It was the summer of 2000, and Ben Mangan was treading water at his job, looking anxiously around for the next thing. He had spent much of his 20s cycling through various careers, trying to find one that fit: he worked as a teacher, a college admissions officer, an assistant on an archeological dig in Minnesota, a consultant at Ernst & Young, and, after moving to San Francisco, as a dot-com apparatchik for a company that was rapidly going to hell. Then he heard about EARN.

A friend emailed him with a job posting from a small San Francisco nonprofit. EARN, which stands for Earned Assets Resource Network, was looking for a president and advancing a fairly radical idea about how to help the poor. It was called asset building, and its central tenet holds that getting ahead in the world requires not just a job—even a well-paid one—but the ability to save and acquire assets. Without money in the bank, the thinking goes, you’ll never get the house, the business, or any of the other accoutrements of middle-class life. In essence, EARN was talking about a whole new way to achieve the American Dream.

We hear the stories from other countries all the time: a Bangladeshi villager transforms her life with a $250 loan for a sewing business; a budding Kenyan entre­preneur, armed with a $500 pledge from kindhearted donors, turns a broken-down roadside shop into a thriving general store. International microfinance is hot these days, and its practitioners, the Grameen Banks and the Kivas, win Nobel Prizes, hobnob with Oprah, and are fêted in Vanity Fair. But here was EARN, an under-the-radar local company, aiming to perform similar near miracles in the Bay Area, of all places—where the obstacles to upward mobility frustrate even the most determined do-gooders. (From an $18,000-a-year job to a median-priced home of $600,000? No way.)

As Mangan pored over the posting, his stomach did double flips. It may sound like something out of a TV movie of the week, but Mangan says the EARN job was an opportunity he’d been waiting for his entire life. You wouldn’t know it unless he told you, but Mangan grew up poor. And while he had long since left material hardship behind, he was still grappling with the psychological fallout of those years.

He was born in Springfield, Massachusetts, a gray factory city that was already sinking into its Rust Belt decline when he arrived. His family led a close-to-the-bone existence: a small apartment in the projects, welfare checks and food stamps, most of the adults in his life either unemployed or on disability. But Mangan’s mother, Lucia Bruno, who split from his father when Mangan was three, was a force of nature who wanted her only child to have the opportunities she never did. So she moved with Mangan to Brooklyn when he was eight. His new home sat on a treeless block with a condemned building on the corner; the sidewalks were broken and the subway was covered with phantasmagoric graffiti. Plus, he had to watch out for neighborhood gangs, who meted out beatings to kids who strayed onto the wrong block. Still, his mother found work at a local nonprofit and felt that New York’s wide horizons would ultimately help Mangan broaden his.

And Mangan, a short, stocky 37-year-old of classic Northeast extraction—Irish, Italian, Quebecois, a little Native American—was a sponge for Bruno’s inspirational lectures. By high school, he was an honor-roll student and class president, landing in classes populated mainly by upper-middle-class kids on their way to college—but he never forgot that he was different. Like many high-achieving poor kids, he learned to be “adaptable,” as he puts it, good at passing for middle-class. But he always had to straddle two worlds. On one side: the shabby couch in his living room, the five-pound block of government cheese in the kitchen. On the other: the easy sense of entitlement that oozed from his friends and classmates. He would visit them in their magisterial Park Slope brownstones or summer houses in the Berkshires, only to return to his apartment all the more aware of his own standing.

“I was faking it all the time,” he remembers. “I was always desperately trying to hide my own circumstances, ashamed of the way I dressed, of the block we lived on, of our apartment. I never took kids back there.”

After high school, Mangan scored a scholarship to Vassar, followed by a public policy degree from Harvard’s Kennedy School of Government, the cradle of East Coast establishment thought. In Cambridge, he shared classrooms with Saudi princes and the scions of international banking empires in order to study affordable-housing policy and urban economic development—and experienced the same disconnect that defined his childhood. “I had survivor’s guilt,” he says. “It felt bizarre to be studying poverty while my own family was still living it. I felt like I was abandoning them and becoming part of this different world.”

