Nerve Endings Firing Away

Bank bailouts are giving the U.S. Congress the chance to attach several conditions that banks otherwise wouldn’t accept. But given the fact that bank executives and financial wizards screwed up so bad, it might seem alright for the government to teach them a thing or two. One might argue that government should not tell banks how to run their private business. In most cases they would be right except that these banks have run their own business without any interference and dug themselves deep taking all of us with them. But that doesn’t mean that the government overnight knows any better. In fact, in these partisan times, any conditions attached to the bailout money has to be thoroughly examined for political motives unrelated to business efficiency.

One such pre-condition was the ban on hiring of foreign workers at ailing banks. This led to Bank of America rescinding on it job offers to foreign MBA students graduating from US business schools [hat tip: Rohit]. The politicians on Capitol Hill feel that these jobs should be offered to Americans. Who was responsible for this pre-condition? Protectionist Democrats and the Obama administration? You would be surprised that it was in fact, Republic Senator Charles Grassley and Independent Senator Bernie Sanders (the only Socialist in the Senate) who introduced this amendment to bar people holding H1-B visas from working in so-called taxpayer-funded banks. These senators falsely assume that banks are hiring foreign workers instead of Americans when in fact, the opposite it true. Any desi student knows that U.S. companies are not hiring them because they are cheap but because they are the best people for the job. Processing an H1-B visa in fact entails additional cost that hiring American workers would not. Given the higher proportion of foreign students in graduate programs especially in top-ranked universities, it is not surprising that an American company is more likely to hire a foreign student. Given the so-called abuse of the H1-B visa system by certain large Indian companies, a case could be made to prevent people who haven’t studied in the U.S but even then, it would miss the point of attracting the best possible talent.

As Megan McArdle says:

As a committed free trader–and an MBA who went through the mass layoffs of the last recession–my sympathy is all with the MBAs. These are people who mostly aren’t eligible for scholarships or subsidized student loans; they’ve borrowed or spent close to $100,000 in America to get their degree, many of them in hopes of staying here. They’re intelligent, highly skilled, and promise to be net contributors to the tax system . . . so America kicks them in the teeth and sends them home without a job.

By keeping these students out, America is actually sending skilled human capital away which in turn makes creating and maintaining efficient and profitable businesses all the more difficult. The “Buy American” clause runs counter to every conservatism principle there is given the arguments of merits, free trade (of intellectual capital, and supporting legal immigration; in fact it exposes xenophobic fears that prey on rational sensibilities. It makes a false assumption that there is a pool of American workers who are equally qualified and willing to replace foreign workers.

Do I blame the Obama administration and Democrats for allowing this restriction to stay in the stimulus bill? Of course, I do. Admittedly, people responsible for drafting the bill had to make several compromises to attract Republican votes but I fail to understand why these conditions were not removed after Republicans refused to vote in favor. Political bickering leads to such compromises that have no direct bearing on solving the crisis and merely results in America being less attractive to skilled immigrants and in turn, less competitive in the world arena. This financial crisis will eventually lead to global restructuring following which the intellectual talent and conducive business environment tempered by smart regulation will be key factors in the next emerging economic superpower. Ignoring skilled immigrant talents will only drive them away to other pastures that will be only too eager to accept them. Otherwise you risk America becoming the land of mediocrity and even idiocracy; case in point – this Verizon customer representative and his manager [YouTube link; hat tip: Rohit].