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Special Edition
Published by the Consumer and Community Affairs Division

October 2004

Financial Access for Immigrants Conference:
Learning from Diverse Perspectives
On April 15 and 16, 2004, the Federal Reserve
Bank of Chicago in conjunction with the Brookings
Institution Center for Urban and Metropolitan
Policy (now the Metropolitan Policy Program)
held a national conference focused on immigrant
access to financial markets and services. This
special edition of Profitwise News and Views
summarizes the conference presentations.

Introduction Page 1
Remarks by Federal Reserve Bank of Chicago
President and CEO Michael H. Moskow Page 2
Conference Summary Page 4
Keynote Addresses
Jim Edgar Page 12
Tamar Jacoby Page 15
Henry Cisneros Page 28
Ben Bernanke Page 34

Conference Announcement
Spring 2003

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Job Loss:
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Financial Access for
Immigrants Conference:
Learning from Diverse
Perspectives
Introduction

The community affairs program of the Federal Reserve
System is an educational, informational, and public policy
oriented function focused on community economic
development. The fundamental goal of community affairs
is to promote credit and capital access to traditionally or
historically underinvested and redeveloping communities
and underserved populations. This goal supports the
Federal Reserve’s economic growth objectives.
There has been much attention focused on immigration to
the United States in recent years, particularly immigration
from South and Central America. In the decade of the
1990s, immigration to the United States occurred at an
unprecedented rate, and it is continuing unabated today,
according to various sources. Further, new geographic
patterns of immigration have emerged, with areas of the
Midwest and Southeast experiencing record volumes
of immigrants attracted by labor opportunities in those
regions. According to data from the U.S. Census Bureau,
as of March 2002, the number of foreign-born U.S.
residents was 32.5 million, or roughly 11.5 percent of the
nation’s population.

In 2003, the Federal Reserve Bank of Chicago initiated
the Center for the Study of Financial Access for
Immigrants. The mission of the center is multi-faceted
and includes: conducting and encouraging research to
increase understanding of key factors that influence
financial behavior of immigrants; organizing forums
where interested parties can share ideas, innovations,
and practices; and documenting findings on the practical,
policy, and research levels that promote U.S. financial
market access for immigrants.
On April 15 and 16, 2004, the Federal Reserve Bank of
Chicago held a two-day conference, Financial Access
for Immigrants: Learning from Diverse Perspectives. The
event was cosponsored with the Brookings Institution
Center for Urban and Metropolitan Policy, now the
Metropolitan Policy Program. This article summarizes
the conference presentations. The full texts of papers
presented at the conference, related papers, slide
presentations, and biographical profiles are available
at www.chicagofed.org/community_development/FAI_
Center_Research.cfm.

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Financial Access for Immigrants:
Learning from Diverse Perspectives
Remarks by Michael H. Moskow
President and CEO, Federal Reserve Bank of Chicago
Chicago, Illinois, April 15, 2004

Good morning. I am Michael Moskow, president and
CEO of the Federal Reserve Bank of Chicago. I’d like
to personally welcome each of you to the Chicago Fed
and thank you for attending what will be an informative
conference.
This event would not be possible without the support of
our cohost, the Brookings Institution Center on Urban
and Metropolitan Policy. The Brookings Center has built
a strong, national reputation through its projects on
immigrant location and financial access in underserved
communities. Their connections to policymakers at all
levels of government have helped us to assemble a great
panel of experts for this conference. I would also like to
acknowledge the generous support of our sponsors, the
Pew Hispanic Center and the Ewing Marion Kauffman
Foundation.
For those of you unfamiliar with the Federal Reserve,
our goals are to foster maximum sustainable economic
growth, price stability, and a stable financial system. One
way we support these goals is by promoting full and fair
access to the nation’s financial institutions. In doing so, we
try to minimize the economic losses that arise whenever
anyone is unfairly discouraged from participating in our
financial system.
In particular, the issue of immigrant financial access has
been growing in importance in recent years. Between
1990 and 2000, the number of foreign-born in the U.S.
grew by 57 percent. Today one out of nine people living in
the U.S. was born abroad. Moreover, the fastest growth in
immigration has occurred in places where immigration was
virtually unknown 20 years ago. In metropolitan areas, new
immigrants are now more likely to live in the suburbs than
in the central city. The sheer size and dispersion of the
immigrant population ensures that the economic progress
of immigrants is a crucial component of economic
progress in the cities, suburbs, and rural areas of America.

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To help us better understand this dynamic issue, the
Federal Reserve Bank of Chicago established the Center
for the Study of Financial Access for Immigrants. This
initiative has three goals:
1) to add to the state of knowledge about the financial
behavior of immigrants;
2) to provide forums, like this one, where interested
parties can share ideas to improve financial market
access for immigrants; and
3) to document findings, innovations, trends, practices,
and policies that enhance immigrant financial market
access.
Since its establishment a year and half ago, the Center
has sponsored a wide range of research that has
examined issues such as the influence of home country
characteristics on
financial market
“...many large and small financial participation,
the role of social
institutions view the immigrant
networks in
market as a key to continued
promoting or
impeding financial
success.”
access, and the
sources of start-up
capital for immigrant
entrepreneurs compared to entrepreneurs born in the
U.S. – you will hear more about some of this research
today. We have also hosted regional Financial Access for
Immigrants conferences in Springfield (Illinois), Milwaukee,
Des Moines, Indianapolis, and Detroit.
Our research and conferences on this issue have
reiterated the existence of numerous opportunities to
incorporate immigrants into the financial mainstream.
According to the Census Bureau, only 68 percent
of immigrants have a savings or a checking account,
compared to 82 percent of individuals born in the United

States. Homeownership rates in the U.S. have reached
unprecedented levels – almost 70 percent for those
born in the U.S. – but immigrant homeownership lags
far behind at 49 percent. These figures underscore how
far we have to go, but they also point to opportunities
for financial institutions to attract new customers. As
you will hear more about today, many large and small
financial institutions view the immigrant market as a key
to continued success. One point of entry that has received
much attention is the large and growing market for
sending remittances overseas. In 2003, immigrants from
Latin America and the Caribbean sent $38 billion back to
their home countries.
While there are many opportunities to promote broader
immigrant participation in the U.S. financial arena, there
are also many challenges. The ethnic diversity of the
immigrant population, alone, means that the requirements
for improving
access vary
tremendously
“The ethnic diversity of the
across immigrant
immigrant population, alone,
groups. Language,
legal status, and
means that the requirements
education are
for improving access vary
also potential
impediments. Many
tremendously across immigrant
financial institutions
groups.”
are working hard to
develop innovative
outreach strategies
and products to address these challenges, and we will
hear from some leaders in this area later this afternoon.

influences participation in other parts. Second, the
scope of the agenda should help us to identify common
themes and best practices that can be applied to improve
immigrant financial access across a wide range of
financial services.
Over the next two days, we’ll hear from a number of
business and policy leaders who are on the front lines,
confronting the issue of immigrant financial access. To
highlight a few of the leaders who will join us:
Our keynote speakers at lunch today, former Governor of
Illinois Jim Edgar and author Tamar Jacoby, will give you
insights on immigration policy and financial access from
both a Midwest and a national perspective.
Tonight, we will hear from Henry Cisneros, former
secretary of HUD. He will talk about American CityVista,
his current venture to construct affordable housing for
immigrants and other historically underserved residents in
America’s cities.
Tomorrow, we will be joined by Ben Bernanke, a member
of the Federal Reserve Board of Governors and one of my
colleagues on the Federal Open Market Committee.
In closing, I’d just like to say that I hope that this
conference will inspire actions that move us closer to
realizing the enormous opportunities represented by
improving immigrant financial access.
Again, thank you for joining us. I look forward to hearing
your insights.

Efforts to improve financial access for immigrants have
received wide-spread support. When the Treasury
Department was deciding to give banks the option to
accept identification issued by foreign governments,
groups like financial institutions, immigrant advocate
groups, law enforcement and regulatory agencies,
community development organizations, and both
political parties all submitted formal comments in favor
of the decision. As you can tell from the title of today’s
conference, “Learning from Diverse Perspectives,” one
of our goals is to incorporate a broad range of viewpoints
on this issue. These diverse perspectives are apparent as
you look around you at the panelists and the conference
participants assembled here today.
Also, you will notice that the conference sessions
cover a broad spectrum of the financial market place:
traditional banking services, housing and homeownership,
entrepreneurship, and remittances. The agenda is
deliberately broad for two reasons. First, research shows
that participation in one part of the financial marketplace

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Setting the Scene

Session One - Setting the Scene
Moderator – Pia Orrenius, Senior Economist, Federal Reserve Bank of Dallas

Session One

Financial Access for Immigrants: Learning from Diverse Perspectives

The first of seven conference sessions featured
presentations of two research papers and the perspectives
of two organizations with strong interest in immigrant
financial assimilation. Audrey Singer of the Brookings
Institution Metropolitan Policy Program (formerly the
Center on Urban and Metropolitan Policy) presented
her paper on demographic trends over the last century
and emerging immigrant gateways. Anna Paulson, a
senior economist with the Federal Reserve Bank of
Chicago, presented research she had conducted with Una
Okonkwo Osili of Indiana University-Purdue University at
Indianapolis on immigrant financial market participation.
James Ballentine, director of Housing, Community,
and Economic Development for the American Bankers
Association (ABA), discussed the importance of building

Figure 1: Percent Change in the Foreign-Born Population by State for
1990-2000

institutional infrastructure to market financial services
successfully to immigrants. Roberto Suro, executive
director of the Pew Hispanic Center, discussed immigrant
assimilation; factors, such as home country characteristics
and perceptions of financial institutions, to consider in
serving the immigrant market; and the role of regulation
in encouraging immigrant financial market participation.

AUDREY SINGER
Brookings Institution
Audrey Singer is a sociologist and demographer with
the Brookings Institution Metropolitan Policy Program.
Singer’s paper, The Rise of New Immigrant Gateways,
reveals how the significant inflows of immigrants in recent
decades have begun to rearrange America’s immigration
map, adding new communities of settlement to well
established destinations. Metropolitan areas across the
United States during the second half of the twentieth
century decentralized, and their suburban areas grew.
Concurrently, there was a large, sustained immigration
of people from very diverse backgrounds that continues
today. These two processes together have produced
significant new settlement patterns that are affecting
everyday life in many parts of the country. Singer noted
that the confluence of factors suggests that the country
will confront, “…major social, cultural, and political change
during the coming decades.”
Singer’s research focuses in particular on more recent
and dramatic immigration trends. In the decade from 1990
to 2000, more immigration to the United States occurred
than in any previous decade. The foreign-born population
grew by 11.3 million or 57.4 percent, bringing the total from
nearly 20 million in 1990 to 31.1 million in 2000.
The six primary states of settlement for immigrants during
the second half of the twentieth century were California,

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October 2004

century from Europeans to Latinos as the predominant
immigrant group, the gateway cities have also changed,
she noted. Continuous immigrant gateways include
New York and Chicago, which had a large proportion of
immigrants throughout the century, while cities such as
Los Angeles, Miami, Houston, and San Jose emerged as
predominant gateway cities after World War II.

Figure 2: Number of Foreign-Born and Share of Population,
United States, 1900-2000

Cites such as Washington, D.C., Atlanta, Dallas, and Fort
Worth comprise what Singer terms emerging gateways,
places that did not experience a high degree of immigrant
settlement until the latter part of the twentieth century.
Singer also identified a category she termed, “re-emerging
gateways.”1 As the term implies, these are cities that
experienced high rates of immigrant settlement in the
early years of the twentieth century, lower settlement
rates as other gateways emerged, and more recently a
resurgence in immigrant settlement.

Texas, New York, New Jersey, Illinois, and Florida. Twothirds of all immigrants lived in these six states in 2000.
Figure 1 illustrates the trends with respect to established
and emerging immigrant destinations. Whereas Texas,
Illinois, and Florida still have immigrant growth rates that
exceed the national average, California, New York, and
New Jersey now lag the national average growth rate,
and the Southeast has emerged as a new immigrant
destination. Thriving job markets in southeastern states,
particularly in the construction services and technology
sectors, are driving growth as both native- and foreignborn people move from within the United States and new
immigrants are attracted directly from abroad.
Singer illustrated the twentieth century immigration
patterns to the United States graphically, showing the
ebbs and flows during different decades. Figure 2
depicts the high level of immigration in the early part of
the twentieth century and an overall decline in the share
of foreign-born population from the beginning to the
end of the century, despite a sharp numeric increase in
foreign-born residents. A slower period of migration during
the middle of the century in combination with the postWorld War II baby boom served to dilute the immigrant
population. The trend in the latter part of the century
that continues today is that of a slower growing nativeborn population and increasing immigration. The other
significant change Singer noted was the shift in source
countries from Europe in the early part of the century to
Latin America, the Caribbean, Asia, and Africa in the latter
part of the century.
Cities such as Philadelphia, Detroit, and Boston attracted
many immigrants at the turn of the last century (1900),
with immigrants comprising up to one-third or more of the
population at the time. With the abrupt shift late in the last

Singer closed by noting the need to understand the
diversity in the immigration history of U.S. regions to
address financial services needs among immigrants.
Gaining an understanding of changing immigration and
settlement patterns is a logical first step in this process.

ANNA PAULSON
Federal Reserve Bank of Chicago
Anna Paulson is the senior economist and manager of
the Consumer Issues Research group in the Consumer
and Community Affairs division of the Federal Reserve
Bank of Chicago. Paulson discussed research she has
conducted with Una Okonkwo Osili of Indiana UniversityPurdue University at Indianapolis. Specifically, their
research focuses on how the quality of country of origin
institutions shape financial choices that immigrants make
once in the United States.2
Paulson pointed out that participation in the financial
system is, “…an important way for us to measure the
success of individual immigrants in the United States,
and it’s also a way to measure…our success as a society
in incorporating immigrants and benefiting from the
aspirations that brought them here.” She discussed the
importance of financial market participation to enable
households to cope with income uncertainty, access credit
in an emergency at reasonable cost, and obtain credit
for customary purposes such as purchasing a car or a
home. Paulson noted other fundamental considerations:
the behaviors of first generation immigrants can affect
the second generation – children learn from the financial
habits of their parents – and clusters of households that
keep large amounts of cash on hand can unnecessarily
give rise to crime.
Paulson presented data from the Survey on Income and
Program Participation from 1996 to 2000 (Figure 3).

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Figure 3: Financial Market Participation – Survey on Income
and Program Participation, 1996-2000

lessons absorbed in schools or at home in the country of
origin. Immigrants who arrive in the United States before
they are 16 years old exhibit financial market behavior
closer to that of native born.
Paulson addressed the question of how long the home
country institutional orientation persists in influencing
financial decisions. The effect is very persistent: “Only
immigrants who have lived in the United States for 32
years or more are unaffected by their home country
institutions,” she said.

These data essentially showed that immigrants as a group
are less likely to own bank accounts, stock, or a home.
She identified three related questions that her research
seeks to answer:

Are migrants from countries with “better”

JAMES BALLENTINE
American Bankers Association

institutions more likely to participate in U.S.
financial markets?

How long do you have to experience a set of
institutions for them to influence your behavior?

How persistent are the effects of the home
country institutions?
Institutional quality3 refers to a summary measure that
captures the capacity of a country’s institutions to protect
private property and provide incentives for investment. On
a scale of one to ten, the median score is 7.07. Countries
such as Switzerland and Luxembourg score perfect tens,
and the United States is close behind at 9.98. The lowest
scoring country is Iraq at 1.81. Countries from which many
immigrants to the United States originate score above the
median: Mexico – 7.51; China – 7.79; and Canada – 9.79.
Paulson and Osili looked in particular at two aspects
of financial market participation: owning a savings
account and stock ownership. To illustrate the impact
of home country institutional quality, they demonstrated
that immigrants originating from El Salvador, whose
institutional quality rating is 5.07, would have stock market
participation that was 5.25 percentage points higher and
savings account ownership that was 4.75 percentage
points higher if the institutional quality rating matched that
of Mexico at 7.51. Paulson stated that the impact of home
country institutional quality on behavior once in the United
States also depends on age at migration. Immigrants
who arrive in the United States after the age of 16 years
exhibit behaviors similar to adult immigrants. Since
teenagers do not typically have bank or credit accounts,
the orientation to home country institutions may stem from

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Paulson closed noting once again that home country
influences are diverse and that to some extent financial
education, products, services, and outreach strategies
could be more sensitized to differences in immigrants’
home country experiences. “Achieving financial access
for many immigrants involves challenging powerful
lessons that are absorbed early in life,” Paulson said, but
“immigrants have signaled their readiness to absorb new
lessons about institutions here in the United States simply
by their decision to move.”

James Ballentine is the director of Housing, Community,
and Economic Development for the ABA. He discussed
the opportunities for banking institutions to reach the
immigrant market, cautioning that, “You must implement
a strategic business plan, not a CRA (Community
Reinvestment Act) plan; this is not about community
reinvestment.” Ballentine referenced the Fannie Mae
Foundation/Georgetown University Institute for the study
of International Migration joint publication, Reaching
the Immigrant Market: Creating Home Ownership
Opportunities for New Americans.4 The ABA has been
conducting training in conjunction with other Federal
Reserve Banks using the publication as a guide; the
training program targets lenders attempting to reach
immigrant markets with financial services.
Ballentine discussed the importance of personal
relationships and personal service with customers, and the
need to understand characteristics valued by the target
immigrant group. He mentioned a Seattle bank where an
Asian lending officer changed jobs but remained in the
same community. Many of the customers of the bank who
had come to know and trust him became customers of
the new bank because the personal relationship was more
important than the institutional relationship.
Ballentine discussed institutional support and capacity.
“You cannot translate materials into Spanish or any other
language, [then] someone calls the institution and lo and
behold no one there speaks that language; it must be a
company-wide strategy.” Further, he noted that English

October 2004

advertising slogans often translate poorly into other
languages, again underscoring the need for fundamental
institutional support. Ballentine closed emphasizing the
need for additional staff training, careful market research,
and a willingness to explore new or modified products to
serve the immigrant market effectively.

ROBERTO SURO
Pew Hispanic Center
Roberto Suro is the executive director of the Pew Hispanic
Center. He began his remarks pointing out that Chicago is
an, “…ideal place to be having this discussion.” Chicago,
he noted, was one of the best “…laboratories for the
process of assimilation for the last wave of immigration.”
Changes in immigration law, the Great Depression,
World War II, and other factors gave rise to a hiatus in
immigration from the mid 1920s to the late 1960s after
continuous immigration to the United States prior to
1925. The country is now experiencing an unprecedented
wave of immigration and Suro stated that the process of
assimilation “…affects not just the newcomers, but the
hosts as well, and so we’re talking about all the societal
as well as the demographic changes that take place when
large numbers of immigrants arrive.”
Suro related his experience as a journalist in Chicago in
the mid 1970s during the first Daley administration, when
he covered the city council. He shared an anecdote where,
in an exchange between Mayor Daley and a councilman,
Daley remarked on his Irish heritage. Not meant in
a casual or facetious way, Suro said Daley’s remark,
“…implied a series of beliefs, associations of networks
that have profound importance.” Suro used the anecdote
to illustrate the point that assimilation is a long process
and the current wave of immigration is at a relatively early
stage. Suro also ventured, “Ethnic affirmation is part of the
process of assimilation, that ability to form a community
of interest is one of the key factors in civic engagement…
The formation of bonds among people with common
nationalities, of common language groups is in itself one
of the ways people become part of a new society.”

stated that it is important to reach immigrants while they
are still fairly new to U.S. society. Accordingly, assimilation,
ethnic affirmation, and an array of other societal
orientation processes are occurring simultaneously.
Aversion to common practices in the U.S. financial system,
home country orientations with respect to financial
institutions, and the trend toward on-line banking and
financial services present further challenges. A person
opening a bank account for the first time in a new country,
who may be the first in their family to open a bank
account, is unlikely to embrace the idea of opening the
account through a computer. Indeed, the need for a human
interaction, with someone who speaks the customer’s
native language, is more likely required to encourage that
person to open an account.
In closing, Suro discussed the importance of the
regulatory environment. He cited Federal Reserve
Chairman Alan Greenspan’s frequent assertion that the
two pillars of the U.S. economy are strict respect for
property rights and market sensitive regulation. The state
has a vested interest in promoting property ownership and
access to financial services among immigrants as part
of a broader array of goals including English proficiency,
citizenship, and overall economic success, he stated.
Notes
1 The paper identifies six classifications of immigrant
gateways and is available at www.brookings.edu/urban/
publications/20040301_gateways.htm.
2 Ms. Paulson’s slide presentation from the conference is
available at www.chicagofed.org/news_and_conferences/
conferences_and_events/files/financial_access_for_
immigrants_paulson.pdf.
3 Anna Paulson and Una Okonkwo Osili, 2004, Institutional
Quality and Financial Market Development: Evidence from
International Migrants in the U.S., Chicago: Federal Reserve
Bank of Chicago, manuscript.
4 The report Reaching the Immigrant Market: Creating
Homeownership Opportunities for New Americans, can be
accessed at www.fanniemaefoundation.org/programs/pdf/rep_
immigrant.pdf.

