Will recent bank failures affect debt ceiling talks?

Make Me Smart March 22, 2023 Transcript

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.

Kai Ryssdal 

Hey, everybody, I’m Kai Ryssdal. Welcome back to make me smart where we make today make sense.

Kimberly Adams 

And I’m Kimberly Adams, this is what do you want to know Wednesday, the day in the week where we get to answer listener questions. You can get your question on the podcast by sending us a email at makemesmart@marketplace.org. You can also send us a voice memo to that same email address. You can also leave us a voicemail at 508-U-B-SMART.

Kai Ryssdal 

I still don’t know what the difference is between a voice memo and a voicemail. But that is not the topic for today.

Kimberly Adams 

You do. I feel like you are being intentionally obtuse here.

Kai Ryssdal 

I do not! They’re the same thing! Voicemail, voice memo same bleeping thing.

Kimberly Adams 

Okay, so the next time that I’m doing a spot, and I have phone tape instead of a voice memo, tell me that they’re the same.

Kai Ryssdal 

Ohhhhh! Okay, now I get it, I get it. Now you have to explain to the nice people why that matters.

Kimberly Adams 

So when we’re doing stories for Marketplace, we try to get our guests to record their side of the interview. So we’ll be talking to them on like Zoom or sometimes on the telephone and we ask them to use their smartphones to record their own voices so that we get their side of the interview. And then they send us those files. And it’s a higher audio quality than if we use our equipment on our end just to record the sound of them on the phone or something like that. And it’s easier for people to understand on the radio. It just sounds better. And that’s the difference between the voice memo and the phone tape. Even though it’s not actually tape. It’s all digital audio. But there’s a definite difference in the sound quality. And that is why we prefer Voice Memos over voice mails.

Kai Ryssdal 

I literally I…. God’s honest truth, did not know the difference. Okay. All right. Anyway, we’re just getting smarter by the second on this podcast. All right, questions today is what we’re doing. What do you want to know Wednesday?

Kimberly Adams 

Look at that.

Kai Ryssdal 

I know. Nath in New Jersey, here’s what that email says. “I’m just wondering if the current banking issue is going to have any impact on the upcoming vote on the debt limit? Do you think Congress will realize how nervous people are and not mess around with the default?” That is essentially a political question Miss Adams. So over to you.

Kimberly Adams 

I am so glad that you asked this question because I was literally about to email a source today, because this has been kicking around in my head for the last couple days. Like how are they able to pull all this money out of the system when they’re supposedly jumping through all these hoops for extraordinary measures to keep us from blowing through the debt limit? And thank you very much to the wonderful producers at Makes Me Smart. I had all the answers laid out right here because of your question. So thanks for that. Here’s the answer. Yes, SVB and Signature Bank’s failures definitely have increased to the conversation about the debt limit. And you know, Democrats are using it as yet another reason why yes, we do need to raise the debt limit to make even more give people even more confidence in the full faith and credit of the US government given that our banking system is not as reliable. Well, it is reliable, it does not appear as reliable as it used to be. Even though it’s fine. So Treasury Secretary Yellen did warn Congress a while back, the US banking system… said the US banking system is sound but said that it won’t be if the debt limit isn’t raised in time. So yet another reason why this is something that needs to get done. But on the other hand, Treasury is saying that the FDIC’s use of funds to pay SVB, and Signature Bank depositors that is, you know, allowing people to make their deposits even though there was no money in those banks. It’s not going to affect the debt ceiling X date. The X date being the date that they officially run out of money to pay the bills. The FDIC withdrew about $40 billion dollars in Treasury funds to cover lost lost deposits. I don’t still… I still don’t quite know the answer as to why it doesn’t affect the X day. But they said it’s not. And I think it’s because, you know, they’re moving things around in different ways. And the extraordinary thing, the the Treasury never actually gave us an X date. It’s always like other people saying, you know, “here’s when we think it’s going to be.” So, you know, the government has pulled out sort of all the stops to restore faith in the US banking system. And I think that this is just as another sign that, you know, Dr. Yellen has a few more tricks up her sleeve to keep the bills being paid, if they’re able to somehow come up with $40 billion, and not throw off whatever the X date people think it is. Now, if the debt limit isn’t raised, that all gets worse. Ultimately, this really is going to be a political fight between Democrats and Republicans over the debt ceiling, debt limit, whatever you want to call it. But in the catastrophic case, the debt limit doesn’t get raised, you can best believe that there are going to be fingers pointed at this rescue of these banks.

