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Monthly Archives: June 2017

Michael S. Casey, an American sanctions expert at the law firm Ropes & Gray, said, “This is a severe penalty in light of the central role that the U.S. financial system plays in the world’s economy.”

Mr. Mnuchin would not say if the United States had warned China about the sanctions, but he said they were not meant as any sort of message to the Chinese government.

“The Department of the Treasury is committed to protecting the U.S. financial system from North Korean abuse and maximizing pressure on the government of North Korea until it abandons its nuclear and ballistic missile programs,” Mr. Mnuchin said. “While we will continue to seek international cooperation on North Korea, the United States is sending an emphatic message across the globe that we will not hesitate to take action against persons, companies and financial institutions who enable this regime.”

By targeting the bank, the Trump administration is also hoping that China’s financial sector will pressure North Korea in ways that its government has failed or been unwilling to.

Anthony Ruggiero, a former official in the Treasury’s Office of Terrorist Financing and Financial Crimes, said that because of Thursday’s move, other Chinese banks would likely be getting calls from their American counterparts to make sure that they were not engaging in illicit transactions with North Korea. He said that similar actions against bigger Chinese banks could be in store.

“This is the tip of the iceberg,” Mr. Ruggiero said. “We know there are more Chinese banks that are either wittingly or unwittingly assisting North Korea.”

It is not the first time that the United States has targeted a Chinese bank to exert pressure on North Korea. In 2006, the Treasury Department designated Banco Delta Asia, an obscure, family-owned bank in the Chinese gambling enclave of Macao, as a “primary money laundering concern.” This started an informal financial embargo that has gradually tightened around Pyongyang and became a negotiating point in the six-nation talks over its nuclear program.

However, at the urging of the South Korean government, who feared it was impeding talks, President George W. Bush reluctantly lifted the sanctions. The talks failed and North Korea continued on with its efforts to build missiles and nuclear bombs.

Sanctions are also being imposed on Dalian Global Unity Shipping and two Chinese citizens who the Treasury said have business dealings with North Korea related to illicit financial transactions.

President Trump encouraged China, one of North Korea’s only allies and a major trading partner, to pressure the North to curb its nuclear ambitions.

Last week, Mr. Trump expressed his frustration on Twitter: “While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out.”

He added, “At least I know China tried!”

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The yield on the 10-year United States Treasury note, which was at 2.12 percent on Monday, had risen to 2.27 percent on Thursday. (Bond yields and prices move in opposite directions.)


Mario Draghi, the president of the European Central Bank, called for prudence in the central bank’s policies in a speech on Tuesday.

Michael Probst/Associated Press

A sign of the state of investors’ nerves was an intraday spike in the index known as Wall Street’s fear gauge, the VIX, which jumped 51 percent, before ending the day up 14 percent.

In his remarks, Mr. Draghi highlighted the success of European Central Bank policies in increasing jobs, spurring growth and stopping deflation.

But in calling for prudence in policy, Mr. Draghi — who, more than any other central banker, is known for his judicious choice of words — sparked an immediate sell-off in European government bonds as investors interpreted his use of the word “prudence” as a stepping away from the bank’s commitment to keep buying European government bonds.

Taken aback by the rout, central bank officials quickly said that the speech should not be seen as a statement by Mr. Draghi that he would tighten policy immediately, but investors paid them little heed.

“Central bankers are saying that economies are doing well enough and conditions are loose enough that we do not need to press the pedal to the metal anymore,” said Michel Del Buono, global strategist for Makena, an investment firm that caters to foundations and endowments. “But many investors are still thinking that they will be doing the maximum forever.”

It is not just the European Central Bank that has, fairly abruptly, signaled a change in direction.

Mark Carney, the governor of the Bank of England, another central banker known for dovish sympathies, said in a speech on Tuesday that an increase in rates might be in order just a month after he indicated that interest rates would remain low.

The pound and the yield on the British 10-year note surged afterward.

The swift sell-off in European stocks and bonds recalled the so-called taper tantrum in 2013, when the Federal Reserve first said it would begin to taper its policy of buying mortgages and other securities in an attempt to stimulate the economy.

Even though an actual rate increase was years away, stocks and bonds in emerging markets, long dependent on interest-rate sensitive capital flows, fell sharply in what would become a three-year bear market for the asset class.

That Mr. Draghi and Mr. Carney moved so quickly to signal this new approach has prompted analysts to speculate that there may be some form of coordination among central bankers to warn investors who have benefited from the liquidity boom.

Stock markets in the United States have hit highs and, for quite awhile, the interest rates on trillions of dollars’ worth of European government bonds dipped into negative territory as global investors piled into these securities, confident that the central bank would continue to buy.

In the last few weeks, some officials from the Federal Reserve have warned about overheated financial markets.

On Tuesday, for example, Janet L. Yellen, the Fed chairwoman, described stock market valuations as being “somewhat rich.” Her language did not carry the punch of “irrational exuberance,” Alan Greenspan’s phrase to refer to a runaway stock market in the late 1990s.

Nevertheless it did send a clear signal to many investors that the Fed, even though it has no official mandate to guide or influence financial markets, is watching for potential bubbles. And that, perhaps, it will consider overvalued stock and bond markets when weighing its next rate increase.

So in that sense, some analysts say, central bankers’ recent turn to a more conservative approach should not be seen as a surprise.

On Thursday, stocks in Paris fell 1.9 percent, while Frankfurt shares ended 1.8 percent lower. The iShares EZU exchange traded fund, a $9 billion fund that follows a broad basket of stocks in the eurozone, closed the day down 1.4 percent.

In the United States, the benchmark Standard & Poor’s 500-stock index ended down 0.86 percent — having recovered lost ground late in the day. The slump came even amid gains in big banks, which, having passed the Federal Reserve’s annual stress tests, announced they would pay their shareholders the largest dividends in nearly a decade.

Of the Dow Jones industrial average’s 30 members, only Goldman Sachs (up 0.9 percent) and JPMorgan Chase (up 1.48 percent) were positive for the day.

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This month the so-called Faang stocks — Facebook, Amazon, Apple, Netflix and Google, which have led the market’s rally — faced a sudden downdraft, which many market watchers called a warning of turbulent times to come. Those jitters were on display Thursday, as tech shares led a sell-off that put a dent in the major indexes.

On June 14, the Federal Reserve raised short-term interest rates for the second time this year, a move that was widely expected. But more ominously for stock investors, the Fed also said it would reduce its $4.2 trillion balance sheet and taper its purchases of longer-term government bonds (though it didn’t say how fast), bringing to an end the quantitative easing it undertook after the financial crisis. And the prospect that European central banks might join in the tightening has sent bond prices lower.