How to get ahead, he agonized, without feeling like a class traitor? Try as he might, he couldn’t square that particular circle, so he put it out of his mind as best he could while he hopped from career to career. But EARN changed everything.

“This is what I was meant to do,” Mangan enthuses. He thought about his mom, and about how living paycheck to paycheck had made it so hard for her to get ahead. Then he thought about how he himself had scaled the walls into the middle class. “I never would have been able to describe it this way before,” he explains, “but going to college for me was a form of asset building.” Mangan knew he might not be able to tear down the psychological barriers that had plagued him—the ones that hold poor people back—but with EARN, he could at least go after the economic ones. In his cover letter to the organization, he mentioned his personal history for the first time in his professional life. In one sentence near the bottom of the page, he said that he understood the struggle; he had been there himself. He got the job.
Seven years later, from his tiny, sunlight-starved offices in San Francisco’s financial district, Mangan is helping to spur nothing less than a nationwide antipoverty revolution. Indeed, EARN and other programs like it aim to be this generation’s answer to Lyndon Johnson’s war on poverty, which erected the scaffolding of the modern welfare state. Though good at providing for the basics of daily survival—Americans aren’t starving or dying of cholera—programs like food stamps, welfare, Medicaid, and Medicare don’t help poor people get ahead.

Wrestling with that failure is exactly what led Michael Sherraden, a professor of social policy at Washington University in St. Louis, to come up with the idea of asset building in the late 1980s. Decades after our government declared war on poverty, he said to himself, too many people were still struggling just to get by. Was it the fault of the poor, as some conservatives claimed, or of the system itself?

He stumbled on an answer while rereading two of the most successful social policies in American history: the Homestead Act, which helped settle the West by giving 160 acres to anyone willing to put down stakes; and the G.I. Bill, which offered World War II vets the money to go to the college of their choice, as well as cheap loans to buy homes. Today, a full quarter of Americans can trace their holdings back to the Homestead Act. And the G.I. Bill, which returned up to $12.50 in economic growth for every dollar the government pumped into it, created the largest middle class in the world and transformed America from a nation of renters into a nation of homeowners.

Sherraden eventually concluded that assets, not income, were the key to getting ahead. It might not sound revolutionary at first, but just do the math. If a teacher making $50,000 invests 10 percent of her paycheck each month, she could end up, after 25 years, with nearly half a million dollars she could either use or pass on to her children (that’s where half of all wealth comes from, after all). On the other hand, the account executive who makes $100,000 but doesn’t save, invest, or buy a home might have some good memories, but that’s about it.

And Americans don’t save. Our personal savings rate, negative 0.5 percent at last count, is the lowest since the Great Depression. The tax code doesn’t help. Each year, the government doles out more than $300 billion in credits to encourage homeownership and investment, but less than 10 percent of those breaks go to people making less than $50,000 a year. The dollar comparisons are shocking: every year, people in the top 1 percent each get the equivalent of a Mercedes C-Class (more than $31,000, on average), while those in the bottom 20 percent barely get enough for two cups of Starbucks coffee.

To reverse that bias, Sherraden invented a device: the individual development account, or IDA, which is now the basis of the EARN program. An IDA is a matched savings account similar to a 401(k), but unlike 401(k)s, which generally come with the kinds of jobs poor people don’t have, IDAs are aimed squarely at the underclass, many of whom have never had a bank account. (San Francisco, for example, has an estimated 50,000 “unbanked” residents.) The accounts are funded by a combination of federal, state, and private money, and offer to match the client’s investment anywhere from 2-to-1 to 5-to-1. IDAs are generally available only to people who live below the federal poverty line (around $20,000 for a single person), and may be used for one of three things: to go to college, start a small business, or buy a house. Just as international microfinance posits that the poorest people are actually the most likely to pay back a loan, Sherraden’s asset building swam upstream against conventional wisdom. It theorized that given the right incentive, the poor could actually save at very high rates.

In 1997, Sherraden finally managed to put his theories to the test. The American Dream Demonstration, the first large-scale IDA experiment, set up 14 IDA programs in places as disparate as Portland, Oregon; Tulsa, Oklahoma; and Booneville, Kentucky, and tracked the progress of 2,400 account holders over six years. It was an overwhelming success, and when word got out, the asset-building rush was on. Today, there are more than 500 IDA programs across the country and up to 50,000 account holders.

