Alan Greenspan and the economic crisis- the impact of subprime mortgages to illegal aliens

Begin forwarded message:


From: Michael Cutler <mcutler007@aol.com>
Date: January 28, 2011 8:59:30 AM PST
To: Michael Cutler <Mcutler007@aol.com>
Subject: Alan Greenspan and the economic crisis- the impact of subprime mortgages to illegal aliens

Hi Gang:
Fox & Friends just did an excellent report, this morning, on how the economic crisis was preventable.  
Here is a link to the Fox News report about the findings of the government’s The Financial Crisis Inquiry Commission:
In 2009 I wrote a commentary about what Alan Greenspan said at a hearing conducted by the Senate Immigration Subcommittee chaired by Senator Chuck Schumer.  In my commentary I focused on Greenspan’s outrageous remarks calling for Americans to compete with foreign workers in order to stop making a “privileged elite” out of Americans with skills!  (Having Americans compete with foreign workers to drive down wages is utterly illegal!)
What you should take note of is the fact that as a means of providing background information for the commentary, I provided quotes made by Greenspan about subprime mortgages provided to “immigrants” (Illegal aliens) that I think your viewers should be informed about as a followup to today’s report to learn how his economic policies truly greased the skids for our economy.
I have provided you with that commentary that I wrote in 2009 below.  I know that this commentary is long- but I think I it provides real insight.
I also have provided you with the testimony of Steven McCraw who was, at the time he testified before the House Subcommittee on Immigration, Border Security and Claims, the Assistant Director of the FBI, Office of Intelligence. 
The hearing was conducted on June 26, 2003 and was entitled:
 “Consular ID Cards in a Post-9/11 World”

Here is a link to his prepared testimony:

I have attached the entire transcript of his testimony towards the bottom of this e-mail.
Give this a bit of thought- McCraw warned about how dangerous it is to accept matricula consular cards back in the middle of 2003 and yet banks and other agencies in the public and private sector continued to accept those cards as though they were reliable forms of ID!  It is my understanding that mortgages were given to aliens who provided those utterly unreliable matricula consular cards.
You should note that when I watched the hearing online back on April 30th of last year, I was reminded of that famous episode of the “Twilight Zone” in which a flying saucer lands on earth and the seemingly benevolent aliens offer to fly humans to their home planet.  The aliens are carrying a large book that is entitled, “To Serve Man.”
Everyone, in that Twilight Zone episode, believes that these aliens are our friends until someone manages to translate enough of the volume to come to the horrific realization that it is a cookbook!
Anyway- I think that Greenspan’s testimony was extremely telling- it is clear that he and, presumably, Schumer, have the middle class of our nation in their sights!  The only way I can describe what he said is to call it a betrayal!
I hope you find this to be helpful.
-mike-

My perspectives on Mr. Greenspan’s Testimony:



Alan Greenspan’s testimony at Senate Hearing “Comprehensive Immigration Reform in 2009, Can We Do It and How?”

Hi Gang:

Last week the Senate Judiciary Committee, Subcommittee on Immigration, Border Security and Citizenship, chaired by Senator Chuck Schumer conducted a hearing that was entitled:

“Comprehensive Immigration Reform in 2009, Can We Do It and How?”

As I noted in my previous commentary, last week, about this hearing, the title reminded me of the lawyer joke in which the name of an apocryphal law firm was, “Dewey, Cheatham and Howe!”

I have attached the notice of the hearing and the prepared testimony of Alan Greenspan, the previous chairman of the Federal Reserve Bank below.

At first blush it might seem odd that the former chairman of the Federal Reserve Bank would be called to testify about immigration (legal and illegal). It might seem stranger still that he would make recommendations about a sweeping amnesty program and visa policies.

But then I would suggest that you recall what I have said for years. “Immigration is not really a single issue but is, in reality, an important factor in everything from national security and criminal justice to the economy, the environment, healthcare and education.”

As “Deep Throat” in the movie “All The President’s Men” said, in advising the reporters, “Follow the money!”

Before you begin considering Mr. Greenspan’s testimony, let me introduce Mr. Greenspan to you in a way that I suspect he would rather not be introduced.

First I would suggest you check out an article that Newsweek published about Alan Greenspan’s “contribution” to the economic meltdown.

The article written by Michael Hirsh and was entitled:

THE WORLD FROM WASHINGTON

Greenspan’s Folly

The former Fed chief’s culpability in Wall Street’s woes.

The article can be found at:

http://www.newsweek.com/id/159346

When Alan Greenspan served as the Chairman of the Federal Reserve Bank, he was an extremely strong proponent for providing loans and credit to a broad spectrum of people including those who, as it turned out, never should have been granted credit.

Of course by focusing on our nation being a “consumer nation” Greenspan saw in people, an army of consumers who would be willing to mortgage their futures and the future of our nation to by more “stuff!”

This may have yielded tremendous profits for corporate America, but it undermined the economic foundation of our country and countries around the world.

