WGBH News: Economy

China Tells Others To Put Financial House In Order

Thu, 15 Sep 2011 04:01:00 GMT

As gloom mounts over Europe's debt crisis, some are looking to China to play a leading role in stabilizing the shaky world economy.

But China made clear its reluctance to take on the role of the global economic savior as it hosted the World Economic Forum's Annual Meeting of the New Champions.

Polite applause greeted Premier Wen Jiabao as he stepped onto the stage Wednesday in the northeastern Chinese city Dalian, but his words depressed markets in Europe, a sign of the shift in the center of financial gravity.

Wen said China is willing to extend a helping hand, but developed countries must do their bit. From Europe, he asked for recognition as a market economy. From the U.S., he hoped for more access for Chinese companies and moves to reduce the budget deficit.

"The fluctuation in the value of the U.S. dollar has resulted in the instability of commodity prices on international markets. New emerging markets are under inflationary pressure," Wen said. "Under these circumstances, the Chinese economy is closely linked with the global economy. Countries must first put their own house in order."

Focus On U.S. Treasury Bills

Another high-powered panel put Chinese investments in U.S. Treasury debt under the spotlight. In the U.S. corner was the new ambassador to Beijing, former Commerce Secretary Gary Locke.

He's developed a reputation for modesty after being spotted trying to buy coffee with a discount voucher. This act sparked an online discussion about just how poorly the U.S. economy must be doing.

On stage, the moderator, a famous television anchor called Rui Chenggang, was determined to bring this up.

"My colleagues told me that you flew coach — economy class — from Beijing to Dalian. Is that a reminder that the U.S. still owes China money?" he asked.

Locke parried that shot by saying it was U.S. government policy. But the other panelists — such as adviser to the Chinese central bank, Li Daokui — were determined to remind him Washington owes Beijing a bundle.

"The Chinese authorities — we — are the most patient, the most cooperative investors in the world. Imagine if the $3.2 trillion currency reserves is being controlled by Mr. George Soros," he said. "I'm sure he'd already be underselling U.S. Treasury bonds. Your financial markets would be in much bigger chaos than it is."

Chinese Eyeing U.S. Assets

Still, Li said Beijing is waiting for reform of the U.S. highway, railway and postal sectors, so it can invest in those, too. Another panel member was even more blunt in his advice, and as one of China's richest men, the opinion of real estate mogul Wang Jianlian carries weight.

"Given the de facto devaluation of both the U.S. dollar and the euro, I'd stop buying treasury bonds. I'd start buying natural resources or other physical investments," he said.

He complained about lack of market access to Chinese investors, saying seven or eight American hotel groups had refused attempts by his company to buy equity stakes. Criticism appears to be mounting — even among these elites — of China's investments.

But that doesn't seem to have changed buying behavior, says Kenneth Jarrett, former U.S. consul general in Shanghai and now chairman of the greater China region for communications firm APCO Worldwide.

"You have the irony of when these calls to stop buying treasury bills [are] peaking, you also have peak periods of China buying treasury bills," he said.

But on his recent trip to China, U.S. Vice President Joe Biden repeatedly compared American holdings of 69 percent of treasury bonds, to Chinese holdings of just 8 percent. This could be a new strategy of downplaying Beijing's role as America's banker. But so far, that new narrative doesn't fit Beijing's playbook. [Copyright 2011 National Public Radio]

Making It In The U.S.: More Than Just Hard Work

Thu, 15 Sep 2011 04:01:00 GMT

First of a two-part report.

Here's a startling figure: The typical white family has 20 times the wealth of the median black family. That's the largest gap in 25 years. The recession widened the racial wealth gap, but experts say it's also due to deeply ingrained differences in things such as inheritance, home ownership, taxes and even expectations.

Take the example of two California women, Dametra Williams and Stephanie Upp, who aren't that different in many ways. Both were raised by single mothers who struggled financially. Both worked hard to get where they are today.

But how they describe basically the same thing about how they got to where they are today differs.

Williams is 40, black and a single mother of one. She just started her own business.

"It's funny, the American dream is sort of steeped in this myth of work hard, be self sufficient and push yourself forward, pull yourself up by your bootstraps, that kind of thing. But much of the wealth in this country was not built on that, in no way, fashion or form," Williams says.

Upp, 43, is white, a mother of two and a part-time consultant.

