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October 28, 2011

Booth School study shows anger and mistrust at financial institutions

It may be almost three years since the financial crisis of 2008, but public anger and mistrust of government financial institutions are at their highest levels in years, according to a leading survey co-published by the Booth School of Business.

Just 23 percent of respondents say they trust the country’s financial systems, down from 25 percent last fiscal quarter, according to the most recent Financial Trust Index, a quarterly survey conducted jointly by the Booth School and Northwestern University’s Kellogg School of Management.

Americans are particularly distrustful of banks, which only 33 percent of respondents trust, down from 39 percent last quarter. This drop was greater than the decreases in trust of the stock market, mutual funds, and large corporations.

The Index, which began in December 2008, surveys 1,000 Americans at the end of each quarter.

“Banks got favors from the government but were not held accountable for laws they broke or actions not taken,” said Luigi Zingales, co-author of the Index, and Robert R. McCormack, professor of entrepreneurship and finance at Booth.

Public trust is lowest for banks that received stimulus money. Second-year Paul Kim, a member of the activist group Southsiders Organized for Unity and Liberation, said these banks have not allocated the resources they received appropriately.

“We need to be looking at the political power financial institutions have and fight back for ordinary people’s interests so they are not put aside for the short-term goals of financial institutions,” Kim said.

The public’s anger at these financial institutions, at 58 percent, is the highest it has been since March 2009, which Zingales attributed to high employment.

This anger can be seen in the “Occupy” protests across the country, Kim said. Kim is one of several U of C students who have participated in the Occupy Chicago demonstrations, of whom at least 13 were arrested at a protest earlier this month.

“We don’t have the lobbyists or buckets of money the banks have,” Kim said, stressing that this type of public pressure on banks and the government is necessary for change. “But we do have people in the streets putting political pressure for things to change.”

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