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Good morning. Shortly after the 2017 general election, I took one of the Conservative party’s most committed Remainers out to lunch. Inevitably, we discussed the threat against Theresa May’s leadership and who might replace her. What about Boris Johnson, I asked.
“Oh no,” they replied, “then you really would get people leaving and a new party of the centre forming. I would join it myself!”
That MP ended up in Boris Johnson’s cabinet, in part because of the Conservatives’ catastrophically bad performance in the 2019 local and European elections.
This is, by way of saying, in response to the question so many of you are asking: of course Boris Johnson might become prime minister again, if enough MPs are desperate enough to put aside their concerns about him. Some thoughts on that and more in today’s note.
Grab your Johnson
The end of, in Jim Pickard’s delightful phrase, Liz Truss’s “mayfly premiership” means that we will have a mayfly leadership election: a lightning-fast process designed to produce a new prime minister as quickly as possible. (Here is how our live coverage of the events unfolded).
To even make the first ballot, candidates require 100 nominations. At most, three candidates will be able to make it that far (there are only 357 Conservative MP backers up for grabs).
Assuming that three do, there will be a subsequent vote among MPs on Monday afternoon to winnow the field down to two. Then, there will be an “indicative” vote later that day to establish which of the remaining candidates is the preferred choice of the parliamentary party.
Once that final vote is cast, you can bet whichever candidate comes second will face an awful lot of pressure to just drop out — but if they don’t, there will be a very quick online ballot of Tory party members, which will close at 11am on October 28.
The two magic numbers for any candidate are 100 — that’s the bare minimum required to enter the contest, and 120 — because if you get 120 MPs, you have a third of the parliamentary party and there is no way that your opponents can vote tactically to shut you out of the top two.
In some ways, all this process does is move some of the horse-trading that takes place in semi-public during the early rounds of the contest out of public view. The reason why Rishi Sunak only got 88 votes in the first round of this summer’s leadership contest, and Truss only 50, is that for different reasons, the party’s left and right harboured doubts about both of them and preferred to flirt with the likes of Tom Tugendhat, Kemi Badenoch, Suella Braverman, Grant Shapps, Nadhim Zahawi, Jeremy Hunt, etc etc.
The private pitch to supporters of Braverman and Badenoch from Truss’s campaign was always “look, come on, you can have your fun with these people, but be realistic: only one candidate from the right is making it to the final two, and it’s Truss”. Now, instead of that pitch being made after those candidates had finished last in the ballot, it is being made before anyone has actually reached the contest proper.
One candidate is essentially guaranteed to clear both the 100 mark and the 120 one: Rishi Sunak. Although Sunak took all five ballots to get past 120 in July, a lot of Conservative MPs now regret not supporting him (many of them regret it so much they have convinced themselves they in fact backed him all along) and he won’t struggle to hit that mark this time around.
Sunak is drawing support from several different places: committed fiscal hawks who share his view of the world and backed him last time, MPs who have been spooked by the market reaction to Trussonomics and think they backed him last time, MPs who want to save their seats and believe he is their best option, and MPs on the party’s left who eventually settled for Sunak last time and who have been forced to hurry it up thanks to the rules of this leadership ballot.
That leaves two candidates with a good chance of clearing the threshold as well. A tally of MPs’ support for the potential contenders – by Sky News – was putting Sunak at 42, Boris Johnson at 38 and Mordaunt at 16. Johnson is drawing support from the party’s right, from MPs who want to retain their seats and think he is the best option, and from MPs who think that when all is said and done, Johnson will get 100 MPs to back him, will make the final ballot of members and will win it, so they might as well get on the Johnson train rather than be under it. While there is a caucus of Conservative MPs who bitterly dislike the idea of another term for Boris Johnson, there are definitely 100 MPs who are either desperate enough or committed enough to Johnson for that not to matter.
It’s Penny Mordaunt who I think will struggle. Last time she did well by essentially running on a ticket of “look, forget the questions you might have about my politics, I’m visibly the most charismatic politician in the race and if anyone in this race is going to keep your seat safe, it’s me”. She pulled over the support of rightwingers who, to put it bluntly, thought that Truss and Braverman were a bit too weird-looking to win an election, and leftwingers who thought that Sunak wasn’t really one of them.
It’s hard for her to thrive in a contest with Johnson eating into her “look, I’m a winner” pitch, particularly on the right. Meanwhile, on the left, many MPs have buried their doubts about Sunak, potentially further cramping Mordaunt’s pool of support.
Now, of course, it’s true to say that Boris Johnson’s popularity among voters has declined pretty significantly since the 2019 general election, when he was in any case much less popular than he was when he was winning London mayoral elections in 2008 and 2012.
