The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

SLCCU Trying To Help Close The Wealth Gap

On August 1st, 2011, posted in: Uncategorized by

In case you missed it, a study of wealth in America was recently released.  An analysis of 2009 government data was conducted by the Pew Research Center and, as dictated by their name, the data stinks.

As it relates to the “wealth gap,” it would appear as though African-Americans and Hispanics are feeling the effects of the Great Recession to a much greater degree than whites.  The disparity (that always existed) steepened between 2005 and 2009 according to the co-author of the report.

Inflation-adjusted median wealth did a nose dive over the four-year period in question.  Hispanic households lost two-thirds of their wealth, and African-Americans lost 53 percent.  As you might imagine, wealth (along with income) is a key indicator of economic well-being.  Wealth, unlike income, can be passed on.  Connecting the dots, one would presume that the period of 2005 through 2009 has done nothing to facilitate economic health in these populations; and worse yet, would appear to have the impetus to be a generation changer with negative ramifications for years to come.

Generation changer – what does it mean?  Depressed housing values are the greatest contributor to the erosion of wealth.  They are probably not going to rebound anytime soon (i.e. years), and the likelihood of foreclosures in our neighborhoods may serve to erode values further; thus exacerbating the unlikely hope of a rebound for years and years to come.

To further the thought of generational impact, the study states that the value of stocks and mutual funds held by minority populations dropped; in the case of African-Americans, a full 71 percent.  At first take, I didn’t get this – how does this happen?  Apparently, because financial distress enters into the picture sooner, sales of stocks and/or stopping one’s contribution to an investment/pension, etc. is much more likely in the African-American community.  The end result is a substantial reduction in value.

St. Louis Community Credit Union has always been prone to help, not judge.  It is what it is.  Now, how do we roll-up our sleeves and jump in and provide solutions?  We are about creating cash-flow in the household through value in financial services.  If you’re a saver, then rates are higher.  If you’re a borrower, then rates are lower.  If you’re a transactor, then fees/costs are much more palatable.  Pick one – it all means more wealth. 

Without assets (housing and investments) booming anytime in the foreseeable future, we need to focus on income (the other piece to economic well-being).  That’s where our value comes into play.  Remember the Washington University study conducted earlier this year: SLCCU provides those who bank with us up to $400 per year in value, i.e. economic well-being.

That’s real money and an important step to reversing such a devastating trend.  Four hundred dollars goes far in fostering a stronger standard of living and a better lifestyle for generations to come.

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