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march
12-14, 2003 |
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| Last updated: July 3, 2003 |
Financial Security PanelA report contributed by Moderator: Goal: Identify and discuss the financial services that are available to Latinos in the Midwest, as well as the means to access capital. Communicate the subjects of remittances, consumer protection and/or fraud, as well as the lack of employee benefits that Latinos receive. Examine the opportunities that exist to increase savings and develop retirement planning, such as Individual Development Accounts and Savings. Panelists:
Kevin Shields, Community Affairs Specialist with the FDIC, spoke about alternatives for the new immigrants to get the financing they need to buy homes and invest in their futures. He addressed the concerns that have arisen about alternative forms of identification, such as the matr�cula consular and the ITIN (Individual Tax Identification Number). The FDIC is working with banks to encourage them to accept these forms of identification. Because of the difficulty they�ve had in obtaining access to banks, the incoming immigrant population is more likely to be exploited by high-interest loan companies, he said. �We�d like to see them start walking into banks and beginning this process, instead of walking into the payday shops,� said Shields. �We want to help more low and moderate-income people into the financial system.� Under the new Patriot Act, Shields said. The banks have to take a look at a potential customer and determine who they are. Once they are educated, most bankers believe the incoming Latino population does not present a risk, and the ITIN and matricula consular are acceptable, he said. The FDIC has been sending speakers around to the different banks and telling them that these are acceptable forms of ID. The issue is of critical importance to the immigrants, he said. �If they don�t have a bank account, what are they going to do with their money?� he asked. �All our people are getting robbed. They�ll take all their savings of $600 and keep it in their pocket because it�s the safest place � but that�s no place to put it.� The FDIC sees this huge growing community as a potential source of profits to be made, he said, and as long as those profits are made fairly, that�s fine. �There are about 8 million people here from Mexico illegally, and that�s probably an underestimate,� he said. The FDIC has worked with some of the meatpacking companies, teaching people financial education and giving them a good basic understanding of finances. Shields spoke of the �Money Smart� program, which cooperates with banks around the community to get basic financial information out there in four languages throughout the U.S. �Money Smart� is a 10-module program in Spanish that teaches Spanish Speakers financial education skills. In 2001, more than $450 billion in purchasing power resided in the Spanish-speaking community, Shields said. An estimated 60 percent of Latinos are estimated to be unbanked. The reasons are that they don�t understand the system, and they�re afraid because they might not be here legally. But Shields emphasized that bankers don�t work for the INS. �As long as your money is green, they don�t care,� he said. �The banks can be and should be considered the friend of the Latino community,� said Shields. �Many, many banks are getting on the bandwagon and accepting the matricula consular.� The average opening amount is $3,000, he said. �That�s a great deposit.� The other thing banks should be interested in is the money transfer business, he said. An estimated $23 billion was sent to Latin America last year. �Someone made $3 billion off of that,� he said. Banks generally charge 9 percent to transfer money internationally, while Western Union and Money Gram charge significantly more. Banks can undercut the price for overseas money transfers. Remittances are the No.1 item on the Latino budget, he said; 70 percent of Latinos send money back home. �We�re talking about regular working people,� he said. �If a bank decides it�s too risky, that�s OK. We as the FDIC would never tell someone to do what they�re not comfortable with. The point is, that this is America, and money makes money. You have to start somewhere.� Responding to a question from the audience about documentation status, Shields said: �We always get that question all the time: documented or undocumented?� I say, So what? We�re more concerned about what�s safer? In your pocket, or in the bank?�
Julie Riddle of the Heart of America Family Services introduced the concept of the IDA, or Individual Development Account. The accounts were developed as an alternative means of investing and building credit. �IDAs are based on the idea of equity,� she said. �The middle class has the 401K and pre-tax benefits and a mortgage. Low-income families don�t have this. IDAs were formed to create parity.� The idea, she said, is that it takes more than income to get out of a stressful financial situation; it takes income and assets. The problem with the welfare system, she said, is that it is based on income transfers alone. It�s supposed to help the poor, but instead it sets them up for failure by penalizing people for having assets. IDAs were created to address this imbalance. The program has several elements:
�It�s not about changing behavior,� Riddle emphasized. �Some of the people we work with are some of the best budgeters we�ve ever seen. Just because someone doesn�t have much money doesn�t mean they can�t manage it. This is about building a structure that will help them over the long run.� In order to qualify, families must meet the following criteria: Ther emus be earned income in the household; the family�s income level must be below 200 percent of the federal poverty level; and the household net worth can�t be over $10,000. For more information, see www.idanetwork.org. Ian Bautista, Deputy Director of El Centro, gave some of the history of that program and referred people to their website, www.elcentroinc.com. Since it was launched in 1975, the agency has developed more than 50 different funding sources, none of them contributing more than 10 percent of El Centro�s budget, so that it could form its own sense of financial security, what Bautista referred to as a �financial fortress.� This was necessary especially in the early days, when discrimination was rampant. El Centro also uses the Money Smart curriculum in its financial education programs, and it sees all kinds of clients. �Some of our customers come in saying, �You know I have $30,000 in my mattress, and I just don�t know how safe that is,�� he said. �It�s a distressing situation, but it�s not atypical, given the population we�re serving.� Bautista referred to the El Centro survey reported by Melissa Lewis in the Wednesday morning session on Kansas City. �Melissa found that despite the fact that though these people are way below the poverty level, and though they�re the first to be fired when there�s an economic situation, they�re still sending enormous amounts of money home, and they�re saving. You talk about saving on a shoestring, our customers could teach us something. They�re the ones who are buying homes and rehabbing them and bringing the urban core back to life.� El Centro does homebuyer workshops in Spanish, and at this moment they have 50 people signed up to take the homebuyer class. �We know that�s the only really strong sector in the economy right now, so we�re excited about that.� They�re getting the word out about these programs through the social service groups who are doing outreach in the community, through the ESL and GED classes and through medical interpreters. In May 2002 El Centro was able to secure $1 million in credit for these investment programs for the Latino community. Now they are working with the Hispanic Chamber of Commerce and the Hispanic Economic Development Corporation to teach Hispanic entrepreneurs about business taxes and accounting. �We need to think more about fairer ways of making money,� he said. �We need to demand the for-profit financial institutions start mirroring their communities and at the VP level and at the teller level. There is a huge emerging market here.� Bautista also warned of the �scam market� that takes advantage of vulnerable newcomers. �Unfortunately, some of the worst abusers are Raza � Latinos themselves. They�re gong on the radio, smooth-talking people out of their money. We fill out the ITIN application for people free of charge, but some people are charging $500.� The Latino community needs to overcome the �fear factor� around banking, he said. It needs greater access to stable and higher-paying jobs, and it needs greater access to homeownership. Finally, the community needs to push for access to higher education. �Once you get a college degree, the rate of earnings skyrockets after that.�
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