No Slack

The Financial Lives of Low-Income Americans

The financial crisis lay bare how the financial system failed the nation but left hidden the many ways in which that system still fails the most vulnerable Americans. In No Slack, Michael S. Barr explores how low- and moderate-income households cope with financial stress, use financial services to make ends meet, and often come up short.

Many households were overleveraged or paid high costs for financial services, while others lacked access to useful financial products that can cushion against economic instability. The financial services system is not well designed to serve low- and moderate-income households, leaving them without financial slack: they did not have adequate breathing room for making the financial adjustments that would permit them to better meet their own needs. No Slack shows us why these families were the least prepared to handle the shock of the deep recession.

This pivotal analysis focuses on the Detroit metropolitan area’s low- and moderate-income neighborhoods, which are similar to those of other Rust Belt communities. The Detroit Area Household Financial Services study—conducted at the height of the subprime lending boom—examines these households’ decisionmaking processes, behaviors, and attitudes toward a full range of financial transactions.

No Slack reveals widespread problems in home mortgage lending, the common threads among people who file for bankruptcy, the reasons so many households are unbanked, and how behaviorally informed financial regulation can make the market work better. Drawing on his deep policy experience, Michael Barr advocates helping families seek financial stability in three primary ways: enhancing individuals’ financial capability, using technology to promote access to financial products and services that meet their needs, and establishing strong protections for consumers.

Among Michael Barr's recent publications are Insufficient Funds: Savings, Assets, Credit and Banking among Low- and Moderate-Income Households, co-edited with Rebecca M. Blank (Russell Sage, 2009), and Building Inclusive Financial Systems: A Framework for Financial Access, co-edited with Anjali Kumar and Robert E. Litan (Brookings, 2007).

Praise for No Slack:

"It is so nice to have Michael Barr back in academia, where he has resumed his scholarly research into the challenge of providing affordable financial services for the poor. In this book, he vividly illustrates that while the hidden fees and surprise charges embedded in so many financial products irritate and annoy us, for those with ‘no slack’ they can have devastating financial consequences. There has got to be a better way, and Barr has devoted his career to finding it."—Sheila Bair, former chair of the Federal Deposit Insurance Corporation

"It is inspiring to see such a thoughtful analysis of the deep financial problems that make life miserable for so many people, and to see that many of these problems can be solved with suitable behaviorally informed financial innovations. Barr faces the real subtlety and complexity of the problems that leave so many people with no slack."—Robert Shiller, Arthur M. Okun Professor of Economics, Yale University

"In many respects the American economy is too financialized. But as Michael Barr highlights in this important book, millions lack access to basic financial services and protections. Barr draws on his unmatched combination of academic expertise and policy experience to define the challenge and suggest ways to meet it. This book deserves to be an important part of any discussion of the future of the financial sector or the prospects for low-income Americans."—Lawrence H. Summers, former U.S. Secretary of the Treasury, president emeritus and the Charles W. Eliot Professor, Harvard University