On April 8, 2005 he addressed the Federal Reserve Board at the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, on the issue of “Consumer Finance.”

Here is the link to his prepared remarks at that conference:

http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/default.htm

I have attached that statement, in its entirety below the transcript of his testimony before the Senate Immigration Subcommittee.

I have provided you, immediately below, with two quotes from that statement from that conference on “Consumer Finance.”

Here is the first to consider:

“A brief look back at the evolution of the consumer finance market reveals that the financial services industry has long been competitive, innovative, and resilient. Especially in the past decade, technological advances have resulted in increased efficiency and scale within the financial services industry. Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country.”

Here is the second:

“Home mortgage loans, as we know them today, are a fairly recent product born of the failures of the mortgage finance system during the Great Depression. Clearly, radical change was needed. One of the most significant responses to this need was creation of the Federal Housing Administration, which instituted a new type of mortgage loan–the long-term, fixed-rate, self-amortizing mortgage–which became the model that transformed conventional home mortgage lending. A whole industry–thrift institutions–grew up around this one product.

The development of a broad-based secondary market for mortgage loans also greatly expanded consumer access to credit. By reducing the risk of making long-term, fixed-rate loans and ensuring liquidity for mortgage lenders, the secondary market helped stimulate widespread competition in the mortgage business. The mortgage-backed security helped create a national and even an international market for mortgages, and market support for a wider variety of home mortgage loan products became commonplace. This led to securitization of a variety of other consumer loan products, such as auto and credit card loans.”

As you read his statements on mortgages and loans to a wider spectrum of borrowers I want you to remember that this is precisely what contributed to the economic avalanche that landed our nation in the crisis we are now digging out of!

So now, one of the architects of the worldwide economic landslide stands before the Senate Immigration Subcommittee and makes his recommendations! This is a level of chutzpah that is amazing, even by Washington standards!

I would urge you to read Greenspan’s testimony in its entirety after you read my perspectives about what he stated just last week as Mr. Schumer and the other “usual suspects” fired the opening round in yet another effort to jam “Comprehensive Immigration Reform” down the throats of the citizens of our nation. This dangerous legislation would forever alter our country in so many ways and, none of them for the better.I will start out by asking you to consider two paragraphs that appear at the beginning of his testimony:

There are two distinctly different policy issues that confront the Congress. The first is illegal immigration. The notion of rewarding with permanent resident status those who have broken our immigration laws does not sit well with the American people. In a recent poll, two-thirds would like to see the number of illegals decreased.

But there is little doubt that unauthorized, that is, illegal, immigration has made a significant contribution to the growth of our economy. Between 2000 and 2007, for example, it accounted for more than a sixth of the increase in our total civilian labor force. The illegal part of the civilian labor force diminished last year as the economy slowed, though illegals still comprised an estimated 5% of our total civilian labor force. Unauthorized immigrants serve as a flexible component of our workforce, often a safety valve when demand is pressing and among the first to be discharged when the economy falters.

Dr. Greenspan certainly seems to recognize the wishes of the great majority of the citizens of our country but then seems to miss the point. It might even be concluded that he sees the laws of the United States, especially the immigration laws and the desires of the citizens of the United States as little more than “speed bumps” when he states that “…illegal immigration has made a significant contribution to the growth of our economy.”

You have to wonder what he would say about the impact of money that drug dealers gain by their criminal activities provided that they then invest their ill-gotten money in the stock market or real estate. It is critical to understand that illegal activities are, to put it succinctly, illegal!

Greenspan certainly falls into the category of those who “Know the price of everything and the value of nothing!”

Furthermore he states that from 2000 to 2007 illegal aliens accounted for nearly 20% of the increase in our nation’s total civilian work force.

Greenspan makes the assertion that the impact of this massive increase of the illegal aliens workforce only has a “marginal” impact on the wages of America’s working poor. While I will certainly not lay claim to being an economist, I recall that back in high school and certainly in college, the most basic principle we were taught about economics was the principle of “supply and demand.” (As you read my commentary, however, you will see that perhaps Mr. Greenspan really does understand this basic principle of supply and demand, but chose to obfuscate his real beliefs by the artful use of deceptive language.)

Numerous studies conducted by highly respected economists make it clear that wage suppression is significant when the marketplace is flooded with illegal aliens who not only reduce labor costs to factory owners and other businesses that make it a practice to intentionally hire illegal aliens because the illegal workforce will work for substandard wages, but because, generally speaking, illegal aliens are rarely provided with health insurance and often will work for long hours without demanding overtime wages. Often illegal aliens are paid “off the books.”

The employers who resort to this illegal tactic don’t pay into the Social Security program or other government mandated programs such as Workman’s Compensation.

The availability of this illegal labor force makes it increasingly unlikely that American citizens and lawful immigrants will be hired when the likelihood of discovery of their violations of law is all but zero.

