Too much oil?

Summary

Marketplace Podcast Summary: "Too Much Oil?"

Hosted by Amy Scott from Marketplace, the episode titled "Too Much Oil?" delves into a range of pressing economic and business topics, offering listeners insightful analyses and expert opinions. Below is a detailed summary of the key discussions, complete with notable quotes and timestamps.

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1. Global Oil Surplus and Trump's Energy Agenda

Overview: The episode opens with an exploration of the global oil market and its implications for President-elect Donald Trump's promised energy agenda. Despite Trump's commitments to ramp up oil and gas production to reduce American energy bills, current market dynamics present significant challenges.

Key Points:

• Record Oil Production: Oil production in the United States has already reached record levels under the Biden administration, complicating Trump's plans to further expand output.

• International Energy Agency's Projection: The International Energy Agency forecasts a global oil surplus exceeding one million barrels per day next year, indicating a saturated market (00:34).

• Weakening Global Demand: Mark Finley from Rice University explains that the increase in crude demand is not meeting expectations, primarily due to declining demand from China (01:35).

  "China's been going through some tough economic times, as you might have heard, and a weaker economy needs less oil." — Mark Finley, Rice University (01:58)

• Rise of Electric Vehicles: The rapid adoption of electric vehicles (EVs) in China is reducing the demand for gasoline, further contributing to the oil surplus (01:55).

• OPEC's Production Strategy: In response to softer demand, OPEC has been limiting oil production to stabilize prices. However, increased oil supply from regions like Guyana, Brazil, the U.S., Canada, and Norway is counteracting these efforts, leading to lower oil prices (02:24).

  "With weak demand and ample supply, you get lower prices." — Henry Epp, Marketplace (02:28)

• Financial Challenges for Oil Companies: Lower oil prices strain oil companies' profitability, making them hesitant to invest in new drilling projects even if regulatory barriers are reduced under the Trump administration (02:48).

  "They are going to be doing what's profitable." — Mark Finley, Rice University (03:11)

Conclusion: The interplay of decreased global oil demand, especially from China, and increased supply from various regions has created a challenging environment for Trump's oil production expansion plans. Unless global conflicts or other factors drive oil prices up, the financial incentives for oil companies to increase production remain subdued.

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2. Disney's Streaming Turnaround

Overview: Transitioning from the oil sector, the podcast highlights Disney's impressive financial performance, particularly in its streaming services, signaling a significant turnaround from previous losses.

Key Points:

• Earnings Report: Disney reported better-than-expected fourth-quarter earnings, with streaming services generating $321 million in operating income—a stark contrast to the over $4 billion losses two years prior (03:24).

• Subscriber Growth: The company added over 4 million new Disney+ subscribers, showcasing robust demand for its content (03:54).

• Content Excellence: Brad Adgate, an independent media consultant, attributes Disney's success to its high-quality content, including Emmy-winning shows like "The Bear" and "Shogun" (04:12).

  "Disney's got great content." — Brad Adgate, Independent Media Consultant (03:58)

• Diverse Offerings: Disney leverages its diverse portfolio, including ESPN for sports fans and beloved franchises like "The Little Mermaid," to attract various audience segments (04:07).

• Innovative Pricing: Michael Smith from Carnegie Mellon University notes that Disney's introduction of an ad-supported subscription tier has successfully attracted more customers without significantly affecting the full-price tier (04:27).

  "Adding, the advertising tier has brought in more customers than it cannibalized customers from the full paid tier." — Michael Smith, Carnegie Mellon University (04:37)

• Organizational Restructuring: Disney's shift from traditional divisions to a structure similar to Netflix, focusing separately on content and platform, has enhanced operational efficiency and agility (04:43).

  "Bob Iger blew up that traditional organizational structure and made his org structure look much more like Netflix." — Michael Smith, Carnegie Mellon University (04:43)

• Industry-Wide Trends: Brandon Katz from Parrot Analytics and Mark Finley observe that Disney's financial turnaround isn't unique, with many streaming services improving their monetary performance through strategies like growing advertising and adjusting subscription prices (05:04).

  "All companies right now are getting better from a monetary perspective in terms of streaming and narrowing losses to turn a profit." — Brandon Katz, Parrot Analytics (05:12)

• Future Outlook: Despite current successes, Katz cautions that only about half of the major streaming services are expected to survive the competitive landscape over the next decade (05:25).

