Marketplace - Green bank, go!

Episode Date: December 18, 2024

The Coalition for Green Capital, funded by private investors and President Joe Biden’s Greenhouse Gas Reduction Fund, began doling out cash this fall. It’s an experiment in using federal dollars to spur investment in mitigating climate change. Will it survive under the incoming Trump administration? Also in this episode: How high can bond yields climb? Will 2025 be a big year for mergers and acquisitions? And, are tuition-free medical schools curing the industry’s ills?

You know what's better than one day of bond market stories? Yeah, two days from American public media. This is Marketplace. In Los Angeles, I'm Kyle Rizdall. It is Tuesday today. This one is the 17th of December. Good as always to have you along everybody. We started our coverage of this economy this week, yesterday that is, talking about bonds.

Specifically, how rising yields on government and corporate debt is a sign of economic optimism. And it is. But there is rarely only one way to look at something as complicated as the bond market. And there is a case to be made that at some point, those higher yields will be too high. T. Rowe Price predicted this week that the yield on the 10-year Treasury note could top 6%,

which hasn't happened in almost 25 years. But if you think about the likelihood of more tax cuts and thus a higher budget deficit, could top 6%, which hasn't happened in almost 25 years. But if you think about the likelihood of more tax cuts and thus a higher budget deficit, which will force the Treasury Department to borrow more money, that is issue a whole bunch of new bonds, that will then drive rates higher, right?

You think about that. Also the prospect of more tariffs, which could push up inflation, do I need to go on? Marketplace's Justin Ho takes it from there. The reason why bond yields could keep rising boils down to inflation. Kai just mentioned tariffs and tax cuts. There's also the threat of mass deportations. Those all smell a bit inflationary to us.

Colin Martin is fixed income strategist with Charles Schwab, a marketplace underwriter. He says tax cuts can be inflationary because they stimulate consumer spending. And if a huge number of immigrants are deported, the labor force shrinks. If we lose some of those workers, we need to find people to fill those voids. And chances are, you know, other potential workers might start to demand higher wages to do those jobs. Again, inflationary. When bond investors expect that prices will rise, Randy Vogel, head of fixed income at Wilmington Trust, says they start reevaluating how much interest they want to get paid on 10-year treasuries. So investors are going

to want to adjust that higher to compensate for higher inflation. And remember, there's a reason why the last thing we say in the numbers every day is the rate on 10-year treasuries. Because as goes the yield on the 10-year T-note, so goes a bunch of other stuff. Mortgage rates being one notable example. That's Abby Ertz with FHN Financial. She says another example is the yield on state and city bonds. If treasury yields jumped to five or even six percent?

That could absolutely translate into layoffs, suspended capital projects. You know, certain infrastructure plans may have to get postponed. Corporations might have to make similar decisions, says Chuck Tomes with Manulife Investment Management. To be clear, he doesn't expect that yields will jump that high this coming year. But he says the possibility is something the Federal Reserve is mindful of. They do want to continue to move forward with the rate cuts that they have been envisioning. It's just maybe they don't do as much as they were once planning. That means interest rates may not be coming down

much farther. I'm Justin Ho for Marketplace. Ten year today, by the way, 4.39% down just a hair. The rest of Wall Street today, red across the board. Not a lot, but red nonetheless. Remember, though, if you would, the major indices are operating within bidding distance of their recent record highs. Details numbers when we get there. ["The New York Times"] Remember that line from Forrest Gump? Life is like a box of chocolates. You never know what you're going to get. Well, to update that for 2024, life is like a box of chocolates and whatever you're going to get is going to be increasingly more expensive.

Cocoa futures in New York hit yet another all-time high today. The price of a metric ton of cocoa beans has basically doubled since the beginning of the year. Drought-diminished harvests in West Africa are partly to blame for that. So at what price point do you think will even the most loyal chocoholics pare back the $26 billion they spend every year on chocolate candy. Marketplace's Matt Levin is on the Price Elasticity of Demand desk today. Apparently, some people are willing to pay $400 for a very special single bar of chocolate.

It's from Ecuador and even comes with a special tool. You grab it with the tongs. Tongs, not fingers. Alexis Villasas researches the chocolate industry at the Ohio State University. And why is this? Because our skin has natural oils and that natural oil actually changed the flavor

of the chocolate bar. Obviously most people don't pay 400 bucks for chocolate, but Villase says craft chocolate lovers, the kind that splurge for those bougie dark chocolates in the candy aisle, they'll absorb higher costs. Regular Joe Six Pack though, who occasionally pairs his Bud Light with some M&Ms, he's got options.

So instead of buying a pack of M&Ms, he might say, well, I'm just going to stay with skittles. Some consumers may switch to desserts that contain chocolate, as opposed to chocolate-first desserts. Think chocolate chip cookies instead of that Lindt bar. Although we may see companies push the limit of that ever-so-delicate chip-to-cookie ratio, says Kelsey Olson at Mintel.

