How Far We Have Come II: a Little Hope for the New Year

Early in my military career, more years ago than I'd like to imagine, it was instilled in me to always be aware of my surroundings:  Security was the key to my success in life and attention to minute detail was vital!  A reasonable precept as we went out into the countryside in three man teams with little backup.  This was a wearisome world I lived in, a world I left behind but which has left a considerable impact on my worldview.  While I try to be optimistic about people, that they will, in the end, rise above their situation, I have a certain amount of distrust toward our economic and political establishments.

You can imagine my weariness, then, when a young lady we helped find a job showed us this great new credit card her employer tried to have her sign up for.  I, and my associate, looked at this card and its disclosure statement with much skepticism.  The statement I read looked much like this, and I was actually impressed that it did not seem outwardly sordid.  Now, I am a researcher by nature.  I enjoy chasing down the why of something I don’t understand and this card piqued my interest to say the least.  In off hours I’ve researched what was going on here and have come to some potentially positive results.

In a previous post, I explained how expensive it is to lack a bank account. When ‘un-banked,’ one is seriously limited and a very tempting target for usurious lenders and check cashing institutions.  The picture is really worse than this post presents.  In this story published by the New York Times, we hear about banks all over the world taking advantage of poor from third to first world countries, giving small loans at exorbitant interest rates: up to 125 percent average annual rate.  These loans, once hailed as an answer to poverty across the world have been twisted by the banking industry.  Prepaid Credit Cards, once believed empowering to low income families, are now being used to take advantage of low income individuals.  One example shows this:

Unmentioned are the fees Simmons’s company imposes for its card, including a $9.95 monthly charge, $3 for activation, $1 for every purchase if a PIN is used, $1 for online bill paying, and 50¢ to check the balance at an ATM. Direct deposits and online account management are free, as is a service that alerts customers when their balances are low.[1]

Our modern banking practices, even when designed to do good, are twisted to take advantage of those who can little afford being used.

But there is hope, the fed is trying to answer usurious practices like these: There is a new pilot program the FDIC has put together using the findings of a report, which are very similar to the results mentioned in a similar report released by the Brookings Institute in 2004.  A list of banks was made to participate in a study, titled the FDIC Model Safe Accounts Pilot, which will examine low-cost, electronic alternatives for safe transactional and savings accounts.  These will hopefully serve the un- and under-banked sectors of our economy.  The study will begin on January 1 of 2011. 

The FDIC Model Safe Accounts Template describes features of electronic deposit accounts that are designed to meet the need of underserved and LMI consumers.  Pilot banks will be strongly encouraged to market the products to those groups.

The largely electronic accounts limit acquisition and maintenance costs and transactional accounts will be checkless, allowing withdrawals only through automated teller machines, point-of-sale terminals, automated clearinghouse preauthorizations, and other automated means.  There will be no overdraft or non-sufficient funds fees associated with the transactional accounts.  All of the accounts will be FDIC-insured; be subject to applicable consumer protection laws, regulations, and guidance; and have reasonable rates and fess (sic!) that are proportional to their cost.[2]

This is not new; other companies have been doing this for a while.  We can start with the Mango Card, a card that allows individuals to put money onto a prepaid credit card and use it wherever that card is accepted.  The mango card is what is called an open system prepaid card, a type of stored-value card, much like a gift card (which is a closed system prepaid card), except a customer can add money to it via direct deposit from their employer and it can be used anywhere.  It does have a five dollar monthly fee, which can be avoided if the customer leaves $500 or more on it.  But the important thing is it allows access to ATM’s (with a fee) and can help someone build credit and spending practices. The downside to this type of card is the potential excesses seen above.

