More Ways to Make an Equality Bank Make a Difference

After we last year proposed “Equality Banks,” ideas flooded in on possible charters.  We also heard from those who so distrust any venture involving private finance that they believe only a public bank suffices to ensure fair delivery of equality-essential deposit, loan, and payment products.  In this blog post, we build on prior work to lay out an array of charter options suitable for different types of Equality Banks owned by different types of financial or private investors.  We reiterate our worries about public banks, adding to our prior evaluation of state and municipal efforts with an analysis of “low-income” credit unions and of the only equality-focused federal public bank to date.  Each of these well-intentioned initiatives in fact made U.S. inequality a little bit worse, providing important lessons as progressive Democrats ready a raft of proposals not only to craft public banks, but also even to make the Postal Service or Federal Reserve become one. Continue reading “More Ways to Make an Equality Bank Make a Difference”

Making “Responsible Innovation” a Reality: Big Tech, Small Money, and U.S. Economic Equality

By Federal Financial Analytics

FedFin has just released a new policy paper laying out how emerging risks in unregulated tech-based financial products may threaten U.S. economic inequality.  It’s not that regulated institutions have always done that much better, but rather that the power of big data, predictive modeling, and far-flung commercial interests combines with tech-firm culture in still more dangerous ways far outside the reach of effective controls or meaningful enforcement.  Continue reading “Making “Responsible Innovation” a Reality: Big Tech, Small Money, and U.S. Economic Equality”

Robinhood and the Sheriff of Nottingham: The Fintech Financial-Inclusion Illusion

By Karen Petrou

On December 14, a fintech venture dubbing itself Robinhood launched a consumer-banking product touting a no-fee, high-return, and yet somehow still profitable checking, savings, brokerage, and payment product.  It didn’t take long to see that Robinhood would steal from the poor to feed the rich.  Speculative investors have somehow bid the company up to a $5.6 billion valuation despite, as even a cursory analysis of public documentation shows, a flawed business model premised on a series of increasingly improbable assumptions about the transformative powers of financial technology and the malleability of U.S. financial regulation.  Continue reading “Robinhood and the Sheriff of Nottingham: The Fintech Financial-Inclusion Illusion”

This Little Equality Goes to Market

By Karen Petrou

After crafting the initial features of the post-crisis bank-regulatory framework, global and U.S. policy-makers were dumbfounded to discover that costly new rules changed the competitive financial-market balance.  Mirabile dictu, when costs rose for banks, banks changed their business model to cling to as much investor return as possible instead of, as regulators apparently expected, taking it on the chin to ensure ongoing financial-service delivery at whatever pittance of a profit remained.  As markets rapidly and in some cases radically redefined themselves, global regulators dubbed the beneficiaries of this new competitive landscape “shadow banks.”  At the most recent meeting of the FSB Plenary, they changed   shadow banks to the less stealthy moniker of “non-bank financial intermediaries.”  A new BIS working paper shortens the scope of shadow banking to “market-based finance,” going on to assess a fundamental question:  does the transformation of financial intermediation from banks to non-banks alter the income and equality landscape?  The answer:  It’s complicated. Continue reading “This Little Equality Goes to Market”