The backlog of EB-5 visas is bad public policy and is not good for anyone except a tiny band of big city developers, middlemen, lawyers, and lobbyists.
The immigrant investor (EB-5) program sells a family-sized set of green cards to aliens who pony up $500,000 for a government-approved, but not guaranteed, investment, usually in ultra-low interest rate loans to urban real estate interests. Currently there is a backlog of approved applications over the 10,000 annual limit set for these visas, which can delay admission to the United States for as long as 10 years.
In many cases, the large EB-5 backlog commandeers thousands of half-million-dollar investments (sometimes the life savings) of aliens wanting to come to this country. They may be in a waiting line 10 years long, and some would like to get their money back and step out of the line — but the current system will not force U.S. interests to return the aliens' money.
This is unfair to the aliens, who should be given the choice of staying in line or getting their money back.
Also, the presence of these backlogs gives the urban developers an excuse to argue that still more visas should be granted to people whose only credential is the $500,000 that they hope to use to get a set of green cards for themselves, their spouses, and their kids under 21.
My sense is that getting rid of the backlogs of approved EB-5 petitions that exceed the 10,000 visa-a-year allotment would be a good idea.
But how do you do it without simply bowing to the fat cats and issuing additional visas?
It would probably take a change in the law, but it can be done, and it can be done without decreasing the $2 billion/year in EB-funded, low-interest loans currently subsidizing the already ultra–prosperous urban middlemen.
I would like to terminate the backlog by terminating the program, except for those already in line, but this looks politically impossible. One of the byproducts of a Democratic majority in the House of Representatives next year would be the elevation to the House Judiciary Committee chairmanship of a man who is, quite literally, the congressman from Wall Street, Rep. Jerrold Nadler (D-N.Y.); he represents the lower part of Manhattan Island, and while a staunch liberal on most issues, is not an advocate of EB-5 reform.
But perhaps my approach could work. It would:
- Let the EB-5 investors who want to get their money back to get it, or at least most of it;
- Eliminate, after several years, the existing backlog; and
- Keep a flow of capital — at say the $2 billion a year rate — going to those well-to-do urban developers.
How can this possibly be done? Well, let's start with the old adage that when you are in a hole, stop digging.
This is the five-part plan:
- As we reported earlier, the current system calls for the steady approvals of EB-5 petitions (a Department of Homeland Security product) even though the total number of approved petitions exceeds the number of visas that can be issued by the State Department: about 10,000 a year. Suspend approval of all new petitions to allow, over time, the issuance of visas to everyone on the waiting list. It would take a little bit longer to take care of the specialized waiting list for Chinese aliens, but that, too, would be gone in a few years.
- To make the backlog disappear more swiftly, allow those who do not want to wait for as long as 10 years under the current system to get as much of their investment back as possible. Since this would involve prying the money from the regional centers, which in many cases have lent it to someone else, this process would be neither swift nor clean.
- Have DHS pay a reward of $50,000 or so to some of those leaving the line to make up for losses resulting from retrieving their money from the middlemen. Those aliens would have to promise not to seek to come to the States, in any way, for 10 years, and to forswear any use of any investor-linked immigrant or non-immigrant visa (such as those used for treaty investors) for the rest of their lives. Of course they could decline the $50,000 and opt to take the route noted in Part 2 and not sign away future rights to apply for immigrant status.
- Require those who want to stay in the line to file a fresh set of papers every year and pay a fee of, say, $10,000. The fees would be used to pay the costs of Part 3. For their $10,000, the investors would be getting a faster set of visas than they would get under the current system.
- Auction off some rapid admissions to those in line in order to keep the flow of dollars coming to the urban developments (and any odd rural ones that made their way into the process).
While 8,000 of the usual 10,000 visas a year would continue to be issued to those standing in line, 2,000 immediate visas would be auctioned off with a minimum bid of $1.2 million per visa, with $1 million going to normal EB-5 investments and the balance to be used by USCIS to reduce the waiting line.
This would produce — if all the ultra-fast visas were purchased — some $2 billion a year for the EB-5 industry, which is what it is getting currently at some 4,000 investments a year at half a million each. If there were a demand for more than 2,000 of the visas, there would be an auction with the excess above $1.2 million to be deposited in the Social Security Trust Fund, which is running out of money while we continue to use the current benefit and tax formulae.
How long would this process take? Recent State Department data and estimates show that there are about 66,000 EB-5 visas backlogged. Assuming that perhaps 10 percent of these would be withdrawn, this would eliminate the problem in six years. The special impact of the 7 percent maximum of the total to any one nation, which creates the long waits for the Chinese, does not apply when there are no backlogs from other nations in a given category; the suspension of new petition approvals would take care of that matter.
After this, if Congress still wanted this sullied program to continue, we would revert to the approval of new EB-5 petitions at rates that would not endanger the 10,000 limit, at, one hopes a much larger charge than the current $500,000 — a price set more than a quarter of a century ago and well below the prices for comparable programs in other nations.
This proposal offers benefits to all on the waiting list, keeps billions a year flowing in the current EB-5 channels, and requires the issuance of no additional visas.
Can anyone — reasonably — ask for anything more?