We are thrilled to have you all here tonight. We would like to think we are more than a bookstore. We love having author signings and readings and we ask if you dont write anything, please think of us in the future when you need your next great read for for the upcoming holiday season. We will have a q a session in about 15 minutes. If you have a question, make sure you get the microphone from cspan before you asked the question. Mehrsa baradaran appeared Mehrsa Baradaran turned the law faculty in fall 2012. She currently serves as an associate professor. She previously taught regulation, socrates administered a blood Brigham Young university. During her time she was into one professor at the year year by the student bar association. Baradaran how the other half banks has been featured in the new york times, the atlantic, american banker and other national and International News and radio outlets. Previously, baradaran was a fellow at the New York University school of law and practiced on the Financial Institutions group at david polk and more well in new york city. She earned her bachelors degree laude in her lot of great commodity from nyu where she served as a member of the New York University law review. These people please welcome Mehrsa Baradaran. [applause] thank you so much for having me. After a disk read suggesting great books. You come in and say i am in the mood for some rain. A lot of times i say i need a pick me up and they gave me the most depressing books ive ever read. It was a pick me up because at least i didnt have their problem. Okay, so they spoke, the problem reveals the historical causes and im going to use powerpoint because i made it and its kind of cool. Even though my students can tell you i just wing it. But this is important so i better do powerpoint. Over half the u. S. Population would need to borrow about a 400 due to some on expect to expense. When these people face an emergency they have to take out loans that they cant borrow from friends or family and said theyd 300 from 200 apr. 40 of the public art on banks. But they do have a bank account or go elsewhere. These people spend 10 of their income each year on financial services. So when policy makers and academics talk about this problem is about regulating or bringing down the interest or make them go away. These efforts have been very frustrating. The payday lenders use to ring around the military so you would have a base and i decided it would be other check cashiers and payday lenders. These efforts have been really frustrating and its kind of like Michael Moore because the new lower interest when you ban one product that comes out with another. We have title lenders and essentially the same model. Im a banking scholar and i come out this from a very different angle. I understand the amount of price of credit and that being a social policy decision. So bank credit has always been entangled with the federal government and especially after the financial crisis in 2008, but even before that. Hes got the fed funds rate is something around 0 for the last decade. Especially lately. Discount window loans, quantitative easing, all of these things that you hear about and essentially what it means that the Federal Reserve despite how would borrow credit and at what price. So the federal government also creates credit markets to the gac, student loan market, it better. Payday lending has much more than a market problem but it is social and political problem. Theres a disparity of Banking Services with highly regulated, highly subsidized Banking Sector for those who can afford it and the very unregulated highpriced and basically stories and sometimes predatory sector for those who cant. So how did we get here . This is where the story, the history comes in. For 200 years in our nations history, we have a Rich Community Banking Sector so everything is in one area. Athens bank and couldnt have a branch in atlanta and the wednesday was advanced that would let you have two branches. No other state had that. You have local control of many. Somewhere around the neck to the 70s that goes away and then the merger starts every bank is swallowed up into bigger bags because they are trying to survive. So you also have the savings and loans and credit union that were created for the low income because they were in mutual ownership. The credit union starts his people that work and shop together and pool their money and pick a member each month or year to get a loan to buy a house and some Consumer Products like a refrigerator. The savings and loan start his mutual help organizations and all of the stop doing that sort of thing. Im not going to go through that a lot, but theres a lot of really rich history that says a lot about the american shaved from saving to credit, which i think reveals a lot. So weve got the daily bank. In just a few decades, daily bank is swallowed up and then a decade later it gets eaten out beaten out by base of america. The french lenders fill the void and there is a direct relationship. There are no payday loans in the night teen 60s or the 70s. This industry starts in the 1980s and blossoms so it is a brandnew that is where regulators have a hard time. Again, this direct causation and the harder problem is how do you fix it. So for the last 200 years, and again we have this jeffersonian idea that the way to fix any conglomeration or concentrated power is community and every legislative effort over the last 30 years has been focused on reinvesting communities and returning to the community model. We all watch it is a wonderful life over christmas and so it still was very large. I think