FORCED SAVINGS You may make nothing at all beyond inflation over time on a home, but the part of your mortgage payment that goes toward principal is a form of forced savings.
Sure, you might do better by renting and investing the difference between the rent and the total costs of ownership. But at least three things need to go right.
First, you need to actually save the money. Americans have trouble with that sort of plan. Then, you need an after-tax return that’s better than whatever a home would deliver. That’s a task that might not have gone so well over the last 10 or 12 years, and it involves its own future risk, given how little safer investments are returning now. Finally, you must not raid the savings along the way.”
Of course it goes without saying that the “forced savings” part of this equation only works out at the point of sale, and even the “nothing at all beyond inflation” somehow has to take in the cost of property taxes, insurance, and maintenance (which can easily be another $5-10000 per year).  Additionally, a family would have to factor in the computations the fact that after cashing out the house, you would either need to buy another house to escape capital gains consequences on the first sale, or make sure that you included those taxes in your figuring as well.    Taking all of those things into account, the house might have to appreciate more than $100,000 every 10 years to breakeven.
None of that says that owning a home is still not an asset providing more citizen wealth than renting, but all of this has to be part of the cold shower that boosterism must be forced to confront before continuing, unrealistically, to argue that home ownership is a guaranteed method of reducing poverty in the US and elsewhere.

New Orleans

For many lower income and working families, the evidence I amassed in Citizen Wealth would still be correct in establishing that a house is an asset which can act to separate a family decidedly, if not irrevocably, from the ranks of poverty, and provides an intergenerational asset that can continue to create income security, which is how I defined citizen wealth in the first place.  It is

also undeniably true that despite the fact that a house may be an asset, it is definitely not a piggybank or a get-rich-quick scheme which some wheeler dealers were promoting on the infomericals and real estate hype of the time.

With millions of homes “underwater” families may need to walk away today in order to have a chance at building assets in the future.  Values may in fact not recover in the generation of their lives.  The housing crises has been disproportionately devastating to African-American and Latino families and the non-existence of any kind of effective home mortgage modification program has been equally disastrous.  Public policy has been at the banker’s heels in this crisis to the peril of the entire nation.

Tax policy and federal expenditure have not caught up to the housing crises.  Our single largest “safety net” expenditure on citizen wealth is the wholesale mortgage interest rate deduction to facilitate home ownership.  The early and mid-20^th Century view that home ownership was a guaranteed winning ticket to poverty reduction is simply not finding evidence in the 21^st Century to support the level of the expenditure, which has now been laid bare as more about subsidizing development, construction, and investments rather than poverty reduction.

The challenge now will be whether or not we can put some sacred cows out to pasture and run with some new programs and plans that remember that housing in its various forms can be assets, but we need a lot more in terms of affordable options for housing and realistic income maintenance and asset building strategies to actually build and sustain citizen wealth.  It’s hard to be optimistic, but that’s the work order today.

Denver

All of this is another window for looking at the increasing claims for micro-business and micro-finance, even in the United States.  An article in recent weeks touted the increasing number of loans that direct micro-lenders like Kiva make in-country ranging up to as high as $10000 along with other emerging micro-lenders.  Articles in The American Prospect reprinted in The Utne Review had a catchy headline about “Turning Hustlers into Entrepreneurs.”  All of which I think goes to the point, which is not an unimportant contribution, but is beside the point of poverty reduction.

It is indisputable that there is a huge market for small loans in the United States because we do not have community banks anymore that care about the small lending needs of businesses and individuals.  It is widely understood that banks have virtually deserted lending in less than $100000 chunks leaving the market open for predatory rates from finance companies, pay day lenders, pawn operations, and other bottom feeders.   None of this creates much, if any, citizen wealth, but is part of day-to-day survival mechanisms for the poor.

Micro-lending claims and practices might feel some of this gap though these are gazillion, billion dollar gaps and micro-lenders in the US are small potatoes in this food chain.  The stories of their successes also seem to focus on what my buggy drivers would have understood clearly are the value of the hustle rather than the worth of the job.  A job brings real entitlements.  A hustle depends on the day to day race to survive in the jungle benefiting speed and wits, the hare not the turtle.