"I think about the little things, like when I went to college. When I graduated, my mom had enough resources to give me her car so that I had a car to get to work so that I could earn money that I could then save to help put me into the next position," Upp says. "I could then save more money and have opportunities. So it wasn't like we had a lot, but there was enough. I didn't do it all by myself."

And that's the difference. Study after study shows that white families are more likely than blacks and Hispanics to enjoy certain economic advantages — even when their incomes are similar. Often it's the subtle things: help from Mom and Dad with a down payment on a home or college tuition, or a tax break on money passed from one generation to the next.

Tom Shapiro of Brandeis University has tracked hundreds of families for almost 30 years and says the gap perpetuates itself.

"The larger the amount of financial wealth a family starts with, the more financial wealth it accumulated over that period of time," he says.

In other words, it's easier to get richer if you already are. Since blacks and Hispanics are less likely to have much wealth to begin with, they're less likely to have money to invest in the stepping stones to success — a small business, college or home.

Stephanie Upp: 'A Richer Life'

Upp, her husband Ben Corson and their two children live in a small bungalow in Oakland. This family is well on its way to achieving the American dream. Corson works in software. Upp consults for nonprofits.

Upp credits her success, in part, to something that happened a long time ago. When her parents divorced, her mother insisted on keeping their home in suburban Kansas. They didn't have much money, but they had stability and good schools, where college was a given and expectations were high.

"In my mind, there wasn't a question that I would have a richer life than I grew up with both financially and then also in terms of experience," Upp says.

College led to graduate school, then a career, then Corson. They started a family, and when they wanted to buy their first house, they got an unexpected boost.

"We were able to have a down payment for this house, thanks to my great aunt," says Corson. "So that definitely helped us."

His great aunt left the couple $60,000 in her will.

Shapiro says inheritance is a big factor when it comes to the racial wealth gap. White families are four times more likely than blacks to inherit. When they do, the median inheritance is 10 times greater.

Now, Upp and Corson plan to leverage their house into a new and bigger one, which will mean better public schools.

Stephanie says they aren't rich by any means, but they have options.

Their 6-year-old daughter, Clare, reads a poem from the Dr. Seuss book Oh! The Places You'll Go that is painted on the wall above her bed: "You have brains in your head, you have feet in your shoes, you can steer yourself any direction you choose."

Experts say choices and expectations can make all the difference.

Dametra Williams: Making Things Work

"When you don't have enough money to make any mistakes, the bottom line is you just don't, there's no room," Williams says.

Today, Williams thinks she finally has choices. Her home health care business in Berkeley is getting off the ground. She beams when her 18-year-old daughter, Yvonne, talks about getting into Mount Holyoke for college.

"I applied to so many [schools]," Yvonne says.

Williams says Yvonne applied to about 23 or 24 schools. "And she was offered admission and scholarships to about 18 of them, so I'm very, very proud," she says.

But it's been a tough journey. Only 12 years ago, Williams and her daughter were poor and homeless. She says that in her family, growing up in Texas, education wasn't a priority and college wasn't in the cards.

"My plan was to work and start my family," she says.

Unlike Upp's mother, Williams' didn't own a home. That's not uncommon among black and Hispanic families. In fact, about a third have no assets at all or are in debt, according to a recent study by the Pew Research Center. That's double the rate for white families. This means no home equity to draw upon and no mortgage interest deduction to ease the cost of housing. Williams knew when she left home at 17, she was on her own.

"There was no cushion for me to go back to, so the reality for me was either make things work [or] be homeless," she says. "I remember my grandmother telling us we could do anything we wanted to do." But, she adds, she doesn't remember getting advice on how to do it.

Like inheritance, financial know-how is key to closing the racial wealth gap, says Stuart Butler of the Heritage Foundation. He says families that don't expect to climb the economic ladder often don't acquire the skills to do so. After decades of discrimination, he adds, blacks especially can be discouraged about their prospects.

"If somebody thinks they will not succeed, there's a high probability that they won't succeed. Because if they don't expect to go to college, if they don't expect to be affluent, they start doing things with that in mind," he says.

'A Formula For It'

At the urging of a school counselor, Williams attended the University of California at Berkeley, but she says she dropped out when she realized she didn't have the right skills. Instead, she started a family. When she and Yvonne's father split, though, her one income as a youth counselor wasn't enough. Williams and her daughter wound up homeless, then in public housing.