we should still stick to that idea. However, the reality is not only are there not enough Community Minded banks, but a lot of them just arent interested in doing that anymore. So this is how a lot of people, a lot of banks feel about small dollar loans for the services that a lot of the poor need because youve got 500 apposite databank. That cost the big money and they dont want your 500. That is why they keep charging you. As soon as it goes below a certain amount of money, it becomes expensive for them to deal the survey would rather have 100,000. This is the small dollar loans they would rather not. The savings and also the loan. The loan to very little processes and said they largely left this industry. I think we should limit this, but what do we do now. This is where i think the banking comes in. This is one way that the federal government is actually an independent agency selffunded and sustained generally calm and fixed the massive problems very easily. And here is why. The post office, going way back now, the origins of the post office are fascinating, really and truly disorganization i backed in. I cannot have with the banking thing and then stumbled upon the post office. So in 1792, our nations founder alexander hamilton, thomas jefferson, James Madison couldnt agree on much, but they agreed to post to be a Public Servant organization. It would not make a profit. It would be selfsustaining but it wouldnt be profitable. The federal government was nothing. This is at a time where we have a National Current fee and predates the constitution because we didnt have the union. We decided post office. Benjamin franklin was the first. The other one was no community would be left behind so you would have a branch of a post office in rural michigan where there was nothing else but the northsouth new york georgia route were profitable and they would subsidize the eastwest routes that were less profitable. They made that decision that they would Service Every week regardless of profit. The third was the newspaper distribution be subsidized. D. C. And new york were the centers of politics and it was hard for information to get wes. So the post office started sending these and so when tocqueville comes to the u. S. To look at our democracy, he is amazed the rural michigan bloggers know exactly what is coming out and whos coming on it so it becomes our democracy. Much of a surprise that James Madison believed it would be this Public Participation but didnt realize how much. The reason i go into the history is the post office has it very rich, public entanglement and has been serving communities for a long time. So in 1861, Great Britain are doing it now. A lot of other countries that also, but Great Britain was her father. New zealand and japan and germany also. They started in 1861. 1871, postmaster general cresswell burst proposes here and he wants to do it to pay for the telegram telegraph, one of those. He proposes postal banking in the united states. But the bankers oppose it. It takes 40 years except for the democrat cleveland pushing for postal banking. Every president pushed for 40 years until we had a banking crisis in 1907. Usually you need a crisis and you saw that with. Friend. Seen it a crisis and that is the panic of 1907. So it becomes a major issue in the president ial election. So how do you fix panic . You can either ensure bags. I think i misspelled that. So William Jennings bryan has a liberal democrat populist says we should have s. B. Eight insurance. Taft is a conservative and said we should have banking because insurance increases moral hazard. Once the bank is ensured they can take all the risk. Those are the two issues on the table. He gets postal banking. In 1910 would have a postal Banking System that passes congress. It is able to appease the Community Bankers of the country and 95 of all the deposits are going to remain local. The worst thing you could do at the time within state and local money to the treasury. 95 say though its called a poor mans bank only for poor people. The deposits are 500 to nearly pay 2 interest back in the oldage. That is no longer the world we live in. 2 interest. These are not your customers and we wont compete with you. You can pay more for the people you want. In 1910, immediately it is successful. They became selfsustaining by 1913 was something around 32 million deposits. The interesting thing is the postal savings system from an administrator says it was extremely popular everywhere except where they expected it to be popular. Soap is not the west in the rural south detonated these banks. It is the endocrine and they flooded because they recognized them from the country they came from. And the post office and these people in new york and wherever they are, and with pamphlets, 24 different so they flood the post office with all of their money. Id 1915, immigrants hold 70 of deposits even though theres 15 of the population. This changes during the Great Depression as the postal banks while the deposits running away, so as banks are failing the deposits in the postal banks doubled every year for three years during 1929 until 1933. At the end of the Great Depression is 1. 