Walking in those other shoes

The old proverb that you don’t know what someone else is going through until you walk around in his or her shoes is routinely and historically pertinent. Yet, one of the challenges we face is we wear those shoes with our own biases and context. In other words, the socks we wear will give those shoes a different feel.

Too often, I read letters to the editor and posted comments or listen to conversation that bias the experience. It is something we must guard against. The same goes when we extrapolate personal or second-hand anecdotes to paint all circumstances with a broad-brush. In other words, the person believes every situation must be this way, as this is what I experienced on one occasion.

As a white man in his sixties, I have a context that is different from an African-American teen male. For the most part, I can go anywhere I want without repercussions. I can walk into a hotel or gathering and go unquestioned. When I am stopped by law enforcement, I am less worried that the next move I make may be my last. An African-American man dressed for church, does not have that same level of trust. And, an African-American teen is in even more in jeopardy if he acts rashly.

I also know I have that white privilege thing. The more common example of white privilege is not overt; it is people who look like me who do not know they benefit from it. It is not the blatant, in your face, white privilege seen on the news by white supremacists. It is the everyday lack of awareness.

It also can spill over into white victimization. This “I am being held down because African-Americans and other minority groups are getting more than a fair break” belief exists and is fed by more strident media and white supremacist groups. It is a way the latter groups recruit to their folds. I experienced this yesterday in a troubling conversation with an old friend. He painted too many woes with the broad brush of this white victimization. I kept thinking “really?”

There is a reason African-Americans and other minority groups feel threatened or feel their rights matter less or not at all. They have been disenfranchised for centuries, sometimes in violent or suppressive ways. We must do our best to guard against this happening, but it is still going on. . People of color are too often the victims of police shootings. It is debilitating and dispiriting. No one deserves to be treated like that.

On the flip side, we must acknowledge that some whites do feel victimized. Life has dealt them some tough hands or fewer opportunities. Yet, it is dwarfed by those who benefit from white privilege. In my opinion, a white person can feel both and not realize it. What concerns me is when these examples are used with a broad brush in an effort to paint over the benefits of white privilege.

With that said, we need to step back and look at why things happen without the lens of biased sources. There often are a multitude of factors that cause things to happen, but race clearly is one of those factors. Poverty is an American problem we must deal with better. Pretending it does not exist won’t make it go away. Limited and limiting opportunities in various communities are a factor. Crime and drug use can fill this void and send a community into a death spiral. Predatory lending or rental practices are an issue. Lack of educational advancement is an issue. Food deserts and hunger are issues. Family size is an issue as poverty is correlated with larger families.

These issues affect people of all colors. They impact urban as well as rural settings. Many may not realize that the largest numbers of American people in poverty are white. The propensity of poverty is higher for non-whites, but I want to make a point that poverty knows no racial boundaries. Fear is used to sell influence and recruit votes. Yet, most issues are complex and blaming other groups is not the answer. It also gets in the way of understanding challenges others may be going through and vice-versa.

I fully recognize my own anecdotes and context have flavored my opinions. In my view, we should acknowledge we have those biases and do our best to look beyond them as well. It will help as we walk around in those other shoes.

What do these folks have in common? (a reprise)

The following post was written almost eight years ago. While more states and cities have increased their minimum wages and the Affordable Car Act helps greatly, this post remains relevant.

The following people have something in common. Please scroll down the series of descriptions and let me know what is common for all of them. The names of have been changed to protect their confidentiality, but the stories are very real.

Anna is working as an office manager working full-time making $8.00 per hour. She has is separated due to a domestic violence situation and has two children.

Hope is working two jobs – one full-time as an Administrative Assistant making $11.75 and the other part-time as an intake specialist at a Human Services agency making $11.00 an hour. She is also separated due to a domestic violence situation and has four children.

Julie is working full-time as a CSR (Customer Service Representative) for a bank making just over $14 an hour. She is unmarried with three children.

Nina is working full-time as a CSR for a utility company making $12.25 an hour. She is unmarried with one child.

Sarina is an assistant manager at a fast food restaurant making $12 an hour. She is unmarried with three kids.

Paul is working full-time on a cleaning crew making $11.00 an hour. He is unmarried with one child.

Carrie and Michael are married with four kids. Michael was laid off and Carrie is working in hospitality at a local hotel making $9.00 an hour.

Felicia is a Certified Nursing Assistant making $9.60 an hour at a hospital. She is unmarried and has one child.

Dedrick is a full-time security guard making $9.25 an hour. He is unmarried with three children.