“We’re in the midst of a big shift,” says Bob Friedman, a domestic asset–building pioneer who founded the Washington-based Corporation for Enterprise and Development. Friedman has trumpeted the cause for almost two decades. (He also sits on EARN’s board.) There will always be a need, he explains, for traditional antipoverty measures like housing subsidies and food stamps for those on the lowest rungs of the scale. (The homeless, for instance, aren’t the best candidates for an IDA.) But Friedman believes the coming years will bring a sea change in the ways in which we confront poverty. “We’re moving from the welfare state to the investment state,” he says. “And for that we’ll need ladders, not just safety nets.”

Despite some big backers—multimillionaire financier Warren Hellman, then–city supervisor Mark Leno, San Francisco Foundation CEO Sandra Hernandez—EARN had just $17,000 in the bank when Mangan started work in 2001. To furnish the office, he salvaged desks and chairs from a shuttered dot-com, dragging them up to the third floor and reassembling them himself. (He still sits at one of those desks, he tells me, giving its glass top a proprietary pat.)

The business model was also problematic. Drawn up in the heady days of the boom, when it was still halfway possible to believe the good times would never end, it called for 8,000 IDAs within the first three years, to be paid for with $50 million from private, public, and corporate donors. Mangan dutifully set out, hat in hand, to shake the money trees. It was a disaster. “People were showing up to work and their dot-com had closed down overnight and the doors were chained shut. Potential donors were laughing at us.”

Then, too, no one actually knew the answer to the most fundamental question: could EARN’s approach work in the Bay Area? The American Dream Demonstration had shown that the poor could save in Tulsa; in San Francisco, however, a recent Chronicle headline screamed, “A Bay Area couple with two kids can’t make it on $50,000 a year.” How could this financial alchemy work for someone making $20,000 or less?

Concerns like these might have scared the hell out of ordinary mortals, but Mangan is an unshakable optimist, the sort of guy who frames potentially crushing life events—that surrealistic business plan, for instance—as “challenges.” First, he needed to raise some money. The marquee names behind EARN got Mangan meetings with some of the biggest foundations in town, but it was slow going; meanwhile, that bank balance was edging toward zero. He had already scaled back the plan from 8,000 accounts to 500, but after a few frustrating months, Mangan realized even that was a pipe dream. “There came a day,” he says, ”when the cumulative facts just caught up to me. I knew it just wasn’t gonna happen.” Chastened, he met with EARN’s advisory board and broke the news: they would shoot for just 100 accounts in the first year.

Soon, though, Mangan’s luck turned. The Levi Strauss Foundation ponied up $20,000, followed a few months later by a $100,000 grant from Citibank. Warren Hellman kicked in some more, and in 2002, a long-awaited $200,000 grant from the city of San Francisco came through. Now Mangan could get down to the real work. He had suffered through a lot of sleepless nights, worrying about logistical screw-ups and cash flow troubles, but he hadn’t lost faith. And then, one day in 2002, he finally got EARN’s first batch of savers together in one room.

Mangan’s eyes go a little liquid under the office lights as he remembers that first meeting, a financial management class that he led himself. Once he saw everyone gathered in that room, he remembers, he was absolutely sure the program was going to work, and that it would change lives forever. “If you’re poor, your dreams get dumbed down,” he says. “With EARN, though, suddenly you’re in this room with people who look like you and have jobs like you, but they’re saving for a house, or they’re working toward a college degree. And you think, ‘Wow, this is for real.’”

Duane Greene wasn’t actually in that room, but his story fits Mangan’s description to a T. He is a small bear of a man, a kindly, 49-year-old hulk with graying hair and the acquired reticence of someone who has seen more than his share of disappointment. He lives on the top floor of a sprawling, hilltop condo complex in Daly City, a pastel-colored fortress of suburban quiet just a few blocks shy of the San Francisco border. One wall of the apartment is plastered with framed commendations from Nancy Pelosi, Gavin Newsom, and other Bay Area political luminaries, testament to Greene’s status as a model EARN client. When I arrive, his three-and-a-half-year-old daughter, Desiree, lies on the floor, practicing her signature, tracing her name again and again, getting it just right. Cartoons beam from a muted flat-screen TV in the corner, while an exercise bike squats next to the dinner table, a reminder to be steady and not get carried away.

