University of Maryland Francis King Carey School of Law Visiting Professor Sarah Bloom Raskin, JD, says an increasing number of Americans are living in fear. Not of bumps in the night, but fear of losing a job, fear of being unable to pay bills, and fear of losing control of financial data.
Raskin addressed those fears and the role lawmakers play in alleviating them at the Maryland Carey School of Law during her Norman P. Ramsey Lecture, “Economic Policymaking in an Age of Financial Anxiety,” on Oct. 26.
“We are living in age of financial anxiety,” said Raskin, who spent the last decade helping to diagnose and restart the economy during the nation’s financial crisis as a deputy secretary of the U.S. Treasury Department and a former governor of the Federal Reserve Board.
“It felt like dominoes, one breakdown after another,” said Raskin, reflecting on the financial crisis. “In many ways we were attempting to stop the dominoes from falling and stand them back up.”
Even though the darkest days of the recession are in the rearview mirror, there is still not a sense of "mission accomplished," Raskin said.
Economic insecurity, defined as experiencing a 25 percent drop in income in a year without an adequate financial safety net, is on the rise.
Out of economic insecurity comes financial anxiety, the inability to dig out of a serious financial downturn.
If ignored, financial anxiety has the potential to slow economic growth and erode the confidence necessary for the financial system to operate, Raskin told the audience of law students, professors, and policymakers.
Raskin said there are features embedded in our laws and financial system that put people at risk that can be identified and altered to make sure a downturn doesn’t happen, or at the very least is short-lived.
She pointed to the recent Equifax cyberattack on more than half of adult Americans’ personal financial data as a source of potential financial anxiety.
“To be defined by this data, but have no control of how it is protected or used and to have little recourse in taking steps after the fact to change the consequences, could be a source of significant anxiety,” she said.
The idea that jobs are going to be taken over by robots, algorithms, and artificial intelligence is another source of financial anxiety. Raskin cited a study that predicted by 2022, 40 percent of jobs could be automated due to cost-saving measures.
While some jobs will disappear, others, requiring new skill sets will be added. The challenge for lawmakers, Raskin said, will be educating the workforce and matching new skills to people who otherwise would be displaced by automation.
High levels of student debt accompanied by late payments and delinquencies can be indicators of future economic insecurity and financial anxiety, according to Raskin, although the story is more complex than it may first appear.
She shared a story of visiting college campuses in 2014, when she was just starting at the Treasury Department. During her campus visits, while talking to students, Raskin realized there was a lot of confusion about the student loan financing system that often contributed to late payments and delinquencies.
“It may not just be an inability to pay that is causing high rates of nonpayment, but also downright confusion about how to pay, whom to pay, and how much to pay,” she said.
In her role as a visiting professor at the Maryland Carey School of Law, Raskin will teach a seminar exploring the convergence of law and economic policy in spring 2018. Students attending the Ramsey Lecture received an open invitation to take her course. “For students who are curious how to make these systems work better for people, you can take my spring seminar ‘Law and Financial Anxiety,’ ” she said. “Join me in exploring something new: the question of whether financial anxiety matters and how our system of laws is structured to either enhance or ameliorate this anxiety.”
The Norman P. Ramsey Business Law Fund was established in May 1993 through the generosity of Tucky P. Ramsey in honor of her husband. A distinguished graduate of the University of Maryland School of Law Class of 1947, Judge Ramsey represented the highest tradition of dedication to the legal profession. His career spanned public and private practice as well as the judiciary, and included service such as a U.S. District Court Judge; managing partner in the law firm of Semmes, Bowen & Semmes; Deputy Attorney General of Maryland; and Assistant U.S. Attorney. The Ramsey Fund provides support for business law programs at Maryland Carey Law.