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 public benefits, consumer behavior, financial services, conversations about race and wealth, and the mortgage settlement.
We’ve written before on The Ladder about the conversations unfolding in Pennsylvania around their asset test for the SNAP program. The debate continues on, with two state senators seeking to prevent the Department of Public Welfare from reinstating the test. One senator said that “requiring people who lost their jobs to obliterate their savings accounts before they can receive assistance for food is the wrong message to send to citizens. ‘Trying to keep the car on the road; incurring a medical expense uncovered by health insurance; a broken furnace in winter– all of these circumstances could wipe out a family’s savings in no time.’” Michigan is also grappling with the consequences of restrictions on benefits with its welfare program. As the Huffington Post reports, families of 46,000 Michigan kids have lost their benefits since the state began enforcing time limits for the program. Even comparatively wealthy parts of the U.S. are grappling with handling the uptick in benefits recipients. In Arlington, Virginia, the Department of Human Services is seeing a greater need for rental assistance as poverty rises.
The Economist has a piece looking at how behavioral economics principles are playing out in public policies. As the article describes, some policymakers have focused “on the role that inertia plays in decision-making, and the tendency that people have to pick the default option in a range of choices. In October new British legislation will change the default option for corporate pension plans, so that employees are automatically enrolled unless they actively choose to opt out.” The benefits of automatic enrollment were also heavily discussed at this Senate Banking Subcommittee hearing, featuring our Michael Calabrese. Meanwhile, the debate over financial education as a means of influencing financial decision-making was up for discussion over at TIME. Dan Kadlec explains that many “would prefer scarce resources be spent on financial education programs aimed at adults and in support of regulations that dictate things like clearer mortgage documents and credit card statements.” The Consumer Financial Protection Bureau, he notes, is designed to do just that. Speaking of the CFPB, Joe Nocera has an opinion piece at the New York Times in which he describes some of conversations he’s had with Consumer Financial Protection Bureau staff. He has found these conversations to be inspiring, evidence that suggests to him there are still passionate people committed to the goals of consumer protection working in the federal government.
Financial Services and Vulnerabilities
Families with members in the military face a range of barriers to financial stability, CNN.com writes. A lack of affordable childcare, expenses from frequent moves, and job disruptions for non-military spouses are a few of the issues the piece highlights. NPR ran a piece this week looking at the re-envisioning process underway in the Occupy Movement concerning banks. The Occupy Bank Working Group is made up of a diverse group including representatives from the hedge fund, credit union, and commercial bank worlds who see potential in the idea of a democratically owned bank that would be more focused on equitable distribution than profits. Meanwhile, a small rural town in Vermont is anxious for any bank to stick around: NPR explains that since the one bank in town closed, Alburgh residents have been scrambling to attract the attention of a financial institution to meet the townspeoples' banking needs. After a long search, North Country Federal Credit Union "answered the call" and is in negotiations with the outgoing bank. A Baltimore Sun op-ed calls attention to a different type of vulnerability: rent-to-own stores, which they identify as a problem for asset poor families who are most at risk to the trappings of this business model because they lack the short-term cash to cover the cost of a new appliance (or similar item).
Race and Wealth
Dedrick Muhammad of NAACP and Mariko Chang, author of a book on women and wealth, teamed up on a Huffington Post piece about race and wealth inequality that highlights many of the dual challenges women of color face when it comes to financial security and wealth building. They highlight a number of factors that disproportionately weigh on women of color, such as their overrepresentation in low-wage jobs without benefits and a lack of savings opportunities in the tax code, but also identify tangible ways for this group to “benefit from the wealth escalator.” Meanwhile, Reniqua Allen, a Schwartz Fellow at New America, has a thoughtful piece at the Washington Post looking at the challenges of discussing race in the age of Obama’s presidency. She has found that having a president of color has made it more challenging, not less, to have productive conversations about continued racial inequality and structural racism.
Mortgages and Foreclosures
Over half of the recent $25 billion mortgage settlement is intended to give “assistance to borrowers who have the intent and ability to stay in their homes” but some academics and former regulators, the New York Times reports, have suggested that “the settlement has less bite than advertised.” As Adam Levitin of Georgetown worries, “it accomplishes remarkably little in the form of real relief for homeowners because it gives the banks credit for far too much.” Only $10.2 billion is designated to be used on principal reduction for borrowers whose mortgages are “underwater” (meaning that they owe more than the home is worth). However, a housing advocate in Florida was “taken aback” by “when two JPMorgan Chase employees who work directly with homeowners recently told her that they were not aware of the deal nor of their bank's pledge to consider principal reduction for underwater borrowers.”
Steven Pearlstein looks at what he characterizes as the false choice that politicians present between equality and economic efficiency.
The Atlantic has a piece that gets at the very real costs to not attending college.
The Global Assets Project had a new podcast up last Friday that features the voices of youth from Nairobi, Kenya talking about their savings goals and what financial products they find most beneficial.
Yesterday, we hosted a panel of speakers to talk about the implications of “encore careers” on the retirement income gap. A blog post summary is forthcoming, but the recorded webcast is available here.