Financial Considerations Begin to Mount for LA

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The banking and finance industry has found itself tossed about recently as shifting monetary policy has sown confusion in a sector that values stability above all else. The Federal Reserve’s announcement last week that it was putting on hold all interest rate hikes was met with skepticism in many corners, with DoubleLine Capital founder and bond guru Jeffrey Gundlach going so far as to openly deride the decision and call into question the Fed’s credibility. “Three months ago the Fed predicted totally different policy than where they are now,” Gundlach said in a tweet. “How can they predict 2020 policy with a straight face?” The high-level policy shift is bound to have some ramifications for local banks, which are already seeing early economic stressors. As we report in our Banking and Finance Quarterly, there has been a rise in nonperforming loans at some local banks, including Preferred Bank and Hope Bancorp Inc. Whether the commitment to stop interest hikes can curtail the growth of loans close to default remains to be seen, but analysts are paying attention as these important benchmarks show signs of stress… Shifting gears from the world of high finance and esoteric monetary policy to a more concrete cause for alarm: It’s impossible not to notice, driving to the Business Journal’s office in Mid-Wilshire each day, the vast and growing presence of homeless encampments that sprawl along freeway underpasses and high-traffic corridors, filling in the city’s smallest segments of open space. Despite the $1.2 billion in public funds approved in 2016 to build so-called supportive housing projects for homeless residents, not much appears to have been done to alleviate the crisis, at least anecdotally. But now, there are numbers to back up the apparent glacial pace of efforts to eradicate homelessness in L.A. A report issued by the city shows that in the last year, just six of the city’s 15 council districts met a pledge to approve 222 supportive housing units. Affluent neighborhoods represent the biggest laggards in project approval with five districts clustered around downtown being the most proactive, representing some 70 percent of the units that have been greenlit. That’s not to say nothing is being done. The data, compiled by the Los Angeles Housing and Community Investment Department, shows that more than 1,100 units are under construction as of the first quarter of 2019, with $810 million of the $1.2 billion in funds committed to 79 projects that will bring nearly 5,400 more housing units online. That number is still a drop in the bucket when looking at the overall homeless population, which was estimated to be more than 31,000 in the city and nearly 53,000 countywide. All this is a reminder, both for us individually and as a business community, that much needs to be done to address the systemic problem… Ending on a lighter note, we’re heading into prime sporting territory for basketball and baseball lovers. The National Collegiate Athletic Association March Madness tournament is in full swing, and the National Basketball Association playoffs are around the corner. Stitching the two together will be the start of the Major League Baseball season. I kicked off the baseball season a little early with a trip to Arizona to see the Los Angeles Dodgers over the weekend. Go Blue.

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