stage and still needing to be passed by parliament, the proposals have given bondholders more clarity on how much might be left over for them after depositors are paid.

Recent cabinet approval of a draft law “is the most tangible element of the rally but it’s hard to distinguish it fully from concurrent developments in Iran”, said Roger Mark, an emerging markets fixed-income analyst at Ninety One.

“A weaker Hizbollah in theory should make political decision-making easier and reduce Iranian influence on Lebanese [government] decision-making,” he added.

Analysts have previously estimated that bondholders would recover only about 25 cents on the dollar in any Lebanese debt restructuring given the costs of sorting out the banking system. But investors have been encouraged by the boost to Lebanon’s reserves from the surge in the price of gold over the past year and an improving economic outlook.

Hedge fund managers stress that bets on Iran through Lebanese government bonds are highly uncertain, citing the difficulty of dislodging the regime and pointing out that while proxies across the region could be weakened, they are likely to remain in place.

“As we’ve seen with Venezuela, sanctions being lifted is usually slow because the US wants to see policy they like enforced first,” said the hedge fund manager.

The protests in Iran, and the possibility of changes to the regime, have also prompted international investors to look at whether they might at some point be able to re-enter the country’s domestic stock market, where sanctions have kept almost all foreigners away in recent years.

Maciej Wojtal, chief investment officer of Amtelon Capital, an Amsterdam-based manager that holds a rare foreign institutional investor licence to trade Iranian stocks, said he is fielding a surge in calls from investors based in Europe and elsewhere.

“The last few days, I’ve been 15 hours a day just communicating with investors . . . this shows there is a lot of people waiting for some sort of catalyst, just to be ready to invest as quickly as they can,” Wojtal said. Amtelon cannot engage with US investors due to Washington’s sanctions.

Despite rising sharply in nominal terms, Iran’s Tedpix benchmark index stands at less than one-third of its all-time high reached in 2020, when measured in dollars using the unofficial so-called “bazaar” exchange rate, which is much weaker than the rial’s official value.

Steps towards the normalisation of Iran’s economy and the removal of sanctions would boost the market by opening up exports and access to foreign currency to relieve the rial’s plunge, Wojtal said.

“Sanctions impact the whole macroeconomic structure, including exports, which impacts hard currency reserves. The more hard currency reserves come in, the stronger the local currency,” he said.

Chief David Solomon says Goldman had largest backlog of deals since pandemic

Goldman Sachs and Morgan Stanley reported bumper earnings for the final quarter of 2025, capping Wall Street’s best year for investment banking in four years.

Four of the five big US investment banks this week reported an increase in quarterly fees from advisory work, adding to bankers’ optimism that the Trump administration’s deregulatory agenda will deliver a boom for the industry.

Goldman chief executive David Solomon said the bank had its largest backlog of deals since the pandemic, as companies seek to capitalise on looser US regulations.

“I think CEOs and boards are looking and saying, OK, we’ve got a window here of a handful of years where the opportunity to consider big, strategic, transformative things is certainly possible.”

Results from Goldman and Morgan Stanley on Thursday underlined how renewed appetite for dealmaking and rising stock markets have buoyed their core Wall Street businesses.

Goldman reported net income of $4.6bn for the quarter, a 12 per cent increase from a year earlier, while at Morgan Stanley, profits rose 18 per cent to $4.4bn.

Shares in both Goldman and Morgan Stanley hit record highs, with Morgan Stanley up about 5.7 per cent and Goldman up 4 per cent on Thursday afternoon.

Investment banking and equities trading were the twin drivers of the banks’ earnings, with a 45 per cent increase in fees from dealmaking at Morgan Stanley helping it leapfrog rival JPMorgan Chase in financial advisory revenues.

Morgan Stanley chief executive Ted Pick said corporate America was coming out of a “stuck boardroom mentality” with executives more willing to borrow and make big acquisitions as interest rates ease. “Now there is really no more time to waste,” Pick said.

However, Morgan Stanley’s Pick couched his optimism with a warning that the “macro backdrop is complicated” and said that now “is not the time to over-reach”, as he left the bank’s medium-term financial targets unchanged.

JPMorgan, which reported earnings on Tuesday, was alone among the top five Wall Street banks in posting a decline in fees from investment banking in the final quarter of 2025, with a 5 per cent decrease year on year.

Bank of America eked out a 0.7 per cent gain, while Citigroup’s turnaround showed progress with a 35 per cent increase in investment banking fees.

