Minsky's financial-instability model suggests that financial crises can be resolved efficiently with lender-of-last-resort and big-government interventions. The crisis that began in 2007 (hereafter, the ''2007 crisis'') has been different: it has been more profound and resistant to policy interventions. This paper examines why. Our approach is to expand Minsky's balance-sheet approach in several ways. First, we incorporate two factors Minsky missed because he built his model in the 1970s: the impact of racial exclusion and U.S. cross-border imbalances on U.S. financial dynamics. In addition, we draw out the analytical implications of the systematic differences between banks' and non-banks' balance-sheets. Minsky didn't do this; but because of the transformation of banking after 1980, these differences have become deeply significant. One key effect of so doing is to see that asset-liability balances as well as cash-flows are crucial in financial dynamics. This paper concludes that the 2007 crisis has been so profound and unresponsive to policy intervention for several reasons: banks no longer bear as well as originate credit risk; banks made exploitative loans to minority borrowers and then generalized these loans as housing prices rose; and subprime homeowners and structured investment vehicles became more leveraged than banks.

Th is paper develops a political economic explanation of the 2007-9 US subprime crisis which focuses on one of its central causes: the transformation of racial exclusion in US mortgagemarkets. Until the early 1990s, racial minorities were systematically excluded from mortgagefi nance due to bank-redlining and discrimination. But, then, racial exclusion in credit-markets was transformed: racial minorities were increasingly given access to housing-credit under terms far more adverse than were off ered to non-minority borrowers. Th is paper shows that the emergence of the subprime loan is linked, in turn, to the strategic transformation of banking in the 1980s, and to the unique global circumstances of the US macro-economy. Th us, subprime lending emerged from a combination of the long US history of racial exclusion in credit-markets, the crisis of US banking, and the position of the US within the global economy. From the viewpoint of the capitalist accumulation-process, these loans increased the depth of the fi nancial expropriation of the working class by fi nancial capital. Th e crisis in subprime lending then emerged when subprime loans with exploitative terms became more widespread and were made increasingly on an under-collateralised basis -that is, when housing-loans became not just extortionary but speculative.

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.

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Given the rapid increase of immigrant populations and ethnic communities in the U.S., it is surprising that so little attention has been paid to the role of ethnically owned banks in community development. Analyses of banking usually focus on developments such as mergers and consolidations within the mainstream financial sector. The academic literature on financial geography and the ethnic economy has established that the discriminatory and exclusionary practices of mainstream banks and other financial institutions play a significant role in impoverishing urban, low‐income ghettos. Research on minority financial services largely focuses on the dynamics of informal financial establishments in ethnic neighborhoods. With the exception of research on African‐American banks, there has been remarkably little scholarship on or even acknowledgement of ethnically owned formal financial institutions in minority communities. This article examines the parallel, co‐respective growth of Chinese‐American residents, businesses, and bank branches in Los Angeles, with special attention to spatial and temporal correlation. In particular, we explore the role of Chinese ethnic banks in altering commercial infrastructures and residential landscapes in Los Angeles County's Chinatown and the San Gabriel Valley ethnoburb area. This article is based on extensive quantitative data and on twenty‐seven multilingual interviews conducted in 1999 with officers of Chinese‐American banks.