And then there’s Mr. Trump himself, whose unpredictability and erratic behavior still have the potential to rattle markets.

So I asked some prominent investors and market analysts whether they were pulling back from stocks, and how they viewed these latest developments.

A Crack in the Faang Stocks

After some of the Faang stocks plunged over 3 percent on June 9, Goldman Sachs compared them to the leading stocks of the tech bubble. But by the end of the month they’d recovered and were again approaching all-time highs.

There’s no question that these market darlings, which together have accounted for a disproportionate percentage of the market’s gains, are expensive, and getting more so. Price-to-earnings ratios range from 38 (Facebook) to 184 (Amazon). Their market caps are so huge they dominate the indexes. They show up not only in so-called growth funds, but also in value and low-volatility funds. Should they embark on a sustained plunge, a bear market could quickly follow.

The tremor in June was “a warning shot across the bow,” said Bill Smead, the founder of Smead Capital Management in Seattle. The Faang stocks “are showing all the classic signs of being overcooked,” he added. “What magazine hasn’t had Jeff Bezos or Mark Zuckerberg on the cover? There’s no question this can end very badly. But the market can stay irrational for a very long time. My sense is that there’s one big blowout rally left in these stocks.”


Traders on the floor of the New York Stock Exchange this month as Janet Yellen announced the Fed’s decision to raise interest rates.

Drew Angerer/Getty Images

Mr. Stack noted that the Faang stocks had brief sell-offs last June and October, only to rebound. Still, he said, “the Faang stocks will be among the hardest hit in the next bear market due to the amount of money that flowed into them and the high expectations that have driven them higher.”

But like Mr. Smead, he doesn’t expect that to be imminent. “We’re not buying them, but we’re not necessarily saying sell,” Mr. Stack said. He urged investors to rebalance portfolios that have become too heavily weighted in these stocks.

A Tightening Federal Reserve

Everyone I interviewed agreed that the Fed is the most likely catalyst for the next bear market, but that may still be years away.

“Historically it’s difficult to find a bear market that wasn’t triggered to some extent by the Fed,” Mr. Smead said. “But I don’t think unwinding the long bond position as gradually as they’re going to will have a significant impact. What would have an impact is if the Fed is forced to raise rates faster than everyone anticipates. The Fed has prepared investors for one more rate hike this year. That’s where the potential surprise could come. If we see two or three by year’s end, we’re going to see definite headwinds and maybe a market top of some significance.”

Mr. Kelly said the Fed had plenty of room to maneuver before stocks start to be affected. “We just had a once-in-70-year crisis that left very long scars. Businesses basically didn’t invest for eight years. In tightening, the Fed is acknowledging that a monetary policy built on a very fragile economic backdrop is no longer appropriate. But we’re just getting to the point now where people are crawling out of their shells and we’re seeing more normal economic activity.”

Mr. Kelly said bull markets typically last another three to four years after such a point in the economic cycle, and can even go another eight or nine. “Bull markets die from excess, not old age,” he said.

Mr. Smead agreed. “There’s no question we’re getting closer to normal rates,” he said. “That will be difficult for the stock market when it happens. People will be less willing to be adventurous. But that’s still years away.”

Over at InvesTech Research, “we’re still quite bullish,” Mr. Stack said. “We’re not increasing cash reserves. We are rebalancing towards more defensive and out-of-favor sectors, like consumer staples and health care.”

‘I Wouldn’t Call It a Trump Rally’

“The risks don’t lie with potential charges of obstruction of justice or even impeachment,” Mr. Stack said. “For political mayhem to upset the economic apple cart, it has to irreparably damage confidence at the consumer and business level. So far we don’t see that happening. Consumer confidence and consumer sentiment measures are at 16-year highs, and C.E.O. confidence in April was the highest since 2004.”

Nor have investors given up hope that a Republican Congress will still deliver business-friendly corporate tax reform and a pro-growth overhaul of the tax code, despite the president’s troubles.

At the same time, “Trump shouldn’t be looking to the market for vindication,” Mr. Smead said. “I wouldn’t call it a Trump rally. He’s basically riding on the Obama years. “

His bottom line: “We don’t pay much attention to politics, and that’s been a good thing.”

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“Is — is that necessary?” asked the Fox News anchor Bill Hemmer, referring to the graphic nature of Mr. Trump’s comments, as Sarah Huckabee Sanders, the deputy White House press secretary, argued that Mr. Trump’s harsh words were justified. Brit Hume, the veteran Fox News analyst, called it “absurd” that a president could feel bullied by hosts of a cable news show.

“I love sick burns on Twitter, but I’m not president of the United States,” the Republican Fox News host Kennedy said during an on-air discussion in which former Gov. Mike Huckabee of Arkansas, Ms. Sanders’s father, allowed that the president’s words might have been ill-considered.

For Mr. Trump’s inner circle, however, the outburst was no surprise. An avid television viewer, the president has fumed for weeks about the coverage on “Morning Joe” — using the “psycho” moniker in private to describe Mr. Scarborough — as the co-hosts became increasingly acidic in their commentary, according to a senior administration official. Minutes before Mr. Trump’s tweets Thursday, Ms. Brzezinski derided the president as “lying every day and destroying the country.”

Mr. Trump has been particularly upset by the hosts’ questioning of his mental state, the official said, viewing it as a form of personal betrayal. Mr. Trump and the “Morning Joe” duo once enjoyed a relatively friendly relationship: Mr. Scarborough and Ms. Brzezinski visited Mr. Trump’s Florida estate, Mar-a-Lago, this past New Year’s.

Privately, Ms. Brzezinski was stunned by the remarks, telling a close friend on Thursday morning: “I really don’t need this.” Her father, Zbigniew Brzezinski, a former national security adviser, died in May, and her mother, Emilie Benes Brzezinski, has suffered two heart attacks since he died, according to the friend, who requested anonymity to describe a private conversation.

Ms. Brzezinski was expected to address the incident on-air Friday morning. For now, her only public comment has been a photograph she posted to Twitter of a box of Cheerios, emblazoned with the words, “Made for Little Hands,” referring to a longstanding insult about Mr. Trump.

CNN, one of MSNBC’s chief rivals, issued a statement in support of Ms. Brzezinski — a rare sign of solidarity in the famously fractious TV news world. The message spoke to a growing sense among journalists that they must unite against the anti-press barrage from Mr. Trump and his aides, particularly after a week where Ms. Sanders, at the White House lectern, encouraged Americans to watch an anti-CNN video, “whether it’s accurate or not.”

