Cashing In On Distress: The Expansion of Fringe Financial Institutions during the Great Recession
The collapse of the housing market was a long term consequence of two concurrent and reciprocal trends: widening inequality and the growth of a two-tiered financial services system, in which the rich and the poor have access to vastly different tools for wealth accumulation. The spatial organization of these dynamics created financially-unstable neighborhoods vulnerable to job loss and predation on behalf of subprime lenders and other fringe service providers. This paper examines whether the same conditions that made certain, predictable communities susceptible to foreclosures also led to an expansion of check cashing outlets (CCOs) in New York City during the Great Recession. CCOs can cost individuals substantially more than a typical savings or checking account; potentially totaling tens of thousands of dollars over the course of a career. Results show that foreclosures and CCO growth were concentrated in the same neighborhoods, which tended to have larger minority presence. The geographic link between widening, racialized financial services inequality and the Great Recession’s consequences provides a strong impetus for wider fair lending and community investment policies.
Jacob W. Faber is a PhD Candidate in Sociology at New York University and a Doctoral Fellow at the Furman Center for Real Estate and Urban Policy. He holds a BA from MIT in Management Science and a dual Master’s degree from MIT in Technology & Policy and Urban Studies & Planning. His research focuses on spatial inequalities by race and socioeconomic status. Faber leverages observational and experimental methods to study the mechanisms responsible for sorting individuals across space and how the distribution of people by race and class interacts with political, social, and ecological systems to create and sustain economic disparities. His dissertation explores the geographic concentration of the consequences of the Great Recession through the lens of mortgage foreclosures, examining why foreclosures were concentrated in black and Latino neighborhoods and the effects of the geographic concentration of foreclosures on communities. In other projects, Faber is studying the stigma attached to residence in poor black neighborhoods, the effect of the Great Recession on college attendance, the role of real estate agents in maintaining segregation, and the demographics of flood risk from Hurricane Sandy.