Maybe we'll see manufacturers and brands cookie ratio, says Kelsey Olson at Mintel. Kelsey Olson, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder,

Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder, Mintel Co-Founder Institute says she doesn't expect demand to drop all that much. People buy based on mood. You can be in a bad mood and consume chocolate and then report being in a good mood. Even if it's more expensive, chocolate is still a relatively cheap coping mechanism. I'm Matt Levin for Marketplace. The wheels of government grind slowly, as you know, which is part of why it's taken a good two years or so for money from the big Biden administration green energy bills to start flowing, the inflation reduction act in particular. President Trump, though, has called climate change a hoax. He has and is said to be considering again pulling the United States out of the Paris

agreement. He's called the EV tax credits wasteful. So as Marketplace's Amy Scott reports, there is new urgency afoot to get that money spent as the change in administration grows ever closer. For more than 15 years, Reed Hunt has been pushing for a national green bank to use public money to attract private investment

in clean energy projects. Offshore wind, solar farms, transmission systems, rebuilding houses and commercial buildings. Hunt, a former chairman of the Federal Communications Commission, tried to convince the Obama administration to set up such a bank back in 2008 and 2009. They passed up the opportunity on the grounds that they had a lot of problems with banks that they had to fix and they didn't need a new bank. Remember that whole financial crisis back then? So instead, Hunt started a nonprofit to create a network of state and local green banks called

the Coalition for Green Capital. Then, during the Biden administration, his dream of federal funding finally came through. In the Inflation Reduction Act, the administration created a pool of money to capitalize a national green bank at last, and that is us. The Coalition for Green Capital and two other groups will share that pool. Hunt's group will have $5 billion to invest. Some of it, in the form of a $10 million line of credit, will go to Spruce Root, a native community development financial institution in southeast Alaska. Alaina Peterson is executive director. My Tlingit name is Gokkitan.

I am a part of the Tlingit tribe. She says Spruce Root will use some of the money to refinance debt for a hydropower project on Prince of Wales Island. And that refinance will allow them to reduce their payments for up to four years at least. Savings that will be passed on to customers. A separate grant from the Department of Energy will help install highly efficient heat pumps in hundreds of homes and buildings on the island, powered by that clean energy. The combination of the heat pump installations on homes will increase demand because there's excess hydropower. And then refinancing that debt has an immediate rate reduction effect for people in the communities

on that island. The Coalition for Green Capital has also announced public private investments in a fleet of electric vehicles and clean energy upgrades in commercial buildings. It's not clear what Donald Trump's re-election and a Republican-led Congress might mean for future investments. Trump has threatened to rescind any unspent funds from the Inflation Reduction Act. Dale Brick is with the Harvard Environmental and Energy Law Program. She says all the money from the greenhouse gas reduction fund has

been awarded—it's either in the hands of grantees or in escrow accounts—with legal contracts that would make it difficult to claw back funds. Still, it's always safer when people can see the benefits in real life. So I think there is an urgency to show what this money can do. And she says once people start to see those benefits, the jobs it can create, the energy bill savings it can deliver, the clean air and clean water benefits, I don't think those are benefits that Congress or the administration is going

to want to take away from their constituents. Most of the money from the Inflation Reduction Act has gone to Republican congressional districts, and the Coalition for Green Capitals' Reid Hunt says most of his group's investments will be in red states. Because that's where most emissions come from. The EPA estimates projects by eight recipients of greenhouse gas reduction funds will reduce climate pollution by up to 40 million metric tons of carbon dioxide per year, the equivalent of nearly 9 million cars. I'm Amy Scott for Marketplace. This was supposed to have been the year that mergers and acquisitions got hot again.

2021 was a big year and then over the next two, according to the consulting firm EY Parthenon, not so much. There has been some pickup in M&A activity in 2024, but not as much and not as quickly as people had been hoping. Marketplaces Henry App reports on what held M&A activity back this year and what might change next. If you run a company, choosing to buy or merge with another company is a complicated and risky move. So the best time to do it is when the broader economy feels stable, says Brian Quinn, who teaches corporate law at Boston College Law School. Executives, he says, want to look ahead.

