Fringe Banking: Check-Cashing Outlets, Pawnshops, and the Poor

Preface and Acknowledgments

Preface and Acknowledgments Many people have questioned the genesis of my interest in pawnshops and check-cashing outlets, since my major professional focus has been on banks and monetary economics. Several years ago, my curiosity about pawnshops was piqued by hearing an interview with a pawnbroker on National Public Radio. Subsequently , an afternoon in the library revealed that no economist had analyzed the role of the pawnbroker in the financial system for over 30 years. I thought that I might undertake such a study, to investigate why and when pawnbroking had died out. When I discovered that it had not died out but, in fact, had boomed over the 1980s, I had to change the premise of my study. My investigation of pawnshops led naturally into a study of checkcashing outlets, which serve many of the same customers and which also had grown explosively over the 1980s. Because pawnshops and check-cashing outlets have received little attention from academics, public policy analysts, and regulators of financial institutions, I had to use a variety of research methods in carrying out this project. I gathered quantitative data on fringe banks wherever that was possible; to check the reasonableness of the data and to address a number of issues not covered by the quantitative data, I interviewed pawnbrokers and check xi XII Fringe Banking cashers across the country; I attended annual conventions of the National Pawnbrokers Association and the National Check Cashers Association; I interviewed numerous state regulators and spoke with an informal, unscientific sample of fringe banking customers . In researching and writing this book, I have been helped by many institutions and individuals. First, I must express my gratitude to the Russell Sage Foundation for sponsoring much of the research that underlies this book. I am grateful for its financial support, and especially value the summer I spent in residence at the Foundation, exchanging ideas with the staff and other visiting scholars. I also thank Charlotte Shelby, Managing Editor at the Foundation, for her outstanding editorial contribution. My 6-year visiting association with the Research Department at the Federal Reserve Bank of Kansas City has also been critically important in this project. I am particularly appreciative of the opportunity to test my ideas in the Bank's seminar series, to receive critical comments on drafts of papers written for its working paper series, and to publish some of my research in the Bank's journal. As the economists there well know, many of the ideas in this monograph were first tested on them over lunch. Much of the research and writing for this book was completed at three institutions: Swarthmore College, Yale University, and the Universidad Nova de Lisboa. I am especially grateful for the support of my colleagues at Swarthmore and the valuable assistance of its skilled librarians. On a sabbatical from Swarthmore, I gained immensely from spending a year as a visiting faculty member in Yale's Department of Economics and a semester at the Universidad Nova in Lisbon, Portugal. The faculty and staff at both of these excellent universities were generous hosts. Among the individuals who contributed to this project, I am most indebted to some first-rate Swarthmore College students who worked with me as co-authors of papers and as research assistants. In alphabetical order, they are Jennifer Ekert, Reade Kern, Andrew Peterson, Bart Yavorosky, and Brian ZikmundFisher . I am also grateful to numerous professional colleagues, especially Janet Ceglowski, Robinson Hollister, Hyman Minsky, and anonymous reviewers, who commented on earlier drafts of the manuscript and related articles. Special thanks go to Hyman Preface and Acknowledgments xiii Minsky for helping me to arrive at the term "fringe banks" as a shorthand phrase covering both pawnshops and check-cashing outlets. I thank Catherine Mansell Carstens, F.J.A. Bouman, T.G. Ford, and Michael Skully for generously sharing their knowledge of pawnshop operations in other countries. I am indebted to Mike Hudson for informing me of the operations and rapid growth of rent-to-own stores. I thank Bill and Sara Caskey for editorial suggestions. This book could not have been written without the cooperation of many pawnbrokers and commercial check cashers. Although I am sure that I omit some names, among the pawnbrokers who contributed the most are A.W. Eckert, Dick George, Angela and Israel Goltzman, Todd Gordon, Mark Leonard, John Marshall, Stan Meyerson, Gary Nopp, Dennis Preston, Jimmy and Louise Seawrite, and Mitch Wolf...