Kai Ryssdal 

Oh, yeah. It’ll be a huge political issue. It’s already, there’s reporting in Politico today and I think Washington Post too that some Republicans in Congress are looking at the debt limit conversation in a new light after the SVB failure. So yeah, it’s definitely common. Yeah, definitely common.

Kimberly Adams 

All right, we have another banking related question, which totally makes sense. It’s a lot to unpack. Here goes.

Tina 

Hi, this is Tina from Morgan Hill, California. So my question for you is with all of this fallout with Silicon Valley Bank, I tend to use credit unions instead of banks. What’s the difference? And does all of this fallout impact my credit union, or is this a different spring? Make me smart. Bye.

Kai Ryssdal 

Yeah, interesting question. So let’s do a little nuts and bolts first, right? Credit unions are financial institutions like banks are right? But they are owned by their members. They are nonprofits. They’re often specifically for a certain group of people. I was in the Navy Federal Credit Union when I was in the service down the road from me. We’ve got the Jet Propulsion Lab Credit Union. So there’s there’s all kinds of different, very specific credit unions. They offer a lot of the same products, but not all of the same products, because they are generally smaller than even small-ish regional banks. Right? Here’s the key thing, though, in terms of this specific story that we’re living through right now. Credit union deposits, although from a different agency, they are insured, just like bank deposits by the FDIC right? $250,000. That is the key thing you need to know. No credit unions have failed because of the latest crisis. But everybody’s worried about their money, just like regular bank companies are. Credit unions do fail, right? Credit unions do fail, right? And two have so far this year in 2023, but they are different beasts in scale, and structure. But again, I want to say this, your deposits are insured up to $250,000. That’s the key thing.

Kimberly Adams 

And also like the profit motive is a little bit different in credit union, as opposed to a regular bank. Like a regular bank might be encouraged, shall we say, to take riskier investments to, you know, get more return for its investors, which are the owners, as opposed to a credit union maybe doesn’t need to do that because their owners or their depositors and that maybe that incentive isn’t so strong? So there’s that too.

Kai Ryssdal 

Totally fair. Totally fair. All right, another one. Luis, send us an email. Here’s what it says. “What does it take to get” oh, there’s a good story. “What does it take to convert an office building to housing and how often does this actually happen?”

Kimberly Adams 

We are helped out so much by the amazing Amy Scott, who recently just like she just did a story on this. And it’s a really good one. You should go back and listen. And she had a look at the conversion of a vac- a vacant historic office building in downtown Baltimore. She lives in Baltimore. It’s a 15 story building. It’s going to be turned into some commercial space and 231 apartments. And yes, there is a trend and there has been to do these kinds of conversions, and it reached an all time high between like 2020 and 2021, although we’re still kind of waiting on newer numbers, to do these kinds of conversions. 11,000 apartments were made out of office space. Which is not all that many when you think about the housing supply, and the number of office buildings in the United States and the number of apartments that we need. It does seem like given all these vacant office buildings or sparsely populated office buildings, including Marketplace headquarters in Los Angeles, that it would make perfect sense to convert these to apartments, it doesn’t always work, and it’s super expensive. So the developer in Amy’s story bought a building for $6 million, and ended up, and is planning to spend $47 million to renovate it. And also, most modern office building floor plans end up being really hard to turn into something that would work as a residence. Think about the last time you were an office building. Did the windows open? Probably not. And as we all learned in COVID, which was a terrible thing, you probably don’t want to live in an apartment where you can’t open the windows. Also, you know, these historic office buildings tend to lend themselves better to this because as Amy reported, there’s no point inside that’s more than 30 feet from a window. Whereas if you look at a modern office building, if you are not so high ranked in your company, you probably have that cubicle in the dead center of the building where you never see the light of day. And anyway, Moody’s Analytics study showed that only 35 out of 1100 New York City office buildings they tracked were able to be flipped into apartments. And then in major cities like New York, office to apartment conversions often end up being luxury apartments with super high rents because those construction costs can be so prohibitively high. So it doesn’t exactly help us with our affordable housing crisis.

Kai Ryssdal 

Yeah, there was a great piece in The New York Times about 10 days ago about exactly this issue. And they looked at old historic buildings and why they sometimes work and why new offices don’t and it’s, it was really interesting piece. Highly recommend. Ten out of ten.

