Week 9 Flashcards
What was the primary regulatory obstacle faced by Citibank in the 1970s?
State usury laws limiting interest rates
Which Supreme Court case allowed banks to export interest rates from their home states?
Marquette v. First of Omaha
Why did Citibank choose South Dakota for its relocation in 1981?
South Dakota had no interest rate caps
What did South Dakota gain by welcoming Citibank?
A revitalized local economy and jobs
What key term in the National Bank Act was central to the Marquette decision?
“Located”
How did Citibank address its rising costs due to state usury limits in New York?
It relocated its credit card division to a state with lenient laws
What broader economic trend did Citibank’s move exemplify?
Financialization and regulatory arbitrage
What protection did South Dakota offer to its local banks when Citibank relocated?
Prohibited Citibank from opening consumer-facing branches
What was the public reaction to Citibank’s early attempts to charge service fees for credit cards in New York?
Backlash, including customers returning their cards
Which financial factor significantly increased the risk for credit card banks in the 1970s?
Rising interest rates driven by inflation
How did Citibank’s move to South Dakota affect the national banking system?
It allowed state-level decisions to shape national credit policy
What role did Governor Bill Janklow play in Citibank’s relocation?
He facilitated Citibank’s relocation to boost South Dakota’s economy
By 1983, what percentage of U.S. credit card loans came from states like South Dakota and Delaware?
75%
What was the long-term impact of states like South Dakota eliminating usury laws?
A nationwide rise in credit card debt and interest rates
What does Sean Vanatta mean by a “race to the bottom”?
States removing consumer protections to attract banking business
What sparked consumer distrust in banks during the Great Depression?
Banks running out of liquidity to return consumer deposits
What was one of the main goals of President Roosevelt’s New Deal?
Stabilizing the economy by capping interest and deposit rates
What was one unintended consequence of deregulating the credit card industry?
Increased reliance on credit among low-income households
What percentage of U.S. households carries credit card debt, according to Vanatta?
40%
What effect did rising inflation in the 1970s have on credit card banks?
It increased the risk of loan losses due to state usury caps
What specific legal strategy did Citibank use to bypass restrictive interest rate caps in New York?
Relocating its credit card division to South Dakota to exploit the Marquette ruling
What was the original purpose of the state usury laws that Citibank circumvented?
To protect consumers from predatory lending practices
Why did the Marquette decision favor out-of-state banks like Citibank over local competitors?
It allowed banks to bypass state-level financial consumer protections.
What was a key argument used by the Supreme Court in the Marquette ruling regarding the location of a bank?
A bank’s location is determined by the state in which it is chartered.
What economic consequence did the removal of state usury limits have on the credit card market?
It led to the rapid expansion of credit card adoption nationwide.
What distinguishes the financialization process described in the article from traditional banking practices?
Use of regulatory arbitrage to maximize profits
How did Citibank’s relocation to South Dakota change the regulatory landscape for other states?
It triggered a competitive “race to the bottom” in deregulation.
Why did South Dakota’s elimination of its usury laws align with its economic strategy?
It sought to boost its struggling economy by attracting financial institutions.
What role did the competitive dynamics among states play in shaping consumer credit regulations post-Marquette?
States competed by lowering regulatory standards to attract banking institutions.
What long-term effect did Citibank’s move have on consumer behavior in the United States?
It normalized consumer debt and reliance on high-interest credit.
What is one of the main arguments presented by the author in Lila McLellan’s article?
The history of Black management emphasizes resilience, community, and alternative business models.
What management philosophy mentioned in the article is highlighted as an alternative to traditional business models?
Ubuntu, emphasizing mutual support and interconnectedness
Which historical figure is noted for becoming the first Black woman in America to charter a bank?
Magdalena Walker
What connection does the article draw between historical Black business practices and modern management?
Historical Black practices of resilience, community reliance, and cooperation offer valuable lessons for creating inclusive workplaces.
What primary concept do Leon Prieto and Simone Phipps suggest should replace traditional capitalist models for Black businesses?
Cooperative economics
How do Prieto and Phipps connect their research to the Black Lives Matter movement?
By highlighting how historical management philosophies can address systemic racism
Which African philosophy do Prieto and Phipps attribute to the cooperative business models in historical Black communities?
Ubuntu
What does the term “Sankofa” from the Akan people of Ghana signify in the context of Prieto and Phipps’ research?
A call to embrace African traditions for reclaiming the future
What was a major limitation Prieto and Phipps identified in management textbooks during their studies?
Absence of African American contributions to management history
Why do Prieto and Phipps consider C.C. Spaulding’s 1927 article significant?
It predates Henri Fayol’s theories on management fundamentals.
Which of the following was NOT one of Spaulding’s eight fundamentals of operations?
Vertical integration
According to Prieto and Phipps, what was a core reason for the success of Black Wall Street communities?
Integration of cooperative business principles
Why was Maggie Lena Walker an early example of a transformational leader?
She emphasized emotional intelligence and a larger mission for her community.
What practical benefit did C.C. Spaulding’s “perks” at North Carolina Mutual offer?
Boosted employee motivation and retention
What criticism have Black entrepreneurs historically faced when forming cooperatives?
Being labeled as communists and un-American
How do Prieto and Phipps link historical African American management to spiritual values?
By showing how spirituality was central to corporate decision-making
Which modern concept do Prieto and Phipps argue aligns with historical Black management philosophies?
Corporate social responsibility
What prompted Prieto and Phipps to study Black management history?
The lack of Black representation in management curricula
What unique perspective did Prieto and Phipps bring to their research as Trinidadians?
Insider-outsider vantage point on African American experiences
