The Washington Post’s Drew Harwell and Renae Merle framed the stakes for Musk: “The legal action could prove devastating for Musk, a brash icon of tech entrepreneurialism who made Tesla into one of America’s most valuable car companies. It could also threaten financial peril for Tesla, where Musk looms large as head visionary and billionaire celebrity chief, as well as his other business interests in space travel, underground hypersonic trains and artificial intelligence.”

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Tesla’s stock tanked in after-hours trading, shedding some 11 percent.

The legal reckoning facing Musk also suggests that Trumpian leadership carries real downside risk, at least at the helm of a public company. Some of the president’s backers defend his bluster as a virtue — a key ingredient in the secret sauce of Trump’s dealmaking prowess that encouraged voters to take a chance on him.

But securities regulators are building their case against Musk on the basis that his “false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors.” (Read the full SEC complaint here.)

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The suit turns on this Musk tweet from August 7:

And these, which he sent later that same day:

The SEC charges that contrary to his tweets, Musk hadn't discussed the matter with any private funding source; hadn't investigated whether investors could maintain their positions in the company if it went private; and hadn’t confirmed investor support for the move. “Musk’s public statements and omissions created the misleading impression that taking Tesla private was subject only to Musk choosing to do so and a shareholder vote,” the agency said.

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Musk denies the allegations. “This unjustified action by the SEC leaves me deeply saddened and disappointed,” he said in a statement. “I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

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The Wall Street Journal reports a fascinating nugget: The SEC had reached a settlement with Musk that it was preparing to file Thursday morning when his lawyers called to cancel — a decision to keep fighting rather than admit fault that Trump could appreciate.

Musk himself has bristled at comparisons to the commander in chief, even while echoing him. “Thought you’d say that,” he said this year when a reporter noted a similarity. “Anytime anyone criticizes the media, the media shrieks, 'You’re just like Trump!' Why do you think he got elected in the first place? Because no ones believes you anymore. You lost your credibility a long time ago.”

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Perhaps unsurprisingly, the two have a complicated recent history. Days before the 2016 election, in an appearance on CNBC, Musk expressed unease about the prospect of a Trump victory. “I feel a bit stronger that probably he’s not the right guy. He just doesn’t seem, he doesn’t seem to have the sort of character that reflects well on the United States,” he said. Yet after Trump's win, Musk made an appearance at Trump Tower in New York and agreed to join the president-elect’s business advisory council. Musk offered mild criticism of Trump’s travel ban that January:

And he defended himself for attending a White House meeting in February, saying that he used it as a venue to air concerns with the travel ban:

On June 1 of last year, when the Trump administration said it would quit the Paris climate accords, Musk announced he was leaving his White House advisory role, thereby ending his qualified affiliation with Trump:

There's no evidence the two have been in touch since. But Michael Hiltzik, writing in the Los Angeles Times last month, said their respective supporters face a similar quandary. “It has been an article of faith that losing Musk would mean the destruction of Tesla, but that may not be true,” Hiltzik writes. “The situation facing Tesla parallels that facing Trump’s administration and his Republican Party. Republican officeholders have been loath to criticize Trump, even when his policies undermine their prospects in the midterm election this November... Trump could become yet another charismatic leader whose charisma created disaster, and then faded fast—but too late.”

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MARKET MOVERS

— Powell plays down recession risk. The Wall Street Journal's Nick Timiraos: "Federal Reserve Chairman Jerome Powell on Thursday played down concerns that bond markets were signaling rising odds of a recession. Mr. Powell addressed concerns over the narrowing spread between short- and longer-term Treasury yields, a difference known as the yield curve. When short-term yields rise higher than longer-term yields, the curve inverts. Over the past 50 years, a recession has almost always followed within a year or two. The curve has flattened this year as the Fed has raised its short-term benchmark rate, and Mr. Powell said that was to be expected... 'Some people have been very reasonably asking the question: If we invert the yield curve, will there be a recession?' Mr. Powell said during a question-and-answer session on Capitol Hill. Looking at the economy broadly, he said, 'there’s no reason to think that the probability of a recession in the next year or two is at all elevated.'"

