Charity begins at home
Tuesday, December 19th, 2006
Mayor Bloomberg's anti-poverty initiative shifted into high gear yesterday with the unveiling of the Office of Financial Empowerment, a division of the Department of Consumer Affairs dedicated to helping low-income New Yorkers avoid the many bad deals and ripoffs that drain cash daily from their pockets.
The city plans to spend $150 million on anti-poverty initiatives, of which $100 million will go to a new Innovation Fund, designed to put dollars in the best and most effective programs.
"We're going to run this fund in the way we do it in the private sector," said the mayor. "Programs that don't work are going to be terminated - it's just that simple."
That promise of a disciplined approach made the location of the announcement - the lobby of the lower East Side People's Federal Credit Union on Avenue B - ideal. Investing in credit unions and other grass-roots financial institutions is a smart, proven way to combat poverty.
Right now, New York has 28 credit unions that primarily serve nearly 43,000 low-income people citywide, in neighborhoods from upper Manhattan and the South Bronx to Central Brooklyn and Southeast Queens. These banklike institutions, which boast about $76 million in combined assets, offer savings accounts, checking and other services for a fraction of the amount charged by the likes of Citibank and HSBC.
As nonprofit financial cooperatives, credit unions are run by elected boards of directors, who focus on making loans to the sorts of families who can't make the cut with credit card companies and big banks.
New York's low-income credit unions extended $15 million worth of new loans last year alone, and have helped revitalize some of New York's toughest neighborhoods when big banks had abandoned them.
Twenty years ago, I happened to be at the lower East Side People's FCU on the day it opened, in an empty, rain-damaged former commercial bank branch that community activists were determined to rescue from becoming one more abandoned storefront in Alphabet City.
Manufacturers Hanover Trust (now part of JPMorgan Chase) had shut its doors in 1984, leaving thousands without a bank.
But the credit union that replaced Manny Hanny has quietly amassed more than $19 million in assets over its 20-year history, and currently has more than $13 million on loan to artists, students, entrepreneurs, public housing residents and others who would otherwise waste money with check-cashers and ripoff deals like rent-to-own stores.
Instead of frittering away their cash, families now have a place to save for their kids' education, borrow capital to start a small business or get money for home repairs. There are similar stories in credit unions all over the five boroughs.
The city should help these successful organizations do even more good for the poor. In addition to supplying loan capital, they are providing financial counseling to low-income New Yorkers, a key part of Bloomberg's anti-poverty strategy.
When dollars begin to flow from the new Innovation Fund, credit unions - along with specialized community loan funds - should be at the front of the line and get low-cost deposits, loans and grants so they can grow faster and serve more families.
The state also needs to take action. This year, the state Assembly and Senate both passed bills that would invest $15 million in state money in community financial institutions. The bill is scheduled to land on Gov.-elect Eliot Spitzer's desk early next year.
Bloomberg should push for the state funds and kick in city dollars as a match - and use every available opportunity to tout low-cost community banking as a proven way to help families pull themselves up from poverty.