"It was really hard," Williams says.

But here's where her story takes a turn. Williams was poor but smart. With the help of a housing authority savings program she eventually returned to college and got her degree.

She also got Yvonne into private schools through a special program for inner-city youth. A San Francisco nonprofit called EARN helped her save money for tutors and a business. Today, she thinks she might be breaking the cycle that have kept so many others in poverty.

"Families of color in particular are becoming much more knowledgeable and much more aware of how to create wealth here in America," she says. "I think there is a formula for it, and it's not work hard and do well. Most poor people work really hard."

Williams says she's still trying to figure out the formula and working hard to catch up. But, she thinks that Yvonne at least is going into the world with the head start she never had. [Copyright 2011 National Public Radio]

Mortgage Savings: Leaders Seek Refinancing Options

Thu, 15 Sep 2011 04:01:00 GMT

In his jobs speech last week, President Obama also took time to say he wants to help more Americans save money on their mortgages.

"To help responsible homeowners, we're going to work with federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4 percent," he said to applause from lawmakers on both sides of the aisle.

Millions of American homeowners don't qualify for those low rates. If they did, they'd be saving hundreds of dollars a month on their home loans, which might give them more money to spend elsewhere and help boost the economy.

"I know you guys must be for this because that's a step that can put more than $2,000 a year in a family's pocket and give a lift to an economy still burdened by the drop in housing prices," Obama said.

At a Senate hearing Wednesday, lawmakers from both parties spoke out in favor of the idea.

Democrat Barbara Boxer has introduced legislation with the same aim: allowing millions more Americans to refinance. Homeowners would be able to refinance even if they owe more than their homes are worth. They could also do so regardless of their credit scores.

Boxer said people with high interest rates who never missed a mortgage payment as the value of their homes went "down and down and down" should have a chance to refinance at current levels.

Proponents say there's a way to do that without more government spending. The crux of idea is this: The government-backed firms Fannie Mae and Freddie Mac are on the hook for millions of loans. They guarantee them. Millions of those homeowners are stuck at higher interest rates.

However, if Fannie and Freddie could extend their guarantee to cover a new, cheaper, refinanced loan, the private sector would make those loans.

"I think there are ways to do things here that don't cost taxpayers money — at all, any money," Moody's economist Mark Zandi testified at the hearing. "I think this is one of those things."

In fact, since the federal government is propping up Fannie and Freddie, letting so many people refinance could save the government money.

A Congressional Budget Office analysis found Fannie and Freddie would actually make money, Boxer said, "about $100 million, because it would stop many people from defaulting. Right away."

Basically, fewer foreclosures could mean less taxpayer bailout money for Fannie and Freddie.

Republican Sen. Johnny Isakson of Georgia, a co-sponsor of the bill, said allowing people to qualify for today's low-interest-rate loans would mean fewer people deciding to walk away from their houses.

"It does make it less likely that people will use strategic foreclosure as a mechanism to deal with their financial situation, and it should help to stabilize home prices in the long run and the short run," Isakson said. "I think it's something Fannie and Freddie ought to do. If they'll do it tomorrow we're ready for them to do it."

Fannie and Freddie don't need an act of Congress to do this, and the Obama administration is pursuing the idea without any new legislation. It would do so by expanding a current federal refinancing program called the Home Affordable Refinance Program, or HARP.

Some economists at the hearing had reservations, however.

"The question I have in my mind: A mortgage is one person's liability, it's somebody else's asset," Mark Calabria with the conservative-leaning Cato Institute said.

In other words, the homeowner would be saving money with a lower interest rate, but an investor in mortgage bonds somewhere was making money off that higher interest rate, so those bondholders would lose money.

"So you're increasing somebody's wealth by decreasing their monthly payment; your decreasing somebody else's wealth by reducing their bond payment," Calabria says. "It's not clear to me as an economist that the effect will be any less than zero."

But other analysts say the move would take billions of dollars from investors around the world and put that money in the pockets of middle-class Americans, who would go out and spend it. They say that would be stimulative.

"This plan would function like a long-term, middle-class tax cut without impacting the budget deficit," said Columbia Business School economist Chris Mayer, who has been proposing the idea for some time.

