Network News

X My Profile
View More Activity
2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Bernanke: Minorities Need To 'Strengthen Their Financial Literacy'

American minorities need to "strengthen their financial literacy," Fed Chairman Ben Bernanke told students and faculty at Atlanta's historically black Morehouse College in Atlanta today.

On a day when President Obama delivered an Economic Crisis 101 lecture to students and faculty at Georgetown University, Bernanke was doing the same thing in Atlanta.

During an expansive Q-and-A session with Morehouse students after his speech, Bernanke was asked about the household wealth gap between whites and blacks in America.

"It’s absolutely right the difference between minority and white wealth is very significant, and part of that is related to income levels where whites have a higher average income," Bernanke said. "But even if you control for income level, you find minorities have gathered less wealth."

Part of the cause, Bernanke said, is a lack of "financial education."

"There needs to be a broader understanding in minority communities, which haven't had that much exposure, about saving and building a credit record and being part of the mainstream economy," Bernanke said.

Too many minorities don't have bank accounts, he said, and "borrow from payday lenders and cash checks at check-cashing services," he said, both of which charge high rates for their services.

"They would be better off in the mainstream banking system," Bernanke said. "So one thing that could help would be to try to strengthen the financial literacy and financial education" of U.S. minorities.

Bernanke also said that "it's an absolute tragedy" that some Morehouse students have been forced to drop out of school because they can no longer afford tuition, thanks to the ongoing recession.

Bernanke was asked if the economic crisis has caused him to change his economic philosophy.

"That's about the toughest question you could have asked," Bernanke said. "I would say the jury's still out on that."

-- Frank Ahrens
Sign up to get The Ticker on Twitter

By Sara Goo  |  April 14, 2009; 3:50 PM ET
Categories:  The Ticker  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Obama: Wall Street Built U.S. Economy On Sand, Not Rock
Next: Bernanke: We See 'Tentative' Signs of Recovery

Comments

Divorce and out-of-wedlock births are the greatest personal wealth destroyers there are outside of large scale natural disasters and war. Since the early 60s the "Great Society" has been hellbent on destorying the family to increase dependence on Government. Blacks and other minorities have been targeted for the most Federal Government "Help" programs and therefore have less personal wealth, a greater dependance on Govt in exchange for which they vote 90+ percent Democrat.

Posted by: majcsmith | April 14, 2009 5:10 PM | Report abuse

This is not rocket science. At the very least, finish high school, without giving birth to a child.

Good luck getting people to value these accomplishments in those communities which suffer from the neglect of them.

Posted by: Miss_Hogynist | April 14, 2009 5:32 PM | Report abuse

The savings rate in minority communities especially black is abysmally low. If anyone has a job, part time or full, there is no reason they should be cashing their checks at one of these check cashing services. Many bank accounts don't have a minimum. There's free checking. Bernanke is absolutely right.

Posted by: jabreal00 | April 14, 2009 5:34 PM | Report abuse

He left out quite a bit of history w/ that response.

Income disparity has a long history along racial lines. Whites have been building wealth through home ownership since the affirmative action programs for whites that allowed them to receive FHA loans, which were denied to blacks via government sanctioned redlining.

During segregation fed, state, local and sales taxes paid by blacks were used to build schools, courthouses, roadways, and many other public facilities for white people to use. This money was not put into black communities.

Currently less than 20% of Americans are willing to purchase homes in predominantly black communities. While there is an 80%+ market for homes in white neighborhoods. Obviously if you only have 20% of a population willing to purchase in a neighborhood, then the sales of those homes go for a much lower price. It's hard to accumulate wealth at the same rate as those in predominantly white areas where they have much larger demand base. If a neighborhood becomes "too black", then property value goes down... no matter what the crime rates are, or location.

During Republican administrations unemployment always rises for black people. When Bush took office unemployment for blacks was around 8.5% now it is over 13%.