Cassandra is working two part-time jobs, one as an afterschool teacher assistant making $11.25 per hour and the other as a retail clerk for a discount company making $7.95 per hour. She is unmarried with two children.

Terry is working as a public school teacher assistant making $11.00 an hour. She is unmarried with one child.

I could go on, but let me ask the question. What do these folks have in common? They are all homeless. When I tell people that the homeless people the agency I volunteer with have jobs, these people do not believe me at first. How can they be working and be homeless? It takes some people time for that to sink in. In fact, 84% of the families we help are working. The median wage for those 84% is $9.00 an hour. I purposefully used higher figures to illustrate a point – you can make above the living wage for an individual, but still be homeless if you are a parent. The living wage in my area for an individual is around $10.00 an hour and for a one-parent, one-child family is around $19.00 per hour.

There are five additional things I want to mention that are important to understanding, preventing and climbing out of poverty:

  • Family size is highly correlated with poverty. We must do a better job on family planning and providing birth control means and education. For my evangelical readers, your kids are going to be tempted to have sex. Please do not preach a message of abstinence alone. Teach girls how to say no. Teach boys to treat girls as more than sex objects and that no means no. But, let them know that if they must have a sexual relationship, to use protection.
  • Education is key. While the economic downturn altered this statement with layoffs and downsizings, for the most part, the higher your education, the less likely you are to be homeless. For kids that fall off the track, getting them back in school or on a path to a GED is essential. Fortunately, the community college systems in cities and regions do a pretty good job at getting people educated and developed with new career skills.
  • Healthcare is very important. The absence of healthcare is the key reason for personal bankruptcy in the US and an important reason for homelessness. People cannot afford their employer plan and one of the kids get sick or has an issue. Or, the parent stopped taking his or her medications due to cost and the resulting physical or mental issue causes a problem for the family or on the job. Fully implementing Obamacare will help, but the states who did not expand Medicaid need to do so.
  • Minimum wage needs to at least be the living wage for an individual. The homeless we help work hard, sometimes at more than one job. People like to say that increasing the minimum wage impacts the number of jobs. To be honest, most studies do not support that contention. We need to increase the minimum wage to the living wage for an individual. These jobs perpetuate poverty (please read “Nickeled and Dimed in America” by Barbara Ehrenreich). Short of that, we need to increase it more than it is now and graduate it to a higher level. Yet, the same people who decry people on welfare, also don’t want to pay people for an honest day’s work. If we pay people better and not like an economic slave, then the economy will actually flourish more.
  • Domestic violence is real. About 30% of the people in our program have come out of an abusive relationship. So, the spouse is making due without one of the incomes (for the most part) as well as dealing with a court-ordered spouse to stay away from her and the kids. I have said this before. If you are in an abusive relationship – leave. He will not change – leave. He will move beyond verbal abuse and it will become physical – leave. For the sake of your kids – leave. You can live a more normal life. Domestic violence is about power and control. It is difficult, but please leave.

Our agency is built with a model of helping people climb a ladder out of homelessness. The past fiscal year, 91% of our families were back to self-sufficiency in 21 months.  We provide rental subsidies based on their ability to pay, but they must work with a social worker and meet certain milestones. We also offer Hope Teams to mentor the family and kids. We do not do for them what they can do for themselves, so they must have a savings plan, take classes on Bridges Out of Poverty, and achieve certain milestones.

We all need to better understand our poverty problem in America. We must do better, but it must begin with realizing how it happens and helping people climb ladders out of poverty. We cannot solve this problem by kicking them when they are down and placing ill-founded labels on them as reasons to dismiss them as undeserving. Not only is that cold-hearted, but it is harmful to our economic growth. As Gandhi said it so well, “a society’s greatness is measured in how it takes care of its less fortunate.”

Class Matters – Socio-economic class that is (a reprise from 2012)

The following post was written almost nine years ago, but still applies today. I wrote recently how America has fallen in the global rankings on socio-economic mobility This story will shed some light as to why.

When you read this title, there are several interpretations that come to mind. While I am a firm believer in acting in a classy way, treating others like you want to be treated, the “class” I am referring to here is socio-economic class. There is a body of work spawned by research conducted by the New York Times, which led to the publishing of a book under this same title – “Class Matters.” It also led to a revolution of thought and I would encourage you to visit “www.classmatters.org for more information.

