Banking on a Revolution: Why Financial Technology Won’t Save a Broken System

0:00 hello welcome everybody uh my name is justin erickson uh and i am the program manager for the 0:06 detroit neighborhood entrepreneurs project which is a project of the center on finance law and policy 0:12 uh which is bringing you this talk today uh the detroit neighborhood entrepreneurs project has the mission to bring together small 0:18 businesses with university of michigan students faculty and staff to solve business owners legal financial 0:24 marketing operational design challenges and we are duly focused on detroit neighborhoods and student learning 0:30 we work across the university of michigan and across detroit this semester we are working with 47 0:37 teams of uni university of michigan students who are enrolled in courses across the 0:42 university working on projects with detroit business owners a brief story about me that i think is 0:48 relevant to this talk today when i graduated from college i worked for an institution-based community 0:55 organizing effort in central florida for an organization called faith in action in that role i worked with others to 1:01 fight mostly unsuccessfully for a more compassionate and effective foreclosure assistance response from 1:07 federal government and the florida state government and i also worked again unsuccessfully 1:12 for reform to the payday lending industry so for those of you who are a little bit 1:17 familiar with dr friedland's work you can imagine that i personally am very interested 1:23 in her talk today dr terry friedland is an associate professor at the school of social work 1:28 faculty director within the center on asset education and inclusion and research fellow at new america in 1:35 washington dc she conducts research to envision redefine and move financial and economic 1:41 justice particularly for and with individuals and groups traditionally excluded from and marginalized by the financial system 1:49 her research covers areas such as access to the financial system and participation 1:55 in today's economy and basic financial products like checking and savings accounts and their importance for conducting a wide range 2:02 of transactions dr freedline has studied access to the financial system through a basic bank or savings account 2:08 as a gateway to the economic world an alternative to debt for achieving economic goals 2:14 and an opportunity for acquiring and accumulating wealth her most recent research mapping 2:20 financial opportunity investigates the financial system from a macro perspective and the racialized ways that banks 2:26 credit unions and payday lenders invest in communities before entering academia she worked for 2:31 several years as a clinical social worker in the juvenile justice system and her latest book which is quite good 2:38 banking on a revolution why financial technology won't save a broken system professor freedline calls attentions to 2:44 systemic issues in society and the economy rather than separately dissecting issues professor friedland groups 2:51 systemic issues under the term financialized racial neoliberal capitalism institutions and philosophies are not uh 2:59 race and gender blind she argues and then demonstrates demonstrates how racism and patriarchy have infected the 3:05 world in which we live so with that introduction is my pleasure to introduce our speaker today dr terry 3:12 friedline if you do have questions you can message them to me privately 3:17 and i hope we have some time at the end for a q a session dr friedland 3:27 well good afternoon everyone it's such a pleasure to be here with you all today and for you to join me on this afternoon 3:33 thank you justin for that kind introduction and 3:39 you know sometimes we don't get to see the successes that our work 3:46 realizes so thanks for sharing about your work and i'm sure that there 3:52 are seeds there that will grow in the future so i have you know immense gratitude for 3:59 the center on finance law and policy for inviting me to give this talk um thank you to everyone working behind 4:04 the scenes to make this possible and for those who are joining this afternoon um you know the process 4:10 of writing a book um you know often isn't solitary so i have benefited you know from a lot of 4:16 support in thinking through ideas um and learning with others um several who are on the call this 4:23 afternoon and so i won't give kind of individual thanks but do appreciate you know that that 4:29 support and that collective thinking um so i'm going to begin the book 4:35 or begin the talk like i begin the book um by situating us in some historical contexts that have contemporary 4:41 relevance and let me give a brief agenda of how i'll move forward so i'm going to talk 4:46 through the origins of banks or you know banks as an origin story 4:52 what that means for fintech and and the subtitle of the book is you know fintech won't save a broken 4:57 system and uh and what that means um 5:02 i'm gonna talk about you know really three chapters of the book one that focuses on student loans including 5:08 financialization and the tyranny of bootstraps corporate landlords and the climate crisis 5:14 and then conclude with a conversation about you know how people-led movements 5:19 are are shifting power and are bringing revolution to the financial system in some pretty important and exciting 5:25 ways i also want to make a few notes on 5:30 accessibility so this might also be useful if you're joining by phone today so i'm a white woman with brown hair i 5:37 have on a blue shirt i'm sitting in a room that overall is pretty empty behind me there are 5:43 three pictures framed on the walls there's some books on a mid height bookshelf in the background 5:49 including my book and those things are visible behind me i'm going to be sharing powerpoint 5:55 slides throughout and there are a number of images on those slides my remarks are going to talk through the 6:00 content of these slides over accessibility purposes i'm happy to make available copies of my slides 6:07 that include written caption descriptions for the images alright so banks as an origin story our 6:15 financial system like the united states is is rooted in histories of white racial violence 6:20 um one of the earliest periods of violence includes the genocide of indigenous peoples 6:26 and laylee long soldier has a poem that's titled 38 that tells the story of 6:31 38 dakota men i don't write about this in the book but i want to share um 6:36 as part of context for this conversation today and i'd like to thank hillary watson and 6:43 who first shared this poem with me so 38 dakota men were mass