At her televised briefing Thursday, Ms. Sanders faced tough questions about the tweets from numerous outlets, including two journalists for Fox News, John Roberts and Jon Decker, who posed some of the session’s more pointed queries.

“The only person that I see a war on is this president and everybody that works for him,” Ms. Sanders said, echoing her comments earlier this week that Americans “deserve something better” from the news media.

“I don’t think you can expect someone to be personally attacked day after day, minute by minute, and sit back,” Ms. Sanders told the journalists. “The American people elected a fighter; they didn’t elect somebody to sit back and do nothing. They knew what they were getting when they voted for Donald Trump.”

That desire to punch back has fueled several of the president’s media feuds, including his ongoing clash with CNN, whose president, Jeffrey A. Zucker, hired him to host “The Apprentice” at NBC.

The president has bragged to friends that he secured Mr. Zucker’s current job by recommending him to a top executive at Turner, CNN’s parent company. People familiar with CNN’s hiring process have said Mr. Trump’s endorsement did not play a role.

A retraction by CNN this week of a report about one of Mr. Trump’s associates — followed by the resignations of three CNN journalists who worked on the story — had buoyed Mr. Trump and his team. The president gloated about the network’s mishap and cited the retraction as evidence that the establishment news media was biased against him.

Some precincts of the right-leaning news media, such as Breitbart News, refrained from criticizing Mr. Trump, playing down the story of the president’s remarks. But other Trump-friendly journalists took exception.

Shortly after the president’s tweets, Trey Yingst, White House correspondent for the conservative-leaning One America News Network, wrote on Twitter: “It costs nothing to be kind.”

One of Mr. Trump’s most stalwart defenders, Sean Hannity of Fox News, at first suggested that Mr. Scarborough deserved the opprobrium for calling the president “a liar, a thug and mentally unhinged,” Mr. Hannity wrote.

By Thursday afternoon, on his syndicated radio show, Mr. Hannity had softened his view. He said that it would have been in Mr. Trump’s “best interest not to do it — in my humble opinion,” referring to the remarks.

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“My first reaction was that this just has to stop, and I was disheartened because I had hoped the personal, ad hominem attacks had been left behind, that we were past that,” Senator Susan Collins, a moderate Republican from Maine who is a crucial holdout on the effort to repeal the Affordable Care Act, said in an interview.

“I don’t think it directly affects the negotiation on the health care bill, but it is undignified — it’s beneath a president of the United States and just so contrary to the way we expect a president to act,” she said. “People may say things during a campaign, but it’s different when you become a public servant. I don’t see it as undermining his ability to negotiate legislation, necessarily, but I see it as embarrassing to our country.”

A slew of Republicans echoed her sentiments. Senator Lisa Murkowski of Alaska, who, like Ms. Collins, holds a pivotal and undecided vote on the health care bill, tweeted: “Stop it! The presidential platform should be used for more than bringing people down.”

Senator Ben Sasse, a Nebraska Republican who opposed Mr. Trump’s nomination during the presidential primaries, also implored him to stop, writing on Twitter that making such comments “isn’t normal and it’s beneath the dignity of your office.”

Senator James Lankford, Republican of Oklahoma, added, “The president’s tweets today don’t help our political or national discourse and do not provide a positive role model for our national dialogue.”

Ms. Brzezinski responded by posting on Twitter a photograph of a box of Cheerios with the words “Made for Little Hands,” a reference to a longstanding insult about the size of the president’s hands. MSNBC said in a statement, “It’s a sad day for America when the president spends his time bullying, lying and spewing petty personal attacks instead of doing his job.”

Mr. Trump’s attack injected even more negativity into a capital marinating in partisanship and reminded weary Republicans of a political fact they would rather forget: Mr. Trump has a problem with the half of the population more likely to vote.


Representative Sheila Jackson Lee of Texas and others in the House criticized President Trump’s remarks on Thursday.

Stephen Crowley/The New York Times

Christine Matthews, a Republican pollster who specializes in the views of female voters, said the president’s use of Twitter to target a prominent woman was particularly striking, noting that he had used only one derogatory word — “psycho” — to describe the show’s other co-host, Joe Scarborough, and the remainder of his limited characters to hit upon damaging stereotypes of women.

“He included dumb, crazy, old, unattractive and desperate,” Ms. Matthews said.

“The continued tweeting, the fact that he is so outrageous, so unpresidential, is becoming a huge problem for him,” she added. “And it is particularly unhelpful in terms of building relationships with female Republican members of Congress, whose votes he needs for health care, tax reform and infrastructure.”

But it was unclear whether the vehemence of the president’s latest attack would embolden members of his party to turn disdain into defiance.

Senior Republicans, including Senator Mitch McConnell of Kentucky, the majority leader, cycled through what has become a familiar series of emotions and calculations after the Twitter posts, according to staff members: a flash of anger, reckoning of possible damage and, finally, a determination to push past the controversy to pursue their agenda.

“Obviously, I don’t see that as an appropriate comment,” the House speaker, Paul D. Ryan, said during a Capitol Hill news conference. Then he told reporters he wanted to talk about something else.

Representative Nancy Pelosi, the House Democratic leader, demanded an apology, calling the president’s Twitter posts “sexist, an assault on the freedom of the press and an insult to all women.”

A spokeswoman for the president, Sarah Huckabee Sanders, urged the news media to move on, arguing during the daily White House briefing that Mr. Trump was “fighting fire with fire” by attacking a longtime critic.

Ms. Brzezinski had called the president “a liar” and suggested he was “mentally ill,” added Ms. Sanders, who defended Mr. Trump’s tweets as appropriate for a president.

Melania Trump, the president’s wife — who has said that, as first lady, she will embark on a campaign against cyberbullying — also rejected claims that her husband had done what she is charged with undoing.

“As the first lady has stated publicly in the past, when her husband gets attacked, he will punch back 10 times harder,” Mrs. Trump’s spokeswoman wrote in a statement, referring to the first lady’s remarks during the campaign.

Current and former aides say that Mr. Trump was chastened by the furor over the “Access Hollywood” tape that emerged in October, which showed him bragging about forcing himself on women, and that he had exhibited self-restraint during the first few months of his administration. But in the past week, the sense that he had become the victim of a liberal media conspiracy against him loosened those tethers.

