It’s been well-documented that America’s banks and financial institutions are no longer the loose-and-easy lenders they were several years ago. But newly released data from the Federal Reserve Bank of New York reveals a less explored implication of that credit tightening: A new geographic divide in how easily Americans can borrow money.
Those who live in the upper Midwest, particularly Minnesota and the Dakotas, still have the healthy borrowing profiles they did before the Great Recession. Those in many other states have seen only modest declines in the ability to borrow. But those in the Deep South — especially in states hugging the Gulf Coast — have seen their access to credit drop off significantly, even though it was already weak to begin with.
The consequences of a credit freeze in the Deep South are daunting. The region is already economically distressed, with disproportionately high poverty levels, and restrictions on credit access limit the ability of those living there to start businesses, make investments, or manage unforeseen expenses. If enough people in an area cannot borrow, the community itself becomes less resilient, said Kausar Hamdani, a senior vice president at the New York Fed.
“It’s the ability to access resources,” Hamdani said. “Not just for emergencies, but to grow a dream, to start a business.”