Conclusion: Disney's strategic focus on high-quality content, diversified offerings, innovative pricing models, and organizational restructuring has propelled its streaming services to a profitable position. This success reflects broader positive trends in the streaming industry, though future sustainability remains uncertain for many players.

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3. Federal Reserve's Monetary Policy and Retirement Concerns

Overview: The podcast addresses recent developments concerning the Federal Reserve's approach to interest rates and the growing financial anxieties among retirees.

Key Points:

• Fed's Cautious Stance: Following the release of sticky inflation data, Federal Reserve Chair Jay Powell signaled a cautious approach to further interest rate cuts, emphasizing that the economy does not exhibit urgency for such measures (05:38).

  "We are hopeful that we'll see a return to the more traditional antitrust approach." — Fed Chair Jay Powell (03:24)

• Market Reaction: In response to the Fed's cautious outlook, major stock indices experienced declines, with the Dow Jones Industrial Average dropping by 207 points and the NASDAQ and S&P 500 also shedding significant ground (12:40).

• Retirement Financial Strain: A report from the Employee Benefit Research Institute reveals that nearly one-third of retirees feel they are spending more than they can afford, a sharp increase from the previous year's figures (05:38).

  "Mark Avery at the Brookings Institution says the economy has bounced back well, but many people are still hurting." — Samantha Fields, Marketplace (06:43)

• Factors Contributing to Financial Strain:

  • Inflation: Teresa Gillarducci from the New School points out that inflation has disproportionately affected retirees, especially in areas like food, shelter, and medical care (07:20).

  • Debt Accumulation: There's a notable increase in retirees carrying debt, with credit card debt rising from 40% to 70%, alongside larger mortgages and persistent student debt (07:24).

  "Nearly half of people never work a job that offers a retirement plan, and others only do for part of their career." — Alicia Minnell, Boston College (07:54)

• Long-Term Challenges: Alicia Minnell highlights that a significant portion of individuals entering retirement lack sufficient funds to maintain their pre-retirement spending levels, emphasizing the need for systemic reforms (07:54).

  "Continuous coverage is really the most important thing that we can do to improve the whole retirement situation." — Alicia Minnell, Boston College (08:18)

Conclusion: While the Federal Reserve adopts a measured approach to interest rates amidst persistent inflation, retirees are grappling with increasing financial pressures. The combination of rising costs, escalating debt, and inadequate retirement planning underscores the urgent need for comprehensive reforms to secure financial stability for the aging population.

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4. Impact of the Trump Administration on Business Legal Proceedings

Overview: Post-inauguration, businesses facing investigations or lawsuits by the Biden administration are contemplating their strategies in light of the incoming Trump administration's potential policy shifts.

Key Points:

• Live Nation Antitrust Lawsuit: The Biden administration sued Live Nation for antitrust violations, alleging that its monopoly in the live music industry harms fans and performers (08:50).

• Corporate Response: During Live Nation's earnings call, President and CFO Joe Berchthold expressed optimism about potential policy reversals under Trump, hoping for a more traditional antitrust approach (09:16).

  "We are hopeful that we'll see a return to the more traditional antitrust approach." — Live Nation CFO Joe Berchthold (09:41)

• Potential Delays in Legal Proceedings: Experts like John Coffey from Columbia Law suggest that companies might delay settlements or legal actions to await more favorable conditions under the Trump administration (10:03).

  "Companies may choose to hold off on a settlement or slow down legal proceedings to wait for more favorable conditions." — John Coffey, Columbia Law (10:16)

• Areas Likely to Continue Scrutiny: Certain types of cases, such as insider trading, accounting fraud, and bribery, are expected to persist regardless of the administration due to their clear legal violations (10:43).

• Influence of New Appointees: The effectiveness of any anticipated policy changes depends on the Trump administration's appointments to regulatory agencies and their willingness to depart from previous enforcement stances (11:13).

  "Those attorneys in the back of their minds, they'll also be thinking, well, I'm going to have to really come down hard on what the Trump administration wants." — Jennifer Saline, Arizona State University (11:48)

Conclusion: Businesses embroiled in legal disputes with the Biden administration are strategically assessing their next moves amid uncertainties about policy shifts under the Trump administration. While some regulatory actions may be tempered, core legal issues are likely to remain a priority, emphasizing the importance of adaptability and proactive compliance strategies for affected companies.