But for a sizeable chunk of Conservatives, “Boris Johnson is a winner” is one of those things Everybody Knows. It’s like telling someone that housing is a safe investment class, or that the UK is a stable and functioning democracy: something that is true until it suddenly isn’t.
Nonetheless, enough Conservatives believe it and given how bad the polls are (the latest update from People Polling puts support for the Tories at its lowest since modern polling began), that may well be enough for Boris Johnson to turn his chance of making the ballot into a return to Downing Street.
Now try this
I went to the Alexandra Palace to see Franz Ferdinand: one of my favourite bands but more importantly one of the best live performers around. If you have an opportunity to see them live, you should, even if you (wrongly) aren’t particularly excited by Franz Ferdinand’s music. It was pleasing to hear the 2013 album Right Thoughts, Right Words, Right Action, which is not only particularly good live but also has a special place in my heart. The first gig my partner and I went to together was the tour for that album.
As I write, however, I am listening to Arctic Monkeys’ new record The Car. Ludovic Hunter-Tilney’s review is here, and it’s very good (the review and the album, though Ludovic’s dislike of Tranquility Base Hotel & Casino continues to be a source of pain and upset to me). I think Sculptures of Anything Goes is the standout track though it’s all very, very good.
However you spend it, have a wonderful weekend.
Top stories today
Meetings with Hunt are like a ‘health spa’ | The chancellor pressed on yesterday with preparations to unveil a crucial fiscal statement — which aims to fill a £40bn hole in the UK public finances — on October 31, in spite of Liz Truss’s resignation. Many Tory MPs, including Hunt’s critics, believe he will remain chancellor under any new prime minister.
Lettuce, tossed | Henry Mance chronicles the rise and fall of Liz Truss, from the early warning signs of her “dismissive attitude towards expertise” as foreign secretary, to the final, humiliating days of her premiership.
‘Deeply disturbing’ | The independent inquiry into child sex abuse found “epidemic” levels of past cruelty in England and Wales and warned of a current escalation in online abuse, in its report issued yesterday following a seven-year investigation.
Dangerous game | A Russian fighter plane released a missile near an unarmed British spy plane patrolling international air space over the Black Sea on September 29, UK defence minister Ben Wallace said, in an incident that Russia later blamed on a “technical malfunction”.
ScottishPower calls for an energy company-backed fund | One of Britain’s biggest utilities has said all energy companies, including oil and gas producers, should pay into a multibillion-pound fund to subsidise electricity and gas bills from April, when blanket UK government support ends.
FT: Time for GE | The Financial Times’ editorial board does not hold back in its leader, “The shattering of the UK’s credibility”. The article sets out why the British people, not MPs or the 170,000 members of the Conservative party, must choose their political future.
Iceland Introduces ‘turkey Promise’ to Ensure Shoppers Get ‘low Price’ Meat
Iceland has frozen the price of its festive fowl.
Bankman-Fried Empire Includes Billions of Dollars of Illiquid Investments
Sam Bankman-Fried’s business empire includes billions of dollars of illiquid venture capital investments, according to internal records seen by the Financial Times, underscoring the uncertain recovery facing customers of his collapsed FTX exchange.
The 30-year-old entrepreneur, once a star of the crypto industry, on Friday placed FTX international, its independent US arm, and his proprietary trading firm Alameda Research into a joint bankruptcy process in Delaware federal court.
Initial filings listed both assets and liabilities of the group at between $10bn and $50bn. FTX’s new chief executive John Ray, who was brought in to chair Enron during its liquidation, said the companies had “valuable assets” and that the bankruptcy would maximise recoveries.
The sprawling venture capital portfolio will add to the complexity of the insolvency proceedings, which itself includes more than 130 companies controlled by Bankman-Fried. FTX’s collapse is among the most dramatic failures in the crypto industry not just this year, but since the creation of bitcoin more than a decade ago.
FTX and its affiliates have not yet disclosed the exact size of their liabilities and assets, and the shortfall that likely exists. FTX’s recently departed head of institutional sales, Zane Tackett, said on Twitter on Friday that the shortfall ran into billions of dollars. FTX did not immediately respond to a request for comment.
Any gap between assets and liabilities will be influenced by the value that can be recovered from almost $5.4bn that FTX and Alameda invested in almost 500 crypto companies and venture capital funds, according to the records seen by the FT.
The largest of those investments is $1.15bn that Alameda ploughed into crypto mining group Genesis Digital Assets between August 2021 and April 2022, the records show.
