Stock Market, Foreclosures on the Rise

Last week, the Dow Jones Industrial Average hit 13,000 points, for the first time in U.S. history. Meanwhile, a record number of Americans are defaulting on their home loans. What do these indicators mean for the average working American? Economist Julianne Malveaux talks with Farai Chideya.

Copyright © 2007 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

FARAI CHIDEYA, host:

So those are just a few items from today's news. And now, we turn to our new weekly segment on economics with Julianne Malveaux. She's an economist and president of Last Word Productions. Julianne, how you doing?

Ms. JULIANNE MALVEAUX (President, Last Word Productions): I'm wonderful, Farai. How about you?

CHIDEYA: I'm doing great. So before we get to the economic news, what do you think about the funeral for the N-word?

Ms. MALVEAUX: How come we can't have a funeral for the P-word - poverty? You know, we are such a theatrical people I think this is fascinating, but I'd like to see a focus on really public policy and not bells and whistles. Certainly, we can bury the word and then your grandma is going to call you one.

CHIDEYA: So...

(Soundbite of laughter)

Ms. MALVEAUX: You know, I'm not spending too much time on this. My focus is on how we deal with issues of economic justice, how we deal with issues of poverty, how we get every child who wants an opportunity to go to school to get there, and I will wish my brothers and sisters substance and not, you know, this sort of drama that has defined too much of the work we've done.

In the past year or so, you know, Imus says something, we're jumping up and down. Sure, Imus was wrong and he's gone. Is he going to be a period or a semicolon?

CHIDEYA: Right.

Ms. MALVEAUX: And so I just didn't - I'm - if they had a funeral, good.

CHIDEYA: All right. Let's have...

Ms. MALVEAUX: (Unintelligible) a funeral for something else.

CHIDEYA: Yeah. Well, speaking of a funeral for poverty, there are some people who certainly have their nest feathered a little bit more comfortably after the Dow Jones Industrial Average hit 13,000 points, the highest - the first time in history. How does this affect most people, if at all?

Ms. MALVEAUX: It doesn't affect most people, Farai. Let's be clear. About half of all Americans have direct or indirect investments in the stock market. Direct as in they buy stock, indirect as in they are in a pension fund or plan or something that has stock involvement.

Most people do not, so we're like people with our noses up against a glass wall watching other people eat candy saying, oh my, it must be good. And so let's just be clear that there's a bifurcation in the way that Americans lead their lives, and a lot of people see this news and it doesn't mean anything to them.

For those that it does mean something to, again be clear that it's bifurcation. In other words, there are people who are gaining phenomenally from this and others who are gaining just a little bit. So if the Dow Jones Industrial Average is 30 stock, it's the average of 30 stock, and it's not all stock that our indexes show how our economy is going.

It's a good number for our macro economy; it doesn't mean much for the micro economy. And for a people of color it means even less, especially if you earn less than $50,000 a year and you don't have a pension.

CHIDEYA: So considering that a lot of people still have some investment, whether it's, you know, through a 401(k) or other retirement fund, is this the kind of thing where you should say, oh, wow, I'm making money or you should just sort of - for example, I'll give you an example.

A lot of people when technology stocks were doing well changed their retirement investments so that they move things into technology, and then later on they felt, like, oh my gosh, this is horrible. If you're someone who is not a skilled investor, should you try to think about whether or not this changes the equation of your money?

Ms. MALVEAUX: If you're not a skilled investor, you should have a financial planner. Either you should be working with an organization that manages your money. If you're a professor or a teacher, TIAA-CREF does a great job. If you're in some other kind of pension fund, the biggest thing to know is if you work for, well, let's go back and say Enron, you don't want all your money in Enron. You want to have a diversified portfolio. But at the same time, what you want to say is that stock growth trickles down sometimes, not all the time, and you got to be very cognizant of what you're doing. If you are busy and you don't have time to do it every day, then don't challenge yourself to do that. Get someone else to do it and pay him for it. You pay him a percent or so a year. If you have $100,000, you pay him $1,000 a year to make you money. If they don't make you money, move on.

