Business
High interest rates are hurting people. Here's why it's worse for Californians
By the numbers, the overall U.S. economy may look good, but down at the street level the view is a lot grimmer and grittier.
The surge in interest rates imposed by the Federal Reserve to slow inflation has closed like an acrid cloud over would-be homeowners, car buyers, growing families, and businesses new and old, large and small. It has meant missing opportunities, settling for less — and waiting and waiting and waiting.
It’s not that the average American is underwater. It’s that many feel that they’re struggling more than they anticipated and feel more constricted. In the American Dream, if you work hard, things are supposed to get better. Fairly or not, that may be a big part of why so many voters have expressed unhappiness with President Biden’s handling of the economy.
The cost of borrowing, whether for mortgages, credit cards or car loans, is the highest in more than two decades. And that is weighing especially hard on people in California, where housing, gas and many other things are more expensive than in most other states.
California’s economy also relies more on interest rate-sensitive sectors such as real estate and high tech, which helps explain why the state has been lagging in job growth and its unemployment rate is the highest in the nation.
Harder to budget
When interest rates rise, savers can earn more on their deposits. But in America’s consumer society, for most people higher rates mean that a lot of things cost a little (or a lot) more. That makes it harder to stretch an individual or family budget. It may mean giving up on the nicer car you had your heart set on, or settling for a smaller house, or a shorter, less glamorous vacation.
And with every uptick in interest rates, which is almost inevitably passed on to customers, some have had to give up on a purchase entirely.
Geovanny Panchame, a creative director at an advertising agency, knows these feelings all too well: He thinks often about what could have been if he and his wife had bought the starter home they were planning for in 2020.
Back then, they had been pre-approved at an interest rate of 3.1% — right around the national average — but were outbid several times. They figured they’d wait a few years to save more money for a nicer place.
Four years later, the couple are still renting an apartment in Culver City — and now they’re expecting their first child.
Pushing to buy a house and get settled before their son is born in December, they recently made an $885,000 offer for a three-bedroom, 1.5-bath home in Inglewood. They plan to put down 10%. At the current average mortgage interest rate of 7%, that would mean a monthly payment of about $5,300 — $1,900 more than if they had an interest rate of 3.1%.
The source of that increase is the Federal Reserve’s power to set basic interest rates, which determines the interest rates for almost everything else in the economy. The Fed’s benchmark rate went up rapidly, from near zero in early 2022 to a generational high of about 5.5%, where it has been for almost a year. The rate has been higher in the past, but after two decades in which it was mostly at rock bottom, most people had gotten used to both very low inflation and low interest rates.
“Clearly, we look back and we probably should have kept going and hopped into something,” Panchame, 39, said. “I’ve been really sacrificing a lot to get to this point to purchase a home and now I just feel like I got here but I didn’t work quick enough because interest rates have gotten the better of me.”
Add property taxes and home insurance, and it’s even more painful for home buyers because those costs have also risen sharply since the COVID-19 pandemic, along with housing prices themselves.
A typical buyer of a mid-tier home in California, priced at about $785,000 in the spring, was looking at a total housing payment of about $5,900 a month. That’s up from $3,250 in March of 2020 and almost $4,600 in March of 2022, when the Fed began raising interest rates, according to the California Legislative Analyst’s Office.
It wasn’t supposed to work like that: Lifting interest rates as fast and as high as the Fed did, in its effort to curb inflation, should have led to falling home prices.
But that didn’t happen, mainly because relatively few homes came on the market. Most existing homeowners had locked in lower mortgage rates before the surge; selling those houses once interest rates took off would have meant paying higher prices and interest rates on other homes, or bloated rents for apartments.
For most homeowners sitting on the low rates of the past, their financial well-being was further supported by low unemployment and incomes that generally remained on par with inflation or grew a little faster. And many had cushions of savings built up in early phases of the pandemic, thanks partly to government support.
All of which has kept the U.S. economy as a whole humming along, blunting the full effects of higher interest rates.
“Consumers are doing their job,” said Claire Li, senior analyst at Moody’s Investors Service, though she added that there are now signs of slower spending, evidenced by consumers cutting back on credit card purchases.