In essence, the term class matters refers to the tenet that your socio-economic class is a key factor in your ability to ask questions of those who are trying to serve you. The higher strata of socio-economic class is highly correlated with better education and more confidence. This translates into the greater ability and lesser reluctance to question things. On the converse, those in lower socio-economic classes tend to have lesser education and more self-esteem issues. They have a greater inability and lack of confidence to question those in power or who are trying to serve them.  As a result, those in the lower classes often make poorly informed decisions as they are:

  • too scared to ask questions,
  • feel threatened if they do so,
  • feel they will show their ignorance if they do,
  • do not know the right questions to ask, and/or
  • fall into a trusting mode, whether legitimate or not, that the person serving them knows what they are doing as they are wearing a doctor’s coat or suit and tie.

To illustrate this concept using a real life occurrence, the current housing crisis we are facing has many areas of cause from the lenders to rating agencies to investment managers to developers to buyers. At the heart of the problem, we had too many developers and realtors selling houses to people who could not afford that price of house and mortgage lenders providing mortgages to people who should not have that level of mortgage or who did not fully understand the terms of the loan. The buyers did not understand what a variable mortgage is or, using one of the lender’s terms, what a “pick-a-payment” or flexible payment mortgage entailed. The concept of negative amortization is term that was not well-explained or fully understood. In “House of Cards” a line that resonates with me is lenders were providing money to people who could “fog a mirror.” Then, they packaged up all of these poor risks in collateralized debt obligations (CDOs) and sold them to investors who thought they were buying a less risky product. The rating agencies did not help by stamping these CDOs with a AAA rating.

There are some who firmly believe in the concept of “let the buyer beware.” In their minds, the people who bought these houses and took out these loans should have been more aware “like I would have been.”  As a consequence, they believe the buyers should be held entirely responsible for the housing crisis. This school of thought has some merit, but misses two greater issues. First, if you have ever bought a house, you are asked to sign more papers than in any other transaction. I would wager that an exceedingly high percentage of buyers do not read every word of what they are signing. The legalese is too complex. More often than  not, they will ask the attorneys to explain simply what they are signing. I would also wager that in these transactions people actually sign papers they do not fully understand.

Second, with that context, people in a lower socio-economic class will be even more trusting of those in suits and ties. They would ask even fewer questions and understand even less of what they are signing. When the American Dream is to own a home and people in suits and ties paint a picture that you can afford this home, the buyers believed them more times than they should have. In some cases, the seller put “perfume on a pig” to dress up the sale as best as possible. Individuals were shown monthly payment numbers and did not realize those numbers could dramatically change every two years. In some cases, their income and wealth numbers were inflated to show they could afford a house and mortgage they otherwise would not. The buyers trusted people showing these numbers and signed on the many dotted lines.

Two true stories will embellish these points. The poster child for one extreme end of what happened was a builder based in Atlanta. The CEO and CFO were convicted of criminal and unethical actions they helped perpetuate with home buyers. In essence, the company-realtors representing  new developments did not represent they would make an extra bonus if you bought in this new neighborhood. They did not represent the inspector was being paid off to inflate the price of the house and show no problems existed. They did not represent that the mortgage lender they recommended was affiliated with the developer. So, along comes the buyer who does not know this, does not know to ask these questions and who sees a financial representation that they can afford this house. Even people above the lower socio-economic classes were taken in by this criminal behavior, yet the lower class people did not stand a chance.

The other anecdote took down a bank of which I was shareholder. This bank bought  a mortgage bank who had developed the concept of the “pick-a-payment” mortgage. This flexible payment mortgage concept was geared for a very astute buyer, not the masses of people who bought it. Mortgage people at this bank wondered why the CEO of the acquirer was pushing these mortgages even up to six months before the bank was destined to fail.  A mortgage person for that bank said we are having “pick-a-payment parties” to promote the sale of these mortgages. We are selling these mortgages to people who do not know what they are buying. They do not understand when they do not pay enough, their mortgage principal increases. Like with the above example, the lower socio-economic class buyers did not stand a chance. The people in higher classes suffered as well.

Yet, the class matters concept goes beyond these examples. It happens in everyday life, whether it is visiting the doctor, buying a car or something on credit or being served by the bank on other issues. We have people who will go into debt as they do not know the exposure they are adding with each purchase. In today’s world, there is a dearth of customer service. You have to be the navigator of your own customer service experience. Many people do not realize this as the case and tend to delegate the responsibility to the customer service person. We don’t ask enough questions of doctors seeking alternative treatments or payment plans. We accept the terms of a store credit card without knowing that if we fail to make one of the 30-60-90 day payments, we will pay back interest to the point of sale. We do not understand that we need to pay more than the minimum credit card payment as it will take 30 years to pay off a washer and dryer purchase. We do not ask the question, do I really need yet another credit card? We do not realize we have the power to say “no.”

