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How effective were the financial safety nets in the aftermath of Katrina?

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  • Julia S. Cheney
  • Sherrie L. W. Rhine

Abstract

This paper describes the U.S. financial system’s response to the destruction caused by Hurricane Katrina and examines how financial safety nets helped meet consumers’ needs in the aftermath of the storm. Overall, we find that consumers who hold deposit accounts at financial institutions are less vulnerable to financial disruptions than individuals who do not have either a checking or a savings account (the unbanked). The federal banking regulators’ and financial institutions’ responses to Hurricane Katrina, the financial vulnerability of unbanked families to this unexpected catastrophic event, and how the American Red Cross, FEMA, and the Gulf States’ relief efforts supplied financial assistance to Katrina’s victims are also addressed. Finally, we present several strategies that can be pursued to further safeguard the U.S. population and the financial community against extraordinary events.

Suggested Citation

  • Julia S. Cheney & Sherrie L. W. Rhine, 2006. "How effective were the financial safety nets in the aftermath of Katrina?," Payment Cards Center Discussion Paper 06-01, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpdp:06-01
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    File URL: http://www.phil.frb.org/pcc/papers/2006/HurricaneKatrinaJan06.pdf
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    References listed on IDEAS

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    1. Christopher R. Knittel & Victor Stango, 2003. "Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards," American Economic Review, American Economic Association, vol. 93(5), pages 1703-1729, December.
    2. David B. Gross & Nicholas S. Souleles, 2002. "Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 149-185.
    3. Calem, Paul S & Mester, Loretta J, 1995. "Consumer Behavior and the Stickiness of Credit-Card Interest Rates," American Economic Review, American Economic Association, pages 1327-1336.
    4. Sumit Agarwal & Chunlin Liu & Nicholas S. Souleles, 2007. "The Reaction of Consumer Spending and Debt to Tax Rebates-Evidence from Consumer Credit Data," Journal of Political Economy, University of Chicago Press, pages 986-1019.
    5. Sumit Agarwal & Souphala Chomsisengphet & Neale Mahoney & Johannes Stroebel, 2015. "Do Banks Pass Through Credit Expansions to Consumers Who Want to Borrow?," NBER Working Papers 21567, National Bureau of Economic Research, Inc.
    6. Calem, Paul S. & Gordy, Michael B. & Mester, Loretta J., 2006. "Switching costs and adverse selection in the market for credit cards: New evidence," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1653-1685, June.
    7. Sanchez, Juan M., 2014. "Paying down credit card debt: a breakdown by income and age," The Regional Economist, Federal Reserve Bank of St. Louis, April.
    8. Meta Brown & Andrew F. Haughwout & Donghoon Lee & Wilbert Van der Klaauw, 2013. "The financial crisis at the kitchen table: trends in household debt and credit," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 19(April).
    9. Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
    10. Matthew D. Shapiro & Joel Slemrod, 2003. "Consumer Response to Tax Rebates," American Economic Review, American Economic Association, vol. 93(1), pages 381-396, March.
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    Cited by:

    1. Becchetti, Leonardo & Castriota, Stefano, 2008. "Does money affect happiness and self-esteem? The poor borrowers' perspective in a quasi-natural experiment," AICCON Working Papers 48-2008, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    2. Julie Birkenmaier & Qiang Fu, 2016. "The Association of Alternative Financial Services Usage and Financial Access: Evidence from the National Financial Capability Study," Journal of Family and Economic Issues, Springer, vol. 37(3), pages 450-460, September.
    3. Dubravka Ritter, 2012. "Do we still need the Equal Credit Opportunity Act?," Payment Cards Center Discussion Paper 12-03, Federal Reserve Bank of Philadelphia.

    More about this item

    Keywords

    Hurricane Katrina; 2005 ; Unbanked;

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