Sallie Mae

The War Against the Republic: The Battle of Madison

Richard Eskow — Thu, 24 Feb 2011 00:43:02 -0500

Sometimes it's worth looking at current events through the eyes of a historian chronicling the end of an age, or those of a district attorney in a time of corruption. Come to think of it, the two perspectives aren't all that different.

However you look at it, calling the Wisconsin struggle a "labor dispute" is like calling the Battle of Normandy "a fight over a beach." There's a war on, one that's best understand by using an Latin expression popular among prosecutors: Cui bono? Who benefits? Gov. Scott Walker's union-busting budget contains buried goodies for somebody, including possibly the Koch Brothers who paid to have it drafted. More importantly, it's another step toward replacing the American dream of prosperity for all with imperial visions of massive wealth for the few.

The heavily-financed forces behind Scott Walker want to bring down the American Republic. If that sounds like rhetorical overkill, it's worth remembering the words of someone who watched a republic fall. "The enemy is within the gates," said Cicero. "It is with our own opulence, our own folly, our own criminality that we have to contend."

"Money money money money," added the O'Jays, "some people do things, do things, do bad things with it."

If this end-of-the-republic rhetoric sounds extreme, listen to Gov. Walker's phone call with a prankster pretending to be David Koch. He spoke to Koch the way an employee talks to the boss. That's a glimpse into the world of corporate political power. Madison's the epicenter for a battle between the dying American middle class and a plutocracy - no, make that a "Lootocracy" - determined to rob it of everything it's earned over the last 75 years.

But wait, says Joe Klein. He says they're protesting against democracy in Wisconsin. "The Republicans won," Klein says, "and there are consequences to elections." But did Scott Walker announce that he would magnify a budget problem and use it to break the ability of state employees to negotiate on their own behalf? That approach is opposed by 61% of Wisconsin voters, according to the latest Gallup poll.

The election in Wisconsin is the latest example of a two-party system where neither party adequately represents the majority's will. One tramples on it, using lies and fear, and the other offers only the weakest defense. The system's been corrupted by money - "cash money," as the O'Jays would say - which casts a shadow over its results. Those results include the election of leaders like Gov. Walker, who's just a footsoldier in the war on the American Dream. There's big money at stake - cash money - and the government swag in Wisconsin's just the tip of the iceberg.

Klein's energy would be better spent fighting for a truly representative democracy, rather than dismissing protestors who represent a majority of their own state's people.

Civil Discourse vs. Civil War

Historians of the future may look back on our time with an indulgent chuckle when they consider the pundits and politicians who, in their anxiety to ensure a 'civil dialogue,' ignored the cui bono principle. Under current conventions, we're supposed to assume that every political action must be the result of selfless ideologies. We must "disagree without being disagreeable," as the President would say.

Meanwhile the plunder goes on unabated. Kevin Drum toted up the score so far from the plutocratic project: a massive upward redistribution of wealth, and the growing dominance of wealthy interests in politics and the media.

How would things would have turned out if during the days of Tammany Hall in New York City or Huey Long in Louisiana journalists and reformers had adopted that attitude? Wall Street caused a global crash two years ago. Today it's richer than ever and throwing its weight around politically as if nothing happened. Next time someone lectures you about 'civil discourse' just say, Look around, pal. This ain't a debating society. Somebody's wheels are getting greased - and the rest of us are on the skids.

Power Grab

At the risk of sounding disagreeable, it's hard to find an "honest difference of opinion" on ideology that explains a paragraph like this one in Gov. Walker's new bill, spotted by my eagle-eyed pal Mike Konczal: "... the department may sell any state−owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount ... no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant ..."

This allows the governor to bypass regulators and legislators and sell the state's power plants, built with millions in taxpayer money to anybody he likes. This paragraph goes on to say that " any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project." The governor can give these plants away if he wants, and nobody can stop him.

Cui bono? Who could possibly benefit from giving the governor the ability to sell the state's "heating, cooling, and power plants" (there are 32 of them), or "contract with a private entity" to operate them, without a bid process or any regulatory oversight?

