Andrew here. Treasury Secretary Scott Bessent spent his career on Wall Street, and now he’s using that trader mind-set in Washington to financially engineer lower interest rates. The unconventional move is raising plenty of questions.

Was it political? Probably. Will it work? Maybe in the short term. The real story is what happens down the road. We unpack the potential long-term consequences below.

Possible fallout from the Bessent buyback

Global bond markets finally look tame on Thursday, after the Treasury Department unexpectedly unveiled a stunning plan to buy back billions in long-dated government bonds.

But that calm may mask new tensions between the Trump administration and the Fed, while market watchers warn that the intervention could backfire, Bernhard Warner reports.

The effect of the buyback, not its size, matters. The Treasury Department will at least double repurchases of longer-dated Treasuries, spending up to $4 billion at a time, at several points between Sept. 9 and Nov. 4, the day after Election Day in the U.S.

Traders responded by buying up 30-year Treasury bonds, pushing yields lower on Wednesday. The dollar sunk and stocks barely budged, as investors flooded into gold and cryptocurrencies.

Some analysts don’t regard the scale of the operation as significant. “I think it’s just jawboning to get market yields lower,” Lawrence Gillum, the chief fixed income strategist for LPL Financial, told DealBook, calling it a “temporary” fix.

But the message could have a more enduring effect. Treasury Secretary Scott Bessent put traders on notice that the Trump administration would intervene in the markets to lower borrowing costs.

After efforts to prop up Argentina’s currency market and the struggling Japanese yen, Bessent, a former hedge fund chief and currency trader, has been called the most “interventionist” Treasury secretary in decades.

Some see a political motive in the timing. Joe Brusuelas, the chief economist at the audit and consulting firm RSM US, wrote to investors on Wednesday that Bessent’s “interest is purely short term and is organized around the upcoming election and not a return to price stability.”

• Worth noting: The Treasury does this kind of maneuver from time to time, but usually at scheduled intervals. In 2024, some economists and Republican lawmakers criticized Janet Yellen, Bessent’s predecessor during the Biden administration, for intervening in the Treasury market ahead of the general election.

Market observers are wondering if Treasury market interventions will become a permanent feature of American politics. Or, at the least, whether they’ll become more frequent so long as Congress fails to address ballooning federal deficits.

The more immediate issue could involve Bessent and Kevin Warsh, Trump’s handpicked Fed chairman. Bessent’s desire to lower yields (to bring down prices) appears to be at odds with the Fed’s growing focus, raising rates to bring down inflation.

“It probably means more volatility ahead within the rates market,” Gillum told DealBook.

HERE’S WHAT’S HAPPENING

U.S. public debt surpasses $40 trillion. Economists and Fed officials have long warned that the rate of federal borrowing — on track to exceed $2 trillion this year — is unsustainable. The ominous milestone has spooked the bond market, but the prospects of either Republicans or Democrats moving to reduce it remain remote at best.

A Chinese court sentences the founder of Evergrande to life in prison. The punishment for Hui Ka Yan came after he pleaded guilty to charges including misuse of funds and fund-raising fraud. Evergrande’s collapse in 2021 brought China’s financial system to the brink, and the country’s property market is still languishing.

President Trump urges Congress to pass a big cryptocurrency bill. His support for the Clarity Act, which would establish national regulation for the crypto industry, prompted a rally in the prices of Bitcoin and other digital tokens. The legislation has stalled in the Senate amid concerns over national security and whether it did enough to stop the Trump family from improperly benefiting from crypto.

Shares in Merck and Moderna soar on prospects for a cancer treatment breakthrough. The drugmakers said on Wednesday that a personalized vaccine has shown promising clinical trial results, which Stephane Bancel, Moderna’s C.E.O., called “a big moment for medicine.” But regulatory approval won’t come for some time.

A.I.’s merger era?

Silicon Valley is paying close attention to Stripe’s deal to buy OpenRouter, a buzzy marketplace for artificial intelligence models.

One reason was the $7.5 billion price tag. But the acquisition also points toward a new phase of the A.I. start-up boom, Michael de la Merced and Sri Muppidi write.

The details: Stripe is paying $1.5 billion to OpenRouter’s founders and $6 billion to its investors, The Times reports. Compare that with the $1.3 billion valuation that OpenRouter fetched just three months ago.

That provides a healthy return to OpenRouter’s investors, including Andreessen Horowitz, the start-up’s biggest shareholder. The venture capital firm, known as A16Z, owns a roughly 17 percent stake, according to a person with knowledge of the matter who wasn’t authorized to speak about it publicly. That would net it nearly $1.3 billion.

Has the A.I. era entered its acquisitions phase? Since ChatGPT shot to fame in 2022, A.I. start-ups have raised billions with ease.

But some investors are getting more discerning, venture capitalists and start-up founders have told DealBook. For companies unlikely to dominate potentially huge sectors, selling — not fund-raising or an I.P.O. — may become a more likely outcome.

Incumbent companies are racing to build their A.I. capabilities. Strategic buyers spent $50.5 billion for so-called unicorn start-ups in the first half of the year, excluding SpaceX’s $250 billion acquisition of xAI, according to Pitchbook. That’s compared with $18.9 billion for all of last year.

Stripe is already a giant in processing companies’ payments. Buying OpenRouter appears to be the company’s “deliberate attempt to embed itself into the middle of capital flows in the A.I. era,” said Franco Granda, an analyst at Pitchbook.

