In this debut, Baradaran (Univ. of Georgia School of Law) charges that nearly half of the American population has been deprived of access to financial services at a fair price thanks to financial deregulation.
The author spotlights the situation of “the other half” who are denied access to banking services or credit, and she cites government statistics showing that “over half the households in the United States could not come up with just $400 to cover a medical emergency without having to borrow, and 60 percent lacked enough money to get by for three months.” They also have to spend about 10 percent of their annual income just to access their own money. This makes them vulnerable to payday and other predatory lenders. People who use payday lenders, writes the author, do not do so out of “irresponsibility or ignorance.” In fact, “many people need small loans.” Baradaran argues that the financial crisis of 2007-2008 is a perfect demonstration of how widespread deregulation has replaced the previous social contract between government, banks, and citizens. The author identifies “the pivotal transformation” as the banks' successful campaign over decades to be freed of regulation and treated like any other for-profit corporation. When Barack Obama's administration attempted to make the bailout conditional, the banks refused. The previous recognition that banks are a public service, and should be treated as such (Supreme Court Justice Brandeis called them “public utilities”), no longer figured in the balance. Now, the continuing profitability of the large banks, which hold more than 50 percent of financial assets, comes first. The author also discusses alternate forms of private banking, which were intended to address this public need, and Baradaran points to the pre-1970 role of the U.S. Postal Service in promoting communication and access to finance for small businesses and citizens.
A comprehensive addition to the ongoing discussions of both inequality and the financial system.