I tell my children “people want your money, so you need to understand that.” Sometimes, they want it by legitimate means. Sometimes they have enticing commercials which are too good to be true. And, sometimes they will try to steal it from you online or by lying to you in person. You have to guard against this. With this backdrop, someone in a  lower socio-economic class will not ask enough questions to be served. They will take that extra credit card that arrives in the mail. They will sign up for the 30-60-90 day store plan to get a 10% discount not knowing the full ramifications of the transaction. I have also witnessed in helping homeless families, budgeting skills could be improved and asking questions about “must have” purchases are not done often enough. Sometimes these “needs” are actually “wants” and could be postponed. They do not know how to zealously navigate the use of coupons or the best times to buy products. They do not ask for the manager or supervisor when being ill-served.

This week I read a series on the inability of hospitals to uniformly offer reduction or the abatement in cost to those without health insurance and in an impoverished state. Someone wrote in that they successfully navigated payment options from one of the studied hospitals asking why couldn’t others have done that. When I read the letter critical of the people short-changed, the concept of class matters entered into my head. The people in need did not navigate the system as they did not know or have the confidence to ask the right questions. They did not relentlessly pursue options. This is exacerbated by the lack of transparency of the payment system, so it takes a concerted effort to understand what is happening even for people in higher classes. There are other examples in our society where you have to make a concerted effort to understand the details.

In closing, my hope is for more people to understand that class matters in getting proper help and service. We have to make it easier for people to ask questions, search for answers and be better served or, at least avoid being ill-served. It is OK to ask questions. As the teachers often say “the only dumb question is the one not asked.”  Please help others remember that. Offer to go with someone to the doctor to help ask the right questions. Or, encourage people to write their questions down beforehand. Encourage people to not get into credit exposure beyond their means.  Share your wisdom of purchasing or not purchasing items. Sources like Consumer Reports, BBB , Angie’s List,  http://www.cars.com are vital tools, e.g. Yet, I guess the big take away is to not assume people are like you. You may have avoided stepping  in the hole, but you would have asked more questions. Not everyone will. Offer them your help and understanding.

Blackbird singing in the dead of night – a reprise

I wrote the following post six years ago after watching an old interview with Paul McCartney. Its lyrics and context still resonate today.

The title is from a line of The Beatles song “Blackbird” which is a tribute to the struggle for African-Americans for their civil rights. The song was sung by Paul McCartney with writing credits to both him and John Lennon, although McCartney was the lead.

Blackbird singing in the dead of night
Take these broken wings and learn to fly
All your life
You were only waiting for this moment to arise

Blackbird singing in the dead of night
Take these sunken eyes and learn to see
All your life
You were only waiting for this moment to be free

Blackbird fly, blackbird fly
Into the light of the dark black night

Blackbird fly, blackbird fly
Into the light of the dark black night

Blackbird singing in the dead of night
Take these broken wings and learn to fly
All your life
You were only waiting for this moment to arise
You were only waiting for this moment to arise
You were only waiting for this moment to arise

Here is what McCartney said about the origin of the song in an interview in 2002.

“I’ve got a poetry book out called Blackbird Singing…..I was in Scotland playing on my guitar, and I remembered this whole idea of ‘you were only waiting for this moment to arise’ was about, you know, the black people’s struggle in the southern states, and I was using the symbolism of a blackbird. It’s not really about a blackbird whose wings are broken, you know, it’s a bit more symbolic.”

I added McCartney’s quote as I wanted the clarity around what the song means. African-Americans are still fighting an uphill struggle for their civil rights. What has happened in Ferguson, Cleveland, New Jersey, Charleston, Charlotte and Baltimore is tragic, but evidence of the disenfranchisement of African-Americans. The lack of opportunity, the malaise, the maltreatment, the deterioration of the neighborhood, the lack of respect given to people of color in our country continues.

I have noted before that Warren Buffett has said he was born lucky. He was born a white male in America. All three components of that phrase are important – white, male and America. Yes, he worked hard, but he was afforded opportunities that African-Americans do not get.  Not only do many whites like me have a hard time knowing the challenges of being black, but we also do not fully realize the advantages of being white. As I wrote recently, as a white man, there are not too many places I cannot go no matter how I am dressed. But, there are far too many stories of how a black man can be dressed in his Sunday best, yet still be stopped by the police and think “be careful as this may be the last thing I do on earth.”

I would encourage three things. First, please do not look at those committing violence and rioting as indicative of the African-American community. The community knows this is not the path forward. Second, people who look like me need to do our best to understand the challenges we have in America for people of color, but also for all people in poverty. Third, as always, talk is cheap. These issues are complex and solutions have to address many underlying concerns. There are no sound byte answers as some politicians have espoused.

