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Stocks Climbing But Is Your Bank Account?


I'm Michel Martin and this is TELL ME MORE from NPR News. Coming up, the National Lesbian and Gay Journalists Association has a new president. She is CNN producer Jen Christensen, and with so many LGBT issues in the news right now, we thought this would be a good time to speak with her about what that organization is all about. So that conversation is coming up in a few minutes.

But, first, we want to talk about the economy. Yesterday, we talked about how middle class paychecks are getting squeezed because of the payroll tax hike, increased health care costs and so on. Today, we want to talk about the other side of the economic picture.

In other areas, the economy is humming along. The housing market is slowly recovering. The Dow Jones Industrial Average has not only regained its pre-recession levels. It's actually hovering around a new record and that's all great news for anybody who watched his or her retirement accounts tank and home values hit the skids over the past few years, but - and, unfortunately, there's always a but - it's not great for everybody.

Here to tell us more is Roben Farzad. He is a contributor for Bloomberg Businessweek and he recently wrote about this.

Welcome back. Thanks so much for joining us once again.

ROBEN FARZAD: Oh, thank you for having me.

MARTIN: So, Roben, first tell us where we are, how we got here and then I'm going to ask you to tell us why it matters. So, first of all, tell us where we are. The Dow Jones Industrial Average has more than doubled since it bottomed out in 2009. What does that number mean and how did we get there?

FARZAD: I mean, we're throwing big numbers around. What's a couple trillion dollars among friends? You remember that great panic of 2008. In the six or seven months that followed, the market saw $11 trillion of market value just evaporate.

What's breathtaking is that, in the four years since that transpired, it has regained pretty much all of that and pretty much under the radar to most Americans. Obviously, unemployment is still high. Many people have not looked at their brokerage accounts. Many investors have plum dropped out.

MARTIN: You called this the - didn't you call - you had a name for this. The Obama bull market. Right?

FARZAD: This was. I mean, by dint of him getting sworn in just right as the market hit a generational low, really, it's not something that he took credit for during the election, but - yes - it was under his watch.

MARTIN: But were there any policy factors that contributed to this run?

FARZAD: There was the tax cut that he had the political capital for in his first 100 days, but let's not forget about the Federal Reserve and Treasury. The Treasury Department came in and bailed out Wall Street for better or for worse. It looks like, in hindsight, it was the right thing to do. It saved the system and the Federal Reserve then follows up and creates these brand new policies to pump trillions of dollars of monetary stimulus into the situation. So that's bound to percolate into the system, obviously, on the company balance sheets and then shareholders take more interest, then bid up the market.

MARTIN: And we've also noted and you've also noted, that the housing market is also kind of inching its way back to a recovery. Why is that?

FARZAD: It's pretty surprising in that, save for this last great recession, housing has brought us out of every recession since about 1950. Now, housing took us into this calamity and you wouldn't think that home builders would be at it again, but when you have interest rates at such low levels and mortgages at such teaser rates, that I think people who can get that credit want to pile back in and that's a whole virtuous cycle. That could add $80 billion to the economy.

You talk about people building houses, construction workers upgrading from Taco Bell to Applebee's, people buying more appliances at Sears. We know the virtuous cycle from that.

MARTIN: Hey, don't talk bad about Taco Bell. That can be pretty good stuff.

FARZAD: Oh, I have no...

MARTIN: That's pretty good stuff.

FARZAD: I have no beef with Taco Bell.


FARZAD: I'm a Chipotle guy, though.

MARTIN: Oh, OK. Well, OK. Well, of course. But you've also called this a barbell recovery and you're saying some are recovering quite well, but other people are just not feeling this at all. They are getting no benefit from this and why is that?

FARZAD: If you think about it, stockholdings, for example - 90 percent of the shares are held by the top 20 percent of income owners. These are the people who have wealth managers, financial advisors, 401Ks, 529s. They're feeling the oats of the market coming back.

On the other end of the equation, you have Hispanics, households under 45. Foreclosed homeowners obviously got disproportionately hit by housing's collapse. If you're any of these constituencies who thought that you were going to be part of that ownership society, in hindsight, many of these people still had more renting ahead of them before they could truly afford housing. It's really tough knocks for you, because you're going to be locked out of the housing market, out of getting a mortgage, for several years.

MARTIN: And we've also talked previously on this program about the number of people who actually were in the market, but cashed out. They took money out of their 401Ks or their retirement plans to fund current expenses. Many people felt they had no choice. They either had to pay their mortgages down or they had to pay college tuition.

Now that this situation is, as it is, as you've just described, is there any bridge between these two groups? Is there any bridge between - I guess what I mean is a policy bridge or some economic bridge between the people who are doing well because they were able to stay in the market and experience these runs and the people who were never in it or got out of it and didn't experience those gains and are still hurting?

FARZAD: Well, think back to policymaking and that there was pretty much unanimity on both sides of the partisan divide 20, 15 years ago, over low interest rates, mortgages available to most people. Republicans and Democrats agreed on that and that really led to a lot of lax lending. It led to great things in opening up the mortgage people - the mortgage market and the American dream to people.

Now, on the other end of this, when we have to deal with the aftermath, you still have both sides of the aisle who pay at least lip service to this idea of an ownership society. Homeowners, after all - they're more invested in their children's PTA. They're more interested in community policing. They are interested in education. This pays huge fringe benefits for society and, similarly, shareholders. These are owners of companies. They're more interested in financial self-determination at a time when companies are cutting back pensions.

So it behooves policymakers of all stripes to come back and say, we have to pick up the pieces. We have to get people out of their state of shell shock to come back, both to the housing market and the equity markets, which have had millions of people now disenfranchised.

MARTIN: Roben Farzad is a contributor for Bloomberg Businessweek. He joined us from Richmond, Virginia.

Roben, thank you so much for joining us once again.

FARZAD: Always a pleasure.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.