Trump aims axe at community lender fund

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Speaker 5 Good news, bad news, we got it all from American public media. This is Marketplace.

Speaker 5 In Los Angeles, I'm Kyle Risbell. It is Thursday, today, the 24th of April.
Good as always to have you along, everybody. I got good news on trade, and I got bad news on trade.

Speaker 5 We're going to do the good first. The White House, President Trump himself actually said this week that his people are actively, that is the word he used, talking to Beijing about all things trade.

Speaker 5 The bad news is that the Chinese foreign ministry said today, quote, China and the United States have not held consultations or negotiations on the tariff issue, let alone reached an agreement.

Speaker 5 The spokesman went on to say that reports of those talks, and again, this is a quote, are fake news.

Speaker 5 The president's newfound interest in negotiating on trade has come after he met with retail CEOs this week, CEOs who told him they are worried about shelves being empty thanks to his tariffs.

Speaker 5 I mentioned that because this morning we learned how the first quarter went for some big-name consumer brands, PepsiCo and Procter ⁇ Gamble and American Airlines by name.

Speaker 5 All three cut their forecasts for the year. All three say trade policy is creating uncertainty for them.

Speaker 5 And as Marketplace's Kristen Schwab reports, it is creating uncertainty for their consumers too. Consumers who are thinking about buying flights and soda, even staples like laundry detergent.

Speaker 6 John Lear, chief economist at Morning Consult, is taking these company earnings reports with a grain of salt because in the business world, it's better to underpromise and overperform.

Speaker 9 My sense is that companies are being sort of overly conservative right now, as opposed to setting up too lofty of expectations and then fail.

Speaker 6 So then, why are companies on their earnings calls so worried about consumers being worried?

Speaker 9 Really, what we're talking about is how are their expectations of the future changing the way that they behave currently?

Speaker 6 Expectations affect actions. And right now, consumers are expecting prices to go up because of tariffs.

Speaker 6 Blake Drosch, a senior analyst at eMarketer, says that especially hits Pepsi, which makes sweet and savory treats.

Speaker 10 It's really can only be a matter of having to raise prices by a little bit bit to get the consumer to start thinking about switching to another alternative.

Speaker 6 But what really concerns Drosch is that after years of consumers making discretionary downgrades, switching from nacho cheese Doritos to store-brand corn chips, people are now trying to cut costs on their favorite household staples.

Speaker 10 Consumers are typically going to be more willing to, let's say, cut back on buying their favorite name-brand cookies than they are to switch from a toothpaste or a deodorant brand that they've been using for years and they're loyal to.

Speaker 6 Some consumers have even started rationing.

Speaker 11 Meaning not doing laundry as frequently, using less shampoo and soap.

Speaker 6 Erin Lash, who directs consumer equity research at Morningstar, says this kind of behavior doesn't raise big red flags yet.

Speaker 11 It does take more than a quarter, maybe more than two quarters before there is the expectation or the opinion that that change in behavior is likely to prove lasting and prove to be a real shift in how consumers and companies interact with the economy.

Speaker 6 I'm Kristen Schwab for Marketplace.

Speaker 5 Here's a housing data point to keep in your back pocket. The spring home buying season seems to be off to a shaky start.

Speaker 5 The National Association of Realtors said today sales of existing homes fell 5.9% February to March, lowest that number has been since 2009.

Speaker 5 Also, if you recall, not a great time in housing. Wall Street today,

Speaker 5 traders somehow did not have a care in the world. We will have the details when we do the numbers.

Speaker 5 The plan, such as it is, that the president and his administration offer for his trade policy, tariff rates not seen in 100 years is that policy, is that making imports to this economy more expensive is somehow going to revitalize American industry and create jobs, millions and millions of jobs, says Commerce Secretary Howard Luttnick.

Speaker 5 Details, so far, are thin.

Speaker 5 This is not, though, the first time an economic golden age has been promised with tariffs as the motivating factor.

Speaker 5 Marketplace Sabri Benishore takes a look at what history has to tell us about how that worked out.

Speaker 7 The world's economic landscape 85 years ago looked very different from today. Industries that are now dead were thriving.
Countries that are now struggling were rich.