After a few minutes, we go out to the deck. It’s early evening, and the wind is whipping across the low hills from the west, while the fog rolls slowly over the sloping avenues. To the northeast, the towers of the financial district are still awash in light. “It’s awesome, isn’t it?” Greene says. He’s referring to the view, but he might as well be talking about everything else in his life these days. Just a few years ago, Greene could barely keep a roof over his head. Last spring, he closed on this $500,000, two-bedroom condo.

It’s been a dizzying climb. In 2001, Greene was homeless in San Francisco, drinking too much and living on the streets near the Transbay terminal. The bad years—he doesn’t like talking about them—are lost forever, part of another life. “I’ve had some struggles in my life,” he says, then pauses. “Things didn’t always go the way I would have wanted them to go.”

The parts of his past he does discuss freely weren’t much easier. He grew up in San Diego, and, after his mom died when he was five or six, went to live with his aunt and her eight children. He didn’t face hardship, exactly, but there were no extras. Greene’s grades got him into Berkeley, but he partied too much and dropped out without a degree. Thinking he could outrun his troubles, he joined the army, where he was posted to Germany. It didn’t work. After his discharge in the mid-1980s, Greene drifted in and out of jobs, climbing the ladder for a few years only to slide back down.

In early 2002, spurred on by his wife, Helen, he decided to clean himself up. The Veterans Administration helped him get into rehab, and it stuck. As soon as he got out, he found work at a company that supplies clerical workers for law firms and banks. He tried to save money, because he and Helen were starting a family, but he was the sole breadwinner and only made $13 an hour. “We had no savings to speak of,” he remembers. “We were just getting by.”

Greene, though, is the kind of guy who, as he says, “just puts my head down. I want to see what I can do to make it happen.” While trolling the Internet for loans and grants for low-income families, he stumbled across EARN and applied immediately. Soon, EARN set up IDAs for Greene and his wife, who also qualified. The organization hooked them up with a financial adviser, and they took courses on budgeting. At the bottom of their new budget was a crucial line item: “Money for my IDA.”

Greene and his wife each planned to put about $160 per month (the average deposit by EARN account holders is $89) into their IDAs, with each deposit matched by $320 from EARN, until they reached their account limits: $6,000. It wasn’t easy on their salaries, but with some old-fashioned thrift—no dinners out, renting movies instead of going to the theater—it took them a year and a half.

Greene, meanwhile, had gotten a series of promotions at work (he’s now making $50,000 a year as a manager). Helen, who found work at the same firm, also got a raise (she now makes about $28,000). With help from EARN’s finance gurus, they cleaned up their credit and consolidated their debt. EARN found them ano-ther IDA program, too—this one with a 3-to-1 match. At one point, Greene tells me, they were working with six different agencies. “I didn’t know how it was going to turn out,” he explains, “so I wanted to grab hold of everything I could to make something happen.” They attended EARN’s first-time-homeowners’ course, then locked down a 40-year mortgage, using their various matching accounts to scrape together the $30,000 down payment. Today, Greene is taking courses online, working toward a degree in business management.

EARN savers now number nearly 2,000, making it one of the two largest IDA programs in the nation (the other is also in the Bay Area: Lenders for Community Development in San Jose). More than 200 people have saved the maximum allowed in their IDAs. DeeDee Brooks, for example, is a 50-year-old clinical research consultant from San Francisco’s Ingleside neighborhood who, a few years ago, found herself stuck in a dead-end job and buried in debt from a difficult divorce. EARN helped her go back to school, clean up her credit, and nearly double her salary. “To transition the way I did without EARN’s help would have been impossible,” she says. Florence Mendoza, too, is happy to testify. Within the space of a few years, she lost her husband to cancer and her longtime job as a buyer for the Emporium (along with most of her 401(k) savings) when it went bankrupt. With EARN’s help, she started over again at age 50, kick-starting a catering business.