As Fed embraces ambiguity. The Wall Street Journal's James Mackintosh: “The removal of ‘accommodative’ from the Fed’s statement on Wednesday was interpreted as a sign that the Fed is approaching the end of its cycle of interest-rate hikes, and bond yields fell slightly. But the real story is about rising uncertainty as forward guidance is replaced with an implicit shrug of [Powell’s] well-tailored shoulders. . . The focus on a single word highlights two important market truths: The Fed isn’t focused on supporting the economy, which is doing very well by itself; and the Fed no longer feels such a need to talk down future policy rates in order to get investors to help. The result is that things are likely to get a lot more confusing for markets. . . In short: The Fed doesn’t know what will happen, or how it will react.”

— Commerce still sees 4.2 percent GDP in Q2. WSJ's Sarah Chaney and Eric Morath: “The U.S. economy expanded at a strong pace in the second quarter, with growth expected to pull back slightly this quarter but still continue its solid run. Gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a 4.2% seasonally and inflation-adjusted annual rate in the second quarter, the Commerce Department said Thursday . . . Overall, Thursday’s report reinforced the view that the U.S. economy was on robust footing in the second quarter, powered by gains in consumer spending, net exports and business investment.”

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But third-quarter growth could drop. Reuters's Lucia Mutikani: “New orders for key U.S.-made capital goods fell in August after four straight months of strong gains and the goods trade deficit widened sharply, prompting some economists to significantly lower their economic growth estimates for the third quarter. ... The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.5 percent last month as demand for computers and electronic products as well as motor vehicles ebbed. ... With business confidence at multi-year highs, in part buoyed by a $1.5 trillion tax cut package, August’s surprise drop in core capital goods orders is likely to be temporary. But economists worry an escalating trade war between the United States and China could hurt confidence and undercut spending.”

— U.S. stocks thrive. AP's Stan Choe: “For investments this summer, it was all America First. Funds that focus on U.S. stocks charged to record heights, bolstered by Apple and other companies reporting tax-cut-fueled profit gains that were even more eye-popping than analysts expected. The U.S. economy also hit its fastest growth rate in nearly four years, and S&P 500 index funds are on track for their best quarter in nearly five years. Other areas of the market, though, were more restrained. Worries about a trade war, falling currency values and slower economic growth meant many foreign stock funds had more modest gains or were down. Bond funds, meanwhile, struggled in the face of rising interest rates.”

TRUMP TRACKER

TRADE FLY-AROUND:

— The trade war damage is here. Bloomberg News's Sho Chandra: “Fresh data on the U.S. economy show [Trump’s] escalating trade war is shaping up as a clear drag on growth this quarter. The merchandise-trade deficit unexpectedly grew in August to $75.8 billion, the widest in six months and close to a record, as exports of food, industrial supplies and autos declined, Commerce Department data showed Thursday . . . While analysts said the trade deficit partly reflected an expected reversal of the second-quarter’s surge in soybean exports before Chinese-imposed tariffs, and GDP growth is seen remaining solid, the numbers illustrate how the trade war is spurring volatility in the data. In addition, the widening deficit runs contrary to Trump’s aim of a narrower gap and underscores the challenges of achieving that goal amid strong domestic demand — which tends to boost imports — and retaliatory tariffs from abroad.”

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— Trudeau: Good deal or no deal. Reuters's David Ljunggren: “Canada on Thursday shrugged off [Trump’s] criticism that talks to modernize NAFTA were moving too slowly and made clear it had to keep negotiating as long as there was a chance of success. ... ‘The Americans are finding that the negotiations are tough because Canadians are tough negotiators, as we should be,’ Trudeau told reporters on the way into a regular weekly cabinet meeting in Ottawa. ‘But a good fair deal is still very possible. We won’t sign a bad deal for Canadians,’ he added, saying his office had not requested a private meeting with Trump. He declined to answer when asked whether Trump had lied.”