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5. Understanding the Federal Home Loan Bank System

Overview: The episode features an in-depth discussion with Elena McCargo and Mark Finley about the often-overlooked Federal Home Loan Bank (FHLB) system, its role in supporting financial institutions, and its impact on housing affordability.

Key Points:

• Introduction to FHLB: Mark Finley explains that the Federal Home Loan Bank system comprises 11 regional banks designed to provide low-cost loans to banks, credit unions, and other lenders, thereby supporting economic development and affordable housing (15:15).

  "We are a real daily part of our financial institutions' ability to provide their products and services and really support grant making, affordable housing and economic development." — Mark Finley, FHLB (17:44)

• Organizational Structure: Contrary to common misconceptions, FHLBs are not federal agencies but member-owned cooperatives, federally regulated and chartered by Congress. They do not engage in direct retail banking but serve as banks for banks (16:05).

• Housing Affordability Crisis: Elena McCargo highlights the acute housing shortages in California, Nevada, and Arizona, with millions of affordable homes needed to meet demand. The FHLB system aims to address these shortages by providing necessary liquidity to financial institutions (17:19).

  "The overall shortage of housing... is making it very, very difficult for affordable housing developers to bring new construction online." — Mark Finley, FHLB (18:04)

• Responding to Criticism: Addressing recent criticisms that FHLBs have strayed from their mission, Mark Finley asserts that the system has adapted to changing needs, increasing investments in affordable housing through advisory councils and new programs (19:37).

• Public Awareness and Importance: Finley emphasizes the FHLB's crucial role in enabling community banks and credit unions to offer essential financial services, thereby sustaining local economies and supporting individual banking needs (20:35).

  "Without the Federal Home Loan Bank system, we would probably not have as many community banks and credit unions that could sustain themselves." — Mark Finley, FHLB (20:35)

Conclusion: The Federal Home Loan Bank system plays a pivotal yet underappreciated role in maintaining the stability and accessibility of financial services across communities. By providing essential funding to smaller financial institutions, FHLBs facilitate economic growth, support affordable housing initiatives, and ensure that essential banking services remain accessible to diverse populations.

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6. Rebuilding Asheville After Hurricane Helene

Overview: Laura Hackett from Blue Ridge Public Radio reports on Asheville, North Carolina's efforts to recover and rebuild in the aftermath of Hurricane Helene, which devastated the region's infrastructure and economy.

Key Points:

• Economic Impact: Asheville, a mountain community with a population of approximately 95,000, relies heavily on tourism, contributing nearly $3 billion annually. Hurricane Helene's flooding crippled the city's water system, halting tourism and causing significant economic distress (21:48).

• Personal Stories of Resilience:

  • Rene Bouchard: A resident whose yoga studio was flooded and whose cleaning job has been reduced, leading to a drastic drop in weekly income.

    "I've just today... the guests didn't come. And it's just like that's me losing money that I thought I was going to get." — Rene Bouchard (22:24)

  • Jeffrey Burrows: A jeweler facing declining sales as the tourist flow remains low, struggling to balance business operations with personal financial obligations.

    "I have to open. I don't know for whom, but I have to open because now I've got to pay rent." — Jeffrey Burrows (25:04)

• Community Struggles:

  • Infrastructure Damage: The water system remains contaminated, with clean drinking water still unavailable. Local businesses operate on reduced capacities, and residents rely on aid sites for basic necessities like clean water and laundry facilities (22:24; 23:22).

  • Mental Health Challenges: Comedian and mental health professional Kayla Clark conducts weekly support groups to help residents process their grief and trauma from the disaster.

    "People feel kind of like they're moving through their day in a fog." — Kayla Clark (23:59)

• Tourism Revival Efforts: Asheville's businesses recognize the necessity of attracting tourists to revive the local economy but face the dilemma of balancing business recovery with community healing.

  "The reality is our city is built and defined by the income we generate from tourism." — Jeffrey Burrows (25:27)

• Resident Expectations: While residents understand the importance of tourism, they advocate for visitors to approach their return with patience and empathy, considering the ongoing recovery efforts.