Mr. Greenspan states that he believes that it is vital for the United States to encourage more foreign workers to enter the labor force in the United States because of the failings of the educational system of the United States.

Certainly our schools are failing our nation’s students.

What Mr. Greenspan conveniently neglected to discuss is the impact of the estimated 2 million illegal aliens who currently attend our nation’s schools and the 3 million United States citizen children who were born to illegal alien parents. These figures were provided in a recent Congressional Budget Office study that also found that it cost from 20% ti 40% more to educate children who lack basic English language skills as compared with those students who are already fluent in the English language when they begin attending school.

The report that contained the statistics about students and many other such statistics and facts was entitled, “The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments

DECEMBER 2007”

That report can be found at:

http://www.cbo.gov/doc.cfm?index=8711

I am not saying that all of the ills of our nation’s schools can be traced solely to the massive influx of illegal aliens and their children, but I do believe it would be absurd to ignore the large impact that these millions of pupils scattered across our nation have on the educational systems of virtually every state.

Furthermore, the fallacy in Mr. Greenspan’s assertions about the failings of the educational system and the need to bring in foreign students and workers is the impact that foreign workers have on wages and opportunities.

The labor market, in many areas, has a finite need for workers. If most or all of the needs for employees are being met by foreign workers, legal and illegal, who will accept lower wages than their U.S. Citizen and resident alien counterparts, the vast majority of employers will simply hire the foreign workers who will accept lower wages and not even consider hiring American workers even if they possess the sort of education that would make them suitable employees.

This, in turn, makes many of the “high tech” professions less attractive. What incentives are their for a bright American college student to devote years of his (her) life to a course of study, often at great financial expense, if the salaries that the profession for which they are studying will not provide them with salaries that are commensurate with their expenditure of time, effort and money?

I think the answer to the question I asked was answered in an obscure manner by Greenspan. Consider this quote from his testimony:

The second bonus would address the increasing concentration of income in this country. Greatly expanding our quotas for the highly skilled would lower wage premiums of skilled over lesser skilled. Skill shortages in America exist because we are shielding our skilled labor force from world competition. Quotas have been substituted for the wage pricing mechanism. In the process, we have created a privileged elite whose incomes are being supported at noncompetitively high levels by immigration quotas on skilled professionals. Eliminating such restrictions would reduce at least some of our income inequality.

As you read the preceding paragraph, I want you to stop and think what he is really saying. It would certainly appear that his point is that by not bringing in more foreign workers, skilled workers are able to earn more money than unskilled workers.

What is wrong with that? Should a person who lacks an education and a trade earn the same money as someone who has a specific skill or education? He talks about a “privileged elite whose incomes are being supported at noncompetitively high levels by immigration quotas on skilled professionals.” He ends that paragraph by saying, “Eliminating such restrictions would reduce at least some of our income inequality.”

What “income inequality” is Mr. Greenspan referring to?

I can assure you that Mr. Greenspan was not discussing the CEOs of corporations who now earn as much as 400 times as much as those who are employed by their companies. He certainly did not discuss the so-called “Golden Parachutes.”

Mr. Greenspan concealed his insidious perspectives in language that obfuscated his beliefs. His goal is clear, if the United States would open up its borders to an unlimited flow of aliens, both legal and illegal, labor costs could be driven down and profits for corporations would be driven up!

It would almost appear that Mr. Greenspan believes that anyone who is not a CEO or high-ranking member of management should be earning little more than minimum wage, including those Americans who are highly skilled and even possess college degrees!

Traditionally, the middle class was comprised of those people who made economic progress by acquiring skills and education. This is what the “American Dream” was all about!

My personal story is not much different from many people in the United States.

My parents never attended college but made certain that I did. They hammered it into my head ever since I can remember, that education was the key to success!

The “American Dream” also included parents working their tails off to provide opportunities for their children that they themselves could never hope to realize.

So, while Greenspan knows that he cannot simply say that a college education would be all but worthless as the country opens its doors to a virtually unlimited supply of college educated aliens, if you look between his words, it would appear that this is precisely what he is saying!

Next consider the paragraph I have copied below:

Our skill shortage, I trust, will ultimately be resolved through reform of our primary and secondary education systems. But, at best, that will take many years. An accelerated influx of highly skilled immigrants would bridge that gap and, moreover, carry with it two significant bonuses.

First, skilled workers and their families form new households. They will, of necessity, move into vacant housing units, the current glut of which is depressing prices of American homes. And, of course, house price declines are a major factor in mortgage foreclosures and the plunge in value of the vast quantity of U.S. mortgage-backed securities that has contributed substantially to the disabling of our banking system.

So, now we see that by bringing in more skilled workers to drive down the wages of skilled American workers, the houses that were vacated due to foreclosure that are now the property of banks could be sold to these aliens, increasing the profits for the banks that have been holding the bag on these properties as they sell these houses to foreign workers!