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Moreover, Mr. Trump’s oldest friends say it is difficult for him to distinguish between large and small slights — or to recognize that his office comes with the expectation that he moderate his behavior.

And his fiercest, most savage responses have almost always been to what he has seen on television.

”Morning Joe,” once a friendly bastion on left-leaning MSNBC, has become a forum for fiery criticism of Mr. Trump. One adviser to the president accused the hosts of trying to “destroy” the administration over several months.

After lashing out at Mr. Scarborough and Ms. Brzezinski at one point last summer, Mr. Trump told an adviser, “It felt good.”

Even before he began his campaign two years ago, Mr. Trump showed a disregard for civility when he made critical remarks on television and on social media, particularly about women.

He took aim at the actress Kim Novak, a star of 1950s cinema, as she presented during the 2014 Academy Awards, taking note of her plastic surgeries. Chagrined, Ms. Novak later said she had gone home to Oregon and not left her house for days. She accused Mr. Trump of bullying her, and he later apologized.

As a candidate, Mr. Trump was insensitive to perceptions that he was making sexist statements, arguing that he had a right to defend himself, an assertion Ms. Sanders echoed on Thursday.

After the first primary debate, hosted by Fox News in August 2015, Mr. Trump trained his focus on the only female moderator, Megyn Kelly, who pressed him on his history of making derogatory comments about women.

He told a CNN host that Ms. Kelly had “blood coming out of her wherever,” leaving Republicans squeamish and many thinking he was suggesting that Ms. Kelly had been menstruating. He refused to apologize and kept up the attacks.

Later, he urged his millions of Twitter followers to watch a nonexistent graphic video of a former Miss Universe contestant, Alicia Machado, whose weight gain he had parlayed into a media spectacle while he was promoting the pageant.

Mr. Trump went on to describe female journalists as “crazy” and “neurotic” on his Twitter feed at various points during the race. He derided reporters covering his campaign, Katy Tur of NBC and Sara Murray of CNN, in terms he rarely used about men.

His tweets on Thursday added strain to the already combative daily briefing, as reporters interrupted Ms. Sanders’s defense of the president to ask how she felt about them as a woman and a mother.

She responded that she had only “one perfect role model”: God.

“None of us are perfect,” she said.

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“It’s not a sudden thing. It’s been a long time coming,” said Guy Moszkowski, managing partner at Autonomous Research U.S., an independent firm in New York. “But American banks are more soundly capitalized today than at any time in my career, which started in 1979.”

On the other hand, critics fear the easing of regulatory pressure and a more laissez-faire-oriented White House could set the stage for a return to the bad old days of enormous leverage and freewheeling deals until the music inevitably stops.

“This isn’t the time to put the brakes on regulation,” said Mark T. Williams, a banking expert at Boston University and a former bank examiner for the Federal Reserve. He noted that with the 10 largest American banks holding 80 percent of all banking assets, “this concentrated financial power residing at the top banks should be carefully monitored.”

“Without regulators and cops in the corner, you will have incentives for banks to take excessive risks,” Mr. Williams added.

It was exactly 10 years ago this month, as the housing bubble collapsed, that the first cracks in what would nearly bring down the country’s economic edifice appeared.

Within 18 months, Bear Stearns and Lehman Brothers were gone, and once invincible names like Citigroup and Bank of America teetered on the edge, necessitating a federal bailout.

The economic and psychological scars of the financial crisis and the ensuing recession linger, as do the industry’s public relations woes.

But in terms of financial metrics like earnings, dividends for shareholders and the ability to absorb potential losses in the event of a recession, the financial sector has clearly turned a page. The banks tested by the Fed now have a $1.25 trillion capital cushion, compared with less than half that in 2009.

In a statement on Wednesday, the chief executive of Citigroup, Michael Corbat, said, “Today marks a significant milestone for Citi and our shareholders.”

The Fed’s assessment, he said, demonstrated that “Citi has the ability to withstand a severe economic scenario and remain well capitalized, while also substantially increasing our level of capital return.”

Although President Trump has promised to roll back many of the rules imposed after the financial crisis while appointing regulators with a much lighter touch, many bank analysts say memories of 2008 and the penalties that followed will also inhibit risk-taking in the future.

“Parts of the industry had a near-death experience, while some financial institutions actually had a death experience,” Mr. Moszkowski noted. And as was the case following the crash of 1929, “the legislative and regulatory response was quite harsh.”


Bank stocks surged on Thursday after the Fed’s report, even as the broader market fell.

Sam Hodgson for The New York Times

The 2008 crisis “forced the U.S. banking system to recognize its losses and recapitalize itself quickly,” Mr. Moszkowski said. “The lack of that type of pressure in Europe has contributed to what has been a longer period of weakness and recovery there.”

With European banks still hobbled, American firms have benefited in recent years, lifting their share of global revenues from underwriting and advice on mergers and acquisitions.

Nearly a decade of historically low interest rates engineered by the Fed also helped banks rebuild their financial fortunes, even if savers and investors watched the yields on money market accounts and C.D.s shrink to the point of vanishing.

“The banking industry has pretty radically de-risked its balance sheet,” said Chris Kotowski, a senior research analyst at Oppenheimer. For example, in 2007 banks held more than a quarter of a trillion dollars’ worth of corporate bonds on their trading desks and other accounts. By April 2017, that figure stood at just over $54 billion.

The current rate of delinquencies on products like credit cards and commercial real estate loans is half what it was during previous periods of healthy economic growth, Mr. Kotowski said.

At the same time, while banks may have the ability to lend more freely, anemic demand for credit and slow economic growth are likely to restrain new loan growth. And the Fed is in the process of slowly raising interest rates in the face of what policy makers see as stronger economic growth.

If rates keep moving up, higher borrowing costs for businesses and consumers would most likely offset whatever benefit slightly easier credit from a healthier banking system provides.

There are other shifts by big banks wrought by the financial crisis and the long economic recovery since then that won’t be reversed.

After shedding tens of thousands of workers, and shuttering hundreds of branches, the banking industry isn’t about to go on a hiring or building spree.

“Necessity is the mother of invention, and banks have been forced to operate more cheaply,” Mr. Moszkowski said. “Changing customer behavior, like use of mobile banking, has also enabled them to cut back on branches and staff.”

While bankers themselves might be more cautious about lending or blurring the distinction between traditional banking and Wall Street-style trading, one element of the go-go years has made a comeback recently: big pay packages for top executives.

With the big rally in bank stocks since the election in November, the options packages and other stock-based incentives that bank executives received in recent years have swollen in value.