  "If tourists do come, they should bring patience, plenty of drinking water, and plan to spend some money in Asheville." — Jeffrey Burrows (25:39)

Conclusion: Asheville's path to recovery from Hurricane Helene is fraught with economic, infrastructural, and emotional challenges. While the community rallies to restore normalcy and attract tourism, the balance between urgent rebuilding needs and the residents' well-being remains delicate. The resilience and collaborative efforts of Asheville's inhabitants are pivotal in navigating this complex recovery journey.

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Final Notes: The "Too Much Oil?" episode of Marketplace offers a comprehensive look into diverse economic issues, from global oil market dynamics and corporate turnarounds in the streaming industry to the intricacies of the Federal Home Loan Bank system and the tangible impacts of natural disasters on local economies. Through expert interviews and real-life stories, the podcast provides listeners with a nuanced understanding of the interconnected factors shaping today's business and economic landscapes.

Transcript

[Sponsor Representative]

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[Amy Scott]

Politicians have their plans, but the market doesn't always cooperate. From American Public Media, this is Marketplace in Baltimore. I'm Amy Scott, in for kyra's doll. It's 30 Thursday, November 14 Good to have you with us. Now that Republicans have won control of the House, President elect Donald Trump will have an easier time passing his agenda. One priority. We heard a lot during the campaign. Drill baby, drill. Trump promised to cut Americans energy bills by expanding oil and gas production. Thing is that production is already at record levels during the Biden administration, and today the International Energy Agency projected a global oil surplus of more than a million million barrels per day next year. Marketplace's Henry Epp looks at how that might complicate Trump's plans.

[Henry Epp]

The basic story of oil this year is that the growth in demand for crude keeps falling short of expectations, says Mark Finley at Rice University.

[Amy Scott]

And so it looks like global oil demand is pretty sluggish.

[Henry Epp]

It's still growing, but not very aggressively. One of the main reasons for that is weakening demand from China, which is both a function of the rapid growth.

[Amy Scott]

Of electric cars but also the overall weakness of their economy.

[Henry Epp]

China's been going through some tough economic times, as you might have heard, and a weaker economy needs less oil. At the same time, the country is rapidly switching to EVs, which cuts into the market for gasoline. And with that softer demand, opec, the cartel of oil producing countries in the Middle east and elsewhere, has been holding back oil production to try to keep prices high. But Matt Smith, an analyst at Kepler.

[Amy Scott]

Says at the same time, you've seen.

[Mark Finley]

Oil coming to the market from the likes of Guyana, from Brazil, from the.

[Henry Epp]

U.S. from Canada, from Norway, essentially making up for any supply gap left by opec, smith says. So with weak demand and ample supply, you get lower prices. Brent crude right now is trading around $70 a barrel. This creates challenges, financial challenges for the.

[Amy Scott]

Oil industry that really depends on high.

[Mark Finley]

Prices in order to make big profits.

[Henry Epp]

Clark Williams Derry is an analyst with the Institute for Energy Economics and Financial Analysis. Lower prices mean oil companies aren't as eager to spend money to drill. So he says while many oil producers will welcome the Trump administration's likely efforts to cut some regulations and open more public land to drilling, if the conditions aren't there for oil companies to make.

[Amy Scott]

Money, they're not going to be doing.

[Mark Finley]

What a politician tells them to do. They're going to be doing what's profitable.

[Henry Epp]

Of course, he says, oil markets are susceptible to global conflicts and other factors, which can push prices up and make companies more eager to boost production.

[Amy Scott]

I'm Henry App for Marketplace Disney had some good news for its investors today. The media giant reported better than expected fourth quarter earnings and said its streaming services posted $321 million in operating income, a pretty big deal considering just two years ago they were losing more than $4 billion. The company more than 4 million new Disney subscribers. Marketplace's Kaylee Wells has more on the apparent turnaround.

[Kaylee Wells]

The primary driver of Disney's success is pretty straightforward.

[Amy Scott]

They've had a great quarter in streaming because people want to subscribe.

[Kaylee Wells]

Independent media consultant Brad Adgate says Disney's got great content.

[Amy Scott]

The Bear and Shogun. They won Emmy awards for best drama and best comedy.

[Kaylee Wells]

Disney's also got espn, which satisfies sports fans, and it's the big brand for kids who want to watch the Little Mermaid again, again and again. The company's also found success in its cheaper subscription with ads, says Michael Smith. He's a professor at Carnegie Mellon University.

[Mark Finley]

Adding, the advertising tier has brought in more customers than it cannibalized customers from the from the full paid tier.