In closing his prepared testimony, Mr. Greenspan sounds a cautionary note that should give us all “cause for pause.” Read his words:

Clearly a line must be drawn between, on the one hand, allowing the nation to be flooded with immigrants that could destabilize the necessary comity of a society and, on the other hand, allowing the nation to become static and bereft of competition, and as a consequence to lose its economic vitality.

The United States has always been able eventually to absorb waves of immigration and maintain its fundamental character as a nation, particularly the individual rights and freedoms bestowed by our Founding Fathers. But it must be conceded that the transitions were always more difficult than hindsight might now make them appear.

Clearly Greenspan is many things, but he is no fool!

He understands that opening the floodgates to permit massive numbers of aliens to enter our country will create the potential for turbulence.

But for him the priority is profits for those at the top of the food chain.

I don’t wish to put words into Greenspan’s mouth, but it would appear that in his view, the middle class needs to be eliminated!

I would love to challenge Mr. Greenspan and ask him what he believes would happen to the average American if his immigration policies were adopted.

Here are a couple of additional questions I would love to ask Mr. Greenspan about his assertions about the impact of nonimmigrant aliens currently employed throughout the workforce of the United States, both legal and illegal:

Estimates vary widely, but it has been estimated that at least 40 billion dollars are wired from the United States to Latin America each year- primarily by foreign workers. Additional billions of dollars are otherwise moved from the United States to Latin America. Additionally, money is similarly moved from the United States to countries all over the world by foreign workers. Do you agree that in total the amount of this money may well exceed 100 billion dollars per year? If so, what is the impact of all of this money being removed from our nation’s economy at a time when the stated purpose of the “Economic Stimulus Package” that has created a historically huge deficit was supposed to pump money into our nation’s economy? Furthermore, by advocating for an increase in the number of foreign workers under the H-1B and other programs, would not this increase the amount of money being removed from our nation’s economy via remittances and other means? Would this not have an adverse impact on the economy of the United States? What harm is done to the economy when American workers are displaced? (The Center for Immigration Studies recently published a report that indicated that the employment of foreign workers in the United States drives down wages of United States citizens.) That report can be found at:

http://cis.org/2006SwiftRaids

This is only the latest of many such previous reports.

What would this do to the size and vibrancy of America’s middle class? (Is it not true that it was America’s middle class that made this country the envy of the entire world and drove this country to attain greatness?)

In years past, a two word expression summed up America’s attitude, “Can do!”

Our nation no longer leads the charge in so many areas.

Wouldn’t a reduction in wages also mean a reduction in tax revenue on all levels of government?

What about the impact of the disproportionate percentage of illegal aliens who enter the United States who are members of the various ethnic organized crime groups and gangs such as the Mexican Drug Cartels, MS-13, Asian gangs, Russian gangs, etc., etc. ad nauseam?

The impact I refer to involves not just economics but quality of life and safety as well.

With healthcare being such a huge issue, why was there no mention of the extreme costs of healthcare for millions of illegal aliens who have no healthcare insurance and who lack the funds to pay for healthcare?

Why was there no mention of the impact on millions of aliens in our country who impact the environment and consume all sorts of energy resources even as there is so much talk about the need to “green” America and reduce our nation’s independence on foreign oil?

What about the relative ease with which terrorists have and would still be able to “game” the immigration bureaucracy to enter the United States and embed the themselves in communities around the United States?

There was absolutely no mention in Mr. Greenspan’s testimony of what needs to be done to make certain that a program for which he is such a strong advocate has integrity.

There is a classic debate topic: “What is mightier, the pen or the sword?”

Clearly the pen is mightier, especially when it is wielded by politicians who refuse to listen to the voices of the people they are sworn to represent. When these politicians decide, rather, to represent those who have the deep pockets and make those huge campaign contributions to buy the votes of those who write our nation’s laws and see to it that certain programs are funded while other programs die a death of a thousand slices as funding is cut out of the program.

I fear that the “Average Middle Class American Family” may wind up as an exhibit in the American Museum of Natural History or another such museum in the hall of the those creatures and cultures that have “Recently Gone Extinct.”

This nightmare can be prevented!

In less than two years more than one third of the seats in the United States Senate will be up for election. In less than two years every single seat in the House of Representatives will be up for grabs! The politicians have become accustomed to expecting that the power of the incumbency is on their side. We only have ourselves to blame for this.

We the People need to take every opportunity to confront those who were elected to represent us and make it clear that if they fail to represent us, we will find someone who will!

The large scale apathy demonstrated by citizens of this nation has emboldened elected representatives to all but ignore the needs of the average American citizen in a quest for massive campaign funds and the promises of votes to be ostensibly delivered by special interest groups. There is much that we cannot do but there is one thing that We the People absolutely must do- we must stop sitting on the sidelines!

The collective failure of We the People to get involved in make our concerns known to our politicians have nearly made the concerns of the great majority of the citizens of this nation all but irrelevant to the politicians.

I implore you to get involved!