executed by 6:49 hanging under the orders of president lincoln in 1862 um and this was in retaliation for 6:54 what's known as the sioux uprising so we must remind ourselves of and 7:00 acknowledge this history because it is still living with us including the acknowledgement of the 7:06 university of michigan is located on the ancestral lands of the nishwa ishgaran and 7:11 the three fires people who are the ojibwe adawa and potawatomi along with their neighbors the seneca delaware 7:18 shawnee and wyandotte nations indigenous peoples experience the 7:23 ongoing colonization of their ancestral lands after the dakota people's land was stolen they starved and there was a 7:30 white trader named andrew merrick who refused to lend to the dakota and to extend 7:35 credit for them um you know to purchase food so if you were wondering how to where is 7:40 the connection to banks and finance uh you know this this white trader refused to extend credit in this case and he's 7:48 known for this callous saying if they are hungry let them eat grass since people who are starved cannot live 7:55 the dakota peoples fought back settlers and traders were killed including merrick 8:00 and in response to the sioux uprising lincoln ordered the mass execution of of 38 dakota men 8:07 which happened just after the christian holiday of christmas on december 26 1862 notably 8:15 lincoln signed the emancipation proclamation just a few days later declaring that enslaved people should be 8:20 freed and so another period of violence was slavery um banks were established during slavery 8:27 to finance the economic and racial system uh the the economic 8:33 system of racial capitalism racial capitalism is our economic system 8:38 that stratifies or creates difference in economic value based on socially constructed hierarchy so 8:44 based on differences around race or gender or economic class and it's fundamentally an economic 8:50 system that concentrates power there's so much more to racial capitalism than what i'm talking about 8:55 today and you know we can thank black political thought that really has especially contributed to our 9:01 understandings on racial capitalism but but this is a backdrop of our conversation so early white owned 9:09 banks in teamwork with white slave holders literally collateralize the bodies of 9:14 black peoples who are enslaved as credit onto the ledgers of our 9:19 financial system white slave holders surveilled the people that they were brutalizing they 9:25 kept detailed records and then they used those bodies as collateral for amassing wealth for themselves through the financial 9:31 system so white surveillance of black bodies and and human capital 9:37 are part of this early financial system the bank of north america is one of the 9:43 united states first chartered banks and it was proposed by a slave trader named robert morris and established in 9:49 1781 and this happens at the peak of the transatlantic slave trade 9:54 morris wanted the bank to expand the country's military and to repay revolutionary war debts 10:00 so early banks underwrote slavery and invested and invested in militarization 10:11 there are there are two quotes that stand out to me have been illustrating this history and one is from angela 10:16 glover blackwell and the others from alexander goodwin banks are the underwriters of american 10:21 racism and police are the muscle of capitalism and so morris specifically 10:26 envisioned the bank of north america to serve these purposes today the bank of north america is known 10:33 as wells fargo many of the the banks and the financial institutions the insurance companies 10:39 that are that have familiar names to us begin their origin stories in slavery um 10:46 i encourage you to read uh carolyn hussain's politicized microfinance or peter hudson's bankers and empire 10:53 mercer brother runs the color of money and chanette garrett scott's banking on freedom for four more exploration of these 11:00 histories so these are histories of white supremacy and racism and specifically 11:06 anti-black racism banks as institutions or the gears that 11:12 turn our financial system have financed redlining and segregation they rely on credit scoring which is an 11:19 algorithm that assigns people a score for determining who's worthy of responsible banking it's a score that assigns 11:25 difference bars are disproportionately assigned the lower scores 11:30 and and so that then um banks can target and exploit them for higher 11:35 higher interest loans which pay you know which cost more over the term of the loan though 11:41 banks kind of set the terms so that they win either way as they still exploit black 11:46 and brown borrowers even when they qualify for loans with better terms 11:53 these are all practices that advantage whites in the united states the median household owes about the median white 12:00 household owns about 41 times the wealth of median black household 12:06 racial wealth divides these are widening and they're growing because our financial system and our 12:11 institutions are designed to prioritize and to monetarily value whiteness 12:18 a good example of this is from the cares act and the pp loans that were distributed i mean banks didn't need to 12:24 do anything differently when they were you know processing applications for their small business 12:30 loans they ended up you know discriminated 12:35 again against and and not lending to black and other minority-owned businesses 12:41 um but but simply they did that by exist by prioritizing their existing customers 12:47 so those are those are part of the gears that are already in place and that are already turning 12:55 so financial technologies or fintech cannot save this broken system it is 13:02 part of what i argue in the book financial technologies or fintech is this broad set of technologies 13:09 that range from everything to include online and mobile banking to payment systems cryptocurrencies and artificial 13:15 intelligence one of the things that i'm going to do throughout my talk today is to weave 13:20 between kind of individual and institutional levels so when talking about fintech so fintech 13:27 that is people facing like online banking and fintech that is institution facing 13:33 like hedge funds investment algorithms and i'm going to attempt to kind of blur these lines for us 13:39 i'm also going to associate fintech with some dynamics that we might not think about 13:45 when it comes to fintech so especially when we focus on fintech that is people-facing we forget that there's this this whole 13:52 other kind of range of activities happening that fintech is helping to enable 13:58 so through combining kind