Let's see now: Wisconsin has nearly one million natural gas customers, so it would presumably be a company that "provides consulting, engineering, design, procurement, fabrication and construction services for the natural gas and gas processing industries worldwide" and has "been the general contractor on some of the largest natural gas plants built in the U.S." And since there are a number of coal-fired plants on the state's list, our corporation would need to be a "leading supplier of coal and related products typically used in industrial applications or to generate electricity."

Those quotes were taken from the website of Koch Industries, the company whose owners are bankrolling a little-known group that's behind initiatives like Walker's budget proposal.

Of course, the winning candidate doesn't have to be Koch Industries. Kris Broughton at BigThink found anothe candidate. ThinkEnergy says it "eliminates the waste of energy and money in facilities through a blend of Supply-Side and Demand-Side energy management measures," and they've placed a hiring ad that reads "Energy client is looking for experienced Plant Managers for multiple power plants located in Wisconsin."

The real issue isn't whether Koch Industries gets the deal to operate Wisconsin's power plants. Somebody will - and the assets built by Wisconsin taxpayers (including the public employees now under assault) will undoubtedly be given to the private sector at very favorable rates. It will be one more step in the Great American Giveaway -- the seizure of public resources by the private sector.

The Great American Giveaway

One of the Lootocracy's objectives is to confiscate all the assets that the middle class has built with its tax dollars. For decades the "privatization" movement has been a front for this plunder of the public's resources, allowing private corporations to enrich themselves by providing services that were once provided at lower cost by the government itself.

How did that work out? Xe, the Company Formerly Known as Blackwater, provides mercenaries for our Middle Eastern wars - at great public expense, and sometimes acting outside the law in ways that harm our national security. The privatization of prisons and reform schools gave us the case of the monstrous judges who railroaded innocent kids into incarceration in return for bribes from a private youth detention facility contractor.

On a national scale, money intended for worthy college students got diverted into private jets and fat salaries after the privatization of the student loan enterprise Sallie Mae, and the privatization of mortgage backers Fannie Mae and Freddie Mac led to a series of scandals, multimillion dollar payouts for incompetent executives, and a worsening of our financial crisis.

Private Parties

With a record like that, you'd think the privatization movement would be dead. And you'd be right - if it weren't for the billions being provided to it by the Koch Brothers and other private financiers. They're major backers of "ALEC" - the "American Legislative Exchange Council" - an organization that proves how smart and determined the armies of the Lootocrats really are. There are two very smart strategies behind ALEC:

1) While everybody's focused on what goes on in Washington, ALEC is able to plunder the massive resources of state and local government.

2) State legislatures are the "farm league" for tomorrow's governors, Senators, and Presidents. ALEC isn't just buying state government. It's buying tomorrow's national leaders too.

This secret army has a clear agenda: Attain power, give away the "store" once in office, and decimate programs that help the middle class and lower income people. Scott Walker's actions fit the playbook perfectly. In fact, his bill was reportedly drafted by ALEC, whose primary objectives include the drafting of "model legislation."

Two enterprising representatives from People for the American Way were able to get into an ALEC meeting in 2005 and, as Joshua Holland reported, they cast a light on ALEC's role as " the connective tissue that links state legislators with right-wing think tanks, leading anti-tax activists and corporate money." They were also able to collect information on the breadth and audacious scope of the ALEC agenda, which is mirrored by other groups offering support for Walker's efforts - groups such as "Americans For Prosperity," another Koch-funded front group.

The war on unions is an essential part of the ALEC Assault. Unions are a double threat: First, they interfere with the Lootocracy's ability to treat its private-sector employees as badly as the law will allow. And government employees are fighting for pay and benefits that interfere with the broader agenda of strangling all forms of government spending so that taxes can be kept low for the Lootocrats. That's why, as Harold Meyerson points out, unions are under attack in a number of GOP-led states, and by Republican members of Congress who are trying to strip funding from the National Labor Relations Board.

All across the nation Republican governors are using the same playbook: Cry "poor" while giving tax cuts to the rich, then use the resulting crises to bust unions and gut services for the poor and middle class. They're all reading from the same script, and if their line readings aren't convincing it doesn't really matter. Ronald Reagan and Arnold Schwarzenegger have already taught us that Republicans don't need to be good actors to succeed.

As Wisconsin Goes

Gov. Walker insists that the state's pension plan is a key driver of the state's fiscal problems. But the state is actually projected to have a small surplus next year, depending on how it handles its debt to Minnesota and a couple of other key issues. In any case, the state's pension plan is extremely well-funded, with 99.67% already in its accounts.