We live in a perilous world and in a perilous era. The survival of our nation and the lives of our citizens hang in the balance

This is neither a Conservative issue, nor is it a Liberal issue- simply stated, this is most certainly an AMERICAN issue!

You are either part of the solution or you are a part of the problem!

Democracy is not a spectator sport!

Lead, follow or get out of the way!

-michael cutler-




Congressional Testimony


Testimony of Steve McCraw, Assistant Director of The Office of Intelligence, FBI
Before the House Judiciary Subcommittee on Immigration, Border Security, and Claims on Consular ID Cards
June 26, 2003
“Consular ID Cards in a Post-9/11 World”




 Consular ID Cards in a Post-9/11 World


— filed under: 
  • Steven C. McCraw
  • Assistant Director, Office of Intelligence, FBI
  • Federal Bureau of Investigation
  • Before the House Judiciary Subcommittee on Immigration, Border Security, and Claims on Consular ID Cards
  • Washington DC
  • June 26, 2003

Chairman Hostettler, Ranking Member Jackson-Lee, and Members of the Subcommittee, the Federal Bureau of Investigation is pleased to have the opportunity to appear before you today to discuss the important issue of consular ID cards. The Department of Justice and the FBI have been charged by the President, with the support of Congress, to protect the American people from the continuing threats of terrorism and the crimes associated therewith. It is in the context of our post-9/11 world that we present our views and concerns to the Subcommittee today.

Over the past two years, we have all seen a dramatically increased effort to promote and utilize consular ID cards as forms of identification for foreign nationals who are present in the United States. The Government of Mexico has been particularly aggressive in marketing the use of its consular ID card, the Matricula Consular. As a result of the extensive efforts to promote the use of the Matricula Consular, a number of other foreign countries are now considering the issuance of their own consular ID cards. The crucial element in the acceptance of any consular ID card is the ability to verify the actual true identity of the bearer of the card. In today’s post-9/11 world, this element is all the more important because, in order to protect the American people, we must be able to determine whether an individual is who he purports to be. This is essential in our mission to identify potential terrorists, locate their means of financial support, and prevent acts of terrorism from occurring.

Since Mexico’s Matricula Consular is currently the predominant consular ID card in existence, I will focus my comments today on this particular card. It is believed that consular ID cards are primarily being utilized by illegal aliens in the United States. Foreign nationals who are present in the U.S. legally have the ability to use various alternative forms of identification “most notably a passport” for the purposes of opening bank accounts, gaining access to federal facilities, boarding airplanes, and obtaining a state driver’s license. In addition, foreign nationals who are present in the United States, either legally or illegally, have the ability to obtain a passport from their own country’s embassy or consular office.

The U.S. Government has done an extensive amount of research on the Matricula Consular, to assess its viability as a reliable means of identification. The Department of Justice and the FBI have concluded that the Matricula Consular is not a reliable form of identification, due to the non-existence of any means of verifying the true identity of the card holder. The following are the primary problems with the Matricula Consular that allow criminals to fraudulently obtain the cards:

First, the Government of Mexico has no centralized database to coordinate the issuance of consular ID cards. This allows multiple cards to be issued under the same name, the same address, or with the same photograph.

Second, the Government of Mexico has no interconnected databases to provide intra-consular communication to be able to verify who has or has not applied for or received a consular ID card.

Third, the Government of Mexico issues the card to anyone who can produce a Mexican birth certificate and one other form of identity, including documents of very low reliability. Mexican birth certificates are easy to forge and they are a major item on the product list of the fraudulent document trade currently flourishing across the country and around the world. A September 2002 bust of a document production operation in Washington state illustrated the size of this trade. A huge cache of fake Mexican birth certificates was discovered. It is our belief that the primary reason a market for these birth certificates exists is the demand for fraudulently-obtained Matricula Consular cards.

Fourth, in some locations, when an individual seeking a Matricula Consular is unable to produce any documents whatsoever, he will still be issued a Matricula Consular by the Mexican consular official, if he fills out a questionnaire and satisfies the official that he is who he purports to be.

In addition to being vulnerable to fraud, the Matricula Consular is also vulnerable to forgery. There have been several generations of the card; and even the newest version can be easily replicated, despite its security features. It is our estimate that more than 90 percent of Matricula Consular cards now in circulation are earlier versions of the card, which are little more than simple laminated cards without any security features.

As a result of these problems, there are two major criminal threats posed by the cards, and one potential terrorist threat.

