A recent Wall Street Journal article examined how the Fed’s use
of low interest rate policies has failed to reach those most in need.
Aptly calling it the “credit divide,” the article finds that “Fed
officials have been frustrated in the past year that low interest rate
policies haven’t reached enough Americans to spur stronger growth, the
way economics textbooks say low rates should.”
That conclusion is of no surprise to many, especially to the 73 million unbanked and underbanked Americans who don’t even figure into the Fed’s equation. That’s because extending credit to these individuals has never been seen as a meaningful contributing factor to the overall health of the economy. Sure, there have been special initiatives like the FDIC’s small dollar loan program a few years back, which by all measurable accounts failed. Not because banks weren’t willing to participate in the pilot program, but at the end of the day, without FDIC incentives banks simply couldn’t make money.