• How the Other Half Banks

  • Exclusion, Exploitation, and the Threat to Democracy
  • By: Mehrsa Baradaran
  • Narrated by: Priya Ayyar
  • Length: 9 hrs and 36 mins
  • Unabridged Audiobook
  • Categories: History, Americas
  • 4.3 out of 5 stars (208 ratings)
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Publisher's Summary

The United States has two separate banking systems today - one serving the well-to-do and another exploiting everyone else. How the Other Half Banks contributes to the growing conversation on American inequality by highlighting one of its prime causes: unequal credit. Mehrsa Baradaran examines how a significant portion of the population, deserted by banks, is forced to wander through a Wild West of payday lenders and check-cashing services to cover emergency expenses and pay for necessities - all thanks to deregulation that began in the 1970s and continues decades later.

In an age of corporate megabanks with trillions of dollars in assets, it is easy to forget that America's banking system was originally created as a public service. Banks have always relied on credit from the federal government, provided on favorable terms so that they could issue low-interest loans. But as banks grew in size and political influence, they shed their social contract with the American people, demanding to be treated as a private industry free from any public-serving responsibility. They abandoned less profitable, low-income customers in favor of wealthier clients and high-yield investments. Fringe lenders stepped in to fill the void. This two-tier banking system has become even more unequal since the 2008 financial crisis.

Baradaran proposes a solution: reenlisting the US Post Office in its historic function of providing bank services. The post office played an important but largely forgotten role in the creation of American democracy, and it could be deployed again to level the field of financial opportunity.

©2016 Mehrsa Baradaran (P)2016 Blackstone Audio, Inc.

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    4 out of 5 stars
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The Borrowers at the Fringe

If one of your brethren becomes poor, and falls into poverty among you, then you shall help him.... You shall not lend him your money for usury.
-- Leviticus 25: 35-37

I should disclose right upfront that I know and am friends (probably closer to acquaintances, since we share several friends and geography prevents us from actually breaking physical bread) with Mehrsa. But she didn't give me the book. I bought the HB version of her book and the audio version as well because I was genuinely interested in these subjects.

Financial policy is one of my hobbyhorses, and the literature (JR, The Big Short, Flash Boys, Cosmopolis, The Bonfire of the Vanities, etc), both fiction and nonfiction, that surrounds money I find super interesting. Some of this is probably due to my background. I started off my working life as a policy analyst in an Eastern State and now work as a financial advisor out West. My job used to be to analyze policy proposals and new regulations. Now, I work in the financial industry.

Anyway, I've decided this year to try and read three or four nonfiction book on the financial industry. I started with Bad Paper: Chasing Debt from Wall Street to the Underworld, read this one, and will hopefully get to Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right and The Money Cult: Capitalism, Christianity, and the Unmaking of the American Dream before the end of the year.

In this book Professor Baradaran lays out the theoretical and historical basis for a public option (the US Post Office) to serve the large segment of the American populace that is underserved (read this book and you will be shocked by just how underserved AND just how many) by traditional banks and credit unions. This large segment is often preyed upon by the payday lending and check cashing industries which, from my own vantage point, are industries that add very few positives to the US economy. As we see income disparity grow, and the poor disenfranchised not just from civic life and political participation, but also banking, we are sowing the seeds of trouble for our democracy.

This book carefully lays out the problems, the history, solutions of the past, current alternatives and roadblocks to change, and points to probably the most viable policy option. Given the nature of Congress' polarization and inability to act on some of the most basic responsibilities of governing, I don't hold much hope of change in the near future. But as demographic changes swell the underserved, as certain parties (like banks) continue to shrink their tent, at some point there might be enough energy and support for real, public option, banking reform*. And at that point, this book will be VERY important.

Professor Baradaran is not Michael Lewis. She didn't weave her economic book into the narrative of some fascinating character that drives the narrative through the channels of postal banking. She is not writing New New Journalism. This book won't get optioned for a movie. Sorry Mehrsa. :( This is a book that ends with 86 pages of notes. That is one page of notes for about 3 pages of text. This is, at heart, a policy brief. But here is the analogy I used with my wife last night:

There is a story about Velvet Underground's first album told by Brian Eno. While Velvet Underground and Nico sold only 30,000 copies in its early years, "everyone who bought one of those 30,000 copies started a band." This book is NOT destined to compete with a Michael Lewis bestseller. It won't get optioned. But like money deposited in a bank with a very low reserve rate, some books (and some albums) are big idea multipliers. And who knows, perhaps, everybody who reads this book will also start a band.

*Also, if you read this book, you should also check out the Post Office Inspector General's white paper Providing Non-Bank Financial Services for the Underserved

24 people found this helpful

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Not my fault

The writer comes from a not my fault mentality. I understand bad things can happen to everyone. People need to learn how to manage their money and be accountable for their own actions.

3 people found this helpful

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Great info, infuriating

Information most people should be aware of, book is very dense (textbook like). I recommend.

3 people found this helpful

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Excellent Information

Literal overlaying of history and economics. As such, it had some dry spots, but was great overall.

2 people found this helpful

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Compelling! How Banking Fails to Serve the Poor

This was, honestly, a very different book from what I expected. I was thinking this would be a "Nickel and Dimed," only about banking. But it's not.

Nevertheless, it's a fascinating (if occasionally dry) look at how the banking industry has evolved and where all of these para-bank organizations like check-cashing and payday lenders came from, and how they strip the poor of what few financial resources they have. If you've ever wondered why the lower- and middle classes are getting poorer and poorer, this book will help you understand. It really is very expensive to be poor.

I'm not sure that the solution proposed by the author would actually solve the problem of the unbanked and underbanked, but it is certainly a thought-provoking idea that is worth consideration.

1 person found this helpful

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First half good, second not

The history and background of our financial system was interesting at beginning of book. Good overview

1 person found this helpful

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I am the other half

I thought this book would give me some guidance on how to bank like the ‘other half’… assuming the ‘other half’ referred to those much wealthier than I. Boy was I wrong. Turns out, I am the ‘other half.’ I have a modest checking account, a tiny bit of savings, a mortgage, and a 401k through my employer. What I just listened to was a great lesson on the history of banking in the US (this part was pretty dry), followed by where we are today with millions of ‘unbanked,’ followed by a proposal to help shore up the middle and lower classes’ financial state. I feel so much smarter now, and will use this knowledge next time I vote.

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public option banking

let's do it. hopefully more will contact their representatives about it. this is a wonderful book regarding the historically referenced context in which our banking system is presently in. public losses and private gains are a product of big government in the wrong application of executing the banking system. apply government to the public option banking instead, and let the private gaining banks accept their private losses.

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Awesome please read

I loved this book. My understanding of banking system was greatly improved. The system is not too complicated.

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Postal Banks, Yes!

Pay Day loans are needed because there is nothing else for people who need 200 to 1,000 or so dollars in short term loans. But PD lenders can end up charging over 1000% in interest due if you count late fees, etc. That is criminal! Banking like this is NOT the “free” market, it is robbery! America, we can do better by the poor, and unbanked.