Newsletter: California Inc: Start-ups take a swipe at the prepaid debit card market
Welcome to California Inc., the weekly newsletter of the L.A. Times Business section. Here's a rundown of upcoming stories this week and the highlights of last week.
Looking Ahead
Supreme Court: A 24-year-old fight between an inventor and California tax collectors will go before the U.S. Supreme Court — for the second time — on Monday. The justices will hear arguments in the California Franchise Tax Board's appeal of a Nevada jury verdict that awarded $388 million (later reduced to $1.2 million) to entrepreneur Gilbert Hyatt. The case, previously heard by the Supreme Court in 2003, hinges on the question of whether the state of California can be sued in other states' courts.
Classic cars: The Petersen Automotive Museum in Los Angeles will reopen to the public Monday after a 13-month, $90-million face-lift. The new exterior of aluminum and stainless steel, designed by Gene Kohn and Trent Tesch of Kohn Pedersen Fox, has drawn both architectural cheers and jeers. The museum's new exhibition and education space features hundreds of millions of dollars in car artistry, plus galleries devoted to automobile production and history.
Government closing? A partial shutdown of the federal government looms, yet again, with Congress facing a Friday deadline to pass a package of spending bills. As a condition of supporting legislation to keep the government open, Republicans have pushed to block new power plant rules, weaken financial services regulations and make it more difficult for Syrian and Iraqi refugees to enter the U.S. Negotiating a compromise has emerged as the first big test of new House Speaker Paul D. Ryan.
Consumer spending: On Friday, the Commerce Department will release retail sales figures for November, a key bellwether of the strength of holiday shopping. Sales in October were up just 0.1%, the latest in a series of months with lackluster numbers. The National Retail Federation, a trade group, forecasts that sales during November and December will climb 3.7% from last year, to $630 billion.
The Agenda
Monday's Business section loads up on prepaid debit cards, financial instruments usually associated with lower-income consumers. In fact, the industry is rapidly growing, with a new generation of start-ups targeting businesses, Uber drivers and millennials who may never have opened a checking account. As one entrepreneur put it, "Branch banks don't make sense. There's a reason we don't have Blockbuster Video everywhere anymore."
Story Lines
Here are some of the other stories that ran in The Times' Business section in recent days that we're continuing to follow:
Philanthropy: Facebook Chief Executive Mark Zuckerberg announced via a letter to his newborn daughter, Max, that he and his wife would donate 99% of their Facebook shares — currently worth $45 billion — during their lifetimes. Zuckerberg, the world's 16th-wealthiest person and America's richest entrepreneur under 40, framed it as a way to help better the world for future generations. But Zuckerberg almost immediately drew criticism for creating a company, not a foundation, to give away his wealth.
Gas prices: Much of the nation is paying $2 or less for a gallon of regular gasoline for the first time since spring 2009 — but not California. Drivers throughout the state are shelling out significantly more, especially those in Los Angeles. L.A. motorists are paying an average price that is 75 cents a gallon more than the national average, compared with a 30-cent difference a year earlier. Fuel experts attribute the increased disparity largely to refinery outages.
Bank investigation: Aggressive sales tactics at Wells Fargo Bank, already the subject of a lawsuit filed by L.A.'s city attorney, have drawn the attention of federal regulators. An attorney representing Wells Fargo customers and former employees who have sued the bank told The Times that representatives from the Office of the Comptroller of the Currency, a federal bank watchdog, have contacted his office about those cases. The bank's practices came to light in a 2013 Times investigation that found that Wells Fargo employees, facing strict sales quotas and fearing retribution from their superiors, created accounts without customers' knowledge and even forged customers' signatures.
Jobs rise: An interest rate increase from the Federal Reserve is virtually a done deal, economists say, after Friday's report that the country added a solid 211,000 net new jobs in November. The central bank's policymaking Federal Open Market Committee hasn't raised the benchmark federal funds rate in nearly a decade, leaving it near zero since late 2008 in an effort to stimulate the economy. The first increase is expected to be just a 0.25-percentage-point increase, and Fed policymakers could wait until June to nudge it up by that amount again.
What We're Reading
And some recent stories from other publications that caught our eye:
New Silicon Valley power player: Fortune magazine takes a look at deep-pocketed Chinese venture capitalists who are buying up clean-technology companies. "China's environment now has cancer," one Chinese venture capitalist says. "But China has lots of cash."
Girl power: Twitch.tv has helped transform video games into a spectator sport. Now, so many people are streaming video game action that Twitch has become one of the biggest bandwidth hogs on the Internet. Bloomberg Businessweek profiles the most popular female broadcasters.
Dissecting the Zuckerberg donation: "Mark Zuckerberg did not donate $45 billion to charity. You may have heard that, but that was wrong." That's the take from ProPublica's Jesse Eisinger, who reports that Zuckerberg carefully crafted his "donation" as an investment vehicle.
Same drug, higher price: The Wall Street Journal explores why the U.S. pays more for some drugs than do other countries. In Norway, for example, a Big Mac and a gallon of gasoline might each cost close to $6. But prescription drugs? Those are far cheaper than in the U.S.
For the latest money news, go to www.latimes.com/business. Until next time, I'll see you in the Business section.
