Louis Jacobson

Recent Articles

Bank Failure: The Financial Marginalization of the Poor

In poor areas across the country, banks have been replaced with check-cashers and pawn shops. While both liberals and conservatives extol the virtues of savings, the recent trend encourages just the opposite.

A s Ross Perot might say, there's a great sucking sound coming from America's poor neighborhoods these days -- the sound of large chunks of paychecks and benefit checks flowing into the pockets of check-cashers, at five times what it would cost a typical bank to provide similar services. Thanks in part to deregulation, bank branches have closed in low- income communities since the early 1980s, and check-cashing outlets have often taken their place. Meanwhile, another institution that more affluent Americans know only from old movies and short stories -- the pawnshop -- has made a big comeback among the poor. The flight of the banks not only means that the poor must now pay more for financial services; it also means their communities are losing the institutions that promote personal savings. It is an irony of the recent era of economic policy: While commentators regularly preach sermons on Americans'low rate of savings, public policy has contributed to the erosion of savings...