of research evidence and storytelling if i've done my job well toward the end 14:05 i will have helped us consider kind of the many ways especially fintech for financial 14:10 inclusion is used kind of as a sleight of hand so we're offering up fintech for helping 14:17 marginalized groups um it is often a guise that enables the financial system 14:23 to continue predatory practices and to concentrate power all the while it's making you know 14:30 many of the practices like more opaque and even harder for us to see than they already are 14:37 so from my vantage point fintech operates you know much more as an enabler of the ways that our 14:42 financial system and banks and our financial services have already have always operated not necessarily the 14:49 disruptor in the ways that you know we often hear that word being used 14:55 so analysis for fintech that lacks a critical analysis of how power is concentrated of 15:02 a historical understanding of how anti-blackness is stitched into our financial system 15:07 is going to like vastly underestimate fintech's potential harms to racially 15:13 marginalize groups and and the thing is this is something that we are all kind of collectively harmed by 15:20 um at the same time i don't want to like totally discard all of technology so it's not my 15:25 intent to like completely throw away everything i'm really thankful for the technologies 15:31 that you know make it possible for us to talk today and to connect while we're all kind of physically distant 15:38 but i began this book because in so many spaces where i was working think tank spaces academic financial 15:45 inclusion conversations policy conversations predominantly white and 15:50 disproportionately wealthy spaces there was no critical analysis of fintech 15:56 so there was no concern about people who didn't have high-speed internet access in their homes which was believed to be 16:04 a small and kind of unimportant group or information and data extraction or the 16:09 concentration of wealth corporate power or the hyper surveillance of poor white and racially marginalized 16:16 groups you know these were really kind of absent from the spaces that i was working in and so 16:23 my intent was to elevate kind of acrylic critical analyses where they were absent 16:32 fintech is often marketed as a way to promote financial inclusion for marginalized groups 16:37 so it's not just marketed you know as another way of banking or managing money it is often 16:43 specifically advertised you know to benefit marginalized groups those for whom 16:50 have you know those that have been exploited and marginalized by the state by the financial system for 16:55 decades just last week there was a senate banking committee hearing and senator 17:01 loomis of wyoming said i see bitcoin as a great leveler for people of color 17:07 and for women so this idea is a is a pretty pervasive idea that that fintech is is going to include 17:13 those that it has historically excluded 17:19 and stuart levy the ceo of facebook or the ceo of facebook's dm project 17:26 said that the company was developing their currency to promote financial inclusion expanding access to those who need it 17:33 most and of course facebook is also the same company that's criticized for 17:39 being a monopoly that violates antitrust laws selling users data being unable to 17:44 remove hate speech from its platforms and discriminating in their online advertising 17:50 their their their payment systems and their and their dm currency um yet is 17:56 is going to be able to promote financial inclusion in some of these really important ways 18:03 so i think then that by moving kind of full throttle toward fintech for financial inclusion we you know abandon responsibility and turn 18:10 over social problems to these calculated technologies that are mostly being developed 18:15 in white wealthy spaces by white engineers who do not have racial justice or anti-racism in mind 18:22 and and many who you know just see a very narrow part of the financial system 18:29 rather than its kind of connections to the rest of the whole and these are technologies that have the 18:35 potential to make it you know really even harder to discern you know how how wealth and power are 18:41 being concentrated how black and brown communities are being surveilled in multiple contexts 18:46 and how data are extracted so i began my own critical analysis of 18:53 fintech thinking about high-speed internet access which is a really a prerequisite 18:58 for using any type of fintech i mean even smartphones have to be connected to the internet 19:04 because my experience has told me that not everyone has high-speed internet access 19:09 and there's no way that fintech can solve for financial inclusion when people already exploited and 19:14 excluded by banks also do not have internet access 19:19 these data a few years ago there's a map of the united states on the screen with 19:27 varying deepening colors demonstrating different levels of high-speed internet 19:32 access so in 2016 in the average zip code in the united states about 50 19:39 of households have high speed internet access in their homes this is about half and this varies 19:45 across the country but it's probably lower than we had imagined um and and things likely have changed in a few 19:53 years since these data were collected but but perhaps not by much um i want to zoom in to the state of 20:00 alabama and the state of alabama in particular you know has a 20:06 has a large rural population about 41 percent of alabama's population lives in rural areas alabama's rural 20:12 counties have high concentrations of black and brown for black and brown residents and um 20:18 the average kind of high-speed internet use in counties in alabama is is 29 um so this is this is different 20:27 than whether or not high-speed internet is available um there's there's more coverage than 29 20:35 but for households that use it it's less than a third of households have high-speed internet in their home 20:43 in the southwestern part of the state uh less than 20 percent have high speed internet so it's so it's 20:50 even a little bit lower um these same counties in the southwestern part um you know have some counties with 20:56 populations of 35 to 85 percent of black residents and these are the same counties 21:02 that have lost you know significant numbers of their bank branches over the last decade 21:09 and i wanted to zoom into alabama in particular because it bears a lot of similarities to the community where my 21:15 family lives where i grew up where my family still lives um so this 21:20 is a picture of my hometown in southwestern pennsylvania um you're seeing um a corn field 21:26 that's at the end of the growing season so that's the corn stalks are chopped down there's a kind of like a 21:33 gravel parking lot there with a car sitting in it this is a poor rural christian 21:40 predominantly white town the last bank branch that was here closed a few months ago during the pandemic uh 21:46 the nearest branch is you know maybe a 20 or 30 minute drive and the town is situated in a valley so 21:54 there isn't satellite service because it's surrounded by mountains there's no high-speed internet 21:59 um people still use the equivalent of a dial up here but there is a hill on 22:04 the top of the town where a farmer has cleared a spot in his corn field so that people can drive up from the valley 22:09 park their car and use their cell phone and so this is what mobile banking looked like 22:14 in in my community in 2008 when i first grabbed this screenshot from from google maps 22:21 and so i saw this real disconnect between folks who are saying you know fintech is going to solve everything in the realities of people's 22:29 lives and people's real material conditions on the ground this lot has not faded away over time so 22:36 even as mobile banking is supposedly you know expanding and allowing more people to pay their bills from the 22:42 comfort of their you know kitchen table this parking lot has become an even more permanent 22:48 fixture in this community so the only difference now over a decade later is that the lot is 22:54 paved so this is a picture of the same field um different time in the growing cycle so 23:00 there are a few uh young corn stalks you know shooting up from the ground in the field 23:05 the car is gone but that you know gravel dirt lot is now paved so while the financial system 23:13 and technologists have been doubling down on fintech this community has has doubled down by 23:19 paving its hilltop parking lot um the pandemic has made disparate 23:24 access to high-speed internet you know much more apparent to us so we've seen students sitting 23:30 in school parking lots to access wi-fi for their virtual school we know that states are relying on 23:35 online portals to schedule vaccine appointments which is you know leaving out some of the people who need the vaccine the most 23:42 um but it for me and trying to understand you know the corporate capitalist 23:48 business practices that create what we have come to term the digital divide um i learned about 23:56 the works of of scholars and organizers who are raising some other critiques so for example ruja benjamin chris 24:03 gilliard twana petty raul carrillo simone brown sophia noble tamara knopper 24:08 and many others who were writing about fintech or writing about 24:14 technology thinking about data extraction discriminatory algorithms hyper surveillance 24:20 where there are new or different forms of technologies that surveil racially marginalized 24:26 groups who are already targets of surveillance in contexts like policing housing and 24:32 education so some of this should ring to 24:37 similarities to the history of white surveillance and white racial violence 24:44 i was especially drawn to chris juilliard's writings who has written about digital redlining um in the context of education and tracy 24:52 mcmillan cotton's writings on black cyber feminism and platform capitalism 24:57 where she writes about black women's kind of sophisticated uses of technology to navigate institutionalized 25:03 oppressions and discrimination and so not only are we confronted with 25:09 disparate internet access their works are are teaching us that we're creating 25:14 new digital forms of redlining and expanding a surveillance state that will be used in more punishing ways towards 25:22 racially marginalized groups so i propose that you know digital 25:27 redlining kind of occurs at this nexus of banking and financial technology 25:33 requires people to sacrifice their privacy crates you know differential costs increased 25:39 costs specifically for black and brown peoples and you know manifests from these 25:46 intentionally you know intentional mutually reinforcing policies and practices across multiple actors so with internet 25:54 service providers decide you know not to expand into certain communities at the same time the 26:00 bank branches are closing these are you know policies and practices across 26:07 seemingly separate industries that that ultimately raise the costs you know 26:13 now internet must be a requirement for virtual schooling or now a smartphone with the with the right 26:21 level of um you know upgrades um and and the the software to be able to use 26:29 mobile banking apps you know all of that has cost associated with it um the data that you can download in a 26:36 given month that these things collectively raise the costs of banking 26:44 so i'm going to give two examples that illustrate the limitations of fintech which which i suggest cannot 26:51 fundamentally change some of these existing power imbalances or the concentrated wealth that that 26:57 racial capitalism creates and the first example is with student 27:03 loan debt which i write about in chapter two the tyranny the financialization and the tyranny of bootstraps 27:10 financialization refers to this kind of growing uh growing influence the rise of finance 27:16 and kind of its infiltration in all different aspects of our lives and education is supposed to be this the 27:22 great equalizer the the straps on the backs of our boots that we can pull ourselves up by 27:28 the debt collective thankfully has been organizing for years around this issue and kind of elevating for us the problems 27:34 of student loan debt and that the burdensome amount of student loan debt that people borrow you know 27:41 undermines any possibility of bootstrapping with education 27:46 the economic definition of debt is you know kind of like money that a person owes so um we think about it as a negative 27:54 but that also acts out kind of like the ideology of an individual responsibility in 28:01 response to collective problems so now we see people being forced to take out 28:07 to take out credit card debt utility debt medical debt housing debt and to take the financial burdens 28:14 the financial responsibility of a global pandemic in absence of any sort of sustained 28:21 public governmental or collective response people have been increasingly forced to 28:26 take responsibility as states have divested from institutions of higher education and 28:32 tuition costs have raised for example and so so students do this in the form 28:37 of student loan debt current student loan debt collectively 28:43 is about 1.7 trillion dollars this is debt that has risen over time 28:48 both as you know a share of total debt and also you know increased rapidly rapidly in 28:54 the amount of debt that people borrow for their educations 29:00 and student loan debt is racialized that debt is racialized in a lot of different ways 29:07 but generally the average white borrower has paid back most of their debt after about 20 years 29:14 and that allows them to be able to convert you know student loan payments into wealth to be able to purchase a 29:20 home to save for retirement all the important things in life that you need 29:26 that money to do and that costly student loan payments on a monthly basis prevent you from being able to perform 29:33 um the average black borrower across the same amount of time you know still 29:40 has you know most of their debt 95 of their debt still which still needs to 29:47 be paid black women hold a disproportionate share of student loan debt 29:52 black women borrow an average or at the median about thirty eight thousand dollars for their undergraduate 29:57 education and and this is higher than the about 25 or 26 000 dollars 30:04 across borrowers overall now the part about student loan debt 30:09 that i want to raise for us and elevate today has to do with something called asset-backed securities 30:16 um so the image that i think about that i think of when i think about securitization is 30:23 this image of of hay or straw you know farmers do not sell straw as individual kind of strands 30:31 or stocks they bundle them together um and and this illustrates how banks and 30:38 lenders convert student loan debt into profits for investors um so by design of the system investors 30:45 can earn profits that the borrowers don't ever see debt that borrowers especially black and brown borrowers spend a lifetime 30:52 repaying my colleague kristen seafelt writes about debt as a form of share cropping 30:57 and so fintech does not alter this system it makes it operate more efficiently and 31:04 can help banks to you know create the conditions so that they're winning and profiting 31:10 in many different ways as i mentioned we think about our debt 31:16 our household debt has a negative but for banks on banks balance sheets 31:21 that is a positive it's an asset it's a profit um and one of the reasons the debt 31:28 operates this way for for banks is because they can sell off that debt to investors and securitization is 31:35 the process of bundling individual lines of debt together kind of under the idea that if 31:40 we pull everything together that will reduce risk and then those bundles can be sold 31:47 most debt is securitized but student loan debt has some unique features and and that's why i 31:52 want to raise it for us today 31:58 so student loan debt student loans they're insured by the federal government so we 32:04 you know publicly support um student loans and therefore 32:09 securitization and the asset-backed securities that are able to be 32:15 created from that 92 percent of student loans are federally insured and about 80 percent 32:20 of student loan asset backed securities these bundles benefit from government 32:27 insurance so this implies that federal dollars our public monies are being used to help guarantee the 32:33 profits to banks and to wealthy investors 32:40 there are strict bankruptcy laws that make it different difficult for borrowers to discharge this debt let me 32:46 see i think yeah um and and some of this is changing because 32:52 bankruptcy judges are increasingly realizing that that monthly student loan payments 32:58 are are burdensome and they are hardships defaulting on student loans comes 33:05 with consequences banks and lenders can report borrowers uh to credit bureaus for non-payment 33:13 they can sue borrowers to compel their payments and they can directly garnish borrower's wages 33:18 from paychecks and from social security checks so student loan asset backed securities 33:25 are lucrative in part because their profits to investors are nearly guaranteed even when borrowers default and so 33:31 unlike other types of securities like mortgage-backed securities where wealthier and whiter investors you 33:38 know assume a good share of the risk student loan asset securities shift 33:43 those burdens uh you know onto onto lenders or onto borrowers 33:49 and and so in part through government insurance banks and wealthy investors keep the 33:55 profits while borrowers pay the penalties um the penalties are levied more and more acutely 34:02 onto black and brown borrowers because as we've seen black borrowers take out 34:07 more more student loans they repay their debts plus interest over longer periods of time and they 34:14 experience comparatively higher default rates so student loan asset-backed securities 34:19 generate their profits disproportionately from black and brown borrowers debts 34:25 for whiter and wealthier investors what does fintech have to offer this 34:30 dynamic banks and lenders are increasingly using institution facing fintech 34:38 to enable securitization and investments so when we think of 34:45 you know when we think of how fintech can be used to help a student loan borrower take out 34:51 a lower interest rate loan or take out a loan from an online lender 34:56 we we miss you know that fintech that is people facing we miss how fintech is also 35:03 you know enabling wealthy investors to profit offer off of people's pain and people's really 35:09 costly student loan debt um so fintech does not change these 35:14 dynamics under racial capitalism i think fintech can make these dynamics just more 35:20 precise and more exacting particularly if we're only focused on one side of the equation 35:28 the second example um is is the nexus between climate change and wall street hedge funds or private 35:34 equity firms that are buying up homes and properties and apartment complexes 35:40 and then becoming landlords so this is chapter four corporate landlords and the climate crisis 35:45 and this chapter deals with the fact that we are in the anthropocene or the idea that we have entered the geological 35:50 epic epic where um you know humans have the the predominant influence on the 35:58 earth and human activity is causing catastrophic weather disasters 36:04 and and to talk through this i'm going to move us to lumberton north carolina because the city of 36:09 lumberton was was devastated from two different hurricanes one in 2016 36:15 and the other in 2018 hurricanes matthew and florence that both brought record levels of flooding 36:24 and so you know much of our our housing development our zoning laws our our floodplains our 36:30 insurance policies these have all been developed around weather disasters from the last few decades or from the data that we 36:37 had previously that we've collected but regions of the country like lumberton are increasingly seeing 500 year and 36:45 1000 year weather events every few years so we're not our models and our society generally is 36:51 not really organized for the future the climate change is bringing 36:57 but in 2016 hurricane matthew brought brought significant flooding to lumberton and there was a technical 37:03 report commissioned by the city that that found 37:08 that if the town built flood gates to close a gap created by a railroad underpass that 37:15 exposed the town to the river that this would reduce flooding 37:20 csx unfortunately owned the railroad tracks running beneath this underpass and they refused to allow the floodgates to 37:26 be built so the flood the floodgates did not get built um i should say 37:31 at this point that 37 of lumberton's residents are black 13 are native and 10 are latino and the 37:38 remainder the remaining 39 are white about 36 of of lumberton residents have 37:46 incomes that are below the poverty line so in 2018 um hurricane florence was 37:53 approaching and the town wanted to build sandbag walls in the location where the floodgates should have been 38:00 and again csx repeatedly like denied these requests and they would not allow the sandbag walls to be built um 38:08 and they threatened lawsuits for people who trespassed and tried to build them but eventually the governor signed an 38:14 executive order of allowing this to happen but you know this approval came late it 38:20 came when the hurricane was just a few hours away and lumberton was flooded again by 38:26 hurricane florence and again it was estimated that 80 percent 38:31 of the flooding would have been reduced or eliminated had the floodgates been built 38:39 um so we can see you know folks in lumberton who are you know 38:44 scrambling at the last minute to build some of this you know some of the 38:49 sandbag wall um that that ultimately caved and flooded most of the town 38:58 now we know that our built environment is not random so people across racial groups do not 39:03 have equal access of experiencing the consequences of extreme weather and that and that devastation so redlining 39:10 segregation ongoing discriminatory lending and real estate practices enable white people to 39:16 buy greater distance between themselves and this extreme weather that's happening um and in fact 39:22 there's there's evidence suggesting that white households gain wealth um when 39:28 after weather disasters have occurred in part through the fema aid that's funneled into those communities 39:36 on average between 1999 and 2013 white houses had gained an average about of about 126 thousand dollars in wealth 39:45 in communities that has had experienced devastation and of course this is in contrast to the 39:50 wealth lost by black and brown households in those same places 39:56 so black and brown people disproportionately bear the burdens of environmental hazards of weather disasters and in lumberton 40:03 black and brown residents were displaced from their homes at a rate that was three to six times greater than that of white residents the 40:10 lumberton rental market shrunk by about 25 um and so at the same time the climate 40:17 change is happening whether disasters are happening um wall street investors like hedge funds private equity firm 40:23 banks they have been you know buying up properties properties that were foreclosed during the great recession 40:29 properties that have been damaged or devalued and and while this example in lumberton is 40:36 focused in the united states this is really a global concern there was a florida-based investment 40:42 company called timeout communities that had been buying up properties in lumberton that were damaged by the 40:48 first hurricane hurricane matthew and then they began opening mobile home parks for residents that have been 40:54 displaced um timeout communities owns 19 mobile home parks in lumberton and they have about 1200 41:01 lots so after the hurricane after hurricane florence timeouts mobile home parks again 41:08 received more residents who were displaced and then the corporations started raising rents 41:14 so residents disproportionately black and brown residents having recently been displaced some by 41:19 multiple hurricanes sought housing in these mobile home parks 41:24 that had become a replacement for the for the housing stock that was lost through the damage but some residents 41:32 saw their monthly rents triple when timeout communities began raising these rents 41:37 residents who complained received eviction notices and were and were evicted and so 41:45 so then timeout communities began evicting and creating additional housing precarity 41:51 for those who are living in limberton and so as a renter to whom do you appeal for justice when 41:57 your landlord is a private equity firm or a hedge fund and and what does fintech have to offer this dynamic 42:04 so private hedge funds and equity firms are are also increasingly using fintech like algorithms and artificial 42:11 intelligence to identify profitable investment opportunities including foreclosed homes 42:16 including apartment complexes and including in distressed markets 42:24 so fintech helps in these cases wealthy investors profit off of disasters and 42:29 people's devastation while while private equity is using 42:34 fintech to concentrate wealth and power on one side our policy responses to the people of 42:40 lumberton tend to be um you know using the people facing fintech 42:46 tend to be things like a financial education class or an app that manages income flows um 42:52 or as senator loomis suggested uh to invest in bitcoin a cryptocurrency that's also being critiqued 42:59 for its potentially harmful uh environmental impacts including energy consumption 43:04 so i'm being a little facetious here because i don't know of an example of where uh you know 43:12 someone you know sought out the residence of lumberton and offered them a financial education class but i also 43:18 would not be surprised to learn if that happened um and so our responses you know often 43:24 really missed the level um of of real need um and and the real lived experiences 43:33 um of of people on the ground and so i hope we you know can realize how 43:40 extremely inadequate and even absurd some of those responses can be to the 43:45 residents of lumberton or the residents of texas who just recently experienced their own extreme 43:51 weather or residents of jackson mississippi or flint michigan who still do not have