Trust and social capital in the regulation of lending activities

When a bank grants a loan, it takes the risk that the borrower will not honor his debt. To reduce this uncertainty, banks have created instrumental evaluation methods in order to try to evaluate the risk more objectively. An analysis of financial counselors’ practices shows the limits of these methods. To obtain information needed for the financial risk evaluation and to reduce the information asymmetry between bankers and borrowers, financial counselors integrate social networks to establish bonds of trust and to accumulate social capital. The quality of the social bond determines the quality of the gathered information and therefore the quality of the risk evaluation. Bank management is aware of the limits of instrumental methods and the importance of social risk evaluation. To improve their economic efficiency, they modify their work organization and their management practices so as to facilitate the emergence of a bond of trust and the accumulation of social capital by their financial counselors. The analysis of economic actors’ speech and behavior involved in activities of credit shows that behind the claimed altruism nature of the trust relationship exists an economic rationality whose social and temporal horizons of optimization differ from the model of the trade exchange seen in conventional economic theory.     

INTERNATIONAL DEBTS: WHAT'S FACT AND WHAT'S FICTION: PRESIDENTIAL ADDRESS TO THE WESTERN ECONOMIC ASSOCIATION, JULY 2, 1988

From the vantage point of 1988, the 1982 judgment that the troubled foreign country debtors had a liquidity problem, not a solvency problem, appears to have been fiction. The fact is that troubled debtors did not use productively the resources they borrowed. Further loans to them only add to the burden of their existing debt. Retaining the loans at face value on the books of the creditor banks is a fiction that financial markets see though. Intervention by regulators and international lending agencies has impeded bilateral bargains between the debtors and the banks.     

Finanzialisierung,Demokratie und Gesellschaft – zehn Jahre nach Beginn der Finanzkrise

This introduction to the special issue—ten years after the collapse of the investment bank Lehman Brothers and the beginning of a worldwide financial, economic, and debt crisis—reflects on the extent to which the economic crisis affected a turning point in society overall. The current state of research into the relationship between financialization, democracy, and social conditions strongly suggests that while the processes of financialization that favored the emergence of a crisis were influenced by the financial crisis, they were not completely reversed. In fact, the financial market regulation, which was changed in response to the crisis, did not exert any modifying pressure in terms of a restructuring of the financial system. An epochal shift in financial market regulation therefore cannot be identified from the steps taken in the reform process. Elseways there is clear evidence that the financial crisis has had a lasting impact on the European integration process, confidence in democracy, and political culture. The financial crisis is therefore likely to be perceived as a historical watershed, mainly due to its impact on societal areas beyond the financial system itself.     

The Emergence of Lifestyle Reasoning in Return Considerations among British Pakistanis

This article discusses the growing popularity of lifestyle reasoning in return considerations among Pakistani migrants and their children in Britain. Although lifestyle arguments are by no means new to scholarship on return migration, I argue that British Pakistanis' settlement history has led to return reasoning beyond purely economic considerations. Changes in status, power, and position, with respect to both countries of origin and settlement, have translated to a more confident capacity to aspire, and therefore to think along lifestyle considerations, whether the decision is to settle or to return. Lifestyle reasoning can therefore to be considered a sign of British Pakistanis' change in confidence about their position in the country of settlement.

Policy Implications

• If the UK wants to engage with Pakistani returnees, it needs to recognize the variety of returns beyond the economic: political, lifestyle and relationship returns are all present in the array of typologies enacted by British Pakistanis
• Any UK policy about return should consider that both pull and push factors influence return decisions, and those are articulated around economic, political, lifestyle, and relationship considerations.
• Policy makers should consider lifestyle return reasoning a symptom of the maturation of British Pakistani citizenship in the country of settlement, rather than systematic evidence of their alienation.

