The Associated Press is getting desperate. Despite making a big push to expand business reporting, the newswire has failed to break any significant news on the credit crunch and is now grasping for straws:
SANTA CLARA, Calif. (AP) -- Banks collecting billions of dollars in federal bailout money sought government permission to bring thousands of foreign workers to the U.S. for high-paying jobs, according to an Associated Press review of visa applications.
The story then reports how the 12 largest banks that have recieved government bailout money have sought H-1B visas to hire 21,800 foreign workers over the last six years. This appears to be a second-rate attempt to match stories such as John Thain's $1.2 million decorating bill or Merrill Lynch's big bonuses. It's a crude attempt to stir envy and nativist sentiment among Americans who are losing their jobs. In reality it's an utter non-story that was never fit to print.
First of all, we don't even know how many visas were granted. The entire quota was filled in the first two months of the year in fiscal 2007, so it's clear that the majority of applications are denied. Big corporations with giant HR offices probably made a huge number of requests as part of a shot-gun approach to filling vacancies.
Second, the math alone is less than impressive. The total translates into 3,633 applications a year, in total, or 302 per bank annually. That comes out to 0.12% of Bank of America's entire workforce or 0.18% of Well Fargo total workforce. If 3,600 jobs disappeared or were created in a single week in the entire economy -- for instance in the jobless claims -- it would have no impact on anything. Stretch them out over an entire year and you're talking about something less than statitically irrelevant.
Third, AP says the jobs would have paid an average salary of $90,721, and then highlights how that's "nearly twice the median income for all American households." At first, that might conjure up notions of envy and class warfare. But, a journalist with half a brain economically would quickly realize that it's good to create high-paying jobs in the USA. Not only does it raise the country's income level and add extra tax revenue. It also means more demand for a house, a housepainter, personal trainer or any number of other jobs that native-born Americans might fulfill. High-income foreign workers live in the country, spend their money here and add an educated diversity to our schools and communities -- unlike many illegal immigrants who perform unskilled labor, live on the margins of society and send much of their earnings home in the form of remittances.
Fourth, AP tries to wrap a class-conspiracy bow around the entire story with this final line:
"Foreigners are attractive hires because companies have found ways to pay them less than American workers."
Not only is this assertion completely unattributed, it's also at odds with the earlier statement about how the foreigners are paid twice as much as average Americans. Obviously, we know they mean that for the kinds of jobs -- skilled positions such as accountants and lawyers -- foreign workers are paid less than Americans. Even if this is true, it doesn't make much sense. Even if all these 21,800 jobs were given to Angolan accountants, Laotian lawyers and Thai traders, they would be way too small a proportion of the banks' workforce as to make any impact on total costs. And, don't forget the added legal cost and hassle of making such a hire -- plus the fact employers need to prove no qualified Americans can perform the job in question. I simply cannot believe a bank would chose to jump through all the hoops needed for an H-1B visa just to save $5-10,000 in salary.
Fifth, would AP rather see the banks avoid the visa problem entirely by instead hiring people in Ireland or India?
The AP should be ashamed of itself for ever allowing such a thinly reported and ill-concieved story to pass for news.
I suspect it resulted from a last-minute attempt to piggy-back on Barack Obama's comments about "shameful" bonuses on Wall Street. In fact, it's worth making a quick observation about how the Democrats have attempted to exploit class envy. They have about as much heart as actors flatly reciting their lines after taking a scene for the 50th time straight. Has the political establishment become so entrenched with special interests and plutocracy that it can do no better than propose limiting Wall Street pay at $400,000? (At the suggestion of Democratic Sen. Claire McCaskill.) Never mind the fact it probably won't happen. Never mind the fact that this is pathetic and meek compared with previous greats in the party such as Williams Jenning Bryan.
For one thing, it shows McCaskill's own political tin ear: Thanks to AP, we know that the average American earns something around $45-50,000. Do you really want to remind them that the executives taking their money will be earning something like nine times their pay? Or is it better to just leave well enough alone?
Secondly, if comp were limited to $400,000, all the best talent -- including many people who made the messes at these banks and are somewhat needed to clean them up -- will leave. It's like a big sign telling the best and brightest not to apply, which will delay these banks' return to solvency and keep them in a zombie state even longer at the taxpayers's expense.
Maybe at the end of all this, the key message is that the Democrats don't care because they don't pay taxes -- that is unless they're appointed to public office, such as Mr. Geithner and Mr. Daschle.
On one final piece of class warfare, Mary Schapiro, the new head of the SEC, will recieve up to $25mln in severance pay from Finra -- the very same people she will be regulating. Much like Mr. Geithner, her main qualification for fixing the mess on Wall Street is apparently that she helped create it.
I have tried to steer clear of partisan politics on this blog, but the conduct of the new administration is unfolding exactly as I had feared. I expected little more than bromides and a superficial change in policy from the Bush presidency. Aside from politically charged issues such as subsidizing overseas abortions and closing Guantanamo Bay, this administration is a continuation of business as usual -- just as little changed when Bush came to office. (All the Wall Street abuses of the dot-com era happened under Clinton's watch.)
Now Obama and Geithner plan to come up with a big mega plan to fix the credit market. Needless to say, it will be some kind of politically concocted grab-bag of subsidies, pork and class envy. At some point along this process, the market will realize nothing is going to get fixed and break out to the downside. It's about time to make the new lows I have been expecting. (I have been targetting 680 on the S&P 500 by the end of March.) If you want some real solutions on actually fixing the problem, read this. Interestingly, mega bond fund Pimco appears to have gotten on board with my argument from late last year that the problem needs to be fixed in the capital markets rather than the interbank market. For a more in-depth analysis, read this.
It's time for Americans to wake up and start seeing the real bubble threatening our country. It's not the housing bubble, the credit bubble or the now ailing Treasury bubble. It's a government bubble that largely traces its roots back to the 1930s, when Americans threw the constitution out the window and let Washington take over a country that spanned six time zones and thousands of miles. Our constitution was designed two centuries ago to solve a handful of problems, yet our politicians have hammered it into a system that tries to manage the smallest details of our economic, political, cultural and legal lives. We have endured decades of of middling results, trillions of dollars in waste, millions of lives ruined by welfare, inner-city decay and the war on crime, and tens of thousands killed in undeclared wars around the globe -- all because of politics. It's time to realize the problem is a government that's out of control because we let it get out of control.
There is no liberal or conservative, no Democrat or Republican. Most Americans agree on 80-90% of issues, and only fight over cheap symbolic issues such as abortion, evolution and prayer in school. It's important to realize that all of these result from the nationalization of politics. They have us battling each other the same way the British kept their enemies in India and Europe weak by getting them to kill each other. Our country has been carved up into political districts to serve the needs of the elected rather than the electors. We're split the same way General Motors and Ford once shared the auto market. Divided, we are easily ruled.
Like all bubbles, the time is approaching for this one to burst. (This article about the coming bear market in US Treasuries could be an early sign this is starting because if Washington can't pay for itself, how long can it keep growing?) We need to return power to the states where it belongs. They are more fiscally responsible and politically responsive. Just as happened in the early progressive period in the second half of the 19th century, states can compete against each other to solve health care, improve education and promote economic growth. There is a never a single answer to any problem, so why pretend we need single policies for 300mln people? It's a question of diversity versus dictatorship.
The answer isn't more government or less government. It's better government -- limited, constitutional government. That's the only kind of change you can truly believe in.