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Comment: Who Is Delaying Reauthorization
It is NOT true that ALL of the EB5 industry is naive about the politics of EB5 reauthorization in the Senate - our information and analysis thereof reveals that only 96% of the EB5 industry is naive. These 96% are naive because they are falling for the deliberate strategy of the other 4% by drinking the kool-aid peddled by the 4%.
The 4% driving the industry strategy are convinced that Grassley-Leahy would be the end of the road for their EB5 dreams. About 2% believe RC reauthorization through Grassley-Leahy would be a long-term dead-end, when USCIS inevitably resurrects the November 2019 modernization regulations, and forces them out of the EB5 market. The other 2% believe that Grassley-Leahy would be an immediate death to them, since they cannot comply with Grassley-Leahy at all. Both components of the 4% are using sophisticated decoys like the Industry Consensus language (which they know has no chance of passing) to stop any movement of Grassley-Leahy at any cost.
Why is the delay of reauthorization in the interest of 4% of RCs? Because most political pundits expect a massive Republican victory at the 2022 elections with Republicans regaining control of both chambers of Congress. This would mean getting to negotiate with Republican heads of committees rather than Democratic. As an aside, an added benefit is that Sen Leahy is not running for reelection, so will be gone–breaking the close bipartisan cooperation between Senators Grassley and Leahy shaping EB5. The 4% hope (likely forlorn) is that they can obtain a much better deal from Congress in 2023.
To get a sense of the political power wielded by these 4% of RC players, it appears that two or more RCs are spending $100,000 to $250,000 per month EACH to lobby Congress. It is not a surprise that knowing that their very existence is at stake and with their deep pockets, they are doing what they can to protect their own interests. In the repeatedly delayed RC reauthorization, we are seeing the effects of political influence that can be purchased with gobs of money. (To the best of our knowledge no RC in the remaining 96% of RCs is spending more than $15,000 per month, hence these 96% become vulnerable to the kool-aid peddled by the 4%.)
The strategy of delay is well thought out, cynical, expensive and produces painful collateral damage to the rest of the EB5 industry/EB5 investors.
- The strategy of delay is not a knee-jerk reaction, nor a quick and dirty initiative - it is well gamed, carefully put together, masterfully orchestrated and, so far, fabulously successful.
- The folks behind the strategy of delay are fully aware that they are playing a losing hand, since they know the reality of where the votes are on the Senate floor, and since USCIS has already expressed its inclination to banish urban RCs from future EB5 monies. Instead of losing gracefully, and engaging in other business pursuits, they are instead retreating inches at a time following a scorched-earth strategy.
- This strategy of delay is not cheap, millions of dollars have been spent so far by those to whom Grassley-Leahy is a threat, and millions more are at the ready - since these millions are merely a drop in the bucket compared to their EB5 profits, past and future.
- EB5 investors, together with the majority of RCs, and even the entire EB5 ecosystem, are all just pawns in the game of delay delay delay - the fact that this strategy of delay is destroying careers/lives and personal/corporate futures is viewed as an acceptable side effect by the folks pulling the strings.
Will these folks - the 4% of RCs - succeed in delaying reauthorization into 2023? We suspect not because:
- There is considerable support in the Senate for the Grassley-Leahy bill, so that bill will be the basis of anything that eventually passes in Congress on EB5.
- The Grassley-Leahy bill is open to small tweaks to accommodate many interests.
- There are multiple possible vehicles for enacting Grassley-Leahy into law, including DHS appropriations.
RC reauthorization will likely occur in Q2/Q3 2022.
Stay tuned to ILW for the latest news and analysis of the RC reauthorization drama.