And have a general idea of what the future is going to hold with respect to the macroeconomic environment, whether or not they can make money given the models that they put together. Much of 2024 was not a particularly good time for that, says Christine Sauter at Southern Methodist University. There was a lot of still cautiousness this year with respect to macroeconomic and political landscapes. Business leaders were hoping for the Fed to cut interest rates. That didn't happen until September, and they were waiting for the outcome of the presidential election. Now they have a bit more clarity. For one, President-elect Donald Trump's administration, Sauter thinks, could take a more hands-off approach to mergers. And so I think that that is really going to push deals forward. And there's an expectation that the Fed will keep cutting rates, which could lower borrowing

costs for companies looking to merge. But, says Suzanne Kumar at Bain and Company, rates won't likely go all that low. This shift towards lower interest rates will still end up at a place that is likely to be relatively high versus the very heady days of early 2021 when no or low very low interest rates fueled such high M&A activity. Those heady days were a really good time for companies looking to get bought up. Kumar says they were highly valued. Those numbers are still in sellers' heads. But companies looking to acquire them don't want to pay as much. The gap between buyers and sellers has started to narrow though, Kumar says.

If it keeps trending that way, we could see more M&A next year. I'm Henry App for Marketplace. Coming up. Now my kind of go-to on the road is they get nuts, jerky, juice. Gotta have a snack, right? First though, let's do the numbers. Dow Industrial is off 267 today, 6 tenths percent, 43,449. The Nasdaq down 64 points, 3 tenths percent, 20,109. The S&P 500 subtracted 23 points, 4 tenths percent, 6,050.

Fresh numbers from the U.S. Census Bureau show retail sales topped expectations last month up 0.7% from October. It's a sign consumers are still eager to spend despite higher interest rates. Holiday shopping, of course, helped fuel that increase. Online retail sales jumped 1.8% for the month's sales, also up in furniture, home and garden supplies and electronics. Matt Levin was telling us about those high cocoa prices. So how about some chocolate makers?

Hershey Company melted 3 tenths percent. Rocky Mountain Chocolate Factory was flat. Mondeliz International, maker of Toblerone and Milka, shrank a quarter percent. Bonze Row's yield on the 10-year T-Node, 4.39% to your listening to Marketplace for up-to-the-minute news, for stories that show you the connections between global events and your personal economy. And you're not alone.

Marketplace is the most widely consumed business and economic news program in the country. We're proud to make fact-based journalism freely accessible. And Marketplace investors make it all possible. Your year-end donation today will make a real difference in our nonprofit newsroom and in the lives of millions of Marketplace listeners every single day. So please contribute what you can today at marketplace.org slash donate. This is Marketplace, I'm Kyle Rizdal.

The American healthcare industry is not without its challenges. It's expensive, it can be hard to access care, there aren't enough nurses, and there aren't enough doctors. The Association of American Medical Colleges says we're gonna be short as many as 86,000 physicians by 2036, a crisis that will be especially acute in rural parts of this country.

Philanthropists, a couple of years ago, came up with a possible solution, subsidized medical school tuition in the hopes that students would not only choose lower paying specialties, but that student bodies in medical schools would diversify as well. In the event, the tuition-free experiment has not gone as hoped, Rose Horowitz wrote about it in The Atlantic the other day.

Rose, welcome to the program. Thank you so much for having me. So talk to me just as a place to start about NYU, which was one of the schools that went completely tuition-free for medical school, like six or something years ago. And you say in this piece, it has been a failure. Discuss. So, NYU's medical school went tuition-free in 2018. And at the time, they set out these metrics and were kind of saying that it will be a

success because more students will go into primary care, will admit students who otherwise maybe couldn't have gone to medical school. And so judged against those metrics, it really hasn't succeeded. Their percentage of financially disadvantaged students actually decreased and the proportion of black students kind of slightly declined with Latino students having just a small increase as well. Okay. Why? Yes.

So that is the million dollar question. So making medical school tuition free is based on this great idea that that will solve the problems that there are in the medical profession. And it's true that students are graduating with hundreds of thousands of dollars of debt. But if you really think about it, making medical school tuition free doesn't actually do anything to solve these specific issues.

There's research showing that the income differential between primary care specialties and specialty care is actually much more significant in what people choose to go into than their medical school debt. And then it also just makes getting into that school much more competitive because everybody wants to go to one of the few medical schools that are tuition free and you know we know that medical school you know application processes really advantage wealthier students and so it just makes sense that the students who

get in would be wealthier. So look if if literally giving away a medical school education won't get it done, what's the answer to the undercount of physicians that we have in this country, which is critical, right? Yes. So it is a very important issue, and everyone agrees that it's a really important problem. So some of the solutions that came up in my reporting were more targeted financial aid or subsidies for low-income students or for people that choose to go into primary care. And then also just focusing on how to expand kind of the supply of medical school and residency

slots. It's more of a supply issue than a demand one, so it's really about, you know, increasing that. When you talked to the schools and said, how's this going? What did they say to you? NYU was really the only school where this, you know, the change was made long enough ago that we can kind of have results of how it went. And you know, they were sort of saying that it shouldn't be evaluated

solely on the metrics and that, you know, this does have real benefits for students. And that is true that the students who do end up going to these schools, you know, it's a great thing. It reduces their stress. And on the margins it might you know lead a few more of them to go into primary care or to practice in an underserved area but it's just not you know kind of having the changes on on the larger scale that we would hope. Rose Horowitz in the Atlantic about free medical school. Rose thanks a bunch I appreciate your time. Thank you so much for having me. ["Summer's Desire"] It is getting down to it for holiday shopping.