Unlike most home loans, credit card interest rates aren’t fixed. And today the average rate has bounced up to almost 22% from 14.6% in 2021, according to Fed data. That’s starting to squeeze more borrowers, adding to their unease.
Rising credit card debt
In California, the 30-day delinquency rate on credit cards is nearing 5% — something not seen since late 2009 around the end of the Great Recession, according to the California Policy Lab at UC Berkeley.
Lower-income and younger borrowers are more prone to falling behind on credit card, auto and other consumer loan payments than those with higher incomes. And it’s these groups that are feeling the effects of higher interest rates the most.
Christian Shorter, a self-employed tech serviceman who lives in Chino, just bought a used Volkswagen Jetta for $21,000. He put down $3,500 and financed the rest over 69 months at an annual interest rate of 24%. His monthly payment is more than $480, and by the end of the loan he will have paid about $15,000 in interest.
Shorter, 45, said he doesn’t have good credit. He plans to take out a personal loan when interest rates drop and pay off the car debt. “Definitely, definitely, they should lower interest rates,” he said of the Fed.
Between the jump in interest rates and prices of new vehicles, some auto buyers have downgraded to cheaper models. The biggest shift, though, especially in California, has been a move by more buyers to turn to electric vehicles to save on fuel costs, says Joseph Yoon, a consumer analyst at Edmunds, the car research and information firm in Santa Monica.
In May, he said, buyers on average financed about $41,000 on a new vehicle purchase at an interest rate of 7.3% (compared with 4.1% in December 2021). Over 69 months, that translates to a monthly payment of $745.
“For a big part of the population, they’re looking at this car market and saying, ‘I got to wait for something to break,’ like interest rates or dealer incentives,” Yoon said.
For a lot of small-business owners, who drive much of the economy in Los Angeles, they don’t have the luxury of waiting it out. They need funds to survive, or to expand when things are going well.
But many can’t qualify with traditional commercial lenders, and when they can they’re typically looking at interest rates of 9%; that’s more than double what they were before the Fed’s rate hikes, according to surveys by the National Federation of Independent Business.
One result: More and more people in Southern California are looking for help from lenders such as Brea-based Lendistry, one of the nation’s largest minority-led community development financial institutions.
From January to May, applications were up 21% and the dollar volume of loans rose 33% compared with a year earlier, said Everett Sands, Lendistry’s chief executive. Interest rates on his loans range from 7.5% to 14.5%.
“Business owners, they’re resilient, entrepreneurial, scrappy — they’ll figure out a way,” he said, adding that he sees many doing side jobs like driving for Uber or making Instacart deliveries at night.
Even so, Sands said, the higher borrowing costs inevitably mean less money spent on things like investing in new technology and software and bringing on additional staff, as well as delays in owners growing their businesses.
“Some of them lose out in progressing forward.”
‘When you put everything on the line, you get desperate.’
— Jurni Rayne, Gritz N Wafflez
Jurni Rayne, 42, started her brunch business, Gritz N Wafflez, as a ghost kitchen in February 2022, preparing food orders for delivery services. She financed that by maxing out her credit cards and getting a merchant cash advance, which is like a payday loan with super high interest rates. Her debts reached $70,000.
“When you put everything on the line, you get desperate,” said Rayne, a Dallas native who moved to Los Angeles a decade ago and has worked as a manager at California Pizza Kitchen and the Cheesecake Factory. “You don’t care about the interest rate, because it’s something like between passion and insanity.”
She has since paid off all the merchant loans. And her business has seen such strong growth that last year Rayne got out of the ghost kitchen and into a small spot in Pico-Union, starting with just three tables. She now has 17 tables and a staff of 14.
This fall she’ll be moving to a bigger location in Koreatown and has her sights on a second restaurant in South Los Angeles. But she frets that she could have expanded sooner if interest rates had been lower and she’d had more access to financing.
Economists call that an opportunity cost. For Rayne, it’s personal.
“Absolutely, lower interest rates would have helped me,” she said.
For many others, the wait for lower rates continues without the balm of intermediate success.
Lynn Miller, 60, began looking to buy a home in Orange County about a year ago, hoping to upgrade from her current 1,600-square-foot apartment.
“It’s not bad, it’s just not mine — the dishwasher is crappy, the washing machine is old,” she said of her rental in Corona del Mar. “I’m obviously not going to invest in these appliances. It’s just different not owning your own home.”