Executive compensation hasn’t declined since the financial crisis. It’s gone up,” Mr. Williams said. In 2016, JPMorgan Chase’s chief executive, Jamie Dimon, received a total pay package of $28 million. In 2006, his overall compensation equaled $27 million.

In 2016, Lloyd C. Blankfein of Goldman Sachs was paid a total of $20.2 million, well below the $70 million he received a decade ago, but far above the postcrisis compensation package of $9.6 million in 2009.

For his part, Mr. Kotowski believes that memories of Lehman, plus the enormous fines paid to regulators, will serve as a check on appetite for risk for years to come.

“Even if bankers all started behaving like drunken sailors tomorrow, it would take years before problems arose,” Mr. Kotowski said. “And with the stress tests by the Fed every year, and the memory of the fines, they’re not about to do that.”

It was painful for banks to give up the revenues and profits that came with added risk, Mr. Kotowski said, “but having made that adjustment, there’s no point in going back to the old world.”

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Karen Bradley, the culture minister, said on Thursday that an investigation into the proposed deal had raised questions about whether the takeover would give members of the Murdoch family too much influence.

“The transaction may increase members of the Murdoch Family Trust’s ability to influence the overall news agenda and their ability to influence the political process,” she said in a statement.

But officials also ruled that 21st Century Fox executives would be “fit and proper” to hold broadcasting licenses. That removes uncertainty for the media conglomerate as it looks to end a lengthy sexual harassment scandal at Fox News in the United States.

The company welcomed the British regulator’s “fit and proper” decision, but said it was disappointed the government still had reservations about its potential control of the local media industry. It added that its takeover of Sky may now happen by June 2018.

The company has until July 14 to respond before the government formally refers the deal to Britain’s competition authority.

“It’s both good and bad news for 21st Century Fox,” said Martin Moore, director of the Center for the Study of Media, Communication and Power at King’s College London.

Mr. Moore added that the company would be more comfortable arguing its case to British regulators over questions of its control over parts of the media industry than on whether it should pass the “fit and proper” test.

Investors reacted positively to Thursday’s multifaceted announcement. Shares in Sky rose more than 3 percent after the British government made its ruling.

The deal for the 61 percent of Sky that 21st Century Fox does not already own prompted concerns almost immediately after it was announced in December. Mr. Murdoch has long coveted total ownership of Sky, a satellite broadcaster he founded in the early 1990s. But the media mogul is a divisive figure in Britain, and a previous bid for Sky was withdrawn.

‘Fit and Proper’: From the Ofcom Report

From a report issued by the Office of Communications in Britain.

We have concluded that the behaviors alleged at Fox News amount to significant corporate failure, however, the overall evidence available to date does not provide a reasonable basis to conclude that if Sky were 100 percent owned and controlled by Fox, they would not be fit and proper to hold broadcast licenses.

The transaction may increase the ability of members of the Murdoch Family Trust to influence the overall news agenda.

Read the full report »

Two politically independent regulators in Britain — the Office of Communications, or Ofcom; and the Competition and Markets Authority — began reviewing the proposed takeover, and attention quickly focused on Ofcom’s investigation, which looked into whether the deal would limit consumer choice and whether 21st Century Fox executives met British broadcasting standards.

Ofcom said in its report that a merged company would control a significant part of Britain’s media landscape, including television, newspaper and online outlets. In response, Fox made concessions to counter those concerns, though the British government — in its separate decision — said that these remedies did not go far enough.

British officials also did not hold back in their criticism of the sexual harassment scandal at Fox News, which, they said, had amounted to “significant corporate failures.”

In its ruling, Ofcom found that the scandals at Fox News had been extremely serious and disturbing, according to its report published on Thursday.

But despite scolding 21st Century Fox, Ofcom passed the company as a “fit and proper” holder of British broadcasting rights. The British regulator added that it had found no evidence that the issues at Fox News had extended through 21st Century Fox, nor that any of the company’s executives were aware of the misconduct before they were informed of it in July 2016.

One lawyer for some of the accusers rejected these claims, saying that 21st Century Fox executives had known about the harassment before that date.

“Fox has represented to Ofcom that no executive director was aware of any allegations of sexual and racial harassment at Fox News prior to July 2016,” Douglas Wigdor, a lawyer representing several current and former Fox News employees who made sexual and racial harassment complaints against the network, said in an email. “I can assure you that the veracity of that statement will be probed in our current litigations.”

In the case of Bill O’Reilly, the former Fox News host, 21st Century Fox repeatedly stood by Mr. O’Reilly even as he faced a series of sexual harassment allegations. The company reached two settlements involving sexual harassment complaints against him in the aftermath of last July’s ouster of Roger Ailes, the former Fox News chief. In addition, the company extended Mr. O’Reilly’s contract this year before he was eventually forced out.

The extended review into 21st Century Fox’s offer comes at a difficult time for the British government, which must eventually decide whether to approve or reject the takeover.

Prime Minister Theresa May was unable to win a majority in parliamentary elections this month, and politicians in Britain are focused on the beginning of negotiations to leave the European Union, leaving little time to consider the proposed takeover. Opposition lawmakers, and even some inside Mrs. May’s Conservative Party, have balked at the deal.

This is not Mr. Murdoch’s first attempt to buy Sky.

He made a previous bid for the satellite giant in late 2010, but was forced to withdraw the offer after a phone-hacking scandal at The News of the World, a British newspaper — since shut down — that was then part of News Corporation, a predecessor to 21st Century Fox.

At the time, British regulators criticized the handling of the scandal by James Murdoch, Rupert Murdoch’s son and then a senior executive at News Corporation, though the authorities eventually cleared Sky as “fit and proper.” James Murdoch is now chairman of Sky and chief executive of 21st Century Fox.

The most recent attempt to buy Sky is part of 21st Century Fox’s efforts to keep pace with digital rivals like Netflix and Amazon, which have used their streaming services to win over consumers increasingly accustomed to watching movies and television programs on mobile devices.

The acquisition of Sky, experts say, would give 21st Century Fox not only a Pan-European satellite network and access to content like the rights to the English Premier League, but also control of Now TV, Sky’s online streaming service.

That could allow 21st Century Fox, which also owns a minority stake in Hulu, to compete with its digital rivals at a time when consumers are forgoing traditional programming to stream content online.

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“We’ll try to enable Cfius to take a tougher line against certain investments emanating from those nations that pose a clear threat to our national security, focused particularly in the area of advanced technology,” said Senator John Cornyn, Republican of Texas, who said last week that he would propose the legislation.

