banks

Conservatives Want the Status Quo for Student Loans

Armand Biroonak — Thu, 19 Nov 2009 21:45:54 -0800

Representative John Kline (R-MN) and Senator Mike Enzi (R-WY) introduced legislation this week that keeps our broken student loan system in status quo, with corrupt private lenders and federal bank subsidies worth billions. This is a move directly against the Democrat-backed Student Aid and Fiscal Responsibility Act (SAFRA) that ends the practice and moves to federal direct lending, thus avoiding the private sector middlemen.

The Republican legislation does nothing to aid students, but sure does resuscitate the private loan industry. The proposal extends the existing Ensuring Continued Access to Student Loans Act (ECASLA) that is the lifeline for the federally-guaranteed, subsidized lender program. ECASLA is set to expire in July 2010, so many in Congress want to make sure lenders’ profits stay fresh.

Proponents of the bill claim that a move to direct lending, particularly during the credit crisis, will jeopardize students ability to gain access to loans they need and that schools are unprepared for the transition –but this is bunk. Deputy Under secretary of Education, Robert Shireman, stated that it takes colleges and universities between three weeks to four months for a complete switch over to direct lending. And even the once hesitant National Association of Student Financial Aid Administrators now recommends that all schools not wait, and prepare to switchover without delay.

Funny enough, Republicans hail their new bill “bipartisan” too, thanks to co-sponsor, and lone Democrat, Senator Ben Nelson (NE). Nelson’s support is no surprise though; his top contributor is the student loan company, Nelnet Inc. He is not alone however, a number of Senate Democrats have expressed that they are on the fence about ending lender subsidies.

Just a signal of who stands to benefit from the Republican bill, private loan companies’ stocks increased nicely on Wednesday when news broke of the proposal. Sallie Mae even responded that, “a delay gives Congress ample time to fully consider how best to reform the student loan program." But also enough time for Sallie Mae and other lenders to ramp up their lobbying to kill SAFRA and protect their profits. In fact, Sallie Mae spent over $3 million lobbying Congress this year so far, and with health care (understandably) clogging the legislative queue, lenders have even more time to scheme.

The Student Aid Bill Must Pass

The alternative bill, the Student Aid and Fiscal Responsibility Act (SAFRA) already passed the House and will actually benefit students, not banks, saving $87 billion by ending subsidies, directing much of the savings in the form of increased Pell Grants, investments to community colleges and strengthening college access and completion programs –and those are just some of the bill’s benefits. SAFRA is truly a game changer for education. The Republicans’ idea? The same old games.

Urge your Senator to pass SAFRA and help students, not banks.

Big Bank Fraud, This Time with Student Loans

Armand Biroonak — Mon, 19 Oct 2009 21:35:09 -0700

Just when you thought that the dust had settled from the scandals of Wall Street (at least temporarily), details come out of another Ponzi scheme by the titans of banking, this time with student loans. According to recently released court documents, Citigroup, JP Morgan and the education finance company Nelnet are being sued by the federal government for fraud of nearly $280 million from their participation in the Department of Education’s Federal Family Education Loan program (FFEL). FFEL provides billions in annual bank subsidies to private lenders for making student loans –the same subsidies that the student aid bill currently in Congress looks to abolish.

According to court filings:

“Nelnet, JP Morgan Chase and Citigroup caused false certifications, records or other statements to be made and used to get false claims paid and approved.”

“Nelnet’s fraudulent course of conduct consisting of brazenly offering inducements to its employees and schools for loan applicants while keeping the DOEd in the dark by virtue of its implied and express certifications of compliance.”

Moreover, to rope in more borrowers to boost subsidy payouts, Nelnet deliberately misled consumers with false advertising, promising students could save thousands of dollars by consolidating their loans –even though FFEL prohibits private lenders from engaging in such practices.

Meanwhile, legislation that would end the system that Nelnet and other banks are profiting off of is in jeopardy of not passing in the Senate. The Student Aid and Fiscal Responsibility Act (SAFRA) would end the $87 billion worth of bank subsidies and move all student lending to the federal government. And even though the House passed the legislation, centrist Democrats such as Sens. Blanche Lincoln (Ark.), Mark Begich (Alaska) Ben Nelson (Nebraska), Tom Udall (New Mexico) vow to stand in the way, voicing opposition to the bill.

Sen. Ben Nelson is among the most vocal in keeping private lenders in business like Nebraska-based Nelnet, stating, "I just don't think we need to turn it [student loans] all over to the federal government.”