Another card, the Revolution Card, is similar to the Mango Card, except that it allows greater freedom with money transfers and additional security.  Important to this card is its use of a pin number, doing away with signatures for security.  How this increases security is it allows someone to lose the card without fear of another using it and racking up charges.  Additionally, it allows for the creation by the consumer of a one-time pin that can be used for secure online transfers of money.  This puts it in direct competition with pay-pal.  If someone steals the one-time pin, they cannot use it.  Costs for a business to participate with this card are very low compared to credit cards, only 0.50 % transaction processing fee.  The company savings, it boasts, can be passed on to consumers in the form of incentives which will encourage customer loyalty.  This puts it in direct competition with the credit card industry. 

Finally, we note the use of pre-paid cards by businesses to “streamline payroll disbursements, facilitate remittance payments by immigrants to relatives through ATM networks, and simplify the disbursement of funds from pretax flexible spending accounts for health care expenses.”[3]  This is where the young lady I was talking to comes into play.  She received a payroll card from her employer which allowed her to use an account created by her employer that was designed to give access to her wages at ATM machines and for purchases anywhere credit cards are accepted.  This reduced costs on both ends of the payroll:  The young lady, who had no access to checking or savings, was able to bypass payday lenders and check cashing fees while the employer reduced payroll costs by eliminating the need to cut and mail checks.  A win-win for both parties.

The FDIC’s pilot program is an attempt to spread this type of card to a broader range of low-income consumers, answering a problem that has plagued our economy for years:  the un- and under-banked.  The problem with pre-paid cards is they require a large upfront investment.  Thus, to be used for payroll, a company needs be large.  Small companies could not afford the cost. The Fed is seeing if, by getting larger banks to back these cards and promote them to a large, underrepresented population, they will turn a profit without harming those the program is meant to help.  The belief is these banks have this infrastructure already in place with the credit card industry.    Most banks have a debit card they offer, often backed by a major credit card  company.  It is, then, only a small step  for them to implement these cards.  Thus, they could eliminate or keep low fees that normally go with these cards.  In addition, this card would eliminate the predatory small loans mentioned above.  This is not ideal, there are still fees.  But this is an unreasonable ideal in our society and these cards may be the best solution to the un- and under-banked sectors of our economy.  The potential to help is there;  the costs for those living in poverty might drop significantly.  If it works there is some new hope for the New Year. 

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[1] Robert Schmidt and Patrick O’Connor, “Rap Impresario Simmons Wins Exemption on Debit-Card Fee,” Bloomberg.com (June 24, 2010).  Found at: http://www.bloomberg.com/news/2010-06-24/hip-hop-entrepreneur-simmons-outflanks-big-banks-over-debit-card-fees.html, accessed December 27, 2010.

[2] “FDIC Model Safe Accounts Pilot” FDIC (Nov. 10, 2010).  Found at: http://www.fdic.gov/consumers/template/, accessed December 27, 2010.

[3] “A Summary of the Roundtable Discussion on Stored-Value Cards and Other Prepaid Products,” The Federal reserve Board (January 12, 2005).  Found at: http://www.federalreserve.gov/paymentsystems/storedvalue/, accessed December 27, 2010.

Three acts of kindness

On my way home from the shelter last Tuesday (the 14th) I learned the true meaning of kindness.  As many of you probably remember last Tuesday night was brutally cold for mid December (a high of 29 degrees and a low of 19 degrees).   The shelter was busy as usual with many new faces.  A house in New London had been condemned and four new guests were staying with us, people who had been braving the cold decided that it was finally too much for them, and then we had the usual guests who call the basement of St. James Church their home for now. 

            The new faces or the extreme cold weather was not what stood out to me that night.  There were three extraordinary acts of kindness.  One of our wonderful, reliable, innovative, regular volunteers had brought in Christmas cards for guests to fill out and then the volunteer generously offered to mail the cards (an activity that she does every year).  This is an extraordinary act of kindness, but not the one that stood out in my mind.  What stood out in my mind is that a guest grabbed four cards and quietly sat down and filled them out.  I am making a note of him being quiet because earlier that night he was anything but quite.  He did not write those cards out to members of his family (in which he has many that care deeply about him) he chose to address them to the staff and volunteers that were there.  He was thanking them for all they do.  I can’t vouch for what the other cards said but mine read;

            “Merry Christmas and thank you for what you do.  You really make a difference.”