But EARN participants don’t just rave about the money. As Sherraden wrote in his groundbreaking 1991 book, Assets and the Poor, “While incomes feed people’s stomachs, assets change their heads.” As Greene tells it, this enlightenment came slowly. “It was lights being turned on everywhere we went,” he says, “as we gained con­fidence that we could actually do this thing.”

Still, that’s not to say people’s mindsets can change overnight. Poor might be something of a dirty word in American society, but in a strange, Stockholm syndrome kind of reversal, it’s not necessarily that much easier to get used to a bit of wealth. Greene says his new middle-class life still feels pretty bewildering at times, as if he spent his first five decades on one planet, then suddenly found himself plunked down on another. “Sometimes it’s just hard to believe,” he says. “It’s one thing to think about it and dream about it, another thing to do it. But I’m here. I’m really here.”

Even Mangan, who certainly knows his way around a Pacific Heights cocktail party by now, says he still hears a scared little voice from time to time, insinuating that he has no business being where he is. It took him five years, for instance, to admit publicly that he went to Harvard. “I’d bend over backward to avoid saying that word,” he says, recounting the rhetorical camouflage he’d use to throw people off the trail:

Questioner: Where’d you go to school?

Mangan: Oh, on the East Coast.

Q: Oh, really? Where?

M: In New England.

Q: Where in New England?

M: In Massachusetts….

It’s a sharp, cloudless day in San Francisco, and the St. Regis Hotel, a plush SoMa landing pad for well-heeled global citizens, is buzzing with a midday crowd. EARN is holding its annual luncheon in a ballroom overlooking Yerba Buena Gardens, and emissaries from the rarefied worlds of finance and politics—Wells Fargo and Citibank execs, a rep from Sotheby’s Realty, Barbara Boxer, Mark Leno—huddle around their Caesar salads, waiting for Mangan.

He takes the podium, gray-suited and well-coiffed, and begins reeling off sobering statistics about the disparities between white and black wealth levels, poverty among female-headed households, and the appalling lack of assets in San Francisco. His face darkens. “When I’m confronted with data like this,” he says solemnly, “it makes me wonder how real the American Dream, the California Dream, actually is.”

Then he shifts gears. “But this is really a celebration,” he continues, “despite all this bad news I’m delivering. I want you to imagine what our state and our country would look like if 40 million low-wage workers had a chance to get ahead, instead of just get by.”

Three of EARN’s savers, including Greene, take the stage next, giving the audience a preview of that imagined future. As Greene finishes speaking, I look around the room: it’s noon, and blow-dried realtors and ruddy-cheeked bankers have tears in their eyes. Nick Eaton, a private wealth manager at Goldman Sachs and one of EARN’s board members, brushes some away as he announces that for the next 30 days, the board will match every donation 5-to-1. There is a pink donation card at each seat, part of a gift bag that includes a green pen and Payday candy bars. A collection plate makes the rounds, just like at church.

As the event winds down, Mangan stands at the center of a good-natured scrum, still deep in conversation with the mandarins who make this city run. To watch him work the room—unflappable, quick to recall a name or a story—is to understand that he has unquestionably made it, even if he doesn’t always feel that way. And so has EARN.

Mangan’s faith in the organization’s principles seems justified. Asset building is still so new that long-term studies have not yet been done, and therefore we haven’t seen any awe-inspiring statistics on the order of the G.I. Bill’s massive payout. An initial study done by Multnomah County, Oregon, though, concluded that every dollar invested in its IDA program brought a $3 return. EARN’s early numbers are also encouraging. So far, more than 200 people—who joined EARN making an average of just $18,000 a year—have completed the program, set against a 20 percent dropout rate. More than 50 people have bought homes, while more than 100 have started small businesses. Another 130 have gone back to school. What’s more, all of EARN’s new homeowners still have their houses. Compare that with the wider population: a recent Chronicle story reported that virtually an entire neighborhood in Antioch had defaulted on its home loans.