There is so much more to add. Bernanke needs to do some research so that he can better understand racial income disparity.

Posted by: 12345leavemealone | April 14, 2009 5:43 PM | Report abuse

Well, at least minorities won't be alone. The past year has set a record for wealth destruction for everyone.

Can anyone explain to me how those who have lost nearly 50% of their retirement savings going to survive? On 2.4% savings interest? The Boomers will run out of cash before they die. Then what? Green Cookies?

And how can people earning $6.55/$7.50/hr. survive at all if housing begins at $800/month?

The profit mongers always make bank on the backs of the poor. Always have, always will.

Economy, thy name is Heartless-Hateful.

PROPER PAUPER

I'd rather die a pauper
working for something proper,
than sell my eternal soul
for a monetary goal.

Posted by: VoiceofReason | April 14, 2009 6:14 PM | Report abuse

@ 12345leavemealone - So it's the whites' fault that minorities don't have bank accounts and cash their checks at currency exchanges? Or are the Republicans telling whites to avoid buying houses in black neighborhoods? Maybe some minorities could use a mirror when looking for the reasons of their economic condition.

Posted by: alientech | April 14, 2009 6:14 PM | Report abuse

alientech. It's all in your name.

Posted by: VoiceofReason | April 14, 2009 6:24 PM | Report abuse

As I understand it, VoiceofReason has it right. Bernanke's reported comments don't go nearly deep enough into the roots of the racial disparity in wealth. There's no question that whites benefited from housing segregation managed by the FHA. Our homes are usually the greatest source of our personal wealth. As a group, we whites were enabled to accumulate wealth in housing that was denied to African-Americans. It has not been a level playing field. Here's a link to an article that explores this further: http://www.pbs.org/race/000_About/002_04-background-03-03.htm

Posted by: StillAwakening | April 14, 2009 6:52 PM | Report abuse

These comments are focussed on who's to blame which doesn't really matter except as interesting social history. Bernanke recognizes a problem and offers a solution, financial education. What's with the finger pointing and condescending attitudes? Solving social problems helps everyone. Sex education is also a great idea but a somewhat separate issue.

Posted by: email4khall | April 14, 2009 7:13 PM | Report abuse

So many are ignorant about the ways that blacks and other minorities have been marginalized and discarded in history, even those who worked hard and played by the rules.

IT was not so long ago that discrimination was the the unofficial law of the land. White employers would not hire blacks because of how there white employees would react. In the early 1960s in Washington, D.C. the bus system was run by private entrepeneurs. DC Transist did not hire blacks before 1966 because the white bus drivers union forbid it. THey threatned to go on strike if any blacks were hired. So, those good middle-class jobs were the sole domain of white men (most who never finished high school).

Every hear of "redlining?" 45 years ago, cnce a neighborhood became predominately black, lenders and insurers would draw a red line on the map encircling the neighborhood and it was no more loans or insurance for them. So, the house declined in value because people couldn't sell them. They couldn't get insurance at affordable rates.

We blacks know what it is to pay the "black tax."

This country has a long history of discrimination that has worked to deprive blacks and other minorities of even amsassing wealth. Or sure, there are some blacks now that have wealth, but you won't find any wealthy dynasties like the Bush's or the Kennedy's or the Rockefellers, because black people couldn't even get in the door, except to clean up.


Posted by: DCNative69 | April 14, 2009 7:13 PM | Report abuse

The present wealth GAP was built up over several generations, blacks only started getting something close to a level playing field a generation ago 1960's/1970's, and even then they were starting from a cramped position having been repressed for such a long time, they did not have to tools to compete. Now more blacks are getting more advanced education and more of them will get a chance to compete and contribute with greater chances of success. They will prepare their children better and the cycle will continue with succeeding generations, and as that cycle reinforces itself with improvements in each generation the gap will narrow, it will not happen overnight though.