Blown deadline doesn't spell NAFTA breakup. "A more likely result is some fudging of the deadline and procedures, and more talks with Ottawa over the coming weeks, and possibly months," WSJ's Jacob Schlesinger writes. "'The likeliest scenario' is a resumption of Canada talks next month 'and then the text of a trilateral deal ends up going to Congress for a vote in the first half of 2019,' said Lori Wallach, head of the left-leaning Public Citizen’s Global Trade Watch and a close observer of the Nafta process."

— Mnuchin: Trump sees Chinese tariffs as election interference. Washington Examiner's Sean Higgins: "Treasury Secretary Steven Mnuchin said Thursday that [Trump's] claim that China is interfering with with U.S. elections is based on China's push to impose tariffs on products that target regions of the U.S. where the president's base of support lies. 'They have targeted areas ... where the president is sensitive. That was what the president was referring to,' Mnuchin said at a forum hosted by the Hill Thursday. The secretary was responding to questions about comments Trump made Wednesday at the United Nations."

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— Businesses applaud talks with Japan. The Hill's Vicki Needham: “U.S. businesses and top Republicans on Capitol Hill expressed support for the U.S. and Japan to negotiate a bilateral trade agreement. . . . The U.S. Chamber of Commerce and the National Cattlemen's Beef Association were among the business groups that said a trade deal with the world's third largest economy would secure better market access for U.S. firms. . . . National Cattlemen's Beef Association President Kevin Kester called the decision ‘exciting news’ for U.S. beef producers. Japan is beef's top export market, accounting for nearly $1.9 billion in U.S. beef sales in 2017.”

— Trump administration isn't enforcing sanctions. Bloomberg's Christian Berthelson and Tom Schoenberg: "Since [Trump] took office, the U.S. Department of the Treasury unit that implements sanctions has emerged as a high-profile foreign policy weapon, advancing U.S. interests by economically isolating Iran, Russia, and other hostile governments. The agency has blacklisted hundreds of people and companies around the globe and rolled out sanctions programs targeting everyone from foreign meddlers in U.S. elections to buyers of North Korean coal. But with 2018 three-quarters gone, a crucial element of sanctions enforcement has all but disappeared: the actual enforcement. Treasury’s Office of Foreign Assets Control is on track to bring the lowest number of cases and penalties in 15 years, according to a Bloomberg Businessweek analysis of agency data. OFAC typically files dozens of cases a year against people and companies that breach sanctions orders, imposing hundreds of millions of dollars in fines. So far this year, OFAC has filed exactly one case. The haul: $146,000."

MELTDOWN WATCH:

POCKET CHANGE

— Dimon: CEOs still overwhelmingly men. Bloomberg News's Michelle Davis: “Jamie Dimon doesn’t see the gender imbalance at the top of corporate America getting fixed soon. It will probably take 10 or 15 years before a wave of female chief executive officers meaningfully improves the ratio, JPMorgan Chase & Co.’s CEO said at a New York Times event focused on female leadership. There are 25 female CEOs running S&P 500 companies, according to Catalyst, a nonprofit that advocates for women in the workplace. The number will go down to 24 when Indra Nooyi leaves her position at PepsiCo Inc., taking the ratio to less than 5 percent.”

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— Thousands of service industry workers to strike. The Post's Taylor Telford: "As union membership in the United States has hit historic lows, several thousand service industry workers will strike next week in seven states to demand union representation. Workers at major fast-food chains will walk off the job between Oct. 2 and Oct. 4, in tandem with strikes and rallies by airport, hospital, child-care and higher education workers, to corral public and political support for unions ahead of the November election. The effort is being orchestrated by Fight for $15, the group that helped popularize the push for a $15-an-hour minimum wage."

The push comes as 40,000 New York City airport workers won a wage fight setting them on a path to earning at least $19 an hour, "the highest minimum wage target set by any public agency in the country," per the NYT.