Equities traders across the five banks posted a record $60bn in revenues for 2025, as stock markets performed strongly and some investors repositioned away from the US.

Bank’s trading businesses, which were unloved for years after the 2008 financial crisis, became a useful crutch when revenues from dealmaking collapsed in 2022.

In 2025, both businesses flourished in parallel. Goldman posted $4.3bn of revenues from equity trading in the final quarter of the year — a record for any bank — surpassing Morgan Stanley’s $3.7bn.

In asset management, into which the banks have expanded to provide ballast to their more volatile investment banking and trading businesses, Morgan Stanley’s client assets exceeded $9tn for the first time in the fourth quarter. 

This brought the Wall Street bank closer to its target to oversee $10tn at its wealth and asset management businesses. The bulk of these funds is in wealth management. 

Goldman set new “medium-term” targets for its asset and wealth management business, including a goal of reaching $750bn in alternative assets under supervision by 2030.

Asset management giant BlackRock reported its biggest ever quarterly inflows, pushing assets under management above $14tn for the first time.

Anna Paulson says central bank chair has been ‘very effective,’ endorses prevailing view that another rate cut isn’t needed right now

PHILADELPHIA—Federal Reserve Chair Jerome Powell has become an unlikely folk hero, the subject of internet memes celebrating his stewardship of the central bank. Philadelphia Fed President Anna Paulson knows this because her 20-year-old son sends them to her.

“So many people have been impressed by his leadership, myself included,” Paulson said in an interview Wednesday, her first with a national outlet since taking the job last July.

Powell disclosed on Sunday that he is facing a criminal investigation related to the renovation of the Fed’s Washington headquarters—a probe Powell said was really about monetary policy and the desire by President Trump for lower interest rates.

“His statement was really strong. I think it really speaks for itself,” said Paulson. Powell “has been a very effective chair,” as were his predecessors, she said. “We’ve had really strong leadership at the Federal Reserve for many decades, and I think that’s been to the benefit of the American people.”

The Fed bank president has attended meetings of the rate-setting committee since 2019 because she previously served as research director at the Chicago Fed. From that vantage point, she has found it “really impressive how he enables a broad open conversation,” she said. “You want to set up conditions where people are able to take the actions that are good for the institution and good for the economy…Part of the job as chair is to navigate that.”

Paulson echoed several of her colleagues who have also vouched for Powell’s integrity and leadership this week. Those colleagues were divided at the end of last year over how to set rates, with Powell facing growing opposition to the rate cuts that he led his colleagues to make.

For now, Paulson suggested that she shares the prevailing view that there is no hurry to cut rates again. Paulson will become a voter on interest rates this year and supported the Fed’s move to cut its short-term benchmark rate at its last three meetings, most recently in December to a range between 3.5% and 3.75%.

he said she expected inflation would make meaningful progress declining to the central bank’s 2% goal by year’s end, but she was comfortable holding interest rates steady at the Fed’s coming meeting, Jan. 27-28. She thinks rates are still high enough that they are slightly above a neutral level that neither spurs nor slows growth, and she said that was appropriate for the time being to help finish the job bringing inflation down.

“I want monetary policy restrictiveness to be playing a role to get us all the way back to 2%,” she said.

But Paulson said she could favor cutting rates modestly later this year, either after inflation data validate her expectation that price pressures are easing or if evidence emerges that job-market conditions are deteriorating unexpectedly.

She said she would be particularly focused on January price data, which will be released next month, because businesses often reset prices at the beginning of the year. In other words, if businesses are preparing larger price hikes, it should show up soon.

If her baseline outlook for steady growth, declining inflation and a stable labor market is right, “well, then we should be at neutral,” an interest-rate setting she thinks is “a little lower than we are now.”

Paulson’s current views put her on the dovish side of the rate-setting committee because she sees risks to the job market as “a little bit higher” than the risk of stubborn inflation.

Last year, some 95% of private-sector job growth occurred in just one sector—healthcare and social assistance. “If you think about an economy that feels solid and healthy, it seems like it would be generating jobs not just in one sector,” Paulson said.

Research suggests that during periods like the current one, where the job market is slowing but economic output, as measured by gross domestic product, is expanding solidly, “it’s the labor market signal that ends up winning.” But past performance is no guarantee of future outcomes, she said. For example, if the economy is “on the precipice of a productivity boom,” then the economic activity could run strong with less demand for labor.

Paulson said the biggest economic surprise of 2025 for her was the extent to which the labor market cooled, “but that process didn’t accelerate. That’s really unusual.” She added, “The labor market could break quickly…So any sign of breaking versus bending is going to be something that I pay sharp attention to.”

