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62 Emory L.J. 483 (2012-2013)
How the Poor Got Cut out of Banking

handle is hein.journals/emlj62 and id is 495 raw text is: HOW THE POOR GOT CUT OUT OF BANKING

Mehrsa Baradaran*
The United States currently has two banking systems-one for the rich, one
for the poor.I It was not always this way. In the past, the U.S. government has
enlisted certain banking institutions to serve the needs of the poor and offer
low-cost credit to enable low-income Americans to escape poverty. Credit
unions, savings and loans, and Morris Banks are three prominent examples of
government-supported institutions with a specific focus of helping the low-
income. Unfortunately, these institutions are no longer fulfilling their missions,
and high-cost, usurious, and sometimes predatory check cashers and payday
lenders have quickly filled the void. These fringe banks do not provide the poor
with useful credit and further bury them in debt.
This Article tracks the neglected history of government-sponsored
institutions designed to offer credit to the indigent and explains how each
abandoned its initial purpose. In doing so, the Article highlights the shifts in
modern banking that rapidly increased competition among banks and caused
homogenization in form. Alternative banking institutions could not survive
deregulation and were forced to assimilate and operate like mainstream banks,
with heightened profits as their sole objective. The poor were the victims.
* Assistant Professor, University of Georgia Law School. The author thanks Arthur Wilmarth, Erik
Gerding, Julie Hill, Kristin Johnson, Peter Conti-Brown, Fred Gedicks, David Moore, Usha Rodriguez, and
Jared Bybee for their helpful comments on earlier versions of this draft. The author would also like to thank
Brad Lowe, Tim Nally, Danny Brimhall, Jonathan Love, and Seth Atkisson for their invaluable research
support. All errors are solely those of the author.
1 The label poor is judgment-laden, paternalistic, and an inadequate description of the relevant group of
people who are affected by the changes involved in banking. This group includes no-income, low-income, and
middle-income individuals who are financially vulnerable in many ways. Poverty is not just about low wages
and may not be a permanent condition, and those who are poor do not share common traits. This Article
attempts to describe circumstances that affect those that have fewer financial resources and less access relative
to others in society. These individuals are often low-income individuals-sometimes minorities or immigrants
and sometimes less educated than their more wealthy counterparts-but no single one of these traits is the
defining trait of the poor. Although the terms poor, underprivileged, and low-income do not accurately capture
this group and have unintended negative connotations, I will use these labels interchangeably throughout the

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