Lessons from the CARES Act: Banking for All in the Time of COVID-19

April 16, 2020

New Roosevelt report explores why an economy that works for all requires financial inclusion policy


New York, NY – As part of Congress’s financial stimulus response to the COVID-19 pandemic, the CARES Act included $1,200 stimulus checks to all qualifying Americans—but there was no clear plan for delivering these checks to unbanked and underbanked Americans. Fintech companies, such as Cash App and Venmo, offered to step in, highlighting a longstanding truth in American banking: Financial inclusion—access to payment systems, credit products, and financial services of all kinds—is an afterthought in current policymaking, but it’s wholly necessary to build an equitable economy.

In a new report released today by the Roosevelt Institute, Rethinking Financial Inclusion: Designing an Equitable Financial System with Public Policy, Mehrsa Baradaran (Roosevelt fellow and professor of law at UC Irvine Law School) explains why achieving meaningful financial inclusion requires structural changes that only the federal government can enact. Using market-oriented patchwork fixes — driven by a neoliberal (or free-market) ideology — will never solve the problem of financial exclusion in a comprehensive or equitable way.

Baradaran argues that policymakers can enact an equity-focused financial redesign in three ways:

  • Provide the unbanked and underbanked with access to the Federal Reserve safe and subsidized payments system, a public service currently only available to banks, which operate as intermediaries;
  • Create a public banking option that would offer free savings and checking accounts, enabling the unbanked and underbanked to engage in simple financial transactions; and
  • Run a public bank to offer direct services, including credit and transactional services, thereby removing commercial banks as an intermediary in credit markets.

“The COVID-19 crisis has made clear that digital access to a payment system is increasingly necessary for participation in commerce—and should be recognized as a public good akin to railroads and electricity,” said Baradaran. “With almost 30 percent of Americans facing immediate unemployment during this crisis—and 40 percent unable to cover a $500 emergency even before the pandemic—receiving a $1,200 check in days rather than weeks makes a huge difference. Our federal government has the ability to get money into the hands of all citizens, fast and easily; we just need to implement the right policy to make this happen.”

With the looming coronavirus recession, the United States must act now to create a banking system that works for all Americans. Inequalities are currently embedded in our banking and credit system and are a threat to our democracy. Policymakers must not abdicate their role to the private market, but must work toward creating an equitable and inclusive credit market. To learn more about why the Roosevelt Institute is pushing a new post-neoliberal framework that works for all, click here.

About the Roosevelt Institute

The Roosevelt Institute is a New York-based think tank that, in partnership with its campus network and the FDR Presidential Library and Museum, is working to redefine the American economy. Focusing on corporate and public power, labor and wages, and the economics of race and gender inequality, the Roosevelt Institute unifies experts, invests in young leaders, and advances progressive policies that bring the legacy of Franklin and Eleanor into the 21st century.

To keep up to date with the Roosevelt Institute, please visit us on Twitter or follow our work at #RewriteTheRules.

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