Equality Banking: A Roadmap

By Karen Petrou

  • Economic inequality and ultra-low interest rates create a vicious cycle in which rates drive down savings, financial intermediation becomes less profitable, unequal households have still more difficulty preserving income and accumulating wealth, banks drop equality-essential services, consumers are made still more unequal, and it all starts all over again.
  • Breaking this cycle requires hard decisions about which retail-banking services genuinely enhance economic equality and quickly developing effective, measurable delivery channels to promote widespread adoption.
  • There is no shortage of commitments from high-level federal officials supporting equitable finance; what’s missing are specific, near-term action steps.
  • This post thus provides a step-by-step roadmap for quick public- and private-sector innovation, regulation, and inclusion. 

Almost a decade to the day after the “Occupy Wall Street” movement crystalized the populist politics that now characterizes U.S. debate, the Acting Comptroller of the Currency announced that his agency’s top priority is reducing inequality.  This echoes the Biden Administration’s emphasis on equality and racial equity, but all of these high-minded goals are more hortatory than clear directives.  They are thus unlikely to advance equitable banking, exacerbating not just economic inequality, but also America’s discontent and resulting disfunction. Reducing economic inequality is clearly essential, with banks and other financial companies sure to face mandates or even public-finance competitors if vital needs are not quickly and equitably met. 

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How Inequality, Not Polling, Predicted the 2020 Election

By Karen Petrou

Perhaps nothing is as startling about the 2020 election as the bad calls pollsters made up to the minute votes were counted.  One might have thought all the mistakes that led to similar 2016 gaffes were corrected – pollsters certainly said so – but they weren’t and the reason why is sad, but simple.  The political-science models on which polling is premised are, like monetary-policy models and so much conventional wisdom, predicated on the vibrant U.S. middle class that once was but is no more.  As we showed early on the economic inequality blog, economic inequality breeds not just acute political polarization, but also a strongly right-leaning shift in voter sentiment.  No wonder – American voters denied the iconic promise of modest economic security and inter-generational mobility are angry.  The more they see prosperity enjoyed by only a few and often a progressive few at that, the angrier they get.  Add in COVID, and this is a witch’s brew of economic despair, social anger, political polarization, and national instability.

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The Dollars That Make a Difference: Results of the New Survey of Consumer Finances

By Matthew Shaw and Karen Petrou

Every three years, the Federal Reserve releases a unique, illuminating data set, the Survey of Consumer Finances (SCF).  The most recent report covering 2016 to 2019 comes at a time of acute political risk for the U.S. central bank due to growing demands for a third, “racial-equity” mandate and heightened recognition of the inequality impact of post-crisis monetary policy.  Perhaps for this reason, the Fed’s qualitative release and much subsequent media coverage highlighted what the Fed described as meaningful reductions in both wealth and income inequality.  Would it were so – percentages sometimes work in the Fed’s favor, but real dollars in people’s pockets, or the acute lack thereof, don’t.

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Trying to Get By While Black

By Karen Petrou

  • African-Americans were better off before the civil-rights era began than they were in mid-2019.
  • Truly huge disparities lie between white and black Americans in terms of income, wealth, and inter-generational mobility.
  • And that was before COVID eviscerated low-income households of color from both a health and economic point of view.
  • It’s past time for equality-focused financial policy, starting first with Equality Banks.

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American Millennials: The Generation the Recovery Left Behind

By Karen Petrou

In our last blog post, we chronicled the continuing demise of the American middle class.  Now, we turn to the equality disaster evident in the most recent U.S. demographics.  A new General Accountability Office (GAO) study confirms that millennials (those aged 18-37) are rapidly losing any chance of doing better than their parents and trends are extraordinarily inauspicious for NextGen followers.  Inter-generational economic mobility was once as much a hallmark of America as its robust middle class – in 1970, 92 percent of 30-year-olds made more money in inflation-adjusted terms than their parents did at similar ages even though the 1970 economy was considerably weaker than the prewar boom.  Now, millennials are far, far behind their parents.  Looking at wealth share,* baby-boomers owned 21 percent of U.S. net wealth when they turned 35 (1990 on average). Continue reading “American Millennials: The Generation the Recovery Left Behind”