The claims of small business advocates that we can deal with citizen wealth by enabling entrepreneurs is more of the same fairy tale, and it is fine as far as the story goes.  Yes, there are people with ideas, energy, and innovations and they desperately need support, so give it to them, and where there is now a banking desert, let someone come in regardless of the name.

But, just as we all know what a real job is, let’s not mistake any of this as being a real strategy for poverty reduction.  Fairy tales are wonderful, but we have to focus on reality to create real change.

Atlanta

The questions were music.

“Why didn’t the IRS do more outreach to ensure participation in the Earned Income Tax Credit?”

“Why didn’t the government move the program away from the IRS to someone who would make more happen with it?”

In Atlanta where I found later that foreclosures are a big enough issue that Ken Johnson, the Southern Regional Director of the AFL-CIO told me they were quietly sponsoring a hearing on the lack of activity on modifications for various unions, I was not surprised to hear many questions on why so little was being done in this area as well.  This was a class under Professor Fred Brooks at Georgia State University and the students were social work or sociology undergrads or graduate students, so I was not surprised that there questions were closer to the ground.  One woman asked an especially poignant question about a friend who was droning on student loans, penalties and collection fees, and trying to somehow put the pieces together.  I was saddened to suggest she consider bankruptcy, though I warned her that I no longer believed that was sufficient to escape student loan burdens, it at least might give her some relief.

A panel that then discussed the Citizen Wealth themes with representatives from 9 to 5, Association of Working Women, the Teamsters, and the Atlanta Prosperity Campaign were also on point and very interesting.  The APC did 10,000 tax returns in 40 locations the woman shared with me after the panel, and was trying to benefit test as well now, though only able to directly move applications for food stamps, but this made a difference since Atlanta participation was less than 70% of eligibles there.  9to5 told the story of how close they came to passing a living wage ordinance in Atlanta though they, like so many places like Louisiana, Texas, and now Florida, had been thwarted by action of the state legislature taking away the right of cities to regulate anything about wages.  Ben Speights, the local Teamsters organizing director who I had know from his time at ACORN in Vegas, told the story of the struggle of workers to get a union at the Coca-Cola bottling plants in Atlanta in the shadow of the corporate headquarters, but the tale was not ending well yet for all of the workers’ courage.

It was exciting to feel the energy from the students, many of them committed to staying in Atlanta and making a big difference, as well as how much organizations are trying to make happen around income security in the city and to hear the number of folks asking for help to make more happen, but at the same time one could feel a city in crises without enough being done.

This is becoming a familiar song in too many cities around the country with too many of the same refrains.

Detroit

And, an education!

So, first some background and definitions.  These ideas have been germinating for some 30 years when Edgar originally conceived of “time dollars” as a way to “pay” for the exchange of services.  In earlier parts of his legal career Edgar had help lead the Legal Services Corporation, push law schools, and as he told me last night, trademarked si se puede / yes we can for Cesar Chavez.  With up and downs and organizational evolutions the dollars morphed into timebanks and shared software and a network of 50 or more groups in the US (this is also big in the United Kingdom).  The mission of the organization focuses on social change but the central machinery is a bartering system of sorts between people and in many of the more successful and significantly funded cases between people and private (hospitals), public (courts, particularly juvenile), or systemic (mental  health) institutions where you trade time, skills, and collective tasks in exchange for services or in the case of individual trades things you need (babysitting for yard work, a massage for tax help).

The social service linkage seems to come from Cahn’s arguments around what they called “co-production.”  Wikipedia offers this definition for him: “the means by which the beneficiaries of charity, philanthropy services or public services are instrumental in the design , planning and delivery of specific services or broader social outcomes as a way of improving the service or activity and rebuilding the local community”  Boiled down this is a form of citizen participation of sorts with a twist since the end result is not empowerment strictly speaking, but some kind of collaboration between  the unequal service providers and the “beneficiaries,” as they are called here or clients or what have you.

All pretty complicated for sure, but these are people of unquestionable good will, and it was an interesting exchange to see discuss two such different notions of community organization and how the principles intersect.  In thinking about new organizational formations I’m spending a lot of time trying to puzzle out how to build a full sustainable organization whose finances rest solely on the membership, and their experience of time exchanges dovetails with some of my thinking about how to convert sweat equity into exchanges and support in direct action.  On their part they are toying with how to add dues systems to their exchanges and were fascinated by the “rules and  rights” regime I was arguing is a critical starting point in achieving “maximum eligible participation.

