What a Post-Office Bank Can and Can’t Do for Economic Equality

By Karen Shaw Petrou

Yes, I know – getting the post office into finance when you despair of getting your own mail, not the neighbor’s, is a stretch.  But the economics of small-dollar banking under the post-crisis monetary and regulatory framework force a hard choice:  create an equality-focused utility for otherwise-unbankable customers or consign them to the only financial sector that profits from them:  predatory companies.  Maybe someday fintech will figure out a way to handle huge volumes of small transactions, but some day is far away and un- and under-banked customers are losing income and wealth every day they cannot obtain affordable, sustainable financial services. Continue reading “What a Post-Office Bank Can and Can’t Do for Economic Equality”

Very, Very Safe Banks and a Very, Very Unequal Economy

By Karen Shaw Petrou

On April 13, federal banking agencies released their plan to require regulatory-capital recognition of the FASB’s new current expected credit loss (CECL) accounting method.  Doesn’t it sound technical, dull, and irrelevant to economic equality?  The integration of capital regulation with CECL is indeed technical and often dull, but it’s absolutely critical to the ability of U.S. banks to make the long-term, higher-risk loans essential for reversing at least some U.S. income and wealth inequality. Continue reading “Very, Very Safe Banks and a Very, Very Unequal Economy”

Caught in CCAR’s Cross-Fire

By Karen Shaw Petrou

  • CCAR now tries to make big banks a shadow U.S. central bank.
  • Result: more systemic risk and still less economic inequality.

How do you make the financial system less stable and increase U.S. economic inequality at the same time?  It’s not easy, but if you’re the Fed, then you accomplish this frightening feat by toughening up the annual CCAR stress test for the biggest banks without an eye to its systemic or market impact.  Stress testing is fine – indeed an important addition to the post-crisis supervisory arsenal.  But, CCAR itself is founded on two flawed premises:  big BHCs are the heart of financial stability and nothing the central banks does adversely affects economic inequality.  Continue reading “Caught in CCAR’s Cross-Fire”

Why “Full” Employment is an Empty Promise

By Karen Shaw Petrou

In her speech on September 26, FRB Gov. Brainard deploys a lot of data to raise, but then duck, what I think is the most critical question about post-crisis monetary policy:  Is U.S. employment really “full” enough to justify wider wealth inequality that is in part the Fed’s fault?  Chair Yellen and others defend quantitative easing (QE) and ultra-low rates on grounds that U.S. “full” employment will eventually be matched by growth, consumption, and resilient, robust recovery.
Continue reading “Why “Full” Employment is an Empty Promise”