Financial Transformation and the Metropolis: Booms, Busts, and Banking in Los Angeles

Abstract

In this paper the implications of the two eras of financial transformation in the 20th century—that of the 1930s and that of the 1980s and 1990s—for urban growth and inequality in Southern California are examined. It is argued that financial structures have profound effects on the pace and distributional consequences of urban growth, in large part because urban development is characterized by widespread spatial spillover effects. The contemporary era of financial transformation has widened gaps between urban communities and banking customer markets. Banking markets that were once segmented by regulation are now segmented by market dynamics. In consequence, a financial system which once facilitated wealth building for households and communities now deepens social inequality and spatial separation. In this paper the historical and contemporary experience of Los Angeles is used to both develop and illustrate the arguments made.

Race, Gender, Power, and the US Subprime Mortgage and Foreclosure Crisis: A Meso Analysis

“…10 Banks maintained fewer branches in minority neighborhoods than elsewhere (Gary A. Dymski and John M. Veitch 1996), forcing households to disproportionately use high-cost alternatives. Inner-city areas were so disadvantaged in access to banking services that a national community reinvestment movement succeeded in pressuring Congress to pass the HMDA and the CRA in 1975 and1977, respectively. High interest rates and recession in the late 1970s and early 1980s generated institutional changes in banking: large banks suffered large loan and customer losses; thrifts experienced insolvency problems, compromising the flow of mortgage credit.…”

Financializing space, spacing financialization

“…For while many will celebrate any brake on what is seen as exploitative and predatory lending, it means that a potential source of credit within low-income financial ecologies already short of options will be closed off; not every sub-prime borrower that engaged with the sub-prime sector defaulted, although undoubtedly like the rest of the population with mortgages, they would have had to divert more of their income to repayments in the face of rising interest rates (see, for example, Kirchoff, 2007). One of the most regressive outcomes of the sub-prime crisis will be a further widening of the gap between middle class and less privileged financial ecologies, as the former continue to access the benefits of the financial system at the expense of the latter, leading to a deepening of the process described by Gary Dymski as financial dynamics, by which more affluent areas become enriched through the financial system at the expense of less affluent areas, leading to a deepening of uneven development (Dymski and Veitch 1996).…”

Free markets and foreclosures: An examination of contradictions in neoliberal urbanization in Houston, Texas

“…One response to the crisis entailed deregulation and weakening of capital controls, which accommodated increasing global investments in speculation on asset values, including technology stocks and mortgage securities, where profits were higher and more assured. This propelled a transfer of capital from the primary to the secondary circuit (real estate), a process which has historically served as a (temporary) counter to economic stagnation and crisis (Dymski & Veitch, 1996;Foster & Magdoff, 2009;Harvey, 1999). Foster andMagdoff (2009), Harvey (2010), and Rajan (2010) note that the housing bubble grew more rapidly after the collapse of the dot-com bubble as wary investors transferred capital to real estate which allowed the emergence from the post-bubble recession.…”