     

Embedded counselling in advisory work with clients in debt

This article addresses the potential for embedded counselling in social work with clients in debt. It is based on experiences from Sweden where budget and debt advisors employed by the municipalities give assistance to clients in financial difficulties. A distinction is made between advice and guidance on the one hand and counselling on the other. As the financial problems often have been long lasting, it is not enough with one-time advice that the client hopefully then follows. The purpose of the article, thus, is to explore the possibilities of incorporating counselling in the role of the advisor.     

Two Sides of the Same Coin? The Differing Roles of Assets and Consumer Debt in Marriage

This study examines whether assets and consumer debts relate to change in marital satisfaction and conflict in opposing ways or in independent ways. It also tests whether these relationships are direct or mediated. Using a nationally representative longitudinal sample, the results indicate that assets and consumer debt influence change in marital outcomes in mostly independent rather than complementary ways. Consistent with prior literature, assets work indirectly by decreasing feelings of economic pressure. Consumer debt, however, directly predicts changes in marital conflict, even after controlling for variables in the family stress model. Debts also act indirectly by decreasing depression once economic pressure is included in the model. This unexpected suppressor effect suggests that the meaning of debts may not be straightforward.     

Relationship between Financial Stress and Workplace Absenteeism of Credit Counseling Clients

The researchers examined how financial stress was associated with absenteeism of credit counseling clients. Data were collected by a national non-profit credit counseling organization, from consumers who telephoned seeking assistance in debt management. The results indicate credit counseling clients’ financial stress affects their absenteeism at work. Clients with high levels of financial stress are more likely to experience higher levels of absenteeism; thus spending work hours handling personal finances, which decreases the time they are at work. The results suggest some insight into providing financial education and assistance for employees with financial strains as productivity loss might influence their pay.Appreciation is extended to the InCharge Institute of America and the InCharge Education Foundation for supporting this research. Dr. Kim served as an InCharge Scholar during this research effort.     

Financial Management Practices of Couples with Great Marriages

The purpose of this qualitative study was to learn about financial management practices of 64 self-selected couples from throughout the United States who believe they have great marriages. Three themes emerged from the data. First, for most couples one of the partners handled the day-to-day finances and that required trust and communication. Second, these couples had little or no debt or had a goal of paying off debt. Third, couples lived within their means and were frugal. Other findings described these couples’ practices of having joint or separate accounts, how they dealt with financial challenges, and their view of other couples having financial challenges.     

The Role of Cohabitation in Asset and Debt Accumulation During Marriage

Research has found that married individuals who cohabited only once before marriage with their future spouse (i.e., “spousal cohabiters”) have a distinctive financial advantage: they accumulate more wealth over time than individuals who married without ever cohabiting (i.e., “directly married”). Using the National Longitudinal Survey of Youth 1979 and growth curve models, the present study attempts to identify the source of spousal cohabiters’ wealth advantage. We find that marriage is associated with gains for financial and nonfinancial wealth, increasing home equity, and decreasing debt over time. Spousal cohabiters begin marriage with more debt than the directly married. Conditional on education, income, and other key factors, spousal cohabiters pay down their debt faster and generate greater home equity over time thereby accumulating more wealth than the directly married. This pattern of financial behavior among spousal cohabiters explains some, but not all, of their financial advantage over married persons who never cohabited prior to marrying. Given the increasing prevalence of cohabitation among young adults, these results offer important insights into the long-term economic outcomes associated with premarital cohabitation.     

When Emotion Work is Doomed to Fail: Ideological and Structural Constraints on Emotion Management

This paper explores how workers try to manage their emotions under conditions that doom them to fail. The workers in question—floor instructors at a sheltered workshop for people with developmental disabilities—were expected to infuse clients with positive feelings about work and to help transform them into committed workers. But structural conditions—boring, poorly paid assembly work and long gaps between contract jobs—forced them to obtain clients' compliance through coercive and confrontational emotion management techniques that contradicted their ideological beliefs. The floor instructors sought to peacefully increase their control over clients through “preventive emotion management” but most often they experienced a loss of control, leading some of them to experience “burnout.” This paper defines burnout as “occupational emotional deviance” that workers experience when they cannot manage their own and other's emotions according to organizational expectations.     

