No slack: The financial lives of low income Americans
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The financial crisis lay bare how the financial system failed the nation but left hidden the many ways in which that system still fails the most vulnerable Americans. In No Slack, Michael S. Barr explores how low- and moderate-income households cope with financial stress, use financial services to make ends meet, and often come up short.
Many households were overleveraged or paid high costs for financial services, while others lacked access to useful financial products that can cushion against economic instability. The financial services system is not well designed to serve low- and moderate-income households, leaving them without financial slack: they did not have adequate breathing room for making the financial adjustments that would permit them to better meet their own needs. No Slack shows us why these families were the least prepared to handle the shock of the deep recession.
This pivotal analysis focuses on the Detroit metropolitan area's low- and moderate-income neighborhoods, which are similar to those of other Rust Belt communities. The Detroit Area Household Financial Services study—conducted at the height of the subprime lending boom—examines these households' decision-making processes, behaviors, and attitudes toward a full range of financial transactions.
No Slack reveals widespread problems in home mortgage lending, the common threads among people who file for bankruptcy, the reasons so many households are unbanked, and how behaviorally informed financial regulation can make the market work better. Drawing on his deep policy experience, Michael Barr advocates helping families seek financial stability in three primary ways: enhancing individuals' financial capability, using technology to promote access to financial products and services that meet their needs, and establishing strong protections for consumers.
Michael Barr is professor of law at the University of Michigan. Among his recent publications are Insufficient Funds: Savings, Assets, Credit and Banking among Low- and Moderate-Income Households, co-edited with Rebecca M. Blank (Russell Sage, 2009), and Building Inclusive Financial Systems: A Framework for Financial Access, co-edited with Anjali Kumar and Robert E. Litan (Brookings, 2007).
Sheldon Danziger is Henry J Meyer Distinguished University Professor of Public Policy at the University of Michigan.
The Author's Forum is a collaboration between the U-M Institute for the Humanities, University Library, Great Lakes Literary Arts Center, & Ann Arbor Book Festival.
Additional sponsorship for this event provided the U-M Law School and Ford School of Public Policy.