Emails, Adriene Dempsey, manager, Media Relations, Federal Reserve Bank of St. Louis, April 1-2, 2015

Sent: Wednesday, April 01, 2015 5:01 PM

To: Selby, Gardner (CMG-Austin)

Cc: Girresch, Laura E

Subject: RE: Austin newspaper, urgent inquiry

Attached is an excel sheet with the distribution of net worth over various waves of the Survey of Consumer Finances. It is public information if you want to replicate it. Let me know if you have any additional questions.

Best,

Adriene

From: Selby, Gardner (CMG-Austin) [mailto:wgselby@statesman.com]

Sent: Wednesday, April 01, 2015 5:14 PM

To: Dempsey, Adriene L

Cc: Girresch, Laura E

Subject: Following up

THANKS.

So the median net worth of U.S. families in 2013 was $81,456, yes? That is, half of U.S. families had net worths of $81,546 or more and  half had net worths less than $81,546?

From another vantage point, 26 percent of families had net worths of less than $10,000?

How is net worth defined?

g.

11:40 a.m.

April 2, 2015

Bill Emmons reviewed your questions.

Your first two points are correct (1. median net worth of U.S. families in 2013 was $81,456, that is half of U.S. families had net worths of $81,546 or more and  half had net worths less than $81,546; AND 2. 26 percent of families had net worths of less than $10,000).

For the net worth definition, please see sidebar 2 (page 7) in a recent essay from our Center for Household Financial Stability titled “The Demographics of Wealth.” Both Bill and Bryan are part of the Center. https://www.stlouisfed.org/~/media/Files/PDFs/HFS/essays/HFS-Essay-1-2015-Race-Ethnicity-and-Wealth.pdf 

Best,

Adriene

Adriene Dempsey

Manager, Media Relations

Federal Reserve Bank of St. Louis

From: Selby, Gardner (CMG-Austin) [mailto:wgselby@statesman.com]

Sent: Thursday, April 02, 2015 9:52 AM

To: Dempsey, Adriene L

Cc: Girresch, Laura E

Subject: More

If you like, please share Craig Copeland’s response to my sharing of what your experts told me… Pasting below. I’d be interested if they agree/disagree and why.

PASTE

From: Selby, Gardner (CMG-Austin) [mailto:wgselby@statesman.com]

Sent: Wednesday, April 01, 2015 6:56 PM

To: Craig Copeland; Stephen Blakely

Subject: Following Up II

Hello again.

After our visits today, I reached William Emmons and Bryan Noeth, both employed by the Federal Reserve Bank of St. Louis, who wondered why any observer wouldn’t count a family’s home or pension as part of their savings. Emmons said: “People do count on their housing equity, not only in retirement, but before that.”

Beyond that, the two said it’s not always meaningful to focus on money held in “savings accounts,” which are a single wealth indicator. “A savings account isn’t where everybody holds their money,” Noeth told us.

Your thoughts?

Noeth and Emmons suggested a meaningful way to gauge how well Americans are faring, savings-wise, would be to consider net worth, which the board’s consumer finance surveys check. By email, a board spokeswoman, Adriene Dempsey, followed up by providing the spreadsheet attached to this email. I think it shows that according to the reserve’s 2013 research, 26 percent of U.S. families had less than $10,000 in net wealth--a tick up from 25 percent of families in the 2010 study. In 2013, half of American families had about $81,500 in net wealth or more, the chart says. Perhaps things aren’t as dire as the senator said? (I say “I think” because I await confirmation from the board staff.)

We discussed the most comparable number to what was said.  There is a long going discussion of what is the correct measure for retirement security.  A big piece left out is Social Security of all this discussion.

It is true not everyone uses savings accounts and that is why we ask about financial assets.  Savings accounts are not broad enough, but financial assets have an immediate cash value and can easily be answered in a one off survey. This is why we do financial assets in our survey.

I referred you to the SCF because they do an extensive and detailed survey of all wealth that takes hours per family.  They have the time to completely detail the of value pension assets and home values versus home debt to get to housing equity.  These both have immediate valuation issues.  Furthermore, the thing about home equity is you have to sell your home to get at the equity (or borrow against it), which will mean you will have new expenses especially if you were mortgage free because you have to live somewhere.  A certain amount of downsizing does occur, but the majority of individuals remain in their homes.  There are also reverse mortgages so you can stay in your home and get the equity out while alive, but you don’t get the full value of the equity.

If you want to parse out the exact words used, you can make criticisms about the statement such as has been made below.  However, the point appears to be regardless of the number used for the median, ultimately a significant percentage of Americans are going to be completely or nearly completely dependent on Social Security income in retirement.  Consequently, if the median is $10,000, $20,000, or $80,000 (including home equity), the qualitative picture is the same.

1:29 p.m.

I ran this by Bill Emmons and he said the following, "The general point is correct in Mr. Coleman's comments. There are many people who depend heavily on Social Security."