Paulson said it was critically important that the Fed ensures inflation returns to its 2% target. She is less concerned about the inflation outlook than some of her colleagues, however, because she sees evidence that goods price increases last year will reverse this year.

Business executives and owners report that they are more concerned about preserving market share than they have been in years, which makes them more reluctant to raise prices and lose customers. “It’s not like demand conditions are so strong that it’s easy to raise prices. Firms are being very careful, very thoughtful,” Paulson said.

Companies in China scrap for access to Nvidia’s latest Rubin lineup while better-funded U.S. competitors are first in line

SINGAPORE—After a year of gung-ho news about China’s gains in artificial intelligence, some elite Chinese AI researchers are coming to a more pessimistic conclusion. The country’s chances of catching up to the U.S. are slim in the short run, they say, because of a bottleneck in chips.

“The truth may be that the gap is actually widening,” Tang Jie, founder of Chinese AI startup Zhipu, said at a conference last weekend in Beijing. “While we’re doing well in certain areas, we must still acknowledge the challenges and the disparities we face.”

One illustration: When AI chip leader Nvidia introduced its next-generation Rubin hardware in January, it named a number of American companies as customers, but no Chinese AI developer was named because U.S. rules block direct sales to China.

Chinese companies have started discussions about renting computing power at data centers in Southeast Asia and the Middle East to get access to Rubin chips, according to people involved in the talks. That follows companies’ efforts last year to access chips in Nvidia’s Blackwell series.

Deals by Chinese companies to use Nvidia chips in third countries are generally viewed as legal. But they require circuitous arrangements and typically leave Chinese AI developers with fewer chips and more inconvenience compared with well-funded American competitors.

Justin Lin, who heads development of Alibaba’s AI model Qwen, was asked at the Beijing conference about the chance of any Chinese company leapfrogging the likes of OpenAI and Anthropic over the next three to five years. His on-the-spot guess was 20% or less.

Washington’s export controls limiting China’s access to the world’s most advanced AI chips have dissuaded many Chinese companies from pursuing state-of-the-art AI, which consumes a huge amount of computing power. Instead, they apply the technology for everyday uses, while American firms invest in the latest chips to push the boundaries.

“A massive amount of compute at OpenAI and other American companies is dedicated to next-generation research, whereas we are stretched thin,” said Alibaba’s Lin. “Just meeting delivery demands consumes most of our resources.”

UBS analysts estimate that the combined capital spending of China’s internet leaders—much of it for AI—was equivalent to around $57 billion last year. That is roughly one-tenth of U.S. peers.

No one is counting China out yet, because developers such as DeepSeek have shown skill at adapting to limited resources. Two other AI developers—Zhipu, formally known as Knowledge Atlas Technology, and MiniMax—raised more than $1 billion combined in Hong Kong this month in initial public offerings. MiniMax’s share price more than doubled from its IPO price in just two trading days.

“Despite a more challenging operating environment, investors continue to price in the possibility of technological catch-up or breakthrough,” said Alyssa Lee, a veteran tech investor who now works at an AI startup. “That optimism itself speaks to the level of innovation Chinese companies have demonstrated.”

Since it turned heads in the U.S. with a high-quality AI model a year ago, DeepSeek has been publishing techniques to improve the efficiency of AI development, some of which have been adopted by Western researchers. DeepSeek published two research papers this month discussing a new training architecture that allows for development of larger models using fewer chips, and a memory design that makes models run more efficiently.

This year, models developed by DeepSeek and Alibaba have narrowed the gap with the best U.S. models to as little as four months, compared with an average gap of seven months in recent years, according to nonprofit researcher Epoch AI. Many of China’s leading models are open-source—meaning they are free for users to download and modify. That is helping Chinese firms raise their global profile while top American models remain closed-source.

Yet DeepSeek has run into snafus. Last year, when it was developing its new flagship model, it tried using less-advanced chips from Huawei and other domestic vendors but the results were unacceptable, so it turned to Nvidia chips for some training workloads, said people familiar with the development. DeepSeek then made progress, and it is preparing to introduce the model in coming weeks, they said.

In recent years, Huawei and many Chinese chip startups have made headway with their products—Zhipu said Wednesday it created an open-source image-generation model using only Huawei chips—but the performance gap with the best American chips remains wide.

China is barred by Washington from acquiring top-of-the-line chip-making technology. Companies can’t tap leading chip manufacturers in Asia such as Samsung and Taiwan Semiconductor Manufacturing Co. to produce many advanced chips, but have to rely on less-advanced imported and domestic machines to ramp up capacity.

