Archive for Tuesday, September 18, 2007

Save money, save yourself

FDIC chief urges better balance of thrift, spending

September 18, 2007

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Three Questions with ... FDIC chairwoman Sheila Bair

Sheila Bair, a KU alum and chairwoman of the Federal Deposit Insurance Corp., answers three questions about understanding finances, grappling with subprime lending rules and the taste of Joe's doughnuts Enlarge video

FDIC Chairwoman back in Lawrence today

The Chairwoman of the Federal Deposit Insurance Corporation is on the KU campus today - a place she knows her way around. Enlarge video

Thirty-two years after she stamped passbooks at a savings and loan on Ninth Street, Sheila Bair fears that America has lost its penchant for putting away money for education, for unexpected expenses - for anything, really.

And now, as the economy struggles to deal with the aftermath of thousands upon thousands of mortgage loans granted to people with risky credit, the Kansas University graduate is hoping that Americans finally will come to realize the importance of keeping money on the plus side of the ledger.

Whether it's paying off credit card debts on time, avoiding payday loans or understanding the implications of taking out an adjustable-rate mortgage, Bair is busy spreading the word about the value of financial literacy and discipline.

"People have forgotten what it's like to sock money away," said Bair, now chairwoman of the Federal Deposit Insurance Corp., the agency charged with maintaining confidence in the nation's banking system. "We need to get back in touch with that."

Bair, who received a bachelor's degree in philosophy and a law degree from KU, was on campus Monday to visit with students, meet with area bankers and deliver the 2007 Fall Chandler Lecture, conducted Monday evening at the Lied Center and organized by the School of Business.

Bair applauded the business school for launching a financial literacy class for undergraduates, who now can learn how to keep a balanced checkbook, save for retirement or avoid credit debt. It's all part of helping consumers survive and thrive in a complicated financial world, one in which credit terms can trip up even conscientious borrowers and saving money becomes less and less fashionable.

"I feel strongly that we need to do more to reinstill a savings culture in our culture," Bair said following an afternoon meeting with 50 area bankers. "I think we do overuse debt, and I think we need to get back to basics: saving for a rainy day, building wealth and perhaps making some sacrifices on immediate consumption to save a little more for longer term economic health.

"I think those are values that our Depression-era parents had, but we're losing somewhat now."

Out by Wescoe Hall, freshman Arthur Nuss could've been Bair's teaching assistant. The 18-year-old from Salina said he'd already learned his lesson - by watching his mother struggle with credit debt herself.

The only form of plastic he'll let himself use is a debit card.

"I can't deal with it," Nuss said. "I don't want the responsibility, or the temptation."

Bair does more than educate. As chairwoman of the FDIC, she leads an organization that has responsibility for insuring $4.2 trillion in deposits in 8,615 financial institutions. The FDIC's insurance fund has a balance of $51.2 billion, and it is Bair's responsibility to safeguard the money so that it can protect depositors.

During her visit to KU, Bair said that she would expect the fallout from subprime loans to continue through 2008, as another 1.5 million adjustable rate mortgages have yet to reset from the low rates granted during rosier times to the higher interest rates feared today.

"We have strongly encouraged banks ... to try to find refinancing opportunities for people who are trapped in these loans," Bair said. "It is in their best interests to avoid foreclosure - even if it means reducing the interest rate. Because being paid on the mortgage, or projected to be paid on the mortgage, they're still going to come out ahead with having a performing loan versus having a loan that's in foreclosure. A foreclosure costs a lot of money and it will have a depressing impact on a lot of neighborhoods."

CORRECTION: An earlier version of this story misstated the number of years since Bair had worked at a Lawrence savings and loan.

- Staff writer Sophia Maines contributed to this story.