— Samsung board chairman indicted. WSJ's Eun-Young Jeong: “South Korean prosecutors indicted the board chairman of Samsung Electronics Co. for allegedly clamping down on labor union activities, adding another legal hurdle for the world’s largest chip maker. Lee Sang-hoon was indicted Thursday for allegedly violating labor union laws while he served as chief financial officer at Samsung Electronics from 2012 to 2017. Mr. Lee, who isn’t related to Samsung’s founding Lee family, became the company’s board chairman in March.”

MONEY ON THE HILL

— Mel Watt denies sexual harassment charge. Politico's Katy O'Donnell: "Housing regulator Mel Watt forcefully defended himself from sexual harassment allegations on Thursday, suggesting that his accuser had manipulated their encounters in a “systematic” effort to build a lawsuit by misconstruing his 'efforts to advise and mentor her.' Watt, the director of the Federal Housing Finance Agency, told his former colleagues on the House Financial Services Committee that he is a 'big supporter of the #MeToo movement … but it cannot be a substitute for going through the legal process.'

"Watt spoke hours after agency employee Simone Grimes testified to the committee that he had repeatedly made sexual advances during conversations about salary concerns, leaving her feeling 'unsafe and vulnerable.' Members of the panel treated Grimes with deference and commended her decision to come forward. Both Committee Chairman Jeb Hensarling (R-Texas) and Ranking Member Maxine Waters (D-Calif.) spoke in unusually personal terms, reflecting the extraordinary cultural moment that spurred two simultaneous hearings Thursday featuring women bringing sexual misconduct allegations against powerful men."

— House Rs tee up tax vote. WSJ's Richard Rubin: "House Republicans, touting the tax cuts that remain popular among their core voters, are poised to pass a $631 billion extension of them in their final legislative push before the midterm elections. GOP Senate leaders aren’t eager to spend any time on tax policy before the Nov. 6 elections, however, and some Republicans say that the votes are largely about sending an election-year message to voters rather than making law... The House passed two tax bills Thursday and was expected to pass a third on Friday. One bill passed Thursday, on a 240-177 vote, would expand retirement-savings incentives. The second, passed 260-156, would add tax breaks for startup businesses."

— Crypto coalition to pay lobbyists in digital coins. Bloomberg's Robert Schmidt: "A group of financial technology companies is banding together to lobby lawmakers and regulators on cryptocurrencies -- and they plan to pay their Washington advocates partly in digital coins. The firms, all based in the San Francisco area, include digital money transfer company Ripple and several startups. They’re announcing Thursday that they’ve started a coalition and are retaining the Klein/Johnson Group, a bipartisan lobby shop that specializes in technology and financial services issues."

THE REGULATORS

— Watchdogs can't handle riskiest loans. Bloomberg: "Washington rewrote the rulebook for Wall Street after the 2008 financial crisis, but dangerous lending is still eluding regulators. Take Bomgar Corp., which just lined up $439 million in loans. The deal marked the software company’s third trip to the debt markets this year. By one estimate, Bomgar’s leverage could soon spike to 15 times its earnings, raising questions about whether the firm could ever pay it off. These kinds of transactions are increasingly common in the U.S.’s more than $2 trillion market for leveraged loans and junk bonds, and agencies including the Federal Reserve can’t do much about it. That’s because some of the most aggressive financing is being done outside the traditional banking sector. 'Regulators should sound the alarm,' former Fed Chair Janet Yellen said in an interview. 'They should make it clear to the public and the Congress there are things they are concerned about and they don’t have the tools to fix it.'"

DAYBOOK

Today

House Financial Services subcommittee hearing on “opportunities for financial markets in the digital era.”

Coming soon

Senate Banking Committee hearing on the “implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act” on Tuesday.

THE FUNNIES

A 1990 New Yorker cartoon from Peter Steiner:

BULL SESSION

The key moments from Christine Blasey Ford's testimony:

Brett Kavanaugh's testimony, in three minutes: