TARP rules force BofA to withdraw offers to new MBAs
In addition to changing the way many banks do business, TARP is poised to transform the way that they hire employees. Because of hiring restrictions tied to TARP funds, Bank of America (BAC) recently became the first U.S. bank to withdraw job offers that it made to MBA students. Other banks are expected to follow suit.
The Grassley-Sanders amendment states that if companies receiving benefits let workers go, then they cannot apply for H-1B visas to hire highly skilled immigrants. This restriction, which lasts for a year, will translate into thousands of financial services jobs that will no longer be available for immigrant business school students.
The most immediate impact of Grassley-Sanders will be that several banks, including Wells Fargo (WFC), JPMorgan (JPM), Goldman Sachs (GS), and Morgan Stanley (MS) will not be able to hire H-1B workers. In fact, many of them will probably have to follow in BoA's footsteps and withdraw offers that they have already made.
On a broader scale, the TARP/H-1B hiring freeze will quickly affect several other industries. H-1B visas are given to immigrants in occupations that require a specialized knowledge; most H-1B visa holders have college degrees. Thus, beneficiaries of these visas work in a wide variety of occupations, including engineering, architecture, biotech, medicine, IT, and (oddly enough) modeling. In 2008, in fact, Microsoft (MSFT) hired more H-1B immigrants than any other company.
A surprisingly large number of pundits and analysts have assumed that the cut in financial-sector H-1B immigrants is, effectively, a boycott against foreign workers. Some overseas consumers, in fact, are calling for boycotts of American exports, while others are claiming that this marks a new stage of American protectionism. Strangely enough, even Senator Chuck Grassley, author of the bill that linked H-1B visas to TARP funds, seems to think that this legislation will slash the number of foreign workers in the United States.
The truth, however, is far more complicated. Every year, the United States grants 65,000 H-1B visas, spread out across all occupations. Grassley-Sanders has not placed any limitations upon this number. Instead, as fewer visas are offered to employees in the financial sector, more will be spread out among other industries. According to some analysts, one impact of this will be lowered wages in the tech sector.
Another long-range impact will be a shift in immigration demographics. As the Wall Street Journal recently demonstrated, TARP funds will massively impact three states: New York, California, and North Carolina, with Minnesota, Ohio, Pennsylvania, and Georgia following closely behind. As immigrant employment shifts from banking to other sectors, the flow of educated immigrants will also shift to other states.
It remains to be seen how seriously Grassley-Sanders will affect business schools. Although the recession has not seemed to have a major effect on MBA programs, it seems likely that reduced opportunities for immigrants will seriously hurt future enrollments.