What happened in Wisconsin? The Governor cut taxes for the wealthy, then declared a budget emergency. In classic "Shock Doctrine" fashion, he used that emergency to slash a retirement plan that's highly stable financially, along with medical services for middle-class and lower-income people.

What's happening in Washington? In the name of "austerity economics" and deficit-cutting, a deal was cut that extends tax cuts for the wealthy. Now the conventional wisdom is that we must cut Social Security, a benefit program that's much more solvent than most government programs, and then gut medical assistance programs like Medicare and Medicaid.

Let's see: A tax cut for the wealthy, followed by the declaration of a budget emergency and the gutting of retirement and medical programs. And along the way, a giveaway of public resources to private corporations. That's not coincidence: It's the plan.

The Home Front

So, cui bono? The richest 1% of Americans, along with the corporations - and politicians - they own. We know who the warriors are, we know their strategy. We know they're winning, too. Can the tide be turned? Not if the people opposed to this Lootocracy refuse to acknowledge what's happening. Republicans are gutting the republic and not enough Democrats will fight for democracy.

"Don't let money rule you," said the O'Jays. And Cicero, who knew a thing or two about military and economic warfare, said "Nothing is so strongly fortified that it cannot be taken by money."

Cicero and the O'Jays ... have they ever been to Madison?

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This post was produced as part of the Curbing Wall Street project and the Strengthen Social Security campaign.

Backdoor Bailout, Tea Party Fakeout: The GOP's Secret $90 Billion Gift to Wall Street

Richard Eskow — Fri, 22 Oct 2010 10:15:48 -0400

GOP candidates are making a point of running against "bailouts" this year. Yet even as they rail about rescuing big banks, they're working on a plan that would slip those same banks an estimated $90 billion in taxpayer money ... and that's just in the first ten years.

"Fiscal conservatism," anyone?

It was always hypocritical to slam a bailout that they and their party initiated. But it turns out they were just warming up. Now they're trying to pull a fast one on the American public, tapping Tea Party rage about big government spending even as they prepare to slip the big bankers some big bucks. They're planning to siphon off $90 billion meant for America's college students and their families and give it to Wall Street.

Any Tea Partier who votes for these guys is being played for a sucker.

The Republican repeal plan wouldn't just put tens of billions of public dollars in bank coffers. It would also raise the maximum amount a graduate is forced to pay each year from 10% to 15% of income. And it would extend the length of time before their debt is forgiven from 20 to 25 years.

Your GOP: Sending billions in taxpayer money to rich bankers, and squeezing young people starting out in life. Call it the New Populism.

Small government? Less spending? The Republican Party's backdoor bailout of wealthy bankers is bigger than the auto industry bailout. It's bigger than the home loan program. It's bigger than the lending program for small businesses. And unlike those programs, it serves no social purpose at all.

This week two Republican Senatorial candidates were the latest to push this secret subsidy for Wall Street. Washington's Dino Rossi and Mark Kirk in Illinois were obviously working from the same playbook, since they made almost identical points while declaring their opposition to this year's student loan reform. "You know, part of the takeover of government has been part of the student loans," said Rossi. "I don't think that we should adopt legislation that the Congress has moved forward to have a complete government takeover of all student loans," said Kirk.

Kirk and Rossi are talking about this year's student loan reform. That program eliminated a cushy deal that gave private banks a percentage of government loan funds for "administering" loans (they weren't actually lending the money). They performed their administrative duties both inefficiently and unethically. What's more, the banks took a portion of their vig and spent it on lobbyists in order to keep the pot sweetened for themselves. It didn't work - but if the GOP has its way, it'll work next year.

You're not seeing a "populist" uprising on the Right. You're seeing lobbyist and billionaire money at work, channeling genuine frustration and anger into an electoral plan designed to help bankers get even richer.

The "government takeover" argument is ridiculous, of course. In this case they're talking about a government takeover ... of government. This is the public's money, and it's intended to be lent to students and their families so that the dream of an ever-more-expensive college education is available to more families. Taxpayers support this program so much that neither Kirk nor Rossi could afford to criticize it. But not too many of those taxpayers would support taking billions of their dollars and funneling it to Wall Street, as the GOP would do.

The "complete government takeover" statements are also absolutely false, since private students loans are still available. (See Pat Garafolo's excellent pieces on Rossi and Kirk for more detail.)

When private bankers managed the student loan process, it was filled with rampant corruption that included kickbacks to school administrators. Millions of dollars meant for students were also stuffed in the pockets of lobbyists and politicians. (Details here.) And as for that 'privatization' mantra we keep hearing from the GOP, consider this: The government created and funded Sallie Mae to help students get these government loans, and then privatized it. The result was a taxpayer-created and financed company that bought itself three private jets, paid bloated executive salaries, and threw government money at Washington pols (including a quarter of a million dollars for George W. Bush's inauguration).

(We've got more information on the loan program, and a rundown on the 'private' Sallie Mae Corporation that includes a photo of one of those jets and their ID numbers.)

Because of our current hard times - hard times brought about by the very same bankers who would get billions under the GOP plan - our student loan program is even more important than ever. Unemployment and under-employment for college graduates is soaring. The average college graduate's debt in 2009 was $24,000, up 6% from the year before, and that's before the full impact of the economic downturn. Diverting billions in Federal student loan money to Wall Street under these circumstances is nothing short of obscene.

But the GOP has made it clear that they're in the bankers' back pockets. Sen. John Cornyn, head of the Republican Senate campaign committee, indicated they would immediately move to repeal the financial reform bill if they gained power. That would give their banker friends free reign to exploit consumers and take even greater risks with the economy. This $90 billion giveaway of government money - our money - is just part of a larger pattern.

While neither Kirk nor Rossi were originally Tea Party candidates, they've both made their peace with the movement. Unnamed "tea party activists" from the State of Washington issued a letter of support for Rossi, while the formerly centrist Mark Kirk has flip-flopped on multiple issues in the last few months in order to pass Tea Party muster. Both candidates are part of a larger GOP plan to use anti-spending, anti-bank rhetoric in order to spend billions on subsidizing banks.

Billions for bankers, benefit cuts for students. A "privatization" scheme that lets a few people get rich off government programs, promoted in the name of "less spending" and "less taxes." That's the system that these Republicans want to bring back and even expand. They want to use student loan money as a piggy bank for rich piggies, tapping taxpayer dollars to to enrich their pals.

So my question for the Tea Party rank and file is this: Are you going to let the big banks and their politician cronies play you like this? Are you going to be a sucker? They've got $90 billion that says you will.

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About the table: The Department of Education Arne Duncan estimates the bank subsidy was costing approximately $9 billion per year, including the interest banks were able to collect . Given the rapid and ingoing increases in college tuitions, it's not unreasonable to think that the total amount could be wind up being much more than either figure. I used the data compiled by the New York Times for the other figures. In every case, I used the highest possible figures for the final cost of each program, to make my estimates as conservative as possible. (I stayed away from TARP, even though we're told it's making a profit, because the total cost is still unknown.)

The result was clear: This GOP's planned Wall Street giveaway the biggest and costliest of all the programs listed.

This post was produced as part of the Curbing Wall Street project.

Sallie Mae's Jets: Bank Shills Use "Socialism" Scare to Shaft Students, Serve the Wealthy

Richard Eskow — Mon, 08 Mar 2010 15:42:15 -0500

Two noted shills for the banking industry - Republican Lamar Alexander and Rupert Murdoch's Wall Street Journal - just trotted out the "socialism" boogeyman, so here we go again: another lie, another con, another ripoff. "School loan socialism" is the new Death Panel. But, hey, somebody's gotta keep Sallie Mae's corporate jets flying.

Alexander's op-ed for the Washington Post is a buzzword symphony, a scare-tactic sonata, a cascading chorus of Pavlovian terminology designed to elicit the predictable autonomic response. "Starting in July," he writes, "all 19 million students who want government-backed loans will (cue scary music here) line up at offices designated by the U. S. Education Department." (It's more likely they'll go online to make their selection. But that "lining up" sounds so Stalinist, doesn't it?)