It’s been a discouraging process, she said, especially when she inputs her numbers into the mortgage calculators on Zillow and Realtor.com, which churn out estimates based on current interest rates.
“If you look at those monthly payment numbers, it’s shocking,” Miller, a marketing consultant, said. “It’ll get better, but it’s just not better right now.”
She’s continuing her house search — she’d love to buy a single-family, three-bedroom home with a backyard for a dog — but is holding off for now.
“I’m still waiting because I do think that interest rates are going to go down,” Miller said, although she knows it’s a guessing game. “I could end up waiting a long time.”
Business
Waymo reports teen riders for bad behavior and delivers them to the police
Robotaxis could be turning into robocops.
A self-driving Waymo reported two teens to San Mateo, Calif., police on Monday after they were found drinking alcohol and shooting toy guns in the back of the vehicle.
According to a social media post from the San Mateo Police Department, officers detained two 15-year-olds after the Waymo they were riding in contacted the department and stopped in a parking lot until law enforcement arrived.
“Parents do you know where your teens are?” the San Mateo Police Department wrote on Facebook following the incident. “Waymo does!”
Officers removed both teens from the vehicle and determined they were using toy guns to shoot Orbeez out the windows. Orbeez are small, water-absorbing beads sold at toy stores.
“Toy guns, water guns, and BB guns all pose real dangers, especially to an untrained eye,” the Police Department said. “The simple handling of them can cause fear in [passersby].” “
A video posted on Facebook shows at least five officers and a police dog responding to the scene and approaching the Waymo with their weapons raised.
Waymo did not immediately respond to a request for comment.
Waymo vehicles have internal cameras and microphones that may be used in an emergency or to “promote safety and security,” according to Waymo’s online support page.
The cameras are also used to ensure the vehicles are clean and to help find lost items, according to the support page.
The company said it does not use facial recognition or other biometric identification technologies to identify individuals.
“In more urgent circumstances, support may access live video during a trip,” the Waymo page said.
The San Mateo Police Department’s Facebook post has garnered nearly 60 comments, with one user accusing Waymo of “snitching.”
“At least they got a designated driver?!” one user commented.
Business
Commentary: How right-wing anti-transgender attacks led to a Supreme Court ruling upholding sex discrimination
At the Supreme Court, the unfounded fear of boys masquerading as girls in youth sports rolled the clock back on gender equality.
On the surface, the Supreme Court’s June 30 opinion upholding state laws barring transgender girls from women’s and girl’s sports teams looks like a victory for women’s rights.
The 6-3 opinion by Justice Brett M. Kavanaugh certainly presents itself that way. “Females and males have inherent physical differences relevant to athletic performance,” Kavanaugh wrote. “Therefore, in contact sports, forcing female athletes to compete against males can create significant safety risks.” He also asserted that “forcing female athletes to compete against males can undermine competitive fairness.”
The ruling applied to prohibitions enacted in Idaho and West Virginia against “biological” males’ participation on women’s teams in public schools. Federal judges in both states overturned the bans. The Supreme Court majority restored them. The ruling essentially upholds similar bans enacted in 25 other states.
There was no record of any transgender person participating in school sports in the State, let alone any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.
— Justice Sonia Sotomayor, demolishing the Supreme Court’s argument in favor of banning transgender girls from girl’s sports
Kavanaugh, like Donald Trump and others in the anti-transgender camp, maintained that one’s gender is an immutable fact of life, established even before birth.
Anything else, Trump stated in an executive order he issued on inauguration day 2025, could only be the product of “gender ideology extremism.” The U.S., his order stated, recognizes “two sexes, male and female. These sexes are not changeable and are grounded in fundamental and incontrovertible reality.” That’s a “biological truth,” he declared.
In his own version of this overconfident and factually insupportable conclusion, Kavanaugh wrote: “As all agree, females and males have inherent physical differences relevant to athletic performance.”
Science recognizes that some people are “born with sex traits that don’t fit into typical male or female patterns,” to cite a discussion on the Cleveland Clinic web page on the topic “intersex.” The condition “may involve chromosomes, hormones, reproductive organs or genitals.”
