We Cannot Let Capital Run Dry

By David Ferreira

United States Hispanic Chamber of Commerce

Vice President for Government Affairs

Our economy needs a helping hand. Lax lending standards and the failure to regulate predatory subprime lending bred irresponsible lending and borrowing. Too many individuals signed mortgages they could not afford. Too many financial institutions invested in risky and new types of mortgage-backed securities.

Now five million homeowners are delinquent or in foreclosure. And too much of our personal wealth has been lost by the declining home values or the free fall of stocks. Hispanic unemployment has risen to 8 percent, the economy has shed 760,000 jobs this year – especially in industries that hire Latinos, and our entrepreneurs are having a more difficult time keeping their business doors open and workers employed. Clearly, something needs to be done quickly.

Rising credit restraint isn’t just a problem for people with bad credit. The flow of capital has slowed like molasses down Main Street. Banks have become eerily risk averse and consumers and businesses that qualify are also increasingly reluctant to borrow. Some banks have even begun calling in loans, not because of a default or late payments, but because they reassessed the risk.

As an organization representing business owners, the United States Hispanic Chamber of Commerce believes that the federal government should exercise a light hand at the tiller of the economy. Nevertheless, we support the Emergency Economic Recovery Act of 2008 as a means to stabilize the economic forces that are derailing our economy.When $40 billion in Treasury bills are sold like at a yield of one twentieth of one percent, it means the entire country is essentially putting their money under the mattress. The American economy does not work when we hide our money. It depends on the flow and trust of capital markets. And, at a time when every financial institution is trying to de-leverage, the only institution that remains that can leverage up is the United States Treasury.

Earlier this week, the U.S. House of Representatives lost an opportunity to restore faith in the markets. The U.S. Senate saw a great opportunity to force the House of Representatives to approve the bill plus tax extenders for the R&D and renewable energy tax credits that it had also rejected not long ago.

Today, the House of Representatives has the unenviable responsibility of bringing to vote the economic recovery bill and either pass it to restore faith and liquidity in the credit markets or be responsible for a steep drop in the Dow and cause the insolvency of many more banking institutions and businesses.

There is a lot of whipping and vote counting going on. Many Republicans and Democrats have announced today that they will be supporting this legislation. Clearly the House is moving in the right direction.

A short month from now Hispanic business owners and their families, as well as many other households across the nation, will talk at their kitchen tables and decide if the much trumpeted value of “change” is coming to their Congressional district. The vote today will surely seal that fate for many Representatives.