Speaker 13 Argentina is outstanding in wealth and progress in South America.

Speaker 7 This is from a documentary for school children in 1940.

Speaker 13 A leader on her own continent and a rival of the United States.

Speaker 7 Argentina was one of the richest countries in the world then.

Speaker 7 Agriculture had treated it well, but it and many other countries at the time felt an urgent need to recreate the industrialization they saw in Europe and the U.S.

Speaker 7 Newly independent former colonies would embrace this too. Here's Ghanaian Prime Minister Kwame Nkrumah in 1963.

Speaker 14 It is impossible to think of economic development and national independence without possessing an unfettered capacity for maintaining a strong industrial power.

Speaker 7 The way to do this, many believed, was to wall their economies off from imports.

Speaker 15 It was the idea that you will put on tariffs, other kinds of restrictions on imports.

Speaker 7 Paul Krugman is a professor of economics at the City University of New York and a former New York Times columnist.

Speaker 7 Why buy from abroad when you can make it at home, creating manufacturing or industrial jobs and accelerating the development of the country along the way?

Speaker 15 The rhetoric in many ways resembled what Trump is saying, although there was never any talk about make Brazil great again, because Brazil hadn't been great.

Speaker 15 Brazil was a poor country that was trying to make it a little bit richer.

Speaker 7 The idea was called import substitution industrialization, and it started to take hold after World War II.

Speaker 15 Build up an industrial sector behind those barriers, and then supposedly it'll become efficient and will no longer need the barriers once it's matured.

Speaker 15 So, you saw that followed everywhere from India to Brazil.

Speaker 7 So, many countries raised tariffs again and again, Argentina among them.

Speaker 16 At some point, they were on average 200%,

Speaker 16 so that's really high.

Speaker 7 Sebastian Gagliani is professor of economics at the University of Maryland and former Secretary of Economic Policy for Argentina. But something happened when the tariff wall went up.

Speaker 16 Stagnation.

Speaker 7 The industries that emerged were competitive only inside the bubble of Argentina. They were not advanced.
Gagliani remembers it.

Speaker 8 So let me tell you a story about toys.

Speaker 7 When Gagliani was a kid in Argentina in the 70s, decades after import substitution started, his dad would travel internationally for work.

Speaker 16 And so he always brought me back toys from Europe. So I got this big bang.

Speaker 7 Big Ben, like the clock, very state-of-the-art for a toy at the time.

Speaker 16 And there's a guy that wants to copy them in Argentina under protection.

Speaker 7 So he says, if you give me your toy, I'm going to have to break it apart to copy it, but I'll give you three of the ones that I make.

Speaker 16 And I say, fine, take my and you give me three. I can tell you that the three he gave me were didn't pay.
He needed to give me a hundred to compensate me.

Speaker 16 What he produced was so bad.

Speaker 7 Being cut off from trade made economies less efficient and less innovative. This pattern repeated itself.

Speaker 8 And so a good country example here would be India.

Speaker 7 Douglas Irwin is a professor of economics at Dartmouth. India produced a car known as the Ambassador.

Speaker 8 which was basically the same in the 1970s as it was in the 1950s. It looked the same.
It didn't really improve the quality of the product.

Speaker 7 He says living behind a tariff wall saddled the country with a large manufacturing sector that wasn't internationally competitive and didn't much improve living standards.

Speaker 8 So yes, import substitution can bring about a lot of manufacturing, but whether that's efficient and adds to the wealth of the nation is another question.

Speaker 7 After three or four decades, governments around the world became disillusioned with this experiment.

Speaker 15 It was not a success story.

Speaker 5 Again, Paul Krugman.

Speaker 15 The industries never became efficient. Economic growth was really disappointing.
And rather rapidly in the 1980s, the developing world changed to a strategy of embracing international trade.

Speaker 7 He says it's a piece of history the U.S. could learn from.
In New York, I'm Sabri Benishore for Marketplace.

