Posted: Monday, February 25, 2013
Year of the City Emerging Scholar Presentation: After the Financial Crisis – Households in Peril
Joëlle Leclaire, associate professor of economics and finance, will share her research as part of the Year of the City Emerging Scholar series on Thursday, February 28, from 12:15 to 1:30 p.m. in Bulger Communication Center South. This series of presentations provides faculty members with an opportunity to share their intellectual work with the rest of the campus.
Leclaire’s talk looks at the structure of household debt relative to the debt held by government, business, and the rest of the world. She explains that household debt cannot continue to support economic growth. Business must start spending again for new growth to be sustainable. "From the late nineties through 2008, most increases in household debt took the form of mortgages used to purchase homes, improve existing properties, and consolidate other types of debt. As the regular mortgage market became saturated, lenders extended a variety of tricky mortgages to households previously denied mortgages, low-income households in particular. This extension of credit to low-income households led to some renewal of many urban centers. With the financial crisis, however, these same urban centers were decimated when those households were faced with changes in both the terms of credit and their ability to pay. Now, many of these same households are denied mortgages but are presented with expensive credit card and other debt, which they are using to cover basic living expenses in the absence of steady employment. The health of a city depends crucially on the level of employment, which sustains the ability to pay mortgages and other debt. Thus, clearing existing household debt through job creation is potentially the most powerful way to sustainably renew a city."