Government Dirt

By Maria Fotopoulos

While the United States ignored immigration laws in recent years to foster an illegal underclass of potentially 38 million people, a twin demon of financial fraudsterism was allowed to grow and flourish. Each creation ugly enough independently, the immigration and financial fiascos together cross paths in ways that challenge the essence of fairness and Democracy.

Greed and ethics failures in the mortgage lending, home construction and financial services businesses contributed to the belief that the American economy could be sustained simply by buying and selling housing (and buying more stuff to put in those homes). This fueled a false prosperity that lured in a large illegal alien population, unhampered due to lack of political will to secure our borders and enforce our immigration laws. Unchecked by government regulators who took little public action to reign in the $2.8 trillion U.S. mortgage market boom, a bubble in the housing market grew and grew, ultimately bursting big time several months ago into the full-blown economic meltdown we’re living through.

Part of the large illegal alien population drawn to the United States supplanted American workers in the construction industry. In recent years, an estimated 27 percent of the illegal labor force worked in construction. A percentage of that illegal workforce, combined with other illegal workers in various other industries, bought into the easy credit notion of home buying that was being promoted. Indeed, government policy encouraged home ownership for immigrants, minorities and low income prospects through sub-prime lending and no-down-payment loans via quasi-governmental entities.

Federal law permitted banks to offer mortgages to illegal aliens using only an ITIN (individual tax identification number), in fact. No Social Security number was required in the estimated $3 billion ITIN mortgage market that expressly catered to illegal immigrants.

As 2008 comes to a close, construction job losses alone have mounted to more than 300,000. So just looking at the construction industry, we can make an educated guess that a portion of the bad housing debt is for home purchases by illegal aliens.

Beyond educated guessing, numerous stories have been reported on illegal aliens buying into the housing market – sometimes buying multiple properties. The complex agreements immigrants enter into for mortgages and other financial transactions often have the English-speaking minor children in the family acting on behalf of non-English-speaking adults.

There’s most certainly a questionable aspect of using children as translators for agreements entered into by adults, regardless of how common the practice is among immigrant households. But the sagacity of extending home mortgages to people who should not even be in the country is more than questionable. However, there’s even more troubling news of outright illegal alien mortgage fraud and abuse that occurred in the lax lending and immigration environment.

It’s been reported that in some parts of the country illegal aliens were recruited by organized groups to purchase FHA-insured homes with fraudulent Social Security numbers and other documents, while other reports tell of illegal aliens being used as “straw buyers” in house-flipping schemes.

A financial system unfettered with government not intervening where it should as a check and balance – and intervening where it shouldn’t to goose the system for higher levels of home ownership, thus helping create the giant housing bubble – has left us all holding the bag now by way of government bailouts. And an immigration system broken has left us with unplanned for population growth, depressed wages, an entrenched second class in a country that holds itself out to be a Democracy and a dangerous criminal and gang element, among other things.

We may tend to overlook the immigration factor in all the current bad news. In fact, a Zogby poll conducted during the Presidential election showed immigration down the list at #11 in issues. We’re now so distracted by continuing volatility in the stock market, fallout from the $700 billion bailout, the should we/should we not auto bailout, business failures, job losses, a $50 billion Ponzi scheme and basically new economic shocks daily.

But we need to keep illegal immigration in very clear focus as a new administration comes to power. Make no mistake: illegal immigration has played a part in the wind-up of the housing bubble and the concomitant unwinding of housing. And while it may be just one symptom of systemic failures in government and business, immigration also adds tremendous costs to our prisons, schools and hospitals – costs which we can ill-afford in this new environment of vast wealth destruction.

Maria Fotopoulos is a Senior Writing Fellow for Californians for Population Stabilization (CAPS, capsweb.org).