Ensuring Financial Innovation without Risky Illusions
A while back, I described the “illusion of inclusion” – what happens when financial products reach under-served consumers or investors largely due to terms that advantage the provider instead of the customer, advertising that a product has vital protections such as FDIC insurance, little of the customer-servicing capacity needed to prevent undue loss, or the vulnerable are otherwise persuaded to take a chance that’s just too good to be even close to true. The events this week show that some policymakers are taking notice, but the notice is so limited and the risks so large that much more is required before still more of the financially fragile are put at even greater risk.