The staff is often times thanked for what they do but this card symbolized that extra effort and I left that night thinking that “I had made a difference.”

            The second act that stood out in my mind on this cold, cold December night started as a conflict.  I went back into one of the men’s bedrooms to mediate a discussion over an assigned bed.  This discussion was quickly solved and with much humor.  As you can imagine, two adults discussing top or bottom bunk with 15 other men around could become quite humorous.  As I turned around to walk back to the common room I heard someone say my name.  He asked if the boots I was wearing where real leather.  I answered that they were and he said, “here take this and weatherize your boots, you are already getting salt stains on them.”  I said thanks but I think I have some at home.  He responded by saying “hey you always look out for me; I’m just looking out for you”.  This act touched my heart immensely because of how generous he was.  This individual had been struggling to find a job for a month or two now and had just found one.  One of his first purchases was the oil and now he was offering it to me to use.

            The third act of kindness that stood out to me was a guest who had just found permanent housing and employment (much less pay than his last job and less hours as well) returned to pay back a guest still staying at the shelter.  He handed ten dollars to the guest and said thanks for letting me borrow it.”  There was a much younger individual standing next to this guest who had no source of income and was very, very new to the shelter.  He said in a very joking manner “hey can I have a dollar?” I expected the answer to be like it so often is: no.  But this former guest surprised me and handed over a dollar.  The young gentlemen said “thanks I really need it and I’ll pay you back when I can.”  The other man said, “no, don’t worry about it.  Just STAY OUT OF TROUBLE” and then turned around and walked out the door.  I don’t know whose face was more shocked at that kindness mine or the young man who had just received the dollar.

Now these are the three acts that initially stood out to me but as I was driving home I realized that the entire night was filled with acts of kindness.  The volunteer that brought in the cards, the guest that helped the staff clean up the community room, the kindness offered to the individuals whose house had been condemned, and the list goes on. 

I haven’t had this much holiday cheer in years and I can completely attribute it to that single night at the shelter.  I never look forward to my night working at the shelter.  Its not so much that I mind the work, but more because it is such a late night and not part of my usual routine.  But religiously, after I leave the shelter I am always in a great mood.  It doesn’t matter if it was an extremely hectic night and no one was getting along or if it was extremely quiet night and I chatted with someone about his or her recent interview or the town they grew up in.  I can always count on leaving in a better mood than I arrived.

            So driving home that bitterly cold Tuesday night I was being rather hard on myself because of how I had dreaded coming to the shelter.  I was thinking “there was nowhere else I could have been that night and been able to witness so many acts of pure kindness.”  Before I got to the shelter I was thinking about all the things I could be doing instead; finishing up my Christmas shopping, cooking dinner with my roommate, reading a book, or many of the other things that we all find ourselves doing after work.  Instead of witnessing kindness, I would have been fighting rude crowds at the mall or watching TV.  I can honestly say that I witness more acts of kindness at the shelter than anywhere else I may find myself any other night of the year.   I would like to thank the residents at 76 Federal Street for restoring my holiday spirit and showing me so many acts of kindness.

HAPPY HOLIDAYS!!

Spotlight Stories: Formerly Wealthy Now Poor

Every once in a while I come across someone in the shelter who, by all logic, should not be homeless.  There’s been some very educated, well-off people who find themselves in homelessness with nowhere to go but the shelter.  I ask myself more often than I should, “why is this person homeless?”  I have no simple answer.  Often it involves a wrong turn in life; drug use, family troubles, mental health, irresponsible spending, illness, bad economy…the list can go on.  Looking into this more I realize NLHHC is not alone in its experience: many people across the country find complete reversals of fortune.  Today I spotlight just a few.

