Guest Blogger Series: Aracely Panameño on “Why Financial Reform Should Pass”

When I bought my house 15 years ago, it was marked up $13,000 more than its value.  I did not know much about how our financial system worked at the time; I trusted the builder, the realtor, the broker, the appraiser, and the closing attorney.  All of them were getting paid from my down payment and the loan proceeds; yet, none of them were looking out for my interest, only for their own.  The bank approved the loan and my daughter and I moved in.

It was not until several years later that I realized I had been taken advantage of.  By then it was too late; I had no recourse.  Eventually, I refinanced my house to a 15 year fixed rate mortgage and the savings from the interest make me feel good about the lessons I learned.  Provided no major catastrophe strikes, the house should be paid off soon and it will become my daughter’s inheritance.  That is the way it should be.  Families should be able to build a “patrimonio familiar” that gets passed on to our children.

Six months ago, I was shopping for a smaller and more fuel efficient vehicle.  After I made my choice, I negotiated the deal and proceeded to the finance department of the dealership.  The finance man was committed to two things: get me to sign on the dotted line and get me to agree to the highest interest rate he could persuade me to.  Unlike the time when I bought my house, I was a better and more informed consumer.  I had done my homework and if I could not get what I knew I deserved, I was willing to walk away.  He offered me 5.5% APR; I knew I could get 3.9% elsewhere.  As I was about to walk, he offered me 2.9% and we entered into an agreement.  I can assure you that the dealership and the bank both are making a profit and I am not being taken to the cleaners.

Since the financial collapse, banks have had access to capital at less than 1% and I see no reason why I should have to pay a significantly higher margin.  I have been blessed not to be so trusting of people who have an interest in my signing on dotted lines.  And, I have had leverage.  Even so, I have not been immune from being taken advantage of.  Other people are not so lucky and our financial system is so bifurcated and unjust that it charges exorbitant rates and fees to those who can least afford it.  I don’t ask for handouts for them, I only ask for fairness for all.

Two years have passed since the national financial system brought our economy to its knees, set off a global economic recession, and caused the highest unemployment rate we have seen since the Great Depression.  Yet, after Hank Paulson unilaterally decided to rescue the banks and Wall Street, the sense of urgency for reform of our financial system has faded.  There seems to be little concern over the struggle of the millions of American families who have already lost or are at imminent risk of losing their homes.  For the first time in our national history, our children will inherit debt and will start worse off than any generation before them.

For almost two years, the Congress has been debating financial reform legislation.  Despite final passage of the Conference Committee report in the U.S. House of Representatives, its viability remains in limbo in the U.S. Senate.

The posturing continues.  In the meantime, according to the Center for Responsible Lending, 2.5 million homeowners have lost their homes; more than six million homeowners are at least two months late with their mortgage payments and in imminent risk of losing their homes; hundreds of billions of dollars have been lost in equity, and community and family wealth.  States, counties and other localities are struggling to make ends meet now that the revenue generating well of housing appreciation has dried up leaving them broke without a rainy day fund.  The states and communities where the problem is most severe are the very places where Latinos and African Americans, and the White middle class reside.  In fact, Latinos and African Americans have been disproportionately impacted by the foreclosure and financial crisis.  They have higher foreclosure rates, higher unemployment rates, and have least access to credit.  Most of those harmed by predatory loans, could have qualified for prime or better terms of credit than what they received.  Still, some folks remain more concern with financial institutions’ ability to continue to do the same they have always done, put their profit interest before sound business practices that are fair to all consumers.

The Conference Committee report, while imperfect, represents the first time in US history that consumers are afforded protections in financial markets while still preserving flexibility in the system to respond to ineffective and inefficient innovation.  Self preservation should keep drivers adhering to safer driving practices; yet some still drive recklessly, drive drunk, fail to yield the right of way, care less about yellow-blinking lights, run stop signs and red lights, and cause harm to others.  Hence, the government regulates the rules of the road and when these reckless drivers are caught, the law is applied to them.  So, it should be with our financial system.  This bill should pass.  Please contact your members of Congress, thank the Representatives who supported the bill, and ask your Senators to vote for the bill.  You may go to the House and Senate websites or dial the U.S. Capitol Switchboard at 202-224-3121 and ask to be transferred to your Senators or Representative.

Aracely Panameño is a Latina leader, activist, and spokesperson at the domestic and international level.  She is a published author, accomplished public speaker, media commentator, reporter and columnist, strategic grassroots organizer and coalition builder, strategic grassroots, and direct lobbyist.  She serves as advisor and is a member of the Insight Center for Community Economic Development’s Experts of Color Network/Closing the Racial Wealth Gap Initiative.  She joined the Center for Responsible Lending in December of 2004 as director for Latino affairs.  Aracely holds a bachelor’s degree in business management from The Catholic University of America in Washington, DC and is MBA in Finance candidate at Johns Hopkins University in Baltimore, MD.

The opinions expressed are personal and do not represent the views of the Center for Responsible Lending.