The Trump administration has not staked out a formal stance, but trade experts are watching how the committee treats a pair of pending deals as a test of the political winds. The first is a $1.2 billion bid by Ant Financial — the electronic payments affiliate of the Alibaba Group, the Chinese e-commerce giant — for a remittances company based in Dallas called MoneyGram. The second is a $1.3 billion offer by a China-backed buyout fund for Lattice Semiconductor, which makes a range of advanced communications and telecommunication chips.

Chinese buyers are pouring more and more money into the United States. In 2016, Chinese investment in America jumped threefold to $46 billion from the year before, according to the research firm Rhodium Group. Chinese purchases in recent years have included buildings and movie theater chains.

But some deals have been in potentially sensitive areas, like semiconductors, which Cfius has increasingly blocked. A growing number have also been among start-ups working on cutting-edge technology, but they are difficult to track and are often too small to be reviewed by Cfius.

In a report this year that was first reported by The New York Times, the Pentagon said it was concerned about the flow of Chinese investment into start-ups working on important technology like artificial intelligence, robotics and augmented reality.

Critics also argue that Beijing and companies supported by the government have sought to form joint ventures or license technology, neither of which Cfius currently reviews.

“There is a perception that different financial structures are being used to avoid potential Cfius oversight,” said Andrew Shapiro, a founder of the advisory firm Beacon Global Strategies and former assistant secretary of state for political-military affairs. “So they will try to close those loopholes.”

Over the past two years, Cfius (pronounced sih-fee-us) has broken up a number of major Chinese bids for semiconductor companies, leading to Chinese complaints.

It is unclear how China’s government would respond to the revamped regulator, but the move would most likely stoke some tensions. At a recent news conference, Lu Kang, a spokesman for the Foreign Ministry, said, “There should not be undue political dimensions imposed on commercial takeovers, let alone political intervention.”


President Trump with President Xi Jinping of China in Palm Beach, Fla., in April. One of the first pieces of imminent legislation under the Trump administration could affect the United States’ economic relationship with China.

Doug Mills/The New York Times

Xiaohe Cheng, an associate professor at the School of International Studies at Renmin University in Beijing, added that some of Cfius’s recent decisions were “discriminative towards Chinese companies.”

Yet foreign businesses often complain of an unfair operating environment in China, and increasingly American officials have begun seeking what they call reciprocity, or bringing American limits on Chinese investment closer to China’s limits on American investment there. Beijing forbids foreign investors from acquiring meaningful stakes in companies in a number of industries, including the media, internet and telecommunications.

Such an initiative in the United States would have far wider economic implications and is likely to be dealt with separately from the coming legislation on Cfius.

Recently, several Trump administration officials, including Wilbur Ross, the secretary of commerce, have also expressed support for expanding the committee.

“His staff is well versed on the issues, and he clearly sees the need for updating Cfius,” said Paul S. Triolo, the head of practice on technology policy for the Eurasia Group, an advisory firm.

“He appears to be leading the charge on this with the administration,” he added.

Cfius includes members of a number of American agencies, including the Departments of Defense, State, Justice, Treasury and Homeland Security, and industry and policy analysts are watching closely to see how the committee acts under the Trump presidency.

Ant Financial, the Alibaba affiliate, outbid a company based in Kansas called Euronet Worldwide to acquire MoneyGram. Some lawmakers, led by representatives from Kansas and Texas, where MoneyGram is based, have said an Ant purchase would expose the personal financial details of American users.

Douglas Feagin, Ant Financial’s head of international operations, said in an interview that the company intended to allow MoneyGram to continue to operate on its own and that the data it had would continue to be stored in the United States on a network separate from Ant’s networks.

“The test cases will be things like the Alibaba deal,” said Adam Segal, an expert on emerging technologies at the Council on Foreign Relations.

While industry and policy analysts say it could be difficult to argue that MoneyGram is important to national security, the potential deal for Lattice Semiconductor offers a more straightforward argument.

The Pentagon report released this year cites the bid for Lattice from a venture capital firm called Canyon Bridge as an example of a tactic used to skirt government oversight. The purpose of creating Canyon Bridge, a private equity fund with links to China, was to obscure the source of capital to “enhance the possibility” that the transaction would be approved by Cfius, the report said.

Canyon Bridge has said that there was never any intention to obscure the source of the fund’s capital, as shown by meetings it had with Cfius before the deal was signed.

The coming debate about Cfius is likely to be undergirded by concerns about reciprocity.

“There’s this question about letting a Chinese company do something in the U.S. that China wouldn’t let a U.S. company do in China,” said James Lewis, a senior vice president at the Center for Strategic and International Studies, a think tank.

“That’s what people say in private,” he added. “That it’s not a two-way street, that it’s not fair and that we need to do something about it.”

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“All the signs now point to a strengthening and broadening recovery in the euro area,” Mr. Draghi said. His comments pushed the euro to almost its highest level in a year, though it later gave up some of the gains.

But along with the optimism is a fear that the economic expansion might bypass large swaths of the population, in part because a growing number of jobs could be replaced by computers capable of learning — artificial intelligence.

Policy makers and economists conceded that they have not paid enough attention to how much technology has hurt the earning power of some segments of society, or planned to address the concerns of those who have lost out. That has, in part, nourished the political populism that contributed to Britain’s vote a year ago to leave the European Union, and the election of President Trump.

“Generally speaking, economic growth is a good thing,” Ben S. Bernanke, former chairman of the Federal Reserve, said at the forum. “But, as recent political developments have brought home, growth is not always enough.”

In the past, technical advances caused temporary disruptions but ultimately improved living standards, creating new categories of employment along the way. Farm machinery displaced farmworkers but eventually they found better paying jobs, and today their great-grandchildren may design video games.

But artificial intelligence threatens broad categories of jobs previously seen as safe from automation, such as legal assistants, corporate auditors and investment managers. Large groups of people could become obsolete, suffering the same fate as plow horses after the invention of the tractor.

“More and more, we are seeing economists saying, ‘This time could be different,’” said Mr. Autor, who presented a paper on the subject that he wrote with Anna Salomons, an associate professor at the Utrecht University School of Economics in the Netherlands.

Central bankers have begun examining the effect of technology on employment because it might help solve several economic quandaries.

Why is workers’ share of total earnings declining, even though unemployment is at record lows and corporate profits at record highs? Why is productivity — the amount that a given worker produces — stuck in neutral?

“The mere fact that we are organizing this conference here in Sintra testifies to our interest in that discussion,” Benoît Cœuré, a member of the European Central Bank’s executive board, said in an interview, referring to the “Robocalypse” debate.