Raw Williams has been in the news of late.  This star of the basketball court, a 10 year NBA veteran from the 80’s who played with other greats of the NBA like Larry Bird, a top 10 NBA pick who once scored 52 points in a single game, a titan of the basketball court, now finds himself homeless and living in his rusting, broken down 1992 Buick. 

“Ray is like many players who invested so much of their lives in basketball,’’ said Mike Glenn, who played 10 years in the NBA, including three with Williams and the New York Knicks. “When the dividends stopped coming, the problems started escalating. It’s a cold reality.’’[1]

The NBA retired player’s association has given Mr. Williams more than $10,000 dollars in grants in the past.  However, he has not taken advantage of efforts to help him find employment.  So, as Charles Smith, head of the retired player’s association points out, “You can only do so much for any one player because there are a lot of guys who need help.”[2]

Ray retired in 1987 a star, a man in charge of his own destiny, well known and well loved.  He also retired in 1987 with no skills outside of the court nor a college degree to fall back on.  He had a lifestyle he had grown accustomed to, little skill spending his money, and nobody to help him transition to real life.  He ran out of money, tapped his support network, and could not cope with life outside the NBA.  And Ray Williams is not alone:  one need only read about former NBA players such as Joe Pace, who in 2008 resided in a Seattle homeless shelter unable to find work, or David Vaugh, who found himself living out of his 2000 Chevy Impala and showering at the Salvation army after leaving the NBA, or boxing champion Rocky Lockridge, who is now homeless in Canada.  Says the former great Ray Williams: “If I didn’t have faith, I probably would have done something drastic by now, something I would regret for a long time.”[3]

It’s not just sports stars who find themselves homeless.  Another ‘riches to rags story’ is that of Minnesota State Senator Mee Moua.  The nation’s first Hmong American elected to any state legislature, Senator Moua “and her family pooled their resources to buy an $800,000 home in an upscale neighborhood in 2005. By the time they foreclosed they were more than $18,000 behind on payments.”[4]  Senator Moua is a good Senator and beloved leader in her community:

Her legislative accomplishments include funding for the Phalen Corridor and Metropolitan State University Library, making it easier to build affordable housing, and improving tax policies for low income Minnesotans. She also fought to protect civil rights and to secure funding for crime victims. Senator Moua is a Majority Whip, Vicechair of the Transportation Policy and Budget Committee, and serves on the Tax Committee and the Health and Family Security Committee.[5]

 

Beyond these accomplishments she also has a degree from Brown, a master’s form University of Texas-Austin, and a law degree from the University of Minnesota.[6]  Senator Moua is a model citizen; her only mistake was that of so many American’s: she put her faith in the housing market only to have it explode.  She now has no home of her own and resides with relatives.  Her May retirement statement made no mention of her condition, only that she will not seek re-election but leave office at the end of her term.

Highly educated, Senator Moua is not alone: A recent article by the DC Spotlight pointed to many educated, formerly affluent persons facing homelessness today.  A similar article, published in 2009 reported the same problem.  These are victims of the economic meltdown in 2008. 

There are the children of formerly affluent, now destitute families to be considered as well.  A recent report from The Arizona Republican noted a growing problem in the wealthy Chandler school district: homeless students.  Discussing the more 513 homeless children in the district of 38000 students, it was noted that, “Those who are homeless don't come just from Title I schools, where nearly half of students qualify for free and reduced lunches. Many attend school in more upscale areas of the city, such as south Chandler.”[7]  Indeed, it was particularly noted: "We have families who have lost everything, dads who had… properties that didn't go well, an engineer who hasn't been employed for a year."[8]

Even for the founding fathers of this country, the rich could go to rags in a heartbeat.  I write about Robert Morris, founding father, a member of the Continental Congress, signer of the Declaration of Independence, father of the US Banking system, and wealthy investor.  Robert Morris “ almost single handed, saw to the financing of the Revolutionary War, and the establishment of the Bank of the United States after.”[9]  He even loaned $10,000 of his own money, a very considerable sum at the time, to the Continental Congress, thereby provisioning troops at a desperate point in the revolution.  His proposal for a national bank in 1781, a proposal accepted by Congress, brought stability to the national economy.  He was even appointed treasury secretary by George Washington in 1889, though he declined to serve in this position. 