clean water in their 43:56 homes um timeout communities in lumberton is a microcosm 44:02 of what's happening across the country so this is not the only example there are a number of examples across 44:08 the country and worldwide just like uh securitization helps bundle 44:14 student loan debt and and sell that debt for profit corporate landlords come in and scoop up 44:20 properties and housing in bulk um we're already seeing reports that that corporate or wall street landlords 44:26 are poised to profit from the current crises where we're expecting mass evictions and foreclosures and so 44:34 as a result of a climate change induced global pandemic and a limited government 44:39 response people can't pay their mortgages banks and lenders will foreclose on homes 44:44 private equity you know can buy up those properties in bulk manage them as rentals and then possibly 44:51 create the conditions to institutionalize housing precarity on a really enormous 44:56 scale um so i want us to consider the ways 45:03 that that fintech can be complicit in this especially as our weather disasters uh become 45:09 more frequent and they get worse um individualizing fintech to focus on mobile banking 45:15 or you know a life hack for managing income flows we can overlook how fintech may be helping to 45:20 concentrate power in these other ways and may even be kind of directly contributing to some of these environmental harms 45:27 um and again when i you know first approached this topic i was thinking of a very kind of person-facing 45:35 i you know idea or notion of fintech and also you know specifically thinking about things like high-speed internet access 45:42 um but there there is much else to be aware of i think within the realm 45:49 of fintech i think when we sanction fintech for things like mobile banking 45:56 i worry that we are also inadvertently giving implicit permission kind of for the rest of fintech and our 46:03 language like the common definition of fintech is defined as a set of technologies so 46:09 so the language around fintech that we use indicates you know this potential to flatten and to lump together 46:15 um and and i think um i think some of that should be should 46:21 be concerning and this is the sleight of hand um how promises of financial inclusion for racially 46:28 marginalized groups are proffered up uh as as you know this potential positive um and 46:36 and understanding these individual critiques i think help us peer into the rest of the ways that the financial 46:42 system can use fintech to stack the deck 46:47 we're also led to believe sometimes that the expansion of fintech is inevitable and that we should accept 46:54 this inevitability and in this process perhaps you know we forget or or we allow ourselves to forget um or to 47:01 look away from you know some of the harms that fintech can cause and so while the examples that i have 47:07 shared may sound dire i actually think that there's a good bit of hope that our financial system like can 47:13 indeed operate differently fintech won't bring about you know the types of changes or revolutions 47:20 that are really needed to make banking more inclusive or more equitable but there are groups of people who are 47:25 working to transform the system in some really beautiful ways and so public banking 47:31 uh is a movement that i think is pretty exciting and is happening right now and i write about this in the book's 47:38 concluding chapter uh native and indigenous communities for a long time have advocated 47:44 um for divesting from environmentally harmful development projects uh from from pooling money um out of 47:51 banks that finance things like the dakota access pipeline as as one example that's been really 47:57 relatively prominent in the news but there are you know 34 and growing 48:03 public banking movements across the united states where public banking coalitions are active they're 48:09 expanding they are passing legislation to make public banks possible i've learned a 48:16 good bit from my colleague maya power that public banking legislation um 48:21 would allow about five trillion public dollars so so collectively states and local governments have about 48:27 five trillion public dollars from pension funds from tax revenues invested in private banks 48:34 that could be pulled out and located in a public bank um that returns 48:41 money to communities returns the profits to communities instead of you know private banks 48:47 wealthy shareholders i think these movements are demonstrating that our institutions 48:54 are not intractable they don't have to be enduring and this is the message that i want to 48:59 end on that these people-led movements with anti-racism with justice with 49:04 equity at their core movements that are questioning the concentrations of power 49:09 and the concentrations of wealth um that are concerned about hyper surveillance rooting out anti-black 49:15 racism and the turning over of our public lives to private banks and proprietary algorithms so i think 49:24 um movements of people can help us imagine and realize the different financial and economic 49:31 futures that are that are possible um technology is often like positioned as futurists but 49:37 it isn't inherently so just because it's you know we often see it prominently depicted in sci-fi genre or 49:44 in our own imaginations of the future it's not necessarily futurists from an 49:49 understanding of a future as space and time technology is something that can 49:55 exist in that space and time um but financial technologies that exact 50:01 kind of old harms in new ways do not have to be an inevitable part 50:06 of our financial system moving forward into the future and i think people-led movements can 50:11 help us really understand the contours of time and space time and space 50:16 and what we might want to exist there and see that there are other kind of better ways of organizing our financial 50:24 system and of building more equitable financial futures 50:29 so um with that that's the conclusion of my talk um thank you very much and i'll stop 50:36 sharing my screen and turn it over to justin for questions 50:42 thank you so much terry um that was great um and if if people in the audience have any questions you 50:48 can either message me privately or i think there's like a little hand raising tool on zoom and you can do 50:54 that and i'll just call on you and then read your question but to start off we we had a couple of 51:00 questions um about initiatives that 51:05 are black-owned or social justice oriented that are trying to use fintech for good 51:12 um um one mentioned was greenwood which i'm not sure if you've heard of