CHIDEYA: Speaking of moving on, some people have had to move on sadly because they have had their homes foreclosed on them. There's a lot more people who are in economic distress that affects where they get to live, if they get to hold onto everything they put into a house.

And the Federal Reserve just issued this report on Wednesday that said the nation is still experiencing economic expansion even though we're in a housing slump. So although a lot of people are experiencing pain on an individual level, is it affecting America as a whole?

Ms. MALVEAUX: You know, Farai, that's such a great question. I was talking to a sister friend the other day and she said how was it that the Dow Jones gets excited when the unemployment rate goes up. You know, let me repeat that. How was it that the Dow goes up when the unemployment rate goes up?

Corporate interests are not the same as human interests and we have to be clear about that. So I've got a phrase I call macroeconomic ecstasy with microeconomic angst. In other words, the economy looks great but individuals don't feel it.

So when you look at silos in our economy, one of the ones that stands out is this whole subprime mortgage situation where people have been inveigled to invest or to refinance. They've done too much, they've been overly encouraged. And now not only does their default affect them personally, but it affects neighborhoods and communities and cities, and it's a tragic situation.

Here's the bottom line, though. We can't talk about economic expansion, which really is an expansion. This is the slowest growing economy that we've seen in four years. Economic growth at 1.5 percent roughly, but we can't talk about expansion while we talk about silos of people being kicked. And the people who are homeowners, the way that they're being dealt with especially at the bottom, is going to be reverberate over to the rest of the economy. So you see some good things, you see stockholders, 13,000 Dow during very well.

The question is how does that connect with what's happening at the bottom. As the moment, it really just doesn't.

CHIDEYA: When you look at African-American communities and there are so many different types from the super wealthy, fancy to just completely gutted. But when you look at, say, a working class, middle-class community, how will that community be affected both by the Dow, the stock market and by the housing issues?

Ms. MALVEAUX: That community, the sort of working class, middle class - let's call it between 30 and 60 grand a year income - those folks are being stretched, they're being squeezed. They look better than people in poverty, if you look at them on the surface, but at the same time, they are having to juggle. Let's add to the pot, Farai, the issue of what's happening with gasoline prices. These are the people who don't get on planning to go on vacation. They put the kids in the SUV and they go to grandma's house.

Well, now going to grandma's house is going to cost them 20 percent more. The $40 tank of gas is now going to be basically a $60 tank of gas. And so these are the folks who are going to say this economy is not working for me. And it isn't working for a lot of working class people who haven't got any raises and we haven't seen raises at the bottom, who haven't had the opportunities, and who basically are seeing an economy exploding - they're not in it.

CHIDEYA: And what about the housing issues, I mean, you know, I think about all the neighborhoods where I have friends and family and a lot of times, you will find situations where you have a promising neighborhood that's teetering because there are some empty houses or a drug house. And we don't have much time but any thoughts on how the housing issues will affect that?

Ms. MALVEAUX: It exacerbates the situation of neighborhood instability, Farai, but if Fannie May and Freddie Mac and some of our legislators are talking about slowing the pace of foreclosure. There are people who have been inveigled into doing the wrong thing with mortgages and we're hoping to put some safe space around them. Anyone who can pay a $1,000 a month for rent can also pay $1,000 a month for a mortgage.

What has to happen is we have to basically protect people from the predatory lenders, protect people from the folks who are coming in with all these crazy ideas, you'll build a porch - it's not going to cost you much. You look up it's costing you $500 more a month. These are the things that public policy can affect so that...

CHIDEYA: Well, Julianne...

Ms. MALVEAUX: ...micro is a neighborhood but the macro is policy.

CHIDEYA: All right, Julianne, lots of great advice. Sorry to cut you short. Julianne Malveaux, economist and president of Last Word Productions. From NPR's Washington, D.C. headquarters, thanks so much.

Ms. MALVEAUX: Thank you.

CHIDEYA: And just ahead, investing in the stock market is a big move. What should you know before you make your picks. Plus, one man who put his money where his mouth is.

(Soundbite of music)

CHIDEYA: This is NPR News.

Copyright © 2007 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Related NPR Stories

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: