How The Other Half
Banks, 2016, Mehrsa Baradaran
Book Review, Joseph
Homer
Towering, national,
corporate banks were not always the dominant monoliths that they are today. But
as ‘big-banks’ edged out their local, community-lending competitors,
lower-income clients, whom they no longer banked, had nowhere to go but to a
growing payday lending industry (Baradaran 8). Chronicling this history of
banking, Mehrsa Baradaran’s “How The Other Half Banks” begins by reviewing key
founding-father concerns about federal banking and its relation to power and
goes on to describe big banking’s near-total abandonment of the non-rich,
non-corporate public. She reviews current banking practices and suggests
alternatives that may very well provide credit opportunities – opportunities to
live and thrive – for all.
Banking, in her view,
has long been bound up with morality, democracy, and opportunity. Importantly,
Baradaran explains that the under-banking of the poor is, in part, bound up
with a deep-seeded but misguided moral conceit: that the ‘poor’ are unable to
bank themselves, and they cannot handle or manage their finances, not to mention
complex financial services (Baradaran 115, 119). Likewise, she shows how a
landscape once covered by community banks concerned with the banking needs of
its local inhabitants was eventually supplanted by that of a concentrated,
centralized system of a few national banks. This trend was the direct result of
increasingly-deregulated industrial and market forces, fierce cost-cutting
competition, and decisions to systematically bank only debtors seen as lucrative
(Baradaran 7, 53, 57, 64). This trend, enabled by financial deregulation, dried
up easily-accessible credit sources for the hard-of-luck, and fueled the
payday-lending industry, which has since unscrupulously and predatorily banked
those abandoned by mainstream banks (Baradaran 8). She observes these unwinding
and seemingly-irreversible trends as indicative of a troubling development in
our democracy, one that strikes at its egalitarian tenets and especially the
notion that, if we work hard, we may each have the resources necessary to live
fulfilling lives. In the place of banks that have failed and neglected most of
us, she suggests that we re-create a public option in banking, returning to the
roots of what, in large part, gave rise to our democracy and the strength of
America in general: the Post Office (Baradaran 9).
Postal Banking could
bank those willfully abandoned by big banks and usuriously exploited by fringe
lenders. This high-interest industry, while serving a market need, preys upon desperate
citizens in complicated financial situations: those grappling for the rescuing
ropes of credit only find the entrapping chains of endless cycles of debt,
exorbitant interest-payments and hidden fees (Baradaran 10). Given this
reality, she urges us to consider Postal Banking as an alternative. Not only had
it been a success in the United States in the earlier part of the century and
had contributed to our victory in Europe; it is also widely practiced and
popular around the world (Baradaran 9). Perhaps most importantly, however, is
the fact that we already have the infrastructure to make it a reality, with postal
outposts inhabiting even the most remote American corners (Baradaran 9, 205). As
private for-profit banks and their payday-lending counterparts continue to
abandon the public-at-large in spite of being funded and routinely rescued by
it, Postal Banking might well provide a new path to social solvency and equality
of access to credit.
Baradaran provides an
interesting look into the history of debt in the particulars of the United
States as well as a defense of those struggling in poverty, and reminds us of
the importance of creating financial opportunity for all. Moreover, she provides
us with a meticulously-argued case for why we must do so: it is incumbent upon
us to put this idea into action, and what is at stake is the very financing of
the American Dream (Baradaran 10).