I mention this last point as we must address the wide disparity in American between the “haves” and “have-nots.” This is not just an African-American issue. It is an American issue, as most people on food stamps are white. Please re-read this previous sentence. Poverty exists in urban areas, in rural areas and even in the suburbs. We have to stop the “war on poor people” and make this a “war on poverty.”

We must invest in our infrastructure and deteriorated assets repurposing them. This will spawn jobs as well in places where it is needed. We must revise our minimum wage to be consistent with a living wage for one person, which varies, but is just over $10 an hour. We must invest in education at all levels. We must embrace the Affordable Care Act as it is helping so many people and fully implement it through Medicaid expansion in the remaining 20 odd states. For some politicians to say we have a poverty problem and be against the ACA is hypocritical and shortsighted, especially when it is working pretty well.

Remember McCartney’s words and lets help these folks with broken wings learn to fly. To do otherwise, goes against what our country is all about and any of the teachings found in religious texts.

The psychology of wealth can make you less compassionate – a reprise about an interesting study

After being reminded of this study in a comment on my last post, I decided to republish a post from 2013. I found it fascinating reading about the comparative psychology of the haves and have-nots.

This title may seem strange, but it is based on a study completed by the University of California at Berkeley and University of Toronto. The folks who scoff at this title and study authors would also be the ones who would say “what would you expect from a study done in UC-Berkeley.” Yet, the principal author Paul Piff, noted in the LA Times “I regularly hear the Berkeley idiot scientist who’s finding what they expect to find. Let me tell you, we didn’t expect to find this. Our findings apply to both liberals and conservatives. It doesn’t matter who you are. If you’re wealthy, you’re more likely to show these patterns of results.” Piff was interviewed along with Dr. Dacher Keltner on a PBS Newshour story by Paul Solman last month called “Exploring the Psychology of Wealth, ‘Pernicious’ Effects of Economic Inequality” which can be found with this link http://www.pbs.org/newshour/bb/business/jan-june13/makingsense_06-21.html.

The study concluded that people with wealth, whether it was real wealth or created in a game format, showed rather conclusively a higher propensity to have a sense of entitlement to get more than their fair share. It is not saying that every wealthy person would act this way and there are many exceptions, yet there was clear evidence to show a propensity to use their position to cut corners and gain further advantage. It also noted there tended to be a higher degree of compassion and fairness by those with less for others in similar or worse circumstances. In other words, it was harder for those who “have” to walk in the shoes of the “have-nots.”

I observe this often in trying to explain the needs of homeless or impoverished people. No matter how hard I try, there are audiences who can not be dissuaded from their pre-conceived notion that homeless or impoverished people are not deserving of help and that they should just get a job. This is one reason I always emphasize that 84% of the homeless families, an agency I work with helps, have jobs. We are also seeing it manifest in the United States with the increasing divide in wealth between those with and without and the decline in economic class mobility.

But, don’t take my word for it. I would encourage you to click on the link above and judge for yourself. The aforementioned study observed the following in multiple tests:

– At a four-way intersection, drivers of the priciest cars were 4 times more likely to fail to correctly yield the right of way than other drivers;

– In a waiting room with a jar of candy where the participants were all told the candy was being saved for a children’s meeting soon following, the wealthier participants took candy from the jar 2 times more frequently than non-wealthy participants;

– In a dice game to add up the results of dice rolls, with the person with largest dice tally winning $50, the wealthier participants were 4 times more likely to cheat; and

– Similar results were also found on other exercises around reporting of incorrect change to a small financial transaction or getting an incorrect grade on an exam when the participant knew they earned less. The wealthier participants reported the infraction in their favor fewer times.

The study went further to show the results of a weighted Monopoly game. One person would get to roll two dice to the other’s one, the same person would also get $2,000 to the other person’s $1,000 and get to use the car game piece to the other person’s lesser token. What the study observed, the person in the game who had the most money and best opportunity to win, used directive comments that showed a sense of entitlement to their success. When the study flipped the weighting, the person who in real life was less affluent, but who now had the upper hand in the game, would also exhibit some of the same traits of entitlement.

The troubling part of the study, is people with wealth, whether real or contrived, exhibited a sense of entitlement to their wealth. It is the same reason when I wrote a few months ago that Warren Buffett said he was also “lucky” to be as wealthy, it bothered people. He said he worked hard, but he was born a white male in America, which gave him a leg up. By the way, Buffett is definitely one of the exceptions to the rule about compassion.