Without Robert Morris, this country might not have a federal bank today, nor the ability to cope with financial meltdowns like the one we are just beginning to get out of.  He gave much of his wealth to this country, never to get it back, and lost the remainder in a failed land speculation scheme.  There was no safety net back then, no aid for even a great patriot and revolutionary financier who gave his all, mentally and financially, to this country.  He died destitute in 1806 at 73 years of age.

What can we say about the poor and homeless in America?  As these stories show, they come from all walks of life.  The story of an NBA veteran failing to transition to normal life could easily be that of a soldier failing to transition to the civilian world.  It is similar to the story of a truck driver I know who, forced from his vocation due to heart problems, cannot transition to a new career.  A highly educated senator, one that should be a success story is just one of many stories of a family that lost their home to the recession, looking to community and family for support.  Children are affected by the losses of their parents; they find themselves living in poverty and shelters through no fault of their own.  There is little support unless we provide it.  The story of a U.S. Founding father proves this to be so.  With nowhere to turn, he died a pauper: brought to ruin by propping up his country and finished off with one bad decision.   

America is the land of opportunity, but it is also a land where things can go terribly wrong.  This is a land where a young man from the wrong side of town can rise to the top becoming a famous NBA player, only to find himself homeless and poor.  A young girl, an immigrant to this country at age 5, can climb the social and political ladder to state senate with prospects of being governor, only to lose everything.  And a child born wealthy, one who serves this country in every way he he is able, could find himself living in poverty before his death, unsupported by the country he loved and served.

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[1] Bob Hohler, “Desperate times: Ex-Celtic Williams, once a top scorer, is now looking for an assist,” New York Times (July 2, 2010): 1  Found on: http://www.boston.com/sports/basketball/celtics/articles/2010/07/02/desperate_times/, accessed Dec. 20, 2010.

[2] Ibid 2.

[3] Ibid 3.

[4] Hart Van Denburg, “Mee Moua is homeless,” City Pages Blogger (Sept. 17, 2010), http://blogs.citypages.com/blotter/2010/09/mee_moua_is_hom.php, accessed Dec. 20, 2010.

[5] “Who’s Who of Asian Americans” found on Asian American Net, http://www.asianamerican.net/bios/Moua-Mee.html, accessed Dec. 20, 2010.

[6] Ibid.

[7] Kerry Fehr-Snyder, “Even Well-to-do Schools Like Hamilton Have Homeless Kids,” The Arizona Republican (Sept. 15, 2010), found at: http://www.azcentral.com/community/chandler/articles/2010/09/15/20100915chandler-hamilton-high-homeless-students-help.html, accessed Dec. 20, 2010.

[8] Ibid.

[9] “Robert Morris,” Signers of the Declaration of Independence: Short Biographies on each of the 56 Declaration Signers, found at http://www.ushistory.org/declaration/signers/morris_r.htm, accessed Dec. 20, 2010.

Current Events: the Living Wage

I like reading the news.  I like sitting at the morning table perusing a newspaper, reviewing the going-ons of New London.   Moreover, I think it's important; especially as a volunteer coordinator.  You see, part of my job is to advocate on behalf of the population I serve to the greater community.  And so, it helps if I stay abreast of issues in poverty and homelessness.  This requires I read the news.  So, my morning fun is work related too.  Of course I don't consider it work, and I don't think my bosses would either.  But it gives me a reason to read the news in the morning.

One thing I've noticed over the past few years is an interesting movement for living wages.  This movement, which started in Baltimore in 1994,^[1] requires employers who receive contracts or tax breaks from the municipality pay a wage relative to the local cost of living, not the minimum wage.  Remember from a previous post that roughly 15 % of single adults and 39 % of adults in families who are homeless in Connecticut do work.  Also recall from another post that the ‘housing wage,’ that is, the amount required to spend no more than a third of the income on housing grew to $23 an hour in 2010 and that about a quarter of Connecticut renters in 2010 both make less than the median income and spend more than 50% of their income on housing. 