Publicly traded mining companies have sold off sharply over the past year as the crypto market has declined. The HashRate crypto mining index, which tracks such stocks, is down 75 per cent since August 2021. Genesis did not immediately respond to a request for comment.
The records also list more than $1bn invested across about 40 funds run by venture capital firms, including some that were investors in FTX such as Sequoia Capital. Those holdings include a $300mn investment by Alameda in K5 Global, the firm run by Michael Kives. The investment amounts to 30 per cent of K5’s general partnership, and $225mn of the total sits in Elon Musk’s SpaceX and Boring Company, and other unidentified businesses, according to the records.
Earlier this year, texts released during Musk’s litigation with Twitter showed Kives suggesting Bankman-Fried as a co-investor in the social media company. Musk was dismissive of the FTX founder and ultimately took money from the head of rival exchange Binance, Changpeng Zhao.
Other big bets detailed in the records include a $500mn investment in Anthropic, an artificial intelligence “safety and research company”, made by Bankman-Fried through Alameda earlier this year. Anthropic did not immediately respond to a request for comment.
Source Here: ft.com
Sam Bankman-Fried’s $32bn FTX Crypto Empire Files for Bankruptcy
FTX, the once high-flying crypto currency group, has filed for bankruptcy protection in the US, marking a stunning collapse of the $32bn empire built by the colourful 30-year-old entrepreneur Sam Bankman-Fried.
The filing in Delaware federal court on Friday included the main FTX international exchange, a US crypto marketplace, Bankman-Fried’s proprietary trading group Alameda Research and about 130 affiliated companies.
FTX’s failure came after Bankman-Fried desperately sought billions of dollars to save the exchange this week after it was unable to meet a torrent of customer withdrawals in a run prompted by concerns over its financial health and links to Alameda.
The collapse of such a prominent group, which advertised during the US Superbowl and whose shorts-wearing, charismatic founder was a leading donor to the Democratic party, has rocked the notoriously volatile crypto industry.
Bitcoin dropped 5 per cent to a fresh two-year low of $16,492 after the FTX bankruptcy was announced. Changpeng Zhao, chief executive of Binance, earlier on Friday said the fall of FTX left crypto facing a financial crisis akin to 2008 and that more businesses could fail in its wake.
Bankman-Fried, who one week ago was among the most respected figures in the sector with a $24bn personal fortune and close links with Wall Street and celebrities, resigned as FTX’s chief executive on Friday. John R Ray, a restructuring specialist who oversaw the Enron and Nortel Networks bankruptcy cases, will take the reins.
“The FTX Group has valuable assets that can only be effectively administered in an organised, joint process,” Ray said.
In just over three years, FTX had secured a $32bn valuation and had wooed a roster of blue-chip investors, including Paradigm, SoftBank, Sequoia Capital and Singapore’s Temasek. Venture capital firms Sequoia and Paradigm have in recent days marked their investment down to zero.
The sprawling business empire run by a tight-knit group of longtime associates around Bankman-Fried, many of whom lived together in a Nassau penthouse in the Bahamas, has around 100,000 creditors and $10-50bn of assets and liabilities, according to the filing.
The US Securities and Exchange Commission is investigating FTX, which includes examining the platform’s cryptocurrency lending products and the management of customer funds, according to a person familiar with the matter.
The bankruptcy filing follows a frantic week in digital asset markets. Rumours about the financial health of FTX and its trading affiliate Alameda Research culminated on Monday in a run on the exchange with insufficient readily accessible assets to meet $5bn in customer withdrawals.
After appeals to its investors and rival exchanges, FTX halted the demands on Tuesday and agreed a rescue by the world’s largest crypto bourse, Binance, led by Zhao, a one-time partner turned arch-rival of Bankman-Fried.
That deal fell through a day later after Binance said due diligence revealed insurmountable financial problems at FTX. Last-ditch efforts to find another investor to supply up to $8bn failed in recent days.
FTX Digital Markets Ltd, the group’s subsidiary in the Bahamas, where it is headquartered, is not included in the bankruptcy proceedings. The Securities Commission of The Bahamas froze the subsidiary’s assets on Thursday and appointed a provisional liquidator.
LedgerX, a regulated US futures exchange, and a subsidiary in Australia are among other units not included in the filing. The group’s Australian business has already been placed into administration while Japanese watchdogs suspended operations of FTX’s affiliate in the country.
Bankman-Fried has blamed mistaken accounting of the exchange’s liquidity and leverage for the collapse.
“I’m really sorry, again, that we ended up here,” he said following Friday’s filing. “I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week.”
Additional reporting by Stefania Palma in Washington
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