Yet, there is hope. Dr. Keltner, who heads the Greater Good Science Center at UC-Berkeley noted: “One of the things that wealth and money does is it comes with a set of values, and if you want a deeper ideology, and one of them is, generosity is for suckers and greed is good. But it turns out, there are a lot of new data that show, if you’re generous, and charitable, and altruistic, you will live longer, you will feel more fulfilled, you will feel more expressive of who you are as a person. You probably will feel more control and freedom in your life.”

The above translates to business success, as well. In the highly acclaimed business book by Jim Collins called “Built to Last,” his team indicated that one of the reasons companies are much more successful than even their best competitors is called “Be more than profits.” These companies were terrific community citizens and invested their money and people’s time in needs of the community. As a result, people valued working there and the community was more supportive of the companies, in both good time and bad.

So, the key takeaways from this study to me are (1) do not let what you own define you, (2) do your best to understand what people in need go through – if you have not been there, you really don’t know what it’s like, (3) there is a huge psychic income to helping others and (4) doing the right thing can only be viewed in a good light. You will be on the “side of the angels.” Note, this post relied on several news articles in addition to the PBS Newshour piece mentioned above – LATimes,org, Dailycal.org and Highandernews.org.

Class matters, socio-economic class that is – a revisit to an old post that remains pertinent

The following post was written in 2012, but it still remains pertinent. When I hear people chastise people in poverty for not working their way out, I think of this topic.

When you read this title, there are several interpretations that come to mind. While I am a firm believer in acting in a classy way, treating others like you want to be treated, the “class” I am referring to here is socio-economic class. There is a body of work spawned by research conducted by the New York Times, which led to the publishing of a book under this same title – “Class Matters.” It also led to a revolution of thought and I would encourage you to visit “www.classmatters.org for more information.

In essence, the term class matters refers to the tenet that your socio-economic class is a key factor in your ability to ask questions of those who are trying to serve you. The higher strata of socio-economic class is highly correlated with better education and more confidence. This translates into the greater ability and lesser reluctance to question things. On the converse, those in lower socio-economic classes tend to have lesser education and more self-esteem issues. They have a greater inability and lack of confidence to question those in power or who are trying to serve them.  As a result, those in the lower classes often make poorly informed decisions as they are:

  • too scared to ask questions,
  • feel threatened if they do so,
  • feel they will show their ignorance if they do,
  • do not know the right questions to ask, and/or
  • fall into a trusting mode, whether legitimate or not, that the person serving them knows what they are doing as they are wearing a doctor’s coat or suit and tie.

To illustrate this concept using a real life occurrence, the current housing crisis we are facing has many areas of cause from the lenders to rating agencies to investment managers to developers to buyers. At the heart of the problem, we had too many developers and realtors selling houses to people who could not afford that price of house and mortgage lenders providing mortgages to people who should not have that level of mortgage or who did not fully understand the terms of the loan. The buyers did not understand what a variable mortgage is or, using one of the lender’s terms, what a “pick-a-payment” or flexible payment mortgage entailed. The concept of negative amortization is term that was not well-explained or fully understood. In “House of Cards” a line that resonates with me is lenders were providing money to people who could “fog a mirror.” Then, they packaged up all of these poor risks in collateralized debt obligations (CDOs) and sold them to investors who thought they were buying a less risky product. The rating agencies did not help by stamping these CDOs with a AAA rating.

There are some who firmly believe in the concept of “let the buyer beware.” In their minds, the people who bought these houses and took out these loans should have been more aware “like I would have been.”  As a consequence, they believe the buyers should be held entirely responsible for the housing crisis. This school of thought has some merit, but misses two greater issues. First, if you have ever bought a house, you are asked to sign more papers than in any other transaction. I would wager that an exceedingly high percentage of buyers do not read every word of what they are signing. The legalese is too complex. More often than  not, they will ask the attorneys to explain simply what they are signing. I would also wager that in these transactions people actually sign papers they do not fully understand.

Second, with that context, people in a lower socio-economic class will be even more trusting of those in suits and ties. They would ask even fewer questions and understand even less of what they are signing. When the American Dream is to own a home and people in suits and ties paint a picture that you can afford this home, the buyers believed them more times than they should have. In some cases, the seller put “perfume on a pig” to dress up the sale as best as possible. Individuals were shown monthly payment numbers and did not realize those numbers could dramatically change every two years. In some cases, their income and wealth numbers were inflated to show they could afford a house and mortgage they otherwise would not. The buyers trusted people showing these numbers and signed on the many dotted lines.