From a psychological standpoint, medical science recognizes “gender dysphoria” as a real condition often requiring counseling and medical intervention such as the use of puberty blockers and hormones to stave off the development of secondary sex characteristics until the condition can be resolved.
No one disputes that there are physical differences between the sexes. Few would dispute that on average or even at the median, males may be bigger and more powerful than females, or that in certain contact sports the difference may be telling and on occasion dangerous.
But that’s not the same as asserting that the physical differences between males and females invariably mean that men will invariably prevail over women in all competitions or that their participation will endanger women.
The International Olympic Committee — in a policy statement Kavanaugh cited incompletely — says that in “most running and swimming events,” males have a 10% to 12% advantage over women. That’s a range that would accommodate the full spectrum of outcomes — transgender females win, cisfemales win, they tie. (The “cis” prefix denotes those living consistent with their birth gender.)
West Virginia and Idaho addressed this ambiguity by banning transgender women from all girls’ teams. So under their rules transgender girls can’t play football or soccer with cisgirls. But what’s the argument in favor of banning them from the 100-yard dash, or cross-country track, or diving, or archery?
But something else is going on here. The Supreme Court’s ruling was almost preordained, given the years-long campaign by conservatives to demonize transgender individuals as if they’re members of an alien species.
It will be recalled that during his presidential campaign, Trump spun a despicable fantasy in which children were kidnapped in school and secretly subjected to sex-change operations.
Trump’s executive order wiped out policies aimed at protecting transgender adults from discrimination. He moved to outlaw gender-affirming medical therapies for anyone under 19 by cutting off federal funding for healthcare institutions that provide such care.
He banned transgender individuals from serving in the military and ordered federal prison officials to move transgender inmates into the general populations consistent with their birth genders, which exposes them to physical assault. (Federal Judge Royce Lamberth of Washington, D.C., has blocked the government from transferring three transgender women into the male prison population or terminating their hormone treatments.)
I wrote during Trump’s first term, when his anti-transgender policies were still gestating, that the goal was to show that “one can target any community, as long as it doesn’t have a strong political voice or political power. These are the actions of bullies and cowards, pretending to be strong.”
Last year, the Supreme Court struck its first blow against transgender rights by upholding a Tennessee law banning transgender care, including puberty blockers and hormone therapy, for minors. Similar laws have been enacted in 25 other states. The majority in that ruling by Chief Justice John G. Roberts Jr. was identical to the one in the June 30 ruling — Roberts, Kavanaugh, and Justices Clarence Thomas, Samuel A. Alito Jr., Neil M. Gorsuch and Amy Coney Barrett.
Who are the targets of this ideological campaign? They number only about 1.6 million U.S. adults, or one-half of 1% of the U.S. population. About 300,000 adolescents ages 13 to 17, or 1.4%, identify as transgender, according to a study by UCLA School of Law.
In West Virginia, as Justice Sonia Sotomayor observed in her dissenting opinion, “there was no record of any transgender person participating in school sports in the State, let along any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.”
In endorsing the flat bans directed at transgender women in Idaho and West Virginia, Kavanaugh argued that any attempt to implement case-by-case judgments of students’ requests to join sports teams inconsistent with their biological gender would create “an enormous practical and administrability problem.”
Is that so? That wasn’t the case in Maine, where the annual K-12 population is more than 170,000. There, a committee was charged with determining whether a student’s participation in a sport consistent with their gender identity but inconsistent with their biological sex would “result in an unfair athletic advantage” or present a risk of injury to others. The committee held 56 hearings from 2013 through 2021, or an average of seven per year. During the entire time span, only four involved transgender girls. (The outcome of those hearings couldn’t be learned.)
It was Maine’s policy, one might recall, that provoked a confrontation between Trump and Maine Gov. Janet Mills at the White House last year, when Trump threatened to withhold federal funding from the state unless it barred transgender students from competing on women’s sports teams. “We’ll see you in court,” Mills snapped.
Whether the Idaho and West Virginia laws genuinely protect girls from unfair competition is questionable. (The Idaho law is styled the “Fairness in Women’s Sports Act.”) In practice, the laws may subject women in public schools to “invasive sex verification procedures,” as educational expert George Theoharis of Syracuse University wrote after the court ruling.
