Month: January 2018

Anticipation high as California rolls out retail pot
sales

Californians may awake on New Year’s Day to a
stronger-than-normal whiff of marijuana as America’s
cannabis king lights up to celebrate the state’s first
legal retail pot sales. The historic day comes more
than two decades after California paved the way for
legal weed by passing the nation’s first medical
marijuana law, though other states were quicker to
allow the drug’s recreational use. From the small town
of Shasta Lake just south of Oregon to San Diego on the
Mexican border, the first of about 90 shops licensed by
the state will open Monday to customers who previously
needed a medical reason or a dope dealer to score pot.
In November 2016, California voters legalized
recreational marijuana for adults 21 and older, making
it legal to grow six plants and possess an ounce of
pot. The state was given a year to set retail market
regulations that are still being formalized and will be
phased in over the next year. “We’re thrilled,” said
Khalil Moutawakkil, founder of KindPeoples, which
grows, manufactures and sells weed in Santa Cruz. “We
can talk about the good, the bad and the ugly of the
specific regulations, but at the end of the day it’s a
giant step forward, and we’ll have to work out the
kinks as we go.” The long, strange trip to get here has
been a frustrating one for advocates of a drug that in
the federal government’s eyes remains illegal and in a
class with heroin.

The state banned “loco-weed” in 1913, according to a
history by the National Organization for the Reform of
Marijuana Laws, the pot advocacy group known as NORML.
The first attempt to undo that by voter initiative in
1972 failed, but three years later felony possession of
less than an ounce was downgraded to a misdemeanor. In
1996, over objections of law enforcement, the drug czar
under President Bill Clinton and three former
presidents who warned it was an enormous threat to the
public health of “all Americans,” California voters
approved marijuana for medicinal purposes. While the
rollout of grassroots collectives of growers and
dispensaries where marijuana could be sold to patients
was at times messy, the law led to wider acceptance of
the drug as medicine. “The heavens didn’t fall,” said
Dale Gieringer, director of California NORML. “We
didn’t see increased youth drug abuse or increased
accidents or crazy things happening as our opponents
predicted.” Today, 28 other states have adopted similar
laws. In 2012, Colorado and Washington became the first
states to legalize recreational marijuana. California
is one of five states, plus Washington, D.C., that
followed suit. Retail sales are scheduled to begin in
Massachusetts in July.

Fannie and Freddie regain capital reserves; withhold
billions from Treasury

Fannie Mae and Freddie Mac have capital reserves again.
As expected, the government-sponsored enterprises on
Friday made their quarterly dividend payments to the
Department of the Treasury. But, thanks to the new
agreement between the Federal Housing Finance Agency
and the Treasury, each of the GSEs withheld billions
from the Treasury to ensure that each has enough
capital on hand to “cover other fluctuations in income
in the normal course of each Enterprise’s
business.”Under the previous version of the Preferred
Stock Purchase Agreements that went into effect when
the government took the GSEs into conservatorship,
Fannie and Freddie send dividends to the Treasury each
quarter that they are profitable. The PSPAs also
stipulated that the GSEs were prohibited from
rebuilding capital and each of the GSEs’ capital base
was required to be reduced, with their capital reserves
scheduled to be drawn down to $0 in 2018. But that all
changed earlier this month when the FHFA announced a
new agreement with the Treasury that allows the GSEs to
hold a $3 billion capital reserve. Collectively, the
GSEs made dividend payments this week to the Treasury
of $2.897 billion. Of that, $2.249 billion came from
Freddie Mac and $648 million came from Fannie Mae.

But those amounts are far less than the amount of
profit that each GSE made in the third quarter. Freddie
Mac’s profit was $4.7 billion, while Fannie Mae’s
checked in at $3 billion, but unlike previous quarters,
the GSEs did not send all of their profits to the
Treasury. Based on some rough calculations, Freddie
withheld $2.451 billion from the Treasury, while Fannie
withheld $2.352 billion. As the chart from the FHFA
states: “As set forth in the Letter Agreement dated
December 21, 2017, amending the Certificate of
Designation of Terms of Variable Liquidation Preference
Senior Preferred Stock, Series 2008-2, the dividend
amount is the Net Worth Amount for the dividend period
minus the Applicable Capital Reserve Amount. Beginning
in 2018, the Capital Reserve Amount is set at $3
billion under most circumstances.” With the $2.897
billion sent to the Treasury for the third quarter,
Fannie and Freddie have now paid approximately $278.783
billion to the Treasury in dividend payments since the
fourth quarter of 2008.