“The primary bottleneck is chip-manufacturing capacity,” said Yao Shunyu of Chinese internet giant Tencent at the Beijing event. Yao recently left OpenAI to lead Tencent’s AI push.

Washington’s recent decision to allow Nvidia to sell its H200 chip in China isn’t likely to be a game-changer in helping Chinese companies catch up, said people in the industry. Nvidia Chief Executive Jensen Huang has said Chinese demand for the chip is high, but people at Chinese tech companies said the chip, which is two generations behind the Rubin series, has become insufficient for training state-of-the-art AI.

Companies are still waiting for Beijing’s approval to purchase the H200s. Chinese officials have recently told some companies that any purchases should be for “necessary” uses such as advanced AI research, people familiar with the guidance said. They said China would continue to push adoption of domestic chips.

Trump wants a loyalist. Senators want independence. Backlash to a Justice Department probe highlights how those goals are in conflict.

The criminal investigation into Federal Reserve Chair Jerome Powell threatens to upend the contest over whom President Trump will choose to succeed him as it enters its final stretch.

The episode is creating new obstacles on Capitol Hill and raising hard questions about whether any nominee can be seen as independent—tension that was always present but is now much harder to ignore. Trump has made clear he prizes loyalty in his pick, but the Justice Department probe—which Powell said was part of a pressure campaign to get the Fed to lower interest rates—threatens to make that quality a liability.

The backlash on Capitol Hill could force that pick to walk a tightrope in any confirmation process this spring. The nominee would have to avoid upsetting Trump with statements that question his efforts to challenge the Fed without provoking concerns from lawmakers or market participants that they are too close to Trump to be credible.

“Trump is making it very difficult by saying he refuses to appoint anyone who doesn’t agree with him and is not going to do what he wants,” said Janet Yellen, the former Fed chair and Treasury secretary. “So you start with that, which undermines a person’s credibility.”

In a sign of some lawmakers’ unease, two Republican senators—Thom Tillis of North Carolina and Lisa Murkowski of Alaska—said this week they won’t vote for any nominee until the probe is resolved.

“I wouldn’t consider my mother for the post under the current conditions, because we’ve got to resolve this matter,” Tillis said earlier this week. “It’s foundational to making decisions about the board going forward.”

Tillis, who sits on the Senate Banking Committee that oversees Fed nominations, has become a vocal, regular critic of the Trump administration. In this case, his complaints are more than just talk: He could hold up the nomination with backing from Democrats.

Tillis suggested that candidates seen as closer to Trump would face harder questions about their independence. “If you’re working alongside somebody for a while, can you really be as independent, even if you think you can be?” he said Wednesday.

Choosing Fed governor Christopher Waller, who is one of four contenders for the job and who doesn’t have a close relationship with the president, “would certainly address a lot of the concerns,” said Tillis.

Other analysts said Waller’s biggest liability—that lack of any real ties to Trump or his inner circle—could be an asset if the confirmation process becomes a referendum on Fed independence. The president appointed Waller to the Fed in 2020.

Last week, Treasury Secretary Scott Bessent said Trump would soon interview one last finalist, Rick Rieder, a BlackRock executive. Rieder was spotted at a White House event on Thursday honoring the Florida Panthers’ Stanley Cup championship.

But the battle has always been between the two Kevins: former Fed governor Kevin Warsh, and the director of the White House National Economic Council, Kevin Hassett.

Hassett’s close relationship with Trump made him a leading contender for the job. Now, it might be a liability.

Hassett demonstrated the difficulty of his position this week. He began one interview on Monday by saying, “I hope everything turns out OK for Jay,” but then he attempted a defense of the investigation as a legitimate exercise in government oversight—putting him at odds with lawmakers who have called it a political hit job.

“If I’m here sitting here in the White House and somebody says, ‘Hey, Justice Department wants to look at all your emails or look at what you’ve been doing on this or that,’ then I would welcome the opportunity to show them that I’m fine,” Hassett said on CNBC.

He compared the criminal probe to routine oversight. “It’s part of government to have people look at you—inspectors general—and check that what you’re doing is completely on the up and up.”

His comments prompted a backlash from economists and other analysts who said they were inappropriate for someone looking to lead the central bank. “It was sad but unsurprising to see him accepting this as an aboveboard, legitimate, independent inquiry,” said Jason Furman, a former economic adviser to President Barack Obama. Furman helped organize a letter supporting Hassett’s 2017 Senate confirmation as chair of the White House Council of Economic Advisers for Trump’s first term.

Trump has kept his own advisers guessing. One person familiar with the process said the contest remains between Warsh and Hassett, and the front-runner “sort of depends on the day.” While the president recently indicated to advisers that he might prefer keeping Hassett in his current post because he likes how Hassett defends his policies on television, other advisers have been working on identifying a successor if Hassett leaves for the Fed.

Trump, who has for months suggested the decision was imminent, said this week he might announce his pick within weeks. “The president is in the same place” he has been “for many, many weeks. He’s in a decision-making phase,” White House press secretary Karoline Leavitt said Thursday. “There are a few people who he likes very much for this job, maybe less than that.”

The U.S. attorney in Washington, D.C., Jeanine Pirro, said in a Fox News interview on Tuesday that her office is investigating whether Powell lied to Congress last summer about the Fed’s building renovation project. Powell, in announcing the probe on Sunday, said it was a pretext to intimidate the central bank to cut interest rates, as Trump has demanded for months.

Lawmakers from both parties have questioned the basis for the probe, and several Republicans have said they don’t want the investigation to escalate into criminal prosecution.

Larry Kudlow, who was the director of the National Economic Council in Trump’s first term, told viewers of his Fox News program on Monday that the president wouldn’t be able to confirm his Fed chair pick until the investigation against Powell has been withdrawn. Powell’s term expires in May.

Some Trump allies who have supported both Hassett and Warsh for the job said any escalation in the criminal investigation of Powell could further tarnish Hassett’s standing with the Senate and his future Fed colleagues given his White House role. These people said that could give Warsh an edge by leaving him in relatively better standing with lawmakers and central bank insiders.

Trump was impressed by Warsh in an interview last month, telling associates over the holidays that he was struck by his acumen and good looks, according to people familiar with the matter.

Warsh, who served on the Fed’s board from 2006 to 2011, hasn’t spoken publicly on the investigation. Unlike Hassett, who works in the White House, he doesn’t face a regular balancing act of defending controversial attacks against the Fed or its leaders.

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But before the probe became public, Warsh had publicly dismissed concerns about Trump’s attacks on the Fed, suggesting Powell had brought them on himself.

Last fall, Warsh disparaged a brief to the Supreme Court signed by all former living Fed chairs and a bipartisan group of Treasury secretaries. They warned the Fed’s independence from the White House would be lost if the president succeeds in his attempt to fire Fed governor Lisa Cook. “I did not know that senior economic officials’ at the Treasury and the Federal Reserve expertise went all the way to constitutional jurisprudence,” he told Barron’s.

There is a final practical consideration that has grown more significant since Sunday. The Trump administration has been focused on ensuring Powell departs entirely when he steps down as chair. While Powell’s chairmanship expires in May, his term as a governor runs until January 2028.

The investigation raises the prospect that Powell won’t leave if the administration tries to use it as leverage to compel his resignation. But analysts say Powell is more likely to vacate his seat if Waller is the pick—a respected colleague with whom he has worked closely.

That would give Trump an extra seat to fill on the board and a total of two this year: One when the term of Fed governor Stephen Miran expires at the end of this month, and then Powell’s in May.

Kathleen Kennedy exits as Disney’s Lucasfilm refocuses on making movies

The Star Wars empire is getting new leadership for only the second time since its launch nearly 50 years ago, as Disney DIS -0.11%decrease; red down pointing triangle opens a new chapter for one of Hollywood’s most celebrated and scrutinized franchises.

Kathleen Kennedy is stepping down after 13 years as president of Lucasfilm, the Disney division that makes Star Wars films and television shows. Veteran Star Wars filmmaker and George Lucas protégé Dave Filoni has been named Lucasfilm’s president and chief creative officer.

Filoni, 51 years old, was hired by Lucas in 2005 to work on the animated series “Star Wars: The Clone Wars.” He directed, produced and wrote numerous Star Wars cartoons and live-action series over the subsequent two decades and was named the Disney unit’s chief creative officer in 2023.

Lynwen Brennan, a 26-year veteran of the company, was named co-president. She oversees Lucasfilm’s business strategy and operations, as well as the Industrial Light & Magic visual-effects studio.

Lucasfilm has had a mixed record commercially and with fans under Kennedy, releasing well-received hits such as “The Force Awakens” and “The Mandalorian,” as well as flops like “Solo: A Star Wars Story” and streaming series “The Acolyte.”

