Pillars of U.S. social provision, public pension funds rely significantly on private investment to meet their chronically underfunded promises to America’s workers. Dependent on investment returns, pension funds are increasingly investing in marginalized debt, namely the array of high-interest-rate, subprime, risky debt—including small-dollar installment loans and other forms of subprime debt—that tends to concentrate in and among historically marginalized communities, often to catastrophic effect. Marginalized debt is a valuable investment because its characteristically high interest rates and myriad fees engender higher returns. In turn, higher returns ostensibly mean greater retirement security for ordinary workers who are themselves economically vulnerable in the current atmosphere of public welfare retrenchment. They must increasingly fend for themselves if they hope to retire at a decent age and with dignity, if at all.
This Article surfaces this debt-centered relational connection between two socio-economically vulnerable groups: retirement-insecure workers and marginalized borrowers. It argues that in the hands of private financial intermediaries, whose fiduciary duties and profit-sensitive incentives eschew broader moral considerations of the source of profits or the social consequences of regressive wealth extraction, depends openly on the tenuous socioeconomic condition of one community as a source of wealth accumulation for another vulnerable community. Consequently, it argues that the incursion of private entities into the arena of public welfare is pernicious because it commodifies and reinforces the subordinate socioeconomic conditions on which marginalized debt thrives.
71 Duke Law Journal
Available at: https://scholarship.law.duke.edu/dlj/vol71/iss4/1