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The Ladder

A Blog from New America's Asset Building Program

Asset Building News Week, October 15-19

Published:  October 19, 2012
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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 inequality, child poverty, housing, and financial products.


A new paper by New America’s Education Policy Program shows that Congress’ effort to alleviate the burden of student loan debt on the middle class is failing to work as intended. Rather than contributing to greater prosperity for the middle class, the revised Income-Based Repayment plan is leading to “windfall” gains for the top earners, while failing to ease the debt burden of the middle class. The New York Times provides commentary on the findings.

The recession has compounded the economic problems of the middle class. On the campaign trail, both candidates argue that middle class prosperity is essential to growth in the wider economy, while the recent recession has only exacerbated income and wealth inequality, not reversed it. New research reported by the New York Times reiterates the finding that extreme wealth inequality, as we currently have in the U.S., significantly slows growth in the general economy. But besides the politically expedient talking points targeting middle-class voters, NPR reports that the candidates’ views on larger issues of wealth inequality and poverty, such as they exist, receive little attention.

Child Poverty

New neuroscientific evidence reveals the irreversible cognitive damage that growing up in poverty can inflict on fragile young minds. The Guardian reports that such experiences of extreme adversity can adversely affect a child’s chances for success throughout the lifecycle, not just socioeconomically, but also physiologically. Research from Boston documents the impact that unstable housing has for young children. The Washington Post reexamines the famous “marshmallow experiment” in which a child-subject is given the option of receiving one marshmallow now or two marshmallows later. The current researchers reinterpreted the nuances of the evidence to conclude that the children were likely engaging in more sophisticated cost-benefit analyses about the motives of the adult researcher and the benefit of having the one marshmallow now. The results call into question the validity of the original results of the experiment, which purported to show the human tendency to fail to invest in the future. Finally, a coalition of children’s advocacy groups published Obama’s responses to their recent request for each presidential candidate’s position on issues related to child well-being. The request was sent by representatives of six child advocacy organizations, who requested responses to three pertinent questions.


The American Civil Liberties Union has filed a lawsuit against investment bank Morgan Stanley for engaging in what it calls “reverse redlining.” In violation of the Fair Housing Act and the Equal Credit Opportunity Act, the bank is accused of purposefully seeking out vulnerable borrowers, particularly African American and Latino borrowers, who took on loans the bank knew they couldn’t repay. American Banker and the National Journal, among others, reported on the story.

Among signs that the housing market is beginning a slow recovery, NPR reports that part of the explanation for the positive signs may lie with so-called “fence-sitters” between homeownership and renting who are falling for the advantages of the former. Another explanation for the falling rates of foreclosures and rejuvenating housing market is the greater prevalence of foreclosure prevention workshops like the one attended by the Illinois governor this week in suburban Chicago.

On the other side of the homeownership versus rental debate, a report by the inspector general of the Federal Housing Finance Agency noted the rise in aggressive tactics used by banks to collect debts from those whose house has been foreclosed on. Too much use of these heavy-handed tactics by banks, however, will preclude home buying by people like those described by the Wall Street Journal this week. “Boomerang buyers” are those who, after a foreclosure, again seek to buy a house in spite of the painful experience of foreclosure. Finally, the National Housing Conference and the Center for Housing Policy report in their blog that housing and transportation expenses are rising faster than incomes, putting greater strain on the household budgets of low- and middle-income Americans.

Financial Products

Walmart’s widely-discussed Bluebird card, offered in collaboration with American Express, was released this week to more debate over its potential benefits and pitfalls to the underbanked population. Business Insider compares it favorably to other products, while Reuters also situates it within the context of other similar products. The verdict is still out on its overall effectiveness and what long-term impact it may have on the underbanked population.

A new online startup, described by CNN, tweaks the payday lending model for the digital age, offering lower rates than traditional brick-and-mortar operations, though not avoiding all of the predatory pitfalls of the model. Also making use of technological advances to help the unbanked, a new firm, described by the Financial Times, seeks to provide some banking services to Africa’s unbanked through the text messaging feature of cell phones.

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