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 housing and homeownership, savings and debt, consumer protection, and inequality.
Savings and Debt
A flurry of articles this week brought attention to the flaws in our retirement structure, particularly the 401(k) system. One columnist for USA Today even went so far as to call 401(k)s a “disaster.” Both Washington Monthly and Reuters also featured pieces on the topic. Much of the recent attention follows in the wake of HelloWallet's well done report on the expanding problem of retirement "breaches" among low- and middle-income families. Such breaches for short-term needs defeat the purpose of 401(k)s, which is to serve as long-term savings vehicles, and often put the most financially vulnerable people in even worse situations than if they had never participated in a 401(k), because they must pay tax penalties and fees for drawing down on their savings.
Another government policy putting strain on the most vulnerable people is the federal Perkins student loan program, designed to provide low-interest loans to students from low-income families. Though Perkins loans are sponsored by the government, the schools, often private, are responsible for collecting loan payments after graduation. Upon delinquency of payment, schools bring lawsuits against the graduates, who are unable to pay due to un- or underemployment, but ironically who received the loan in the first place because they were in positions of “extraordinary financial hardship.” Reforming the financial aid landscape more broadly is the focus of a recent report by New America's Education Policy Program that offered solutions to some of the repayment and loan terms issues. The American Prospect evaluates the Education team's proposals and says they are "novel."
Housing and Homeownership
Georgetown University sociologist Brian McCabe evaluates the relationship between homeownership and "good citizenship." While owning a home is associated with slightly higher rates of civic engagement in organizations like school groups than is found in the renting population, he argues that these slightly higher rates do not justify the exorbitant costs of government support for homeownership (such as through the mortgage interest deduction). His recent paper in the Oxford Journal Social Forces addresses the continuing issues of homeownership that have long been beyond dispute. Yet the notion of homeownership as the American dream persists, even among younger generations. As discussed in a previous Asset Building News Week, 90 percent of young renters say they want to own a home, but according to a recent study by the Federal Reserve Bank of St. Louis, those same young families were the ones who fared worst in the housing crisis. Around the country, reports of “skyrocketing” foreclosure rates in places like Chicago and Florida evince that the housing market still plagues the nation.
For many people living in extreme poverty, however, homeownership is merely an abstraction. AlterNet has taken on an admirable project to remind us in a new and ongoing series of who these people are and how often we forget about them. For one high-profile politician, though, affordable housing is on the agenda. District of Columbia Mayor Vincent Gray announced an expansive new initiative to fund affordable housing projects in a city infamous for its beleaguered housing program.
Last week, Asset Building News Week noted a story about the huge database that Equifax, the credit reporting agency, was compiling to store data on an enormous portion of the U.S. workforce. The database controversy has caught the attention of other news agencies because of its perceived threat to workers’ privacy. Money News follows up on the original NBC story and the American Prospect also provides commentary. S&P, a financial services company, has been in the news after the Justice Department and attorneys general from various states have filed complaints alleging that the company was influenced by its broader financial interests in determining credit ratings for bad securitized mortgages. Bloomberg reported on the story on February 4th and 5th. The official complaint announcement by the Department of Justice is here. Finally, Joe Valenti and Lawrence Korb with the Center for American Progress want to see the Virginia legislature extend federal government protections of veterans from usurious interest rates to the broader public. They argue that neighboring states like Maryland, North Carolina, and West Virginia have pursued such legislation to good effect.
On the coattails of our recent event with the Washington Monthly on Race, History, and Obama’s Second Term, Preeti Vissa for the Huffington Post considers the same topic. In the spirit of our event, the question, she suggests, is not "Why [does she] keep talking about race?" but rather "Why does America try so hard not to talk about race?" Indeed, race should be hard to ignore from the evidence provided in Michael Fletcher’s article for the Washington Post, which describes the “bleak economic picture black for Americans.”
The National Low Income Housing Coalition (NLIHC) nicely summarizes the recent debate over the “hidden prosperity of the poor,” most vociferously argued by the Heritage Foundation. By pointing out that the ownership of simple household appliances does not equate to extensive liquid assets (as even a car can supply because its resale value is higher), NLIHC reaffirms that asset poverty is still, and has always been, a significant problem for low-income households. Finally, in an intriguing argument, a columnist for the New York Times’s Economix blog compares the Equal Employment Opportunity Commission (EEOC) to other government commissions to point out the inability of the agency to publish information about the most oft-offending corporations. She argues that while the Environmental Protection Agency and the Occupational Safety and Health Administration, for example, can “make public company-specific data on the release of toxic chemicals [and] workplace injuries,” the EEOC is powerless to call attention to corporate citizens for their misdeeds in the fulfillment of equal employment opportunities.