Suro noted that a key component to assimilation in U.S.
society is the use of financial markets and financial
services. He compared gaining familiarity with our
complex financial system to acquiring a new language. A
key distinction between the last wave of immigration and
the current one is the wide range of laws enacted since
to facilitate homeownership and savings from which new
immigrants can benefit. Many of these changes occurred
while the rate of immigration was low.
Suro identified some of the challenges facing financial
institutions seeking to reach recent immigrants. First, he

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Financial Education and Traditional Financial Services
Moderator - Michael Berry, Manager, Emerging Consumer and Compliance Issues Unit,
Federal Reserve Bank of Chicago
Session Two

Financial Access for Immigrants: Learning from Diverse Perspectives

The second session of the conference addressed financial
education and factors impacting the decision to own a
bank account, the ramifications of U.S. tax code, and
highlighted strategies of one small and one large banking
institution to reach immigrant markets with financial
services. Sherrie Rhine, a senior economist with the
Federal Reserve Bank of New York, presented a paper
coauthored with William Greene of New York University
considering the decision by immigrants of whether or not
to hold bank (transaction) accounts. Nina Olson, national
taxpayer advocate for the Internal Revenue Service
(IRS), discussed the important role the tax code has on
financial access and financial literacy for immigrants in
achieving long-term financial success in U.S. society.
James Maloney, chairman of Mitchell Bank in Milwaukee,
discussed building community relationships to reach a
growing ethnic market, a matter of business survival – and
ultimate success – for the community bank he leads.
Alice Perez, vice president and Hispanic market manager
for U.S. Bank, discussed, in a large bank context, serving
growing Hispanic populations with financial services
and the nuanced strategies in marketing, staffing, and
product development that branches serving diverse ethnic
populations must undertake.

SHERRIE RHINE
Federal Reserve Bank of New York
Sherrie Rhine of the Federal Reserve Bank of New York
presented a paper she co-authored with William Greene
of New York University: The Bank Status Decision of
the Foreign Born. The paper addresses several specific
questions about the decision to own a transaction account.
Rhine noted that the Survey of Consumer Finances
showed that 9.1 percent of all U.S. households do not
hold a checking or savings account. Among non-White

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Hispanic households, the ratio is 21.8 percent and among
White, non-Hispanic households, 5.1 percent. She referred
to the consumer protections afforded to households that
own an account versus households that pay bills with cash
and linked ownership of a transaction account with longterm asset accumulation. “We know that a relationship
with a financial institution is a method by which consumers
can gain better information, and more timely information,
to make sound financial decisions. We know that
communities with well-functioning financial markets are
more resilient against economic downturns and can take
better advantage of economic growth as well,” she said.
With respect to account ownership, Rhine stated that the
specific purpose of the research was to identify, “…those
socioeconomic and demographic characteristics that
influence that decision.” She noted in addition that cultural
orientations and preferences may well influence decisions
regarding financial services. The research controls for,
“…cross-period, cross-time correlations of what are
unobserved individual effects,” she said. Examples of
these effects include family specific characteristics
or home country attributes. The broad demographic
categories that tend not to hold bank accounts include:
households that have lower education attainment, are
younger, low-income, and a member of a minority group.
Households that do tend to hold bank accounts include
those that are married, employed, and have larger family
size and relatively greater net worth.
Rhine and Greene track these characteristics across
four immigrant groups: Mexicans, other Latin Americans,
Europeans, and Asians. Among Mexican immigrants, 53
percent do not hold transaction accounts; among other
Latin Americans, 37 percent do not; among Asians, 20
percent do not; and among Europeans, 17 percent do not
hold transaction accounts.
Rhine mentioned the importance of programs like
the Earned Income Tax Credit (EITC) and Individual

Development Account (IDA) in influencing the decision
among immigrant households to hold an account and
ultimately influence wealth accumulation. Broadly, the
EITC is a public benefit administered through the tax code
to income-qualified households; the IDA program offers
institutionally administered matching funds to savers
meeting certain income requirements. Often, qualifying
households access their EITC by visiting volunteer
income tax assistance (VITA – an IRS program that
helps cities and communities to organize volunteer tax
return preparers) sites where financial institutions market
low-cost transaction accounts and products. Individual
deposit accounts can attract potential savers to financial
institutions through the offer of the matching incentive.
In closing, Rhine discussed stored value cards as a means
to link immigrant households to financial institutions. The
cards address in part the danger of carrying or storing
large amounts of cash, though loss of the card could lead
to a short-term liquidity crisis while the card is cancelled
and replaced. Rhine also noted that the level of consumer
protections afforded holders of these cards is not yet
clear. Moreover, stored value products may not lead to
near-term positive outcomes with respect to establishing
a credit history or accumulating wealth. Rhine used this
example to highlight the rapid evolution of U.S. financial
markets and products stating, “These markets are
perpetually changing, which only exacerbates the need for
financial education, and I think that that is very important;
it certainly is to the Federal Reserve System, and we really
need to continue those efforts.”

NINA OLSON
Internal Revenue Service
Nina Olson, national taxpayer advocate for the IRS
discussed the implications of the tax code on financial
access and financial literacy for immigrants, pointing out
that “Taxes are a primary, if not the first interaction that
these taxpayers have with the U.S. financial system.”
Olson stated that an understanding of the tax system is
fundamental to long-term financial success in U.S. society.
Mistakes in the early stages of an immigrant’s tenure in
the United States can have significant impact on his or
her ability to participate in other aspects of the financial
system. As an example, she discussed the W-4 form
that every salaried worker must fill out prior to beginning
work. That form requires a Social Security number. It
also requires the worker to set a withholding level, which
has ramifications if it set too high or too low. Accrued
interest and penalties on tax liabilities can be financially
devastating. The tax return is an important document in
applying for credit, particularly for a mortgage or student
loan or student financial aid. Tax returns are also important
to the legal immigration process. For individuals who have

lived in the United States without proper documentation
to take advantage of any kind of amnesty program, or
when in due course their request for citizenship reaches
the critical stage, copies of tax returns “show good moral
character.” Similarly, a person living in the United States
who wants to sponsor a family member or friend from the
home country must show the financial means to do so.
Preparation of the tax return further serves as an annual
financial checkup for the taxpayer, a building block to
financial literacy.
Olson also pointed that taxes are a major savings vehicle
for the unbanked. Through over-withholding, the tax
system provides a method of forced savings. But she
noted that many of the participants in the tax preparation
industry that serve the unbanked are unregulated or
poorly regulated. The result is that check-cashers,
pawnbrokers, car dealers, and other seemingly poorly
suited organizations and individuals prepare tax returns
for the unbanked. Some of the organizations that prepare
taxes offer refund anticipation loans that often have triple
digit annual percentage rates, but represent a fast way for
the taxpayer to access his or her refund or earned income
credit (a benefit not presently available to non-citizens).
She also mentioned the VITA sites that prepare taxes free
of charge with volunteer staff.1 The receipt of the refund
represents an opportunity to open a bank account and
begin a long-term savings regimen, but without financial
literacy, the impetus to open the account is not there.
Olson discussed home country orientation, where the tax
code and related practices may differ notably from U.S.
norms. Language also represents a barrier in many cases,
she added, and even absent the necessary expertise
locally, immigrants may be highly reluctant to go outside
of their community for assistance. Olson stated that
immigrants may even have difficulty putting in context a
request from the IRS, not understanding the urgency to
respond, or knowing that IRS interpreters offer counsel in
69 languages.
Olson touched on the “…profound conflict between
immigration law in the United States and tax law that
compounds these challenges.” There are two tests
that require immigrants to file based on their worldwide
income. Anyone holding a green card is documented and
required to file a tax return on all income. The second is
the substantial presence test: essentially anyone holding
a job, regardless of immigration status, is required to file a
return. These individuals by definition do not have Social
Security numbers, but can use individual tax identification
numbers (ITINs), for the purpose of filing a tax return.
An apparent conundrum with respect to workers that fall
into the latter category is that all salaried workers must
provide a Social Security number to complete a W-4 form
in order to work in the United States. It is well documented
that many immigrant workers have used, illegally, Social

Profitwise News and Views Special Edition

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9

Security numbers of others in order to obtain work.
However, Olson noted that it is the official policy of the
IRS to encourage wage earners who have used the Social
Security numbers of others, which is technically identity
theft, to file a return using an ITIN anyway, stating, “We
administer the tax laws, not the immigration laws.”
Olson also touched on the special needs of immigrant
taxpayers with respect to language. As the founder of the
first low-income taxpayer clinic in the country not affiliated
with an academic institution, she had incorporated an
ESL (English as a second language) outreach program.
Congress in 1998 created a grant program to fund similar
efforts – there are presently 14 such clinics nationwide
– which Olson now administers. An underlying tenet of
the grant program, which has few restrictions, is that
“…undocumented
workers in this country
“We administer the tax laws, contribute to our
economy, pay taxes, and
not the immigration laws.”
need representation and
education,” Olson stated.
Nina Olson
Olson also noted that
there are bills before
Congress that link tax
preparation with financial literacy.
Olson discussed changes to the procedures for obtaining
and using an ITIN. The key change is that applicants
for an ITIN must prove that the number will be used for
tax administration purposes; they must also provide a
completed tax return with the W-7 application for an ITIN.
The IRS has issued notices to state government agencies
to ensure that the ITIN is not accepted as an identification
number, as the identity verification process at IRS upon
application for an ITIN is not extensive. Olson closed by
challenging the financial industry representatives in the
audience to think creatively about reaching undocumented
immigrants, who are often part of a household that has
both documented and undocumented members, with
financial services, and to facilitate financial literacy.

is still concentrated in urban areas. He discussed the
need to build relationships with social, religious, and civic
institutions that have broad membership and acceptance
in the immigrant community as a key method to gain trust
and acceptance for the bank.
Mitchell Bank has a full-service branch known as Cardinal
Bank located in South Division High School in Milwaukee.
A unique aspect of the branch, which is named for
the school’s mascot, is that it is run by students at the
school. They play a key role in fostering the financial
literacy of the community by bringing their parents to the
bank to, initially,
cash paychecks.
The parents are
“This is not about CRA; this
introduced to
is a real opportunity to tap a
other financial
services, as many
market…and it is the future.”
of the students
are bilingual. “We
James Maloney
use the students
as teachers for
their parents because we are dealing with such a large
undocumented population; they do seem to be willing to
extend their knowledge to their parents,” Maloney said.
Maloney noted that customer activity at the main branch
increased fourfold after the opening of the high school
branch. “Had we not done this, we probably would not
have survived as a bank,” he said. Maloney closed by
reiterating a point made by James Ballentine of the
American Bankers Association. “This is not about [the]
CRA (Community Reinvestment Act); this is a real
opportunity to tap a market…and it is the future.”

JAMES MALONEY
Mitchell Bank
James Maloney is president and CEO of Mitchell Bank in
Milwaukee. The bank is located in a predominantly Latino
and largely immigrant community and has roughly $80
million in assets.2
Maloney began his presentation by noting that many
characteristics are common to Latino immigrant
communities – low education attainment, low-income
rates, undercounted population, and low homeownership
rates. In Milwaukee, unlike Chicago, the Latino population

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Profitwise News and Views Special Edition

Mitchell Bank’s Cardinal Branch in South Division High School, Milwaukee, Wisconsin.

October 2004

ALICE PEREZ
U.S. Bank
Alice Perez is a vice president and the Hispanic market
manager for U.S. Bank. She also raised the point
that marketing to immigrant populations is not a CRA
opportunity – it is a business opportunity. Formerly,
the work Perez headed up at U.S. Bank was called the
Hispanic Banking Initiative. It is no longer considered an
initiative and is now called the Hispanic Banking Segment.
The advertising slogan is “Usted tiene amigos en U.S.
Bank,” which translates into, “You have a friend at U.S.
Bank.” U.S. Bank is headquartered in Minneapolis and
has offices in 24 states and assets of $195 billion.
U.S. Bank launched the initiative in June 2001; it involved
300 branches at that time. Presently, more than 500
branches are involved in the Hispanic Banking Segment.
Perez noted the bank’s commitment to staffing branches
to in part reflect the ethnic makeup of the community
being served. She stated that the bank makes an effort
to promote from within, affording career growth for locally
hired staff.
Perez also noted the critical need for bank branches
to participate in the civic and social segments of the
communities served. This outreach serves as a means
to attract financial services customers; however, Perez
stated that these relationships are also valuable in
determining community credit and product needs and
tailoring marketing campaigns to the values and customs
of local residents.
In addressing the
Hispanic market,
Perez noted the bank’s
Perez noted the
commitment to staffing branches bank segments
its marketing
to in part reflect the ethnic
by tenure in the
makeup of the community being
United States.
served. She stated that the bank Recent immigrants
require much more
makes an effort to promote from hands-on attention
within, affording career growth for and often speak
no English. Second
locally hired staff.
generations of
families very often
have transaction
accounts but have lower homeownership rates and also
represent a potential market for investment products. The
third tier is essentially Hispanics who are fully integrated.
However, Perez noted that the third tier may still represent
a market opportunity for investment products, as she
mentioned a tendency for Hispanics not to gravitate
readily to securities.

In closing, Perez discussed some of the partnerships the
bank has formed to address particular types of services. A
partnership with the U.S. Hispanic Chamber of Commerce
called “¡Capital!” has the goal of lending $1 billion to small
businesses in high growth Hispanic markets nationwide.
A partnership with L@ Red de la Gente3 helps to promote
wealth building both among U.S. immigrants and Mexicans
still living in Mexico. Combined with a very low-cost
remittance service, this program provides incentives for
recipients of remittances in Mexico to save and invest.
Notes
1 For more information on the VITA program, refund anticipation
loans, and the EITC, see “An Informed Discussion of the
Earned Income Tax Credit,” Profitwise, Winter 2003, at www.
chicagofed.org/publications/profitwise/2003/pwwinter03.pdf.
2 The panel included representatives from a small (assets less
than $250 million) and a large bank.
3 L@Red de la Gente is itself an alliance of the National Savings
and Financial Services Bank (known in Spanish as BANSEFI)
and the Association for Popular Colinias (ACP) in Mexico. That
alliance was formed to promote broader bank usage, particularly
in rural areas of Mexico, and more efficient distribution of certain
government benefits. For more information, see Profitwise
News and Views, December 2003, at www.chicagofed.org/
community_development/12_2003_profitwise_news_and_
views_page4.cfm.

Profitwise News and Views Special Edition

October 2004

11

Keynote Speaker
Remarks by Jim Edgar
Distinguished Fellow, Institute for Goverment and Public Affairs,
University of Illinois, Urbana-Champaign and Former Governor of Illinois

I first of all want to compliment the Federal Reserve Bank
of Chicago and all the cosponsors of this event. I think
this is an extremely important and very timely session,
but I have to note that they are pretty tough task masters.
I looked over the agenda. You have a full agenda, you
have two speakers at lunch. Now I think that is more
than you should be expected to endure, and I know that
my following speaker will be much more interesting than
me and much more knowledgeable, so I’ll try to keep my
remarks brief. Plus, as was mentioned, I’m at the University
of Illinois and I’ve got to drive a hundred and fifty miles
and teach a class by 4:30, and I no longer have any kind
of immunity from the State Police, so you can be assured
I won’t be here too long. Also let me just say I’ve been
involved with a lot of conferences in my past and I was
very impressed at such a large gathering in this room
and the fact you’re still here. It is a beautiful day outside,
and the Cubs and the Sox are both playing in town, but
somebody pointed out you were threatened that if you
ever leave here you can’t ever get back in, so this is a good
place to have a conference.
I, as a student many years ago, majored in history, and I
always had a tendency to look at things from a historical
perspective. I’m a great believer that you can plan for
the future a lot better if you understand the past, and if
you look at the past in America, we are truly a nation of
immigrants. That’s what I think sets America apart from
every other nation on this globe and I think that’s our
strength. In fact, I have to say that I used to think this
was kind of in our past. In the eight years I was Governor
during the 90s in Illinois I realized how wrong I was – that
immigration is a factor today and even maybe greater than
in the past. The 90s were a time of huge immigration here
in Illinois and throughout the nation. In fact, it rivaled the
turn of the century, which most of us think was the peak
of immigration, and as a result of that immigration, not only
because of the immigration but the impact it had on our
society, we are undergoing huge changes. There is major

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Profitwise News and Views Special Edition

October 2004

change in our demographics and in our culture as a result
to a great extent of this huge influx of new immigration.
Also, I think there is awareness now that we need to take
a look at our immigration policy at this point in our history
when there is, I think, awareness on the part of many that
we need to look at where we are in immigration, where we
should go, and what should be our policies. Because of
security and economic concern, there is the danger that
our immigration might be directed toward more restriction,
which I think would be very unfortunate. We need a
comprehensive and effective set of national immigration
policies that addresses security and economic and social
concerns, but we also need to take into consideration how
immigration really benefits most of those concerns and
not in any way to put walls up or to divide communities
because I think that would be very detrimental to the
future of this country.
So as a result of this need to re-examine our immigration
policy, the Chicago Council on Foreign Relations
established the task force of which I have the honor of
cochairing to take a look at this issue. In fact, there are
other members of the task force here in the audience and
will probably be with you throughout the session. They
don’t have to drive a hundred and fifty miles and two and a
half hours to get to a class. But one of the reasons that the
Chicago Council thought that we needed this Task Force
was, besides the fact this is an extremely timely issue that
has huge implications both internally and externally, is that
often when these types of discussions occur, there’s a
tendency to think that all the wisdom is either on the East
Coast or the West Coast and the Heartland doesn’t really
know or doesn’t really care. But in fact again, if you look at
history, the Midwest has been a center where many of the
immigrants who have come to our shores have settled, and
that continues today. In fact, again, many of you are from
the Midwest, you know the history. In the 1800s, many
came from Germany and Poland and settled in our cities
and our smaller communities. At the turn of the century

many came from southern Europe and that’s continued
right up to today where we see many from Asia, from
South America, Central America, continue to come here to
the center of America, the Heartland. In fact, a Brookings
Institution Report as recent as this year describes Chicago
as a “continuous gateway, a long established destination
for immigration that also continues to receive a large
number of new immigrants.” So we believe the Midwest
has a lot at stake in this discussion, and we also think
the Midwest has a lot to offer in this discussion, and so
the Task Force is made up of 37 distinguished leaders
from a variety of backgrounds throughout the Midwest.
We’ve been meeting since last fall. We’ve held a series
of meetings and we have examined many of the topics
that apply to immigration, some that you probably would
expect: the impact
of immigration on
“So while it’s ironic that many
the national and
regional economies
people worry about immigration
– and I want to talk
being a detriment to our economy, a little bit about
that in a minute; the
in fact immigration, recent
security dimension
immigration, as I think it has
of immigration
which has been a
historically, has been a major
very timely issue;
factor in our economic success,
also the issue of
and as we look to the future that’s undocumented
immigrants which
not going to change.”
I think probably,
putting on my old
political hat, is
probably the most difficult issue and perhaps one of the
most important issues we need to deal with sooner than
later.
The Task Force is now completing its findings. We’re in the
process of finalizing our report and we will be submitting
that report to policy makers not only at the national level
– which I think everyone understands that the federal
government plays a major role in immigration – but also, as
was commented in the last panel discussion, we recognize
there’s a role for state and local government in dealing
with immigration issues, and we’ll have recommendations
for what we think state and local governments can do as
well as the federal government.
We truly believe that the Midwest, when it comes to
immigration and many other issues, is really a microcosm
for the nation, and we think our thoughts are applicable
not only to the Midwest but throughout the nation. Now
one of the issues that we will talk about in our report
and particularly that I think are pertinent to what you’re
talking about today and tomorrow is the demographics. If
you look at America’s population today, you see that the
immigrant population is the fastest growing segment of

our population by far. Thirty-five percent of U.S population
growth came from immigrants, but even more important
to me is that 40 percent of our new labor force came
from immigrants; meaning that our work force, where the
growth has been in our work forces, has been particularly
among the immigrants, and as we look to the future that’s
going to be even more crucial.
During the last decade the Urban Institute said that one
out of every nine U.S. residents was foreign-born. One
out of seven workers was foreign-born and one out of
five students in school was foreign-born. I think that
underscores anyone who in a public policy position says
that immigration is a major factor when we’re looking
at the future of this nation and trying to determine how
we’re going to meet some of the challenges we face.
Now I think everyone recognized that the 1990s was a
very good decade for our economy. What I don’t think
a lot of Americans appreciate is one of the reasons we
had the success in the 90s was because of the number
of immigrants coming to America. They really fueled that
economic boom and those are not just the words of my
thoughts; those are the findings of the Northeastern
University Center for Labor Market Studies, which found
that immigrants were a major factor in the boom of the
90s; and also as commented by Fed Chairman Alan
Greenspan. So while it’s ironic that many people worry
about immigration being a detriment to our economy,
in fact immigration, recent immigration, as I think it has
historically, has been a major factor in our economic
success, and as we look to the future that’s not going
to change. We know that in the decade of the 90s
immigration had a major impact. It’s going to continue to
have a major impact and I think a positive impact if it’s
handled properly.
The number of available jobs projected in the next decade,
or by 2010, is going to be roughly 22 million, but current
population projections are only a 17 million increase. So
there will be 22 million more jobs where we only have
17 million people to put in those jobs. That underscores
again, the importance why we need, from an economic
point of view, to look favorably on immigration and not
look upon it as a detriment. Also, one of the things that
the experts tell us is the types of jobs that will become
available between now and 2010 are jobs that immigrants
are probably going be more willing to take on than those
who have been in America for several generations. Fiftyeight percent of the total job growth will arise in sections
that require short work-related training while postsecondary degrees will account for only 13 percent of the
increase. So again we know from recent history, as we
know from long-term history, that immigrants are willing to
take on jobs that a lot of Americans don’t want to do. Now
we also know they take on those jobs and move up the
economic ladder, which to me is what America’s all about.

