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GGR221 Lec 9

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Deborah Leslie

Lec 9March1714103 PM1980s 1990s Financial Exclusion paved the way for the 2000s a way for inclusion in the form of subprime mortgages In USA and Canada deregulation in financial services In USA there were a series of laws in 1980s and 1990s deregulating savings and loans institutions and relaxed interstate banking restrictions Banks couldnt grow too big in US unlike CanadaRestrictions were relaxed allowing banks to grow bigger Series of Acts passedGrammLeachBliley Act 1999Allowed commercial banks investment banks securities firms and insurance companies to consolidateExcluded large investment banks and a number of financial instruments from regulation Glass Steagall Act in 1933 Separated commercial banks regular banking of public from investment banks So average consumer did not have to worry about banks gambling and losing all the money Protect the consumerCommercial banks were not allowed to engage in investments and vice versa CityCorp emerged with Travelers Group insurance companythis is an example of a bank and insurance company merging Banks engaging in speculative financial activityCanada traditionally maintanence of discrete banks securities dealers trust companies and insurance firms 198687 universal banks allowed Greater entry foreign banks Financial ExclusionIncreased competition for banks Competition within the markets Foreign bankseg grocery stores now entering financial services eg Presidents Choice ING direct dutch bank entered Canadian marketCompetitiors cherry picking customers In response banks have waged a flight to qualityTop 40 of the marketmore likely to buy from the banks The most affluent 40 of customersWealthy customersEncouraging them to buy all kinds of investment related productsSignificant polarization in incomeRicher Canadians became richerOccupy Wall Street Increase in investmentrelated products Growth private banking services in USAWithdrawal from poor urban and rural areasFinancial Exclusionthe inability to access necessary financial services in an appropriate form Carbo et al 2007Risk assessments Access exclusion Condition exclusion Price exclusion Marketing exclusion target marketing elitesSelfexclusionGeographic ImplicationsWithdrawal bank brances from low income areasfinancial desertificationDesertification eg grocery stores food desertsPoor communities can not access financial services In USA usually in African American and Hispanic areas most affectedEthnically affectedReturn to redlining redlining practice of banks drawing lines araound certain areas of mapLectures Page 1
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