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The Ladder

A Blog from New America's Asset Building Program

Asset Building News Week, July 2 - 6

Published:  July 6, 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 anti-poverty initiatives, access to financial services, and inequality.

Anti-Poverty Initiatives

The Massachusetts Individual Development Account (IDA) program received $50,000 in state funding last Thursday. The IDA program, which includes financial literacy training, asset building programs, and matched savings initiatives, is expected to allow many low- and middle-income Massachusettsans to achieve homeownership, post-secondary education, or entrepreneurial goals.
 
Maurice Lim Miller, founder of Family Independence Initiative (FII), has a unique strategy which is helping families succeed economically. According to Lim Miller, “A safety net is crucial when people are in crisis… But most poor families are not in free fall. They don’t need nets to catch them so much as they need springboards to jump higher.” The initiative works mostly through the social connection of families with similar objectives, financial and otherwise. Families meet monthly to discuss problems, goals, and strategies. FII staff establishes a loose meeting structure but offers no advice, allowing families to guide the meetings toward issues they deem important. This strategy has seen significant success in its first two years, including, “a 240% increase in savings, and an increase in earnings of 23% among participating families. More than a third of participants launched their own small businesses, and nearly a fifth bought homes.” For more on FII and Lim Miller, check out these articles in New York Times and Forbes.
 
Access to Financial Services
 
According to new data from Core Innovation Capital, underbanked individuals in America are spending $45 billion each year on financial services, with mortgage loans ($9 billion), overdrafts ($7 billion), and rent-to-owns ($5 billion) topping the charts. These statistics show that, even without a bank account, unbanked Americans demonstrate a demand for financial products.
 
The topic of financial access also saw significant international coverage. National leaders at the G20 summit in Los Cabos affirmed a strong commitment to the goal of universal access to financial services. Tilman Ehrbeck writes, “Under the Mexican G20 presidency, the notion that all working-age adults should have access and be able to use formal financial services to help improve their lives has gained further ground.” See Ehrbeck’s Huffington Post piece for ideas on how to translate this promising commitment into tangible positive change on an international scale. Vishnu Sridharan with the Global Assets Project also wrote recently for the Global Post on this issue, noting that Mexican “banking reforms help reduce poverty and unemployment among the country’s lowest earners.”
 
Inequality
 
A new report from the Economic Policy Institute says that the metro area of Minneapolis and St. Paul, Minnesota has by far the largest unemployment gap between black and white workers. In 2011, the rate of African American unemployment was nearly triple the white unemployment rate, a troubling statistic indicating the area’s pressing need to reduce the gap. For more on the Twin Cities' efforts to respond to this problem and equalize employment opportunities, check out this article from Minnesota Public Radio.
 
Joseph Stiglitz, Nobel Laureate and Columbia Business School Professor, argues in his new book The Price of Inequality that the American economy produces inherently unfair circumstances which increase the wealth gap and are detrimental to the country as a whole. In Stiglitz’s interview with Bankrate.com, he discusses the implications of inequality and the growing wealth gap.
 
Quick Hits
 
•A new national survey of adult education state directors highlights the importance of affordability in national economic recovery. Funding for adult education programs, in addition to individual tuition fees, typically comes from a mix of different sources at local, state, and federal levels. The survey finds, however, that “the state and local share of adult education funding may be far from the oft-cited three-to-one ratio of nonfederal to federal funds.”
 
•The newly formed Consumer Financial Protection Bureau (CPFB) aims to “restore trust in the consumer financial marketplace,” says director Richard Cordray in this New York Times piece. The CPFB plans to first reform the mortgage market, making the process more straightforward and requiring mortgage servicers “to provide clearer information, better service and options for a borrower facing foreclosure.” Next on the CPFB’s agenda is a study of the private student loan market.

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