The Ladder

 

The Asset Building Program hosted an event on Wednesday (entitled "Jobs are Not Enough") to mark the release of the July/August special issue of The Washington Monthly. The issue is dedicated to the idea that assets are a critical pathway to and safeguard for the middle class and that there opening pathways to asset development should be a critical national priority. The event explored various topics including savings as a path to higher education, the importance of life-long savings mechanisms, the role of federal policies in promoting prosperity, and a growing political divide between young and old Americans. We recommend you read the whole magazine.

 

 

Establishing good credit is an important element of financial security, since it serves as a tool with which an individual can demonstrate his or her ability to repay debt. Unfortunately, many low-income and unbanked Americans are unable to establish good credit due to a lack of participation in the traditional credit system of banks and credit card companies. This exclusion from the mainstream credit cycle can cause individuals to seek out alternative forms of lending, such as payday lenders and pawn shops, often accompanied by steep interest rates. Professor and author Jerry Buckland argues that this financial exclusion is not only detrimental to those with bad credit scores, but that banks are missing out on a profitable venture. Buckland’s book also explores income distribution and inequality in Canada and makes the case that a decrease in poverty rates is good for everyone, including big business.

 

Increased access to financial services has been a subject addressed by others, including two former business executives. Zestfinance, a computer program founded by Douglas Merrill and Shawn Budde, uses complex data analysis to analyze the risk associated with borrowers without established credit histories. “Our mission was to use big data to save the under-banked billions of dollars in high fees,” Merrill told the New York Times. That's a similar mission to the CFPB, which is looking to use the biggest database of credit card transactions ever assembled to help level the playing field for consumers, according to John Gravois in The Washington Monthly.

 

Also, check out this article advocating for the distribution of financial education through places of worship. Patrice Peyret argues that faith-based organizations are in an ideal position to distribute crucial financial advice from credible sources like the CFPB, or to hold workshops on basic personal finance.

 

 

According to a new national survey, positive views on homeownership are continuing to grow, despite increasingly negative views regarding the economy and personal finance. “Although this positive trend may be short-lived if the general economy falters, one might ask whether consumers are increasingly seeing the current environment as a unique opportunity to buy a home while home prices remain depressed, rental costs are increasing, and interest rates are near historic lows,” said Fannie Mae Chief Economist Doug Duncan.

 

The New York Times reports that the CFPB continued this week with their overhaul of the mortgage market, revealing a proposal which would require mortgage companies to provide a loan estimate and closing disclosure to potential homebuyers. Janis Bowdler, director of the Wealth Building Policy Project at the National Council of La Raza (who spoke at New America in May), discusses the actions of the CFPB in this blog article, and argues that families should continue to aspire to homeownership in the year 2012.

 

Anya Schoolman argues that we could increase the value of homes as assets by enabling homeowners to install solar panels and sell green electricity back to the power companies.

 

 

On Tuesday, Demos hosted a national conference entitled “50 Years Since the Other America: Understanding and Addressing Poverty in the 21st Century.” Keep an eye out for Aleta Sprague’s upcoming post summarizing the event and its relevance in the context of asset building. These graphical summaries from Ezra Klein’s WonkBlog provide a comprehensive and historical look at poverty in America over the last 50 years. Dylan Matthews at the New York Times argues that this data from the Census Bureau demonstrates a few important points: “The poverty rate went down, and stayed down… We’re doing more to fight it… and [poverty] is still racially concentrated.” However, poverty rates as a whole have actually increased since 1970. Interestingly, poverty rates for the elderly have steadily decreased from 35% in 1959 to only 10% in 2010. Check out this Huffington Post piece exploring the issue.

 

Suburbia, traditionally conceptualized as a place of prosperity and stability, has also seen a dramatic increase in poverty rates. In the last decade, suburban poverty has increased by 66%, compared to only 47% in urban areas. Both of these alarming increases demonstrate a need to address the issue of poverty on a highly comprehensive level. 

 

NPR came out with an interesting video and article exploring the cycle of poverty in Reading, Pennsylvania, the nation’s poorest city. Two thirds of single mothers in Reading live below the poverty line, and NPR speaks with these women about their relationship with the welfare system and stereotypes which they struggle with as benefit recipients.

 

 

This photo essay explores the subject of inequality in the Bridgeport-Stamford-Norwalk area of Connecticut, the nation’s most unequal city in terms of income. “A controversial new finding nicknamed the Great Gatsby Curve makes the strongest case yet that inequality and mobility are intertwined. The more unequal a society is, the greater the likelihood that children will remain in the same economic standing as their parents.”

 

A new study from Pew’s Economic Mobility Project finds that upward economic mobility, a crucial element of the American Dream, has been largely unattainable for many poor Americans. According to the study, “Just 4 percent of people who grew up in the bottom fifth of the household income ladder made it to the top fifth as adults.” In addition, “70 percent of Americans whose parents were in the bottom fifth of the income ladder stayed below the middle as adults.” Despite the fact that people today are earning more than their parents did at the same age, “People can make more money than their parents and still not rise up the income ladder because median income has increased at all levels.”

 

In this CNN piece, Trina Shanks calls for an increased recognition of the fact that life choices are very often dictated by economic circumstances. Referencing her own research and experience as a social worker, Shanks explains, “Children with proven academic ability fall behind if they grow up in families that are poor. By the age of 3, one study showed, poor children already have half the vocabulary of higher-income children. Another study showed that children in high-risk social and economic environments can start in the top 25% academically at the age of 4 but fall to the bottom by the time they are in high school.”