This presentation covers the key findings of the "Household Balance Sheet" section of our report on the State of Lending in America and it's Impact on U.S. Households.

1. The State of Lending in America
and its Impact on U.S. Households
America’s Household Balance Sheet
M William Sermons
December 12, 2012

2. Strong consumer financial status is
important for U.S. economy
Consumer spending is key element of US economic activity
Annual GDP, Current Year and Real Dollars Consumer Expenditures as a
$16,000 Percent of U.S. GDP
$14,000 (average annual share)
$12,000
1961-1970 61.8%
GDP ($Billion)
$10,000
$8,000 1971-1980 62.5%
$6,000
$4,000
1981-1990 64.6%
$2,000 1991-2000 67.3%
$0
1970 1980 1990 2000 2010 2001-2010 70.0%
Annual GDP, Current Year Annual GDP, Inflation Adjusted
Source: CRL Tabulations of Bureau of Economic Analysis data SOURCE: Organisation for Economic
Co-operation and Development.

3. Many American families have little
financial breathing room
Typical household has just $100 left each month, after
covering basic expenses, debt payments, etc.
Item Value ($)
Yearly Income (less taxes and insurance/pension $ 41,516
contributions)
Annual non–discretionary expenses $ (37,651)
Housing (including upkeep and operation) (11,455)
Transportation (7,160)
Food (5,596)
Utilities (3,603)
Health Care (3,068)
Education (including reading) (594)
Other expenses (excluding alcohol, tobacco, (6,175)
entertainment)
Annual debt payments (excluding mortgage and auto) ($ 2,658)
Discretionary annual income $ 1,207

4. Reason #1: Declining incomes
• Happened even though workers increased productivity by 20%
• African Americans and Latinos especially hard-hit because of job losses in
manufacturing and construction.
Real Income
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$-
2000 2002 2004 2006 2008 2010
Median Income; $ 2010 Black Households Hispanic Households
Source: Current Population Survey, U.S. Census Bureau

5. Reason #2: Increasing cost of living
Many non-discretionary expenses (e.g. education, medical,
utilities and housing) grew faster than inflation
Increase in Nominal Household Spending
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: Consumer Expenditure Survey, U.S. Bureau of Labor Statistics

6. Reason #3: Recession depleted assets
Values dropped for both household financial assets and homes
- $7 trillion drop in home equity alone
Asset Holding and Median Value ($2010), Asset Holding and Median Value ($2010),
Financial Assets Home Values
% Families Holding Asset
100% $40,000 100% $250,000
% Families Holding Asset
80% 80% $200,000
Median Value
$30,000
60% Median Value 60% $150,000
$20,000
40% 40% $100,000
$10,000 20% $50,000
20%
0% $0 0% $0
2001 2004 2007 2010
2001 2004 2007 2010
% Families 67.7% 69.1% 68.6% 67.3%
% of Families 93.4% 93.8% 93.9% 94.0%
Value $151,300 $184,700 $209,500 $170,000
Value $34,400 $26,600 $30,200 $21,500
Source: 2010 Survey of Consumer Finances Chartbook
Source: 2010 Survey of Consumer Finances Chartbook

7. Reason #4: More debt
Increases primarily in mortgages and student loans, with
lower credit card balances and auto loans
Debt Holding and Median Value (2010 $'s),
Any Debt
% Families Holding Debt
100% $80,000
90% $70,000
Median Value
80%
$60,000
70%
60% $50,000
50% $40,000
40% $30,000
30%
$20,000
20%
10% $10,000
0% $0
2001 2004 2007 2010
% Families 75.1% 76.4% 77.0% 74.9%
Value $47,700 $63,800 $70,600 $70,700
Source: 2010 Survey of Consumer Finances Chartbook

8. Financial snapshot: 2007 vs. 2010
2007 2010
Median household $126,400 $77,300
net worth
Families with credit 46.1% 39.4%
card debt
Families with 15.2% 19.2%
student loans
Median amount of $110,000 $75,000
home equity
Source: Federal Reserve Survey of Consumer Finances. All figures adjusted for inflation

9. Household wealth now down to
pre-1995 levels
• 40% drop from 2007-2010
• Wider wealth disparity between white and African–American or
Hispanic households
Median family net worth by race/ethnicity,
2010 $'s
$150,000
$100,000
$50,000
$-
1995 1998 2001 2004 2007 2010
All Families Non-white or Hispanic
Source: 2010 Survey of Consumer Finances Chartbook

10. Keys to rebuilding household
balance sheets
• Promote access to safe and affordable credit
• Provide strong protections to prevent predatory
lending practices
CRL’s State of Lending report offers our perspective on how to
achieve these.

11. For More Information
See all CRL research: http://rspnsb.li/UpZetS
Contact us:
Bill Sermons (DC): 202-349-1851
Kathleen Day (DC): 202-349-1871
Graciela Aponte (CA): 510-379-5518
Ginna Green (SC): 510-866-5989