Congress should let the EB-5 immigration program expire.
AS the congressional session winds down, one thing Congress should not do is permanently reauthorize components of the controversial EB-5 investor visa program.
Under the program, foreign investors and their families can qualify for permanent residency if they invest at least $500,000 in the United States and create or preserve 10 jobs.
Supporters say the program generates jobs and helps finance U.S. businesses that would otherwise have a hard time attracting investors. In practice, however, the program is poorly regulated, susceptible to fraud and bears paltry economic benefits.
U.S. Citizenship and Immigration Services estimates that as of Sept. 30, 2014, the program generated a minimum of 73,000 jobs and more than $11 billion in investments since EB-5’s inception 25 years ago. That’s a pittance compared with the more than $200 billion of foreign capital the U.S. attracts each year.
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Originally created in 1990, EB-5 didn’t generate much interest until the recent recession. American developers saw the program as a way to attract inexpensive capital and a growing number of affluent foreigners, mostly from Asia, who sought entry into America.
A major component of the program is so-called regional centers, which are private firms approved by the federal government to connect investors with U.S. projects or businesses in need of capital. Close to 95 percent of EB-5 applicants apply through regional centers, which are at the heart of the fraud concerns. It is hard to track where the capital is coming from, where it ends up and exactly how many jobs are created since investors can count “indirect jobs” to fulfill the requirements.
In our region, Lobsang Dargey, the CEO of Everett-based regional center Path America, has been accused of improperly skimming money from investors for personal use. A federal fraud investigation has halted construction on its $190 million Potala Tower, a residential and hotel development at 2116 4th Ave. in Seattle.
Critics say projects like Potala Tower, in the middle of a booming downtown market, don’t need the extra incentive of a green card to attract capital.
The EB-5 program generally requires foreigners to pony up $1 million, but that threshold goes down to $500,000 for investments in areas that have 1.5 times the nation’s unemployment rate. Regional center operators have found ways to gerrymander employment zones to invest in thriving cities like Seattle, San Francisco, New York and Miami, while passing over rural and economically depressed areas the exception is aimed at helping.
The regional center part of EB-5 was set to expire Sept. 30, but Congress approved an extension through December.
Lawmakers have introduced three bills to reauthorize regional centers with some reforms. But congressional leaders should be asking if the EB-5 program is worth the hassle of fixing.
Congress should focus on far more pressing concerns, such as crafting comprehensive immigration reform and reauthorizing the Export-Import Bank, instead of wasting time on a problematic program that produces meager results.