[Kaylee Wells]

Smith says Disney also got rid of the old structure with a movie division and a TV division and an international team.

[Mark Finley]

Bob Iger blew up that traditional organizational structure and made his org structure look much more like Netflix, where he's got a division that's focused on content and he's got a division that's focused on platform.

[Kaylee Wells]

Disney's success is not that unique. Brandon Katz is a senior entertainment industry strategist with Parrot Analytics.

[Mark Finley]

All companies right now are getting better from a monetary perspective in terms of streaming and narrowing losses to turn a.

[Kaylee Wells]

Profit thanks to growing advertising and increasing subscription prices. Plus, there's the whole thing where it's harder to share passwords now, proving that.

[Mark Finley]

Netflix is not the only one that can get you off that freeloading ability.

[Kaylee Wells]

Kat says that success won't last for everyone. Out of the main eight streaming services, he says general consensus is roughly half will still be here in a decade. Kaylee I'm Kaylee Wells for Marketplace.

[Amy Scott]

After some sticky inflation data, this week, the Fed is taking a cautious approach to further interest rate cuts. In a speech in Dallas today, Fed Chair Jay Powell said the economy is not sending any signals that we need to be in a hurry. Wall street had a down day. We'll have the details when we do the number we had an update this week on the state of retirement in this country. A report from the Employee Benefit Research Institute found that nearly a third of retirees feel like they're spending more than they can afford. That's almost double the percentage who said that in 2020. Marketplace's Samantha Fields has more.

[Samantha Fields]

The last four years have been a bit of a roller coaster.

[Amy Scott]

We had a huge pandemic. It was traumatic for so many people and their jobs and the economy.

[Samantha Fields]

Mark Avery at the Brookings Institution says the economy has bounced back well, but.

[Mark Finley]

Many people are still hurting, especially many.

[Samantha Fields]

Older adults who retired earlier than they planned, says Bridget Bearden at the Employee Benefit Research Institute.

[Elena McCargo]

Many of the retirees that we spoke.

[Amy Scott]

To experienced a decline in their standard of living.

[Samantha Fields]

Inflation is part of the reason. Teresa Gillarducci at the New School says the biggest increases were on things that retirees spend most of their money on.

[Amy Scott]

In food, in shelter and in medical care.

[Samantha Fields]

People are also carrying a lot more debt. Two years ago, 40% of retirees had outstanding credit card debt. Today it's 70%.

[Amy Scott]

And we're finding more and more retirees with larger and larger mortgages. And we also see a significant number of retirees who are still carrying student debt.

[Samantha Fields]

Some of these factors are new or getting worse. But Alicia Minnell at the center for Retirement Research at Boston College says the basic reality has been true for years.

[Amy Scott]

That somewhere between 40% and 50% of people who are entering retirement are not going to have the kind of money that will let them spend the way they spent before.

[Samantha Fields]

One of the biggest issues is that nearly half of people never work a job that offers a retirement plan, and others only do for part of their career. Monnell says that needs to change.

[Amy Scott]

Continuous coverage is really the most important thing that we can do to improve the whole retirement situation.

[Samantha Fields]

That and fix Social Security before it runs out of funds. I'm Samantha Fields for Marketplace.

[Amy Scott]

Imagine for a moment you're involved in running a business that's been the target of an investigation by the Biden administration or or even a lawsuit. You're probably weighing two options, right? Try to reach some kind of settlement with the outgoing administration or sit back and wait for what might be a better deal from the Trump administration. After Inauguration Day, Marketplace's Kimberly Adams has been looking at that very real scenario.

[Kimberly Adams]

Earlier this year, the Biden administration sued Live Nation, the entertainment company that runs Ticketmaster along with concert venues, accusing it of antitrust violations harming fans and performers by monopolizing the live music industry. But on Monday, during the company's earnings call, president and CFO Joe Berchthold had a cautiously optimistic outlook on life under the incoming Trump administration.

[Amy Scott]

We are hopeful that we'll see a return to the more traditional antitrust approach.

[Kimberly Adams]

As opposed to the more aggressive approach of the Biden administration's lawsuit.

[Amy Scott]

Some parts of the case, we think, reflect a much more interventionist philosophy today than you'd expect of a Republican administration. Obviously, the request of Breakup, Live Nation and Ticketmaster would be an example of.

