An Occupy Wall Street Takeaway
The Occupy Wall Street movement may still be amorphous, but it is making clear that awareness about lack of basic understanding of the financial markets and homeownership is proliferating education efforts most likely toprevail for years to come and regardless of the outcome of the movement it helped set off.
At Zuccotti Park in New York people parade messages, often handwritten and ambiguous. Last week, a man who would not identify himself was holding on his chest one of the memorable exceptions, a foot-and-a-half long printout of a quote from Henry Ford. It read: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning!” With a smiling face he was pointing to a very sensitive issue.
Concern about how to put checks and balances on a complicated financial system and educate people about it and their personal finances may be one of the first few positive side effects of the housing crisis that precede the Occupy Wall Street movement. During the past few years the mortgage industry has sponsored round after round of foreclosure prevention counseling events across the country at a progressively higher frequency and intensity. Entities large and small, public and private, at the federal, state and even county level, are expanding financial education options nationwide.
In a recent example in Nevada, the state hardest hit by the foreclosure crisis, during a single event housing counselors volunteered their time and expertise to provide private financial counseling to 127 families. It brought together representatives from the Federal Home Loan Bank of San Francisco, Chase Bank, Wells Fargo Home Mortgage, Bank of America and the Department of Urban Housing and Development.
Dwight Alexander, VP of legislative and regulatory affairs at FHLBank of San Francisco, noted how opening lines of communication with the lender creates workout opportunities. “It’s critical that homeowners are aware of the options that are available to them,” he said.
Bank of America, Wells Fargo and some of the other megabanks routinely organize counseling events and have been expanding their networks or customer assistance branches that enable fate-to-face communication. Hope Now, the national coalition created to prevent foreclosures, also is a regular sponsor of counseling events.So far this year Hope Now said it has worked with 118 counseling organizations at borrower events counseling over 4,000 homeowners in 12 markets. In 2010 up to 271 organizations counseled 14,700 families at 33 events.
As a rule lower-income people do not have access to private financial advisory firms. Despite their wealth level, states president of Burnham Gibson Financial Group, Darin Gibson in a press release about financial resolutions for 2012, the world of finance can be so intimidating that “many otherwise intelligent people disregard important expenses, fees and information due to lack of knowledge,” or inability to completely understand certain transactions including mortgages, or new legislation and need to consult with an expert.
Financial education not just for delinquent homeowners is blossoming as the one economic turned political issue in the agenda of many state legislators who are now leading state level initiatives in an effort to ensure legislation exists and is effectively enforced.
In Illinois state treasurer Dan Rutherford partnered with the Illinois Bankers Association and the providers of EverFi, a financial literacy platform designed to teach core financial disciplines such as banking, mortgages, credit cards, credit scores, savings and budgeting, financing higher education, stocks, retirement plans, insurance and taxes. EverFi was chosen because it makes the learning process attractive to students through highly interactive media technology such as 3-D gaming, online animations and social networking.
Several Illinois banks have signed up for the program. Together they are sponsoring about 40 high schools in the state at no cost to the school or the state of Illinois. The goal is to bring in new participants every week. According to the Illinois Bankers Association president and CEO, Linda Koch, local banks have underwritten the Web-based curriculum demonstrating their “ongoing commitment to financial literacy.”
State law added financial literacy education to the mandatory Illinois high school consumer education curriculum.In August 2008, the Illinois Senate passed Bill 2387 amending The School Code by changing Section 27-12.1, its Customer Education requirement, adding: homeownership, “including the basic process of obtaining a mortgage and the concepts of fixed and adjustable rate mortgages, subprime loans, and predatory lending.”
The existing state uniform Annual Consumer Education Proficiency Test for pupils in grades 9 through 12 who elect to take it became available for the first time during the 1986-1987 school year—which coincides with the so-called Thrift Crisis of the mid-1980s.
In retrospect, going forward it may help to also amend the test’s status from elective, to required.
And while the long-term impact of targeted education on future generations of homeowners may not be measurable yet, awareness about the importance of short and long term financial health is notably increasing.
According to the 3Q 2011 “Trends in Employee Financial Issues” report published by Financial Finesse, a customized financial education programs provider founded in 1999 in El Segundo, Calif., during the quarter employees “demonstrated they are aware that their financial futures are in their own hands.” The expectation is there will be less and less help from government and employer-sponsored benefits on which they can depend on in the future.
Employees are showing increased awareness about the need to be more self-reliant when saving for retirement, as shown by the fact that year-to-date 2011 the self-reported retirement participation rate reached 91%. The firm reports the number of people asking questions on retirement planning increased from 26% in 3Q 2010 to 34% in 3Q 2011.
Findings also show that higher awareness leads to efforts to improve cash management skills that in turn help decrease financial stress. The percentage of employees reporting high or overwhelming financial stress is down from just over 32% last year to just under 21% year to date 2011. In addition, the percentage of employees reporting no financial stress is up from 3% in 2010 to nearly 16% this year, reflecting a better sense of security among those who are employed.
The housing crisis created opportunity for a financial literacy revolution to start and spread beyond the mortgage market. It is one meaningful way how Wall Street will continue to meet Main Street.