In recent years, the subject of “reaching out to the unbanked” has popped up in the news from time to time (I wrote about it here in 2007), the idea that everyone should have a relationship with a bank beyond cashing their paycheck seeming to be an integral part of what passes for conventional wisdom amongst the nation’s economists and bankers.

But, apparently, the housing bust and the resulting recession have both set that effort back just a bit, the appeal of racking up huge piles of debt and paying bank fees no longer what it used to be, at least according to this story in USA Today.

In an effort to bring more consumers into the financial mainstream, the board of the Federal Deposit Insurance Corp. is scheduled to vote today on a program to encourage banks to offer no-frills, low-cost checking and savings accounts. The FDIC’s model checking account would allow customers to open an account for as little as $10. While banks may decide to charge a low monthly maintenance fee, the accounts won’t have the kind of surprise fees — such as overdraft protection fees — that have led consumers to abandon banks, says FDIC Chair Sheila Bair.
…
Bank regulators and consumer advocates say more low-cost bank and credit union accounts are needed because consumers who use alternative financial services are vulnerable to theft and predatory practices. A 2008 study by the Pew Charitable Trusts estimated that the average “unbanked” household in California spends $700 a year just to cash checks. When they need to borrow money, unbanked consumers often turn to payday loans, which carry annual percentage interest rates of 380% or more.

Unbanked and underbanked consumers are also less likely to save, says Eleni Constantine, director of the Pew Health Group’s Financial Services Portfolio. In a survey of low-income Los Angeles households, Pew found that more than twice as many consumers who had bank accounts said they were earning enough to pay their bills and save for the future than those who didn’t have bank accounts.

It’s a good thing we’ve got government agencies looking out for the banks. It’s hard to imagine how the nation’s economy will ever recover if we don’t get more people to borrow more money to buy more things that they don’t really need.