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Speaker 5 Among the many things the pandemic did to this economy and to the people in it is that it prompted a lot of Americans, a lot of Americans, to move from the Northeast and the West Coast to the Sun Belt to Nashville, atlanta tampa and austin and phoenix and points in between

Speaker 5 incentives being what they are developers in all those markets build housing lots of it new apartment construction jumped almost 40 percent between 2020 and 2022 that's from the census bureau but since then apartment construction starts have fallen below where they were in the before times marketplace adjusting ho has that one early in the pandemic apartment construction was booming in texas you had robust job growth, population growth in the central Texas region.

Speaker 18 That's John Kirk, the founder of the Light Path Company, an apartment development firm based in New Bronffils, Texas, about an hour south of Austin.

Speaker 18 He says that construction boom started to taper off a couple years ago when it started getting harder to get loans.

Speaker 19 Lenders started getting really tight on capital, the interest rates where they were,

Speaker 19 very difficult to underwrite.

Speaker 18 At the same time, all of those new apartment buildings that were built early in the pandemic started hitting the market. And that new supply caused rent growth to slow down.

Speaker 18 That gave builders less incentive to start new projects.

Speaker 19 And when you put all that together, all those different levers, it needs to produce a return.

Speaker 19 And if that return is not there for the risk that you're going to take, well, okay, it doesn't make sense to start this project.

Speaker 18 Developers are facing other headwinds, too. Danishka Nanyakara with the National Association of Home Builders says there's a construction labor shortage.
And then, of course, the president's tariffs.

Speaker 18 So the costs are expected to rise for steel aluminium copper appliances as a result apartment construction starts are likely to fall even farther xander snyder senior commercial real estate economist at first american says that'll have consequences in 2026 and 27.

Speaker 10 starts is really just a leading indicator for completions as you can imagine you can't deliver new apartments that haven't started to be built yet snyder says there's still a national housing shortage so if developers deliver fewer apartments in the coming years, rents will probably stabilize for a little bit and then they'll turn back into growth territory because that housing shortage dynamic will pick back up.

Speaker 18 Developers are still trying to find ways to meet the demand for housing given all the headwinds. Paul Habibi is principal of the real estate consulting firm Grays Lake Advisors.

Speaker 18 He says right now, many developers are trying to add capacity to existing properties.

Speaker 21 That could be something as simple as building ADUs on a portion of the parcel that may have capacity. It could be, you know, renovation and rehabilitation of existing units to try to add value.

Speaker 18 Habibi says other developers are focusing on building single-family homes for rental instead of big apartment buildings.

Speaker 21 If you think about a build-to-rent single-family community,

Speaker 21 the construction and delivery tends to be somewhat more simple. You're typically not building a large, complicated project.

Speaker 18 In New Bronffils, Texas, John Kirk, the apartment apartment developer, says the construction slowdown is an opportunity.

Speaker 18 He's laying the groundwork for a new apartment building with almost 300 units that'll break ground this fall.

Speaker 19 We've got our construction loan in place. It's very exciting.
And so, you know, taking the risk to finalize design and submit for permits.

Speaker 18 Kirk says, even though it's an expensive and risky environment right now, the new building will hit the market at a time when supply will be low and rents will be picking up.

Speaker 19 I mean, when you're delivering into less supply, it's always a good thing. You know, it's a fundamental supply and demand.

Speaker 19 And so if there's less supply and there's more demand, that's that's always a good scenario for success.

Speaker 18 A good scenario for apartment developers, not so much for renters. I'm Justin Ho for Marketplace.

Speaker 5 Coming up.

Speaker 22 It was a ranch-style home for the most part. Five steps to get from the driveway to the home.

Speaker 5 Life as a first-time home buyer coming up. But first, let's do the numbers.

Speaker 5 Dow Industrial is up 486 today, 1.2%, 40,093. The NASDAQ grew 457 points, 2.7%,

Speaker 5 17,166. The S ⁇ P 500 added 108 points, 2%,

Speaker 5 54, and 84. The CEO, Procter ⁇ Gamble, says the company will likely raise prices because of tariffs.

Speaker 5 The maker of such products as Charlie Banana Diapers and Fixitent Venture Adhesive reported a third-quarter revenue loss and cut its full-year guidance shares down 3.7% today.

Speaker 5 Speaking of passing tariffs on to consumers, the Fed's Facebook yesterday noted that, and this is a quote, many firms have already received notices from suppliers that costs would be increasing.

