OPINION:
Economic uncertainty continues to be a salient theme with Americans. Yet far too many politicians and their allies are pushing for counterproductive paths that hinder access to financial opportunities and services and hinder everyday Americans striving for upward mobility.
Access to credit and home loans are two critical areas in the crosshairs. Unnecessarily restricting these two markets also restricts opportunity to empower low- and middle-income households.
For example, research from the small-business mentoring organization SCORE shows that access to affordable credit has been a significant barrier to growth for Hispanic entrepreneurs as the pandemic has receded. Nearly 40% of Hispanic small-business owners reported that obtaining financing continues to present a major challenge, compared with only 18% of their non-Hispanic White counterparts.
Hispanic-owned businesses contribute over $800 billion to the economy each year, so the effects are felt beyond one demographic.
Small business is our country’s economic engine. About 46% of employed Americans work for a small business. Policymakers should never lose sight of that.
Owning a home is another key measure of economic progress, a cornerstone of the American dream and a driver of generational wealth. Americans are uneasy about their prospects for homeownership. Communities across the country face challenges. Hispanic homeownership rates still lag behind despite some improvement, for example.
The first order of business should be to stop promoting policies that exacerbate the problem. Recognizing that intentions are not enough and relying on real-world effects are the next building blocks.
Putting the banking sector in the crosshairs is especially risky. Banks are not only the first institution consumers typically engage but also the primary one as their financial lives progress. That prevalence makes them targets for politicians who are eager to impose a political or cultural agenda.
A notable example of the apparent disconnect between regulators and real people is the proposed change to banks’ capital requirements — rules that determine how much capital banks must hold at any given time to protect against potential losses.
The Federal Reserve initially announced changes to the rules in the middle of 2023. After a public outcry, the Fed’s vice chair for supervision, Michael Barr, announced that the proposal would be scaled back. Mr. Barr acknowledged that “higher capital requirements can raise the cost of funding to a bank, and the bank can pass higher costs on to households, businesses, and clients engaged in a range of financial activities.”
Still, congressional oversight and involvement or approval of these agreements in the first place would be a more effective way to keep regulators in check, especially when they involve commitments made by regulators to foreign bodies such as the Basel Committee on Banking Supervision in Switzerland, whose “Basel III Endgame” framework is the foundation for the Fed’s proposal.
Other regulatory bodies should also be pushed to understand the full ramifications of their decisions as well. Proposed rules from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. on bank mergers and acquisitions come to mind.
Regulatory uncertainty helped kill a proposed merger of TD Bank and First Horizon — and with it went the banks’ plan to invest $50 billion to open new branches in underserved communities. Instead of adding to that burden, regulation of mergers and acquisitions should be streamlined to prevent this from happening again.
The proposed increases to capital requirements and merger restrictions exemplify government overreach that targets large financial institutions under a vague assumption that they must be bad.
But increasing bureaucratic efficiency via regulatory burdens is far from a justifiable end, especially when the practical effects make it more difficult for our financial system to serve everyone, especially individuals and communities that face financial obstacles.
Expanding access and opportunity for low- and middle-income Americans so that more people can benefit from the enormous power of our capital markets, for example, would be an actual solution that would give more households the ability to prosper.
Hardworking Americans’ chances for upward mobility should not be collateral damage. Lawmakers who truly want to solve problems should focus their energy on policies that empower low- and middle-income households.
• Mario H. Lopez is president of the Hispanic Leadership Fund, a public policy advocacy organization that promotes liberty, opportunity and prosperity for all.
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