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So as we look to the future and we talk about immigration
policy in this nation, anyone I think who’s really concerned
about America’s economy continuing to grow has to view
a positive immigration policy as a necessity and that’s
one of the things that I think we have found in our Task
Force, that this is extremely important if we’re going to see
our economy continue to grow as we move through the
twenty-first century.
I don’t have to tell anyone in this room, I think to some
extent I’m preaching to the choir when I talk about
the positive implications of immigration. There are
unfortunately some who do not view immigration in what I
would consider a positive light. There are some who want
to be restrictive, which I think would be very detrimental
to this nation. It’s critical though that, as we debate our
immigration policy,
we speak up and
“Economic integration with other make sure the
nations will continue and increase people understand
that our economy
pressure for greater regional
depends on
and
labor mobility, another issue that immigration
that dependency
gets people pretty excited, some- will increase over
Economic
times very hostile to the question time.
integration with
other nations
of immigration.”
will continue and
increase pressure
for greater
regional labor mobility, another issue that gets people
pretty excited, sometimes very hostile to the question of
immigration.

potential. They need to be successfully integrated into
our society, and what you’re about to hear over the next
two days is an important part of seeing that integration
is successful. Now if this country does not face up to
the need for enlightened immigration policy, let me just
say from a political point of view, that’s not always that
easy, much easier in this room probably to agree on
an immigration policy than on a national level, but it’s
critical. If we don’t face up to this need then we will see
our population decline, we’ll see unfulfilled jobs, we’ll see
slower growth and I think perhaps, most devastating of all,
we’ll see increasing divided communities in our nation.
Now I’m optimistic, I’m hopeful that our American policy
makers as well as our American citizens won’t let that
happen. And with your help, we can be successful in
meeting that challenge, and making sure that we take
advantage of a great opportunity this nation has had
throughout our history and will continue to have as we
welcome millions of new people to our shores and see
that in a very short time they’re no longer viewed as ‘this’
nationality or ‘that’ nationality but they truly are part of the
American dream.
Thank you very much.

The key for the United States, and what we hope to
contribute from our report, is that the United States will
need to determine the right balance between having
relatively open borders and how we protect our home
land from attack. The United States needs to develop
immigration integration policies that address the need
for fully incorporating immigrants into American lives,
and that’s what’s so important about this conference.
You’re talking about one of the most important facets
of successful integration into our society; and that’s
making sure that immigrants have access to our financial
institutions, that they’re able to protect the hard earned
money that they’ve made and see that money grow, and
see that they have the opportunity that other Americans
have, to buy homes and do the things that we do in this
nation, and enjoy the fruits of our labor. So they gave me
a list of things I could tell you what you ought to do, but
I don’t think I need to tell you. I think you people know
much more about that aspect than I do. But let me just say
I think it’s extremely important for our immigrants to be
successful and for us as a country to realize their fullest

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October 2004

Keynote Speaker

Remarks by Tamar Jacoby
Senior Fellow, Manhattan Institute

Thank you, Charles, and thank you also to all the
institutions that have played a role in sponsoring this
conference for giving me the opportunity to speak to
you today. It’s a special pleasure for me to be here in this
room because I spend a lot of my time traveling around
the country making the case for immigration reform,
and mostly that means talking to audiences that don’t
understand why immigrants are good for the country,
people who argue, often with smoke coming out of their
ears, that we need to lower the number of immigrants we
admit, restrict their rights and even deport those already
here – I’m sure you know the kinds of audiences I’m
talking about. And in contrast, it’s a great pleasure to be in
a room like this where everyone understands exactly why
immigrants are good for the country and is willing, even
eager, to spend some time thinking harder about how to
integrate them more effectively.

“So you as bankers may be saying you’re not
interested in the fuzzy, amorphous steps like
identifying as an American. But I’m afraid at
some level you have to be – it turns out you have
a stake in those steps too. All the layers, all
the tiers, are interconnected. And all of us, all
Americans, have a stake in the entire, complex
process.”
Indeed, as I’ve learned this morning, many of you are
on the front lines of immigrant integration. One way or
another, you spend your days working to advance that
cause – helping people put down roots in America by
helping them interact, many of them for the first time, with

the U.S. financial system. This is extremely interesting
and impressive work, and I’ve been learning an enormous
amount listening to your presentations. And what I’d like
to do with my time is stand back a bit – because if you
operate on the front lines, I operate at 30,000 feet – and
put what you’re all talking about in some context.
How does the kind of financial integration you’re talking
about fit into the larger process of immigrant absorption?
How is that absorption going in America today? How does
the rest of the country – ordinary native-born Americans
– think about the process? And what, if anything, should
we be doing in addition to the kind of work you’re doing
to advance it? What should we as a nation be doing to
encourage immigrant integration or assimilation?
Before I get started, let me say a word about terminology.
Let’s not get hung up on terminology. I use the word
assimilation, among other words, but please don’t
misunderstand me. I’m not talking about ‘melting’ anyone.
I don’t mean obliterating the cultures that immigrants
bring with them. Immigrant absorption isn’t a one-way
street; it’s a two-way street – the American mainstream
changes even as the immigrants do. I do believe that being
an American means something. There’s a non-negotiable
core to the American identity, and we expect newcomers
to buy into it. But that doesn’t and needn’t require anyone
to forget who they are or what they brought with them. So
please don’t get hung-up on my vocabulary.
Because the point is that immigrants arrive, and what
follows is a long, slow process – the process of becoming
an American. It takes a lifetime and sometimes two. It’s
a many-tiered process, and it proceeds along what I
like to think of as a hierarchy of needs. It starts with the
very basics – finding your first apartment, getting your
first job – then runs through opening a bank account
and more complex steps like learning the language, all
the way to the most amorphous and really miraculous

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15

change; coming to feel that you belong and identify as an
American.
Now obviously, in some ways, these layers are
independent. You get your bank account; that’s one step
or one layer – and it’s sui generis. But the layers are
also interconnected. Sometimes the connections are
simple and obvious, you can’t get a bank account until
you have an address. But there’s also a more complex
and emotional triggering system that operates between
the layers. For example, you don’t generally become a
citizen until you feel you belong here. I compare becoming
a citizen to getting married when you’re already living
together. And not surprisingly when you become a citizen,
a whole lot of other things also begin to change. You’re
much more likely to buy a home, for instance, once you’ve
become a citizen.
So you as bankers may be saying you’re not interested
in the fuzzy, amorphous steps like identifying as an
American. But I’m afraid at some level you have to be
– it turns out you have a stake in those steps too. All the
layers, all the tiers, are interconnected. And all of us, all
Americans, have a stake in the entire, complex process.
Now, as I’m sure you all know, we’re starting to see a fairly
serious debate in this country about whether assimilation
is happening or not. ‘Samuel P. Huntington’ – need I say
more? For those of you who don’t know of him – in case
there’s anyone here who doesn’t know him – Huntington
is a highly regarded Harvard professor who has written
a book, excerpted this spring in a widely read magazine
article, saying that assimilation isn’t happening, can’t
happen, won’t happen. And he’s not alone. A lot of other
thinkers and writers are saying the same thing these days.
A lot of other people are similarly worried about the future
– and the debate is heating up.
But what’s interesting about this debate is that the people
who say that assimilation can’t and won’t happen are not
generally citing hard evidence. Some are, but most are not.
More often than not, what they’re talking about are merely
potential risk factors.
Some of their arguments are put forth in good faith: some
are people trying seriously to diagnose the potential risk
factors. Others are not in such good faith; put forward
mainly by people who want to stop immigration and cite
these potential risk factors to alarm us. Nevertheless, I
think these arguments about risk factors have to be taken
seriously. Imagine if you were a doctor – a physician. If
you’re a responsible doctor, you want to look as hard as
you can at your patient’s risk factors. You can’t just shrug
them off – can’t say they sound alarmist, so you’re going
to ignore them. And we wouldn’t be doing our job as
social scientists if we were just to shrug off Huntington’s
arguments – if we didn’t think seriously about the risk
factors facing today’s immigrants.

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So what are the risk factors? You’ve probably heard many
of the arguments. A lot of people are concerned that many
immigrants today, more immigrants than ever before in
our history, are coming from a single region and speaking
a single language other than English. People who are
concerned about this look at the immigrant population
and the proportion of it that’s Hispanic, and they’re right;
it’s a high percentage – more than half. And they worry
that these migrants are clustering in enclaves where the
primary language is Spanish and the culture is Hispanic
– enclaves where young people don’t have to learn English
to get a job and where there’s not much incentive to look
outward or participate in mainstream society.
A second risk factor: people talk about contiguity. Mexico,
Latin America, many of the countries where the bulk of
today’s immigrants come from are right next door. And
certainly, it’s true; people travel back and forth very easily.
And the argument is that this will get in the way of their
putting down roots in this country. After all, why would
you put down roots here if you can go home for $250?
And many people do travel back and forth in a circular,
seasonal way – living between two countries for decades,
if not most of their adult lives.
A third risk factor: people talk about the fact that today’s
immigrant wave hasn’t and isn’t going to benefit from a
‘time out,’ a period when we close the door and give the
immigrants already here time to adjust and assimilate.
After all, this argument goes in the last century; we did
close the doors, closed them in 1924 and didn’t open them
again until 1965. And it was that period, people argue, that
gave the Ellis Island wave time to assimilate.
Still another risk factor: people talk about cultural
characteristics that may make it harder for today’s
immigrants to assimilate. There are more reasonable
versions of this argument and less reasonable versions.
But many people make the case that a large number of
today’s immigrants come from cultures that don’t put a
premium on education, and surely if true, that could be
an enormous obstacle to assimilating in a knowledge
economy.
Still another risk factor: the missing rungs in the economic
ladder. A hundred years ago this argument goes, the route
into the middle class was easier. You came as an unskilled
laborer, but before long you were working in a factory,
making what were then astronomical wages, and you used
those wages to buy a house and build a life that became
a springboard for your children. Then, before you knew it,
they or your grandchildren were in college and on their
way into the middle class. But today the argument goes,
that path into the middle class no longer exists. Industrial
jobs are disappearing, service-sector jobs don’t pay the
kind of wages industrial jobs used to pay, and there’s no
way for new immigrants working service-sector jobs to

October 2004

accumulate the wealth that earlier immigrant families
accumulated.
Still another risk factor: illegality. And there’s no question
about it, undocumented status is very much a risk factor.
It creates concrete barriers but also psychological ones. If
you have trouble opening a bank account, if you don’t get
in-state tuition breaks that allow you to send your kids to
college, if you don’t feel you belong and so don’t invest in
settling or succeeding here – obviously all of those things
can be serious impediments to assimilating.
And finally, there are the cultural factors generated here
in the United States. People worry about multiculturalism
and identity politics – and they’re not entirely wrong. We
do put more emphasis on difference in America today. And
yes, we’re much less clear – there’s much less consensus
– about what it means to be American. And it isn’t hard
to see how that could make it harder for immigrants to
identify with the mainstream and assimilate.
So those are risk factors, and let’s be honest, some of
them are serious potential problems. If even a few of them
– just one of them – turned out to be the obstacle people
think it could be, we could face a difficult future.
But the good news is that these are only risk factors – no
one has actually proved that they’re producing the kind of
problems the alarmists worry about. And I don’t see that
it makes any sense to go through them and refute them
theoretically – because they’re just risk factors.
Far more useful, I think, let’s get beyond the theoretical
and look at the evidence. Are today’s immigrants
succeeding or not? Are they assimilating or not? Does
the evidence suggest that the risk factors are taking the
toll that alarmists say they’ll take – or not? Let’s look at a
couple of concrete areas.
Let’s start with language – the sine qua non of
assimilation. And sure, it’s easy to see why people are
concerned that immigrants – and Hispanic immigrants in
particular, aren’t learning English; it’s hard to learn a new
language as an adult, especially if you come here without
much education. And much of the time you can get by
without it – many people do. Many people, particularly
Hispanics, get by in today’s immigrant’s enclaves without
much English. Our schools don’t do as good a job as they
should at teaching English; it’s widely recognized that
bilingual education has not fulfilled its promise. And yes,
we hear a lot of Spanish all around us in America today
among first generation Latinos, 72 percent are Spanishdominant. That’s a lot of people speaking Spanish and
having trouble with English.
But the point is that first generation has never learned
English well. They didn’t a hundred years ago and they
don’t today. It’s always the children who learn the new
language and who, within months if not weeks, are

translating for their parents. And that’s no different today.
Among Latinos, in the second generation, everyone is
proficient in English. If you grow up here in America, you
learn English. Even if you don’t learn it in school, you learn
it from TV or on the street. Survey after survey bears this
out; among the second-generation Latinos, 93 percent are
fully bilingual or English-dominant. They understand that
English is the language of their future; they prefer it even
if they don’t speak it as well. And by the third generation,
almost all Latinos are English-dominant, so much so that
two-thirds of the third generation speaks only English.
A second concrete measure of assimilation deals with
economic and educational progress. Most immigrants to
America today fill niches at the top or the bottom of the
job pyramid. And I don’t think we have to worry very much
about those who plug in at the top end – the nurses and
engineers and Silicon Valley entrepreneurs. During the
‘90s boom, Asians accounted for one-third of the scientific
workforce and ran roughly a quarter of the high-tech
companies in Silicon Valley. And I don’t really think we
have to say much more about them.
But unskilled manual laborers who come here with a
seventh-grade education are a different matter. And
certainly in that case, there are factors that are cause
for concern. These newcomers often settle in bad
neighborhoods. Their kids go to the worst of our failing
public schools. They often catch a bad attitude toward
schooling from their classmates in those failing schools.
And even in the best of cases, the ethos in many Latino
communities is to drop out of school as soon as possible,
either to get a job or have a family. And there’s no
question, in today’s knowledge economy, all of this can
create problems – serious problems.
But there’s good news here too. Second-generation
immigrants work very hard in school, including secondgeneration kids from families of the kind I’ve just
described. The best and so far biggest and most important
study of the second generation followed 5,000 kids
over more than a decade from inner-city schools in San
Diego and Miami. And what the survey found was that
on every dimension you could imagine immigrant kids do
better than native-born kids. They do four times as much
homework, two hours a night instead of the usual halfhour. They aspire to higher achievement, they get better
grades, and they drop out far less often – between a third
and half as often. So if school achievement is any guide, I
think it’s clear we’re looking at a pretty rosy future.
Now, of course, the big question is what kind of jobs
these kids end up getting. How will they plug into the
economy? It’s a particularly acute question in a knowledge
economy, and there’s cause for concern because of the
disproportionately low college attendance rates we see
among Mexican-Americans and other Hispanics. But I

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October 2004

17

think it tells you a lot about what kind of problem we are
and aren’t talking about when you consider the divide
between pessimists and optimists on this question.
The debate isn’t between people who say the second
generation is going to do terribly and people who say
they’re going to do well. Everybody recognizes that they’re
making progress. The question is what the benchmark
should be. Should we be measuring the second generation
against their parents, or should we be measuring them
against their native-born peers? And the point is that
however you measure it, even among the least successful
ethnic and national groups, the immigrant trajectory is
upward. Each generation does better than the one before.
Among Latinos, for example, the second generation
makes 50 percent more than their parents – not quite
as much as native-born Whites, but still 50 percent more
than their parents.
And frankly, what I think we’re seeing among this
Latino working class is a kind of alternative path into
the mainstream – not the conventional Horatio Alger
immigrant path, where you go from ghetto to college
in one generation, but something more like the ItalianAmerican path. I don’t know if any of you have spent any
time in Latino working class neighborhoods in California,
but everyone in those neighborhoods owns their own
home. Every house has an American flag flying from
it. And every house has a truck out front, because the
owner is a contractor of some kind. And if this doesn’t
seem remarkable to you, just think about it for a minute.
Most of these are people who came here to work in the
fields, certainly their parents came to work in the fields,
just 20 years ago, they were the men who were pushing
the lawnmowers, and today they own the company – they
own the lawnmowers and the truck and they keep the
books and they hire other, more recent immigrants to walk
behind the mowers. You see the same kind of pattern
in New York City, Mexican Americans who start out as
dishwashers or busboys and end up, after just 20 or 25
years, owning the coffee shop – and all of this without
going to college.
Not only that, but the numbers bear out these vignettes.
The statistical evidence we have suggests there’s
something to this Italian-American parallel that I and other
commentators like journalist Michael Barone have noticed.
Despite all the obstacles they face in terms of language,
education, difficulty navigating U.S. credit markets and
so forth, business ownership among Latino immigrants
is roughly equivalent to that of native-born Americans.
And so, over time, are their rates of homeownership.
The education bell curves are quite different than they
are for the native-born. Obviously, Latino newcomers
are way behind when it comes to accumulating wealth.
But they gravitate very quickly to entrepreneurship and
homeownership.

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Profitwise News and Views Special Edition

True enough, we’ve heard a good deal about
homeownership this morning, and most of it hasn’t been
encouraging. But most of the numbers we’ve heard are
aggregate numbers: no one has broken them down
according the number of years that immigrants have
been in this country. And it’s true – it takes a while for
newcomers to settle in. Relatively few buy homes within
five or ten years of arrival. But I haven’t heard anybody
talk today about what happens over time. And the fact is,
according to the 1990 census, which are unfortunately the
most recent numbers I have for this, but I doubt the pattern
has changed, within 20 years more than 60 percent of
Latinos live in owner-occupied housing. And by the time
they have been here 25 years, their homeownership rates
have passed those of the native born.
I could go on and on with numbers of this kind – statistics
about improving educational attainment, naturalization,
most astoundingly of all, intermarriage rates. And we
can talk more about that later if you like, but the point is
that for both Latinos and Asian Americans, the trajectory
points upward. People are learning how to play the game
here. They’re making good, their children are getting on
the economic ladder, often at the very bottom, but they’re
getting on and starting to move up.
And this absorption isn’t just external. It’s internal or
subjective to – and the evidence on that score comes from
opinion research. My favorite example was some terrific
work done recently by the Pew Hispanic Center, which
grouped Latinos according to how long they had been
here and how well they spoke English, and then asked
them how they felt about a number of personal issues,
including – and this is the question I found the most
striking – a question about fate, and free will. The question
read, “Can you control your future enough to make
plans for it – or is it better to accept whatever happens
fatalistically?” Very deep, personal stuff – at the core of
who one is and one’s outlook on life, it seems to me. And
amazingly, when you look at the way immigrants answered
the question, you can literally see their attitudes shifting
over time – it’s like watching a time-lapse movie of people
assimilating.
A full 60 percent of Hispanics who were still Spanishdominant said you should accept life fatalistically. Sixty
percent – that’s compared to 15 percent of native-born
Whites. But when the pollsters put the same question to
second-generation Hispanics or those who had been here
long enough to become English-dominant and absorb
American culture, 75 percent said they felt they were in
charge of their lives. Not quite as many as the native-born
85 percent, but getting close. Their inherited Hispanic
fatalism had given way to an American can-do spirit in the
space of just 10, 15 or 20 years. They weren’t just going
through the motions of assimilating – they were changing

October 2004

internally too. They were becoming Americans – and many
of them before they’d been here even a full generation.

suggested that immigrants need to make a choice – either
their past or becoming an American.

So that’s the snapshot, that’s a quick picture of how
assimilation is and isn’t working today. And by and large,
it’s an encouraging snapshot. But even so, I think it raises
the question: what can and should we as a nation do to
encourage assimilation? I think it’s obvious enough this
is an extremely complex, personal process – and I don’t
believe we can or should be trying force it. I’m not sure
we can even hurry it when it comes to change as deep
and personal as this, coercive means usually backfire. But
personally I believe there’s quite a bit we can do to assist
and encourage immigrant absorption, and what I’d like to
do with the time I have left is throw out two ideas for you
to consider – two big clusters of ideas about what we as a
host nation can do to encourage this process.

And I don’t think it’s hard to see how both sides – both left
and right – are failing the newcomers and their children.
Remember – we’re talking about people who are still
struggling to make it onto the ladder. Perhaps they’ve
managed to get a hold of the very first rung, or climbed a
few rungs up, and they’re looking around and asking, ‘How
do I fit in here?’ And one group of Americans is answering,
‘You’ll never fully fit in and shouldn’t want to,’ while another
group scolds them, ‘Well, in order to fit in, you have to give
up your heritage and everything you brought with you,
even who and what you think you are.’

