73 million Americans on the wrong side of the credit divide

A recent Wall Street Journal article examined how the Fed’s use of low interest rate policies has failed to reach those most in need. Aptly calling it the “credit divide,” the article finds that “Fed officials have been frustrated in the past year that low interest rate policies haven’t reached enough Americans to spur stronger growth, the way economics textbooks say low rates should.”

That conclusion is of no surprise to many, especially to the 73 million unbanked and underbanked Americans who don’t even figure into the Fed’s equation. That’s because extending credit to these individuals has never been seen as a meaningful contributing factor to the overall health of the economy. Sure, there have been special initiatives like the FDIC’s small dollar loan program a few years back, which by all measurable accounts failed. Not because banks weren’t willing to participate in the pilot program, but at the end of the day, without FDIC incentives banks simply couldn’t make money.

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Yet we have 73 million men and women who live with the constant fear that a financial hiccup will trigger a need for money that they don’t have and most likely can’t get. While the feds are making easy money, it’s going to those with near-perfect credit scores, leaving many of these 73 million Americans scrambling for other options. In other words, while interest rates are at an all-time low, money still isn’t available to those who need it the most.

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