Stores are getting crowded. Amazon UPS and FedEx vans are making It is getting down to it for holiday shopping. Stores are getting crowded, Amazon UPS and FedEx vans are making all those last mile deliveries, and semi-trucks by the millions are crisscrossing this country carrying products and packages and gifts. Those long-haul truckers can be on the road for days at a time, and if you have ever taken a road trip of any length, you know that healthy food options are few and far between on the American interstate. Think fast food, hot dogs on those metal rollers, yum,

fried chicken under a heat lamp. You know what I'm talking about. But one entrepreneur is trying to change that and create a new business in the process. David Weinberg has the story. In Natchez, Mississippi, Chef Jerita Frazier King likes to put her own spin on classic soul food dishes at her catered events. We just had the consulate from Ghana here and so

I just fed them, made plantain chips. King runs the Natchez Heritage School of Cooking, offering classes in cooking and the history of Southern cuisine. But during the pandemic, she had to close down and find a new job. She decided on truck driving. She got her CDL, commercial driver's license, and hit the road in an 18-wheeler. You got to take a physical to get CDLs. Can't be insulin dependent and you cannot have uncontrollable high blood pressure. So I was like, how the heck do they think people supposed to manage this stuff? And there ain't nothing out here to eat. It's fast food. Matthew 2 That lack of healthy food, plus the sedentary nature of driving for long stretches, are two of the reasons that truck drivers have higher rates of certain diseases.

Bailey Hotaling is a registered dietician and scientist who has researched this problem. Over two-thirds of truckers reported having obesity compared to less than one-third of average working adults. She says there are efforts that trucking companies have made to educate drivers about good nutrition. But that doesn't really matter if there are no healthy options at a truck stop.

There were no questions asked of truckers about like, how would you like your environment to change? Like, what would be useful to you? In my opinion, there's two types of truckers. One's they eat too much and one's they eat too little. I started to fall into the too little category. Daniel Schubert is a long haul driver who called me on his route from LA to Florida.

He's eating less in part because he wants to steer clear of unhealthy options. Now my kind of go-to on the road is they get nuts, jerky, juice, and you know kind of protein shakes. If he's lucky, he can stop at a grocery store. But you know parking an 18-wheeler, you know, things just aren't really convenient or easy. As for Jerita King, her time on the open road was short-lived. We were going to Illinois, went to Jersey, Minnesota. And there was the straw that broke the camel back. What happened in Minnesota?

It was seven below. I was like, no, ma'am, it's too cold for me. So she quit and reopened her cooking school. A few weeks later, King pitched an idea at a business competition. So I'm developing a pre-prep meal system for truck drivers, a new innovative way to get healthier options for drivers while they're out there on the road. King wants to sell her own recipes in truck stops. Dishes like black-eyed pea and collard green fritters,

which she makes for me at her cooking school. And so these are Italian bread crumbs that I use. So we're going to do an egg wash on them, and then we're going to roll them in those bread crumbs. Each fritter is about the size of a golf ball and is made from mashed black-eyed peas and collard greens with potato. And these just take a minute to get brown.

They're served with a sweet pepper dipping sauce. Bon appetit. King is launching the new business next year and hopes to have her first meals available to truckers in Mississippi this summer. In Natchez, I'm David Weinberg from Marketplace. ["The New York Times"] This final note on the way out today,

a key consumer shortage over in the United Kingdom saw this in the Wall Street Journal today, that pubs across the UK are literally running out of Guinness. Guinness is, of course, a classic, maybe the classic stout beer. Exceptional consumer demand, says the brand's owner, Diageo. It is, in fact, the number one selling beer over there. Our digital and on-demand team includes Kerry Barber, Jordan Mangy, Dylan Mietinen, Janet Wynn, Olga Oxman, Ellen Rolfus, Virginia K. Smith, and Tony Wagner. Francesca Levy is

the executive director of digital and on-demand. And I'm Kai Rizdal. We will see you tomorrow, everybody. This is APM. You turn to Marketplace for up-to-the-minute news, for stories that show you the connections between global events and your personal economy. And you're not alone. Marketplace is the most widely consumed business and economic news program in the country. We're proud to make fact-based journalism freely accessible. And Marketplace investors make it all possible. Your year-end donation today will make a real difference in our nonprofit newsroom and in the lives of millions of Marketplace listeners every single day.

So please contribute what you can today at marketplace.org slash donate.