Number one: I think we need to change how we think
and talk about assimilation. We need to come up with a
definition we really believe in – a definition we can get
behind and work on selling to newcomers. That sounds
simple enough, I know, but the truth is we don’t have a
definition like that. As most of you know, as recently as the
mid-’90s and still today in many circles, assimilation is a
taboo subject. Many people won’t use the word. They don’t
see it as something we as a nation should be encouraging.
And the result is that we don’t encourage it – and I think
both the right and the left are responsible for this failure.
The left’s contribution is a little more obvious, in my view.
They’re the ones who don’t want to talk about assimilation.
They claim it’s a dirty word. They’ve told immigrants that
it’s unnecessary and worse, to want to be incorporated
into America – that it can be a form of oppression. Leftleaning scholars champion transnationalism, and poohpooh the idea of identifying as an American. They warn
people of color that they will never be accepted as full
members of the American body politic and urge them to
question why they would want to belong in the first place.
I don’t want to tip over into stereotype here, but I’m sure
you’ve all heard the arguments – assimilation is cultural
genocide, or as James Baldwin famously put it, “Who
would want to be integrated into a burning house?”
But don’t get me wrong, the right has been as remiss as
the left on this – albeit in a different way. Conservatives
have jumped on the assimilation bandwagon with a
vengeance in the last ten years or so, but the assimilation
they’ve been promoting has been an impossible, coercive
kind of Anglo-conformity. Angry right-wingers have
scolded immigrants and spread alarm about them among
the general public. They warn newcomers that they
shouldn’t cling too hard to the cultures they brought with
them, that they shouldn’t live among their countrymen
or speak their mother tongue or identify too strongly
with other people who look like them. It has even been

So both sides are failing the immigrant community. There’s
vacuum where there ought to be a billboard, or at least
a signpost. And so the first thing I think we have to do
as a nation is fill this vacuum. We have to come up with
a definition of what it means to become an American. It
has to be a definition that’s consistent with the realities
of the twenty-first century – with globalization and
multiculturalism and ethnic niche advertising and all the
rest. I have my own ideas about what that definition should
be, and I’m sure you do too. But the point is that we as a
nation have to come up with a definition we can stand by.
We have to get to the point where people are comfortable
using the term “assimilation” or some term like it. We
have to be willing to say we want people to fit in and put
down roots. We have to be willing to ask them to become
Americans.
But that’s only step number one. Step number two has to
be more concrete, and this brings me back full circle to
some of the important work you all are doing. Obviously,
you, or many of you, are in the trenches helping people
make these concrete steps toward integration: opening
their first bank account, getting a mortgage, getting a
business loan – critical steps up the ladder of assimilation.
But my point is that I think even this important work
could be more effective if the nation as a whole could
connect the dots a little better. And what I mean by that
is that I would like to see the public and private sectors
and civil society making much more of a deliberate and
coordinated effort to welcome immigrants and invite them
in. How? Well, two ways: first, by setting some goals for
integration – laying out what we think it means to become
an American; and then by providing people with the tools
to reach those goals.
Just think about it for a minute – think about how it
works today. You arrive as an immigrant. Maybe your local
community organization helps you find an apartment.
Maybe a bank reaches out to you and offers a product.
But these are scattered, ad hoc efforts, and basically
you’re on your own to sink or swim. We as a nation do
not say, “Welcome. We’re glad you’re here. We want you

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October 2004

19

to prosper.” We don’t offer people any kind of roadmap
outlining what their journey is going to be like. And
we never suggest that we could help –that behind our
seeming indifference, we actually want them to do well
here. Essentially, we leave it to the market and assume
that the rest will take care of itself. Now, don’t get me
wrong, I’m not pooh-poohing the market. I’m glad all of you
are making a living helping people open bank accounts
and get mortgages and that sort of thing. But I think we as
a nation can and should be doing much more to talk about
the process and guide people through it – guide them
through the opportunities that are open to them.
So the first step is setting the goals – essentially drawing
the roadmap. Of course, most immigrants figure these
steps out for themselves over time, if not immediately. But
wouldn’t it make it easier for them if part of what we did
in welcoming them was foreshadow some of the steps
that are inevitably going to be part of their future? They
grasp early on that they need to learn English, or their kids
do. But how long does it take them to figure out, “Well
gee, maybe becoming a citizen would be a good idea.”
Or “having a credit card might help me function here.”
Or “if I voted, it
could really make
“We have to come up with a
a difference for my
life and my kids’
definition of what it means to
future.” Sometimes
become an American. It has to be it takes a long, long
for people to
a definition that’s consistent with time
figure these things
out – to recognize
the realities of the twenty-first
the opportunities
century – with globalization and
that await them.
multiculturalism and ethnic niche And why should
we leave that
advertising and all the rest.”
recognition to
the vagaries of
the market or the
random accidents in their lives? Why couldn’t we as a
nation set out a series of steps or goals and popularize
them?
Now of course this has to be done in the right way. We
can’t seem coercive or scolding. We can’t seem as if we’re
trying to rush people. And it can’t be polarizing figures
like Sam Huntington leading the charge. It should be
community-based organizations and ethnic leaders and
Spanish-language media and, yes, corporate marketers
and appropriate government agencies. All of these
different kinds of players should be working together to
popularize a series of steps that assimilating immigrants
can expect to take over time.
Think of the campaign that was mounted in the year 2000
to get minorities to participate in the U.S. Census – only
on a much bigger scale. What would the goals be? Well, I
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Profitwise News and Views Special Edition

think they’re obvious: learn English, plug into the financial
system, eventually become a citizen, vote, make sure that
your kids finish high school. Now we can quibble about
how exactly to frame those goals, but why couldn’t we as
a nation go so far as to suggest that we think it makes
sense for most people to do most of this within, say, 15
to 20 years of arriving? That’s not a deadline – we’re
not going to kick you out if you don’t achieve all of them.
But that’s the time frame within which most newcomers
naturally meet these goals, so why not say we think these
are goals and we think you should try to achieve them in
roughly that period of time?
So that’s the first part of the process – the first part of
what I think we, as a nation, should be doing. But that’s
only the first prong of the two-pronged effort – because
if we’re going to set goals, surely we also have a
responsibility to provide the tools for people to meet them.
Many of you are already doing just this – giving people
tools to meet the goal of financial participation. But I think
the nation could mobilize in a much more concerted and
coordinated way to provide those tools and others.
If the first, most important goal is learning English, we
ought to be providing English classes. The government
ought to be spending much more than it currently does
on English-as-a-second-language instruction, and the
business community ought to be doing its part. If the
goal is getting into the financial system, then one tool is
financial literacy classes and outreach of the kind many
of you are doing. If the goal is encouraging citizenship, we
ought to be providing a more meaningful naturalization
process. We ought to be offering instruction not just in
English, but also in history and civics, and we ought to be
providing volunteer mentoring by native-born individuals or
families to help new immigrants get through the citizenship
process.
There’s a long, long list of things that I think we could be
doing – I’m sure you get the idea. But in closing, I’d like
to come back full circle – come back to where I started
– to the critical work you all are doing. You in the financial
business are on the cutting edge of something very
significant – and it’s important for two reasons.
The first is simply the services you’re providing. You’re
not just giving immigrants their first lesson in financial
management or helping them open their first bank account
or get their first mortgage. You’re walking them through
a step or series of steps that are part of a much larger
process – a process in which every step builds momentum
and eventually leads to another step and another and
another step. That’s how assimilation works. It’s like an
escalator where one thing has a way of leading, almost
automatically, to another. Learning the language means
getting a better job means making more money means
opening a bank account. Or watching your kids thrive

October 2004

means feeling more at home here means becoming a
citizen means not just voting but also buying a home or
starting a business. So every time you help someone
– every time you do something as simple as help them
open a checking account – you’re also performing a much
bigger service by helping them get on that escalator, and
that in itself is critically important.
But even that’s not the end of the story – because the
reasons that have led your industry to do this are critical
too. Nobody here, nobody who has spoken this morning
has been bashful about this. You’ve been completely
candid – few, if any of you, come to this out of sheer
altruism. On the contrary, you’ve been telling us in no
uncertain terms, your industry is driven by self-interest.
And my point is that’s good – that’s a virtue because this
is America after all, not statist Europe or Canada. And
the only way anything like the movement I’ve been talking
about – the movement to encourage immigrant absorption
– is going to take off in America is if it’s driven by selfinterest, and the corporate world takes up the lion’s share
of the burden.
Sure, the government can and should jumpstart the effort
by drawing up the first roadmap. But I suspect that even
publicizing the roadmap will be beyond the government’s
power – beyond its ability and beyond the political will of
anybody I’ve met in Washington. If this movement is going
to take off on any scale that matters or that’s useful, it’s
going to have to have a momentum of its own. It’s going
to have to get out of control – get out of control in a good
way. And the only way that’s going to happen is if other
economic sectors – many others do what you’ve done
– step up to the plate and start to play a role. And they’re
only going to do that out of self-interest, so in that regard
too, you and what you’re doing are a model.
So really, in closing, I’m back to where I started. I’m just
glad to be here and be learning from all of you. Glad to
have a chance to hear how you’re doing well by doing
good, glad to learn a little bit about how you’re helping
immigrants put down roots and become Americans by – of
all things – drawing them into a productive relationship
with the banking system.
Thank you very much.

Profitwise News and Views Special Edition

October 2004

21

Housing and Homeownership
Moderator - Raoul Raymundo, Chief Executive Officer, The Ressurection Project
Session Three

Financial Access for Immigrants: Learning from Diverse Perspectives

The third session focused on homeownership among
immigrants and its importance for long-term wealth
accumulation. Sherrie Kossoudji, associate professor of
social work at the University of Michigan, began by citing
her research with Stan Sedo, also of the University of
Michigan, on homeownership as an indicator of wealth.
Andrew Schoenholtz, deputy director of the Georgetown
University Institute for the Study of International Migration,
discussed joint research of the institute with the Fannie
Mae Foundation to increase immigrant homeownership1.
Michael Frias, Chicago regional community affairs officer
for the Federal Deposit Insurance Corporation (FDIC),
addressed nontraditional ways that banks have penetrated
immigrant markets and the role of the Community
Reinvestment Act (CRA) in those efforts. Frias also
discussed the New Alliance Task Force, an association of
various concerned organizations, whose main mission is to
bring immigrants into the banking system.

homeownership rate for U.S. natives is 70.3 percent, for
citizen immigrants, it’s 67.6 percent, and for non-citizen
immigrants, 34.9 percent. At younger ages (25 to 35),
there is almost no difference in homeownership rates
between native-born and immigrant citizens; there is a
disparity among older heads of households toward native
born (see Figure 1). The disparity between non-citizens

Figure 1: Homeownership by Age*

SHERRIE KOSSOUDJI
University of Michigan
Sherrie Kossoudji is an associate professor of social
work at the University of Michigan. Kossoudji began her
remarks noting that despite low education attainment and
a tendency not to use traditional banking services, the high
level of remittance activity to Mexico suggests a certain
level of “financial savvy.” Her research with Stan Sedo of
the University of Michigan focuses on homeownership as
an indicator of wealth. Previous work she had conducted
with Sedo focused on income of immigrants compared to
that of U.S. born workers. But, said Kossoudji, “Suddenly
it occurred to us that [income] covers a pretty transitory
phenomenon…where the real action is in wealth.”
Kossoudji stated that the U.S. Census now tracks for the
first time immigrant citizen homeownership rates distinct
from those of non-citizens. She showed that in 2002 the

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October 2004

and citizens, both native born and immigrant, remains wide
across all age segments.
Kossoudji also discussed the significance of nationality of
immigrants, noting that Europeans and immigrants from
other developed areas have higher homeownership rates
than native born. She further added that ethnicity, not just
national origin, has an effect on homeownership rates.
After controlling for nationality, there is a wide disparity in
homeownership rates based on ethnicity (Figure 2). This is
an area Kossoudji urged others to research more deeply,
especially given that home equity is a primary component
of household wealth. Kossoudji concluded by summarizing
the key findings of her research:

struggling to provide appropriate financial services and
address other services and needs.

 Immigrant citizens and native born living in urban
areas are equally likely to be homeowners;

 Immigrant citizens and native-born homeowners are
almost equally likely to have no mortgage and have
similar debt-to-value ratios when they do have a
mortgage;

 Immigrant citizen homeowners have significantly

Schoenholtz cited research showing that the foreign
born are three times as likely as U.S. born to rank buying
a home as their number one priority, and posed the
question: “Why are immigrants largely an untapped home
buying market?” The study notes these barriers:

 Cultural assumptions/lack of familiarity with the U.S.

higher equity values than natives;

 Immigrant non-citizens lag behind on every measure,
no matter how many years they have lived in the
United States; and

credit system;

 Lack of credit history;
 Conventional tools used by financial institutions to

 Housing is a higher proportion of wealth for
immigrant citizens and non-citizens than for native
born.

measure credit worthiness;

 Language limitations;
 Conventional mortgage products out of reach for
low-income; and

 Limited supply of affordable housing.

Figure 2: Homeownership by Nationality

In undertaking the study, Schoenholtz stated that he
wanted to focus on financial institutions that have had
some success in reaching the foreign-born market,
and the relationships they have with community based
organizations (CBOs) and other partners to help them
reach it. He noted that the study, which was published in
2001, uncovered a number of very good practices. The
researchers wanted to ensure that the handbook would
add value to efforts to reach immigrant markets, and so
they formed a strategic business plan with the American
Bankers Association (discussed by James Ballentine of
the ABA in the opening panel).

ANDREW SCHOENHOLTZ
Georgetown University
Andrew Schoenholtz is deputy director of the Georgetown
University Institute for the Study of International Migration.
He discussed joint research of the institute and the Fannie
Mae Foundation that focused on practices to promote
homeownership among immigrants.1
Schoenholtz shared his experience in meeting with
financial institutions to discuss his findings. He said
that he usually begins the discussions on a macro level,
noting that there are already 35 million foreign-born U.S.
residents. That number is currently growing by roughly a
million per year. About half come from Latin America and
a fourth from various parts of Asia. Further, he referred
to a point made earlier in the day that the last decade
and a half has seen immigrants populating areas that had
little immigrant settlement prior to 1990. These areas are

Schoenholtz emphasized the need to design and
market creative mortgage products with the goal of
sustainable homeownership. The successful institutions
have taken the time to conduct both quantitative and
qualitative research on their markets to determine the
community profile, that is, the makeup and cross-section
of immigrants in the market. The successful institutions
have also staffed themselves to accommodate their
market, and made the commitment to re-evaluate the way
they determine creditworthiness given special needs and
preconceptions of many immigrants. They have further
recognized that traditional mortgage products may not suit
all immigrant markets.
Schoenholtz discussed qualitative aspects of determining
credit needs and other market characteristics and ways to
ensure success in delivering financial services. In effect,
the bank must establish a presence in the community
beyond what might traditionally be described as being a
good corporate citizen. Schoenholtz stated, “Establishing
a presence in the community and really building trust
[among CBOs]…I can’t underscore more the importance
of the trust issue, which is why partnerships become very,

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23

very important. The financial institutions do not have to do
this alone.”

MICHAEL FRIAS
Federal Deposit Insurance Corporation
Michael Frias is the Chicago regional community affairs
officer for the FDIC. Frias began by addressing earlier
comments about the CRA.“[The] CRA has never been
about charity. We have never encouraged banks to do
things they shouldn’t be doing; it’s always been about
good business.” He stated that the CRA was enacted to
keep banks from ignoring certain, generally low-income,
markets. Even though the households that remit funds to
Mexico, other parts of Latin America, and the Caribbean
are among the poorest in the country, banks are actively
pursuing their business because they represent an
opportunity.
The CRA, Frias also noted, has encouraged banks to
pursue nontraditional approaches to serving low-income
and new immigrant markets. “We heard from James
Maloney [of Mitchell Bank] that he will accept alternative
forms of identification; there’s nothing traditional about
that. They put a branch in a high school; it’s probably the
only bank in the nation that has done that. And the bank is
a certifying acceptance agent.” 2
Frias discussed the New Alliance Task Force, a group of
55 organizations, including CBOs, small and large banks,
regulators, capital markets institutions, private mortgage
insurers, and the Internal Revenue Service (IRS). The
principle mission of the task force is, “…to open doors for
immigrants and get them into the banking system,” Frias
said. The task force has four working groups focused on
financial education, bank products and services (except
mortgages), mortgage financing, and social projects.
Frias discussed the work of the mortgage task group. The
group developed a model mortgage product based on the
mortgages already issued by Mitchell Bank in Milwaukee
and Second Federal Savings in the Pilsen neighborhood
of Chicago. The unique aspects of the product are that
instead of a Social Security number, the applicant can
use an individual tax identification number (ITIN) for
documentation. Also, references from certain utilities,
landlords, and even clergy can be considered in lieu of a
formal credit history.

mention that Neighborhood Housing Services of America,
which has made a secondary market for nonconforming
loans for decades, would begin purchasing ITIN
mortgages in the near future. Another entrant into the
secondary market for ITIN mortgages, Frias noted, is the
Wisconsin Housing and Economic Development Authority
(WHEDA). The agency will work with four banks including
North Shore Bank and Mitchell Bank to purchase ITIN
loans. A unique aspect of the underwriting for these
loans, Frias stated, is, “They are actually going to consider
remittances (monies sent back to home countries) back
to Latin America as an obligation…as alternative credit
information.”
Frias noted that the USA PATRIOT Act, “…distinguishes
between a U.S. person and a non-U.S. person.” For a
non-U.S. person, a bank must obtain a Social Security
number, an ITIN, or a foreign-issued identification as
documentation to create the banking relationship. He
stated that about 32 percent of bank offices nationwide
accept alternate forms of identification adding, “That’s
immediate access to the system.” The Chicago area
banks that already serve the immigrant market with
mortgage products, Frias stated, are mostly community
banks that can implement decisions quickly, but are also
having difficulty meeting demand in some cases. Frias
closed by urging the bankers present to become well
versed with the PATRIOT Act. Other than that, he advised
bankers to stay aware of safety and soundness issues,
and understand and manage default and other relevant
risks.
Notes
1 The report Reaching the Immigrant Market: Creating
Homeownership Opportunities for New Americans, can be
accessed at www.fanniemaefoundation.org/programs/pdf/rep_
immigrant.pdf.
2 An Acceptance Agent is an individual, business, or
organization (college, financial institution, accounting firm, etc.)
authorized by the IRS to assist individuals in obtaining ITINs. For
more information go to www.irs.gov.

Frias stated that neither Mitchell nor Second Federal
had experienced any losses or delinquencies in the
approximately three years they had been issuing these
types of loans. Mark Doyle, CEO of Second Federal, Frias
said, “…told me that these loans are better than they’re
saleable [to the formal secondary market dominated by
Fannie Mae and Freddie Mac] loans.” He went on to

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October 2004

Innovative Practices for Reaching Immigrants
Moderator - Jennifer Tescher, Director, Center for Financial Services Innovation at
ShoreBank Advisory Services
Session Four

Financial Access for Immigrants: Learning from Diverse Perspectives

The fourth conference session featured one community
based organization (CBOs) representative who discussed
her efforts to attract a bank branch to her community,
along with representatives of a community bank, a
nationally recognized credit union, and a large Chicago
bank who discussed practices among their institutions to
address immigrant populations in their market areas. Yman
Huang Vien, chairman of American Metro Bank, discussed
the importance of personal and specialized service based
on ethnicity and cultural orientation. Norma Polanco,
executive director of the Humboldt Park (Chicago)
Economic Development Corporation, discussed her
experience in encouraging a large bank to open a branch
in a predominantly low-income and Hispanic community.
John Herrera, chairman of the Latino Community Credit
Union (LCCU) in North Carolina, discussed the innovative
ways the credit union has found to address needs of the
burgeoning Latino immigrant population in his region.
E. Martin Heldring, president and CEO of Harris BankGlencoe (Illinois), discussed the challenges of shifting
course in a large financial institution to provide relevant
financial services to Latino immigrants.

YMAN HUANG VIEN
American Metro Bank
Yman Huang Vien is the chairman of American Metro
Bank. Vien provided some background on herself, noting
that as an immigrant refugee, a business owner, a onetime social service provider, and now a banker, she could
comment firsthand on the importance of access to
financial services for immigrants.
Vien arrived in the United States in 1978 via Malaysia,
eventually settling in Chicago. Her family was initially on
welfare, but only for six months. Neither Vien nor any of
her family had any English proficiency at the time. Vien
and her family are Chinese, though they lived in Vietnam.

Her father was a business owner in Vietnam, but worked
in a factory in the United States. After several layoffs,
he decided to buy a business in Chicago’s Chinatown.
He bought a garment factory that the previous owner
financed for him. As garment manufacturing was not his
previous business, he quickly ran into difficulty meeting
current obligations and approached a local bank for
a small loan. The bank determined that the factory’s
equipment was too old to use as collateral, and Vien’s
father had no track record running the business and no
personal credit history. Vien noted that borrowing money is
not necessarily viewed
positively in her culture,
Vien noted that borrowing
and many come to
the United States not
money is not necessarily
only unaware of how
to undertake normal
viewed positively in her
banking transactions,
culture, and many come to
but also with only a
vague, if any, idea
the United States not only
of what a bank is.
unaware of how to undertake
She also stated that
normal banking transactions, though many Asian
immigrants are viewed
but also with only a vague, if as wealthy, financially
aware, and not in
any, idea of what a bank is.
need of assistance
to understand the
financial system, the same is not true of Asian refugees.
American Metro Bank was formed in 1997 in Chicago’s
Uptown neighborhood, an ethnically and culturally diverse
area of the city. It is a point of entry for many different
immigrant groups, both refugees and mainstream
immigrants. Vien pointed out that the bank serves many
ethnic groups and staff members have proficiency in a
disproportionate number of languages. The bank’s costs
are consequently higher, and Vien stated that the bank’s

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25

distinguishing competitive characteristic is service as
opposed to price.
Vien noted that the bank is a certifying agent for individual
tax identification numbers (ITINs) and estimated that the
bank had processed about 500 applications since gaining
certifying agent status. Many customers open checking
accounts with the minimum balance and then wire money
to their home country when they reach a certain balance.
The bank has gone from approximately five wire transfers
per week to 15 per day since becoming a certifying agent,
and the amounts of the individual transfers, she noted,
continue to grow as well.
Vien emphasized the importance of personal contact with
customers, stating that most of her day is spent greeting
individual customers, almost all of whom she knows by
name. She shared several anecdotes about customers
of different ethnic backgrounds, and mentioned that in
addition to one in Uptown, the bank has branches in
Chinatown, Humboldt Park, a primarily Latino community,
and Harvey, a predominantly Black, non-immigrant, south
suburban city.

