WSJ What’s News - Rising Borrowing Costs Threaten the Wall Street Party

Episode Date: October 13, 2026

P.M. Edition for Oct. 13. It was another strong quarter for some of the country’s biggest banks, but WSJ banking and payments reporter Ben Glickman says rising interest rates are darkening the mood on Wall Street. Plus, Journal housing reporter Nicholas Miller tells us about a new type of mortgage that’s driving investment in some low-income neighborhoods. And Kimberly Guilfoyle has resigned as U.S. ambassador to Greece following Journal reporting that she had solicited payments from a Trump donor ahead of her confirmation. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Kimberly Guilfoyle resigns as ambassador to Greece after reporting from the journal that she had solicited money from a Trump donor. Plus, four of the country's biggest banks kick off earnings season with strong results. There's a lot to be very happy about if you're a bank CEO right now. Even as the mood on Wall Street is becoming more cautious. And a new type of mortgage is helping investors buy homes in low-income areas. It's Tuesday, October 13th. I'm Alex O'SLev for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

Kimberly Gilfoyle has resigned as U.S. ambassador to Greece after the White House asked her to step down. Here's Katie Zachariah in her first briefing as White House press secretary this morning. We have asked Ambassador Guilfoyle to resign. She has been a wonderful asset to the team, and we wish her well. The move follows reporting from the Wall Street Journal that Gilfoyle had solicited $100,000 from a Trump donor in the run-up to her confirmation hearing last year. Gilfoyle's attorney disputed the authenticity of the messages but declined to provide specifics. When asked about Gilfoyle today, President Trump told reporters that he didn't like what he had read about her and hadn't spoken with her. In a post on X, Gilfoyle pushed back on the recent allegations against her and said that she intends to defend her name, reputation, and integrity.

And in education news, Cornell University has suspended parties at fraternity houses on campus for the rest of the academic year. The school is under scrutiny over rape allegations from a former student. The student's lawsuit filed in September has ignited a national conversation around sexual violence on college campuses. Cornell said today that it will help students develop, quote, save social alternatives to the frat parties. On the housing market, September home sale data brought some good news. According to the National Association of Realtors, last month home sales rose 1.5% from the previous month. That's the first rise since May and easily beat analyst expectations. There's a couple caveats here, though.

August and September were still the two slowest months for home sales this year. And the September sales largely reflect contracts signed in July and August. Back then, mortgage rates were in the mid-6% range. But rates have now risen to nearly 7.5%. And the rise in mortgage rates has pushed many buyers out of the market. Speaking of mortgages, there's a new type of mortgage. It's meant for landlords, and it's enabling them to renovate properties that have been abandoned in parts of cities where banks once thought it was risky to lend. For more, I'm joined now by Nicholas Miller, who covers the housing market for the journal. Nicholas, from a nuts and bolts perspective, how do these mortgages work and how are they different from a traditional mortgage? The most important thing to understand is that a traditional mortgage, it's usually based on the earnings of the actual bar.

But for this new kind of mortgage, which is called a debt service coverage ratio loan or DSCR, it's focused a lot more on the property itself and the potential rental income that that property can generate. In a lot of cases, proof of income for the actual borrower is not even a requirement. You don't need to submit pay stubs. And so it becomes a lot easier for investors who want to have a property that they can rent out to get a mortgage to do so. So in the past, lenders have been wary of offering mortgages in neighborhoods where income levels and property values are low. How does this kind of mortgage change that calculus for banks? Banks have for a while been wary of loaning and distressed neighborhoods in cities like Baltimore and Cleveland and Detroit. Property values are low, income values are low.

And when you're approving a mortgage, you look at both of those. A lot of times, you're not going to approve a mortgage for a kind of rundown property. for someone that doesn't have a lot of income. The people that take out these DSCR mortgages primarily are investors. It's a loan particularly for landlords. And so, yeah, it has opened up a whole flow of people who previously were not really in real estate investment, but see this opportunity for this loan that's pretty easy to get. And it's relatively simple. For a lot of these investors, the advantage of the DSCR loan is that it takes away risk. And so that projects where before they renovated the home and just couldn't sell it.

Now they can refinance into this new kind of DSCR loan and become landlords. And that makes the math work on projects that otherwise it wouldn't have. You spoke to one investor named Ashley Wilson who fixes up and flips properties. She's from Florida. Where did she end up investing? She does a lot of investment in the Cleveland area, particularly East Cleveland, which is a separate city. She got into real estate investing several years ago and she had wanted to,

to initially invest in her native Florida, but prices had risen too high. And she saw a huge opportunity, as many investors have seen, in some of the most run-down parts of Cleveland and the surrounding suburbs. I don't mind investing in, like, the worst part of the city. He said that's where I get the cheapest deals at, and I can make the most money. A lot of these homes that you can buy for $5,000, $10,000, $15,000, and you put money into them and rent them out for, you know, a solid rental income. and you can just keep doing that.

For lenders, what are some of the risks associated with these loans? A lot of people in the industry say that lenders have gotten to lax. And in the rush to approve as many loans as they could, they didn't do their proper due diligence. So in some cases, like in Baltimore and Philadelphia, that allowed fraudsters to come in and use fraudulent appraisals to inflate the actual value of the home and pull out cash. and that eventually led to a whole a rash of foreclosures. But the industry does say that lenders have adjusted and that they have become more restrictive and more careful and that delinquency rates on these loans are quite healthy. Journal reporter Nicholas Miller, thanks so much for joining us.