Who can tell where conversations like these might lead?

New Orleans

The tricks of the trade are seductive:

• Deferrals:  sure seems like a friendly thing to do but the debt accumulates and grows while the payments are postponed.
• Compound Interest:  I forget the movie where the old rich fellow was telling the callow the youth the secret to wealth, and it was “compound interest,” not “plastics.”  The ability to charge interest on top of interest on top of interest, takes the simple debt and its simple interest rate to stratospheric levels once you add time.  You are thinking this isn’t predatory, right?  This is just the way loans work, chump!  If there is no effort to explain the consequences transparently, then over time this morphs into a predatory practice as well.  Get it?
• Penalties and fees:               The story detailed preposterous charges of $20000+ and $50000+ for turning over collection to a debt agency.  What?!?  How can that be possible?

More of this is going to happen to young people given the huge recession.  But according to the story there is over $750 billion and only 40% of the debt is being actively repaid.  This also means the debt (see above on compound interest) is also soaring on that 60% for sure.

There was a story of a doctor who had $250,000 in debt which has now gone over $500000+ in 5 years with what and what.  There was another story of a mother whose unemployment check of $300 is being garnished by the federal lender, Sallie Mae, for $120 because she had signed for her son while he was in school, and he lost his $29000 job, and defaulted because he was unable to keep up.

If trying to own a home is one ticket to trying to achieve financial security for working families, and we are watching much of that dream wash away in foreclosures and fallen prices, then education was certainly supposed to be another investment in a better future.  With eroding jobs, increasing debt, escalating college pricing, and no relief, this looks like a mess.

Seems to me that getting these young scholars right sized on their debts would have been a good investment by the government when it was in bailout mode, but perhaps the reason the government is allowing the banks to patty cake around on the foreclosure mess, is the fact that clearly the government is not willing to write down some of this outrageous debt that they are allowing to grow unabated through predatory practices.

Monteverde

In this light an article posted on the New American Media site caught my eye entitled:  “Scarcity of Non-Profits in Neediest Communities Will Hinder 2010 Census”  by Cassidy Friedman.  Most of the piece was focused on California and San Francisco particularly and the fact that even though the City of San Francisco had appropriated almost a half-million dollars to fund door-to-door outreach efforts by nonprofits in this well resourced city, the efforts were flagging in lower income areas where most of the nonprofits did not have a base and were not well know.  Bay View – Hunter’s Point and Visitacion Valley were the examples used because the undercount was lowest in these two areas in the 2000 Census.

“This is a big, big challenge,” said Ted Wang, a census consultant with Grantmakers Concerned with Immigrants and Refugees, which is coordinating private sector funding for outreach in California. “Neighborhoods that have the least amount of infrastructure often are the ones that are the most difficult to count.”

Does it really matter, especially to the future citizen wealth of lower income communities?  Hell, yes!  We are talking big bucks here.

“…when the city was undercounted by 100,000, resulting in a loss of more than $300 million in federal funding, according to a 2007 study.   If the same pattern repeats across the state, California residents could lose billions of federal dollars for vital services over the next decade.”

These Republican and rightwing attacks may look like they have little impact, but when you start counting how much money is at stake especially for the beleaguered cities and strapped states in the current economy, it is easier to understand the real game here and the partisan effort to deny resources and capacity where it is needed the most.

Oh, and it goes without saying, if my memory serves me, that one of the strongest bases for San Francisco ACORN used to be in Bay View – Hunter’s Point and similar efforts.  I think you can put the pieces of this puzzle together for yourself can’t you?

Quepos           

            Partially, it was simply the “one that got away.”  It’s footprint was smaller with a base in Santa Barbara that was too far away from our groups and members to do much damage.  They had gotten into this predatory business and done very well, but were impervious to the impacts.  What did it matter to their normal customer base  in Santa Barbara after all?

            Direct discussions with Jackson & Hewitt, when I was with ACORN, when round-and-round, with J&H always claiming they would not “unilaterally disarm,” but would do so as H&R Block did so and others like Liberty Tax Services.  H&R Block was going to move from HSBC to its own bank.  I’m not sure if that happened or not.  Liberty was also a big customer for Santa Barbara. 