NORMA POLANCO
Humboldt Park Economic Development Corporation
Norma Polanco was the executive director of the
Humboldt Park Economic Development Corporation
(HPEDC) at the time of her invitation to speak at the
conference. Just prior to the conference, she had taken a
position with the Office of the Comptroller of the Currency,
a bank regulatory agency, in Cleveland, Ohio.
Polanco discussed her experience in her former role in
trying to attract a financial institution to the Humboldt
Park community, northwest of the Chicago Loop. The
HPEDC’s mission is to facilitate entrepreneurship
opportunities in the community by providing employment
training and workshops. The Humboldt Park community
has roughly 60,000 Puerto Rican, Mexican, and Black
residents. There is also a small proportion of ethnic Whites
and some small pockets of gentrification.
Historically, Humboldt Park was settled by eastern
Europeans, but more recently has become known as a
predominantly Puerto Rican community. A recent, large
influx of Mexican residents has changed the demographic
profile and given rise to much higher demand for wire
transfer services, low-cost transaction accounts, first-time
homebuyer programs, and multilingual bank staff.
Polanco noted that the average household income in
Humboldt Park hovers around $30,000, though it is
somewhat higher for Latinos than for Blacks. It has a
relatively young population; 71 percent of Latinos and 44
percent of Blacks are under age 40. Polanco stated that
only 22 percent of Latinos and 17 percent of Blacks in
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Profitwise News and Views Special Edition

Humboldt Park possess high school diplomas, adding, “We
have a number of barriers besides language barriers…
high unemployment, high drop-out rates, and in turn there
might be a lack of role models in the family that have a
relationship to a banking institution.”
The goal of attracting a mainstream banking institution
to the community was the result of a larger strategy to
revitalize the commercial corridor along North Avenue, a
main thoroughfare, that included improving streetscapes,
attracting new businesses, strengthening existing
businesses, and constructing partnerships between
residents and businesses. The HPEDC surveyed residents
to determine what local services were lacking and where
they needed to go, for instance, to gain access to those
needed services. After a U.S. post office, a bank was the
second most desired institution in the community among
the 470 households surveyed. At meetings arranged at
local schools and other institutions, residents discussed
their interest in bringing a bank to the community. A key
point raised at some of these meetings was the desire
to avoid the crime associated with carrying around or
keeping large sums of cash.
Polanco cited a Chicago Tribune study showing that the
ratio of bank branches to population was nearly 50 times
higher in Lincoln Park, a very affluent Chicago community,
than in Humboldt Park. Polanco stated, “With the Chicago
Tribune for instance, we were able to leverage their report
to continue our [efforts] to bring a bank to the area, and
we wanted to let the banks know that we would help
publicize their efforts and it would be a win-win for both of
us.” The HPEDC recruited undergraduate students from
DePaul University to research bank CRA records and the
organization conducted a search using other criteria as
well. Ultimately, the HPEDC connected with Charter One
Bank, which had already been considering Humboldt Park
as a branch location. Further, the bank staffed the branch
with an eye to the community employing predominantly
bilingual and Latino staff, and offered a product line
consistent with the needs of the community, including
low-cost accounts and wire transfer services, and financial
literacy and first-time homebuyer training. The bank also
offered an enclosed ATM (automatic teller machine)
for the first time in the community, another frequently
mentioned amenity in the course of the HPEDC’s
research.
Polanco closed by noting the additional investment in
the community that the addition of the bank branch has
drawn, “We’ve been able to connect with other banks that
are interested in our area; it helps businesses and attracts
the infrastructure improvements. It’s obviously provided
much needed financial services for the unbanked.”

October 2004

JOHN HERRERA
Latino Community Credit Union
John Herrera is chairman of the LCCU in Durham, North
Carolina. He is a naturalized U.S. citizen originally from
Costa Rica who had settled in North Carolina in the early
1990s.
Herrera began by discussing the changes in
demographics in Durham during his tenure there. He
shared a personal anecdote that essentially illustrated
the broad acceptance of Latino immigrants into the
local/regional marketplace. He discussed the importance
of investing in financial education when and where it
is needed to encourage immigrant communities and
populations to participate in financial services and obtain
bank accounts.
Most of the presentation was devoted to a video
documenting the establishment and growth of the LCCU.
The credit union was created in response to the rapidly
expanding immigrant Latino population in urban North
Carolina that tended not to use bank services, a condition
that was giving rise to robbery and other crimes. The
LCCU was created with assistance from the States
Employee Credit Union, the Self-Help Credit Union,
and the North Carolina Minority Support Center. The
partnership also involved the North Carolina Credit Union
Network, the Carolinas Credit Union Foundation, and the
National Credit Union Foundation. A cornerstone of the
services the credit union provides is financial education,
critical for a population three-quarters of which had never
previously held a bank account.
The LCCU was one of the first financial institutions in
the country to serve members without Social Security
numbers. By helping members to obtain ITINs so that they
could open interest-bearing accounts, the LCCU led the
way for other credit unions and eventually other financial
institutions to open transaction accounts using ITINs. The
credit union also helped charter the Latino Community
Development Center, a statewide nonprofit with the goal
of supporting CBOs.

E. MARTIN HELDRING
Harris Bank-Glencoe
E. Martin Heldring is president and CEO of Harris BankGlencoe. As a representative of a large Chicago bank
owned by a foreign bank (Bank of Montreal), with personal
experience running a bank branch in a foreign country
(South Korea), Heldring discussed the challenges facing a
larger institution in changing corporate culture.

panels, to respond to the growing Hispanic banking
market. “In a big organization, it’s not like you can go into
one room and say, ‘We’re going to do this.’ [The decisions
involve] legal, audit, compliance, marketing, operations,
systems, technology, and I’m just touching the basics.”
Heldring added, referring to hiring of Spanish-speaking
staff, “Our [human resources] department came to us
and said that test I mentioned to see if someone spoke
Spanish would cost us $500,000 to produce…We ended
up going to an outside service that cost $25 a time, but
that took nine months [to approve].”
Heldring noted some early hurdles in addressing the
Hispanic market once the bank’s management did decide
to pursue it. A branch in a Chicago suburb, Waukegan,
was turning away 90 percent of loan applicants because
of documentation rules. Without a Social Security number
or credit history, there was no basis at the time on which
to approve a loan. Even in establishing a deposit account
the bank encountered difficulties. The bank has a policy
of running credit checks on applicants for transaction
accounts. Heldring stated that in the late 1990s the
bank had a wire transfer service, but it took two days
for the funds to arrive at their destination. The bank
was competing with services that could transfer funds
in a few minutes. Harris partnered with Bancomer of
Mexico to offer a more competitive wire transfer service.
As had many previous speakers, Heldring emphasized
the importance of community partnerships. The bank is
approached frequently by various groups, and some early
partnerships, “…weren’t as productive as we had hoped,”
he said. He stated that the bank is only interested in
long-term relationships with partners seeking to address
community needs, including financial education of
immigrants.
Despite early challenges, Harris was a leader among
the larger Chicago retail banks to address the Hispanic
market, Heldring noted. The bank was the first among
large Chicago banks to introduce a Spanish language
Web site and bilingual call center, and recognized at an
early stage the need for financial education. Still, for
some a deposit account is not the answer, “There are
some people who can’t deal with banks and some who
don’t want to deal with banks…so we launched Harris
Express, which provides check cashing, money transfer,
and bill payment, all to those who are unbanked.” In
closing, Heldring stated that the bank, after success with
the Hispanic initiative, moved aggressively to address
other immigrant populations and is now researching new
features for ATMs that may include the ability to wire
funds.

In the early 1990s, Heldring noted, Harris was not quick,
in contrast to the community banks represented on earlier

Profitwise News and Views Special Edition

October 2004

27

Keynote Address
Remarks by Henry Cisneros
Chairman, American CityVista and
Former Secretary of Housing and Urban Development

This is a coming home moment for me in a number of
ways. Obviously, being introduced by a person that officed
right next to me for four years, and we were inseparable
for hours and hours of the day, is special. But also present
here this evening, and you’ll hear from him tomorrow, is
the present assistant secretary of HUD for housing, the
housing commissioner of the United States. It’s also the
job that includes the FHA commissioner of the United
States, John Weicher, who is a very distinguished public
servant having served at HUD during the Jack Kemp
years and then returned in this administration.
John, very good to see you and congratulations on your
wonderful work at HUD, and of course, President Moskow
of the Federal Reserve Bank of Chicago. I feel very close
to the Federal Reserve System. I had the privilege of
serving on the Dallas branch bank before going into the
Cabinet; it was a wonderful experience. It gave me as
a business person then, kind of unique insights into the
decision making process of the Federal Reserve. And
then, during the years that I was at HUD, I maintained a
strong relationship with the chairman and was privileged
to watch from the vantage point of Housing Secretary, the
effects of Federal Reserve decision making through the
‘90s and what it meant for our country: obviously, one of
the longest economic expansions on record as a result
of that solid economic management, low interest rates,
employment growth, record job creation, wage increases,
declines in poverty rates, the lowest poverty rates for
minorities on record since the creation of the indices
in the 1960s, record homeownership rates, and then
economic effects on social indicators like infant mortality
rates and such. That was the legacy of a long economic
expansion and we can all respect the work of the Federal
Reserve decision makers; I certainly do. And Mr. Moskow,
thank you for giving attention to this subject by your
presence and by cosponsoring this with the Brookings
Metropolitan Center. In many ways that kind of economic
progress, evolution if you will, for our country makes this

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October 2004

conversation, the subject of this conference, possible and
productive.
My perspective on the convergent themes of this
conference are several. First, I speak to you as a son of
an immigrant mother, of immigrant grandparents. I live in
my grandparents’ house in an immigrant neighborhood
of San Antonio, the west side Latino community of San
Antonio today. It’s not unusual as the house quiets down
for the night to hear voices out on the street walking along
the sidewalk outside of my house, and it’s quite likely that
there are people who’ve arrived literally within the last
hours or days in our neighborhood. The church that we
attend, the Catholic parish, one block from my home, when
we left for Washington in 1992, was a church that was
almost empty on Sundays, maybe a quarter full, mostly
older people in a neighborhood that had been in decline
as the young people moved on and older folks died off.
We came back in 2000, to that same neighborhood
and the church is absolutely packed, literally cannot get
into it on Sunday at the 10:30 mass or the 12:30 mass
for the number of immigrants who now populate that
neighborhood.
The San Antonio experience is not dissimilar from what
other cities are experiencing. It’s a truly powerful, in our
community, revitalizing, energizing impact, so I speak to
you from that perspective, as well as, Bruce suggested,
having served as president of what is now the fifth most
watched television network in the country. After ABC,
NBC, CBS and FOX comes America’s Spanish language
network Univision, a testament to the number of people
who are watching Spanish language television. And I
watched from that perspective, the evolution of thinking
about what has been called assimilation, give way to
another concept of ‘acculturation,’ as fewer people sort
of move automatically into the mainstream of American
society and instead maintain dimensions of their own

culture, not just Hispanic, but a wide range of cultures
across America.
I also speak from the perspective of the professional
work that I’m doing today, which is working on building
homes in communities and seeing the dynamics of
rising immigration and rising economic prospects for
immigrants play out in America’s cities. In the 1990s,
New York achieved the highest population in its history,
eight million people, largely because it is the number one
destination for immigrants among America’s cities. You’ve
seen the resurgence of entire neighborhoods, such as the
Bronx, and a virtual United Nations honor roll of nations
from which immigrants come to New York: Dominicans,
Chinese, Russians, Eastern Europeans, Israelis, Mexicans,
Middle Easterners, Africans, and people from the
Caribbean.
In Houston, Rice University professor of sociology
Kleinberg has just finished an analysis in which he charts
the evolution of Houston as a city in two dimensions, what
he calls the two revolutions of Houston, the economic
transformation from an old industry oil energy capital to a
kind of new broad-based, small business entrepreneurial
city, and the revolution associated with the demographic
change that’s occurring in Houston, which has become
the number one destination for Nigerians in America, for
example, because of the old oil connections. The Hispanic
community of Houston is now the largest in Texas having
surpassed my hometown of San Antonio. But it’s not
because of Mexicans, it’s because of Guatemalans,
Hondurans, El Salvadorians, other Central Americans who
have gone to Houston.
And of course Chicago reversed 50 years of decline in
the census pre-2000. For five previous census, Chicago
had a smaller population than the previous ten years, until
2000, when the tide was turned. And it was again, largely,
experts agree, a function of the immigration increases.
Absent the immigration increases, the decline would have
continued. Today as those of you who live in Chicago
know in many neighborhoods the issue is how to deal
with overcrowded schools. Ten years ago the issues were
the closing of schools in many neighborhoods that simply
were not being utilized.
Other American cities without immigration have paid
the price for the lack of being a sufficient economic or
social magnet. City council members in Philadelphia have
debated how to offer incentives to immigrants to come to
Philadelphia, and a front page Wall Street Journal story
on Pittsburgh describes the efforts there of minority
communities to attract other immigrants to Pittsburgh for
the benefits that they will bring. We see similar effects, not
just in the major cities, but in other parts of our country
which are dramatically impacted by immigrant flows:
Arkansas, whose Latino population grew by 400 percent

in the 1990’s; Georgia, immigrants of multiple nations
go to work in the textile industries of Georgia; North
Carolina, textiles and furniture draws immigrants there;
meat packing in Kansas and Nebraska; and migrantrelated work in Washington state. It is truly a national
phenomenon and it’s impacting big cities and small
communities all across America in profound ways.
The final perspective that I would give you is from a role
that I play in San Antonio as a former mayor, and active in
economic development, and it comes from a recent series
of visits to Japan. In association with the attraction of a
major Toyota plant, which is located in San Antonio, about
an $800 million plant that will employ 2,500 people and
produce the Toyota Tundra in a poor neighborhood of San
Antonio. It is the absolute dream moment for a former
mayor involved in economic development, and I must say
that at least part of the Toyota calculation as to where to
locate that plant was driven by these same factors.
They, Toyota, under-perform among Latinos, and Texas
has the second largest Latino population in America; it’s
also the most pickup-driving state in America. You put all
those factors together, and it results in a plant in a place
where they can market the fact that they are producing
vehicles for this community.
In any event, during this trip we met with leaders of the
Japanese Kaydondron, which is kind of an amalgam of
their top business leaders and governmental leaders, and
they were decrying. These are the top business leaders
of Japan, in private conversation, decrying the loss of
population they project over the course of the next 40
years or so. It’s a fearsome subject for them because
this is a free enterprise economy that will have a smaller
market. We haven’t experienced that in the developed
world before, in modern, developed, industrial nations such
as Japan.
It is a prospect that confronts not only Japan, but also Italy,
Germany, and France, which traditionally have had serious
issues, to put it mildly, with immigration. The Japanese
basically are very tough on immigrants and Koreans who
go there have a very difficult time. The Germans, the
Italians, the French, similarly, – we all follow the news, I
won’t get into that here – but the fact of the matter is, they
are going to confront issues of Social Security adequacy,
of health systems financing, and of military staffing
because of their population dynamics. The United States
of America will not confront those problems.
We will have other issues, but declining population, loss
of economic momentum or energy, and loss of markets
will not be an issue because we are an immigrant nation.
And even as we have one population group that ages,
so we have other population groups that are young and
characterized by large families. And they will not only

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29

rejuvenate neighborhoods and communities, but provide
markets for the American economy.
While I was at Univision we did an analysis of the
automotive industry, and it showed that at about 2008 or
so, absent immigrants and minority purchasers, the growth
in immigrant and minority automobile purchases flatten
out in the United States. It is only when you reinsert those
immigrant numbers that they grow at about 100,000
automobiles per year – as I say, beginning about 2008. So
this is a real economic issue and immigrants will play an
essential role in the American social and economic future.
It is a corollary that financial services are not a luxury, and
cannot be thought of as something that is somehow nice,
but not essential. I would argue that financial services
in modern America are as essential a utility, if you will,
as water or electricity in our cities. Once upon a time
you could live without piped water or electricity, but in
a complex, modern, integrated, specialized society, we
fundamentally cannot; and we have evolved to the point
where basic financial services are in the same category in
our modern urban communities.
This conference focuses both on the inadequacies of
availability of financial services, and therefore, corrective
steps as well as recognition that the market is moving
quickly. Many people in this room are moving to fill the gap
and provide financial services, and therefore, will provide
insights and guidance – sort of constructive suggestions
– about how to move the ball forward. In both respects
this conference is important.
I know that you’ll be talking about traditional services:
checking, savings, ATM, credit card, very important basic
services. Many immigrants have little experience with
these and because they are reluctant to engage, create
problems for themselves in the long run because they
have no banking records or experience. We run into that
all the time in our work. We’re also seeing an evolution
towards more sophisticated products, such as insurance
and the recognition of insurance. Many immigrants
understand basic life insurance and will make sacrifices
to get insurance, but simply don’t have the knowledge of
more sophisticated types of disability insurance, long-term
care insurance, and other important financial products for
the long run. Retirement products, investments in stocks,
bonds, mutual funds, and CDs, are sort of the next step
in the evolution of financial sophistication in immigrant
communities.
Housing and mortgages, obviously, are critically important.
For most Americans the sum total of their net worth is
the equity they have in their homes, and when we see a
homeownership gap of the dimension that continues to
exist, obviously I am very proud of the work that we did on
our watch. I am proud of John, the present secretary, and
the administration, to continue shoring up and boosting

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Profitwise News and Views Special Edition

the national homeownership rate. It’s now the highest
in American history; the homeownership rate is over 68
percent. The White homeownership rate is 74 percent,
and although the minority homeownership rate grew at the
fastest rate on record during the 1990s, in recent years it
is still only 48 percent. Sixty-eight percent is the average,
74 percent is the White percentage, and 48 percent is the
minority – a 26 point gap to the White rate.
It would be bad enough if that gap suggested only a gap
in the honor of being a homeowner, but what it really
represents is a gap in access to the levels of wealth, to
the basic instrument, the first instrument of amassing
something beyond income that represents savings, wealth,
and equity in our society. So it is critically important to
address the gap in mortgage opportunities as part of the
discussions at this conference.
Small business loans, access to capital for small
businesses is another subject that you will be covering. In
Texas I was looking at some numbers today, the African
American community is 11 percent of the population of
Texas, but owns only four percent of small businesses
in Texas. The ratio is 37 African American businesses
per thousand population, against 184 businesses per
thousand in the White community; vast differential. Any
way you look at it, whether number of loans, size of loans,
or number of rejections, the numbers are badly skewed in
our society with respect to small business loans for ethnic
minorities. And of course, immigrants are buried within
those numbers. Then of course, the issue of remittances
and international linkages, which are hugely important in
immigrant communities, and companies that charge huge
amounts for providing remittances.
Let me share with you a few overarching observations,
if I may, related to this range of subjects that you’ve
already addressed today or will address in the conference
tomorrow. Just a number of random observations, if you
will, and I speak not as a scholar, or as a researcher, but
from the perspectives that I’ve already described as my
vantage point for thinking about immigrants and their
financial needs.
The first is that immigrants and American minorities
generally are now a core business concern. As I tried to
describe a moment ago in the statistics I cited, relative
to the automotive industry, in industry after industry
in our country, companies must decide whether or not
they are going to treat immigrants as a core business
strategy issue. In my judgment, those that get it, those
that understand that basic reality, will grow, and others
will find themselves in another decade wondering why it
is that they stagnated, why it is they didn’t grow. And it’s a
basic strategic question of whether or not they’re going to
address the immigrant and minority markets.

October 2004

Secondly, many companies will understand that they have
to innovate with respect to the practices with which they
address immigrant communities, particularly those related
to creating access; that will mean user-friendly locations.
There’s a lot of interesting discussion about locations and
whether or not mainstream financial institutions should go
into minority communities as themselves, or as an entity
with another face, with another name, as many financial
institutions do. I’ve even read that some institutions that
think they ought not put their best foot forward, ought
not put their nicest retail location in a minority community
because it would make people uncomfortable, and they
want something that’s a little less grandiose in a minority
community. I think that’s falling victim to urban myths.
Minorities are, like every other community, complimented
by the best corporations can put forward and that means
strategic locations, it means user-friendly material,
language appropriate materials. It means companies
position themselves by their advertising, how they position
themselves with respect to the community and it means
perhaps, training staff to provide comparative examples
between products and techniques utilized in the United
States and things that they may encounter in their home
countries where either legal or financial practices are
different. And all of those things are simply practical

“...recent arrivals or arrivals within the last five years
are in a very different financial and life situation than
people who have been here for a longer span of time.
We know that homeownership is a huge goal, for most
American immigrants, particularly for Latinos for whom
the land, la tierra, is something you can control and own
and have the honor of being the homeowner...”

dimensions of relating to immigrants and relating to the
marketplace in an effective way.
Another dimension of this third point, is that with
immigrants, as with respect to every other population,
one must be mindful of the phases of life. That is to say,
recent arrivals or arrivals within the last five years are in
a very different financial and life situation than people
who have been here for a longer span of time. We know
that homeownership is a huge goal, for most American
immigrants, particularly for Latinos for whom the land, la
tierra, is something you can control and own and have
the honor of being the homeowner; inviting family over, of
having family celebrations, is hugely important and they
work very hard for it.

