Financial Literacy: A Tool for Economic Progress; More Access to Financial Information and Instruments Will Help Less-Well-Off Households and Businesses to Flourish, According to the Federal Reserve Chairman

By Greenspan, Alan | The Futurist, July-August 2002 | Go to article overview

Financial Literacy: A Tool for Economic Progress; More Access to Financial Information and Instruments Will Help Less-Well-Off Households and Businesses to Flourish, According to the Federal Reserve Chairman


Greenspan, Alan, The Futurist


In our economy, the three principal means for household asset accumulation are through home ownership, small business ownership, and savings. As important as these are for the individual, they also represent distinct and important benefits to the broader economy and, therefore, play prominent roles in the operation of our financial markets and the priorities of our public policy

BUILDING ASSETS THROUGH HOME OWNERSHIP

The choice to buy a home is a decision to plant a family's roots in a community with all the implicit incentives to make that community thrive. Where home ownership flourishes, it is no surprise to find increased neighborhood stability, more civic-minded residents, better school systems, and reduced crime rates.

Just as important is the effect of home ownership on a household's ability to accumulate assets. For most households, home ownership represents a significant financial milestone and is an important vehicle for ongoing savings. The Federal Reserve's 1998 triennial Survey of Consumer Finances indicates that home ownership represented 44% of gross assets for families earning $50,000 or less annually. Further, investment in residential property has been generally more stable than other types of investment, and it is perceived to be largely permanent.

With these important benefits, an increased rate of home ownership has been chosen by our society as a national priority, with many publicand private-sector resources devoted to achieving this goal. Indeed, measurable progress has been made toward this end, with the overall rate of home ownership reaching 68%, a new high, in the third quarter of last year. In assessing the opportunity for home ownership in under-served markets, the Census Bureau reports significant gains. The home-ownership rate for blacks and Hispanics, between 1997 and 2001, grew at more than double the pace for the general population. Additionally, the homeownership rate among households earning less than the median income increased more than three times the pace for households with incomes above the median.

INVESTING IN SMALL BUSINESS

Small business accounts for about half of private gross domestic product in our economy. It is an important vehicle for significant numbers of minority families to accumulate assets.

Recently released data from the Census Bureau, for example, indicate that, between 1992 and 1997, the number of minority-owned businesses grew more than four times as fast as the number of U.S. firms overall, increasing from 2.1 million to about 2.8 million. In addition, the Census Bureau estimates that during this five-year period the number of women-owned businesses increased 16%, to 5.4 million enterprises.

These data suggest that the increases in small business ownership and equity investment by traditionally under-served populations result, in part, from increased access to appropriate financing to fund the startup and growth of businesses. It is essential that the opportunity to start an enterprise is open to anyone with a viable business concept. We must continue to seek ways to promote the creation and expansion of viable firms by lowering barriers to funding and financial services.

To the extent that market participants discriminate--consciously or, more insidiously, unconsciously--capital does not flow to its most profitable uses, and the distribution of output is distorted. In the end, costs are higher, less real output is produced, and national wealth accumulation is slowed. By removing the noneconomic distortions that arise as a result of discrimination, we can generate higher returns to human capital and other productive resources. Investors and lenders need to understand that failure to recognize the profitable opportunities represented by minority enterprises not only harms these firms, it harms the lending institutions as well. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Financial Literacy: A Tool for Economic Progress; More Access to Financial Information and Instruments Will Help Less-Well-Off Households and Businesses to Flourish, According to the Federal Reserve Chairman
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.