The Asset Building News Week is a weekly Friday feature on 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 the Fed’s Survey of Consumer Finances for 2010, homeownership, and income inequality.
Survey of Consumer Finances
On Tuesday, the Federal Reserve published the Survey of Consumer Finances for 2010, giving numerical values to the economic pain of American families in the aftermath of the financial crisis. The Fed found that between 2007 and 2010 the net worth of the median American family plummeted by 38.8%. Binyamin Appelbaum points out in the New York Times that the decline in average wealth was due largely to the huge and lingering toll of the housing collapse for middle-class Americans; he writes: “Families with incomes in the middle 60 percent of the population lost a larger share of their wealth over the three-year period than the wealthiest and poorest families. One basic reason for this disproportion is that the wealth of the middle class is mostly in housing…And while other forms of wealth have recovered much of the value lost in the crisis, housing prices have hardly budged.” In fact, Ylan Mui of the Washington Post notes, “the wealthiest families’ median net worth rose slightly.” The trends in savings among Americans also stand out. The SCF indicates that the percentage of Americans who contributed anything to savings decreased by 4.4% between 2007 and 2010. In light of the fact that total savings has increased, Appelbaum observes, this implies that “a smaller group of families is saving more money, while a growing number manage to save nothing.” Appelbaum highlights the changing nature of savings, reporting that the proportion of Americans saving money as a “precautionary measure” has increased while the share of those saving money for less liquid and longer term investments like housing or human capital has fallen. Hannah Emple parses the SCF data for the Asset Building Program at the Ladder. At “On the Economy,” economist Jared Bernstein analyzes evidence from the SCF regarding the effect of the recession on the racial wealth gap. Bernstein writes: “Since minorities were hit harder than white households, both the income and wealth gaps grew in the Great Recession. But look at the magnitude of the net worth gap: non-white or Hispanic households had only 16% the net worth of white households.” PBS Newshour produced a segment on the story featuring a discussion moderated by Gwenn Ifill on “the effects of and the reasons behind the precipitous decline in wealth.” Writing for Bloomberg View, Michael Kinsley suggests that the enormity of the wealth gap revealed by the SCF indicates that income statistics alone fail to capture the full extent of economic inequality.
The Washington Post featured the story of a former mortgage agent at Wells Fargo, Beth Jacobson, who during the height of the boom claims to have been pressured to push prospective homebuyers who could have qualified for standard loans into subprime loans, which at the time were more profitable; she further accuses her former employer of specifically targeting African Americans for subprime loans. Jacobson’s testimony crucially supports a lawsuit the City of Baltimore is pursuing against Wells Fargo on the grounds that the company discriminated against African Americans in its lending practices. The Post reports: “She said she grew uncomfortable after being excluded from meetings about marketing to black churches. She said that she later learned how sales pitches purposefully shunned the word ‘subprime’ and that she was taken off the roster to speak at a ‘wealth-building’ seminar in predominantly black Prince George’s County because she was ‘too white.’ ‘The point was clear to me: Wells Fargo wanted black potential borrowers talking to black loan officers,’ she wrote in the affidavit.” Jacobson now runs a business dedicated to helping troubled borrowers fight foreclosure and is struggling to stave off a foreclosure on her own home. Bloomberg picks apart the failure of the Obama administration to spark significant improvement in the housing market or provide adequate relief to troubled borrowers, a reality perhaps best captured by the fact that right now “23 percent of borrowers are underwater on their loans, virtually unchanged from 2009,” the year Obama assumed office. Vermont Public Radio looks into changing attitudes toward homeownership among the Millennial Generation.
NPR’s Tell Me Morehost Michael Martin discusses worrisome trends in poverty and income inequality in the U.S. with two experts: Timothy Noah, who recently spoke at New America Foundation, and law professor Peter Edelman. Over at the New Republic, Noah explains why he chose to focus on income and not wealth inequality. Finance blogger Felix Salmon reviews Timothy Noah’s book, The Great Divergence, and Paul Krugman’s Book, End This Depression Now!, for the New York Times. Salmon writes that while Noah and Krugman shed important light on income inequality and the economic difficulty of the middle class, both books suffer from the lack of a compelling story and the absence of policy proposals commensurate to the magnitude of the problem. Bloomberg reports on the decline of Occupy Wall Street. The Wall Street Journal flags a new study showing that consumption inequality has been increasing alongside income inequality at a rate more rapid than BLS data implies. Economic Scene Columnist Eduardo Porter looks at the gender pay gap, noting that it is much worse among high earners than among low earners: “It’s telling to look at the pay gap among the nation’s highest earners — where women’s deficit is largest. At the 10th percentile of earners, women make about 90 cents for every dollar earned by men. By contrast, at the 90th percentile, near the top of the distribution, women only make about 77 cents for every $1 men earn.”
- President Obama and candidate Romney were both in Ohio on Thursday to deliver dueling speeches about economic policy. You can watch Obama’s speech here and Romney’s speech here.
- In a blog post for American Banker, two banking industry representatives explain why they left their meeting with the Consumer Financial Protection Bureau “pleasantly surprised.”
- Citi, with help from USAID, is hoping to eventually serve ½ of the world’s unbanked population through mobile banking technology, reports National Journal.
- At the blog of the Joint Center for Political and Economic Studies, Melissa Wells provides a summary of the data showing that federal spending on asset building goes mainly to those at the top of the income distribution.
- The widow of a deceased veteran blogs about the financial challenges she faced following the death of her husband and the need among military families for greater access to financial education.