How would you define the point at which a family is poor in this country? How about in San Francisco? Most people are shocked when they learn how the federal government measures poverty. If you’re unfamiliar with this number you too will be shocked. Especially if you are a Californian.

According to the Feds, a family of three has to be earning under $17,600 per year to be poor. Let’s put this into perspective: The average family income in San Francisco is $94,000 per year, according to HUD, and the average is about $50,000 per year for the entire United States. But there is no allowance to adjust poverty levels locally. In addition to being unfair, this is unreasonable.

The Federal Poverty Rate is an absolute dinosaur of policy tool. It might even be funny if its obsolescence didn’t make it so harmful for tens of millions of poor Americans. Mayors across the nation have long bemoaned this discrepancy – because it has shortchanged cities of cash they’ve needed to serve the huge number of poor people the federal government won’t recognize, due to where the poverty line rests.

But it appears local efforts at redefining a definition of poverty, by Mayors, has created some new momentum at the national level.

A September 1st, 2008 NY Times article describes a meaningful, bi-partisan effort in Congress to redefine the poverty line. According to the article, “Democrats and Republicans alike say [the federal policy level] is hopelessly outdated…This month, Representative Jim McDermott, the Democrat from Washington who is the chairman of the House subcommittee on income security, plans to introduce legislation that would require the government to develop a more modern and accurate method to determine who is poor.” For more click here.

What is now unclear is how the staggering $700 billion price tag on the bailout package might make reasonable legislators think twice before they expand the universe of people who become eligible for federal aid.

I recently had the opportunity to participate in a working group tasked with identifying strategies that encourage CalWORKs clients to take full advantage of asset building programs and services. As mandated by AB 1078 (Lieber), a bill that was signed into law earlier this year, the California Department of Social Services (CDSS) assembled this large working group in Sacramento recently.

As I’ve reflected on this day, I’ve been struck by the promise this group has and what a shift this conversation represents. I was heartened that asset-building was finally being officially integrated in the state’s approach to helping low income families get ahead.

Representatives from the public and nonprofit sectors working on local, county, and state levels engaged in lively discussions to identify effective administrative and legislative strategies that encourage CalWORKs families to take advantage of

Earned Income Tax Credit (EITC), a refundable tax credit that is among the nation’s most effective tools in helping families leave poverty;

Save or invest part of their EITC funds;

And, leverage their savings through matched savings programs such as Individual Development Accounts (IDA)

The upshot of this group will be a formal report to elected officials. Findings and recommendations made by EARN and APIC along with other public and nonprofit organizations will be outlined to the legislature and released December 1, 2008. We hope creative conversation like this grow within California and in states around the nation.

FDIC, which took over IndyMac last month, has unveiled an ambitious plan this week to help thousands of troubled IndyMac borrowers repay their mortgages and stay in their homes. The FDIC will be mailing out about 25,000 loan modification proposals to borrowers whose mortgages it currently owns and services.

This plan aims to assist 37% of IndyMac’s seriously delinquent borrowers by conditionally modifying the loan into a fixed-rate mortgage with an interest rate capped at 6.5%. Once the modification offer reaches the borrower, all they need to do is sign the new agreement, send a check for their new mortgage payment, and information necessary to verify income.

“Keeping borrowers in their homes is the optimal low-cost choice,” says Sheila Bair, Chairwoman of the FDIC.

Recent FDIC research finds that sales of performing loans to outside investors recover 87 cents on every dollar, compared to 32 cents for nonperforming loans.

The large-scale nature of this new program hopefully signals a paradigm shift in the way regulators and banks assist borrowers. Analysts predict dozens of small bank failures in the next two years. If successful, this loan modification plan could be FDIC’s new strategy in the event of a similar bank takeovers.

To learn more click here and here.

A new documentary produced by the California Reinvestment Coalition (CRC) entitled “Mo’Money, Mo’Money, Mo’Money” shows how foreclosures destroy the dreams of California families and threaten the stability of small businesses, city governments, and neighborhoods.

The film reveals how this disaster could have been avoided if regulators and government officials had not ignored predatory lending practices.

California accounts for a quarter of all foreclosures in the country and seven of the state’s cities are consistently in the list of top ten foreclosure rates in the nation. Earlier this year, seven bills were introduced in the California legislature to address the mortgage foreclosure crisis. Despite strong support from community groups, the legislature only passed one meaningful bill.

To view the documentary and learn more click here.

Asset building groups have advanced over 80 positive policy changes in the last year and half, according to CFED’s Assets & Opportunity Scorecard Progress Report. These policies are bringing an additional $325 million towards asset building and asset preservation programs throughout the United States. Key policy victories include enacting state Earned Income Tax Credits, reforming asset tests for public assistance, and curbing predatory lending.