The first criminal threat stems from the fact that the Matricula Consular can be a perfect breeder document for establishing a false identity. It is our understanding that as many as 13 states currently accept the Matricula Consular for the purpose of obtaining a drivers’ license. Once in possession of a driver’s license, a criminal is well on his way to using the  false identity to facilitate a variety of crimes, from money laundering to check fraud. And of course, the false identity serves to conceal a criminal who is already being sought by law enforcement. Individuals have been arrested with multiple Matricula Consular cards in their possession, each with the same photograph, but with a different name. Matching these false Matriculas are false driver’s licenses, also found in the criminals’ possession. Such false identities are particularly useful to facilitate the crime of money laundering, as the criminal is able to establish one or more bank accounts under completely fictitious names. Accounts based upon such fraudulent premises greatly hamper money-laundering investigations once the criminal activity is discovered. As the Subcommittee is well aware, the FBI is particularly concerned about fraudulent financial transactions in the post 9/11 environment, given the fact that foreign terrorists often rely on money transferred from within the United States.

The second criminal threat is that of alien smuggling, a crime that has resulted in many deaths within the past year. Federal officials have arrested alien smugglers who have had as many as seven different Matricula Consular cards in their possession. The cards not only conceal the identity of the smuggler, they also serve as a magnet for the victims who are enticed to entrust their lives to the smugglers, believing that the Matricula Consular that awaits them will entitle them to all sorts of benefits within the United States.

These criminal threats are significant, but it is the terrorist threat presented by the Matricula Consular that is most worrisome. Federal officials have discovered individuals from many different countries in possession of the Matricula Consular card. Most of these individuals are citizens of other Central or South American countries. However, at least one individual of Middle Eastern descent has also been arrested in possession of the Matricula Consular card. The ability of foreign nationals to use the Matricula Consular to create a well-documented, but fictitious, identity in the United States provides an opportunity for terrorists to move freely within the United States without triggering name-based watch lists that are disseminated to local police officers. It also allows them to board planes without revealing their true identity. All of these threats are in addition to the transfer of terrorist funds, mentioned earlier.

In addition, it is important to note that the White House Homeland Security Council is currently chairing an interagency working group that is developing recommendations on Federal policy for Federal acceptance of these cards as well as guidance to state and local governmental agencies on acceptance. The interagency group is examining policy for acceptance of all consular identification cards. They are also specifically examining counterfeit and fraud concerns with the Mexican consular identification card that would impact its acceptance for identification purposes. The Department of Justice is an active participant in that group.

The events of 9/11 forever changed our world. As unpleasant as it may be, we must face the realities of our current world as they relate to protecting the people of the United States. This requires continual vigilance, particularly when it comes to being able to detect and deter those who might abuse the system to directly cause harm, or those who might aid and abet the financing of terrorist operations. Thank you.

Testimony of

Alan Greenspan

April 30, 2009


Testimony of Dr. Alan Greenspan Subcommittee on Immigration, Refugees, and Border Security

Embargoed until: April 30, 2009, 2:00pm EDT

Mr. Chairman and Members of the Committee:

Thank you for this opportunity to testify before you this afternoon.

Immigration to the U.S. slowed markedly with the onset of the current economic crisis. But as this crisis fades, there is little doubt that the attraction of the United States to foreign workers and their families will revive. I hope by then a badly needed set of reforms to our nation’s immigration laws will have been put in place.

There are two distinctly different policy issues that confront the Congress. The first is illegal immigration. The notion of rewarding with permanent resident status those who have broken our immigration laws does not sit well with the American people. In a recent poll, two-thirds would like to see the number of illegals decreased.

But there is little doubt that unauthorized, that is, illegal, immigration has made a significant contribution to the growth of our economy. Between 2000 and 2007, for example, it accounted for more than a sixth of the increase in our total civilian labor force. The illegal part of the civilian labor force diminished last year as the economy slowed, though illegals still comprised an estimated 5% of our total civilian labor force. Unauthorized immigrants serve as a flexible component of our workforce, often a safety valve when demand is pressing and among the first to be discharged when the economy falters.

Some evidence suggests that unskilled illegal immigrants (almost all from Latin America) marginally suppress wage levels of native-born Americans without a high school diploma, and impose significant costs on some state and local governments.

However the estimated wage suppression and fiscal costs are relatively small, and economists generally view the overall economic benefits of this workforce as significantly outweighing the costs. Accordingly, I hope some temporary worker program can be crafted.

The second policy issue that must be addressed by Congress is the even more compelling need to facilitate the inflow of skilled foreign workers. Our primary and secondary school systems are increasingly failing to produce the skilled workers needed to utilize fully our ever more sophisticated and complex stock of intellectual and physical capital. This capital stock has been the critical input for our rising productivity and standards of living and can be expected to continue to be essential for our future prosperity. The consequence of our educational shortfall is that a highly disproportionate number of our exceptionally skilled workers are foreign-born—two-fifths of the science PhDs in our workforce, for example, are foreign-born. Silicon Valley has a remarkably large number of foreign-born workers.

The quantity of temporary H-1B visas issued each year is far too small to meet the need, especially in the near future as the economy copes with the forthcoming retirement wave of skilled baby boomers. As Bill Gates, the chairman of Microsoft, succinctly testified before Congress in March 2007, “America will find it infinitely more difficult to maintain its technological leadership if it shuts out the very people who are most able to help us compete.” He added that we are “driving away the world’s best and brightest precisely when we need them most.”