Still, EARN and other asset-building groups face enormous hurdles, not the least of which is cost. While IDAs and alternative matched-savings plans stack up well against other social policies designed to help the poor—Pell Grants, say, or affordable housing programs—they’re a hard sell in D.C. and Sacramento due to budget woes. As Jean Ross, executive director of the California Budget Project, a Sacramento think tank, puts it, “Anything looking for new state dollars will have a very tough time.”

Meanwhile, many commercial banks that would administer the savings accounts are still leery of the idea. While some are licking their chops over the business these new customers could generate, others would just as soon not deal with all those low-balance accounts. Compared with their higher-yield relatives in international microfinance, groups like EARN just don’t look that good. Because they operate in the Third World, international microfinanciers have far lower overhead and can charge 30 percent interest rates on their loans, a provision that would qualify as highway robbery in the U.S. Many international programs, in fact, are turning a profit, which makes them irresistible to both investors and the media. Eric Weaver, who runs the asset-building group Lenders for Community Development in San Jose, says ruefully, “That’s the sexy thing about international microfinance.” Then, switching into a would-be investor’s voice, he asks: “You mean I can help the poor and get an 8 percent return on my investment?”

It frustrates Mangan, too, who is still nowhere near where he originally expected to be by this point. Despite EARN’s status as one of the biggest, fastest-growing, and most effective asset-building groups in the country, it’s still just skating along the surface with a shoestring budget and staff of 11. Still, Mangan is encouraged by the bipartisan political support that seems to be developing around the core idea of asset building. On the national level, it has entranced everyone from John Kerry to former Pennsylvania senator Rick Santorum, the rabidly right-wing Christian who famously compared homosexuality to bestiality. So far, the political stars haven’t yet aligned, but reams of legislation are already wending their way through the halls of Congress and statehouses across the nation—with a number of victories to show for it.

A bill introduced by Senators Hillary Clinton of New York (D) and Gordon Smith of Oregon (R) aims to improve the country’s miserable savings rate by pushing financial training, making more low-income families eligible for 401(k) tax credits, and creating IRAs for kids. If it passes, it could create billions of dollars in savings. And in California, EARN’s advocacy arm, the Asset Policy Initiative of California, has racked up a few wins—including a provision that allows income-tax filers to split their refunds electronically between checking and savings accounts, a move that should dramatically increase saving.

But the biggest battles are still on the horizon. Ultimately, advocates of asset building see IDAs as a major new government investment, funding matching grants and services for millions of people. Already in Washington, 103 members of Congress, from Mississippi’s Thad Cochran to San Jose’s Zoe Lofgren, have signed on to a pro-posal that would provide IDAs for up to a million people.

Despite bipartisan support for the legislation, many believe the greatest resistance to asset building will likely come from conservatives who say the poor haven’t done anything—like win a war, say, or make the desert bloom—to deserve the money. Last fall’s SCHIP controversy, in which Republicans complained bitterly that some of the bene-ficiaries of an otherwise anodyne low-income children’s healthcare bill weren’t needy enough, may offer a glimpse of the coming storm.

Not only conservatives are uncomfortable with lifting up the lower classes. In the age-old debate over character versus destiny, Americans have generally come down on the side of character. Life is what you make of it, the saying goes—that’s what the dream is all about. Yet if we’re honest with ourselves, we’d have to admit that success is usually a mix of the two factors. If you’re always swimming against the current, after all, you’ll have a tougher time than the guy in the speedboat. Hard work is critical, but so is a helping hand. As Weaver, the San Jose microfinancier, says, “Give people the chance, and they’ll rise to the occasion.”

This is the true American Dream in a nutshell, Mangan posits, and it’s just too powerful an idea to ignore. “If you look at other big waves of social change, it took decades. We’re still in our first decade, more or less. We’re brand-new,” he says. “When that window opens, this idea will have its day.”

As for treating the psychic ills, well, the best cure, Mangan says, is time and success. To that end, EARN is organizing groups of alumni who are starting small businesses or dedicated to buying TICs, so savers can solidify their gains. “Success builds on itself,” he says. “And when that happens, it transforms the demons.”

Chris Smith is a San Francisco contributing writer.