Two true stories will embellish these points. The poster child for one extreme end of what happened was a builder based in Atlanta. The CEO and CFO were convicted of criminal and unethical actions they helped perpetuate with home buyers. In essence, the company-realtors representing  new developments did not represent they would make an extra bonus if you bought in this new neighborhood. They did not represent the inspector was being paid off to inflate the price of the house and show no problems existed. They did not represent that the mortgage lender they recommended was affiliated with the developer. So, along comes the buyer who does not know this, does not know to ask these questions and who sees a financial representation that they can afford this house. Even people above the lower socio-economic classes were taken in by this criminal behavior, yet the lower class people did not stand a chance.

The other anecdote took down a bank of which I was shareholder. This bank bought  a mortgage bank who had developed the concept of the “pick-a-payment” mortgage. This flexible payment mortgage concept was geared for a very astute buyer, not the masses of people who bought it. Mortgage people at this bank wondered why the CEO of the acquirer was pushing these mortgages even up to six months before the bank was destined to fail.  A mortgage person for that bank said we are having “pick-a-payment parties” to promote the sale of these mortgages. We are selling these mortgages to people who do not know what they are buying. They do not understand when they do not pay enough, their mortgage principal increases. Like with the above example, the lower socio-economic class buyers did not stand a chance. The people in higher classes suffered as well.

Yet, the class matters concept goes beyond these examples. It happens in everyday life, whether it is visiting the doctor, buying a car or something on credit or being served by the bank on other issues. We have people who will go into debt as they do not know the exposure they are adding with each purchase. In today’s world, there is a dearth of customer service. You have to be the navigator of your own customer service experience. Many people do not realize this as the case and tend to delegate the responsibility to the customer service person. We don’t ask enough questions of doctors seeking alternative treatments or payment plans. We accept the terms of a store credit card without knowing that if we fail to make one of the 30-60-90 day payments, we will pay back interest to the point of sale. We do not understand that we need to pay more than the minimum credit card payment as it will take 30 years to pay off a washer and dryer purchase. We do not ask the question, do I really need yet another credit card? We do not realize we have the power to say “no.”

I tell my children “people want your money, so you need to understand that.” Sometimes, they want it by legitimate means. Sometimes they have enticing commercials which are too good to be true. And, sometimes they will try to steal it from you online or by lying to you in person. You have to guard against this. With this backdrop, someone in a  lower socio-economic class will not ask enough questions to be served. They will take that extra credit card that arrives in the mail. They will sign up for the 30-60-90 day store plan to get a 10% discount not knowing the full ramifications of the transaction. I have also witnessed in helping homeless families, budgeting skills could be improved and asking questions about “must have” purchases are not done often enough. Sometimes these “needs” are actually “wants” and could be postponed. They do not know how to zealously navigate the use of coupons or the best times to buy products. They do not ask for the manager or supervisor when being ill-served.

This week I read a series on the inability of hospitals to uniformly offer reduction or the abatement in cost to those without health insurance and in an impoverished state. Someone wrote in that they successfully navigated payment options from one of the studied hospitals asking why couldn’t others have done that. When I read the letter critical of the people short-changed, the concept of class matters entered into my head. The people in need did not navigate the system as they did not know or have the confidence to ask the right questions. They did not relentlessly pursue options. This is exacerbated by the lack of transparency of the payment system, so it takes a concerted effort to understand what is happening even for people in higher classes. There are other examples in our society where you have to make a concerted effort to understand the details.

In closing, my hope is for more people to understand that class matters in getting proper help and service. We have to make it easier for people to ask questions, search for answers and be better served or, at least avoid being ill-served. It is OK to ask questions. As the teachers often say “the only dumb question is the one not asked.”  Please help others remember that. Offer to go with someone to the doctor to help ask the right questions. Or, encourage people to write their questions down beforehand. Encourage people to not get into credit exposure beyond their means.  Share your wisdom of purchasing or not purchasing items. Sources like Consumer Reports, BBB , Angie’s List,  http://www.cars.com are vital tools, e.g. Yet, I guess the big take away is to not assume people are like you. You may have avoided stepping  in the hole, but you would have asked more questions. Not everyone will. Offer them your help and understanding.

