Many Americans are never going to retire.

On Tuesday, I laid out an argument for why most Americans cannot afford a payday loan. The main thrust of that blog focused on the “median” American household, which has about $100,000 in assets.  But what about the majority of Americans are not median, and in particular, those individuals who fall onto the low side of the bell curve?

The low-income median is much lower. According to the 2007 Survey of Consumer Finances (pdf), the lowest quartile of American households had a median of $1,200 in net worth.  That is the good news. The median is much (more…)

African-American households have lost wealth in the last decade, and now stand on the edge of widepread insolvency. The lack of assets is most evident among single parent households headed by African-American women.

The new data, culled from the 2007 edition of the Federal Reserve’s Survey of Consumer Finances, reveals how inequalities in wealth between white and black households have grown since 2004.

African-American women that are the sole head of households have a median net worth (MNW) of five ($5) dollars during their prime earning years – ages 36 to 49. The same subset of single white women have a MNW of more than $42,000.

The stress implied by living under these kind of budget constraints would be incredible. It means that not only can a parent not afford to miss a day of work or pay for a repair, she can’t even afford to hire a babysitter for one hour without going into debt. Back to the unbanked, this also underscores why she can’t afford even one overdraft charge.

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I made a map that compares the number of tax filers who used a refund anticipation loan with the number of tax filers who made an IRA contribution, on a county level, for North Carolina in 2006.

It is possible that a filer might do both.  I cannot account for a double counting. I do not think that there were many instances of double counting, though.  That is due to the nature of who gets a RAL.  RALs (refund anticipation loans) generally go to filers who have very little in the way of liquid assets.  They are not the kind of people who can afford to put money away for forty years.  Heck, their decision to use a RAL tells us that they can’t even wait 9 days to use their money.

The two smaller maps, in the insets, show the distribution of poverty and wage income.  Poverty is on the left, wage income on the right.  The poverty map counts the percent of households in poverty.  The wage income map shows the percentage of households with wage income.

A glance at the maps would seem to say that there is a much closer correlation between poverty and RAL use than between wage income and RAL use. That makes sense, although it is not a slam dunk – most RAL filers do have jobs because most RAL filers are getting the earned income tax credit.  In North Carolina, about 40 percent of EITC recipients get a RAL, and another 20 percent get a refund anticipation check (RAC).  There are fees for both, although the RAL fees are much higher.

This map shows the dynamics of our economy.  In a large section of eastern North Carolina, many people are living on the margins. They are not saving for the future.  They can’t save for 9 days.  The rest of the state is hardly better. Most of this map is pink or red – meaning that fewer people are getting ahead than are trying to catch up.  The grey areas show were family finances in order.  These, for the most part, are the growth areas in the new North Carolina along I-85.  There is also a concentration of wealth building in some of the areas that have attracted many retirees.

Today the FDIC has apparently drawn up a list of banks that it believes are moving into dangerous territory towards a potential failure. Yesterday, in fact, The Columbian Bank & Trust Company of Topeka, Kansas was shut down. The remaining assets will go into a receivership arrangement. It is the ninth bank this year that has failed. The largest, of course, is IndyMac.

It has been a tough year. We have seen the end of Bear Stearns. We may see the end of Freddie and Fannie, as we currently know them. There may be more to come.

We know why it is happening. Mortgage loans are going bad. Lots of them.

This is why I think manufactured housing has a chance to break through, right now, in redefining its image among housing policy advocates.  That involves examining the underlying motive for our interventions in housing.

But lo, I do not want to dedicate this post to asserting who is at fault for this situation. That is a good (more…)