The treatment model of the guidance center for gamblers and their relatives in Vienna/Austria

Within 8 years, Gamblers Anonymous in Vienna evolved into a guidance center for gamblers and their relatives, with professional aid. It is a non-profit institution and the therapeutic team consists of one psychologist, one social-worker and one psychiatrist. The clients can remain anonymous, but about 90% of them reveal their identity. The treatment model integrating professional therapy and self-help is presented. The reasons we decided to base our work on an addiction model of pathological gambling are explained. All the clients consulting our center in 1990 (N=237) are described according to age, sex, types of gambling, duration of problem gambling, family status, profession, income, debts, and income/debt relationship. Finally, the treatment program of our center is presented.This article is an extension of the special issue on Gambling in Europe edited by Iver Hand, M.D.     

The Association Between Consumer Debt and the Likelihood of Divorce

As part of the Center for Financial Security’s 2010 symposium, this study examined the association between consumer debt and divorce. Longitudinal data from the National Survey of Families and Households (N = 4,574 couples) indicated that consumer debt was positively associated with divorce. Financial conflict completely mediated this association for both husbands and wives and marital satisfaction also completely mediated the association for wives. These findings suggest that when families take financial steps to secure their financial stability they may also be taking steps to secure their relationship stability.     

The Effect of Households’ Student Debt on Life Satisfaction

This study finds a negative effect of holding student-loan debt on the life satisfaction of household heads using longitudinal data from the 2011 to 2017 U.S. Panel Study of Income Dynamics and a fixed-effects modeling approach. Although debt is taken to improve future utility, it provides disutility to the head of household until it is paid off. Thus, financial planners and educators should remind their clients about the consequences of holding student-loan debt in the short term, not just the future benefits.

     

Returnees' Perspectives on Their Re‐migration Processes

The return of refugees and migrants back to their country of origin is an important topic on the agenda of Western European governments, as return is considered as the most “durable solution” for the “refugee problem”, and as an instrument with which to tackle “illegal” migration. However, these migration policies generally lack a clear evidence base, as little studies have focused on returnees' current living situations and on their perspectives on the re‐migration process. In this paper we therefore try to listen to returnees' voices, through in‐depth interviews with four Nepalese migrants both before (in Belgium) and after (in Nepal) their return, and with 16 returnees after their return to Nepal. The interviews show how most returnees start with a disadvantageous “point of departure” to realize a “successful” return: mostly, they do not really depart “voluntarily”, and they only have limited possibilities for preparing their return and setting realistic expectations. But also, back in the “home country”, most returnees judge their current economic, social and political living situation as bad, meeting little of the expectations that they set before they returned. The participants consider the support they received through the NGOs' return programmes as minimal, because they are mostly limited to a small amount of financial support, and thus of little significance in these returnees' efforts to rebuild their lives in their “home” country. If return programmes want to make a difference in returnees' lives, they should have two extensive components in the “home” and the “host” country, incorporating in both components an integral approach, including economic, political, social and psychological aspects. Viewing these findings, it is not surprising that most interviewees eventually evaluate their return as unsuccessful, and many returnees consider re‐emigration, all of which clearly questions the current basis of worldwide migration policies.     

Student debt and hardship: Evidence from a large sample of low- and moderate-income households

Student debt has risen in recent years as higher education costs have shifted to students and their families, particularly those with low-to-moderate incomes (LMI). Though a college degree continues to convey higher earnings, those who finance their degrees have lower net worth and greater financial difficulties than persons without student debt. We assess the relationship between student debt and material and health care hardship among a large sample (n = 5558) of LMI tax filers, using propensity score analysis to adjust for self-selection into student debt status and loan amount and monthly payment quartiles. We find that participants with student debt have a higher likelihood of hardship. Loan amounts only partially predict hardship, and borrowers making current loan payments are at lower odds for hardship than non-payers. We also find that among those with student debt, non-payers and those without college degrees have much greater social and economic disadvantages.     