Some critics say the move still wouldn't be fair to those bond investors. It's also still unclear how many people the plan would reach. Everything depends on how it's implemented, Mayer said; you might reach fewer than 1 million people or you might reach 20 million, depending on the details. [Copyright 2011 National Public Radio]

On The Road, Obama Faces Mixed Reaction Over Jobs

Wed, 14 Sep 2011 21:01:00 GMT

For the second time in less than a week, President Obama visited a college campus today, touting his new jobs plan. He told supporters at North Carolina State University that if Congress goes along with his proposal for tax cuts and new government spending, it will help to restore middle-class jobs.

A new CNN poll shows more Americans support the President's jobs plan than oppose it.

But that survey and others also find widespread disappointment with the U.S. economy — and Obama's handling of it.

At an outdoor rally in Ohio this week, cheering supporters quickly took up Obama's call for Congress to "pass this bill."

Just a couple of blocks away, out of earshot of the rally, it was easy to see the toll that the long economic downturn has taken here in Ohio — an important political battleground that Obama won three years ago.

At a job fair sponsored by the regional logistics council, seasoned managers were putting in resumes for entry-level stock jobs. Matt Dawson lost his job as a lab technician two years ago. He's been looking for work ever since.

"We definitely need help," Dawson said. "I was making 16 dollars an hour and I'm considering jobs at 11, 9, 10, 8. And they're tough to come by."

Denise Coffield has been working part-time for minimum wage, since losing her job in a corporate downsizing.

"Something's got to change. I mean the economy's not going to grow if people aren't working and they can't spend money," Coffield said. "I just really hope that something changes soon."

That deep-seated frustration is echoed in national polls, showing that most Americans feel no better off now than they did three years ago. And they doubt that Obama's economic policies are helping.

It's not clear how much the president's new jobs plan will change those numbers. Alex Fischer heads the non-profit Columbus Partnership, which is made up of some of the area's biggest businesses.

"First we have a bit of skepticism," Fischer said. "I mean this is Stimulus Two. You can call it whatever you want to. Is that additional government spend the right strategy?"

Obama's first stimulus effort is widely seen as unsuccessful, even though many economists argue the recession would have been worse without it. Unemployment in Ohio did come down — from a high of 10.6 percent to 8.6 this spring. But with money from the first stimulus mostly gone now, unemployment has begun creeping up again.

Belt-tightening local governments continue to shed workers, here and across the country. That's why the president of the Columbus teachers union, Rhonda Johnson, was cheering Obama's plan to use new federal dollars to help keep teachers on the payroll.

"I know in Cleveland they had a layoff of more than 300 teachers," Johnson said. "As a union president, the hardest thing you have to go through is when your members lose their jobs."

Unions played a big role in electing Obama. But labor support could be tempered next year, with so many union members out of work. When asked how enthusiastic his members are about working for the president's reelection, Mario Ciardelli of the Central Ohio Building Trades Council's members replied, "That's a good question."

"A lot of us were a little disappointed in the recent past that he wasn't able to get things done," Ciardelli said. "And we need to bring jobs back to America. It's eroded our tax base. It's eroded the American Way. The American Dream. People are just losing heart over not having employment."

Ciardelli says the president's newfound push for the jobs act is a major step in boosting support.

Passage of the bill in a divided Congress is anything but certain. Alex Fischer of the Columbus Partnership said he wonders why Washington can't function more like his city, where Democrats and Republicans at least sometimes work together.

"We're able to push out all this partisanship and all the crap that goes on from that standpoint," Fischer said. "And that's a big frustration in Washington. Not pointing fingers at anybody but maybe pointing fingers at everybody."

Polls suggest as doubtful as Americans are about the President's economic policies, they like the Republican alternatives even less. [Copyright 2011 National Public Radio]

Herman Cain Talks Jobs, 'Atrocious' Poverty Rate

Wed, 14 Sep 2011 16:00:00 GMT

Former Biden Advisor Critical Of Cain's Jobs Plan

Wed, 14 Sep 2011 16:00:00 GMT

'Civil, Sober' Super Committee Gets To Work

Wed, 14 Sep 2011 16:00:00 GMT

Census Bureau: Poverty Rate Rises Past 2009 Level

Wed, 14 Sep 2011 08:00:00 GMT

Portion Of Obama Jobs Bill Would Update Schools

Wed, 14 Sep 2011 08:00:00 GMT

Moody's Downgrades Ratings Of 2 French Banks

Wed, 14 Sep 2011 08:00:00 GMT