Innovative Market Solutions
Jonathan Rowe on Oct 3rd 2008
I’m one of those libertarians skeptical of government bailouts of private enterprise. I wish more attention in these types of crises would be paid to innovative market oriented solutions. Here’s mine for the mortgage crisis. I don’t necessarily think this would solve the problem, but it could greatly help alleviate it: Automatic American citizenship for any person who buys a house, owned by a bank and previously foreclosed on, after a natural security check of said person. The national security check and payment in full to the bank for the real estate would be the only requirements for American citizenship.
Many anti-immigration folks argue against poor, uneducated immigrants coming to the nation looking for cheap work, that too much of it will turn America into a second or third world nation. And obviously those kinds of immigrants wouldn’t be buying houses. I don’t know how many potential immigrants there are in the first place who have that much $$ laying around. Certainly some relatively rich Europeans who wouldn’t mind retiring in an American suburb would qualify. However 1) the dollar is still relatively weak, comparatively, which makes the deal relatively attractive and more affordable. And 2) companies who want to hire educated immigrant workers would be permitted to buy houses (perhaps with tax incentives) for and on behalf of their workers and award them as compensation, holding the “mortgages” for so many periods until the immigrant workers’ full rights in the said real estate vest. And keep in mind, the world does have 6 billion people, with only 300 million in the United States. If this plan is open to the entire world, even a small fraction of the relatively world rich and upper middle class could make a difference.
This might be a pie in the sky plan. But, keep in mind, China and India alone each have over a billion people with sizable middle classes, many of them well educated. And there are other nations in similar positions.
American businesses and Universities, who would buy the houses and hold the mortgages on behalf of the immigrants, further, could help “drain the brains” from places like China and India whose rapid growth puts the fear of God into some experts that they soon one day will overtake America’s dominant economic might.
So what’s wrong with this idea?
Filed in The Basement, The Bureau
Certainly worthy of consideration. . . Also a fine example of the best of libertarian thinking as well.
What bothers me is that there there is a process one goes through to arrive at optimal decisions. We have yet to hear if such a process was employed for this event. It appears it was minimal though I question my own notion given Paulson’s prior career.
Part of such a policy-making process is brainstorming, like you do here. Original brainstorm ideas are usually not the “eureka” event, however they often lead to a wider perspective of available options, their cost vs. benefits, and ultimately to the optimization of a more well-thought plan in regards to having done a better job of fine-turning the plan based on superior falsification attempts of the chosen policy.
Jonathan:
I’d say there’s nothing wrong with your idea exactly, but I don’t see it as a solution to the current problem. The trouble is in the financial sector, the housing market may have been the bomb that caused the damage, but sticking the bomb back together doesn’t undo the damage from the explosion.
Michael:
I’m a government policy analyst (though not for your government of course) and I’d be very surprised if a robust decision-making policy went into this. Politicians tend to panic when bad things happen suddenly, and that means the policy people who are supposed to do all the deep thinking are usually directed to come up with something fast. Since bureaucracy takes time to do anything, and even more time to do anything well, the result is a half-assed policy proposal with only the scantiest justification.
Now it could be that in the US the reaction to these situations is different than in New Zealand, but since your civil servants are tied much more closely to politics than ours, I really doubt it.
James K - Our Sec. of the Treasury, Hank Paulson, spent the bulk of his career until recently in Investment Banking, where he ended up as CEO of the Goldman Sachs, one of the premier investment banking entities in the world. He only recently entered public service. Most of his tenure in banking was as an executive managing others.
Paulson was the one of the two primary people that managed the identification that a crisis was at hand and led the effort to draft the initial proposal. I assumed the career path he took at Goldman Sachs, again heavy on managing others, required he hone his critical thinking and “firefighting” skills given his path to the top coupled with the large amounts of money at stake at Goldman.
This is the context within which I ask the question regarding the quality of the process to develop their proposal, which I thought was weak though I have no direct experience in high finance, my career having been spent in manufacturing operations.
It seems to make sense. I would add some type of security check. Canada has a similar immigration program and we seem to be far more desired by potential immigrants. I might also add a requirement similar to Canada’s that you have to bring at least $200,000 dollars with you (or maybe less, but something somewhat substantial).
Recent reports seem to indicate that Paulson has been working on his plan for almost a year. But he will think in terms of the industry he knows, lean toward helping the people he knows, and trust the methods he knows. And, when he headed Goldman, he apparently thought it was a great idea to hold lost of mortgage-backed securities. My instincts tell me to look for ideas from someone who thought the FMs were trouble and that mortgage-backed securities carried some significant risk.
Michael: My point has less to do with the talent of the people involved, but rather the brute fact that decision-making in a government agency is slow.
Besides which Paulson would be too high-ranking to be forming the policy options, that would be handled by someone much lower down.