The Ladder

A Blog from New America's Asset Building Program

Asset Building News Week, 4th Edition

Published:  January 27, 2012
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The Asset Building News Week is a weekly Friday feature on the The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include alternatives to mainstream banking, EITC awareness, financial literacy, income and wealth inequality, homeownership, bankruptcy, and weakened social protection.

The big news this week was President Obama’s State of the Union address on Tuesday. While he mentioned tax reform, homeownership, and inequality, his speech, Reid Cramer argues, failed to articulate a meaningful anti-poverty policy agenda. Rachel Black also notes that Obama missed a valuable opportunity to recast the Supplemental Nutrition Assistance Program (SNAP, or food stamps) as a playing “a critical role serving our countries most vulnerable families in the recession and its aftermath.”

Serving the Unbanked with Alternatives to Mainstream Banking

A press release on MarketWatch by The Network Branded Prepaid Card Association featured Pamela Chan’s paper Beyond Barriers: Designing Attractive Savings Products for Lower-Income Consumers. NBPCA presents prepaid products as “viable alternatives to checking accounts” particularly for currently underserved markets. While prepaid cards are an exciting innovation in the consumer financial services market, like all financial products they do not inherently serve the needs of low-income consumers. Transparent fee structures, easy to use savings features, and clear disclosures help address these needs. Recent immigrants are frequently part of this demographic underserved by mainstream banking services, but some financial institutions aim to change that, such as Mitchell Bank in Milwaukee, featured in this Public Radio International piece. The bank has built trust within the Latino community over time, by employing bilingual, bicultural staff and working with documented and undocumented residents alike. Creative business strategies like this one are cropping up in the alternative payment sector as well. For example, Business Wire features “mopay,” an online payments company that is working with an online dating service to give people without credit cards a chance to find love online.

It’s EITC Awareness Day!

The National Community Tax Coalition hosted a briefing on Capitol Hill yesterday in preparation for Earned Income Tax Credit Awareness Day (today, January 27). David Rothstein's remarks on the importance of EITC are available here. NCTC also released a new policy paper (pdf) about the EITC. Check out last week’s News Week for links to free tax preparation sites in your area.

Employment

The Atlantic has a lengthy article about shifts in the U.S. economy, as seen through a detailed history of one manufacturing company and its employees. These economic changes have ramifications for workers and their wages, the importance of higher education, and global competitiveness. Minnesota Public Radio has a local take on a similar set of issues. MPR investigates the tension between claims of a skilled labor shortage with high unemployment.

Financial Literacy

Congratulations are in order for the University of Wisconsin Credit Union, who recently won the Wisconsin Financial Literacy Award for the third year straight. Credit unions across the U.S. were responsible for providing financial education to an estimated 16 million consumers in 2010. But credit unions aren’t the only ones making contributions to financial education. Locally, WUSA9 reports that Virginia Cooperative Extension is providing free financial education classes for Alexandria and Arlington, Virginia women (who they argue have unique financial needs due to a longer lifespan and greater likelihood of taking time out of the workforce). Freakonomics has a fascinating podcast up about financial literacy that features both proponents and skeptics of financial education. And last but not least, librarians in Ohio are using their time with preschool age children to talk about basic financial literacy concepts.

Income and Wealth Inequality

The Palm Beach Post is not the first newspaper to document the disparity between lawmakers’ net worth and that of their constituents. They report that 42% of the Florida House legislature has a net worth over $1 million, not counting home equity. As we’ve written about before (and this podcast from Reid Cramer describes), wealth inequality has profound implications for the health of our democracy. Speaking of wealth, Bill Gates told the BBC, “Right now I don’t feel people like myself are paying as much as we should.” He has joined Warren Buffet and other ultra-rich people in calling for higher taxes on the wealthy, something Gates sees as "just justice."

Homeownership

The Pew Hispanic Center released a new report about the impact of the flailing economy on Latinos and included a section on homeownership. The report explains, “In 2005, Latinos derived nearly two-thirds of their net worth from home equity. However, because many Latinos live in places where housing prices increased the most prior to the housing crisis—and have fallen the most since—the housing bust had a greater impact on Latino household wealth than any other group.” The enduring strength of the relationship between wealth and homeownership points to a great need for policies that ensure genuinely equal opportunity to own a home.

Bankruptcy

However, the structural barriers to equal opportunity of wealth accumulation remain numerous. For example, as the New York Times reported, there is a discrepancy between white and black bankruptcy, with research findings showing that bankruptcy lawyers were more likely to recommend a costlier chapter of bankruptcy for black families than for white families, even when their financial circumstances were the same. Research like this helps shed light on how institutions replicate racial wealth disparities over time.

Weakened Social Protection 

An ongoing theme in the news(the past two editions of News Week and a recent blog post have talked about this) is the impact a tough budgetary climate is having on decision-making about public benefits programs at the state and local level. Kansas is considering a policy that would deny SNAP (food stamps) benefits to American children if their parents are undocumented immigrants. New Hampshire is contemplating denying an increase in welfare benefits to mothers who become pregnant while already receiving welfare. These policies are short-sighted and ultimately do not save the states money. Kansas seems to be forgetting that SNAP dollars are primarily federal money that is reinvested into the local economy and the New Hampshire legislator who proposed this cut has already admitted that the savings from this welfare cut will only save the state $34,000 - a meager drop in the budgetary hat. In short, policies like these hurt children and do little to address their parents’ poverty.

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