In this issue, a new video on poverty and opportunity, Trump and the universal basic income, the Wall Street rules rollback, and impact investing in a volatile age.
Last year, Heron released a series of videos looking at the challenges of being poor, working poor and investing in a future more inclusive economy in the United States. Check out this latest featured video on poverty and opportunity:
You may also be interested to know that the first video on the Murphy Family was awarded a "Vimeo Staff Pick."
This NPR story looks at the number of college students who may be hungry and homeless:
Researchers at the University of Wisconsin surveyed more than 4,000 undergrads at community colleges across the country. The results? Twenty percent of students reported being hungry, 13 percent homeless.
Sara Goldrick-Rab, a sociologist who led the research team, says it's not just that college students need to work while in school. "It's that they're working, and borrowing," she says, "and sometimes still falling so short that they're going without having their basic needs met."
Meanwhile this other NPR report looks at how poor minorities struggle to build wealth at the same rate of their white counter parts. In Bloomberg, Peter Coy discusses research that offers a few conclusions for why that is:
A new study trashes most of the conventional explanations—and solutions—for the wealth gap. It’s called The Asset Value of Whiteness: Understanding the Racial Wealth Gap. It’s by researchers at Brandeis University and a public policy group called Demos. The table of contents says it all:
- Attending college does not close the racial wealth gap.
- Raising children in a two-parent household does not close the racial wealth gap.
- Working full time does not close the racial wealth gap.
- Spending less does not close the racial wealth gap.
You also might be interested in new research from the Economic Policy Institute's Emma Garcia on how black children are more likely to attend high poverty schools.
Also in Bloomberg, we have a look at the new face of unemployment and the role of drug use, former incarceration, disability and age that leave as many as 20 million struggling to find work. And finally, over at Inverse, Cory Scarola looks at whether the universal basic income might become a Trump administration policy push:
The core problem with Trump’s promise to improve the lives of working class Americans is that there is no clear way for him to bring jobs back to the places they’ve disappeared (to the degree to which they have and to the degree to which the gig economy hasn’t filled gaps with benefit-free labor). This is likely why Trump has spoken very little about cutting or privatizing entitlement programs, something polls have consistently shown Americans don’t support. In fact, voters were encouraged by Trump’s promise not to do those things...
If Trump’s base is concerned about economic backsliding — and that seems to be the case — universal basic income represents a politically expedient way to assuage their fears. Politically speaking, it also represents an expedient way to break through the Washington “gridlock.” Trump could easily present a UBI initiative as an effort to give Americans back the money taken from them by incompetent careerists and government elites. And, in a very literal sense, that would be the truth. It would also be big. And Donald Trump likes big.
Some critics worry that a role back of post-economic crisis rules will herald the return of an "unfettered Wall Street." In the American Prospect, Manuel Madrid looks at the potential repeal of a rule governing pre-paid bankcards:
“It is outrageous that Congress may block basic fraud protections on prepaid cards so that NetSpend can keep gouging struggling families with overdraft fees that have no place on prepaid cards,” Lauren Saunders, associate director of the National Consumer Law Center (NCLC), said in a statement...In 2015, 7 percent of U.S. households, or about 15.6 million adults and 7.6 million children, didn’t have a bank account at all, according to the Federal Deposit Insurance Corporation. Prepaid cards are most popular among low-income people who can’t qualify for a credit card.
Another of the more talked about repeal is a rule requiring money managers to act in the best interest of their clients, but in the New York Times, Vanguard's John Bogle says that genie may not be going back into the bottle:
It is widely agreed that the fiduciary rule would give impetus to the growing use of lower-cost, broadly diversified index funds (pioneered by Vanguard, the company I founded), such as those tracking, with remarkable precision, the S&P 500 stock index. But even without the rule, there has already been a tidal shift to index funds — actually, more like a tsunami. Since 2008, mutual fund investors have liquidated more than $800 billion of their holdings in actively managed equity mutual funds and purchased about $1.8 trillion of equity index funds. Low-cost index funds are almost certainly what Mr. Cohn means when he refers to the “healthy food on the menu.”
Several major brokerage firms have already embraced the fiduciary principle, announcing plans to comply with the rule by eliminating front-end commissions (known as loads) on retirement plan accounts in favor of an annual asset charge. And dozens of companies have reacted to the proposed rule by creating a class of generally less costly mutual fund shares with initial loads of 2.5 percent followed by annual charges of 0.25 percent of total assets.