            The actions of OCC and other banking regulators are key here, because the withdrawal of Santa Barbara from this line of lending could finally push RALs out of the market, which would be huge.

            This was the Christmas present report from Bloomberg News:

Regulators ordered Santa Barbara Bank & Trust to stop providing the loan money, which covered about 75 percent of Jackson Hewitt’s financial products program, according to a regulatory filing by Jackson Hewitt.

Shares of the company, the No. 2 tax preparer behind H&R Block, dropped $1.34 to $4.50 on Thursday.

The Office of the Comptroller of the Currency told Santa Barbara Bank & Trust on Dec. 18 that the lender would not receive regulatory approval to originate the refund anticipation loans in 2010, according to a statement from the bank’s parent, the Pacific Capital Bancorp.

A bank spokesman, Tony Rossi, said that “the tax refund loan business is a sort of niche business that falls outside of what would be considered core banking operations.”

The bank signed a nonbinding letter of intent with a private equity firm to sell the tax business, the statement said.

Tax preparers are locked in a battle for customers, with Jackson Hewitt vowing this month to regain market share from H&R Block. Firms can attract clients with refund anticipation loans, in which customers who need cash immediately can get a short-term loan, typically lasting a few weeks, that is based on the expected amount of their tax refund.

Jackson Hewitt, with 6,600 outlets and almost three million clients, has been losing customers to H&R Block and Intuit, which makes TurboTax software. It suspended its dividend in March and has hired Goldman Sachs to explore “strategic alternatives,” language that typically means a company may be sold.

            The next target for economic justice reformers and citizen wealth advocates will need to be the unknown “private equity” company that will be tarnishing its reputation and brand – if such a concept is possible in private equity – by buying the Santa Barbara RALs business.  The other target may end up being whomever buys Jackson & Hewitt if Goldman Sachs is able to do the offload.

            You sow what you reap.

      

            Even the bright spots crept through some clouds when we would pass massive new school construction blocks away from huge shuttered parochial facilities with fences flapping in the wind.  Bill Covington, an old colleague from the HOTROC organizing drives in New Orleans, was my guide and mentioned there were 11,000 abandoned houses in the city now.  Each one entailed $10,000 in costs to demolish.  The city had announced a multi-year plan to tear down 500 per year.  Gulp.  That would be 22 years of demolition while the inventory would continue to grow and communities would be living with permanent scars.

            I was reminded of Professor Ken Reardon’s conversation with me in Sicily about his efforts to build a center at the University of Memphis to address the crises of mid-sized cities and their future.  I had heard these stories in Springfield, Massachusetts recently and now Buffalo, New York seemed like deja vu.  More than an institute is needed though.  The isn’t an organizing plan yet, and that’s work work and thought.

            Talking about Citizen Wealth that evening to a great group of hardy souls, the frustration kept arising around healthcare and the slow and fragile development of any progressive legislation.  There’s no happiness in Mudville.  We may be close to getting something on healthcare, but no one is talking about “winning” anymore.

            Today’s papers were discouraging.   To reach of Senator Sanders being thwarted from even trying to have a debate about something better is disheartening.  To reach the role of the U.S. Catholic Conference’s willingness to hijack any hope for reform around what now seems to be their single issue (abortion) and to realize that a great, historic advocate for the poor and downtrodden has beyond myopic is depressing.  It isn’t hard to feel the gloating of the Republicans over the success of their “kill reform” at any price strategy.  What the heck?!

            But, just like Buffalo there are still strong rays of hope, though perhaps more mirage than reality.  Seems that more than one can play the amendment game, and Senator Rockefeller from West Virginia had two great cards on the table according to the story in the Times: 

“Senate Democratic leaders said they would probably accept two contentious proposals by Senator John D. Rockefeller IV, Democrat of West Virginia. One would increase the powers of a proposed new agency to limit the growth of health spending, including payments to hospitals.

The other proposal would require insurers to spend a specified share of premiums — at least 85 percent — on clinical services and activities that improve the quality of care. This would, in effect, limit the profits of insurers.”

Hope springs eternal!