Our skill shortage, I trust, will ultimately be resolved through reform of our primary and secondary education systems. But, at best, that will take many years. An accelerated influx of highly skilled immigrants would bridge that gap and, moreover, carry with it two significant bonuses.

First, skilled workers and their families form new households. They will, of necessity, move into vacant housing units, the current glut of which is depressing prices of American homes. And, of course, house price declines are a major factor in mortgage foreclosures and the plunge in value of the vast quantity of U.S. mortgage-backed securities that has contributed substantially to the disabling of our banking system. The second bonus would address the increasing concentration of income in this country. Greatly expanding our quotas for the highly skilled would lower wage premiums of skilled over lesser skilled. Skill shortages in America exist because we are shielding our skilled labor force from world competition. Quotas have been substituted for the wage pricing mechanism. In the process, we have created a privileged elite whose incomes are being supported at noncompetitively high levels by immigration quotas on skilled professionals. Eliminating such restrictions would reduce at least some of our income inequality.

If we are to continue to engage the world and enhance our standards of living, we will have to either markedly improve our elementary and secondary education or lower our barriers to skilled immigrants. In fact, progress on both fronts would confer important economic benefits.

Immigration policy, of course, is influenced by far more than economics. Policy must confront the very difficult issue of the desire of a population to maintain the cultural roots that help tie a society together. Clearly a line must be drawn between, on the one hand, allowing the nation to be flooded with immigrants that could destabilize the necessary comity of a society and, on the other hand, allowing the nation to become static and bereft of competition, and as a consequence to lose its economic vitality. The United States has always been able eventually to absorb waves of immigration and maintain its fundamental character as a nation, particularly the individual rights and freedoms bestowed by our Founding Fathers. But it must be conceded that the transitions were always more difficult than hindsight might now make them appear.

In closing, I would like to concur with President Bill Clinton’s view of our immigration history as expressed in remarks of more than a decade ago: “America has constantly drawn strength and spirit from wave after wave of immigrants. . . They have proved to be the most restless, the most adventurous, the most innovative, the most industrious of people.”

We, as a nation, must continue to draw on this source of strength and spirit. To do so, in the context of a rapidly changing global economy, our immigration laws must be reformed and brought up to date.


http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/default.htm

Remarks by Chairman Alan Greenspan

Consumer Finance

At the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C.

April 8, 2005

It is a pleasure to be here today as you conclude your discussions about our dynamic consumer finance market. Our nation’s vibrant financial services industry is remarkable in many respects, with myriad providers offering consumers a broad range of transaction and credit options. The industry is central to the functioning of our robust consumer sector. Therefore, it is essential that policymakers, regulators, bankers, researchers, and consumer groups remain fully engaged in monitoring developments in the consumer finance market and continually seek to better understand the strengths and weaknesses of the financial services industry, including how well it serves lower-income and underserved consumers.

Evolution of the Consumer Finance Market

A brief look back at the evolution of the consumer finance market reveals that the financial services industry has long been competitive, innovative, and resilient. Especially in the past decade, technological advances have resulted in increased efficiency and scale within the financial services industry. Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country.

From colonial times through the early twentieth century, most people had quite limited access to credit, and even when credit was available, it was quite expensive. Only the affluent, such as prominent merchants or landowners, were able to obtain personal loans from commercial banks. Working-class people purchased goods with cash or through barter, since banks did not make consumer loans to the general public.

However, more-intense industrialization and urbanization during the late nineteenth and early twentieth centuries dramatically changed the market for small consumer loans. Urban wage earners used credit to help them purchase the vast array of durable goods being produced by the new industrial economy, such as automobiles, washing machines, and refrigerators. Naturally, this growth in demand fostered increased competition for consumer credit, and, most important, the development of new intermediaries to supply it. Early in the twentieth century, many new organizations that focused exclusively on the needs of consumers entered the field, and the structure of consumer finance began to change dramatically.

Semi-philanthropic groups, called remedial loan societies, were formed to combat the high-rate cash lenders. “Morris Plan” banks, which made loans based on savings plans by borrowers, and the first credit unions, accessible exclusively to consumers with a common place of employment, soon followed. By the 1930s, a wide array of lenders served consumers, including credit unions, small local savings banks, and a nationwide network of state-licensed consumer finance companies. Savings and loans were created, in large part, because commercial banks and other local lenders would not make home mortgage loans. Hundreds of sales finance companies were formed to help manufacturers and retailers provide credit to their customers. Although commercial banks continued to finance merchants, manufacturers, and farmers, they were forced to turn more to consumer lending during the Depression, when their primary business sharply contracted.