[Kimberly Adams]

That, so we can expect some companies to try to slow down the progress on some of these cases during the transition, says John Coffey, a professor at Columbia Law and an expert on corporate governance.

[Amy Scott]

They don't know, but they are hoping that the incoming administrator of a given agency will be dramatically opposed to the positions of the predecessor administrator.

[Kimberly Adams]

Coffey says companies may choose to hold off on a settlement or slow down legal proceedings to wait for more favorable conditions.

[Amy Scott]

This is particularly true at the SEC and the ftc, where they've had positions that Trump has publicly criticized.

[Kimberly Adams]

Now, not everything at the securities and Exchange Commission and the Federal Trade Commission will grind to a halt.

[Amy Scott]

Things like insider trading, accounting fraud, when people pay bribes to, you know, foreign officials, those types of cases are going to continue.

[Kimberly Adams]

Jaime Marlier is a partner at Morrison Forrester in New York and spent years in the SEC's enforcement division.

[Amy Scott]

Where I think we might see some changes would be in more topical areas.

[Kimberly Adams]

The cryptocurrency industry, for instance, has an incentive to wait things out, given what the president elect has said. So do companies in fights over corporate disclosures around environmental, social and governance issues, issues esg. But whether or not waiting will pay off will depend on who President Elect Trump chooses to run these agencies and how far he gets with efforts to turn career civil servants into political appointees. Jennifer Saline teaches law at Arizona State University. Many of those positions will end up being attorneys, and those attorneys are the ones who often are the ones that are negotiating with corporations and companies that regularly interact with the federal government. And even if the pressure to toe the line isn't explicit, Celine says, those attorneys in the back of their minds, they'll also be thinking, well, I'm going to have to really come down hard on what the Trump administration wants, because if they don't, they might find themselves looking for a new job in Washington. I'm Kimberly Adams for Marketplace.

[Amy Scott]

Coming up, I've heard from a lot of people that they feel kind of like they're moving through their day in a fog. And who could blame them? But first, let's do the numbers. The Dow Jones Industrial Average lost 207 points, a half percent to close at 43,750. The NASDAQ fell 123 points, 6. 10% to land at 19,107. And the S&P 500 shed 36 points, 6. 10% to finish at 59. 49. Henry Epp was telling us about global oil supply and demand and their possible impact on oil prices. Taking a look at some firms in the petroleum industry. Exxon Mobil rose less than a 10%. Valero gained 3. 10%. Occidental sour 9, 10. Chevron grew 1 and 9. 10%. Advance Auto Parts added 6. 10%. It announced plans to close more than 500 corporate stores and 200 independent locations as part of a wider restructuring. Bond prices fell. The Yield on the 10 year T note rose to 4.45%. You're listening to Marketplace.

[Mark Finley]

This Marketplace podcast is supported by Rubrik, a cybersecurity company focused on securing the world's data. When cyber attacks put businesses reputations and careers at risk, Rubrik provides the power to bounce back fast and become cyber resilient.

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[Bridget Bodnar]

More money, more problems, and way more questions from your kids, right? But not to worry, million bazillion, a podcast from Marketplace has you covered. I'm Bridget Bodnar and with my co host Ryan Perez, we take you and your young ones on grand adventures and comedic sing alongs to answer all the questions your little ones have about money. Join us as we explain how banks work, why name brands are more expensive, and what happened to Black Friday sales Listen to Million Bazillion wherever you get your podcasts.

[Amy Scott]

This is Marketplace. I'm Amy Scott. There's an important part of the US banking ecosystem it's possible you've never heard of. It's the Federal Home loan bank system. 11 regional banks that operate throughout the country providing low cost loans to banks, credit unions and other lenders. The Federal Home Loan bank of San Francisco, as the name implies, is based in San Francisco, but has more than 300 members throughout California, Nevada and Arizona. Elena McCargo recently as President and CEO of the San Francisco bank. Before that she was the president of Ginnie Mae. Thanks for joining us.

[Mark Finley]

Thanks, Amy.

[Amy Scott]

All right, so let's start with a quick explanation for people who aren't familiar with the Federal Home Loan banks, which I think is probably many of our listeners. So what do you do?

