The Progressive Ensign

insights and analytics to build an economy that works for all

Category: Solution (Page 2 of 2)

Gillibrand – Khanna Postal Bank Bill Helps The Underserved

Image: Campaign For Postal Banking

As payday lenders make low cost loans to minorities and the poor at exorbitant interest rates a possible solution is at hand.  Senator Karen Gillibrand – D- NY and Congressman Ro Khanna – D- CA 17 and others have introduced a bill to provide checking accounts, savings accounts and low cost loans to underserved neighborhoods in cities across the US.   Many community banks and large city banks left these neighborhoods in the 1990s when banking deregulation occurred for more profitable locations.  We have seen the present GOP Administration pander to payday lenders by relaxing consumer protection regulations that cap loan rates and require full disclosure for loans with interest rates of 400 % to 1200 %.  Fourteen states of have outlawed payday lenders entirely. There are 37 million the adults that do not have a bank account:

Source: Pew Charitable Trust – 2016

The Postal Banking Bill would offer loans up to $500 at T-bill rates of 1.65 % clearly targeting the payday lender market. The Postal General in a report on the bill viewed that rate as too low and will probably need to be raised to 25 % to handle possible defaults. According to the United Nations Postal Union 87 nations provide checking and savings accounts to over 1 billion customers, though not that many offer low cost loans.

We need to serve those that have been left out of the economic mainstream by offering reasonable low cost financial services with inexpensive loans – not making our low income population a target of loan sharks.

California Attacks Middle Income Housing Crisis

 

Photo: St. Vincents Housing

The California legislature has introduced a bill to make low income housing tax credits available to housing agencies for middle income housing. Assemblyman David Chu, D -San Francisco, said “During the housing crisis middle income Californians are in a very tough spot, “he noted that “They don’t qualify for low income affordable housing, but also can’t afford market rates”. It is good to see the California legislature taking action on this core issue for the middle class.

With stagnant wage increases, lack of affordable housing and rising interest rates middle income families are forced to rent instead of buying a starter home. Overall nationally the number of first time buyers in the market has dropped by two percentage points to 30 % from 32 % last month which indicates how they are getting squeezed out of the market in our recent blog of 2-20-18. The housing affordability index is at a 9 year low as well.

Add to these factors driving the lack of affordability is the inventory of starter houses is continuing to shrink as builders go for higher margin larger homes with higher prices – the average price of a home has increased year over year by 6.8 % way above the average salary increase barely reaching 2.5 %.

The following chart shows how home ownership rose during the period prior to the Great Recession but has fallen since to 1990s levels.

Source: Department of Commerce – 4/26/18

We need to have housing ownership levels back to 2003 levels before all the sub-prime mortgage programs spiked the home owner binge.

As we have observed in the past home ownership is a foundational goal for many people. Homeowners invest time and energy in a commitment to the long term improvement of our communities. Household creation boosts our economy when new home owners buy appliances, furniture, carpeting and improvement services.

We applaud the California bill but it does not go far enough. We need renewed housing funding via Fannie Mae and Freddie Mac, incentives for builders to build low cost starter homes, cities to set aside more land for housing and an end to Administration protectionist tariffs against Canada driving up the piece of lumber.

At Last Some Relief On Student Debt

 

image: seiu668.org

Student loan debt continues to mount as the Federal Reserve reported a major increase to $1.49 trillion in February of this year. But, a partial solution is coming.

Image: The Federal Reserve Bank,  St. Louis – 2/8/18

As part of the spending bill that Congress passed last month, $350 million was allocated for a fix it forgiveness program for some types of student loans.  Senator Elizabeth Warren has been surveying the issue and individuals trying to take advantage of the provisions where she found that it was quite complex, answers were in complete from the Department of Education and work still needed to be done to setup the process. She found many firefighters and teachers having a difficult time getting into the program.  Prior to passage of the spending bill Senators Whitehouse and Kaine wrote a bill to setup a student debt forgiveness program and get it funded, their bill set the stage for Democrats to push for provisions of the bill to be included in the omnibus spending bill.

This solution is still not enough compared to the huge issue of $1.49 trillion outstanding placing an anchor of debt on our young people when they need to be investing in starting their families and careers and buying homes. In blog of February 16th in our archives, we review an idea to cancel all student debt.  We like the idea moving forward, yet recommend that forgiveness be done in stages, by reducing interest rates, offering Heartland Service,  providing a universal national service option and corporate sponsorship of an internship by the student.

Blackrock CEO To Corporations: Focus on Social Responsibility Too, Are They Listening?

Image: ipleaders.in

Laurence Fink, CEO of Blackrock with $6.3 trillion of assets under management sent a letter to one thousand CEOs outlining that in the future they will be evaluating companies on their societal impact not just profits.  Blackrock manages major index funds which require that they invest in firms included in the index even when they don’t like the direction management is taking the company or take actions that are detrimental to their employees or community.  Fink tells executives that a new age has arrived where shareholders and company management need to be more actively engaged. Plus, companies need to take the long term view related to rising automation,  slow wage growth and climate change and explain their plans to shareholders.

Next Steps: 

We applaud Fink’s focus on social responsibility by corporations.  As he notes governments maybe way behind in the seeing the needs of society and solving those problems.  Corporations can even add value, as Deloitte observes in five ways: creating new market opportunities, taking regulatory relationships from reactive to proactive, retaining top talent, enhancing brand value,  and building sustainable supply chains. Now, let’s make this a priority on Wall Street.  Fink in an interview on NPR’s Marketplace today, clarifying that Blackrock was not Wall Street.  We have a ways to go with Wall Street expectations for quarterly results – we can hope that Wall Street was listening to a major investor like Blackrock.

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