Credit Where Credit Is Due

The Bank of America offers credit cards to illegal immigrants. What could be more American?

The Bank of America was born in San Francisco in 1904 as the American Bank of Italy. Its savvy first-generation American owner, Amadeo Giannini, founded the bank in order to tap into a market that other bankers considered too down-market and perhaps even ethically dubious: the working class. Giannini went door-to-door, explaining how banks (and credit) worked to win his first customers, in language they could understand. By 1928, his face was on the cover of Time magazine. He had revolutionized the banking industry.

Given Bank of America's history, it's not surprising that the bank has been ahead of the game in offering services to immigrants. In 2005, it eliminated fees for transfers to Mexico for account holders. And last week, the bank expanded a tiny pilot program offering credit cards to people without credit history or Security numbers. In other words: illegal immigrants.

After the Wall Street Journal broke the story, a blog-and-cable hullabaloo followed. Lou Dobbs called the statement explaining the bank's policy "silly and outrageous," and hollered that Bank of America's spokewoman was "some kind of idiot," calling her a "moron" for being surprised at the fury of Dobbs and his compatriots.

Michelle Malkin posted an item on her blog about the "Bank of Illegal Aliens in America" in which she parodies the bank's slogan "higher standards…except for illegal aliens."

"There's no question that the intent of this new policy is to give credit cards to illegal aliens. They're hoping to tap a new market. They're hoping to make some money. So anyone who suggests otherwise is just silly," said Steven Camarota of the Center for Immigration Studies, echoing the Dobbs' subtle rhetorical style.

Rep. Tom Tancredo (R-Colo.) fretted about national security implications of the new cards in a press release: "Clearly, Bank of America established this program for the explicit purpose of aiding and abetting illegal aliens," said Tancredo. "I hope the administration will shut down this reckless and illegal program before Bank of America extends a line of credit to a potential terrorist." He went on to propose an oddly ungrammatical slogan of his own for the program: "Bank of America, it's everywhere Terrorists wants to be."

But filling out a form claiming to be "Ivanna C. Card" won't be enough to get credit. Bank of America requires applicants to have a checking account with the bank for three months with no overdrafts. The cards have a $500 credit limit and are issued only to people with government-issued taxpayer ID numbers. The bank asks for an initial deposit of $99, which is refundable after six months of on-time payments. The interest rate is high, but comparable to similar cards for people who apply with Social Security numbers.

Critics say that the taxpayer ID numbers are easy for illegals to get. Which is probably true. The IRS has been granting taxpayer numbers to people regardless of their immigration status for years. It's a reasonable, practical measure and it enables recent arrivals to the country-legal and illegal-to do business on the up-and-up. In fact, these numbers make it easier for those people to pay their way in taxes for the services they use, and easier for the government to track them. But Tancredo and Dobbs imply that private companies should be expected to do the work of government, screening illegals better than government itself can manage.

"Its practical effect is an amnesty for illegal aliens," declares analyst John Keely, also of the Center for Immigration Studies. But, of course, it's not at all like a nationwide amnesty. It's one bank, experimenting with one program at 51 locations in one part of California. If the illegal immigrants who open accounts and get credit cards abuse the privilege, default too frequently, or otherwise fail to be responsible customers, the bank can cancel the offer. And you'd better believe that if they don't make money, or if they see legal trouble on the horizon, Bank of America will cancel it. It's hard to conceive of a federal amnesty plan that would be as flexible or responsive to conditions.

Other critics treat the bank as an outgrowth of the federal government, citing FDIC and other programs designed to bail out banks in trouble. But there's no sign that issuing small credit cards to illegal immigrants is likely to put taxpayers on the hook for bailing out Bank of America, the country's second largest bank (or fund terror, for that matter).

It's unlikely that high default rates or illegal banking behavior will bring the program down. Immigrants, many of them illegal, are the most prolific entrepreneurs in the United States: They open about 80 percent of new businesses each year. Many banks already offer mortgages and checking accounts to the same group of people lacking Social Security numbers. There has been no evidence that they have a higher rate of financial irresponsibility than in Americans of similar socioeconomic status.

Somewhere in the neighborhood of 10 million illegal immigrants (estimates vary) need financial services, and most are making do with second-best options right now. According to a recent Brookings Institution study, immigrants (legal and illegal) spend $2 billion a year on check cashing facilities and pay another $2 billion a year to send remittances back to relatives and friends in their home countries. Critics worried about the ethical implications of offering credit cards to lawbreakers would do well to consider the ethical implications of shutting out an underclass from the banking services the rest of us enjoy.

Will offering legit accounts to illegals encourage more scofflaw behavior? Probably not. It's far better to have legal mainstream options for getting money or credit when it's needed. When an illegal immigrant is faced with unexpected medical bills, surely it is preferable for him to be able to put it on a credit card and pay it off gradually, rather than turn to various unsavory and potentially illegal ways to get his hands on the money. And far better for illegals to keep their money in banks with a taxpayer ID than under a mattress in a crowded house, ripe to cause conflict or encourage theft.

The Journal's original report, though, shows modest aspirations on the part of Bank of America. Consumer and small business banking chief Lian McGee said: "The push has little, if anything, to do with grand political gestures. It's about profits…. If we don't disproportionately grow in the Hispanic [market], we aren't going to grow."

And there's nothing wrong with that. But I like to think the ghost of Amadeo Giannini is hanging around somewhere, pleased at this development at Bank of America for more than just the profits.

Katherine Mangu-Ward is an associate editor of reason.