Mario Draghi, president of the European Central Bank, in Estonia earlier this month. “All the signs now point to a strengthening and broadening recovery in the euro area,” he said at a gathering in Sintra, Portugal on Tuesday.

Ints Kalnins/Reuters

Of particular interest to the European Central Bank is why faster economic growth has not caused wages and prices to rise. The central bank has pulled out all the stops to stimulate the eurozone economy, cutting interest rates to zero and even below, while printing money. Four years of growth have led to the creation of 6.4 million jobs. Yet inflation remains well below the bank’s official target of below, but close to, 2 percent.

One explanation is that more work is being done by advanced computers, with the rewards flowing to the narrow elite that owns them.

Still, among the economists in Sintra there was plenty of skepticism about whether the Robocalypse is nigh.

Since the beginning of the industrial age, almost every major technological innovation has led to dire predictions that humans were being permanently replaced by machines.

While some kinds of jobs were lost forever, greater efficiency led to more affordable goods and other industries soaked up the excess workers. Few people alive today would want to return to the late 1800s, when 40 percent of Americans worked on farms.

Robocalypse advocates underestimate the power of scientific advances to beget more scientific advances, said Joel Mokyr, a professor at Northwestern University who studies the history of economics.

“Think about what computers are doing to our ability to discover science,” Professor Mokyr said during a panel discussion, citing computers that can solve equations that have baffled mathematicians for decades. There may be breakthroughs that “we can’t even begin to imagine.”

There are other explanations for stagnant wages besides technology.

Companies in Japan, the United States and Europe are sitting on hoards of cash, doling out the money to shareholders rather than investing in new buildings, equipment or innovative products. Just why is another topic of debate.

Hal Varian, the chief economist at Google — whose self-driving technology may someday make taxi drivers unnecessary — said that the plunging cost of information technology “has virtually eliminated the fixed cost of entering a business.” Companies can rent software and computing power over the internet.

And flat wages reflect the large number of women who have entered the work force in recent decades as well as the post World War II baby boom, Mr. Varian said, adding that those trends have run their course. “We are going to see a higher share going to labor,” he said.

Yet already, disruptions caused by technology help account for rampant pessimism among working-class and middle-class people across the developed world.

Mr. Bernanke referred to polls showing that about twice as many Americans say the United States is on the wrong track than say the country is moving in the right direction.

As a result, “last November Americans elected as president a candidate with a dystopian view of the economy,” Mr. Bernanke said.

Mr. Autor, co-author of the Robocalypse paper, concluded that it was too early to say that robots are coming for people’s jobs. But it could still happen in the future.

“I say not Robocalypse now,” Mr. Autor said, “perhaps Robocalypse later.”

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A new start-up incubator in Paris symbolizes France’s tech ambitions, but can the land of the 35-hour workweek overcome its cultural and regulatory barriers to surpass London and other tech hubs?

The Station F start-up incubator in Paris.CreditRoberto Frankenberg for The New York Times

PARIS — One thousand start-ups in a refurbished train depot as long as the Eiffel Tower lying down. Rooms scattered with Legos and beanbag chairs. Elevated walkways bridging cargo-container offices and open-air desks. Graffitied railway cars transformed into cafes.

The vast project in the heart of Paris, Station F, is a symbol of France’s ambitions to be the start-up capital of Europe. Under an arc of glass and curved concrete, it aims to amass the largest group of entrepreneurs, venture capital firms, incubators and accelerators anywhere in the world.

The main hall in Station F will hold 3,000 desks for entrepreneurs.

The ambitious effort would seem an expensive, even quixotic undertaking for France, a country better known for a 35-hour workweek and rigid labor laws. And plenty of countries are trying to emulate Silicon Valley’s start-up ecosystem, with varying degrees of success.

While France needs to lure more international investors and further ease rules for entrepreneurs, the country, backed by government officials and tech leaders, has started to inject new energy into the start-up scene. France has already become one of Europe’s top destinations for start-up investment; venture capital and funding deals last year surpassed that activity in Germany, making it second only to Britain in Europe.


Silicon Valley has taken notice. Facebook and Amazon are backing Station F. Microsoft is basing its newest artificial intelligence start-up program there, and will be joined by French giants like the video game publisher Ubisoft and overseas players like Line, the Japanese messaging app. President Emmanuel Macron is expected to inaugurate the site on Thursday as part of France’s push to become what he calls “the leading country for hyper-innovation.”

The Talent Scouts

Station F is the brainchild of Xavier Niel, a technology billionaire bent on transforming the French start-up scene. He’s invested 250 million euros (about $280 million) of his own money and brought in a Silicon Valley up-and-comer, Roxanne Varza, to lead the effort.

Xavier Niel

What’s important is that we create successes. The risk is that in a few years, that doesn’t happen. But that risk is really null.

Often referred to as the Richard Branson of France, Mr. Niel, 49, is one if the country’s most successful tech entrepreneurs, worth around $8.1 billion. He shook up French telecoms by starting an ultra low-cost internet service and mobile operator, Free, which forced industry stalwarts to follow. An aggressive investor, he co-founded Kima Ventures, which focuses on early stage start-ups, and a coding school called 42, with no tuition, teachers or textbooks.

Mr. Niel sees Station F as a way to help France steal Britain’s crown as Europe’s premier start-up hub. Raised in a gritty suburb of Paris, he is also trying to empower would-be entrepreneurs, especially marginalized youths. And he wants to capitalize on France’s strength as a producer of math and engineering whizzes.

Roxanne Varza

“When people talk about France, they don’t see it as a small-league player anymore.”

Born in Silicon Valley to Iranian parents, Ms. Varza, 32, founded Girls in Tech, a forum to improve gender equality in a male-dominated industry, and FailCon, a conference for start-up founders to learn from failure. After working at several young ventures, Ms. Varza, an avowed Francophile, moved to Paris in 2012 to oversee Microsoft’s start-up operations in France. Mr. Niel recruited her after seeing articles she had written critiquing the French tech scene.

Ms. Varza has been trying to lure to Station F the early-stage start-ups that have the potential to be the next disrupters in health, finance, education and even fashion. Britain’s decision to leave the European Union, she says, has been an opportunity to snap up talent. 

An office in Station F that will be home to Daphni, a venture capital firm.CreditRoberto Frankenberg for The New York Times
Xavier Niel and Roxanne Varza.CreditRoberto Frankenberg for The New York Times

The Groundbreakers

To get into Station F, start-ups had to have a business prototype and a path to growth. A group of 1,000 companies are expected to move into the space by early July. Here are three of them.