2 billion in deposits into the postal bank. This trend wouldve continued had fdr not chosen the insurance. So fdr didnt actually like. He was convinced to take care. It was a calm friend. The postal banks become less necessary because he makes the banks day. However, after the Great Depression, the banks are retold to pay off the debt and fund the world wars. Between 1940 in 1941, they start selling the stands. I wish i could shave them. Some of these are quite threatening and menacing. But you know, women they are saying this is how you fund the war. You go to the post office and they were used to pay off the Great Depression and fund the war to the 10 of 9 billion. And then there is a sharp deposit in 1946 from all of the soldiers out fighting who are mailing their income back. The only institution able to receive those funds is the post office because it specializes in mail. Anyway, we got the we got this low we got the slowing of funds in the 1950s we have faith burgeoning economy and we had the golden era of Community Banking so every community has a bank. During that time they have a credit union or a Small Community bank. The post office start losing their customers and the post office is so cap to 2 . The money flows back to the bank in 1966 president johnson sees it as no longer streamline the federal government. Note that 30 years later or 20 years later, the banks of the communities are no longer there. Post offices remain without banking functions. One of the reasons i think the post office was able to succeed so well doing this is because of its public function. It was not subsidized by the federal government but it was also not a profitmaking institution. The postal administrators is not a moneymaking adjunct nor was it intended as such. It was until a higher to encourage thrift among all classes of citizens to diminish crime at the very doors of those in remote section and safeguarding savings with absolute confidence in the government and will trust no other institution. That right there is crucial for banking. They need that trust. You can either do it through the insurance. Our history we went through the fda see insurance row. For 30 years the post office was the alternative of bad and also a central bank before we had a Federal Reserve that would hold the deposits and the deposits and used ms liquidity as banks were facing a crunch and it was also again helpful in funding the wars. The truth is when a sort 1970, it becomes this nonissue. Only Time Magazine writes about it. They get basically all the facts drawn. So i think we should bring it back and it would offer small savings, checking, money transfer. This would be filling the void that payday lenders have felt in doing some name it did for a lot of our history and also it is done in most every other country abroad. A lot of the people in the press called it a revolutionary idea. It couldnt be further from revolutionary. Hes proposing this in 1870. And we did this for a long time and i think it is just the public for god or it seems like such a public intrusion. This is big government, but this is not. We are to have a post office to an institution that will fail otherwise. Again, just as the government has created, funded and made good mortgage market, they can also help start a small lending market and this will be the more controversial aspect of it. All bugs are risky and there are losses that can occur. You underwrite the price of the loss and do what a lot of Community Banks were doing across the country, which is lower interest and i couldnt get in to that if you have questions later. At this pinellas out because id love to take any questions. I am curious. I agree with the idea. [inaudible] i think its a good idea, but how would you propose [inaudible] a question. This may be more information than you want, but the unions at this point ive been working with them for a year or so and theyre trying to not do it through congress. As you said, its hard to do legislation. Do we do this in 2006 theres a post office bill that says the post office cant add any more services than theyre already offering. In 2006 they were already offering money orders. So you can expand the definition of money orders or get to the root of blood or money orders and use that to make it look like debit cards or transactions. Probably not loaned, maybe not savings accounts. That would be the next step. But they certainly could do the transaction. At the 90 billion industry. You saw the debit card remittance, sending money abroad. All of that stuff we could certainly make the case. It will be challenged, but there are nonlegislative earth right now. Some are trying to push it and i think that would not be a good idea. I imagine some folks are making money off the currency. In your view, are the big banks also invested in the Current System or do you think it pays [inaudible] a banks will oppose anything right away. They will always say no and then you have to convince them. These are not big and commercialism that is a Crucial Point because it was funny when you saw walmart it taken down by the banks could walmart tried to get a bid to service these customers in the big banks shut it down in the small banks shut it down. You see it as a very powerful institution because the banks dont want to do it. You dont do it. That is just true of the lobby system. I think the way to get the banks away, and this is sort of like playing around, but get them on board. That is the current proposal to say once you get the banks ideas, the only opposition is payday lending. And then are you a legislator thats going to come out and say im supporting payday vendors and i dont want this to pass. But these are not their customers. Theyve lost this market. The banks are invested in the payday lenders, but through investments that i dont think they care about. So looking at the debate that made content, it is fascinating to read the legislative history because they can have been today. The banks and they dont want the government about the government about the government defaulted on the government