Newly released transcripts reveal Fed officials underestimated the severity of economic conditions during the financial crisis. Officials repeatedly fretted about overstimulating the economy, only to realize time and again that they needed to redouble efforts to contain the collapse. Ben Bernanke was clearsighted in warning of the risk of a severe recession, but struggled to persuade his colleagues. Janet Yellen, then president of the Federal Reserve Bank of San Francisco, was even more alarmed. She and Eric Rosengren, president of the Federal Reserve Bank of Boston, were the most forceful advocates for stronger action. The Fed’s understanding of the crisis was clouded by its reliance on indicators that missed sharp changes in conditions. Officials also appeared to be biased toward worrying about the risk of inflation while downplaying the risks of rising unemployment. The transcripts also show, however, that Fed officials responded decisively in the final months of the crisis, heading off an even worse recession.

The Federal Reserve Bank of San Francisco has compiled a series of articles and essays highlighting the stabilization strategies of nonprofits across the country. The essays emerged from experiences in the Neighborhood Stabilization Innovations Initiative, a project which supported emerging strategies for neighborhood stabilization after the foreclosure crisis. In this review, findings from that initiative are presented on topics including mitigating foreclosure, new models of housing counseling, public-sector entrepreneurialism and fair housing. "The 10 projects funded under the Neighborhood Stabilization Innovations Initiative point to a wide range of workable approaches, spanning many local markets and housing challenges. In each case, the success of the demonstration began with a strong, highly capable nonprofit institution," write contributing authors O'Callaghan and Weech. 

Over a weeklong stretch last month, all six institutions offering bank payday loans discontinued the product due to pressure from federal banking regulators. The coming months will test how hard those banks are willing to fight for low income borrowers. Whatever banks offer will likely be less profitable than deposit advance. Possible replacement products like secured credit cards may fill some of the void, but many customers who used deposit advances won't qualify for secured loans. Some banks are partnering with nonbanks that already have expertise in small-dollar lending, such as LendUp, an online short-term lending startup. Mixed signals from regulators have hampered the development of new products. The FDIC and OCC issued the guidance that killed the deposit advance, but the Federal Reserve Board declined to sign on. The picture should become clearer later this year when the CFPB releases regulations which will apply both to banks and payday lenders.

Lisa Sevron, a professor at the Milano School of International Affairs, Management, and Urban Policy at the New School, describes the experiences of payday borrower Azlinah Tambu, a twenty-two-year-old single mother: Ms. Tambu's car had broken down, and she needed it to drop her daughter off at day care and get to work. Tambu had no savings or credit card; no family or friends who could help. So she took out five payday loans from five different lenders knowing she would not be able to pay them back on time. When the lenders tried to withdraw the money she owed from her checking account, she did not have sufficient funds and was hit with overdraft fees that mounted to $300. Tambu paid off the overdraft charges and closed her account. Still, Ms. Tambu feels the loans were a necessary evil. “I think they should still exist," she said. "You know it’s undoable to take out five loans and be able to pay them back. But sometimes you have no choice. The reason I’m working so hard to pay these loans back is that I want to be in good standing, in case I ever need another one."