Greenspan housing solution: Admit more "skilled immigrants" to stablize U.S. housing market

Former Federal Reserve Chairman Alan Greenspan is arguing that the most effective solution to the housing downturn is for the United States admit more "skilled immigrants" who would earn enough to buy houses and stabilize the housing market.

In an interview with the Wall Street Journal, the 82-year-old economist estimates there are 800,000 units of "excess supply" housing for sale in the United States, and predicts the housing market will not recover until those homes are sold.

From the Journal: "He did offer one suggestion: 'The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants,' he said. The only sustainable way to increase demand for vacant houses is to spur the formation of new households. Admitting more skilled immigrants, who tend to earn enough to buy homes, would accomplish that while paying other dividends to the U.S. economy.

More: "He estimates the number of new households in the U.S. currently is increasing at an annual rate of about 800,000, of whom about one third are immigrants. 'Perhaps 150,000 of those are loosely classified as skilled,' he said. 'A double or tripling of this number would markedly accelerate the absorption of unsold housing inventory for sale -- and hence help stabilize prices.'"

Also in the Journal interview, Greenspan sharply criticized the Bush administration's rescue plan for Fannie Mae and Freddie Mac, reasoning the government should have nationalized the companies instead of supporting them as for-profit, shareholder-owned entities. He says the administration and Congress should have "wiped out the shareholders."

-- Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Getty Images

Comments

[Rob]

Kooky uncle Greenspan.

[James W]

Companies are leaving bubble areas like SoCal for more business friendly areas like Texas. Does Greenspan plan to employ these workers himself?

[fezco]

So let me get this straight:
* Greenspan's policies created a climate of loose lending so any idiot could obtain an expensive home (for at least a little while). This took houses off the market, thus demand and prices skyrocketed.
* Here we are , a few years later, and those that should have never been able to qualify for a home are getting the boot therefore freeing up some inventory.
* These vacant houses are finally starting to drop in price and open up for hard working Americans who didn't buy into Greenspan's hype.
* Now he says that we should fill these houses with 'skilled' immigrants?!?! What happened to all the skilled American workers who were smart enough not to buy into the bubble?

Greenspan- I think the nurse needs to increase your medication in the ol' skilled nursing facility. You're losing your grip on reality.

[mike]

wipe out the shareholders...this guys solutions are sweet.

[E]

Bring in Doctors from Cuba.

It might help with the cost of healthcare.

But like affordable housing, he'd probably see affordable health care as a threat to the economy.

Has Greenspan been checked for senility lately?

[Rational Renter]

Wow. It's so funny to me that he can't admit what the REAL "solution" to this "problem" is: let home prices fall to affordable levels. It's amazing that an economist of his stature won't admit that prices are unstable because they're inflated.

[Bryan Morris]

Once again, Greenspan illustrates why Libertarians/Objectivists should never be allowed to be in charge of anything more important than their own Star Wars action figure collections.

[TakeFive]

Why not just offer residency to anyone that buys a house? And for every Hummer you buy, you get to bring in one family member.

[Nelcisco]

Although I do agree with Greenspan's criticizm on Bush's rescue plan for Fannie & Freddie, which is a classic case of privatizing profit & socializing losses, I don't disagree with him on the immigrants. Selling homes to uninformed immigrants w/ no $
was one of the biggest cause of this meltdown.Maybe because they were unskilled.

Can some elaborate on what "skilled immigrants mean"?, maybe foreiners with masters degrees, but will they want to buy in the Fontucky
or Palmcaster area?

[some investor guy]

There would be a significant lag in implementing this. Not sure if it would help materially, because the immigrants might go completely different places than where the housing problems are. If skilled immigrants are coming to jobs they already know about, what portion are going to be in Detroit, Miami, and Merced?

Still, there is a big backlog of immigration applications being processed. Speeding that up might help a little without having to make new public policy.

[James W]

Bryan Morris:

Greenspan is the furthest you can get from a Libertarian. Libertarians believe in a free market.

[Mary C.]

The immigrant proposal is one of the dumbest things he's proposed yet. For one thing, won't these skilled immigrants just take jobs from native-born Americans (not always, because there are shortages due to our terrible educational system, but often enough)? So, one new American can buy a house, one "old" American won't be able to due to a job loss. It's a wash in many cases. For another, many skilled immigrants are in the income category where they would be buying homes in areas and categories where the markets are still in good shape. Such as Silicon Valley or Seattle. Skilled immigrants are often affluent immigrants. America's big problems are in down-market and middle-market areas. Skilled immigrants aren't going to be buying houses in Stockton or the Inland Empire. Just stupid. He needs to stop talking, or people need to stop interviewing him, or at least giving him such prominent coverage. It just points out how nuts it was that so many administrations kept him in charge.

[RealEstateEconomist202]

This is the dumbest idea I've ever heard. The more I read Greenspan's comments, the more I'm realizing this guy is detached from reality and may even be getting senile.

Demand is not the problem. There are plenty of people that will buy houses if the prices are affordable. Affordability is the problem and now with the market falling, buyer confidence is becoming a contributing factor.

If you want to find out the top end of prices for your area and where price support is at the bottom, check out UsHousingMeltdown.org Ceiling and Floor tools. Once you know the ceiling and floor values then you''ll know how much risk there is to current prices. Prices in bubble areas will likely settle close to the ceiling. Prices in economically distressed areas, will likely settle slightly beneath the floor.

[Bryan Morris]

James W:

Greenspan was an acolyte of Ayn Rand and a devotee of Objectism (Libertarianism without the legalized drugs or so darned much personal freedom for the masses). He continued to follow this laughable philosophy but had to make adjustments to strict "free market Uber Alles" policies as reality increasingly came in conflict with theory.

There's nothing sadder than a Libertarian clinging to his failed ideology while standing in line at the unemployment office.

[William E. Jones]

I wonder if we could find skilled immigrants who could be our central banker, Sec. of Treasury, and head up the major NY investment banks? They might work harder, smarter, and for less money.

[sheila]

uh, why not just pay the skilled workers we have a LIVING WAGE, instead of trying to force them to compete with sweatshops, child labor and environmental poisoners?

in fact, why not only trade with companies who pay a living wage, enforce fair labor standards and good environmental practices? the whole world would be richer and cleaner, corporations would no longer be allowed to externalize their costs onto society and the environment while privatizing the profits in their pyramid schemes, and consumption of useless crap would drop. win/win/win/win/win.

if you want to be a social engineer, you really need to take the blinders off, look at a larger, long-term sustainability model and have a conscience.

[Tony]

Can't we just fry this guy already?

[Steve]

Bryan Morris, I'm positive Greenspan is a Republican. BTW, he's first appointment was by Ronald Reagan back in the 80s.

[J.W.]

Greenspan has done more to cause the housing bubble and resulting meltdown than any individual in the Federal government. Now.............he proposes to bring in more skilled immigrants? What kind of dope is he smoking? There are hundreds of thousands of legal, US. citizens who are skilled and whom have lost their jobs because companies have outsourced their jobs to India. Now, ole Greenspan wants to bring those workers to the USA. What a doucebag!!!

[Shonji]

Astonishing.

When the patient's vital organs show signs of failing, Greenspan is ready with another injection of heroin. Rehab is out of the question.

Greenspan's established legacy is a complete denial of the cyclic nature of asset valuations, credit markets, and economic growth. He and his compatriots, including Bernanke and Paulson, have cultivated an othodoxy that seeks to amplify the upside and cauterize the downside, leaving a swath of moral hazard in their wake. That's why we're moving downward in slow motion, punctuated by unfounded rallies as the dipsh1ts, with Greenspan's term as fed chair as their only frame of reference, anticipate bottom with a fed/treasury-sponsored rescue, and spray their money at every dip. In a free, unmanipulated market, investors would instead be displaying a healthy and appropriate aversion to risk.

This is going to be a long, bumpy glide down.

[356man]

Who knew Big Al was a sit down comic?

[NV]

how about create some jobs for those already here. I'm confident Michigan, Ohio, Indiana could use some jobs.
I suggest to Greenspan to use his personal retirement account and buy a few Escallades, and if his friends do the same, who knows maybe we can get this gig rolling

[Digitalian]

I am a software engineer who has seen his real wages decrease over the last 6 years. This is in large part due to outsourcing of jobs to India and China and the abuse of the H1B visa program. What Greenspan is proposing would just further suppress wages for skilled American workers who by the way also buy houses. Greenspan has been and remains a menace to the financial well being of the people of this country.

[Bryan Morris]

Digitalian,

Amen brother. I lost my software engineering job in 2002 thanks to the tech bubble bursting. Then I coudn't find another one for two and a half years thanks to the outsourcing/H1B bubble. When the "ship all tech jobs to India" bubble burst, I was finally able to find work. Meanwhile, my life's savings were down the toilet and, adjusted for inflation, my current salary doesn't match what I was making back then. Through some smart selling and buying of homes I managed to hang on to, but not add to, my home equity during that time. Now that's gone thanks to the housing bubble popping.

A lot of us are drowning in all the bubbles that the free market/trade greedheads keep blowing.

[Richard Gaylord]

"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . . Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers."

-Remarks by Chairman Alan Greenspan on Consumer Finance At the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005

Greenspan should be in prison.