Public reporting: A neglected aspect of nonprofit accountability

Nonprofit organizations have a compulsory external accountability (largely involving financial reporting) to government agencies such as the Internal Revenue Service and state regulators. They also have a pragmatic “must‐do” accountability to their funders, clients, and other obvious stakeholders. But are nonprofits also accountable to the public at large? If so, how can such accountability be implemented, given the diffuseness and breadth of the public as an audience? This article suggests that nonprofits should consider the citizenry as a stakeholder, if only due to the substantial taxpayer subsidy of the sector. The theory of public reporting that emerged in public administration literature beginning in the 1920s and 1930s can be helpful. Using principles, templates, and examples from public administration, nonprofit organizations can pursue more vigorous public reporting as one method to increase citizen confidence in their activities and in the sector as a whole.     

Credit Card Debt and the Provision of Financial Support to Kin in the US

Credit card debt stands at over $1 trillion in the US and grows continuously. Scholars have argued that high (and growing) levels of credit card debt are attributable in part to rising economic vulnerabilities, combined with a thinning public safety net, credit cards being increasingly employed to make ends meet in this context. This paper extends this line of work by stressing that individuals and households do not rely on their credit cards only to mitigate their own financial hardships, but also those experienced by their non-coresidential kin members. More specifically, building on the notion that kin networks can constitute a source of negative social capital, we argue that individuals often accumulate credit card debt as they attempt to provide monetary assistance to their relatives in need. We also show that this effect is particularly strong in lower-income groups and in African American communities, in which need levels are especially high. Based on random and fixed effects analyses of data from the Panel Study of Income Dynamics, these insights extend scholarship on both kin networks of support and the sources of credit card debt.

     

Household debt,automatic bill payments and inattention: Theory and evidence

In this article we analyze the impact of automatic bill payment (ABP) on household debt. We present a theoretical intertemporal consumption model that shows an inattention effect when individuals subscribe an ABP for their debts. This effect causes a higher level of indebtedness (beyond optimal) and, therefore, well-being loss. Furthermore, we empirically test this theory for Chile, an emerging economy. We estimate a Tobit-Probit conditional mixed process (CMP) model, using data from the Central Bank of Chile’s Household Financial Survey (HFS). The results confirm the existence of a positive and significant effect of the use of ABP on the financial burden of households.     

Government Subsidies and Household Debt Burden After the Great Recession

During the recent Great Recession, US households, especially those with low incomes, faced severe financial distress. Households experiencing economic hardship may turn to receiving government assistance to alleviate the hardship or distress. Receiving government assistance may improve a household’s financial situation as it could be decreasing its reliance on debt or even improving a household’s ability to repay their current debt. We investigated how households’ financial debt obligations were affected by receiving government assistance, as has not been previously analyzed. Given the focus of this research, we included households under 185 % of poverty threshold released by the 2012 US Census Bureau. Results from the 2010 and 2013 Survey of Consumer Finances indicate that government assistance was positively related to the odds of meeting debt-to-income ratio guidelines, implying that government assistance plays an important role in financial security of low-income households. This study provides important insights for researchers and policymakers in the areas of poverty and household finance.     

人口因素如何影响中国未来经济增长

中国过去一直保持10％的经济增长速度,2010年以来人口红利消失后,潜在经济增长率马上降下来。如果我们不接受经济增长速度下降的事实,同时国际上还有强劲需求,那么我们很可能还继续保持很高的增长速度,而导致实际增长率与潜在增长率相偏离。但是欧美金融危机和主权债务危机使得国际需求下降,这反而给我们一个进行速度调整的机会,换句话说就是我国被迫接受调整。这是促进我国经济健康发展的一个意外之喜。因此,不应该通过拉动需求来使经济发展超越潜在增长率,但这并不意味着潜在增长率不可以提高。在人口红利消失、劳动力成本提高的背景下,可以通过提高劳动力供给和提高劳动生产率来提高潜在经济增长率。