Racial inequality has deteriorated further with COVID-19

In an article in The Charlotte Observer a few days ago by Gene Nichol called “What the pandemic has done to racial inequality in North Carolina,” racial inequality has become even worse. Nichol is a contributing columnist and professor at the University of North Carolina School of Law, with a focus on poverty. The article can be linked to below, but here are a few key paragraphs:

“It doesn’t happen as often as one might wish. But, on occasion, you can still be surprised by what someone says. For example, earlier this month, the Donald Trump-appointed Chair of the Federal Reserve, Jerome Powell, explained to the Senate Banking Committee:

‘Disparate economic outcomes on the basis of race, have been with us for a very long time, they are a long-standing aspect of our economy, and there is a great risk that the pandemic is making them worse. Because the people who are most affected by the job losses are people in relatively low-paying parts of the service industries that happen to skew more to minorities and women, there is a real concern that if we don’t act as quickly as possible to support these people then we’ll leave behind an even more unequal situation. We need to do as much as we can to avoid exacerbating inequality.’

The traditional patterns of racial economic subordination Powell referenced have long dominated every component of life in North Carolina. Today, for example, twice as many African-American Tar Heels live in poverty as whites. The numbers are even worse for Black kids – nearly three times as many are poor as whites.

Racial income disparity is huge. But racial wealth disparity astonishes. Black households, on average, claim less than a tenth of the economic assets of white Tar Heel families. Racial minorities are dramatically more likely, in North Carolina, to be unemployed, uninsured, food insecure, housing insecure, and trapped in low wage work. Such defining disparities have existed throughout the entirety of our state’s history. Radical, systemic, disproportional racial economic impact, as Chairman Powell put it, has ‘been with us for a very long time.’

And then came the tragic, terrifying COVID-19 pandemic. Hundreds of thousands of Tar Heels were cast, anew, into poverty. No Kid Hungry estimates that, this year, one in four Tar Heel children won’t be able to get enough to eat. State food pantries report a 38% increase in demand over recent months. Since March, over half of Black families, and 43% of Latinx households, lost significant employment income sources. Over a third of Latinx renters have been forced to miss monthly payments, jeopardizing their housing. Eighteen percent of all North Carolina adults aged 18-65 are now without any health care coverage whatsoever. Nearly 40 percent of N.C. Latinos now have no medical insurance. As Fed Chair Powell put it, Covid ‘will leave behind an even greater’ landscape of inequality.”

Rather than add my own two cents, I encourage you to re-read the testimony above from Chairman Powell, along with Nichol’s commentary. What is happening in North Carolina is an example of what is going on in other places. People with low income jobs do not have the luxury of working from home, so they must go in or get fired. So, the COVID risks are much greater to a group already at financial risk.

What COVID-19 has done to racial inequality in NC | Charlotte Observer

Bank CEO blasts peers for not seeing inequality (per The Charlotte Observer)

With more interest and advocacy for the disenfranchised in our midst, an article by Austin Weinstein of The Charlotte Observer caught my this week called “Bank CEO blasts peers for not seeing inequality. A link to the article is below.

I have written often about the “haves and have-nots” in America. The disparity has been worsening for years and it now matters more to whom and where you were born than merit. Sadly, the declining middle class and growing poverty problem has been addressed by more trickle down economics and attacks on benefits to help people in need.

Per The Charlotte Observer:

“Kelly King, the CEO of Truist — America’s sixth largest bank — issued an exhortation to the economic elite of North Carolina and the country: We are blind to the difficult lives of many in the U.S. and must work to resolve the country’s educational and economic divides, or risk the consequences.

‘We see what happens when we have this giant divide between the haves and the have-nots,’ King said to bankers and executives gathered in Durham for an annual economic forecast hosted by the North Carolina Chamber and North Carolina Bankers Association. ‘If we have this scenario where people lose hope, they have no sense of opportunity, they’re dysfunctional. They get mad, they get on drugs, they get guns, they start shooting.’…

While there are many origins to America’s widespread educational and economic inequality, King pointed to the perceived failures of American public school system as one of the paramount reasons for the divides in the country. If people can’t read or do simple math, he said, they are effectively left out of much of the U.S. economy.

‘We are cheating our kids and our grandkids of a future,’ King said. ‘They will not have the same kind of life we have had,” he warned, if the current course of the country isn’t changed.'”

We must invest in our children and our communities. Asset Based Community Development means repurposing depleted assets or restoring them to original form. A neighborhood school is more than a place of seven hour education. It offers a community meeting place for after-school programs, neighborhood meetings, civic meetings, exercise classes, etc. Inviting schools, rewarded teachers, safety mind-sets, etc. will reinforce better education for our kids.

King’s admonition speaks to the crisis it is. The US disparity has widened at the same time our educational ranks in science and math have fallen. If we don’t invest in our kids, we really don’t have the standing to speak of American exceptionalism. It is hard to be a shining light on a hill if we fall from the top.

Read more here: https://www.charlotteobserver.com/news/business/banking/article239048138.html#storylink=cpy