This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Amid other good news about the U.S. economy — a declining unemployment rate, lower child poverty — the Federal Reserve has just reported that the net worth of U.S. households rose $1.4 trillion, to $81.5 trillion, during the second quarter of 2014. This means that families' assets, such as homes and stocks, have risen roughly $23 trillion in value since the depths of the "Great Recession" in 2009. Credit the market on Wall Street and recovering real estate prices, both partly attributable to the Fed's easy-money policies.
Too bad this resurgent wealth was anything but equally shared. As the Fed reported in a separate document, "families at the bottom of the income distribution saw continued substantial declines in real net worth between 2010 and 2013, while those in the top half saw, on average, modest gains." That's because upper-income people generally own more stock, and more valuable homes, than do lower-income people. Confirming the Fed findings, a Pew Research Center analysis of recent Census Bureau survey data on household wealth found that, despite some modest gains at the very bottom of the wealth distribution scale, "for the broad middle up to the most wealthy 4% of American households, wealth declined from 2009 to 2011."
In short, the rich are getting richer — and everyone else, not so much. The concentration of wealth may reflect the aging of the U.S. population, since more households are headed by those who have a lifetime of saving behind them. Still, such structural factors can't explain all of the increasingly pyramidal shape of wealth in American society. Government and the private sector need innovative approaches to help ensure opportunities for people at all income levels to save and profitably invest. One of the more worrisome points in the Fed data is that stock ownership is declining for the bottom half of households — probably because their participation in retirement plans such as 401(k) accounts has been falling since 2007.
For Americans of modest means, homeownership has long been the path to wealth accumulation, and government has spent billions trying to subsidize it. The housing crash showed that homeownership was oversold, and much government aid misspent; millions of people stretched their finances on the false assumption that house prices could never collapse. In response, conservative scholar Ed Pinto of the American Enterprise Institute and liberal housing activist Bruce Marks of the Neighborhood Assistance Corporation of America have proposed a new 15-year Wealth Building Home Loan — which they say would build equity more rapidly and with less exposure to volatile house prices than a standard 30-year loan.
The concept is to let customers of modest means use a down payment of up to 5 percent to "buy" a lower interest rate, after which 77 percent of their monthly payments would go to equity rather than to pay interest, because of the loan's shorter term. A number of banks are interested in offering the product to help meet their affordable-housing obligations, Pinto says. The results of those pilot programs, obviously, are still years away. But this is the kind of creative thinking about spreading the wealth that the country badly needs.