[Mark Finley]

So first of all, it's great to be with you. And the Federal Home Loan bank system, you are absolutely right, is pretty much an unknown system that has been in the background of our financial Services system for 92 years. The federal Home Loan banks are really here to provide sources of funding and liquidity to our members to really support economic development. Affordable housing, I think those are, that's the system perspective and so understanding that the Federal home loan banks1 are not federal agencies, we're member owned cooperatives, which is a really interesting structure. And this is why a lot of people have a hard time understanding what we are and how we are.

[Amy Scott]

But our members, well, the word federal is right in there. So it implies a certain relationship.

[Mark Finley]

Yeah, federally regulated, chartered by Congress. We don't make home loans. And so that's part of our name. And we're not a direct retail bank to consumers. We are a bank of bankers and financial institutions. It's a growing role and I think going forward will continue to be the case.

[Amy Scott]

So it seems like a rebranding is in order. Federal Home Loan bank, none of those.

[Elena McCargo]

Are really what you do.

[Amy Scott]

So that's a question for another time, I guess.

[Mark Finley]

Exactly. We'll talk about that one later. I just wanted to mention too, just in San Francisco loans, most of our footprint, believe it or not, is smaller local lenders. So we're a real like daily part of our financial institutions ability to provide their products and services and really support grant making, affordable housing and economic development in their communities.

[Amy Scott]

Yeah. And your mission, housing affordability is one of the reasons we wanted to have you on because this crisis has been especially acute in your region, California, Nevada and Arizona. So as you've taken on this new role. What challenges are you seeing in making, in closing that affordability gap?

[Mark Finley]

Yeah, I mean, as you know, affordability has been a long time challenge. Our state, the state of California alone needs to build 1.2 million affordable homes to meet the demand of low income renters in our state. Arizona, it's over 175,000 units short. Nevada, nearly 100,000 units. So the overall sort of shortage of housing and then the implications of homes that are in disaster prone areas are on the rise. And so when that convergence happens, you can understand if you have a significant shortage, all prices are going to do is rise. And it's making it very, very difficult for afford housing developers in our states to even bring new construction and new affordable housing online. And I think that's a real significant challenge.

[Amy Scott]

I want to ask you about some criticism of the Federal Home Loan bank system, which is, you know, that some argue the banks have really strayed from their mission to support affordable housing and community development. As I'm sure you know, this summer a group of mostly Democratic senators sent letters to each of the 11 banks pointing out that last year they spent only $398 million on affordable housing and that a sizable share of bank members had not originated a single mortgage in five years. First, I know you're new to the system, but I want to know how you respond to that and do you think the system needs reform?

[Mark Finley]

So I think the system has changed and the needs across the country have changed. And I think the system has done a really good job of listening to stakeholders of all kinds, including members of Congress. I think that there has been increased commitments, increased investments nationally in the affordable housing side of our mission. I do think what we do with our affordable housing advisory councils, what we're doing to really increase our investments, the new programs that we've put in place, that's really meaningful and we are already seeing meaningful change and we'll continue to see that going forward.

[Amy Scott]

So going back to what we talked about at the beginning, that many people aren't familiar with the Federal Home Loan bank system. I read a line from the Brookings Institution that said the system has basically been toiling in obscurity. So why should a regular person know about and care about your institution?

[Mark Finley]

I would say that the reason to know that your banker has a bank that is helping to support their ability to do whatever it is they're doing, whether it's to bank you, to lend to you, to provide you with a mortgage loan. Those are enabled by your bank's relationship with the Federal Home Loan bank system. I would go as far as saying without the Federal Home Loan bank system, we would probably not have as many community banks and credit unions and smaller financial institutions that could maintain themselves and continue to sustain. It's not obscure and it's not small. It's very consequential that the Federal Home Loan banks are there to provide that needed liquidity and ensure that we have the financial stability we need and that community banks and others can thrive.

[Amy Scott]

All right. Elena McCargo is president and CEO of the Federal Home Loan bank of San Francisco. Thank you so much.

[Mark Finley]

Thank you so much for having me.

[Amy Scott]

On the show. Yesterday we heard from a tea producer in Asheville, North Carolina, who's figuring out how to rebuild in the aftermath of Hurricane Helene. Lots of businesses in Asheville are trying to do the same. It's a mountain community of about 95,000 people, and tourism is a big part of the economy. It brings in nearly $3 billion per year. But when flooding destroyed huge parts of Asheville, including its water system, tourism ground to a halt. Laura Hackett from Blue Ridge Public Radio looks at how locals are navigating when and how to invite tourists back.