Artificial intelligence

JetPack Data

Shankar Arul co-founded this French-Indian start-up, which allows users to convert large amounts of data into graphics and offers data analysis online.  With three employees and offices in Chennai and London, he counts Groupon among his clients.

Food tech

La Belle Vie

This Paris-based online delicatessen, with 25 employees, delivers homemade dishes and produce to hundreds of clients. Its founders, Paul Lê and Alban Wienkoop, are betting on Station F as a platform to expand internationally. They plan to tap ShakeUpFactory, an accelerator that specializes in helping food start-ups, for contacts and funding.

High-tech fabrics


Révèle develops high-tech shock-absorbing fabrics to protect women in heavy contact sports like rugby and boxing. The company, founded last year in Paris by Clémence Fabre and Laetitia Pingel, quickly expanded internationally, with half of its sales now coming from the United States and Britain.

Outside Station F, in the 13th Arrondissement of Paris.CreditRoberto Frankenberg for The New York Times
The so-called Creativity Room inside the incubator.CreditRoberto Frankenberg for The New York Times
About 1,000 companies are moving into the new space.CreditRoberto Frankenberg for The New York Times


The Entrepreneurial Spirit 

Tech leaders say France has significant potential. In 2016, French start-ups attracted record levels of investment from business angels, venture capital, growth equity funds and corporate investors — on par with Israel and in reach of Britain.

Success Stories

As the French start-up scene takes off, BlaBlaCar, a low-cost ride sharing service, is one of the early winners. Frédéric Mazzella got the idea after he couldn’t get to his family’s home in southern France for Christmas in 2003.

Back then, the French start-up culture was virtually nonexistent. There was no ecosystem of incubators and funding. He and his co-founders relied on money from family and friends for six years before venture capital funds stepped in.

Today, BlaBlaCar is one of four French “unicorns” (start-ups valued over $1 billion), with 45 million users in 22 countries and a global staff of 500.

In France, “entrepreneurs used to be seen as people with nothing left to lose,” said Mr. Mazzella, sitting in his company’s sleek new headquarters near the Paris Bourse, a couple of floors down from Facebook’s France operations. “Now it’s become acceptable, even desirable, to be a start-up.”

Growth Obstacles

Failure is often stigmatized in French society — so much that the government started a campaign to persuade people that it’s O.K. to take risks. More than three quarters of workers hold so-called jobs for life, and unions protest when businesses demand workplace flexibility. Taxes are high to fund France’s social welfare system, and the 3,400-page labor code introduces new regulatory requirements on companies as they get larger.

It is a culture sometimes at odds with entrepreneurial drive.

Karim Oumnia, 49, the founder of Digitsole, which makes a temperature-controlled “smart shoe” that monitors health and automatically wraps around the wearer’s foot, is considering leaving France to propel his business.

Karim Oumnia in the headquarters of Digitsole.CreditRoberto Frankenberg for The New York Times

Founded in 2014, Digitsole employs 20 people in the town of Nancy and has won numerous orders from European sports teams. Former President François Hollande cited Mr. Oumnia as an emblem of French entrepreneurship.  

But Mr. Oumnia has struggled to scale up. When he wanted to offer stock options to lure and retain engineers and designers, the French rules were so complex that he dropped the plan. Social taxes pushed his employee costs to nearly twice what they would be in the United States. 

The financial infrastructure isn’t fully developed, either. France has around 4,500 angels, investors who take risks on first-stage start-ups, compared with 18,000 in Britain. While more venture capital is flowing into France, the levels still lag Britain, Germany and Israel.


“France has plenty of talent to create start-ups,” Mr. Oumnia said. “The problem is to grow them to midsize companies that create jobs in a country where unemployment is high.”

“Regulations and taxes have still not evolved enough to allow start-ups to flourish once they get off the ground,” he said, adding that he hoped President Macron would change things. “So it’s fine to say, let’s create a thousand start-ups. The question is, ‘Are you creating the environment for them to become champions after?’”

 “The answer is, ‘Not yet.’”

A Government Push

Mr. Macron has pledged to make the country more business friendly, with the government paying particular attention to entrepreneurs. Here is a look at France’s tech agenda.

INVESTING BILLIONS The government has created numerous state investment vehicles like the French Tech Acceleration Fund and the Large Venture Fund. Led by the French public investment bank, Bpifrance, with €42 billion under management, the state makes billions in loans and grants available to fund start-ups and accelerators at easy terms. Mr.Macron recently announced another €10 billion euro public fund to invest in start-ups. Such backing, critics say, can make it hard to discern whether French start-ups are competitive.

PROMOTING TECH In 2014, the government started French Tech, a sprawling program to burnish the country’s tech credentials. Thirteen French cities were designated high-tech hubs, including Bordeaux, better known for wine. The government also supports the growth of French start-ups in dozens of foreign cities, including New York and Shanghai, and promotes French entrepreneurs at big industry events like the Consumer Electronics Show in Las Vegas.

OFFERING INCENTIVES The government is trying to lure international tech talent to France by providing a fast-track work visa for entrepreneurs and their families, relocation grants and free office space.  

EASING TAX LAWS France created a special tax status for “innovative new companies” and has granted over €1.17 billion in tax exemptions for 6,600 start-ups since 2004. Still, entrepreneurs say more needs to be done. In a bid to stoke more start-up investment, Mr. Macron has pledged to exempt ownership of company stakes from France’s wealth tax and introduce a flat capital-gains tax of 30 percent, down from as high as 50 percent now.

Caroline Matte of Facebook.CreditRoberto Frankenberg for The New York Times

The Backers

The biggest vote of confidence in Station F is from Facebook.

A few years ago, the social media giant set up an artificial intelligence hub in Paris — its third after Silicon Valley and New York — to recruit from what it saw as a source of talented engineers at France’s elite universities, and from around Europe. The unit researches improvements to image and speech recognition, and other artificial intelligence applications.

The company is now anchoring an incubator program at Station F called Startup Garage, which will mentor 12 budding tech entrepreneurs every six months in health, education and other fields, and capitalize on their creative ideas. In exchange for coaching, Facebook will observe how the start-ups approach issues like privacy, and identify cutting-edge tech trends, said Caroline Matte, 26, Facebook’s French start-up program manager.

“France can definitely become a start-up nation,” said Ms. Matte, a French national. “The potential is there.”


At what was once a train depot, graffitied railways cars have been turned into cafes.