Remarks by
Sheila C. Bair, Chairman,
Federal Deposit Insurance Corporation
to the
Greenlining Institute's 14th Annual Minority
Economic Development & Homeownership Conference
Los Angeles, Calif.
4/19/07
Thank you very much. It's great to be here in Los Angeles.
As the head of the FDIC I wear two hats. One is the safety and soundness of our
banking system. And the other is consumer protection.
Some might say you need a split personality to run the FDIC. But the fact is safety and
soundness, and consumer protection are closely linked.
Banks can't make money without customers, and consumers can't live out their dreams,
such as buying a home or saving for a child's college education, without affordable
credit. It's a peaceful co-existence, a balancing act between two powerful forces that
ultimately have a major impact on our communities as well as our national economy.
Today I'll be primarily wearing my consumer protector hat. I want to cover two areas:
How we can include more people in the banking system, and then focus on the troubles
borrowers are having with subprime mortgages.
Economic Inclusion
As most of you know, I've made it a priority at the FDIC to explore ways that we can
help more consumers enter the mainstream financial system. Too many people,
especially those with lower incomes, rely on a mix of high cost non-bank financial
service providers for their credit needs. And their numbers are growing.
Some estimates put the number at 40 million households.
The growth in the payday lending industry alone, for example, shows how many people
are shunning banks for their credit needs.
By some estimates, payday loans topped $28 billion last year, and have doubled every
year for the past five years. These numbers are really frightening.
Many borrowers who use payday loans have a checking account and a steady
paycheck. So, why aren't they borrowing from their bankers?
Sheila C. Bair, Chairman,
Federal Deposit Insurance Corporation
to the
Greenlining Institute's 14th Annual Minority
Economic Development & Homeownership Conference
Los Angeles, Calif.
4/19/07
Thank you very much. It's great to be here in Los Angeles.
As the head of the FDIC I wear two hats. One is the safety and soundness of our
banking system. And the other is consumer protection.
Some might say you need a split personality to run the FDIC. But the fact is safety and
soundness, and consumer protection are closely linked.
Banks can't make money without customers, and consumers can't live out their dreams,
such as buying a home or saving for a child's college education, without affordable
credit. It's a peaceful co-existence, a balancing act between two powerful forces that
ultimately have a major impact on our communities as well as our national economy.
Today I'll be primarily wearing my consumer protector hat. I want to cover two areas:
How we can include more people in the banking system, and then focus on the troubles
borrowers are having with subprime mortgages.
Economic Inclusion
As most of you know, I've made it a priority at the FDIC to explore ways that we can
help more consumers enter the mainstream financial system. Too many people,
especially those with lower incomes, rely on a mix of high cost non-bank financial
service providers for their credit needs. And their numbers are growing.
Some estimates put the number at 40 million households.
The growth in the payday lending industry alone, for example, shows how many people
are shunning banks for their credit needs.
By some estimates, payday loans topped $28 billion last year, and have doubled every
year for the past five years. These numbers are really frightening.
Many borrowers who use payday loans have a checking account and a steady
paycheck. So, why aren't they borrowing from their bankers?
Why isn't lower-priced credit more available in underserved neighborhoods, especially
inner cities?
A Federal Reserve study says that higher-priced lenders may disproportionately work
with ... and market to ... borrowers from minority neighborhoods. The study found that
metropolitan areas with larger minority populations and higher unemployment rates are
more likely to have greater amounts of higher-price lending.
Other studies found that subprime lenders are more active in lower income, urban areas
and that minority access to credit is dominated by these higher-cost lenders.
High cost, predatory lending strips wealth and locks hardworking families into an
endless cycle of debt and financial distress, undermining faith in our financial systems.
The FDIC will continue to act as a catalyst for productive partnerships between financial
institutions and community development organizations ... organizations such as
Greenlining ... to improve access to the banking system for low- and moderate-income,
minority and other underserved communities.
Let me tell you about one way that we're working on this.
The Alliance for Economic Inclusion, or AEI, is our national initiative to create grass
roots coalitions across the country to get more people into the financial mainstream.
The goal is to expand the availability of low-cost savings products, small loans with a
savings feature, and other affordable services.
Why is this effort important? Low income consumers have a need. And for Main Street
bankers, this is a business opportunity.
The 40 million under-banked people in the U.S. earn $1.1 trillion a year, (of which half
don't have a banking relationship). All told, Americans spend at least $11 billion
annually on alternative financial transactions.
Here in L.A., estimates suggest that one in 10 of the city's 4 million residents is
un-banked.
48 percent of the Mexican immigrant population in Los Angeles is under-banked,
according to a poll by AEI's New Americans Committee.
This is why we picked the City of Angels as one of nine cities to promote
economic inclusion.
I met this morning with members of the new Los Angeles AEI, all of whom are here in
this room ... some 35 accomplished individuals who are committed to promoting
financial inclusion. They are leading local AEI's efforts in expanding new and affordable
financial products and services for the underserved. And I thank them for their service.
inner cities?
A Federal Reserve study says that higher-priced lenders may disproportionately work
with ... and market to ... borrowers from minority neighborhoods. The study found that
metropolitan areas with larger minority populations and higher unemployment rates are
more likely to have greater amounts of higher-price lending.
Other studies found that subprime lenders are more active in lower income, urban areas
and that minority access to credit is dominated by these higher-cost lenders.
High cost, predatory lending strips wealth and locks hardworking families into an
endless cycle of debt and financial distress, undermining faith in our financial systems.
The FDIC will continue to act as a catalyst for productive partnerships between financial
institutions and community development organizations ... organizations such as
Greenlining ... to improve access to the banking system for low- and moderate-income,
minority and other underserved communities.
Let me tell you about one way that we're working on this.
The Alliance for Economic Inclusion, or AEI, is our national initiative to create grass
roots coalitions across the country to get more people into the financial mainstream.
The goal is to expand the availability of low-cost savings products, small loans with a
savings feature, and other affordable services.
Why is this effort important? Low income consumers have a need. And for Main Street
bankers, this is a business opportunity.
The 40 million under-banked people in the U.S. earn $1.1 trillion a year, (of which half
don't have a banking relationship). All told, Americans spend at least $11 billion
annually on alternative financial transactions.
Here in L.A., estimates suggest that one in 10 of the city's 4 million residents is
un-banked.
48 percent of the Mexican immigrant population in Los Angeles is under-banked,
according to a poll by AEI's New Americans Committee.
This is why we picked the City of Angels as one of nine cities to promote
economic inclusion.
I met this morning with members of the new Los Angeles AEI, all of whom are here in
this room ... some 35 accomplished individuals who are committed to promoting
financial inclusion. They are leading local AEI's efforts in expanding new and affordable
financial products and services for the underserved. And I thank them for their service.