US steelmakers raise their bets

Steelmakers are betting on the US again, building mills
they hope will help them compete against cheap imports
as demand rises. Steel companies have complained for
years that steel from China, South Korea, Vietnam,
Turkey and elsewhere is being sold in the US for less
than the cost to make it. While imports are still
increasing, steel prices are also on the rise globally.
And demand for US steel is starting to rebound, thanks
to rising oil prices and a strengthening manufacturing
sector, steel executives say. Still, others see
expansion as a risky bet. Some steel companies say they
can capture more customers with new plants that can
make more steel at less cost than older plants, and can
deliver it faster to customers. They’re also counting
on additional US tariffs to drive out cheap,
foreign-made steel, creating more opportunities for
domestic producers. S tiff tariffs imposed over the past
18 months have significantly slowed steel imports from
China, according to Commerce Department reports. Nucor
Corp. is building a $250 million steel mill in Sedalia,
Mo. Startup Big River Steel LLC in Osceola, Ark.,
accelerated production early this year at one of the
largest new steel sheet mills built in the US in years.
And Tenaris SA started making pipe for oil and gas
wells at a new $1.8 billion mill near Houston this
month.

California’s record poverty and real-estate bubble are
creating a “wheel-estate” boom of people with good jobs
living in their cars

Extreme housing prices in California — driven by a
combination of speculation, favorable legal/tax
positions for landlords, foreclosures after the 2008
crisis, and an unwillingness to build public housing —
has created vast homeless encampments, but there’s a
less visible side to the crisis: working people in
“good jobs” who have to live in their cars. There’s a
whole subreddit devoted to these folks, a mix of maker
culture (modding cars to make them more comfortable as
homes), hobo chalk-marks (where can you park, and for
how long?), and generalized anxiety. It’s not just
single middle-class people, either — they’re roaming
America’s streets in company with a vast nomad army of
homeless seniors who drive from town to town looking
for seasonal work to repla ce their busted pensions.
What’s striking in California is that many communities
already accept people living in vehicles, despite there
often being rules or laws against it. This fall, the
city of San Diego expanded its Safe Parking Program,
which designates lots that can be used by those living
out of their cars, and many other cities have similar
programs. Under a law passed last year, Los Angeles
also allows overnight parking in some commercial
districts. In Mountain View, the mayor brags about the
services his city provides to those living in more than
330 cars, trucks and RVs. So long as vehicle dwellers
aren’t in residential areas, the NIMBY attitudes that
have helped spur California’s housing shortage seem to
be relatively in check. And given the many huge parking
lots that are empty overnight, capacity is not going to
be a problem if living in vehicles becomes a Califor nia
phenomenon — at least if owners of those lots have a
compassionate streak or can monetize this use of their
property. Given the centrality of Golden State’s car
culture to its image and history — reflected in movies
like “American Graffiti” and in the once-huge
popularity of drive-in restaurants and movie theaters —
a redefinition of the car in California as not being
about independence and adventurousness but about
shelter would be a twist that not many state residents
would have seen coming 25 years ago.

Foreclosure rate in Minnesota lowest in a decade

The foreclosure rate in Minnesota is now at the lowest
level in more than a decade, and far below the national
average.At the end of September, just 0.2% of all
Minnesota homeowners with a mortgage lost their homes
to foreclosure, according to CoreLogic, which tracks
mortgage delinquencies at several intervals. That rate
was down from 0.3% last year and was only about a third
of the national average. At the same time, far fewer
homeowners are having trouble staying current on their
mortgage payments. In Minnesota, 2.9% of all homeowners
were 30 or more days late on their payment compared
with 3.1% last year. “We’re encouraged to see another
year of flat or declining delinquency rates for
homeowners across Minnesota,” said Julie Gugin,
director of the Minnesota Homeownership Center. “It
shows people are in the right homes f or their families
and their wallets.” During the height of the
foreclosure crisis, the organization’s counselors were
overwhelmed by demand from homeowners who needed help
avoiding foreclosure, Gugin said. Today, the need has
shifted to providing unbiased information and hands-on
financial coaching for low-income families that want to
buy a home. “They want to make choices based on solid
and factual information,” Gugin said. “Rent prices are
on the rise and homeownership is a valuable
asset-building alternate for some families.”

Gugin said that while declining foreclosures are
clearly a positive sign, underlying problems linger.
Namely, the recession and subsequent economic recovery
only broadened the homeownership gap in Minnesota.
There are more low-income families than before that are
unable to own a home. “Our goal is to ensure that
homeownership’s benefits are fairly available and
sustainable to everyone, no matter their race or where
they live,” she said. “Next year — and even 10 years
from now — we want the delinquency rate to stay low,
and with a closed homeownership gap. Individuals and
families, communities and our state would be better off
as a result.” Foreclosure rates across the country are
also falling. Nationwide, the foreclosure rate fell
slightly from 0.8% to 0.6%, and the 30-day plus
delinquency rate fell from 5.2% last year to 5.0% in
September. There was a slight increase, however, in the
number of homeowners who were 30 to 59 days late on
their payments, mostly because of hurricane-related
troubles in Texas, Florida and Puerto Rico.