No A Students Anywhere

xperian, one of three major credit rating agencies, reported the top ten and bottom ten cities in the U.S. according to average credit score this past fall (on a scale of 501-990). The top ten cities clustered around the Midwest, notably Wisconsin (congrats Wausau (789), Madison (785), Green Bay (780) and LaCrosse (777)!). The bottom ten cities were overwhelmingly located in the South and Texas (Texas, of course, being Texas).

Those who reported on Experian's information hypothesized that the findings were based on two particular causes: high unemployment and high foreclosure rates. Nothing shocking there, I suppose. If you're unemployed how are you going to pay your bills and your mortgage?

But are those really the only two reasons?

Let's go to the 2010 U.S. Census for a minute, shall we? A little demographics, please. Each of the bottom ten cities had either Hispanic or African American majorities, often exceedingly so. The top ten? Not so much. Only San Francisco (781), helped by an Asian population of 33.3%, by a shade over 1.5% had a "minority" majority.

So minorities, Asians aside, don't know jack about how to balance their finances, right? They can't hold a job, they just take handouts from the government, right? Or they're all suckers. Yeah?

This reminds me of the folks who said the former-Soviet republics didn't understand capitalism and that's why their economies didn't take off after the fall of the Berlin Wall. As economist Hernando de Soto later explained, they understood capitalism, but their new governments never updated the laws to allow for capitalism, property rights in particular. In other words, the best explanation usually isn't that straightforward and requires a little more digging.

It's also difficult to overlook the long history in the U.S. of higher mortgage lending rates to minorities ("African-American borrowers pay an additional $425 for their loans. Latino borrowers pay an additional $400. (The average fee for all bowers was $3,133 on loans that averaged about $105,000)" (Thaler, Richard H. and Cass R. Sunstein. Nudge: Improving Decisions About Health, Wealth, and Happiness. New Haven: Yale University Press, 2008).

Here's my hypothesis: The top ten cities, Wisconsin's in particular, are areas known for their Scandinavian/Germanic roots and heritage. Are the Scandinavians and Germans financial geniuses? They seem to do well, but that's not what interests me. What interests me is how long they've been in the country, never mind the Midwest alone, and how they seem to have a tradition of handing down (pardon the repetition) good financial habits and knowledge.

The bottom ten cities? Three Texas cities (El Paso (710), Harlingen (686) and Corpus Christi (702)) on the list are near the Mexican border. I'm going to go out on a limb and say that a high percentage of the folks who live in these three cities do not speak English as a first language and have not been in the U.S. for longer than a generation or two. In other words, I have a feeling they have little to no tradition of handing down good financial habits and knowledge that fit within the U.S. financial and legal systems.

Question is, what will help them more? A Mexican-Spanish version of a book on financial education (to start a tradition of good financial habits) or something else, such as...receiving their monthly bills in Spanish? or having mortgage or credit card applications to review and fill out in Spanish? (assuming that is not already the case).

And the African American communities, you ask? English should not be a problem for them, you say. And you are probably right. The best hypothesis I can come up with is that white communities in the U.S. have had a 400 (approximately 12-13 generation) year head start in terms of amassing capital and partaking in the U.S. financial and legal worlds whereas the African American communities have had less than 100 years (or approximately 3-4 generations) as citizens with rights (ie, technically able of participating in the economy and politics of the country as opposed to being intentionally kept out which still happens informally). Never mind the interruption of knowledge transfer that incarceration brings which both communities have predominantly dealt with the last 20-30 years in particular (and that's erring on the short-end).

In short, I suspect we in the U.S. have relied upon family members to teach us about money because I don't think it is happening in school consistently if at all (Wherefore art thou, Home Ec?). While it's easy to target the bottom ten cities, Experian reports that the national average credit score in 2011 was around 749, or in terms of grades, a C. So the best cities with their 780s, are what C+/B- then? And 686 is, say, a D? No A students anywhere then.

Wall Street and Washington can point fingers at each other, but until we educate people better about money and the basic laws surrounding money, the same mistakes will continue to occur. 

Needless to say, I have some homework to do. Homework that requires a little travel and talking to folks.

How did I get here? I got here by asking myself, "Are you sure that the educational book you've written will answer the questions and problems of those who most need it?" I'm still not sure and so I'm going to find out.

Progress Report: Talking to an illustrator in L.A. for Hooey. Conceptually making progress with The Boston Squeeze to make it tighter because, to be honest, it was getting out of hand. If I can make it go from a knuckler that doesn't knuckle (its present condition) to a tightly wound Andy Pettitte curveball, I'll be a happy man.