Roberto Suro and Pew have published some data on
this in recent months that shows the rapidity with which
immigrants work at becoming homeowners, and therefore
need the kinds of financial services we’ve described. So
there are differences between recent arrivals, people who
have been here for a while, and second generations, and
all of those require financial strategies targeted to those
phases of life.
A fourth point I would make is the importance of staffing.
It will mean hiring people who can relate to immigrant
communities and yes, that does mean hiring persons of
similar ethnic backgrounds, and it does mean focusing on
issues of language. But in my experience, hiring people of
the same ethnicity and language is probably not enough
because there is cultural nuance. Some of the greatest
disrespect I have seen towards Hispanics is from other
Hispanics who think they are at a higher state of life or
education or sophistication, and look down on people
in the almost kind of ‘padron’ way that we see in Latin
American nations. These sort of class differentiations can
be very painful for people who come for financial services.
Time and again I’ve seen people who show up in blue
jeans and scuffed boots with the big cowboy belt and a
big buckle and rough calloused hands of a construction
worker who have need for financial services and real
capabilities but never get respect. They walk in with a shy
demeanor because they’re ashamed of their pronunciation
of the English language or because they are ready to
accept the disrespect that will come because of their
social station in life. It is, for me, a very painful thing to see,
forget the level of analysis or public policy, just as a human
being to see people treated in that way.
I recently had the opportunity to attend a church service
in Phoenix, a Catholic service in downtown Phoenix, and
the priest asked me to say a word, and I did. And then he
asked me to stand with him at the back of the church as
the parishioners came out and greet them. And I wanted
to learn something from the experience, so I asked every
family what they did and no exaggeration, every single
worker, male, who came out of that church had a family,
was in construction – every single one was in construction
– and they dressed as if they were in construction and
I could imagine how they would be viewed by someone
who did not understand the pride of owning a pickup
truck and a wheelbarrow and some tools and being able
to head out and do driveways and curbs in the Phoenix
area, and would be looked down on in the air conditioned,
carpeted, nice setting of a financial institution. And yet I
know that those people are very proud of their capabilities,
have real resources, have real businesses because most
of them introduce their sons who are working with them
in the business and now have a business that is a thriving
enterprise that’s really going to amount to something.
The staffing is important because it adds a human face

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31

to financial services that are increasingly technologically
driven and it will be very important to have people who can
interface, who can interpret, if you will, the technological
processes and who can bring judgment and as I say,
cultural nuance to financial transactions.
A fifth point is that we have to be cognizant of the abuses
that occur in the financial environment. I serve on the
board of Countrywide Financial, the largest non-bank
mortgage provider in the United States and we constantly
wrestle with these issues; the line between sub-prime
lending and what crosses over into predatory. I’m not
particularly proud of this, this is something that pre-dates
my service but Countrywide offers its prime mortgages
in the name of Countrywide and its sub-prime in the
name of a company they call Full Spectrum Lending, it’s a
completely different company.
Now I’m not suggesting that they come anywhere near
the line of what would be predatory but they feel a need
to market the sub-prime in a different way. Now, subprime in and of itself is not a bad thing, were it not for
sub-prime many people, many minorities would not be
able to get mortgages because the risk analysis of their
financial situation requires a higher price, it is an actuarial
calculation that results in a higher price and pushes them
over into the sub-prime world. That is a business reality
of the situation but it does require thoughtful analysis of
this whole area of sub-prime. I have a great respect for
Frank Raines, the chairman of Fannie Mae who served
as the head of the Office of Management and Budget in
the Clinton administration, top flight business person of
high integrity and he believes that we need to find ways
to articulate the truth about sub-prime, how it works,
and how it can be made available to people and what
a significant part of the answer it is in many minority
communities.
It is also true, we have to be careful however, to avoid
automatically pushing people who ought to be prime
lending candidates into sub-prime because of who they
are, because of how they look, or because of external
dimensions of their characteristics. So this whole area of
sub-prime lending is critical as we think about minority
communities. And then of course, there are the things
that do cross the line; payday lending, check cashing at
exorbitant rates, rent-to-own stores, home repair financing,
extra charges for remittances, auto title lending, all kinds
of devices that people have come up with that are not
regulated, that suck money out of minority communities
because other vehicles are not available to them. And
obviously, a lot of thought and a lot of attention needs to
go into those things.
The sixth point that I would make is the importance of
financial education, of financial literacy and I know that
this is a subject on the agenda here. I won’t dwell on it

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other than to say that it is critically important because so
many immigrant individuals in our society and minority
individuals get themselves in trouble without even knowing
that they are heading in that direction or without knowing
that they are in trouble. Time and again we run into people
who have financial capability but their credit record is
a disaster for decisions they made five years ago, or
automobile payments they didn’t make five years ago. It’s
critically important that we educate people in the forums
where they can be reached early about the implications
of financial decisions that they make; it is in all of our
interests to do that. It is critically important that we start
with the very young. I’m working right now with Bob
Litan, who you’ll remember was at OMB, who is with the
Kauffman Foundation now in Kansas City, a foundation
that gears itself to entrepreneurship and small business
lending. And we’re working on creating a curriculum for
high school students that can teach them the workings of
the American economy and personal financial literacy in
order that we can begin to, at that level, explain to young
people the problems associated with making bad financial
decisions.
Financial education will also allow financial institutions,
collectively, to help make the market among immigrants.
When you watch an NBA basketball game and you
see the Fannie Mae Foundation advertising the joys of
homeownership, it is because they are trying to reach
particular demographics who they believe have issues in
homeownership or credit and are attempting to articulate
a message, a targeted message, helping to make the
market for the long run. This is not something that’s going
to reap immediate benefits to any company or even the
sector, but it is an essential underpinning of building the
market for the long run.
The seventh point I would make deals with legal issues
and I don’t know to what extent you will address those
in this conference, but the issues associated with
documentation of immigrants are very large and important.
In the home mortgage field, most mortgages cannot be
made, even with a Matricula Consular without a Social
Security number and there may be perfectly good
reasons for that. Now there are financial institutions
who are pushing the edge. I know of several banks, for
example, who are offering mortgages with the skimpiest
of documentation, they are willing to carry the paper and
make mortgages. The whole country has to address this in
a rational way. I think its part and parcel of the immigration
discussion, its part and parcel of the security issues
discussion, privacy issues and a lot of other things, but
I do know that one of the absolutely major impediments
in the mortgage field to tapping the full potential among
immigrants is the documentation questions. You cannot
attend a minority, either Hispanic or other immigrant,
real estate meeting without the focus being how do we

October 2004

solve the problem of documentation if we want to extend
mortgages further.
And, finally, the eighth point that I would make, just again
random observations, is the importance of other financial
vehicles beyond the traditional; vehicles such as credit
unions, vehicles such as community development financial
institutions and others which can offer credit and financial
services in places and in ways that traditional financial
institutions may not.

diversity is celebrated and our system allows everyone
to find their place. All so that we can, in a modern sense,
harken back to John Adams time and say truly, with
absolute sincerity and significance that we live in one
nation, under God, indivisible with liberty and justice for all.
The subject of this conference deals with no less profound
subjects than that. Thank you very much for allowing me to
be with you.

Let me close simply by saying that this discussion is
fundamentally about expanding national opportunities,
not only for those
who are immigrants
themselves but for
“It’s critically important that we
our economy and
educate people in the forums
the institutions that
where they can be reached about comprise it. It’s
about giving people
the implications of financial
the full range of life
choices because
decisions that they make early,
what we’re talking
it is in all of our interests to do
about in financial
that. It is critically important that services is exactly
that. As I said at
we start with the very young.”
the outset, it is a
fundamental part
of the mechanics,
the lubricants if you will, that move a modern enterprise
society, and we have to extend the full benefits to all of our
citizens.
I’m a believer in the inevitable march of human progress
and to me one of the most sort of beautiful ideas that
captures it is a quotation from John Adams who in a
letter to his wife Abigail, mused on the progression of life
and service and work. Paraphrasing, he said “I study war
and diplomacy so that my sons can study commerce and
agriculture and the building arts so that my grandchildren
can study the arts and literature, music, horticulture and
the humanities.”
I’ve often thought that there’s a sort of modern analog to
John Adams framework. It’s possible for this generation of
Americans to say, our fathers and mothers worked through
a depression, won a world war against fascism, and beat
dreaded diseases like Polio so that my generation could
participate in a civil rights movement, advance the rights
of women in our society, send men and women to space,
and work to tame the vagaries of the economic cycle.
That creates stability in which people can prosper so that
our children’s generation can make meaningful progress
on things like the global environment, conquering world
diseases, and ravages such as cancer, creating enduring
and respectful peace around the world, and building
a society in which everyone has a place, in which our

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Friday, April 16, 2004

Remarks by Ben Bernanke
Governor, Board of Governors of the Federal Reserve System
The Case of Remittances

I am delighted to join you here at the Federal Reserve
Bank of Chicago to address this conference on financial
access for immigrants.
As everyone attending this meeting knows well,
immigrant communities in the United States have
become increasingly visible as well as economically
important. Unlike some earlier periods, during which
political refugees made up a larger share of the inflow
of migrants to the United States, most immigrants
today come for economic reasons, driven by the hope
of making better lives for themselves and their families.
Immigrants today tend to be younger than in the past,
and in most cases they are imbued with a strong work
ethic and an entrepreneurial spirit. Indeed, although they
represent about 11 percent of the U.S. population as a
whole, immigrants today constitute nearly 13 percent
of the labor force (Population Resource Center, 2002).
Even more impressive, when we consider the limited
financial resources of most immigrants, is the rate of
entrepreneurship among the foreign-born; at 10 percent,
this rate is nearly equal to the 11 percent rate of business
ownership of people born in this country (Camarota,
2002). The positive values and attitudes of most
contemporary immigrants hold the promise of upward
mobility, particularly for the second and third generations,
and they help to make immigration a key source of
American economic dynamism.
As we discuss the barriers that immigrants must overcome
to achieve full integration into American society, we
should keep in mind that virtually all of us here are
immigrants, even if at some remove. To speak personally
for a moment: All four of my grandparents were foreignborn, coming from Europe to the United States either just
before or directly after the First World War – a period,
incidentally, that represented a high-water mark of
immigration to the United States.1 My grandfather Jonas,
who came to the United States from Austria after a stint

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October 2004

in the army of the Emperor Franz Josef, was probably the
most entrepreneurial member of my family. He put himself
through school and became a pharmacist in New York
City, on the East Side. He didn’t like working for someone
else, however, and so he resolved that he would become
the owner of the pharmacy where he was employed.
The owner was interested in selling, and my grandfather
had some savings, but not enough to meet the owner’s
price. Evidently impressed by the young man’s potential,
the storeowner agreed to lend my grandfather, on a
handshake, the $1,000 he needed to buy the pharmacy,
with the remainder to be paid back out of future profits.
My grandfather, who had the restlessness characteristic of
many immigrants, owned several drugstores around New
York City before finally buying a store and settling in what
became my hometown of Dillon, South Carolina. My father
and his brother purchased that same South Carolina store
from their father with the same type of owner financing
that Jonas had used in New York. I understand that they
even got a good interest rate.
My grandfather’s method of financing the purchase of
a small business, as well as his subsequent sale of the
South Carolina store to his sons, illustrates the traditional
importance of informal networks, especially family
networks, in the financial lives of immigrants. Informal
credit networks have some important advantages; for
example, lenders in informal networks tend to know their
borrowers well, and borrowers may feel a particularly
strong obligation to repay lenders who happen to be
friends or family members. But informal credit networks
also have important drawbacks, such as limits on the scale
of financing and on the range of financial instruments
available. As the papers and discussions at this
conference have emphasized, full economic integration
of immigrants requires that they have access not only to
the informal financial sector but also to the formal one,
including banking, insurance, pension funds, and other
institutions. Only by using such institutions will immigrants

successfully expand their range as entrepreneurs, become
homeowners, build credit histories, save for retirement,
and insure against financial and other risks.
How do we provide immigrants, many of whom have little
experience with financial institutions, with access to the
U.S. financial system? Many approaches are possible. At
the risk of anticipating some of the themes of a session
to be held later today, I will talk briefly this morning
about the provision of remittance services as a way to
bring immigrants into the formal financial sector. This
topic is especially appropriate because, as I will discuss,
the Federal Reserve System has recently expanded its
support for international money transfers. However, I
should say that my remarks today represent my own views
and not necessarily those of my colleagues in the Federal
Reserve System.2
***
Many immigrants to the United States send substantial
shares of their earnings – sometimes half of their incomes
or more – to family members in their home countries. The
U.S. Department of
Treasury estimates
that remittances
“...full economic integration of
to developing
immigrants requires that they
countries totaled
more than $90
have access not only to the
billion last year.3
informal financial sector but
These remittances
have a significant
also to the formal one, including
economic impact
banking, insurance, pension funds, on the receiving
countries.
and other institutions.”
Remittance flows
to developing
countries typically
exceed official development assistance, are similar in
magnitude to foreign direct investment, and are more
stable than either of these other flows. For example,
in 2002, the Latin American and Caribbean countries
received $32 billion in remittances, of which $25 billion
came from immigrants to the United States. These
remittances constituted about 2 percent of the gross
national products (GNP) of the region in that year.
In 2002, remittances from citizens working abroad
accounted for nearly 30 percent of the GNP of Nicaragua,
25 percent of the GNP of Haiti, and 15 percent of the
GNP of El Salvador. Mexico receives the largest absolute
amount of remittances in Latin America – about $9
billion in 2002.4 Just-released figures show that total
remittances to Latin American and Caribbean countries
in 2003 rose about 19 percent from the total in 2002,
to $38 billion (Inter-American Dialogue Task Force on
Remittances, 2004).

Who sends remittances? In its report, Billions in Motion:
Latino Immigrants, Remittances, and Banking, the Pew
Hispanic Center/Multilateral Investment Fund (2002)
profiled a typical remitter. Of Latinos in the United States
who send remittances to their home countries, 63 percent
are under the age of forty, 59 percent have not completed
high school, 72 percent rent their homes, 54 percent
speak little or no English, and 64 percent of those who
are employed are low-skilled laborers. One would not
expect this group to be financially sophisticated, and that
expectation is borne out by the data. The Pew Center
found that 55 percent of these remitters do not have
credit cards and 43 percent do not have bank accounts.
In particular, Latino immigrants, about half of whom
send remittances, tend not to use banks when sending
money home, employing services such as wire transfer
companies instead. For example, in Los Angeles,
according to the Survey of Financial Activities and
Attitudes administered by the Office of the Comptroller
of the Currency, 37 percent of immigrant remitters used
wire transfers, compared with only 14 percent of nonimmigrants who remitted. Immigrants are also much
less likely to have any kind of banking relationship. In
Los Angeles, only 53 percent of low- and moderateincome immigrants reported having a bank account,
compared with 82 percent of low- and moderate-income
non-immigrants. Concern that opening a bank account
may require proof of legal residence may inhibit some
immigrants from doing so, in fact, many banks now
accept foreign-provided documents such as the Matricula
Consular; but lack of knowledge about the services banks
offer and the fees they charge is likely an important
factor as well. Indeed, the Pew Center study found that, of
remitters without bank accounts, fewer than 25 percent
understood that sending a remittance through a bank was
even possible.
Supporting the idea that information and previous
experience are critical for financial access, the research
of Una Osili and Anna Paulson (2003) found that the
propensity of immigrants to the United States to use
financial services is closely linked to their financial
experience in their home countries. In particular, these
researchers found that immigrants from financially
underdeveloped countries, like most of those in Latin
America and the Caribbean, are significantly less likely to
participate in U.S. financial markets than are native-born
people of similar age, education, and income.
I do not mean to imply that using nonbanks such as money
transfer companies for remittances is a poor choice in all
circumstances. Nonbank providers of remittance services
vary greatly in quality, and in some cases nonbanks
can provide better service or greater convenience than
banks can. For example, wire transfer services may
allow remittances to be sent to rural areas of the home

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35

country where access to banks (which tend to be urban
institutions) may be limited. Anecdotal evidence suggests
that some nonbank providers are attractive to immigrants
because of their “personal touch” – a Spanish-speaking
agent who lives in the community, for example. Moreover,
increased competition among providers has lowered the
cost of sending money home through nonbanks as well as
banks. According to Manuel Orozco (2003), who has done
much interesting research on remittances, the typical cost
of sending remittances to Latin American and Caribbean
countries has fallen from 15 percent of the principal
amount in the 1990s to between 5 percent and 9 percent
today, depending on the receiving country.
Nevertheless, typical nonbank fees for remittances remain
high on an absolute basis, and consumers who deal with
the less-scrupulous providers of remittance services may
bear a significant financial cost. One problem in practice
is that users of remittance services often do not know
precisely how much they are paying. For example, many
remitters do not appear to be aware that some services
exchange dollars for foreign currencies at rates less
favorable to the consumer than the market-determined
exchange rate.
A related concern is that regulatory oversight of nonbank
remittance services remains somewhat uneven, both in the
United States and
in the immigrants’
home countries. In
“Indeed, the Pew Center study
the United States,
found that, of remitters without
federal law requires
funds transfer
bank accounts, fewer than 25
services to register
percent understood that sending
with the Treasury
a remittance through a bank was Department, but
these laws are
even possible.”
concerned primarily
with preventing
money laundering
rather than with
protecting consumers. The consumer protection rules that
exist in the United States are set mostly at the local level.
For example, 28 states and the District of Columbia have
regulations requiring transfer services to be licensed by
the state banking agency, and some of these states have
specific laws regarding foreign transmittals. California
has a mandatory disclosure law that requires funds
transfer services to provide each consumer with a posttransaction receipt, in English and in the language used
by the wire transfer licensee, listing the fees charged, the
amount presented by the customer, and the amount to be
delivered to the beneficiary. In June 2003, Texas passed a
similar law, under which consumers are entitled to receive,
upon request, certain pre-transaction disclosures from
money transmitters, including the exchange rate that

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applies and the amount that will be paid in the foreign
currency.
Of course, these protections are effective only to the
degree that consumers know their rights, such as how
to file a complaint. It is interesting that one of the more
effective sources of information about remitters’ rights
in the United States is Profeco, the Mexican consumer
protection agency. Profeco provides consumers with
practical advice about how to remit money to Mexico,
including information on the costs of remitting, a
comparison chart of the prices charged by 23 money
order transmitters in eight U.S. cities (updated weekly),
and information about where to lodge complaints, both
in the United States and in Mexico (through a toll-free
number).
Beyond the quality and cost of remittance services
provided by nonbanks, however, another factor should be
considered, by using nonbanks for making remittances,
many immigrants forgo the opportunity to enjoy the wider
benefits that arise from an established relationship with
a bank. A money transfer company, for example, cannot
provide the opportunity to open a savings account.
As you would expect, mainstream financial institutions
in the United States are aware of the potential financial
return to serving immigrant populations, both in
facilitating remittances and in performing other types
of financial services. Indeed, immigrants have become
just too important economically to ignore. According to
the University of Georgia’s Selig Center, the Hispanic
market represented some $653 billion in purchasing
power in 2003, about 8 percent of the U.S. total, and the
Asian market represented another $344 billion, about
4 percent of the total (Humphreys, 2003). According
to the data from the Federal Reserve’s 2001 Survey of
Consumer Finances, more than 44 percent of all Hispanic
households own their own homes, a statistic that implies a
demand for mortgage loans, insurance, and other services.
Reflecting this growing potential market, a 2003 survey
of 340 banks by the American Banking Association
found that 47 percent of these banks are either “active
in multicultural marketing, or plan to market to different
ethnic groups.” Almost three-fourths of the banks that
target various ethnic communities tailor their marketing to
reach Hispanics.5 Some of the more-successful programs
involved a financial training and literacy component. For
example, a community bank in Rogers, Arkansas obtained
many new immigrants as customers through financial
seminars offered through local operators of poultry farms,
the principal employers of immigrants in that community.
In another example, a Chicago-based bank leveraged
its relationship with small-business clients to provide
financial education and services to employees who had
not previously had bank accounts. As a result, numerous