I do not envision these responses to the fiduciary rule being reversed. With or without regulation by the federal government, the principle of “clients first” is here to stay.
Now that Wall Street has been welcomed back to Washington, it should use its return to the corridors of power to repair its tarnished reputation and to restore public confidence in the markets. That’s the least Wall Street can do after exacerbating one of the worst financial crises in history and then carrying on as if nothing bad had transpired. Mr. Trump can help make this happen, but only if he trades the repeal of Dodd-Frank for a wholesale reform of how bankers, traders and executives are compensated on Wall Street. A new system that rewards prudent risk-taking and holds people personally and financially accountable for their actions is a prerequisite to restoring our faith in Wall Street...
So while [the Trump administration and others] whittle away at Dodd-Frank, they need to do something else as well: junk Wall Street’s compensation system, which continues to reward bankers for making big bets with other people’s money and does nothing to hold them accountable when the bets go bad. We need to replace this system with one that rewards people when they succeed but penalizes them when they fail.
To do this, the government could require that the leading executives at each big bank — the top 500 or so people — put their own assets on the line in the event of a bankruptcy filing, bailout or default. Creditors and shareholders would have what’s called a first lien against executives’ co-op apartments, Hamptons houses, art collections and bank accounts. This would go beyond a now doomed Dodd-Frank proposal to claw back bonuses.
Over at Impact Alpha, Anthony Bugg-Levine looks at impact investing in our politically volatile age:
There has always been hate and fear of the other that shows up as racism, sexism, and xenophobia. But the Trump and Brexit forces tapped into a sense of hopelessness and an anger over the selfishness that has fueled growing inequality. In the long-term, we need to provide hope and a new narrative of common purpose...
[W]hen all of us make the case that investors can and should consider the social impact of their investments and not just the financial return, we offer an alternative to the narrative of selfishness that says we should only use investments to secure our own interests.
There is a real danger that impact investing will only makes rich people feel good about their unequal share of wealth. But if we do it well, and remember our purpose, then we will bolster the forces allayed against selfishness who argue that we should consider how our investments, along with all our actions, impact others.
In the Stanford Social Innovation Review, the McKnight Foundation's Kate Wolford discusses why it is important for foundations to see themselves as institutional investors:
At a moment when our planet faces daunting challenges, it is worth reminding ourselves what is possible when we use every lever of influence to create positive social and environmental impact. It’s a lesson I took to heart at the Paris climate summit, where I saw the transformative effect of using diverse levers of influence—both on the streets and in the negotiating halls—to establish a landmark climate agreement. I attended the summit as part of a delegation of institutional investors, rather than in my traditional role as a grantmaker. Participants included asset managers, as well as the heads of global brands, some of the world’s largest pension funds, and insurance companies—but I was often the only foundation president in the room...
An impressive roster of Fortune 100 companies, private businesses, and institutional investors like The McKnight Foundation reaffirmed the need to meet or exceed the Paris Agreement commitments. If McKnight had acted alone, our voice—and the $2 billion endowment behind it—would have meant very little. The power of this action comes from us pooling our assets to amplify a collective voice and underscore that market actors are seeking ambitious policies to address climate change. Yet only one percent of the signatories are foundations.
These experiences leave me wondering whether the philanthropic community is leaving behind some of our influence. If the lenses through which we chose to see ourselves included institutional investor, it could very well open the door to powerful new networks, new conversations, and new market-driven strategies.
Meanwhile, NPC Tris Lumley looks at the need harder about creating "a user-centered social sector":
The nonprofit sector is built on a deep and rich history of community engagement. Yet, in a funding market that incentivizes accountability to funders, this strong tradition of listening, engagement, and ownership by primary constituents—the people and communities nonprofits exist to serve—has sometimes faded. Opportunities for funding can drive strategies. Practitioner experience and research evidence can shape program designs. Engagement with service users can become tokenistic, or shallow...
The scope and pace of technological change is terrifying for most nonprofits and funders., Technology has driven huge changes in how we as citizens and consumers live our lives—how we find information, buy products and services, find love, and communicate with businesses and politicians. While nonprofits have been quick to work out how to use digital technologies in their communications and fundraising, the same cannot be said for their delivery of services and products. And while individual organizations are starting to move forward, we have not yet seen the true potential of web-based technologies in the social sector—the potential to radically transform the relationships between individuals and organizations, between organizations, and between individuals themselves.