Alexander hammers home the Russian Constructivist imagery: " ...(G)etting your student loan will become about as enjoyable as going to the Department of Motor Vehicles." Leaving aside for a moment the absurd idea that students find loan applications "enjoyable, " here's an editorial note for conservatives: You really need to stop using the DMV as a scary image. I went there recently, and even here in depression-wracked California it works fine. Computerization and modernization have made it easy and convenient. So whenever you guys say "DMV! Scary! Whoo-ooo!" it just confirms the suspicion that you're rich guys who haven't done your own errands for decades.

Not that scare tactics are all Alexander's got to offer. There's also the quasi-pastoral vision of a disappearing nation, to be lamented as freedom dies under the Red fist. "Gone are the days," he writes, "when students and their colleges picked the lender that best fit their needs; instead, a federal bureaucrat will make that choice ..."

I recently helped my son choose an institution for his student loan and, trust me: It's a rat's nest of confusing information, different loan models with no tools for side-by-side comparison, and runaway hucksterism. And my daughter's loan has been passed along from bank to bank at least once and maybe more.

"Picked the lender that best fit their needs"? Most students close their eyes and pray, and then wonder if the lender they choose will still be their lender next year. And how do colleges "pick the lender that best fits their needs"? Greed and graft have played their part on more than one occasion.

Alexander complains about the 4% difference in interest rates between what the Treasury will charge the Education Department and the Department will charge students. He ignores the fact that the President's proposal reduces the maximum amount for repayment from 15% to 10% of income. And his outrage over 4% for the underprivileged doesn't extend to the billions skimmed by bankers without financial risk.

In other words, "socialism" for the rich is fine, but helping middle-class and lower-income kids improve their lives is an outrage. Alexander's position may seem irrational until you consider the fact that, like a number of like-minded Senators, he's received campaign contributions from the very private bankers who interests he so devotedly serves.

Sallie Mae's the poster child for the moral and operational bankruptcy of the 90's privatization craze. Created and funded entirely by the taxpayer, it went private in the late 90's and immediately went on a greed binge. It started throwing mad money at Presidential and Congressional candidates, then kicked in the maximum allowable amount - $250,000 - to George W. Bush's inauguration.

About those jets: We learned that Sallie Mae had at least one when stories came out about Sen. Boehner's golfing trips to Florida on it. (His daughter works there, too; hey, no conflict there, right?) After some Internet digging, I can confirm Internet rumors: It appears Sallie Mae has owned at least two different private jets, as reflected in this summary of corporate flights for Phoenix Airport .

Actual photo of one of Sallie Mae's corporate jets: Model IAI-1125A Astra SPX, registration #N188AK

Jets. Campaign contributions. A quarter of a million dollars for the Bush inauguration. And think of it: All of that came from money intended for student loans.

Alexander tells the story of Edsouth, a nonprofit lender in Tennessee - a touching story, except that nonprofits in the student loan industry are a rarity. In fact, the vast majority of lending takes place through for-profit lenders, of whom Sallie Mae is far and away the largest. And since it is the largest, you'd think its executives - who receive big money and fly around in those corporate jets - must be good at what they do. Instead, mismanagement runs rampant. The company branched out into the hedge fund and derivatives business, as well as some add-on loans for students, and proceeded to lose its shirt. So it's back to basics for Sallie Mae: funding politicians who'll help them keep on milking the American treasury.

Worse, in what amounts to virtual redlining,Sallie Mae used the "subprime" excuse to walk away from the students at traditionally low-income and minority schools - the ones who need loans the most.

The Wall Street Journal echoes Alexander's deceptions and scare tactics in an editorial entitled "That Other Government Takeover," and throws that new four-letter word "reconciliation" for good measure. The WSJ shows a particular tone-deafness in characterizing the government loan system as a "public option," since polls show the public option's popular. And it manages the near-impossible task of making Alexander look subtle, by referring to the government program as a "Soviet-style takeover."

Here's another editorial note: In polite circles the Communists-under-the-bed message is supposed to be more, well, subliminal. Instead the WSJ comes off sounding like a Tea Party bull session on amphetamines. Democrats want to "concentrate power in Washington," it screams, "while they still can"!

Lamar Alexander and Journal owner Rupert Murdoch, on the other hand, want to concentrate power in places where they're more comfortable -- in private jets and corporate suites funded by taxpayer money. And what do they call this high-rolling lifestyle on the taxpayer's dime?

Why, the free market, of course.