Kimberly Adams 

You know what does work really well for affordable housing conversion, and I can find some articles on this, is churches. In the neighborhood where I grew up, they converted. Well, this was a this is a slightly bad example. But then I’ll get to the good one. There was an old Catholic Church, that they converted into condos, and those were expensive. But there’s a trend happening all over the country, where churches which have declining, you know, attendance, because you know, we millennials and Gen Z are godless heathens, you know, we don’t go to church. So they aren’t having as many, you know, members, and people aren’t tithing and supporting the upkeep. So what a lot of churches are doing is they’re, they own the land that they’re on a lot of times. So they’ll sell the land to a developer, who will make like a smaller footprint church for them, and then build apartments up around it. There’s like three of these in my neighborhood in DC. And I think one is under construction, where they tore down the old church, and they built a big apartment building where like the church has like the ground two floors on one corner. And some of these churches when they’re making these deals, they’re requiring that a big chunk of the housing becomes affordable housing or housing for seniors or workforce housing or something like that. Which, you know, it’s not exactly converting a building, it’s usually knocking something down and building something up, but it does bring that housing and it’s much more affordable.

Kai Ryssdal 

Hmm, churches… fascinating.

Kimberly Adams 

Yeah. All right. Last question of the day Moriah in Tallahassee sent in two questions for you Kai. “Number one: does Kai know there’s a sandwich named after him? The Kai Ryssdal at Wax Paper Sandwich Shop is described as quote, American tuna salad, marinated celery, shredded lettuce, green onion vinaigrette, black olive aioli, on a France sesame roll. Second question. Are there any laws around naming menu items or other products after famous people?” Kai?

Kai Ryssdal 

It’s a good question. So so yes, I am aware. I have been to Wax Paper many a time. The best part of that whole thing is that I am just not a tuna salad guy at all.

Kimberly Adams 

Which is why I was cracking up.

Kai Ryssdal 

I just I just I just tuna salad and me just it don’t go. But my daughter loves the Kai Ryssdal. So if you go to the wax paper Co.’s website, I think I think it’s waxepaperco.com or something like that. Anyway, there’s a bunch on there, right? And there’s some local NPR member station folks have their sandwiches named. And I get, I think an Audie Cornish, which is like a like or a Steve Julian, who used to be a guy here. It’s a pork thing. And it’s anyway. Great, great, great sandwiches. They literally started right before the pandemic in a in a shipping container down near the LA River. And now they’ve got two locations. It’s booming. It’s awesome. Highly recommend if you come. Number two, yes, there are laws that say they can’t do that. And in fact, it’s the whole name image likeness thing, right? They prevent, those laws prevent businesses from using my name, or my image or my likeness, in ways that drive their profitability. And if I wanted to, I could object. But number one, I’m not a jerk. And number two, this is a small business that’s, you know, thriving based, at least part I hope I’m, on what my sandwich is doing for their sales. Really good historical example. And thank you, Courtney for digging this one out, is Shirley Temple, right? That mocktail was served for a long, long time. I think it’s like club soda and grenadine with a maraschino cherry. Right? I used to get them when I was a kid. They were served for years and years and years. And it wasn’t until a soft drink company named one of the new products after Shirley Temple that she decided to sue. So yes, they can do it if they’re, if this celebrity, celebrity in air quotes, because that’s not what I am. Is okay with it. Or, you know, they could just they could just wait for the cease and desist letter to come from my attorneys, which I will never send to wax paper company. That’s all I’m saying.

Kimberly Adams 

Not that anybody should take this as license to start like making all kinds of crazy Kai things. Because then he will be a celebrity and send his lawyers.

Kai Ryssdal 

Yeah that’s right. But yeah, try those sandwiches. There’s one there’s one location in Chinatown and then the other one in Frogtown. If you come to LA. That’s it. We’re done. If you got a question about businesses or sandwiches or technology or this economy or anything you want, you know how to get a hold of us. And I know now the difference between voice memos and voicemails. 508-U-B-SMART, and makemesmart@marketplace.org is how you do that.

Kimberly Adams 

So glad we were able to finally solve this for you.

Kai Ryssdal 

Yes. Literally I was not aware.

Kimberly Adams 

Make Me Smart is produced by Courtney Bergsieker who has the answers to all of the questions. Ellen Rolfes writes our newsletter. Our intern is Antonio Barreras. Today’s program was engineered by Charlton Thorp.

Kai Ryssdal 

Ben Tolliday and Daniel Ramirez are still in our credits. They did our theme music. Our acting senior producer is Marissa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director of Digital and On Demand.

Kimberly Adams 

And you got it before the fade out.

Kai Ryssdal 

Bam. There you go.