Thanks for having me. Coming up, what rising interest rates could mean for banks' earnings, Apple's hoping its newest product can take on Alexa, and why six-flag stock sold off today. More after the break. Stock markets slipped today even after some solid bank earnings. More on that in a minute. And then comments from a Chinese memory chip maker on a new type of chip it's rolling out

sent U.S. memory stocks like Micron sliding. As for financial companies, an index of bank stocks dropped 1.4%. The Dow led the losses in the major indexes and closed down almost 0.4%. earning season got off to a strong start today, with results from several of the U.S.'s biggest banks. J.P. Morgan, Goldman Sachs, Wells Fargo, and City Group each reported higher revenue for the third quarter, and they posted a combined profit of $32 billion, up 14 percent from a year earlier. Overall, trading and banking were better than a year ago, but weren't as high as the booming second quarter. For more on the numbers, I'm joined now by Ben Glickman, who covers banks and

payments for the journal. Ben seems like the high-level trend for profit for all four of these banks was pretty positive. Where are they seeing the bright spots in their business? There's a lot to be very happy about if you're a bank CEO right now. First and foremost, I would say that the U.S. consumer looks very strong. They're still spending. They're not really falling behind on their debt or credit card payments or anything like that. The other element that has continued to be a really big positive for the banks has been dealmaking. So corporate mergers, stock market debuts. The other big thing is that everyone is building out AI and data centers and needs to invest

a bunch of money. And ultimately, that ends up coming back to the capital markets. And yet, despite all of these positive elements you just went through, bank shares dropped today. What's making investors feel uncertain? This quarter, the results from specifically trading bonds were somewhat lackluster relative to what Wall Street was expecting. that sort of ties in to a lot of the turmoil that we've seen in the bond market in the last couple weeks.

Right. Goldman's CEO, David Solomon, mentioned that turbulence on the company's call this morning, although he said the recent rise we've seen in Treasury yields didn't, quote, scare him. A 5% tenure treasury, you know, doesn't scare me in terms of an operating environment. It's the overwhelming periods of time in my life, the tenure treasury has been, you know, has been higher than the level that it's in. And so, you know, we can have very, very effective capital markets with that. What, you know, what creates headwind for markets is when you have very, very abrupt move. So the fear is that there's more of a pullback coming from big corporate clients and financial clients.

Bank CEOs were talking quite a bit about the possibility that higher for longer interest rates and this volatility in the bond market could lead to companies pulling back on doing stock offerings and deals to wait to see where things settle. When there are higher borrowing costs, consumers also tend to pull back and it leads to more unemployment. So generally there's a concern that all the kind of good economic stuff that we were talking about before chills out a little bit. It comes to an end. That was the journal's Ben Glickman. We'll have been on the show later this week to talk in more detail about these bank results for this earnings season first episode of What's News and Earnings.

That'll be in your feed around midday Eastern on Thursday. To more pieces of business news, Johnson & Johnson says it's leaning towards spinning out its hips and knees business. The journal has reported that the company talked with private equity firm Apollo Global Management about a roughly $20 billion sale of that division. The remarks came as Johnson & Johnson raised its outlook for the year after the company said revenue rose 6% in its most recent quarter, thanks to strong sales of prescription drugs. Still, its stock closed down more than 5.5%. And Six Flags has closed 10 of its rides across seven parks after a man died on one of its roller coasters in Georgia yesterday. Investigators believe that the man was ejected from the ride and struck other passengers before falling to his death.

A Six Flags spokeswoman said there was no timeline for when the rides will reopen. Six Flags has faced pressure from activist investors to pursue a sale and recently came under scrutiny over the safety record of another roller coaster at a park in Southern California. multiple lawsuits alleged that the ride caused serious brain injuries, and the company permanently closed that ride last month. Six Flags shares today fell more than 14%. And finally, today Apple announced its new smart home hub called HomeView. It's a 7-inch tablet and speaker that costs about $300, and it can connect with new gadgets like smart locks, video doorbells, and security cameras, also from Apple, that are launching along with HomeView. Rolf Winkler, who covers Apple for the journal, says the company is reentering the smart home display space with opportunities to disrupt it. What if Apple could come in, release a great product, and get people to upgrade their smart homes en masse?

There are a lot of people out there that just want to buy Apple's new products. And for sure, there will be some number of people that think this is a great Christmas gift. What if all this gadgetry that Apple is releasing just works? then all of a sudden new smart homes might start to standardize on Apple. That's a possibility. I think the bigger opportunity would be if Apple actually had market-leading AI that could do things for you, which they don't. Home View is powered by Siri and Apple's given Siri a big AI upgrade. But Rolf says Siri's still nowhere close to frontier AI models.

Apple says that its new Siri AI is amazing and much more capable. and that's true, but only in relation to the old Siri, which was pretty dumb. The new Siri AI still is not as good as Chachy P.T. or Anthropic. So it'll be interesting to see how much traction this gets. Before we go, heads up that we made a correction to our morning show. The U.S. Consumer Prices report is due out tomorrow. An earlier version of the show said the data were coming out today. And that's what's news for this Tuesday afternoon.

Today's show is produced by Anthony Bansy with supervising producer Tali Arbell. I'm Alex Osloaf for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.