For example:

Washington became the first state without an income tax to enact a State Earned Income Tax Credit (EITC). 3 other states passed legislation also enacting a State EITC.

New Hampshire passed a bill capping interest rates for payday and title loans at 36%

California along with 7 other states significantly raised asset limits or exempted categories of assets to help more families qualify for public assistance.

9 states took up substantive mortgage lending reform bills though only 6 states successfully enacted legislation. California introduced a comprehensive package of predatory lending, foreclosure reform bills but only one (SB 1137) passed.

California asset building advocates and policy makers introduced ambitious bills earlier this year to address the foreclosures crisis, retirement savings, and financial literacy, but due to the widening $16 billion state budget deficit, all but a few bills stalled in the legislature.

Now that Congress and the White House have agreed on an economic stimulus package to spur spending and try to keep the U.S. economy from going into recession (if it isn’t there already), it’s time to think about ways to encourage more saving and investing in America.

Millions of Americans are barely getting by, living from paycheck to paycheck, or going into debt using high-cost financial services. One in five families lacks sufficient assets to survive at the federal poverty level for three months if they lose their income, according to CFED’s 2007-2008 Assets & Opportunity Scorecard.

What messages are workers and families in America hearing every day? Spend, spend, spend. Although continued consumer spending might help the broader economy and some families to stay afloat in the short term, this continued spending craze is not helping families living on the edge to become more financially secure in the long term.

What we need are policies that encourage people to save — for a rainy day, for home ownership, for college, for retirement, and for their children’s futures. Most of the current policies that encourage saving and investing primarily benefit those who already have assets. We need policies that also help low-income families to save and build wealth.

States and tribal governments can encourage public benefit recipients to use mainstream financial services and begin saving for the future by counting financial education as a welfare work activity, eliminating asset limits that discourage saving, facilitating direct deposit of cash benefits, supporting free tax counseling and preparation programs, and allowing taxpayers to split state refunds. Allowing self-employment as a welfare work activity and supporting car ownership programs expands the range of work options available to low-wage workers.

States, schools, and banks can partner to develop teen bank programs that bring a new generation into the financial mainstream and prepare teens for jobs in the high tech financial services industry. Savings programs such as Individual Development Accounts, Lifelong Learning Accounts, Family Self-Sufficiency accounts for public housing residents, universal Child Development Accounts, and automatic enrollment into portable retirement accounts help adults and children save for postsecondary education and training, homeownership, small business development, retirement, and other asset goals.

Banks and credit unions can partner with cities and states to bring everyone into the financial mainstream through innovative programs such as Bank on California and America Saves.

Policies that protect consumers from high cost financial services such as check cashing, payday loans and consumer installment loans, refund anticipation loans, and predatory mortgage loans allow people to redirect those resources into savings and investments.

Let’s work to implement these policies and encourage people to save, save, save!

Dory is Supervising Attorney for Community Investment at the Sargent Shriver National Center on Poverty Law in Chicago. For more information, contact Dory Rand at 312.368.2007 or doryrand@povertylaw.org.

Under a recent plan announced by Governor Arnold Schwarzenegger, four major subprime lenders promised to freeze the initial, lower mortgage interest rates for subprime borrowers who cannot afford their escalating mortgage payments. According to Barclays research estimates, this will help about 12 percent of borrows with adjustable-rate subprime loans.

Countrywide Financial Corp., GMAC Mortgage, Litton Loan Servicing and HomeEq Servicing—together have serviced more than 25% of California’s subprime loans, however under this voluntary agreement, the four lenders have agreed to contact borrowers before their rates adjust and establish a streamlined process for handling loan modifications. To qualify for this special program, the borrower is required to occupy the home, have made their payments on time, and prove they cannot afford payments with the higher interest rate.

The agreement states that all four loan servicers will provide this interest freeze program for a ‘sustainable’ period of time.

“Lenders could freeze rates for five years or longer, but terms will depend upon each borrower’s situation” Schwarzenegger said.

“We’ve been in like a desert of despair. There’s not been any good news, and it had not appeared the state was taking sufficient steps to intervene…This seems to be a significant step.” Said Kevin Stein, associate director of the California Reinvestment Coalition who was quoted in The Sacramento Bee. Advocates for lending policy change remain cautiously optimistic about the impact of these approaches, and note that the real impact will be driven by program design details.

I was just a child during the Vietnam War. It didn’t really register for me. When I moved to San Francisco as a young adult and did advocacy work with homeless people, I was upset to learn that a third of the folks on the city’s street were military veterans and most had served in Vietnam. They were soldiers who returned from the trauma of war, to a country ambivalent (at best) about their service and shamefully unprepared to help them make their way back to a stable civilian life.