Speaker 5 Yes, that's how it works. Those costs get passed on.
The maker of products like Nerf Blasters and My Little Pony Mini World Magic Critter Corner Compact Creation Playset, up 14% today.

Speaker 5 What company is it, you ask? Hasbro.

Speaker 5 That was first quarter results of beat expectations. You're listening to Marketplace.

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Speaker 3 You've finally broken loose from work.

Speaker 17 Three friends, one tea time,

Speaker 1 and then the text.

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Speaker 5 This is Marketplace. I'm Kai Rizdahl.

Speaker 5 There is a list, a very long list, of programs and offices and agencies that are being targeted in the Trump administration's disassembly of the federal government.

Speaker 5 On that list is a program run by the Department of Treasury that goes by the initials CDFI, Community Development Financial Institutions. Technically, it's the CDFI Fund.

Speaker 5 It offers loans and financial services to underserved communities and individuals that aren't served by traditional banks. Last year, it awarded more than $400 million in grants and loans.

Speaker 5 And while exactly what is going to happen to a lot of the programs and agencies the president is targeting is still up in the air, or in court, lenders that rely on CDFI fund support are getting ready for a future without it.

Speaker 5 Marketplaces Savannah Peters has more.

Speaker 17 Tongass Federal Credit Union runs 14 branches along the southeast Alaskan coast, most on remote islands where you can't just drive to a bank and then you're a city.

Speaker 12 That's not how it works. You get on a plane and pay $350 round trip or more.

Speaker 17 CEO Helen Mickel says the credit union's presence in those communities is possible because of low interest loans from the Community Development Financial Institutions Institutions Fund.

Speaker 12 It's helped us to kind of level the playing field and get in to areas that otherwise would never have had any financial services.

Speaker 17 Areas like the Metlakatla Indian community of less than 1,500 people.

Speaker 17 And Mikkel says the credit union offers loan products specifically for Alaska Native fishermen who sometimes lack the proof of income usually required to take out a loan.

Speaker 12 We have made arrangements to accept their fish tickets, which is the proof of the sale that they get from the fishery, and we're able to use that to help qualify them.

Speaker 17 In other words, Tongass Federal has expanded and tailored its services to meet these small communities' unique needs, in ways Mikkel says big commercial banks won't.

Speaker 17 Now, she says her credit union can keep its doors open without that federal support.

Speaker 12 It will just slow down any additional work that we might do in erasing banking deserts.

Speaker 17 In mid-March, President Trump deemed the CDFI fund, quote, unnecessary and ordered it to be eliminated to the maximum extent legally possible.

Speaker 17 That got the attention of 23 senators from both parties who signed a letter urging the Treasury Department to protect the program.

Speaker 17 Michael Swack is with the University of New Hampshire's Center for Impact Finance.

Speaker 25 This is typically something that's not very controversial to serve communities that aren't well served by mainstream lenders, mainstream capital markets.

Speaker 17 For now, it's business as usual at the CDFI fund. It accepted funding applications for this year.
But it's not clear if the fund's small staff and relatively modest budget are safe from future cuts.

Speaker 25 So there's still a limbo. You know, what will happen to the executive order? Will the CDFI fund be continued? And if it is continued, where will it sit in the budget?

Speaker 17 SWACK says that's a tough environment for community lenders. Most that I reached out to to declined to speak on the record right now.
That's not surprising to Lenwood v.

Speaker 17 Long, head of the African American Alliance of CDFI CEOs.

Speaker 26 Oh, no, no, no. They don't want to draw attention to themselves, but sadly, the attention is on them.

Speaker 17 Without CDFI fund support, Long says some of the smallest lenders in his organization would fold.

Speaker 26 So when you think about the gap it would create in communities that have been bypassed for so long is frightening and chilling.

Speaker 17 Community lenders and their investors are waiting for clarity.

Speaker 17 Ann Hines is CEO of Dream Spring, an Albuquerque-based loan fund supporting small business owners that uses the CDFI fund brand to attract partnerships and capital from commercial banks, which may be wary of the risks that come with the now uncertain funding.