Even A.I. companies are turning to M.&A. Consider SpaceX’s purchase of Cursor or reported bid for Cognition, another major coding start-up, according to Bloomberg.

• Follow this story line, too: Stripe has long insisted it can stay private for a long time. Buying OpenRouter mostly in stock — and also pursuing a multibillion-dollar takeover of PayPal with a private equity firm — is a flex demonstrating why that’s the case.

A Wall Street legend’s brush with a fashionable fraud

Years before the fashion-tech start-up CaaStle — pitched as a kind of Shopify for clothing rentals that tried to popularize “clothing as a service” — imploded amid a $283 million fraud, one of Wall Street’s savviest investors sensed something was wrong, Anita Raghavan reports for DealBook.

Henry Kravis of the private equity giant KKR grilled Christine Hunsicker, a founder and the C.E.O. of CaaStle, in 2019 over the start-up’s financial opacity, said two people familiar with the situation who were not authorized to speak publicly about the matter.

The details of the confrontation have not been previously reported.

Hunsicker is set to be sentenced on Thursday in a Manhattan federal court after pleading guilty in March to securities fraud. CaaStle, which promised to turn shipping boxes for Bloomingdale’s and Banana Republic into a high-margin business, disclosed last year that Hunsicker had been vastly overstating its financial results.

Step back: Hunsicker started CaaStle in 2011 with Jaswinder Pal Singh, a Princeton professor. Singh helped bring in Kravis as an investor, two people familiar with the situation told DealBook. The hedge fund mogul Bill Ackman was also an investor.

(Singh hasn’t been charged with a crime, and there is no evidence that he had prior knowledge of or participated in the fraud.)

Over all, CaaStle raised more than $600 million, and in 2018 was valued at $1.25 billion.

In 2019, investors, including Kravis, put pressure on Hunsicker. By then, CaaStle’s sales had started to stall, according to a sentencing memo prepared by Hunsicker’s lawyers and filed with the court.

The memo describes a confrontation between Hunsicker and an unnamed investor, who the people familiar with the situation say is Kravis.

Kravis, who invested his own money, began demanding detailed quarterly financial data from Hunsicker. But his investment gave him access only to general annual financial information, Hunsicker’s lawyers wrote in the sentencing document.

Also in the memo:

• Before the 2019 meeting, Hunsicker created a false income statement and balance sheet that she believed would satisfy Kravis.

• At the meeting, Kravis “became hostile, repeatedly yelled and ‘wiped the floor’ with her,” threatening to ruin her career if she didn’t start providing him with more information.

Asked about the characterization of Kravis, a KKR spokeswoman told DealBook: “Hunsicker has a long record of deception. This latest fiction is a desperate attempt by a convicted fraudster to rewrite history and evade accountability.”

Another person caught wind of the confrontation. “Hunsicker told me, ‘I have come from the most horrendous meeting with Henry,’” said Alex Brick, who in 2019 was a senior adviser to SWaN & Legend Venture Partners, a venture capital firm, and sat in on CaaStle meetings as a nonvoting board observer.

Brick added, “She literally said, ‘He screamed at me.’”

Questions about Anthropic’s multiclass stock

As Anthropic prepares for a potentially enormous I.P.O., it’s taking a page from some of the biggest publicly traded tech companies: letting its founders maintain control.

The Information reported that the artificial intelligence giant is set to provide its seven founders — including Dario Amodei, its C.E.O., and Daniela Amodei, his sister and the company’s president — with supervoting stock that has more voting power than standard shares.

But Anthropic appears to be doing things a little differently. Niko Gallogly and Sri Muppidi take a closer look.

It’s unusual for a big bloc of nonfamily founders to have supervoting shares. Most tech companies with multiclass stock tend to restrict that power to just one or two individuals: Think Google, where Sergey Brin and Larry Page control roughly 53 percent of the shareholder vote; Meta, where Mark Zuckerberg owns about 13 percent of the equity but controls about 60 percent of the vote; or SpaceX, where Elon Musk gained supervoting stock after not taking it at Tesla.

The closest comparison with Anthropic is Palantir, where its founders, Alex Karp, Peter Thiel and Stephen Cohen, collectively control the voting power in perpetuity.

We have questions about Anthropic’s setup:

• Will all seven founders have equal voting power? (The Information reported that they each hold roughly the same amount of stock.)

• What happens if there is a dispute among the founders? “You would expect some kind of tiebreaking mechanism,” Ann Lipton, a professor at the University of Colorado Law School, told DealBook. The challenge of shared voting rights, she added, is that “you don’t know what the standoffs or quarrels are going to be.”

• What does this mean for the founders’ tax bill? California’s Proposition 40, which would impose a onetime levy on the state’s billionaires and is on the ballot in November, appears to value supervoting shares the same as an equivalent amount of standard voting stock. That could supersize the Anthropic founders’ tax bill.

THE SPEED READ

Deals

Politics, policy and regulation

• The Commodity Futures Trading Commission banned two former FTX executives, Caroline Ellison and Gary Wang, from trading for five years over their roles in the crypto exchange’s collapse. (Bloomberg)

• “Trump backed down from 50 percent tariffs on Canada. It’s not a TACO.” (Politico)

Best of the rest

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