They’re also based on a retrograde view of women as fragile creatures needing men’s protection, Theoharis wrote — “the same logic that has historically been used to justify excluding women from making their own healthcare decisions and girls from rigorous math and science; that physically demanding work is simply beyond them.” (There don’t appear to be any state laws barring transgender women from competing in men’s sports.)
Becky Pepper-Jackson, the plaintiff in the West Virginia case, in which she is identified only as B.P.J., is the only transgender girl who sought to join girl’s teams — track and cross-country — in the state. That was in 2021, just after West Virginia passed its law and she was about to enter sixth grade. She didn’t appear to pose any competitive risk to others on the track and cross-country teams she applied to join — her lawyers told the Supreme Court that on those no-cut teams, she “came in near the back.”
Anyway, she had not gone through male puberty, which theoretically might have endowed her with a competitive advantage, because she had been taking puberty blockers and female hormones.
Thanks to the court’s ruling, Sotomayor observed in a dissent joined by Justices Elena Kagan and Ketanji Brown Jackson, West Virginia can deny Becky access to school sports “because it thinks they have an inherent athletic advantage, even if the facts show that they do not.”
B.P.J., Sotomayor wrote, “cannot practice on girls’ teams, even if she would not take anyone’s spot in an eventual competition, even if everyone who tries out for the team makes it, and even if having the chance to participate could aid immensely in treating B. P. J.’s gender dysphoria.”
So whose interest was really protected by the Supreme Court?
Business
Orange County real estate investor pleads not guilty in $100 million bank fraud case
An Orange County real estate investor accused of criminally defrauding an Arizona bank of nearly $100 million pleaded not guilty Monday and remains in custody.
Mahender Makhijani, 44, of Corona del Mar — who also was ordered by an arbitrator to pay $1.34 billion in a separate civil fraud case — was arraigned in Santa Ana federal court on two charges.
He is accused of bank fraud and making a false statement to a bank in a June 8 case involving a $100 million real estate loan made by Phoenix-based Western Alliance Bank. He was taken into custody on June 10.
Makhijani is accused of providing bogus collateral for the October 2024 loan now in default. In a civil lawsuit, Western Alliance said the outstanding balance as nearly $99 million.
Prosecutors say he falsified title insurance policies that showed the bank would have a first lien on the underlying collateral if the loan went bad, when in fact it did not.
A trial was set for August 11 before U.S. District Judge David O. Carter in Santa Ana.
Michael Schachter, his criminal defense attorney, did not respond to messages seeking comment.
In the civil case, an arbitrator in May ordered Makhijani to pay Laguna Beach real estate mogul Mohammad Honarkar $1.34 billion after ruling he had fraudulently induced him into a 2021 joint venture — and then wrested control and lost to creditors more than two dozen properties Honarkar had owned.
Makhijani has not been criminally charged in that case, but prosecutors alleged in an affidavit in support of the bank fraud charges that he used “force and threats” in his dealings with Honarkar and others — including taking over the landmark Hotel Laguna in 2023 that Honarkar was renovating.
Prosecutors sought to hold Makhijani without bail after his arrest.
The affidavit noted he is a legal Indian immigrant with a home and bank accounts in that country, has access to private jets and threatened to “run away” if caught in a difficult situation.
The request was denied and he was granted $500,000 bail.
However, Makhijani remains in custody after a hearing sought by prosecutors last month before Magistrate Judge Autumn Spaeth.
The judge declined to accept a $450,000 cashier’s check submitted by a Makhijani associate for the bail, finding insufficient proof the source of the funds was legitimate, according to court records.
Makhijani is not prominent outside Orange County real estate circles, but he established a thriving distressed-assets business over the last decade that attracted prominent Southern California real estate investors.
Prosecutors said it paid for a lifestyle that included two multimillion-dollar homes in Corona del Mar, a luxury apartment in Newport Beach and various luxury vehicles.
As of last month, prosecutors had not fully traced his assets, which they believe are not held in his name and some of which may be in India.
The businessman employed an array of shell companies and strawmen to sign documents on his behalf, and to stand in for him as operators of his companies, according to the affidavit.
Makhijani told an associate he took extra precautions because wanted to insulate himself from litigation and that “they were sharks in the distressed world who took advantage of people,” the affidavit stated.
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