While others in the Senate, such as Sens. Bob Casey (Penn.) and Mark Warner (VA) are on the fence because of jobs —Sallie Mae, the largest lender under FFEL, has extensive operations in both states. For this reason, watch for proposals in the Senate to preserve private lenders' role for the future. And because the private industry has done so well with loans, lets not forget that Sallie Mae was embroiled in a major ‘pay-to-play’ scandal two years ago for bribing college financial aid officers and administrators to pawn loans upon students.

This sure is a system worth saving isn’t? All in all lender subsidies only feed big bank greed, which is why the passage of the student aid bill is so important. Lenders are geared up and have friends in the Senate to keep their profits at the expense of students and taxpayers. Visit our partner, the Campaign for College Affordability, to end this madness and pressure your senator to stop financing banks and start helping students.

Time to Take on the Banks

Eric Lotke — Fri, 16 Oct 2009 12:32:49 -0700

It's time to take on the banks. 74% of American voters agree that “greed and risky decisions of banks and financial companies led to the financial crisis and recession, and it's time that Congress cracked down on their reckless practices to protect consumers.”

The American people are angry. There is a strong, bi-partisan appetite for reform. By a 64 to 27 percent margin, people believe that “we need stricter safeguards on banks and financial companies to improve accountability by reining in excessive bonuses, protecting consumers from exorbitant fees, and making financial dealings safer and more transparent.”

All these findings come from a new survey of registered voters done by the Benenson Strategy Group for SEIU. People understand what damage was done and who’s to blame. And behind the damage is a strong sense of betrayal.

•• “While taxpayers are still suffering under the economic crisis, the big banks are back to business as usual after their bailouts, ignoring their commitments to help taxpayers and are helping themselves instead, making tens of billions in profits on the backs of the American taxpayers.” 75 percent agree.

•• “It's outrageous that after taking trillions of our tax dollars in bailout money, the big banks are now spending millions to lobby against reforms that would protect us from their abuses in the future.” 72 percent agree.

The solutions are clear as well. Supermajorities in the eighty percent range support technical reforms like capping rate hikes and regulating overdraft fees. Similar supermajorities support philosophical reforms like limiting executive compensation and requiring that bail-out money be used for business lending. That’s what the people want.

Now it does get partisan. Democrats have an opportunity to lead. People didn’t vote last November for laissez-faire capitalism and billion dollar bonuses. They didn’t bail out banks that were too big to fail so they could take over banks that were smaller and did.

But reform is stalling. The proposed Consumer Protection Finance Agency gets weaker every day. Efforts to regulate derivatives — what Warren Buffet called “weapons of financial mass destruction" — are barely off the ground. A grassroots push to Audit the Fed and find out what it did with our money ($2 trillion) hits deaf ears in the Senate.

Almost exactly six months ago, Senator Dick Durbin (D-Ill.) called banks the most powerful lobby on Capitol Hill. “And they frankly own the place.”

Now is the pivot point. After the melt-down and the election, now it’s time to find out if they still do. Democrats can show that they’re on the side of working people. They can show the courage to take on the banks. If it wasn’t obvious before, the SEIU poll makes it clear.

Next week the American Bankers Association will meet in Chicago, and protesters are organizing to be heard. Democrats can take a side.
——
Curious what happens if we don’t win this fight? Read my novel. 2044. The Problems Isn’t Big Brother. It’s Big Brother, Inc.

Obama "Pay Czar" Contradicts G20 Claims

Dave Johnson — Fri, 25 Sep 2009 09:11:57 -0700

This story just hit the news: "Pay czar" will not cap compensation, reveal names. (Apologies for using the idiotic Glenn Beck term "Czar" to describe an adviser to the President, but Reuters felt it was appropriate to use Glenn Beck's framing, so I have to in order to report on it.)

According to the Reuters story,

President Barack Obama's "pay czar" said on Friday he will not cap compensation for the top employees at bailed-out companies, and will not reveal names, when he releases the first wave of decisions within a few weeks.

If this report is accurate it undermines commitments being made at the G20 to do something about the problem of excessive compensation for executives at financial firms -- an incentive to take risks that endanger the world economy.

An example of the problem is oil-futures-trader Andrew Hall. As I wrote here in the post, The Bonuses and the Damage They Do,

Irresponsible behavior leads to bonuses for Wall Street while working hard and playing by the rules leads to unemployment and foreclosure for Main Street.

[. . .] the top bonus-getter this time around is Andrew J. Hall. Hall "earned" it by helping to run up the price of oil last year. Hall is getting a $100 million bonus. (Thanks to previous years' bonuses Hall already owns a 1000-year-old castle called Schloss Derneberg. Go look at some of the pictures of what these nice Wall Street bonuses can buy.)

Does this report mean that the taxpayers are really going to pay Hall the $100 million he made by running up the price we pay for oil - thus helping set off the recession? Remember, this is taxpayer money paying these bonuses.

If true, this is terrible news. As I wrote in The Bonuses and the Damage They Do,

The Damage Done: While the bonuses are the largest ever, for public trust in their government and elected leaders this may equate to some of the most damage ever. People see these bonuses being handed out, paid for with taxpayer money, and they understand that their money is going out to the very people who destroyed the economy and their dreams. This kind of unfairness and injustice can tear apart the fabric of society. We are seeing elements of this in the disruptions at the Town Hall meetings on health care. People are angry at the way they are being treated, and the corporate right is channeling that anger into further demands for deregulation and favors for a few at the top.

PLEASE tell me I read this report wrong, or that it is being misreported!

Shalom Hamou

Shalom Hamou2 — Thu, 27 Aug 2009 14:51:49 -0700

Tel Aviv, Ramat Aviv, Israel

I am the youngest economist at My Yield Curve.

Since spring of 1994 I have been working on economic depressions.

I am writing The Tract Pro Bono.

It explains the nature and causes of economic depressions.

After a period of Irrational Exhuberance, which will inflate the Mother of All Asset Price Bubbles, we will have a Keynes' Liquidity Trap, The Crash and The Deep Depression.

The Crash will take place on September 18th, 2009 4:11 PM EST for Eid ul-Fitr and Rosh Hashana.

There is plausible alternative to The Deep Depression, The Adjusted Credit Free, Free Market Economy.

I designed a system, F**k the Fed, by which our economy can gather momentum for a successful and quick implementation after The Crash.

I have an MBA from Boston University ,USA, an Engineering Diploma from Ecole Centrale de Lyon France, a degree in Computer Engineer from Sivan Marchevim, Israel.

I have worked as a bond trader in Paris, France and as a NIP (Local) on the Paris MATIF.

My Yield Curve:

We prepare the implementation of the Adjusted Credit Free, Free Market Economy.

Arm the COP on the Bank Beat

Robert Borosage — Tue, 21 Apr 2009 19:58:58 -0700

"The decisions that are made in the next six months or so are likely to set the economic course of this country for the next 50 years," says Elizabeth Warren, who chairs the COP, the Congressional Oversight Panel charged with reviewing the banking bailout. "That's what happened coming out of the Great Depression, and I think that will happen now."

So Warren is pushing for Treasury to show us the money. What has been done with the $4 trillion the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporations have poured into the financial houses to date? In February, Warren's committee revealed that Treasury provided the top 10 TARP recipients with a subsidy of $78 billion over the market value of the preferred shares purchased for taxpayers, even while stating publicly that the purchases were made "at par."

But it has been hard going. This weeks' brief hearing with Treasury Secretary Tim Geithner represented the first time a Treasury official appeared before the panel. And repeated requests for documents were met with "prolonged silence," in the words of COP commissioner Damon Silvers, until Treasury finally disgorged 10,000 documents this week.

The Committee's April report summarized the experience of this and other countries in previous banking crises and concluded that successful resolutions all involved four critical elements:

transparency (particularly an honest evaluation of bank holdings),

assertiveness (including shutting down banks that were irreparably insolvent),

accountability (replacing management and prosecuting criminal conduct)

clarity (forthright reporting on use of public funds)"

These do not exactly evoke the current Treasury plan.

Warren's pluck is earning her the enmity of the banking lobby. In a shot placed in Politco, one of Capitol Hill's house newspapers, banking lobbyist Wayne Abernathy of the American Bankers Association groused: "A number of people wonder if this is the new Warren commission or the congressional oversight panel. It's looking more like the former than the latter."

This opposition has been echoed, naturally, by the two Republicans on the COP itself, Rep. Jeb Hensarling and former Senator John Sununu, recently rejected by voters as too conservative for New Hampshire. They dissented from the last report, suggesting bizarrely that COP's charter allowed it only to investigate Treasury's plan, not review other alternatives.

Remarkably, one of the three Democrats on the panel, New York State Superintendent of Banks Richard Neiman joined Sununu in a dissenting comment that might have been written at the bankers association. Neiman, who touts himself as House Speaker Nancy Pelosi's appointment, earned HuffPost kudos by inviting readers to send in questions to ask the Treasury Secretary. But he joined with Sununu to suggest that even "speculation on alternatives" like "nationalization" could end up "needlessly eroding market confidence."

Say what? The IMF says that U.S. finance sector faces $2.7 trillion in losses. Bank of America and Citibank are still writing off billions each month. Nobel prize winners like Paul Krugman and Joe Stiglitz are warning that the Geithner plan can't work. And Neiman and Sununu think that the COPs review of alternatives may shatter confidence? If not for that paragraph or two, our faith would be restored?