Posted by: ebundagen1 | April 14, 2009 9:30 PM | Report abuse

Becoming more financially literate is a great idea for everyone. It's an ongoing and life long process. The earlier we start, the better.
Sam X Renick
www.itsahabit.com
www.sammyrabbitblog.com
Changing children & family lives one dime and habit at a time while teaching kids smart money habits and choices.

Posted by: savingsammy | April 15, 2009 5:22 AM | Report abuse

the headline on this story gives the wrong impression. I sat and watched the entire presentation, as well as the Q&A session.

Bernanke was responding to a student's question (by the way, the Morehouse students were very impressive).

There was nothing negative about the entire event.

So there is really no need for condescending comments towards the black community. By the same token, there's no need for any negativity towards Bernanke either.

It was an insightful, intelligent, discussion between Ben Bernanke and the students of Morehouse College.

www.glennwilliamsjr.com

Posted by: glenn_w | April 15, 2009 9:24 AM | Report abuse

I beg to differ. "Free checking" accounts still have hefty overdraft fees. Most users of check cashing services aren't sophisticated individuals, and generally they are unable to reconcile a bank account. Many of those individuals have had bank accounts in the past and have been burned by hundreds of dollars in fees for poor account management.
There is yet another angle to this situation. The vast majority of check cashing places are small business, owned by local residents. This is money that circulates in the community. Banks, on the other hand, are owned by a wealthy class that is getting wealthier by the minute. Of course they want the poor's money. They want everyone's money. But remember, it was bank's poor management of their portfolios that led to our current economic crisis.
I do not agree with payday lending, as it definitely helps to further the cashflow problem that could be resolved by better money management. But payday lenders are the legal alternative to loansharking. Again most people don't see it that way because they do not work on the industry.
And the comment about check cashing fees being hefty, that only shows lack of knowledge. In Florida the cap by regulation for check cashing fees is 5% but the average fee is below 2%. Compare that to a $29 overdraft fees most banks charge.
I often use the following example to illustarte this: Jane Doe and John Doe get a $500 paycheck. Jane Doe uses a check cashing service that charges 2%, and buys 4 money orders at $0.50 each to pay bills. Lets' assume she pays $400 in bills, and her fees for cashing the check and money order is $12. She's left with $88 in her pocket, and all bills will get paid.
John Doe deposits the money into his account, writes 4 checks, and so far no expenses. But later in the week he needs to get money out of his account, and mistakenly he draws more than the $100 he should have, as only one of the checks cleared. The other 3 checks will result in $90 in overdraft fees. So much for free checking account.
If anyone is willing to debate this, I'm game.

Posted by: amlclass | April 15, 2009 11:13 AM | Report abuse

@amlclass, you said...

"Most users of check cashing services aren't sophisticated individuals, and generally they are unable to reconcile a bank account. "

that's actually making Bernanke's point about the need for financial literacy.

are you making the claim that people should use check cashing places, because that person will bounce a check?

wouldn't it make more sense to learn how to balance a check book? or at the very least...budget.

i also find it hard to belive that money that goes into check cashing agencies..."circulates" in the community. money in general does not circulate in the African American community, which is part of the problem.

www.glennwilliamsjr.com

Posted by: glenn_w | April 15, 2009 6:16 PM | Report abuse

Who invited that assinine? He should have been booed for that racist remark. He's right, "it's an absolute tradegy" caused by his people/kind. Kiss off and kiss our....

Posted by: wibo07 | April 15, 2009 6:40 PM | Report abuse

I think EVERYONE needs financial literacy education. Foreclosures, bankruptcies and increasing credit card debt is leading to a downward spiral in nation pocketbooks. I personally, have never received a relevant financial class/lesson in school and I got out into "real life" and found myself a little unprepared! I am trying to become more financially fit by following a tip a day from Sharon Lechter- a passionate expert for financial literacy- hopefully it helps you too. http://www.slechter.com/30-tips-to-ensure-your-financial-fitness

Posted by: mrose1 | April 17, 2009 1:38 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company