A healthy Star Wars franchise is vital for Disney, which for the past decade has relied on a small number of franchises to fuel its business on big and small screens, in theme parks and on toy-store shelves.

Lucas, who directed the original 1977 “Star Wars” and retained ownership of the brand, hired his friend Kennedy as his successor in 2012. Several months later, Disney, in a big bet by Chief Executive Bob Iger, bought Lucasfilm for $4 billion and kept Kennedy as its leader.

The franchise’s long-awaited return to theaters with J.J. Abrams’ “The Force Awakens” in 2015 was a success and three of the four Star Wars movies released over the next four years grossed more than $1 billion each. But they polarized fans, and some were beset by creative problems behind the scenes.

Kennedy brought in a new filmmaker to complete 2016’s “Rogue One,” fired the directors of “Solo” mid-production, and brought back Abrams for 2019’s “The Rise of Skywalker” after originally announcing it would be helmed by Colin Trevorrow of “Jurassic World.”

On Disney+, “The Manadalorian” was a hit, particularly with families, that helped launch the streaming service. “Andor” was a critical sensation that attracted a more sophisticated adult audience, but had a hefty price tag of about $25 million per episode, according to people familiar with the matter.

People who have worked at and with Lucasfilm said Kennedy has been more of a hands-on producer than a business-focused studio executive. “She’s my first call, last call, all the time,” “Andor” creator Tony Gilroy said in an interview with The Wall Street Journal last year.

After starting her career as Steven Spielberg’s secretary, Kennedy became one of Hollywood’s most accomplished producers, with credits including “Back to the Future,” “Jurassic Park” and “The Sixth Sense.”

Running Lucasfilm put her in the crosshairs of one of the world’s most opinionated and outspoken fan communities.

They have blamed her both for content that disappointed and a number of projects that were developed but never made, including a Lando Calrissian effort starring Donald Glover and movies from “Wonder Woman” director Patty Jenkins, Marvel chief Kevin Feige and the writers-producers of “Game of Thrones.”

“The only thing we’re clear about is that Kathleen Kennedy is the one who seeks out these creative types and puts them in charge of projects at Lucasfilm, and sometimes that has gone horribly wrong,” said Meg Jeffery, who runs the YouTube channel Star Wars Meg from her home in London.

Kennedy has expressed frustration with the scrutiny directed at her over Lucasfilm’s development process.

“We want to make those things that, as time passes, feel relevant to what the audience responds to,” she said last year in an interview with Deadline. “Of course we’re going to develop lots of different things with an understanding that not everything gets made.”

Now the franchise’s creative future rests with Filoni, who has long been a public ambassador for Lucasfilm. Often seen wearing a signature cowboy hat, he brings credibility with fans as someone who grew up loving the original movies, had a hand in popular content including “The Mandalorian,” and studied at the feet of Lucas.

“If you want to study and make a Hitchcock film you’d study Hitchcock, so you should study George Lucas if you want to make a Star Wars film,” he said on the Writers Guild of America’s 3rd & Fairfax podcast in 2024.

Filoni has worked closely with Kennedy since becoming chief creative officer, so the leadership transition likely won’t be abrupt, said people familiar with the matter. With his background as a filmmaker and lifelong passion for Star Wars, he brings a different sensibility to leadership than Kennedy, a producer who was a professional peer of Lucas.

Disney hasn’t released a Star Wars movie since 2019’s “The Rise of Skywalker,” the lowest-grossing and worst-reviewed entry in the Kennedy-produced trilogy that started with “The Force Awakens.” In the early 2020s, Lucasfilm focused more on TV shows as its film development stalled and streaming became Disney’s priority.

Lucasfilm’s strategy now is to have movies once again drive the Star Wars franchise, according to a person familiar with the matter. A “Mandalorian” film featuring sidekick Grogu, popularly known as Baby Yoda, comes out in May; and “Starfighter,” a movie starring Ryan Gosling, recently wrapped production and comes out in 2027.

“A Complete Unknown” writer-director James Mangold and “Thor: Ragnarok” director Taika Waititi are working on scripts for new Star Wars films. Longtime X-Men writer-producer Simon Kinberg is writing a new trilogy of Star Wars movies.

The only coming television series the company has announced are a second season of “Ahsoka,” created by Filoni, a new animated show about “The Phantom Menace” villain Darth Maul and an anime-style series called “The Ninth Jedi.”

Kennedy will continue producing Star Wars films and work on independent projects, Disney said. “I will die making movies,” she told Deadline last year.