Big Banks and the White House Are Teaming Up to Fleece Poor People
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FEBRUARY 23, 2016
When Wall Street and its regulators talk about servicing the so-called “unbanked,” people who are generally disconnected from the banking sector, it often sounds like a mission to do God’s work — bank unto others as thou banketh for thyself.
“Basic financial services are out of reach for one in four individuals on Earth,” U.S. Treasury Secretary Jack Lew, a former Citigroup banker, said at a December speech launching the White House’s latest initiative targeted at the unbanked, which involves a partnership with JPMorgan Chase and PayPal.
A report co-sponsored by JPMorgan Chase in 2014 speaks of the problem in similarly biblical terms: “Roughly 75 percent of the world’s poor — 2.5 billion people — do not have a bank account or otherwise participate in the mainstream financial system.” The lack of access to “secure, affordable financial products and services severely limits the global poor’s financial security and opportunities.”
Yet when bankers and regulators debate the travails of the unbanked or underbanked — effectively euphemisms for poor and lower-middle-class Americans — they usually avoid two key questions: Why is this cross-section of society so marginally attached to the banking system in the first place? And who is behind the provision of “alternative” services — high-cost loan sharks, payday lenders, cash checking stores, pawnshops — the poor turn to instead of banks?
In reality, it is the banks themselves that appear to have cut off and driven away the low-income consumer, not the other way around. Wall Street won’t make loans to the poor — at least not directly. But large banks, it turns out,are behind many of the predatory nonbank, high-cost lenders that notoriously prey on poor communities. Most recently, the same JPMorgan Chase that’s working with the White House to reach the unbanked partneredwith OnDeck Capital, an online lender that approves loans in a flash and charges eye-popping interest rates that averaged around 54 percent as of 2014.