about the novice and its of any good at this money in your community. Okay thats fine. We can do it. Youd have to do some tradeoff. The other tradeoff that i think its one that could get the banks on board as they currently have the investment act requirements. The Community Reinvestment act says if you have a branch in a really rich area, then you cant exclude poor people. This is about redlining. They would have a bank in a rich area and post like a proverbial bread mind about a community and not lend there. You have to lend there if youre going to send in the Rich Community. They are always trying to fight this. Personally i would be willing to give up on the cra because it actually has no teeth into so you dont have those responsibilities. We will take care of you. High. But the growing demand upon my big thing, [inaudible] good question. I think of the dead have been given the post office they would have to look like any other bank. They would have to have an online function. You get your atm card, the machine, but also you could have your online checking your account remittance. They would have to give this servicing options of any normal bank. In fact, one of the vantage is here is low income folks live in a cash economy. So they dont have these ways to pay for things online. Its such a weird industry because you have to pay 5 to get the card and 3 every time you fill it, 3 every time you use it and 2 to check your balance. Thats a huge industry. A lot of money is going in because they allow people to use their debit card to buy things online. One thing a bank account does is graduate the poor into a Digital Currency which is how we all operate. We all operate in essentially transactions that are all online. If you ever go to this water office downtown. I went to set up my water and there is a line and people trying to pay their water bills. So it is not just that its expensive because they turn their paychecks in the cash which cost them money, but it also takes up their lunch hour. The one when you have to wade in. It said waterville, energy bill and what about those who have. I dont know because all of minor auto pay. Thats another way you benefit from not just the cost savings. You mentioned i wont take questions from you. My student, my one and only. You should be studying. You mentioned the Banking System, could you speculate how long its taken . Yeah, the post office came out with numbers. So this is like i said and 90 billion sector. If they could get 10 of that or 5 of that, then you meet a that, that anita cuts up the shortfall appeared right now the post office is in a whole, about 13 billion. For some political reasons, but also because their books dont match up. Maybe two, three years depending how much of the sector they can get. But as soon. The alternative is they default on the treasury loan. The question for the post office now is do you keep cutting costs and hope something works or do you add revenue and this is the way they had revenue. And by the way, every poster brought to the extent they are making money, they are doing it through financial services. A lot of them are doing financials. An ipo this week or last week ive lost track of time. 11 billion ipo at a trillion dollars in savings that they sold off. Its a very profitable posts and a lot of people want it. So, currently there a lot of these payday lending institutions are businesses. How do you think do you think it will be hard to change the public mindset . Good question. I dont know i stressed surveys, but the Pew Research Center did a survey in only 90 of the respondents said they were bank of the post office. So that is a survey. The other aspect is how people feel at the post office. A lot of us feel angry. However, it sounds like we think of the post office is a dinosaur, but thats the difference. A lot of people dont trust banks. So people just take their money out because they dont even trust them anymore. Same with payday lenders. This is a bad product, they are valuable player. But do you have at the post office has maybe you dont think it would place you want to be right now, but its also not a place that will screw you for lack of a better word. Anecdotally i can say i lived in harlem for a decade and theres a lot of payday lenders and people didnt have them at all. The post office was the center of the community were a lot of stuff happened outside of it. I think there was a feeling people would feel comfortable there. Banks purposely make it very elegant and i was purposeful. In the old days before we had fdic insurance, a way of bank would protect themselves from irans is that they had really fancy buildings with marble and gold and now is very much an economic decision to tell the public we are good. We have so much money in the bank in the back. You have no idea. As soon as the public runs it is over. They dont actually have your money there. Theyll even put them there is of the banks being run, they would put gold bars on the window to say we are fine. And so, i think you have ever met our allotted banks had these really repo, fancy buildings and low income folks if you dont speak that language or whatever feel uncomfortable, where payday lenders operate. These are very profitable, but they put up these neon signs and its kind of dirty on purpose. Its a little bit like we are cool, part of the community, right next door to the potshot down here. So we are cool. Ive heard from friends. So they do have this theory, you know, we are not a bank. The post office is closer to nine than they are to the banks. In your conversation, what kind of reaction are you kidding . So far