By Paulson, Anna; Singer, Audrey
American Banker , Vol. 171, No. 120
The congressional debate over immigration reform may go on for quite a while, given the latest stumbling block.
One piece of the Senate bill proposes that illegal immigrants who adjust their legal status pay back taxes and other fees. But the Constitution allows only the House to create bills that include any revenue-raising, and it is entitled to block any legislation by the Senate that includes such measures.
While the legislation may be held up, the national conversation will continue. Echoing the debate raging in the halls of Congress, the public debate is centered on what to do about the large group of immigrants living here illegally -- currently estimated to be about 30% of all foreign-born residents.
But let's not forget that 70% of immigrants -- nearly 25 million men, women, and children -- live, work, and go to school in the United States legally. The economic impact of immigration on our society will be shaped far more by what happens to these immigrants than how we come to terms with those who are here illegally.
No matter what Congress decides, we need to focus on the long term and agree that making it easier for immigrants to integrate economically and socially will decrease the costs of immigration and increase the benefits.
Making it easier for immigrants to use mainstream financial institutions such as banks and credit unions is a step in the right direction. Studies show that broad financial access is one important indicator of a thriving community; income, homeownership, and employment are higher, and crime rates are lower, in metropolitan areas where a greater proportion of the population has a bank account.
However, immigrants are less likely to have checking or savings accounts and less likely to own a home or invest in the stock market than those born here. This is true even after socio-economic characteristics like education and income are taken into account.
That is because many immigrants arrive with little or no banking experience, as a result of weak political, legal, and economic institutions in their countries of origin that discourage ordinary citizens from saving and investing. In many developing countries, banks are only for the rich, and inflation, fraud, and financial crises often erode account values.
We have the most sophisticated financial system in the world, but many immigrants will not take full advantage of it. Make your way down a commercial corridor in an immigrant neighborhood, and you will see where working-class immigrants do their banking -- at businesses that offer check cashing, payday loans, and international money transfers. These activities generate more than $4 billion of fees each year.
These fees, together with the opportunity to reach new customers, have not gone unnoticed by banks and credit unions. Across the country, banks large and small are working hard to attract immigrants. …