Comments

kneejerkreaction 7 years, 9 months ago

Save money, save yourself - every man for himself - women & children first into the boats -

justthefacts 7 years, 9 months ago

Freedom of choice leads to good and bad results. Some people are survivors and thus learn that they should not spend every cent they make, or buy anything on credit unless it is for a necessity (food, shelter, medical care). Other people are better at ignoring repeated lessons or would rather "gamble" that tomorrow may never come. The old grasshopper and ant fable comes to mind. See http://en.wikipedia.org/wiki/The_Ant_and_the_Grasshopper

I say to each their own. As many totalitarian governments have learned (USSR, China, Cuba, Korea etc.) most people will find a way to harm or help themselves despite every attempt to govern their every choice or action. Just so I'm not asked to bail out those who choose to ruin themselves. I may do it anyway, on my own. But I doubt the ants of this world can take care of all the grasshoppers - and why should they be required to do so?

Haiku_Cuckoo 7 years, 9 months ago

Thanks to BushCo's economy, I don't have any extra money to save!

Rent Utilities Food Scratch-off lottery tickets Fishing boat payment ATV four-wheeler payment Cable TV payment (I get the movie channel package, so that ain't cheap) Car payment (I buy new cars 'cause they look nicer than used ones)

Now tell me, how am I supposed to save any money??? Thank you for nothing President Bush!

Ken Miller 7 years, 9 months ago

What is to stop predatory lenders in the future, when the Fed comes in today and rescues all the poor slobs who got the variable rate/interest-only loans to buy the house they couldn't afford in the first place?

NOTHING.

In the past 15 years, many people in this country have excelled at living way beyond their means. The current bailout is like putting the proverbial thumb in the financial dike breach. Bad news is coming eventually, people - and my guess would be the economic bottom starts to fall out about a year into the next President's term.

inatux 7 years, 9 months ago

Excuse me while I roll my eyes at those who complain they can't save "anything."

Bull.

A vast majority of Americans could save something, anything, if they really wanted to do it. So what if you only save $5 a week? It's still better than using your credit card and paying that amount back with interest.

That $1 for a pop in your work vending machine adds up over time.

But as Americans, we want everything and we want it now. Read the news about housing, credit and how it affects the economy? Wake up. This is a serious problem, folks.

Mackadoo 7 years, 9 months ago

Ramirez, you missed Bair's point entirely, demonstrating just how right she is.

Live within your means. If you can't afford to pay a mortgage and still save up for whatever the future holds, don't buy a house yet. There are plenty of apartments in Lawrence that are low-cost and nice. Renting one of them would save you hundreds of dollars a month, but with your midset, I'm guessing you would find a way to squander it.

Richard Heckler 7 years, 9 months ago

The USA government and corporate america shipped manufacturing abroad with white collar following closely behind sooooo where are the savings dollars?

George_Braziller 7 years, 9 months ago

Live UNDER your means, it's as simple as that. As the child of children of the Depression putting money away was hammered into my head from an early age. Doesn't matter how much, just put something away. As poor newlyweds in 1960 there wasn't anything left after paying the bills but even if it was only $5.00 they put something into savings

Kat Christian 7 years, 9 months ago

This is so blind and obnoxious. Every dime and I mean every dime goes to keeping a roof over my head, utils running at a bare minimum (I scrimp on these as is) and food enough to live on - nothing fancy. I don't do big gifts, make my own cards, bring no pot lucks to work and drive a car just about ready to croak. About as much I can save is a quarter here and there then when I get enough to put gas in my car to make it to work it goes. So how do you save when employers don't pay enough to live on? What a joke. Get real Lady.

gogoplata 7 years, 9 months ago

Vote for Ron Paul. He wants to abolish the IRS. Imagine that, you would get to keep the money that you earned. What a concept.

George_Braziller 7 years, 9 months ago

Sunshine - Fifty cents a day thrown into a bucket or jar would add up to $182.50 a year. Less than one can of soda. Internet access isn't something that qualifies as "utils running at a bare minimum." It's all about priorities.

George_Braziller 7 years, 9 months ago

Hawk - "stretchted to the hilt" doesn't mean that you can't throw two bucks a week into a savings account. It's called personal responsibility.

George_Braziller 7 years, 9 months ago

Mr. Ramierz - Nope. Own my house free and clear. And have four years of living expenses saved in the bank. Paid for it all by my own thrift and hard work. My debt = $0.00. Choke on it.

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