[Elena McCargo]

Asheville is a mountain community and can be an expensive place to live. So like a lot of residents, Rene Bouchard has a couple jobs, one teaching yoga, the other cleaning short term rentals. When Hurricane Helene hit, both jobs were affected.

[Amy Scott]

My yoga studio that I was teaching at completely flooded.

[Elena McCargo]

So now she's relying on her cleaning job for income. But most visitors have canceled fall bookings, meaning much of Bouchard's income dried up. She used to clean one or two houses every day and get around $900 a week. Now she's lucky if she got third of that.

[Amy Scott]

I've just today, you know, showed up to a property and it wasn't used so the guests didn't come. And it's just like that's me losing money that I thought I was going to get.

[Elena McCargo]

Still, Bouchard says she gets why visitors are avoiding Asheville right now.

[Amy Scott]

The water is probably going to be some sort of yellow to sweet tea color. It's not going to be clear when you wash your hands. It's going to smell like chlorine and chemicals.

[Elena McCargo]

There's no timeline for when clean drinking water will return. The reservoir is still a muddy mess, and in town it still feels like a disaster zone. The restaurants that are open are serving reduced menus on paper plates, and residents are still visiting aid sites for basic necessities like drinking water. Clean showers and laundry.

[Amy Scott]

We're left with all this wreckage and trying to navigate how to rebuild or whether to rebuild or relocate.

[Elena McCargo]

That's Kayla Clark, a comedian and mental health professional. She's been holding weekly support groups for Asheville residents to grieve and process.

[Amy Scott]

I've heard from a lot of people that they feel kind of like they're moving through their day in a fog.

[Elena McCargo]

And in this mental state, it's hard to welcome and serve tourists.

[Amy Scott]

There are people that come in and they say, whoa, there was a storm here, which is really jarring because it feels like, I mean, it was just so intense and huge for all of us.

[Elena McCargo]

But what's also tough right now is paying basic bills. On a Saturday morning, Jeffrey Burrows sits in his tiny jewelry shop in Asheville's River Arts District with an iced coffee. Luckily, his business didn't get flooded during Helene.

[Mark Finley]

We're on the higher side of the tracks, you know, further from the river, and there's only about, you know, currently 20% of the district remaining. But it's open pre Helene, his store.

[Elena McCargo]

And the whole neighborhood will be filled with shoppers.

[Mark Finley]

And this is a Saturday. There would be so many people out here walking around, and it's just leaves on the ground.

[Elena McCargo]

And normally he would sell at least a few custom bracelets, but so far today, zero sales. Burroughs says he's still processing the disaster himself and it feels awkward to reopen the shop.

[Mark Finley]

Well, I have to open. I don't know for whom, but I have to open because now I've got to pay rent.

[Elena McCargo]

And he says Asheville needs visitors right now.

[Mark Finley]

Regardless of how I feel about tourism, the reality is our city is built and defined by the income we generate from tourism. That's our current situation.

[Elena McCargo]

He understands that residents are torn, but they do agree on one if tourists do come, they should bring patience, plenty of drinking water, and plan to spend some money in Asheville. I'm Laura Hackett for Marketplace.

[Amy Scott]

This final note on the way out today in news that sounds like something you'd read in the Onion. The winner in a bankruptcy auction for Alex Jones's Infowars media company was the Onion. Jones, a far right conspiracy theorist, was forced to surrender Infowars and related assets after a billion dollar judgment against him for promoting lies about the Sandy Hook School massacre. With backing from some Sandy Hook families, the Onion has plans to relaunch the platform in January as a parody site with ads and other content from the nonprofit Everytown for Gun Safety. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher and Stephanie Seek are the Marketplace editing staff. Amir Bibawi is the managing editor and I'm Amy Scott. We'll be back tomorrow. This is apm.

[Bridget Bodnar]

What do they say? More money, more problems, and way more questions from your kids, right? But not to worry. Million Bazillion, a podcast from Marketplace, has you covered. I'm Bridget Bodnar and with my co host, Ryan Perez, we take you and your young ones on grand adventures and comedic sing alongs to answer all the questions your little ones have about money. Join us as we explain how banks work, why name brands are more expensive, and what happened to Black Friday sales. Listen to Million Bazillion wherever you get your podcasts.