Fast-forward thirty years. America is again engaged in a protracted, potentially futile, certainly unpopular war. But now I’m a grown up; this war is happening on my generation’s watch. The people fighting are our peers, and some are even our children. Regardless of what we think about the current war, it is imperative that we not neglect our soldiers, as this country did after Vietnam. We must remember that for the soldiers, the struggle isn’t over when the war ends.

Already more than one third of Iraq and Afghanistan war veterans are suffering from post traumatic stress disorder (PTSD) or traumatic brain injury (or both), and these numbers are certain to grow. Forty percent of our soldiers are Reservists and National Guard members.

They tend to be older and have left behind families, financial responsibilities and jobs. After serving multiple tours, they are too often returning to find their jobs gone and their families in economic distress.

Unemployment among young veterans (ages 20-24) is currently 15%, three times the national average for this age group. And preliminary research shows extremely high rates of sexual trauma for women in the service (20%-40%), making them particularly vulnerable to PTSD.

Some of our policymakers are waking up to this reality, recognizing that many veterans and their families will need substantial services and opportunities to successfully transition back to civilian life. In its November e-newsletter, APIC highlights recent legislation including the proposed Twenty-First Century GI Bill of Rights Act (SB1409), which would expand education benefits, business development assistance and favorable homeownership financing for veterans of the Iraq and Afghanistan wars.

These are critical initiatives. But those of us devoted to helping low-income people build wealth and achieve lasting economic advancement also need to take a fresh look at this issue: How can we tailor asset-building strategies to ensure they reach and are of value to veterans and their families? It is a challenge well-worth grappling with and I look forward to your thoughts.

Amanda Feinstein is the Program Officer for Economic Security at the Walter and Elise Haas Fund in San Francisco.

Speaking to the Congressional Black Caucus, Democratic front-runner Hilary Clinton spoke about her baby bond proposal saying, “I like the idea of giving every baby born in America a $5,000 account that will grow over time so when that young person turns 18, if they have finished high school they will be able to access it to go to college, or maybe they will be able to put that down payment on their first home, or go into business.”

Her announcement sparked a short, but heated national debate over the feasibility and success of such a policy. Rudolph W. Giuliani opposed Clinton’s idea saying, “Now, I know this never occurs to the people like Hillary and the other Democrats here in Washington…[that] This costs money.”

The Los Angeles Times published an article in reference to the criticism and the negative media spin sparked by her proposal. The LA Times argued that baby bonds are actually more feasible than critics claim. Not only do similar policies enjoy bipartisan support in the US, but countries such as Britain have instituted very similar programs. “The intellectual history of this idea is property ownership…the idea is to put children on a path toward lifetime savings and wealth accumulation, a notion that appeals to conservatives and liberals” said Ray Boshara, Director of the Asset Building Program at the New America Foundation.

For example, “When everyone was talking about Social Security and savings and retirement security, this was the only idea that brought Democrats and Republicans together.” Boshara argued in a recent piece in the Washington Post.

Unfortunately, Clinton has publicly disavowed her baby bond idea, declaring to the Wall Street Journal that it was off the table. Policy makers and advocates of similar policies such as the ASPIRE Act are sad to lose Clinton’s ability to give currency to this idea. Hilary’s public disavowal begs the question of whether the asset building field risks losing further momentum after her change of heart.

The good news is that Hilary Clinton is offering new savings plans that would match every 401(k) retirement account up to $1,000 annually. Here’s hoping this proposal has a longer shelf life!

California fares poorly—receiving an overall “C” grade—in the 2007-2008 Assets and Opportunity Scorecard, a biannual report released by the national Corporation for Enterprise Development (cfed). This report presents a comprehensive look at wealth, poverty, and the financial security of families on a national and state level. The 50 states, along with the District of Columbia, are assessed on 46 performance measures in five major areas: financial security, business development, homeownership, healthcare, and education.

According to the report, California is at the forefront of small business development, receiving an “A” grade for Business Vitality. However, California still has a long way to go in areas of asset poverty, homeownership, and access to health care. For example, California ranked:

• 39th in asset poverty
• 50th in affordability of homes
• 51st in median mortgage debt
• 49th in homeownership rates
• 42nd in percentage of uninsured low-income children
• 39th in percentage low income parents without health insurance

Overwhelming new data for the golden state indicates a need for:

• More asset-building saving programs
• State earned income tax
• A public health insurance programs to cover all low-income residents
• Eliminating asset limits on public benefit programs such as CalWORKs and MediCal

Grim data such as this is just the beginning if legislatures and advocates fail to respond to California’s growing insecurity.