that i'm not sure what that is but 51:18 um so yeah so just kind of like maybe general thoughts on like those initiatives and how we might think about 51:24 um some of those things you know i i know there's like some of the big companies that will dive into that 51:29 um you know in detroit i'm familiar with some of the organizations that use that type of language but to get 51:35 your thoughts on that yeah i think that's a good question because um it's easy to 51:42 create kind of firm categorized dichotomizations 51:48 you know about like good and bad um and i think there are some really 51:55 good examples um and i'm i'm slightly familiar with greenwood um 52:03 but examples where you know people are working to um move the financial system in a 52:10 different way and and some of that is fintech based and and i think those efforts 52:19 that are rooted in ideas of a more equitable a more a more fair and 52:24 more just system are part of the steps um along a path to a financial system 52:32 that is better than the one that we currently have so so if we think about you know a long 52:40 continuum of change in the financial system there are all these little steps 52:46 happening i think that are that are pushing it um pushing to make it a little bit better a little bit different a little 52:52 bit more equitable and fintech is involved in some of those 52:57 steps um and so and so i think you know those examples 53:05 of fintech um are hopeful um and important and useful and and that we want to learn 53:12 from them um while simultaneously knowing that there is this whole other 53:20 um fintech that that may be trying to do something different 53:25 um and so so how do we not let that kind of undermine um 53:32 the good work that um that those groups are doing 53:37 i hope that gives justice to the question yeah thank you i and then kind of a 53:43 related question i have here um and the question is about um 53:48 the question is about kind of uh financial institutions and and and others kind of adopting language 53:55 about structural change and about like changing the system um 54:01 and how we might like and how like i know your background is as a social 54:06 worker and how like social workers might like try to engage with that 54:11 or how like social workers might better engage with financial conversations um and 54:17 and conversations about financial systems um i i would love to talk with other 54:24 social workers who are interested in thinking about that um i you know it's not an area 54:31 um where we think there are many social workers working i think we might underestimate the 54:38 presence of of organizers and activists and and folks who are social work 54:44 aligned doing this work i think institutions and our financial and 54:50 economic systems in some ways are intentionally opaque that it seems like it's hard to figure out 54:56 and i learned myself new things every day about how it works um and so 55:05 so i encourage you you know if you if you relate to that at all not not 55:10 quite sure where to jump in that that these are things that you can learn right that i have learned about 55:16 um and that there are likely people working around you um that would want to learn about them 55:22 too i do not take at face value and institutions kind of statements about you know kind of 55:29 structural changes um i would like to see you know to see the evidence uh where where those 55:37 are being implemented um of our large banks and lenders that you know have made statements about 55:43 black lives matter and um that are that are that have funded 55:48 a lot of financial inclusion work you know while simultaneously um engaging in discriminatory lending so 55:57 i would i would like to see there i'd like to see their proof yeah um cool thank you um i think we 56:04 have one time uh time for one more question um and it's kind of like a two part here so um it's just about like 56:10 international efforts um some in international development some with other countries um and things that are happening with 56:16 fintech so it's kind of a two-part question one is like have you seen other countries that maybe are getting um financial empowerment financial 56:23 inclusion right in terms of policy um and then the other one that's related is what do you think of some of the 56:29 fintech stuff happening in international development like m-pesa in africa or the tech enabled microlending i mean are 56:35 those having a serious empowering impact or not that's a great question and there's um 56:42 kind of a lot to untangle i think uh in different places that have different you know 56:48 political and economic and cultural contexts um for example you know there was there was 56:54 good hope a few years ago about like kind of microlending and empowering women in particular 57:00 and in the southern hemisphere carolyn hussain's book politicide microfinance is a great 57:07 um great resource for that [Music] uh we also have seen countries with kind 57:13 of different sorts of infrastructures so for the most part we have a fairly 57:18 widespread bank branch network with gaps and holes but it exists kind of across the country 57:26 which is not the case in many countries that have stood up kind of mobile 57:31 banking as an infrastructure for their banking system 57:37 and we also see reports you know every now and then about the difficulties of financializing and 57:44 introducing finance um in a way that didn't exist previously and that there you know are 57:51 some associated harms possibly with that 57:57 cool thank you um all right i think we're we're at time um i will say thank you um 58:04 on behalf of the center and finance law and policy this was um so interesting i i wish we could keep 58:09 talking for a while that's why i may email you all right i think i talked too long yeah i talked too long no no 58:15 this is great i just i you know i wish there was more conversations like this happening um in communities at the university so 58:22 i'm so glad that this happened today um so but thank you for everyone and check out terry's book 58:28 um i've i've read it it's fantastic um and and thank everybody for attending 58:33 today's event you can check out our upcoming events at financelawpolicy.umich.edu 58:39 our next month's blue bag talk is called um the myth of the millionaire mindset 58:45 experimental evidence from filipino entrepreneurs that will be april 1st um april 1st from 58:51 noon to 1. again this is a virtual event and that will be dean yang who's a professor of public policy 58:57 and economics um so yeah thank you again professor freedline and thank you everyone for attending 59:04 thank you all