i will tell you whos been supported wont be said. Senator warren early on very supportive. Senator brown recently, Ranking Member of the Senate Banking democrats. Bernie sanders recently joined very publicly and ralph nader was not an elected official. So far people who are focused on the staff having gained wide traction, but the conversations have just started. But again, it is best to not pay a legislator. It is better to convince the postmaster general. By the way, the first female postmaster general. Neither here nor there, but interesting. [inaudible] i have relatives who have fallen into payday loans and its very coming very difficult. They did themselves in a hole that they just cant get out of. The people live from paycheck to paycheck. You said in your presentation earlier the Banking System was to encourage economies. For many people, they are very foreign to them. They dont think longterm. So how would the postal banks encourage more quickly or economically or how would it be a way for them to manage better . When i go to the package at the post office, [inaudible] so what you think . Great question. When they answer that in two parts. One is i think a lot of people who rely on the, you know, it is not necessarily lack of education or financial management. It really is the only option. I think, you know, i dont know how to manage. I dont have these financial skills. I think if i lived paycheck to paycheck, i would have more financial problems that i have now with the buffer i have. So people who do these laws, they express actually higher awareness of interest and fees. Im not saying they are not the most educated because the surveys dont show that, but they do know what theyre getting. It is not necessary port management. But they live paycheck to paycheck. How does that encourage savings . That is the problem. Going back to 1910, all the money that came in 1910 came from peoples mattresses and stockings. There is a similar the data is hard to measure. The data shows a lot of money that is not in banks right now. So a lot of people have money to save, but no place to save it so it ends up in cash or in a debit card or just put it away. But the cash in your wallet. It is gone. I think having a place to save the misses were to japan and germany example for something we cant speculate, but in japan and germany have had a small sailing through the post office since the 1800 they just have more savers. They have, you know, a culture of saving and just per capita much more than the u. S. There is one historian, a japanese who claims it was the postal bank that caused that. I cant say, but that is what he said. So it is possible that once you have a place to put your money, more people will. But i cant speculate. I would hope. [inaudible] [applause] awarded a school of honors after the Second World War and with her daughter by her side, she was actually being made again. She pasted various honorary degrees, including one from oxford university. The decree was being given to her for her power to achieve, a face to persevere in a full measure of courage. That citation reflected her role in popularity. It actually only hinted. That little bit of how important and crucial as yet then. In fact, churchills own chief of staff saw her work close to during the war, during those desperate times. He concluded without any doubt the history of what John Churchill and the world would have been very different. I suppose its a way few came to that conclusion in a minute. What is very strange is no one remembers clementina now. Shes really not valid anymore. In fact, ill show you the picture of her. They are all well educated, knowledgeable women of the world. I knew one, knowing who she was. So she hasnt traded into one. Who was she . It is worth reflect gain and thats great, she never had the chance to study for her degree herself that she was one of victorian age and did not undergraduate in britain the silly comparative rarity in the 20th century. Her mother, the willful lady blanche, oldest daughter had made very, very certain that she wouldnt go to university. Brady bunch had woken down onto the weight of both sides, disapproved of bluestockings. Particularly, as youre saying mass. Anyone who could do some incapable of attracting many men. They had great hopes in the wealthy husband and i would solve two problems. It would take this rather an conventional daughter of her softer hands and she also never had any money although she was hard up and clementine had grown a period she has grown up being used to having to go to stores and ask for credit is that there wasnt any cash around. Sometimes the lady blanche who say was very unfaithful herself and had many, many lovers and sometimes as many 10 at the same times. Sometimes she was too busy and forgot to put supper on the table. These were all event that have an effect. She was very careful little crow who find it difficult to make friends partly because she grew up in this raggedy household. Here is a man is a pattern of the the pinnacle of power in this country for or decades rather uniquely adept to 9 11 and iraq and beyond. You dont stick around at those levels unless you are really good and really affect dave and i think that is why the left has had such an obsession with dick cheney. You see this even in barack obama today. He called dick cheney in response to this interview and the worst president of his lifetime. There is a joke there, but it speaks to dick cheneys extraordinary influence on our time and the central role that would be occupying the intellectual university
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