Speaker 17 In an environment where there is at the moment a lot of uncertainty, that absolutely affects the underwriting decisions that those lenders make.

Speaker 17 Even if the fund survives federal downsizing, Haynes says a chilling effect on investment in the community lending sector has already set in. I'm Savannah Peters for Marketplace.

Speaker 5 In addition to the monthly home sales data that I mentioned up at the beginning of the program, every year the National Association of Realtors puts out a big report about who exactly all the buyers and sellers of homes in this economy are.

Speaker 5 From the 2024 version of which I am now going to pull two data points. First, last year the percentage of home buyers who were first-timers fell to a record low of 24%.

Speaker 5 Second, and also 17% of homebuyers bought a multi-generational home. That is a record high.
You got aging parents, kids that moved back in after college, lots of reasons.

Speaker 5 Here's the latest installment of our series, Adventures in Housing, all about first-time homebuyers.

Speaker 22 My name is Savannah Melendez. I am 27 years old, and I just bought my first house in Anchorage, Alaska.

Speaker 22 In 2015, my mom was diagnosed with a sarcoma. She went for surgery in 2023.
It was a partial pelvic reconstruction so that she could get rid of the cancer but still maintain her ability to walk.

Speaker 22 There were times where she'd have to, you know, be carried up the stairs. There were times where, you know, we'd scooch her up the stairs one by one.

Speaker 22 So finding a different apartment that was more accessible in a place that wasn't three flights up, it sounded like the best option at the time because the home purchase felt so unobtainable at that point for a 20-something year old.

Speaker 22 But I really wanted to intervene and make sure that my mom was taken care of the way that she had taken care of so many people her entire life.

Speaker 22 The cancer has never fully gone away. And so they are just trying to make sure that she has as healthy and as happy of a life as she possibly can.

Speaker 22 I happened to come across this one house that seemed like a unicorn. It had a really big yard.

Speaker 22 And it was a ranch style home for the most part, five steps to get from the driveway to the home, but a ranch style home. And I serve at a local restaurant here.

Speaker 22 And I remember telling one of the other waitresses that I was so bummed because, look at this house, and look how beautiful it is.

Speaker 22 And if I just had the opportunity, if I was just in a different position, that I might be able to own this home.

Speaker 22 But I'm not. And so I ended up having that same conversation with my supervisor at the other job that I have.

Speaker 22 And that's where she gave me the advice to not necessarily deny myself the opportunity before I was even given it. it.

Speaker 22 We offered $256,000 for the home, which was just a bit over-asking. My first mortgage is for just over $200,000, and then the down payment assistance covered the rest with a second mortgage.

Speaker 22 That made it, so I came to closing with only prepaid expenses and the closing cost fees.

Speaker 22 Closing was very emotional.

Speaker 22 I remember at one point looking over and seeing tears in my mom's eyes and that I had to bite my cheeks to not cry with her because

Speaker 22 I remember us having a conversation years and years prior where she wanted to purchase a home. She just never felt that it was possible.

Speaker 22 So to be able to be a part of her homeownership dreams coming true, it's beautiful and I'm so grateful for it.

Speaker 5 Savannah Melendez in Anchorage.

Speaker 5 We cannot do this series without you, no matter where you live. So, if you're hunting for your starter home or settling in your first mortgage already, tell us about it, would you?

Speaker 5 Marketplace.org/slash adventures in housing.

Speaker 5 This final note on the way out today. We started with good news and bad news, so shall we end.

Speaker 5 We got March durable goods orders from the Commerce Department today. Big expensive stuff, durable goods, right? The good news is they were up 9.2% from a month earlier.

Speaker 5 The bad news, and if you're a regular listener, you know where I'm going. The bad news is that that bump is A, because people were trying to get ahead of tariffs.

Speaker 5 And as a result, also B, there's likely to be a sag in those orders coming.

Speaker 5 John Gordon, Noyer Carr, Amanda Peacher, and Stephanie Seek are the marketplace editing staff. Amir Babawe is the managing editor.
And I'm Kai Rizdahl. We will see you tomorrow, everybody.

Speaker 5 This is APM.

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Speaker 3 We always answer the call because real protection means showing up, even when things are in the rough.

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