As these structural changes continued, market demand and growing competition among this wider variety of lenders spawned further innovation. As early as 1900, some hotels began offering credit cards to their regular customers. By 1914, gasoline companies and large retail department stores were also issuing credit cards to their most-valued patrons. These first cards were simply a convenient way for good customers to run a tab with a particular retail business concern, since balances had to be paid in full each month. Later versions, introduced by retail giants Sears Roebuck and Montgomery Ward, allowed customers to pay their bills in installments, with interest charged on unpaid outstanding balances. This shift to revolving credit, and another innovation–allowing one card to be used at multiple businesses–later generated increasing competition in the card industry. In the 1950s, commercial banks entered into the credit card business.

Home mortgage loans, as we know them today, are a fairly recent product born of the failures of the mortgage finance system during the Great Depression. Clearly, radical change was needed. One of the most significant responses to this need was creation of the Federal Housing Administration, which instituted a new type of mortgage loan–the long-term, fixed-rate, self-amortizing mortgage–which became the model that transformed conventional home mortgage lending. A whole industry–thrift institutions–grew up around this one product.

The development of a broad-based secondary market for mortgage loans also greatly expanded consumer access to credit. By reducing the risk of making long-term, fixed-rate loans and ensuring liquidity for mortgage lenders, the secondary market helped stimulate widespread competition in the mortgage business. The mortgage-backed security helped create a national and even an international market for mortgages, and market support for a wider variety of home mortgage loan products became commonplace. This led to securitization of a variety of other consumer loan products, such as auto and credit card loans.

The Current Banking Structure

Today’s fiercely competitive market for consumer credit evolved into its present form slowly but persistently. Along the way, critical structural changes occurred, including entry of, and expansion through, new players.

Deregulation of U.S. banking markets has contributed to an approximately 50 percent decline in the number of banking and thrift organizations since the mid-1980s, when industry consolidation began. From 1995 to 2004, the ten largest U.S. banking and thrift organizations, ranked by the total assets of their depository subsidiaries, have increased their share of domestic banking and thrift assets from 29 percent to 48 percent.

However, according to most studies, this ongoing consolidation of the U.S. banking system has not reduced overall competitiveness for consumer financial services. When consolidation occurs, it is not uncommon for the merger to result in de novo entry to take advantage of any inefficiencies or transition difficulties of the newly consolidated enterprise. Over the past five years, for example, for every five bank mergers that have been approved, two de novo bank charters have been granted. Even in the face of consolidation, competition is fought on the battlefield of the local market, where most households obtain the majority of their banking services. And, it is noteworthy that our measures of local market competition have remained quite stable over the past fifteen years.

Deregulation and consolidation have also cultivated the expansion of the financial services marketplace, as evidenced by the proliferation of many nonbank entities that provide the credit and transaction services that were once mainly the province of depository institutions.

The Impact of Technology on Financial Services Markets

As has every segment of our economy, the financial services sector has been dramatically transformed by technology. Technological advancements have significantly altered the delivery and processing of nearly every consumer financial transaction, from the most basic to the most complex. For example, information processing technology has enabled creditors to achieve significant efficiencies in collecting and assimilating the data necessary to evaluate risk and make corresponding decisions about credit pricing.

With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.

For some consumers, however, this reliance on technology has been disconcerting. Credit-scoring models are complex algorithms designed to predict risk. Consumer advocates have raised concerns about the transparency and completeness of the information fit to the algorithm, as well as the rigidity of the types of data used to render credit decisions. Consumer advocates contend that the lack of flexibility in the models can result in the exclusion of some consumers, such as those with little or no credit history, or misrepresentation of the risk that they pose.

To address these concerns, some firms have worked to customize credit-scoring systems to include new data and to revalue the weight of the variables employed. Also, new organizations have emerged, developing new systems for collecting alternative data, such as rent payments and other recurring payments that will enable creditors to evaluate creditworthiness of consumers who lack experience with credit.

Improved access to credit for consumers, and especially these more-recent developments, has had significant benefits. Unquestionably, innovation and deregulation have vastly expanded credit availability to virtually all income classes. Access to credit has enabled families to purchase homes, deal with emergencies, and obtain goods and services. Home ownership is at a record high, and the number of home mortgage loans to low- and moderate-income and minority families has risen rapidly over the past five years. Credit cards and installment loans are also available to the vast majority of households.

The more credit availability expands, however, the more important financial education becomes. In this increasingly competitive and complex financial services market, it is essential that consumers acquire the knowledge that will enable them to evaluate products and services from competing providers and determine which best meet their long- and short-term needs. Like all learning, financial education is a process that should begin at an early age and continue throughout life. This cumulative process builds the skills necessary for making critical financial decisions that affect one’s ability to attain the assets, such as education, property, and savings, that improve economic well-being.

Conclusion

As we reflect on the evolution of consumer credit in the United States, we must conclude that innovation and structural change in the financial services industry have been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means. Without these forces, it would have been impossible for lower-income consumers to have the degree of access to credit markets that they now have.

This fact underscores the importance of our roles as policymakers, researchers, bankers, and consumer advocates in fostering constructive innovation that is both responsive to market demand and beneficial to consumers.


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