Michael S. Barr

Banking the Poor: Policies to Bring Low- and Moderate-Income Households in the United States into the Financial Mainstream

Low- and moderate-income households who use alternative financial service providers pay a high price to convert their income into cash, pay their bills, and obtain credit, and they lack a regular means to save. The high cost of alternative financial services undermines key income redistribution policies for the poor, including the EITC. Existing banking products are often not well designed to meet the needs of the poor, and few banks compete with alternative financial services providers for low-income customers, particularly in low-income neighborhoods. The cost to individual financial institutions of research, product development, account administration, staff training, marketing and financial education with respect to new financial products for the poor, relative to their expected financial return, means that the market is unlikely to change quickly on its own. In addition, network externalities in electronic payments systems and distribution networks suggest that net social benefit could be obtained through further expansion.

International Law-Making by Hybrid Bodies: The Case of Financial Regulation

The recent financial crisis, which roiled the globe beginning in September 2008, nearly decimated global financial markets and in fact devastated the real economy of the United States and Europe, with concomitant global harm. The crisis exposed fundamental weaknesses — both procedural and substantive — in the international financial regulatory architecture. The Bretton Woods institutions (the International Monetary Fund (IMF), World Bank, and World Trade Organization (WTO)) were never really equipped to deal with the growing complexity, breadth, and size of the global financial system, and instead left rule-making and supervision largely to the domestic arena. The cross-border rules that were developed by national regulators and the international standard-setting bodies that took root in this global institutional lacuna in the 1980s proved woefully ineffective. Despite strategies to increase the accountability and legitimacy of these hybrid standard-setting bodies,1 the rules failed substantively, and overwhelmingly. Global finance, and a “soft-law” architecture left unchecked by a decades-long regulatory race to the bottom, proved weak in the face of global financial institutions and crushed the real economy.