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 savings products and financial behavior, the Consumer Financial Protection Bureau, income inequality, and housing.
This week is America Saves Week 2012, an annual campaign organized by the Consumer Federation of America to draw awareness to encourage savings. A 2011 study showed that two-thirds of Americans reported spending less than they had made and saving the difference, a 7 percent drop from 2010. Author Sheldon Garon (who spoke with us here at New America in December about his book) sat down with Tess Vigeland at Marketplace to talk about why Americans have such a dreary track record when it comes to savings. He attributes this to a lack of legislative support for small-dollar savings options and the combined profitability and deregulation of the credit industry, among other factors. TED Talks has a new segment up with economist Shlomo Benartzi, entitled “Saving for Tomorrow, Tomorrow” that looks at behavioral obstacles to saving for retirement.
Retirement Security, Banking Products, and Financial Behavior
Speaking of retirement, Colorlines has a piece up reporting on a new University of California Berkeley study that shows that black and Latino seniors struggle more than their white counterparts in their later years and have higher rates of poverty. As the piece explains, “less than a third of employed Latinos and less than half of black workers are covered by an employer sponsored retirement plan, a critical resource in ensuring adequate retirement income. As a result, they are disproportionately reliant on the limited income provided by Social Security.” This lack of access to workplace retirement savings can be addressed in a variety of ways. This Boston Globe piece chronicles a few approaches happening in the Boston area, including the work of the D2D Fund which has designed financial education video games to reach audiences that wouldn’t normally come to workshops. Senior poverty and retirement security are major concerns, but child poverty rates across the U.S. are much higher. This USA Today article is accompanied by a helpful visualization tool that lets readers select the year and see how rates of child and senior poverty have changed. That said, consumers of all ages feel less financially secure than they did a year ago, according to a Bankrate.com poll “in large part because of their lack of savings to cushion a job loss or other problems.” These consumers may be particularly keen to use free checking accounts. Monthly maintenance fees and other charges can make it hard for lower-income consumers to effectively use these accounts. As TIME reports, while maintenance fee rates inched down in 2011, overdraft fees crept up. Charges like these, which some consumers find hard to predict and avoid might explain some of the demographic trends in bill pay behavior. As a piece from The Street reports, lower-income consumers tend to prefer in-person bill pay.
Consumer Financial Protection Bureau
As overdraft fees rise, the CFPB is launching an inquiry. Forbes, the Washington Post and NPR all have articles summarizing what this might look like. As CFPB Director Richard Cordray noted, this initiative will have a big impact on a relatively targeted segment of the banking population: "Nine percent of the people incur about 84 percent of the overdraft fees,” he explained. Forbes also had an article that looked at declining profits from overdrafts that offers insight into how this type of financial regulation affects companies. Over at The Daily Beast, Eleanor Clift writes that “if anyone can lower the temperature on Capitol Hill, it could be Cordray… He refuses to be drawn into attacks on critics of the new consumer agency, saying he takes their concerns at face value and is confident that once they size him up and see what his agency is doing, they’ll be won over, or at least neutralized.”
Former Senator Rick Santorum shared his ideas about income inequality last Thursday: “There is income inequality in America. There always has been and, hopefully, and I do say that, there always will be.” As Charles Blow remarks in a New York Times op-ed, “for Santorum to champion income inequality in Detroit, of all places, is still incredibly tone-deaf.” Chris Christie, governor of New Jersey, made the pronouncement that he’d like Warren Buffet to “shut up” about wealthier Americans paying a great share in taxes. Meanwhile, Business Insider has a longer piece that looks at the housing crisis as an example of how inequality hurts the economy.
Fannie Mae released a report that says “housing could contribute to gross domestic product growth in 2012 for the first time in years.” The body that regulates Fannie Mae and Freddie Mac (the Federal Housing Finance Agency) submitted a plan to Congress that the Washington Post says would make for a “leaner Fannie and Freddie” and “would mean fewer mortgages are backed by the government. That could make buying a home more expensive because it would lead to higher interest rates.” Efforts to improve the foreclosure situation are still underway. In Florida, the Chicago Tribune reports “more than 17 percent of Florida mortgage-holders are 90 days late in their payments” and 12% of mortgaged homes are in foreclosure. Foreclosure numbers across the U.S. have been slowly improving with the economic recovery. However, for the families who did lose homes during the housing crisis, the situation remains dire. The Atlantic quotes a report from HUD that notes that “the number of homeless persons in families has increased by 20 percent from 2007 to 2010, and families currently represent a much larger share of the total sheltered population than ever before.” In cities like Washington, D.C. with a significant population of homeless people, the city is taking an expensive route to providing shelter to them in the colder months by putting them up in hotels. John Lozier, of the National Health Care for the Homeless Council, remarks on the irony “that the cost of just a few nights in a hotel can pay a full month's cost of standard housing.”
Lastly, in case you needed another push to get your taxes in order this year, the IRS announced that about one million Americans are still eligible to receive a combined $1 billion in refunds from 2008. However, in order to claim those funds from 2008, filers need to file on time this year or forfeit their claim to the money.