October 2004

immigrant employees established relationships with that
bank.
The provision of remittance services is a potentially
effective method by which mainstream financial
institutions can attract unbanked immigrants. If
immigrants establish bank accounts for the purpose of
sending remittances, they become far more likely to avail
themselves of other services offered by the institution,
including direct deposit services, savings accounts, and
consumer loans. An article by the Federal Reserve Bank
of Boston (Samuels, 2003) identifies several steps that
financial institutions must take, beyond identifying a
local population with a demand for remittance services,
to establish successful remittances programs. First,
institutions can realize great advantages by hiring staff
members who speak the immigrants’ language and are
otherwise familiar with the immigrant community. Second,
institutions should establish outreach and financial
education programs (in the appropriate language, of
course) that will help members of the targeted group learn
about the financial services that the institutions provide.
Of course, these two steps are useful as part of any
marketing program to immigrant or ethnic groups. Third,
and importantly, the institution must offer sufficiently
competitive prices for remittance services to overcome
what reluctance remains.
Controlling the cost of international money transfers
can be achieved in a number of ways. One strategy is
to employ an existing money transfer network, such
as SWIFT.6 Establishing a partnership with a financial
institution in the home country of the group to be
served is a second viable approach. For example, the
Federal Reserve Bank of Boston article referred to
earlier (Samuels, 2003) provides an interesting case
study of how Citizens Bank, a regional bank operating
in the Northeast, created a remittances program for an
immigrant population from the small African country
of Cape Verde by forming partnerships with two banks
from that country. A number of banks have pursued a
third strategy – entering the remittances market through
partnerships with existing money transfer organizations.
Although this strategy has some potential for abuse if
mismanaged by the bank, the combination of the transfer
service’s transmission infrastructure and the bank’s
marketing services and branch network is likely to reduce
costs, making lower charges to the consumer feasible
(Orozco, 2003).
Yet another increasingly popular approach for banks is
to build remittance services on the existing networks of
automatic teller machines (ATMs). Orozco (2003) notes
that Bank of America and Citibank have recently adopted
this model. Bank of America’s SafeSend program and
Citibank’s Money Card program issue debit cards to a
person in Mexico designated by the U.S. remitter, allowing

the recipient to gain access to funds transmitted from
any ATM. Remitters are typically charged a flat fee for
the transfer, for example, Bank of America charges $10
per transfer. Second Federal Savings in Chicago offers
account holders an “amigo card,” a second ATM card
that can be sent to a family member in Mexico. One of
the downsides of the ATM-based approach is the lack
of access to these machines in rural areas. Most banks
offering ATM-based services therefore also offer more
traditional funds transfer services as well (Bair, 2003).
Banks still have only a small market share in remittance
services, but that share seems poised to grow rapidly.
Orozco (2003) notes that Wells Fargo initiated a
remittances program in 1996 and released its current
product, Intercuenta Express, in 2001; under this program,
amounts less than $500 can be sent to Mexico for a flat
fee of $10. In the first three years of its program, Wells
Fargo made nearly half a million money transfers to
Mexico, representing at least $100 million in revenue per
year.
Credit unions, particularly those serving predominantly
Latino constituencies, have been proactive in attracting
customers through their remittance services. The World
Council of Credit Unions began a remittances project
in 1997 and introduced its IRnet service in July 2000.
In partnership with other institutions (including Travelex,
a major retail provider of foreign exchange), IRnet now
provides remittance services to more than 40 countries.
At last report, nearly 200 credit unions in 37 states offer
this service (Herrera, 2003).
The Federal Reserve is attempting to support banks’
efforts to better serve immigrant populations, with
remittances and other money transfers being a key area
of interest. Since the late 1990s, the regional Federal
Reserve Banks and the National Automated Clearing
House Association (NACHA) have been working to
improve cross-border payments services through
enhancements of the Automated Clearing House
system (ACH). For instance, in 2001, the Reserve Banks
introduced international ACH services for payments
from the United States to Canada, and in 2003 they
added service to Switzerland and the United Kingdom.
The extensions of service to the latter two countries are
the first steps in the development of the Reserve Banks’
Transatlantic Service, which will be further enhanced to
include service to Austria, Germany, and the Netherlands
later this year. More important for remittances, in February
2004 the Reserve Banks expanded their international
ACH services to Mexico, in cooperation with the Central
Bank of Mexico. The service potentially connects any
bank account holder in the United States with any
bank account holder in Mexico, uses an exchange rate
guaranteed to be within one percent of the Central Bank
of Mexico’s wholesale rate, and costs the banks less than

Profitwise News and Views Special Edition

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37

$1 per transaction. Providing service to Mexico is also
an important step for the U.S.-Mexican Partnership for
Prosperity, an agreement designed to improve financial
linkages between the two countries. These Federal
Reserve initiatives will support U.S. banks’ ability to
serve immigrants by allowing remittances to be sent to
foreign banks at low cost. Ongoing improvements in the
infrastructure for sending remittances, collaborations
among foreign governments, and increased competition
among service providers should ensure that cost savings
are passed on to consumers.
Although the opening of ACH service to Mexico is an
important step, broader international coverage is needed
to serve the diverse immigrant population. To help meet
that need, the Federal Reserve Banks will be hosting a
conference in Atlanta this October to explore how best
to establish compatible electronic payments systems
throughout the rest of Latin America. The conference
will bring together financial-sector leaders and payments
systems experts to discuss ways to facilitate cross-border
electronic payments throughout the hemisphere. This
initiative supports a commitment made at the recent
Special Summit of the Americas in Monterrey, Mexico, to
reduce the cost of international remittances by at least
half by 2008.
To conclude, I have highlighted how the sending of
remittances is the most important type of financial
transaction for many immigrants and their families. This
fact engenders both a challenge and an opportunity. The
challenge, for regulators, researchers, and immigrant
advocates, is to ensure that remitters can send funds
to their home countries conveniently, safely, and at a
reasonable cost. The opportunity, primarily for banks and
other mainstream financial institutions, is to find ways to
leverage immigrants’ need for remittance services into a
broader relationship, one that will both be profitable for the
bank and will also provide immigrants and their families
with greater financial access.

Humphreys, Jeffrey M. (2003) The Multicultural
Economy, 2003: America’s Minority Buying Power,
Georgia Business and Economic Conditions, 63 (Second
Quarter). Selig Center for Economic Growth, Terry College
of Business, The University of Georgia.
Inter-American Dialogue Task Force on Remittances
(2004). All in the Family: Latin America’s Most Important
International Financial Flow, (January).
Orozco, Manuel (2003). Worker Remittances: Issues and
Best Practices. Statement presented to the U.S. House
Committee on Financial Services, October 1.
Osili, Una Okonkwo, and Anna Paulson (2003).
Institutional Quality and Financial Market Development:
Evidence from International Migrants in the U.S., Federal
Reserve Bank of Chicago, working paper (October).
Pew Hispanic Center/Multilateral Investment Fund
(2002). Billions in Motion: Latino Immigrants,
Remittances, and Banking, November 22.
Population Resource Center (2002). Executive
Summary Insert: 2002 Demographic Characteristics of
Immigrants, (August).
Samuels, George (2003). Banking Unbanked Immigrants
through Remittances, Federal Reserve Bank of Boston,
Communities and Banking (Fall), pp. 3-8.
Notes
1 In 1910, the foreign-born made up nearly 15 percent of the
U.S. population, compared with today’s figure, already noted,
of about 11 percent. Thus, the challenges posed by the current
influx of immigrants are hardly unique in our history.
2 I wish to thank Sandy Braunstein and members of the Federal
Reserve Board’s Division of Consumer and Community Affairs
for their excellent assistance in the preparation of this talk.
3 Testimony of Treasury Secretary John W. Snow before
the Committee on Financial Services, U.S. House of
Representatives, State of the International Financial System,
March 25, 2004.

References

4 All in the Family: Latin America’s Most Important International

Bair, Sheila (2003). Improving Access to the U.S.
Banking System among Recent Latin American
Immigrants, University of Massachusetts-Amherst and the
Multilateral Investment Fund, working paper.
Camarota, Steve A. (2002). Immigrants in the United
States - 2002: A Snapshot of America’s Foreign-Born
Population, Center for Immigration Studies (November).

Flow, Inter-American Dialogue, January 2004.
5 American Banking Association,”Banks Will Boost Marketing
Budgets in 2004,” news release, September 13, 2003.
6 The acronym stands for Society for Worldwide Interbank
Financial Telecommunication.

Herrera, John (2003). Developments in the International
Remittance Industry. Statement presented to the U.S.
House Committee on Financial Services, October 1.

38

Profitwise News and Views Special Edition

October 2004

Community Development and Immigrant Entrepreneurs
Moderator - Donna Rockin, Director, Duman Microenterprise Center and Loan Fund
Session Five

Financial Access for Immigrants: Learning from Diverse Perspectives

Session five of the conference addressed the immigrant
small business entrepreneur, reasons that immigrants
gravitate to self-employment, and innovative financing
methods illustrating the need for differentiation in products
and services to serve specific immigrant groups. Maude
Toussaint-Comeau, an economist in the Consumer and
Community Affairs division of the Federal Reserve Bank
of Chicago, related her study’s findings on the rate of
immigrant self-employment. Pyong Gap Min, professor of
sociology at Queens College and the Graduate Center of
the City University of New York, discussed the influence
of local, ethnic networks on the decision to seek selfemployment opportunities among Asians. Chen Fu Hang,
business advisor and loan officer for the Neighborhood
Development Center in St. Paul, discussed innovative
financing products and technical assistance techniques
used successfully in his community. Barbara Robles,
assistant professor at the LBJ School of Public Affairs
at the University of Texas at Austin, discussed the role
of community development organizations in fostering
entrepreneurship along the border area of Mexico and the
United States.

to have business concentration in specific communities
and neighborhoods, “…immigrant businesses are closely
intertwined with our interest in community economic
development.” Therefore, documenting the impact of
these businesses in urban ethnic enclaves is important.
In that respect, Toussaint-Comeau presented some data
that show the relative importance of the immigrant small
business sector and its contribution to small business
growth in the United States.
She explained that based on statistics available, as of
the year 1997, there were already 20.8 million firms in
existence. Immigrant-owned firms represented about 13
percent of all firms at the time. Asian- and Hispanic-owned
firms represented more than 50 percent of all minorityowned firms. From 1982 to 1997, they increased by 295
percent (see Figure 1); 70 percent of the growth came
from immigrant-owned firms, consistent with the increase

Figure 1: Growth of Minority-Owned Businesses, 1982-1997

MAUDE TOUSSAINT-COMEAU
Federal Reserve Bank of Chicago
Maude Toussaint-Comeau is an economist in the
Consumer and Community Affairs division of the Federal
Reserve Bank of Chicago. Toussaint-Comeau began by
outlining the purpose of researching self-employment
among immigrants.1 She pointed out that self-employment
is historically a common means by which immigrants
have entered the financial mainstream in the United
States. Self-employed immigrants have greater earnings
and wealth than those who are not self-employed. As
such, self-employment contributes to the socioeconomic
progress of immigrants in the country. An important factor,
she observed, is that because immigrant groups tend

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39

in population over the period. Black-owned firms during
the same period grew by 153 percent.
Despite the high growth in immigrant-owned firms,
Toussaint-Comeau noted that there are still challenges for
immigrant entrepreneurs that warrant policy consideration.
First, Toussaint-Comeau explained that Hispanic and
Black immigrants, and immigrants in general, are still
underrepresented in the area of small business ownership
in relation to their respective populations. One in 12
native born is a business owner, compared to one in 13
immigrants, one in 16 Hispanic immigrants, and one in 20
Black immigrants. Moreover, immigrant entrepreneurs are
less likely to have a relationship with a financial institution,
potentially limiting access to credit, requiring heavy
reliance on personal savings or alternative financing, and
potentially negatively affecting the long-term viability of
their businesses.
Toussaint-Comeau also discussed differences in rates of
self-employment of different immigrant groups and the
factors that may explain such differences. They include
gender, ethnicity, ethnic geographic concentration,
educational attainment, English language proficiency, and
tenure (years since migration) in the United States. Based
on U.S. Census data, she noted that the self-employment
rate of female immigrants is higher compared to that of
female native born, but the self-employment rates of U.S.born and immigrant males are relatively the same at about
10 percent. She pointed to the fact that differences exist
in the self-employment rates of immigrants of different
regions and country of origin. For example, Hispanic
and Caribbean immigrants have relatively lower selfemployment rates, whereas immigrants from Northeast
Asia and India tend to have higher self-employment
rates. Her research shows that the longer an immigrant
has been in the country, the greater is the rate of selfemployment. Self-employed immigrants have completed
slightly more years of schooling and have greater English
proficiency. The exceptions with respect to English
language proficiency are Southeast Asian, Northeast
Asian, and Caribbean immigrants. Ethnic networks within
these groups may account for the exceptions.
Toussaint-Comeau concluded by noting that immigrants
contribute to the U.S. economy by creating and growing
small businesses. She called for initiatives that support
immigrants’ efforts to succeed in business and gain
language proficiency, particularly with respect to
underrepresented minorities: Hispanic and Black
immigrants. She also stated that ethnic concentration
tends to increase employment opportunities for
immigrants, and efforts to support business enclaves,
including adjacent affordable housing, could further
promote entrepreneurship and employment among
immigrant populations.

40

Profitwise News and Views Special Edition

PYONG GAP MIN
Queens College, City University of New York
Pyong Gap Min is a professor of sociology at Queens
College and the Graduate Center of the City University of
New York. Min’s presentation focused on the reasons that
immigrants gravitate to self-employment. Min mentioned
a book published in 1972, Ethnic Enterprise in America:
Business and Welfare among Chinese, Japanese, and
Blacks.2 Essentially the book argued, according to Min,
that Chinese and Indian immigrants to the United States
were as disadvantaged as native-born Blacks, but had a
much higher rate of self-employment thanks to communal
associations and networks. Other books and much
research focused on the same topic.
Min presented data showing sources of start-up capital for
Korean, Japanese, and Taiwanese immigrants at different
periods. Though there was variation in all categories, loans
from banks were not the predominant source of business
capital for any of the groups. Among Koreans and
Japanese, the predominant source of funds was savings
accumulated in the United States (versus brought from
home country); for Taiwanese, it was funds from family.
Min summarized his presentation saying that American
banks should take further steps to reach out to
immigrants as they have difficulty accessing bank loans
for businesses. Many have turned to U.S. branches of
banks based in their home country as there is no language
barrier, and documentation and credit background checks
are closer to the experience in the home country.

CHEN FU HANG
Neighborhood Development Center
Chen Fu Hang is the business advisor and loan officer for
the Neighborhood Development Center (NDC) of St. Paul,
Minnesota. The organization recently celebrated ten years
of serving entrepreneurs and aspiring entrepreneurs in St.
Paul, Minneapolis, and more recently other parts of the
state of Minnesota, with financing, business incubators,
micro-entrepreneurship training, one-on-one technical
assistance, and real estate development. The group seeks
to develop entrepreneurial talent, particularly, at present,
among Somali and Hmong immigrants, to build successful
businesses that serve their respective communities.
The NDC also helps to redevelop inner-city commercial
property to promote community redevelopment.
Hang noted the diverse staff of his organization, a
key to the NDC’s success. Staff members speak five
languages including Somali, Oromo (Eritrea), Hmong
(Laos, Cambodia), Spanish, and English. Almost half of the
business financing the NDC provides goes to Hispanic,
Asian, and Somali immigrants. The NDC developed a

October 2004

specialized program for Islamic Somali immigrants, as
Muslims are prohibited from paying reba, interest on
debt, by Islamic law. What others would pay as interest is
built into principal payments made by participants in the
“Reba Free” program. For example, if a Somali business
owner needs to purchase a piece of capital equipment,
the NDC buys the equipment on her behalf, marks up
the price to reflect the interest cost, and charges the
business owner payments based on the increased price,
not the price plus interest. In 2003, the NDC received an
award recognizing the program from the Association of
Enterprise Opportunity.
Hang highlighted the NDC’s efforts in two communities,
one in Minneapolis and one in St. Paul. The Minneapolis
project took a run-down commercial strip and renovated
it into a business incubator that serves primarily Hispanic
and Somali entrepreneurs. The St. Paul project is also a
business incubator serving primarily Hmong and other
Asians who have settled in the central part of the city.
A newer, bank-funded initiative finances real estate
development in NDC target communities.

BARBARA ROBLES
University of Texas
Barbara Robles is an assistant professor at the LBJ
School of Public Affairs at the University of Texas
at Austin. Robles discussed entrepreneurship in the
borderlands of Mexico and the United States, highlighting
the role of community development organizations. The
border states in Mexico are Nuevo Leon, Coahuila,
Chihuahua, Sonora, and Baja, California The U.S. states
are Texas, New Mexico, Arizona, and California.
Robles began by noting that the region along the Mexico
– U.S. border is economically depressed, comparing it to
the Appalachian region in the United States. Among the
U.S. counties that border Mexico, many have more than 70
percent Latino population, according to the 2000 Census.
Unemployment runs from 12 to 18 percent in the counties
along the border, and per capita income, from $7,000
to $18,000. Educational attainment is also very low,
particularly in Texas.
Robles stated that three large micro-finance lending
organizations – Acción Texas, Acción New Mexico, and
Acción San Diego – all community development financial
institutions (CDFIs), have supported small businesses in
the region since the mid 1990s. Cumulatively they have
made loans of more than $40 million, serving almost
8,300 micro businesses. Given the high unemployment
rate, Robles underscored the importance of microbusiness development and discussed other key roles of
the community based groups that do. “They also provide
financial planning, tax preparation, consumer and financial

literacy outreach, and most importantly networking for
businesses, opening up their customer base,” she said.
Community based organizations also help newly arrived
immigrants to acclimate in the United States and serve as
translators and mediators in some instances. Community
based organizations play an important role in linking
businesses in more isolated communities that lack basic
amenities, sometimes called colonias, with the mainstream
market.
Robles noted that the CDFIs serve as front-line lenders
to families and households with irregular income and little
or no established credit history. The CDFIs help banks
to fulfill Community Reinvestment Act goals by acting,
“…as a proxy for the lending institutions.” The banks
lend to the CDFIs at reduced rates; the CDFIs in turn
provide the technical assistance and the more rigorous
loan servicing that the market may require. The CDFIs are
attuned to local customs and practices and do not rely on
externally developed and imposed models for lending and
development.
Robles closed by discussing two policy-related issues.
First, referring to the presentation the prior day by
National Taxpayer Advocate Nina Olson, she emphasized
the importance of training and certifying tax preparation
volunteers as an integral part of promoting financial
literacy among self-employed immigrants. “It’s a crucial,
crucial component for economic development, not only
with the earned income tax credit refunds, but also in
terms of establishing that immigrants are not wards of the
state and will not be wards of the state; they’re actually
self-sufficient.” Finally, Robles urged continued funding
of the CDFI program and Small Business Administration
programs, noting that, “These programs really promote
self-sufficiency and community development.”
Notes
1 Toussaint-Comeau’s complete presentation is available at
www.chicagofed.org/news_and_conferences/conferences_
and_events/files/financial_access_for_immigrants_toussaint.
pdf.
2 Light, I. (1972), Ethnic Enterprise in America: Business and
Welfare among Chinese, Japanese, and Blacks. Berkeley, CA:
UC Press.

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41

International Linkages: Immigrant Remittances and
Financial Adaptation
Moderator - Carlos Sada, Consul General of Mexico in Chicago
Session Six

Financial Access for Immigrants: Learning from Diverse Perspectives

The sixth of the conference sessions explored the
impacts of immigrant remittances in the United States
and abroad, and the ramifications of this frequently used
service as an entree to promote use of traditional bank
services among both U.S. immigrants and home country
recipients. B. Lindsay Lowell, director of policy studies
at the Institute for the Study of International Migration at
Georgetown University, discussed remittances and the
economic impact on sending and receiving communities.
Manuel Orozco, senior researcher at the Institute for the
Study of International Migration at Georgetown University,
discussed immigrant remittance practices, home country
use of remitted funds beyond consumption, and the
ramifications to promote traditional account usage. David
Grace, senior manager at the World Council of Credit
Unions (WOCCU), discussed his organization’s efforts
to decrease and regulate the cost of remitting funds for
credit union members here and to increase credit union
membership.

to build a school or work on other improvements, have
positively affected remittance volume. Local governments
in Mexico have put matching arrangements in place
for local improvement projects, creating incentives for
hometown associations to increase their remittance
volume.

Figure 1: Mexican and Central American Remittances in
Billions of Current Dollars, 1980-2002

B. LINDSAY LOWELL
Georgetown University

42

B. Lindsay Lowell is the director of policy studies at
the Institute for the Study of International Migration at
Georgetown University. Lowell discussed the impacts of
financial remittances in the United States and abroad and
emerging trends in relation to remittances. He noted that
the majority of remittances in the Western Hemisphere
flow from the United States to Mexico and Central
America, and that the flow of funds had increased at a
high rate since 1990, with no interruption in growth during
the slowed economy of 2000-2001 (Figure 1).

Lowell mentioned that studies prior to the mid 1990s
suggested that a significant proportion of remittance
dollars in the receiving countries went toward
unproductive consumption (consumer goods), and that
the flow of dollars could promote inequality within local
economies. More recent research indicates a multiplier
effect, where a dollar remitted increases gross domestic
product in the receiving country by two to three dollars
and that the inequality effect varies widely based on the
nature of the local economy and its history of immigration.

New actors in the marketplace that remit funds have led
to stiff competition and a decrease in the cost to remit.
Hometown associations, which are groups of immigrants
with a common goal in their shared home community

The impact of remittances on emigrant households (family
left behind in the home country) in alleviating liquidity
constraints is limited in that a third or less, depending
on the particular country of these households, hold bank

Profitwise News and Views Special Edition

October 2004

accounts. While remittances can offset poverty in the
home country, interruptions in (or cessation of) the flow
of funds can create additional hardship. Finally, hometown
associations tend to be informal, fluid organizations;
obtaining their assistance can be difficult.
Citing earlier presentations and other research indicating
that longer-tenured immigrants tend to remit less to
their home country, Lowell suggested that the growing
proportion of immigrants with at least ten years in the
United States may give rise to some of the effects he
described (Figure 2). The rate of remittance growth may
not continue unabated as new immigrants represent
a smaller proportion of all immigrants. Lowell stated
that remittance senders represent a largely untapped
market for financial services, but different immigrant
groups exhibit notably different behaviors in relation to
remittances and financial services in general. Financial
institutions should consider emerging trends as they seek
to tap the immigrant market.

