REMARKS
BY
DON POWELL
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
BEFORE THE
NATIONAL ASSOCIATION OF AFFORDABLE
HOUSING LENDERS
2002 INDUSTRY CONFERENCE
NEW YORK, NEW YORK
JUNE 13, 2002
Good morning. I am pleased to have been invited to address the National Association of
Affordable Housing Lenders' Industry Conference. Special thanks to your President,
Judy Kennedy, for extending the invitation.
There are any number of topics of mutual interest I could talk about today, but I want to
talk about one that is not only of critical importance to both state and federal regulators,
but to the American people as a whole.
I want to talk about financial education.
Abraham Lincoln, in his first public speech, called education "the most important subject
which we, as a people, can be engaged in."
I couldn't agree more.
But I would add that, increasingly, financial education — particularly of those who are
outside the financial mainstream — is one of the most important things which we, as
Americans, can be engaged in today.
I don't need to tell you that.
You're engaged in the business, each and every day, of helping create and preserve
communities across this country by promoting investment in affordable housing.
We all know that the best interests of the nation are served by assuring that as many
people as possible not only achieve but sustain the American dream, like owning your
own home.
But in order to reach the goal of a home or education or a small business, people have
to understand how money works. They have to understand that if it is not working for
them, it will often be working against them. And unless their money is working for them,
it will be impossible to build assets and secure a piece of the American dream.
BY
DON POWELL
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
BEFORE THE
NATIONAL ASSOCIATION OF AFFORDABLE
HOUSING LENDERS
2002 INDUSTRY CONFERENCE
NEW YORK, NEW YORK
JUNE 13, 2002
Good morning. I am pleased to have been invited to address the National Association of
Affordable Housing Lenders' Industry Conference. Special thanks to your President,
Judy Kennedy, for extending the invitation.
There are any number of topics of mutual interest I could talk about today, but I want to
talk about one that is not only of critical importance to both state and federal regulators,
but to the American people as a whole.
I want to talk about financial education.
Abraham Lincoln, in his first public speech, called education "the most important subject
which we, as a people, can be engaged in."
I couldn't agree more.
But I would add that, increasingly, financial education — particularly of those who are
outside the financial mainstream — is one of the most important things which we, as
Americans, can be engaged in today.
I don't need to tell you that.
You're engaged in the business, each and every day, of helping create and preserve
communities across this country by promoting investment in affordable housing.
We all know that the best interests of the nation are served by assuring that as many
people as possible not only achieve but sustain the American dream, like owning your
own home.
But in order to reach the goal of a home or education or a small business, people have
to understand how money works. They have to understand that if it is not working for
them, it will often be working against them. And unless their money is working for them,
it will be impossible to build assets and secure a piece of the American dream.
Currently, millions of Americans do not have a banking relationship with any traditional
financial institution. These "unbanked" — estimated at anywhere from 10 to 13 percent
of U.S. households — are primarily low to moderate income, minorities, and/or recent
immigrants. There is also a deep divide along educational lines. Only 20 percent of all
heads of household with less than a high school education use a traditional financial
institution, regardless of race or ethnicity.
Of course, the existence of unbanked households is not new. What is new is agreement
among the public and private sectors that improving their access to affordable and
convenient financial services is good public policy.
Millions of our citizens use so-called "fringe banks." The costs of using their services
and products are far in excess of the costs of traditional bank services and products.
These alternative outlets continue to grow.
At the same time, homeownership is an important national priority, and the
homeownership rates in traditionally underserved markets has been growing steadily
and at an impressive rate, due in part to the efforts of organizations and institutions like
yours.
And, the rates have been growing because of the wider availability of credit through
"subprime" lending. That's good for America, and for Americans.
But lending has a "dark underbelly." That underbelly is predatory lending.
The troubling problem of predatory lenders — an abusive form of subprime lending —
continues to be a hot topic of debate. And while the debate goes on year after year,
these predatory lenders continue sucking the economic lifeblood from families who have
finally been able to achieve homeownership through changes in housing finance; or
they target elderly homeowners on fixed incomes who are "house rich and cash poor."
Two years ago, the FDIC held forums on predatory lending in seven locations
nationwide. Those attending the meetings included bankers, community leaders, city
and state officials, and local residents. Participants identified problems in their particular
area and recommended solutions, which ranged from more legislation to better
enforcement of existing regulations.
But there was one recommended solution that remained constant no matter where we
went or who we talked to. That recommendation was consumer education — equipping
the consumer to help himself.
It's clear to all of us that there is a problem: the problem of millions and millions of
Americans without traditional banking relationships. The problem of people relying on
so-called "fringe providers" at costs they can ill afford. The problem of abuse in lending
practices targeting vulnerable segments of our population.
financial institution. These "unbanked" — estimated at anywhere from 10 to 13 percent
of U.S. households — are primarily low to moderate income, minorities, and/or recent
immigrants. There is also a deep divide along educational lines. Only 20 percent of all
heads of household with less than a high school education use a traditional financial
institution, regardless of race or ethnicity.
Of course, the existence of unbanked households is not new. What is new is agreement
among the public and private sectors that improving their access to affordable and
convenient financial services is good public policy.
Millions of our citizens use so-called "fringe banks." The costs of using their services
and products are far in excess of the costs of traditional bank services and products.
These alternative outlets continue to grow.
At the same time, homeownership is an important national priority, and the
homeownership rates in traditionally underserved markets has been growing steadily
and at an impressive rate, due in part to the efforts of organizations and institutions like
yours.
And, the rates have been growing because of the wider availability of credit through
"subprime" lending. That's good for America, and for Americans.
But lending has a "dark underbelly." That underbelly is predatory lending.
The troubling problem of predatory lenders — an abusive form of subprime lending —
continues to be a hot topic of debate. And while the debate goes on year after year,
these predatory lenders continue sucking the economic lifeblood from families who have
finally been able to achieve homeownership through changes in housing finance; or
they target elderly homeowners on fixed incomes who are "house rich and cash poor."
Two years ago, the FDIC held forums on predatory lending in seven locations
nationwide. Those attending the meetings included bankers, community leaders, city
and state officials, and local residents. Participants identified problems in their particular
area and recommended solutions, which ranged from more legislation to better
enforcement of existing regulations.
But there was one recommended solution that remained constant no matter where we
went or who we talked to. That recommendation was consumer education — equipping
the consumer to help himself.
It's clear to all of us that there is a problem: the problem of millions and millions of
Americans without traditional banking relationships. The problem of people relying on
so-called "fringe providers" at costs they can ill afford. The problem of abuse in lending
practices targeting vulnerable segments of our population.