They go on to suggest that by merely parsing receivership for the major banks—something the FDIC does with insolvent banks regularly—Warren was verging on the subversive, since the Congress clearly wanted a plan like that current one that "avoids the subsequent need for more extensive forms of government intervention in the markets- forms less consistent with our American experience of democratic capitalism."

But even if Neiman regains his senses and rejoins the majority, Warren's investigation is limited because the COP is essentially unarmed. It has no subpoena power. No right to demand production of documents. No right to demand appearance of witnesses. It can ask questions and blow whistles. It can, as Warren says, be "cranky" in public. But it can't force answers or haul in the evasive. It has neither the charter nor the power to expose what is going on inside the banks, much less investigate the roots of the crisis.

Now House Speaker Nancy Pelosi has added her powerful voice to the call for an independent investigation—something like the 1930s Pecora Commission to probe the excesses and crimes that led to the current financial collapse that cost Americans some 20 percent of their wealth.

As I've written here, the Pecora Commission, named after its chief counsel Ferdinand Pecora, was the 1930s Senate Banking Committee investigation that exposed the frauds and crimes of Wall Street of that day. Armed with the subpoena power to delve into records and to haul miscreants and barons before the committee, Pecora helped create the record, fuel the public outrage, and gird the congressional courage to put in place real regulation of the banks.

What Pelosi intends isn't clear. She congratulated Rep. John Larson, a member of the House Democratic leadership, for his legislation calling for an independent bipartisan commission. But Larson's bill doesn't make clear provision for subpoena power. And it calls for the commission to report back in 90 days, an impossible deadline that would provide clear incentive for every target to run out the clock. The relevant committee chairs, Sen. Chris Dodd and Rep. Barney Frank, appear unenthusiastic, preferring to get onto reform and hold hearings themselves. .

Will Congress set up a special committee or an independent commission, armed with subpoena power, led by a fiercely independent counsel, to hold very public hearings into the roots of the crisis, exposing the crimes and follies of Wall Street? Or will it continue to leave the cop on the bank beat disarmed?

Cynicism is easy. The Wall Street "financial services" sector has been by far the largest contributor in every U.S. election cycle for the last 20 years, according to the Center for Responsive Politics. Individual and political action committee donations from Wall Street in 2007 and 2008 totaled $463.5 million, compared with $163.8 million from the health-care industry and $75.6 million from energy companies.

But now the follies of finance have devastated not just Wall Street but families across this country and the world. As Pelosi says, Americans are angry. We want to know what happened. We want those responsible to be held accountable and we want to make certain it can't happen again.

Will Congress step up? Whether we get this right will depend upon a citizenry outraged enough to demand the congress create an independent investigation with the charter, the capacity, and the sheer chutzpah to expose how Wall Street drove us off the cliff.

Newsflash: Populism Is Popular

David Sirota — Thu, 17 Apr 2008 10:08:50 -0700

Whenever pundits and political elites express surprise at the power of populism, I always think back to the tongue-in-cheek headline of Chris Hayes' In These Times article that read "Economic Populism Proves Popular." Populism is an ideology that says that government should - gasp! - reflect what actual people want. It is just so damn funny when the same political Establishment professing reverence for our democracy then expresses outrage and surprise that politicians once in a while are forced to reflect what the public wants.

So I was laughing today when I read this Bloomberg News piece breathlessly telling us that "Democrats Pushing Obama, Clinton Toward Populism" - as if that's something so outrageous and odd as to be shocking. Here's the critical news from Pennsylvania, Indiana and North Carolina - three states whose primaries are coming up:

Democrats in all three states had a negative view of trade, with 58 percent in Indiana, 55 percent in Pennsylvania and 61 percent in North Carolina saying it has hurt the economy. At least three in 10 in each state say it hurt a lot.

This finding conforms with earlier polling showing voters of both parties are sick and tired of lobbyist-written trade policies that undermine our economy and destroy the environment and human rights in the developing world.

Additionally, the same poll shows the public is angry about our politicians using their power to hand over more goodies to the banks and Wall Street firms that created the financial crisis:

A majority in each state favors a government bailout of homeowners in danger of foreclosure, according to a Bloomberg/Los Angeles Times poll of likely Democratic voters...After mortgage lenders, voters in the three states faulted insufficient government regulation, as well as irresponsible borrowers, for the housing crisis...Respondents in all three states say, by margins of 2 to 1 or better, that the federal government should regulate the financial industry more aggressively.

That news outlets seem so surprised that the public supports populist policies to deal with our economic crisis just shows how out of touch with mainstream public opinion our political elite is from the rest of the country.