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Red -- Getting Out of It -- Is the New Black

Across California and the nation- in New York, Los Angeles, San Francisco, and Sacramento- money is the subject of buzz, new ideas, and VIP events. Specifically, the topic is the lack of money- the have-nots, the why-nots, and trendsetting solutions.

For once the subject is not just the typical California budget woes. Those aren't new (yet somehow the designers bring them back every season). It's banking development districts (BDDs), and the new models of community-building and economic development being tried on by cities. And it's the poverty measure, and the work being done to revamp its outmoded form and function.

BDDs create incentives to encourage banks and credit unions to locate in low-income areas that lack mainstream financial institutions, and are fast becoming the subject of local buzz. On October 30th the Los Angeles City Council announced it was unanimously passing a motion directing the city attorney to draft a BDD ordinance.

LA is the first city in the nation to create a BDD ahead of the example of its own state. New York City created one, after New York State did ten years ago. That model has been proven to work, but other states have failed to pick up the trend. (And with any hot, "in" model, there's been a bit of catty criticism. These ordinances make city deposits already deposited in - guess what - banks a 'carrot' for those volunteering to locate in bank-less areas. That's not "corporate welfare" or "letting council members play with bank funds," it's good, smart policy.) This recent local action could provide the impetus to state legislators to create a statewide BBD program.

As far as non-legislative ways cities can help their unbanked constituents, San Francisco has set the trend. The city's "Bank on" initiative is a public-private partnership to 'bank the unbanked,' who in San Francisco pay as much as $40 million a year to check cashers and payday lenders, by facilitating access to free or low-cost traditional bank services. Where location of banks is not the issue, partnerships like Bank on do much to increase the economic stakes of hard working families. And 50 cities across the nation 'Banked on' after seeing Frisco's success.

We're talking about poverty. So let's see what we're talking about. The federal poverty measure, which was designed the same year as the lava lamp and the smiley face, is pitifully outdated. Tripling the cost of food does not endure eternally as the measure of 'how much is enough' for America's families. Housing and health care have become luxury goods, while food has become relatively cheap.

New York City, not surprisingly, is where the modern measure debuted. Mayor Bloomberg's Director of Poverty Research Mark Levitan took the National Academy of Science's recommendations to create a method that reflects both the geographic differences in housing costs, and all the varying kinds of state support received, when determining whether a family is in poverty. That's two things the current measure does not do. President Obama endorsed the update. And a few weeks ago, New America's California Asset Building program hosted Dr. Levitan at a small roundtable in the Capitol for key staff. If California follows suit, it will be fitting with the goal of keeping the state on the leading edge.

All fashion puns aside, the work and the conversation is not important because it's new, but because it's necessary- California may actually have the highest poverty rate in the nation. And before a problem can be mended, it has to be measured correctly.

Simple and creative solutions are not going to go out of style- we just need to make sure we update policies that no longer function the way they were originally designed.


I doubt that you will

I doubt that you will publish my comments but I hope that you do. The "bank on" programs push customers into banks touting low cost accounts. The truth is that these programs come with heavy fees. The accounts have 1 free overdraft fee per month but do nothing to address overdrafts numbers 2 and on. These fees can easily surpass any fees charged by a check cashing store or retailer that charges to cash checks. No one will every do it but somebody should ask the question, "exactly how much in bank fees have been paid by customers in the "bank on" programs?"