Figure 2: Percent of Entrants Within 10 Years of Survey
for Select Latin American Countries

telecommunications, and other industries also provide
services resulting directly or indirectly from high levels of
immigration (to the United States).
Orozco attributes these changes to household-tohousehold relationships at the transnational level. A typical
immigrant to the United States may have:

 A family relationship in the home country that
triggers the remitting of funds;

 Social and community-based relationships that
may raise funds for home country community
development purposes;

 A relationship with the home country at the
consumption level (for home country goods/
services); and

 Capital investments in a small business either in the
United States, home country, or both.
The remittance market represents a point of entry for
financial institutions to the immigrant market for financial
services, but there are distinct market preferences
between immigrant groups. The better the understanding
of these individual preferences, the greater the
opportunity for profit on the part of financial institutions.
Orozco noted that remittance volume steadily increased
through the 2001 recession, even as immigrant
unemployment increased. With regard to the remittance
market, Orozco stated that the policy implications are
significant on several levels. A large proportion of
remittance volume goes to rural areas of Latin America,
and in particular Mexico, where there are few if any
traditional financial institutions. Among the remitting
households in the United States, despite greater access to
banks and thrifts, the majority does not have transaction
accounts. At least a part of the policy discussion should
center on reaching these households with appropriate
financial services. Exchange rates, fees, and access to
financial institutions in the home country also affect the
fiscal impact of remittances. While costs are gradually
decreasing, they remain high, Orozco stated.

MANUEL OROZCO
Georgetown University
Manuel Orozco is a senior researcher at the Institute
for the Study of International Migration at Georgetown
University. Orozco began by citing an earlier presentation
that raised the subject of globalization. “A lot of what
we are talking about here has to do with transnational
dynamics – how immigration has become a key factor
in integrating many developing nations into the global
economy,” he said. Orozco noted that the reverse is also
true; industries in developed countries have changed their
business practices in many ways as a result of immigration
from the developing world. Certainly the high volume of
remittances has impacted financial services, but airlines,

DAVID GRACE
World Council of Credit Unions
David Grace is a senior manager with the WOCCU.
The WOCCU is an international trade association and
development organization for the global credit union
movement. The organization represents 40,000 credit
unions in 80 countries and serves 118 million members.
Grace stated that the WOCCU has been working to
strengthen credit union programs in developing countries.
More recently, the WOCCU has been working with
credit unions in the United States. He noted that many
immigrants come to the United States having had no

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43

experience with a transaction account or a financial
institution, having had a negative experience with a bank,
or with a negative cultural orientation toward financial
institutions generally. In Mexico, only 15 percent of the
economically active population has bank accounts,
he stated, and 35 percent or less of all Mexicans own
accounts. The ratio in other parts of Central America is
lower.
Grace showed the wide variation in account ownership
among different (remittance-sending) Latin American
immigrant groups. Account ownership ranged from 72
percent for immigrants from Guyana to 25 percent for
immigrants from Mexico (Figure 3). He also discussed
some of the reasons Latino immigrants do not hold bank
accounts. According to the research he cited, nearly 40
percent did not know the benefits, a fourth thought they
could not own an account without a drivers license or
Social Security number, and almost 10 percent thought
the process for obtaining an account too complicated.

Figure 3: Banking the Unbanked in the U.S.

Grace also discussed data regarding senders of
remittances in the United States, stating that 68 percent
of Latino immigrants in the United States are age 18 to
24; 73 percent of this group remit funds home. Credit
unions provide financial services to both documented
and undocumented immigrants and disclose and
guarantee exchange rates, he noted. The IRnet serves as
a relationship builder, bringing unbanked immigrants to
credit unions where they can receive further information
on accounts and services in addition to the remittance
service. In that respect, the IRnet helps the WOCCU fulfill
its mission to serve the historically underserved with
financial services. Other products used by remittance
clients include used auto loans, savings accounts, and a
small number, as yet, of mortgage loans.
Finally, Grace used Guatemala and Mexico as examples
to illustrate the impact of credit unions in home countries.
Aside from increasing remittance volume to credit union
members in Guatemala, the presence of credit unions in
areas that previously did not have financial institutions has
led to growth in “banked” residents in these sometimes
remote areas. Roughly two-thirds of remittance recipients
are nonmembers, and in Guatemala, about 1 percent
per month join credit unions. In Mexico, 56 percent of
nonmembers in a recent period have joined, and the
institutions serving them are developing remittance-linked
savings and credit products.

The WOCCU had been approached by credit unions in
Guatemala and El Salvador in 1996 regarding the high
volume of remittances coming into those countries. The
organization formed alliances with two wire transfer
services; the purpose of forming the alliance, known
as IRnet, or International Remittance Network, was
to reduce the cost of wiring funds to Central America
and the Caribbean. In the United States, the network
of credit unions that take part in the alliance includes
225 institutions with 950 locations from which to remit
funds. Within Guatemala, Honduras, Mexico, El Salvador,
Jamaica, and Nicaragua, there are 540 locations that can
receive funds through the network.

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October 2004

Where Do We Go From Here?
Bruce Katz, Director, Center on Urban and Metropolitan Policy, Brookings Institution
Una Okonkwo Osili, Assistant Professor of Economics at Indiana University-Purdue University at Indianapolis
John C. Weicher, Assistant Secretary for Housing/Federal Housing Commissioner, U.S. Department of Housing and Urban Development
David Marzahl, Executive Director of the Center for Economic Progress, Chicago, Illinois
Jeremiah Boyle, Community Affairs Program Director for the State of Wisconsin at the Federal Reserve Bank of Chicago

Session Seven

Financial Access for Immigrants: Learning from Diverse Perspectives

The final panel of the conference was designed to distill
and discern the lessons of the conference in a less
formal question and answer format. Bruce Katz, vice
president and senior fellow at the Brookings Institution
and founding director of the Brookings Institution
Center on Urban and Metropolitan Policy, moderated the
panel. Panelists included Una Okonkwo Osili, assistant
professor of economics at Indiana University-Purdue
University at Indianapolis, and associate faculty at the
Center on Philanthropy at Indiana University; John C.
Weicher, assistant secretary for housing/federal housing
commissioner at the U.S. Department of Housing and
Urban Development; David Marzahl, executive director
of the Center for Economic Progress in Chicago, Illinois;
and Jeremiah Boyle, community affairs program director
for the state of Wisconsin at the Federal Reserve Bank of
Chicago.
Panelists were asked to address the following questions:

 What do you all take from the sessions?
 What are the key lessons?
 Can we draw policy solutions or lessons at the
practical level for financial institutions, community
practitioners, and researchers?
Osili emphasized the importance of the heterogeneity
among the immigrant populations in research. Legal
status, location and settlement, family networks, return
migration plans, languages and dialects, duration of stay
and skilled versus unskilled labor are key differences
between and among different immigrant groups.
Early research indicates that the size of an immigrant’s
home country and their experience with financial
institutions in the country of origin also influence financial
decisions. Highlighting research involving Somali, Hmong,
Vietnamese, Latin American, African and Eastern
European populations, Osili emphasized that different
populations bring different attitudes, trust and knowledge

levels about financial institutions. These differences
require both different business strategies and different
policy prescriptions to deal with the complexities of
financial access for immigrants. Better data and new
models need to be developed that capture these complex
realities.
Relationship building and trust were key themes
throughout the conference. Mitchell Bank’s strategy of
bringing families into the bank through relationships
established at the high school and American Metro Bank’s
cultivation of informal relationships were highlighted as
examples. As small community bank strategies, these
examples raise the question of what larger institutions
should do to address immigrant populations in the era
of mergers, acquisitions, and huge, often multinational
institutions.
Weicher emphasized the lessons learned with regard to
housing and immigrant populations. HUD/FHA insures
about 6 million home mortgages, a little less $500 million
worth of mortgage insurance. “About 80 percent of our
homebuyers are first-time home buyers and 40 percent
are minorities. We do not track immigrant status and we
do not track citizenship, but we know for instance, that
105,000 of our first-time buyers last year were Hispanic
Americans and 35,000 were Asian Americans.”
Weicher noted that many speakers and papers focused on
how agencies and institutions communicate with people
that might want to achieve homeownership. He highlighted
projects that both HUD/FHA and the Interagency Fair
Lending Task Force undertake to provide multilingual
information on home buying, the settlement process, and
avoiding foreclosure.
Home purchase counseling (as part of a comprehensive
package of financial education topics) is another important
component emphasized during the conference that is a
HUD priority. HUD supports 550 counseling agencies
that served 1.2 million families in 2003. FHA data shows

Profitwise News and Views Special Edition

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45

“I draw the lesson that, while you don’t need to wait
a century or a generation for results, if you make the
support available and you reach out to the people who
need help, and you reach out to them in the communities
in which they choose to live, and if you go after those
who prey on immigrants and minorities, and you keep an
eye on the progress you’re making, we’ll be doing okay.”
John Weicher
that “FHA borrowers who receive counseling are about
5 percent less likely to default on their mortgage than
those who do not, and that’s cost effective for us, and
we know from research by Freddie Mac and by academic
researchers that it works in other parts of the market as
well,” Weicher said. “The main impact of counseling is on
reducing the default rates for Hispanic Americans, African
Americans, and Asian Americans. It doesn’t particularly
work for Whites – doesn’t work particularly for Native
Americans,” he added.
HUD/FHA also has a number of rules prohibiting
predatory lending practices with FHA loans, an antiflipping1 rule, and standards for appraisers, home
inspectors and lenders’ loan correspondents, all of which
are attempts to help people stay in their homes.
“My grandfather raised two kids who were financially
literate, successful, and homeowners. He had three
grandchildren, three grandsons, all of whom were
homeowners. The next generation hasn’t gotten around
to it yet, but we think they will. So I draw the lesson that,
while you don’t need to wait a century or a generation for
results, if you make the support available and you reach
out to the people who need help, and you reach out to
them in the communities in which they choose to live,
and if you go after those who prey on immigrants and
minorities, and you keep an eye on the progress you’re
making, we’ll be doing okay.”
Marzahl’s key takeaway from the conference was the
need to blend technology with personal relationships and
trust building. High-tech, according to Marzahl, includes
ATMs with transnational debit cards, speedy and low cost
remittances, and bilingual Web sites.
Marzahl also noted the importance of the regulatory
environment to determine what identity documents can
be used to access the technology deployed by banks.
“Absolutely critical is the individual taxpayer identification
number (ITIN).” Noting some emerging controversies over
the use of ITINs to access financial services, Marzahl said,

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Profitwise News and Views Special Edition

“I think it is incumbent upon community groups, financial
institutions and others to realize that government does
play a role in establishing certain tools. Those tools can
also be taken away. There are some real risks out there
right now with respect to the ITIN and its future.”
Bilingual services and relationship building are obvious
and important elements of financial access for immigrants.
In addition, more flexible protocols for establishing the
creditworthiness of immigrant populations also help.
Marzahl referred to American Metro Bank CEO Yman
Vien’s example of using a pool of gross income from seven
working family members to establish the creditworthiness
of a family business.
Finally, Marzahl emphasized the critical role of community
intermediaries such as community development
corporations, faith-based organizations, and credit unions
in, “creating the framework for moving from the personal
relationship that a banker may establish with someone to
creating a structure and connecting the dots.” Pointing to
the case study of the North Carolina credit union that is,
“…losing market, but they established themselves. They
looked at the gateway communities they were in and they
provided a range of services that the mainstream banks
were not willing to provide. If there weren’t a credit union,
if they hadn’t established themselves, where would those
people have gone? They would have stayed with many of
the predatory lenders without question,” Marzahl said.
Boyle noted that the key lesson was, “If you are going to
make a dent in this growing and important market, it’s
going to take human interaction, and that has always been
the case.”
The same is true now, according to Boyle. The reasons
that things work at Mitchell Bank, for example, is because
the Chairman of the bank, and staff alike, operate
from the standpoint of, “Let’s find a way to serve this
person.” “In the end,” Boyle said, “it’s going to be that
kind of person-to-person contact and service that will
make the difference in bringing people into the financial
mainstream.”
The next set of questions focused on the extent to which
the private market responds to the needs of immigrant
populations and the appropriate roles for nonprofit actors
and government agencies in increasing immigrants’
access to mainstream financial services.
Katz noted that the conference highlighted profitable
market-based innovations outreach by private institutions.
“What then, is the primary role of the government and the
nonprofit sector to support, enhance and further promote
what seems to be a market response?” Katz asked.
Weicher responded, “The most heartening thing I heard at
the conference was Professor Kossoudji’s paper showing
a very slight difference in homeownership rates between

October 2004

native-born Americans and immigrants who are citizens.
I think that tells us that there is a real market response
going on here and there is a real phenomenon and that
time is on our side.” Weicher argued that government’s
role should be to facilitate that market response, provide
information as a “public good,” and to “provide support to
local entities that are prepared to work one on one.”
Marzahl emphasized the unmet funding need for more
general, broad-based financial and economic education
initiatives. He specifically noted the funding cuts for the
First Accounts Program, a program that was designed
to help people access private financial accounts. “I
think there’s a need for some education of members of
Congress,” Marzahl said, “of what the ultimate value of that
is: reduced foreclosures, reduced defaults. And again, you
look at the raw numbers in terms of the huge increase in
predatory financial products being peddled in low-income
communities, it’s beyond alarming, it’s just sucking the
money out of poor communities.”
Marzahl also believes that nonprofit entities will continue
to be innovators at the community level, developing new
products and new approaches. But if government and
the private sector are going to adopt something, then
nonprofits need to make sure they build an evaluation
component into it. He highlighted the Financial Links
for Low Income People2 (FLLIP) as an example of a
program with an evaluation component that demonstrates
its positive impact. “People’s financial behaviors change
if you have sustained, systematic financial education.”
Community groups are also important advocates, building
and creating accountability. “It’s a lot of players, its a lot of
pieces coming together, but I really think community and
not-for-profit groups play an absolutely critical role and
need to be very creative in working with government.”
Katz discussed community development corporations’
heavy dependence on fee-based affordable housing
production. Funding and financial support for the kinds
of programs and initiatives discussed at this conference
comes mostly from philanthropic support and is less
secure than funding for affordable housing production.
The panelists were asked for comments on the funding
issue.
An audience member suggested that we might need
new organizations, arguing that those community
development corporations that have engaged in affordable
housing production may not be particularly responsive to
demographic changes in their neighborhoods.
The final set of questions for the panel focused on
how success is measured in terms of greater access to
financial services to immigrants. “I’m really interested in
how you would define success, and prospectively how
you would benchmark to measure the progress,” Katz
explained.

Osili stated that financial participation should be linked
to larger goals such as wage assimilation, income, wealth
accumulation, small business ownership, investment
patterns, ultimately socioeconomic mobility, job creation,
and community development. “We even heard about

“The fact that we are focused on this market now really,
historically, is an extension of what the Community
Reinvestment Act has achieved. This is about identifying
markets that are underserved and serving them
better. Now, if you’re going to serve them particularly
well, you’re not going to do it based on a regulatory
framework, it’s going to be a viable business strategy
for your bank. If that strategy also serves a low- or
moderate-income community, then the Community
Reinvestment Act will smile upon that.”
Jeremiah Boyle
reduction in crime in some communities when banks
were available,” Osili said, “so I think financial access
needs to be put in a bigger context which is the overall
socioeconomic progress of immigrants.”
Osili also emphasized the need to monitor and measure
sustained homeownership and sustained financial
participation. “I think that dynamic picture needs to be part
of measuring success,” she said,” not just at a point in time
but over time – not just getting people a bank account, but
making sure they have access to the full range of financial
services.”
Marzahl offered a visual benchmark, “When I can drive
through some of the neighborhoods in Chicago, into
Englewood, Back Of The Yards, and see branches of all
of the banks that I find on the near north side and in the
north suburbs.... You go to a particular street corner and
there on a strip mall is a Payday Lender next to a Jackson
Hewitt, next to a Rent-A-Center, next to some other
predatory lender. To me, success would be when – not
when they are gone – but when there’s rough equivalency.
Now we may never get there, but right now the contrast is
so stark.”
Boyle referred again to the FLLIP Coalition’s report
as an excellent example of measuring success. What
these efforts are trying to accomplish are: 1) make the
unbanked customers and; 2) make customers better
customers.
“When you’re making that argument to the bank, what
better way to do it than specifically, ‘26 percent of

Profitwise News and Views Special Edition

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47

participants that did not previously have an account
opened checking and savings accounts for the first time.’
Compare that to a direct marketing campaign,” Boyle
said, “where you expect 3 percent response. That’s a very
compelling argument.”
Boyle indicated that one of the things that the Center for
the Study of Financial Access for Immigrants is set up to
do is to bridge the gap between the programs and the
need for effective evaluation of those programs.
“My idea,” Weicher said, “would be that, whatever measure
of financial access you’re using – distribution of wealth,
distribution of income – when you do the analysis, all the
coefficients on race and ethnicity are insignificant. When
we get there, we’ve solved the problem.”
Katz offered a final observation: “I am really struck by
the richness of the conversation and how much this field
has moved along in such a really small period of time. To
go back in time ten years even, is to be in another world
compared to the conversation that is going on in this room.
So there is an enormous amount of affirmative momentum
and people should take an enormous amount of pride in
that.”

Michael V. Berry and Jeremiah Boyle summarized the
conference sessions.
Michael V. Berry is a senior research analyst and manager
of the Emerging Consumer and Compliance Issues unit
of the Federal Reserve Bank of Chicago’s Consumer and
Community Affairs division. Mr. Berry is also the managing
editor of, and a frequent contributor to, the Federal
Reserve Bank of Chicago’s Profitwise News and Views
publication. Mr. Berry holds a B.A. in political science from
Susquehanna University in Pennsylvania and an M.B.A.
from DePaul University.
Jeremiah P. Boyle is the Wisconsin community affairs
program director for the Federal Reserve Bank of Chicago’s
Consumer and Community Affairs division. Mr. Boyle
provides technical assistance to financial institutions and
community groups to promote community and economic
development. Mr. Boyle holds an M.B.A. from North Park
University, a Master of Urban and Regional Planning degree
and a B.A. in political science from the University of Illinois
at Urbana-Champaign.

Notes
1 Flipping is the common term for the practice of a lenderinitiated refinancing of a mortgage within a relatively short period
after its inception, where the new loan usually has less favorable
borrower terms than the loan refinanced. For a discussion of
common predatory lending practices see “MCAP’s Continuing
Role in Ensuring Fairness in Mortgage Lending,” at www.
chicagofed.org/publications/profitwise/2000/pwJan00.pdf.
2 For a discussion of Financial Links for Low Income People
and its financial education efforts, see www.chicagofed.org/
community_development/spring_2003_profitwise_news_and_
views_fllip.cfm.

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SM

Introducing the FedACH International
Mexico Service: An easy, low-cost and
safe way to send money from your bank
account to a bank account in Mexico
How Does It Work?
First, you ask your bank to help you send money electronically from your bank account in the United States to a bank account
in Mexico, using FedACH InternationalSM. This service sends the money electronically through the Federal Reserve Bank of the
United States (Fed) and the central bank of Mexico (Banco de México). In Mexico, Banco de México receives your payment in
dollars from the Fed and instructs the commercial bank to deposit the pesos in the bank account that you specify – in Mexico.
Every day millions of electronic payments (Social Security, payroll payments and others) are made between bank accounts in the
United States over the automated clearinghouse (FedACH). Now the Fed and Banco de México have connected their payment
systems so that the same safe, reliable system can carry your money to any bank account in Mexico. Payment will reach the local
Mexican bank two days after your bank in the United States sends the money to the Fed.
How Much Does It Cost?
Each bank in the United States decides how much to charge its customers for this service, so you will have to ask your bank for
the exact amount of the charge. However, the price is expected to be lower than what you may pay to wire or telegram money to
Mexico. Moreover, the person who owns the account in Mexico receives the full amount of the money with no fees taken out.
The Benefits of FedACH InternationalSM

 You can send money to any bank account in Mexico. To use FedACH InternationalSM, you must have a bank account in the
United States, and the beneficiary must have a bank account in Mexico.

 You receive a very favorable foreign exchange rate. The dollars from your bank account will be converted into pesos using a
very favorable foreign exchange rate, which means that the beneficiary will receive more pesos than if a less favorable rate
was used.

 You pay less than what you would pay to wire or telegram money to Mexico.
 You can be sure that the money will be at the bank account in Mexico within two days after your bank sends it to the Fed.
Money does not get lost. No lost or stolen checks.

 You pay all costs so that 100 percent of the money you send is credited to the bank account in Mexico. The person receiving
the money receives the entire peso equivalent of the U.S. dollar amount transferred from your bank account. The bank in
Mexico does not take out any money.
What If My Bank Needs More Information About This Service?
Just have your bank contact any of the following Federal Reserve officials to find out what steps it must take in order to let you
and other customers use the Mexico Service:
Larry Schulz
(404) 498-8792
larry.schulz@atl.frb.org

Elizabeth McQuerry
(404) 498-7888
elizabeth.mcquerry@atl.frb.org

Harry Pestine
(312) 322-5877
harry.pestine@chi.frb.org

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