Tag: Financial Inclusion

Pick Your Poison: Abandoning Regulated Banking in Search of Financial Inclusion

~ Karen Petrou ~ 1 Comment

By Karen Petrou

  • Transaction and savings accounts are critical to financial security and inter-generational economic equality.
  • Nonbank offerings might increase financial inclusion, but pose risks to safeguarding savings, personal privacy, and consumer protection unless or until consumer-finance standards symmetrically apply to banks and nonbanks offering like-kind products to vulnerable households.
  • Public-utility, postal, or CBDC alternatives to bank accounts are a long way off and may not effectively safeguard high-risk households. 
  • Expanding low-cost, no-risk bank accounts is a critical near-term policy option.
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The Dollars That Make a Difference: Results of the New Survey of Consumer Finances

~ Matthew Shaw ~ Leave a comment

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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Why a Racial-Equity Mandate Isn’t Enough: Action for Inclusive Financial Policy

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By Karen Petrou

  • The lack of racial equity in U.S. monetary and regulatory policy is only part of the problem.  Inclusive policy must reach all groups – including persons with disabilities – now overlooked by the Fed and thus left behind by the U.S. economy.
  • The Fed’s monetary policy mandate in current law is already inclusive, but unmet and unenforced.  Fixing that by legislation may focus the Fed’s attention with better data, but data aren’t enough.
  • Inclusive financial policy effectively reaches all under-served groups via equality-focused financial regulation and ground-up – not trickle-down monetary policy.  The Fed is already a fiscal agent via its huge asset purchases, but this is the opposite of inclusive policy due to its direct and unequal wealth impact.  Inclusive policy realigns monetary and regulatory accountability, but does not replace it with a still greater fiscal presence.
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Dialing for Dollars: Solving CBDC’s Equality Conundrum

~ Karen Petrou ~ 1 Comment

By Karen Petrou

  • CBDC advocates tout its inclusiveness, but the digital divide is a profoundly exclusionary impediment to CBDC access for LMI, disabled, older, and rural households. 
  • Centralized deposit-taking and payments via the Post Office and/or Fed pose challenges to personal privacy and even freedom of expression that, if not averted in initial design, could come to pose significant political and governance risk.  Lack of private competition also presents discrimination risk based on pricing or other terms not subject to outside scrutiny.
  • If CBDC succeeds as some envision it, then lending will come either from the federal government – Big Brother problems of still more concern – or capital-markets sources outside the perimeter of safety-and-soundness and often also consumer-protection regulation and enforcement.
  • A CBDC in which the Fed acts as an open-source utility corrects for many current inclusion, governance, and intermediation obstacles to payment-system speed and efficiency. 
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Trying to Get By While Black

~ Karen Petrou ~ Leave a comment

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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