It must also be stated that the living wage is a basic wage, often less than the housing wage but above poverty level, and a minimum wage necessary to live unsupported by the government or community.^[2]  This wage varies with the cost of living in each municipality.  However, in all municipalities a person working 40 hours a week who is paid a living wage has food, health care, housing, and other basic necessities met.  Further, the living wage rises with the cost of living, at a greater rate than the minimum wage.^[3] 

There are three ways for a municipality to attain living wages: ‘community benefits agreement,’ ‘prevailing wage laws,’ or ‘business assistance living wage laws’  The first of these methods “is a project-based contract signed by community groups and a developer that requires the employers participating in the project to adhere to a negotiated set of wage standards and provide specific amenities on a particular project.”[4]  These agreements are not very pervasive but have been spreading of late.  The second, ‘prevailing wage laws,’ “require that covered businesses pay their employees wages at or above the typical wages in a certain industry, and thus not undercut the existing market wage structure.”[5] These are used often with government contracts, and are beginning to spread to other economic development plans backed by the government.  The third listed, ‘business assistance living wage laws,’ are the most prevalent today.  They “require businesses participating in projects receiving public subsidies to pay workers wages above the poverty level.”[6]

These methods of ensuring living wages by government contracts are controversial.  One need only look at Chicago’s divisive “bigbox” living wage law proposal in 2006, which required big retail stores like Wal-Mart or Home Depot to pay a living wage by 2010 and resulted in Mayor Daley’s first veto.  Since then, other cities are looking into or have already adopted similar laws, such as New York and Pittsburg. 

The controversy surrounding these froms of legislation is that “these “business assistance” living wage laws directly challenge the logic of local economic development policies by placing additional requirements on firms that engage in development agreements with the public sector.”[7]  This would then raise the cost of doing business and drive away investors, a significant fear I must agree. 

However, a recent study conducted by the Economic Policy Institute found that there was no difference in the amount of jobs created by cities such as Harford, CT, which implemented business assistance living wage laws, and cities that had no such laws.^[8]  But for those cities that did have the living wage laws, all jobs created with municipality or government funds were quality jobs and had a greater effect on the local economy than minimum wage employment.  If the results of this study bear scrutiny, and I admit, I am not the one to perform such scrutiny, this means that quality job creation need not limit the amount of jobs created.

A living wage is important; In my opinion it is one of the best ways to fight homelessness.  With appropriate health care, a proper diet, and descent housing, many causes mentioned in a previous post for the majority of homeless could be eliminated.  The 15 % of single adults who work but reside in shelters like ours could move out, into sustainable housing and a better life. 

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[1]Jared Bernstein “The Living Wage Movement: Pointing the Way Toward the High Road” Economic Policy Institute article, March 2002.   From original in Community Action Digest Spring 2004.

 www.epi.org/publications/entry/webfeatures_viewpoints_lw_movement/ accessed Dec. 13, 2010.

[2] Note concerning Hartford: “The living wage was $11.66/hour in 2009 if health insurance was provided and $17.78/hour if no insurance was provided”. T. William Lester and Ken Jacobs, ‘Creating Good Jobs in Our Communities How Higher Wage Standards Affect Economic Development and Employment.’  Center for American Progress Action Fund, November 2010: 35.  Found at: http://www.americanprogressaction.org/issues/2010/11/pdf/living_wage.pdf, accessed Dec. 13, 2010

[3] Ibid 1:  “Average wage growth for the bottom 80 percent of workers grew by only 0.6 percent between 2001 and 2007 while wages for those in the top quintile rose by 5.3 percent”

[4] Ibid 5.

[5] Ibid 5.

[6] Ibid 5.

[7] Ibid 5.

[8] Ibid 1.