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How Wall Street Profits From Student Debt |
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Thursday, 14 April 2016 13:34 |
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Carrillo writes: "As the presidential primaries rumble on, the candidates - especially Bernie Sanders and Hillary Clinton - have debated college affordability and Wall Street greed. Unfortunately, no one is confronting the links between the two."
More than 40 million Americans have student debt, totaling at least $1.2 trillion. (photo: Scott Houston/Corbis)
How Wall Street Profits From Student Debt
By Raúl Carrillo, Rolling Stone
14 April 16
One person's debt is another person's asset
 s the presidential primaries rumble on, the candidates — especially Bernie Sanders and Hillary Clinton — have debated college affordability and Wall Street greed. Unfortunately, no one is confronting the links between the two.
More than 40 million Americans have student debt, totaling at least $1.2 trillion. On average, borrowers out of school owe $36,000, with a monthly payment of $680. Roughly 11 percent of borrowers are in default. Overall, indebtedness discourages people from starting degrees, families and businesses, dragging everyone down.
Or almost everyone. One person's debt is another person's asset. What some owe, others own. And student debtors don't just cut checks to lenders. Our money flows to third parties — including investors.
One rarely discussed feature of the "student loan industrial complex" is the $200 billion market for student loan asset-backed securities (SLABS). This is a circular business, involving lenders like Sallie Mae and big banks like Wells Fargo and Bank of America. Like mortgages, student loans get pooled and repackaged into new financial products (securities). The lenders then sell the securities to investors. Investors receive the reward of monthly loan payments, plus interest. They can hold the securities themselves, trade them or bet on them. In turn, lenders receive quick cash, including fees and commissions, and push the risk of the underlying loans onto investors. This shift allows lenders to make more, and larger, loans.
In theory, more loans means the securitization process benefits borrowers.
But reality suggests otherwise. Student debt is special, as borrowers shoulder most consequences of non-payment. As such, SLABS players gain from an increasing supply of student debtors saddled with heavy, almost inescapable burdens.
Absent the most extreme circumstances, borrowers can't declare bankruptcy and have their student loans forgiven like other debts. The threshold for relief is so high, and lawyers are so expensive, that fewer than 1,000 borrowers even try each year. For most loans, if borrowers don't pay on time, the government can dip into wages, unemployment benefits, tax refunds and even Social Security checks. Unlike mortgage borrowers, who can hand over their keys and walk away, student debtors can't return their diplomas. Overall, these constraints for borrowers make SLABS uniquely safe investments. As one corporate attorney explained in the Wall Street Journal last year, SLABS are attractive primarily because of harsh bankruptcy legislation.
Most SLABS investors also benefit from government insurance. From 1965 to 2010, both public and private lenders made loans with 97 to100 percent of their value insured by the federal government. Of the outstanding volume of SLABS, $160 billion worth (roughly 80 percent) are backed by these government-insured loans. This means even if borrowers default, and investors have to wait for their money, they're still guaranteed to get it.
You'd think a surefire bailout would decrease resistance to debtor relief. But investors want timely payments; they fear federal relief programs might slow cash flow from an otherwise "bulletproof asset class." This creates twisted incentives, especially for SLABS players involved in loan servicing: They often have a stake in borrowers defaulting rather than paying smaller amounts over a longer period of time.
It's perverse policy — bankers are pampered because student debtors are hounded and pounded. To help borrowers, the government should facilitate bankruptcy reform and expand federal relief programs. But we have deeper problems: Lenders, servicers, collectors and investors prosper while students suffer because schools increasingly rely on private tuition rather than public funding.
The Higher Education Act, which governs the administration of many federal student aid programs, has expired. Its reauthorization is a crossroads. Elites want to cut federal lending in favor of private lending, but that's no good for borrowers or the economy overall, especially when one factors in private loan securitization. Private SLABS, or P-SLABS, are even more harmful than their counterparts. They're especially enticing to investors precisely because the underlying loans are even worse for debtors than federal loans — they have higher rates and stiffer terms. Coupled with grim changes to the bankruptcy code, demand for P-SLABS has already spiked total costs for students. The P-SLABS market is currently worth only $37 billion, but it's hot enough to include start-ups. If the market expands and explodes, things will worsen for borrowers; governments tend to stabilize financial markets by suspending the force of law for creditors and further tightening the screws on debtors.
As Mike Konczal has argued in Rolling Stone, rather than privatizing higher education finance, we should simply replace federal lending with stable federal spending. A public option of free college would not only fend off a SLABS nightmare, it would decrease student debt and lower tuition by pressuring the private sector to compete.
There are many ways to reprioritize funding to pay for free college. Above all, though, the myth that Washington is broke holds us back. The federal government doesn't have to balance its budget like states or schools, so it certainly doesn't have to profit from students. It can afford to simply spend money it's already lending, and absent inflation, it needn't increase taxes to do so. Even if you disagree with this increasingly popular perspective, higher education ultimately "pays for itself." In the long run, educated people tend to stuff public coffers by paying more in income and payroll taxes, and relying less on welfare programs.
We need free public universities, community colleges and historically black colleges and universities (or HBCUs). Those truly concerned with a swelling education sector should recognize why it's engorged. Most people pursue college because they want decent jobs. A true commitment to full employment and living wages would curb matriculation at schools that don't deliver — like for-profit colleges, the major sources of defaults and fiscal waste.
Most Americans agree that education is the great equalizer — everyone's climb to security and further opportunity. Yet our current policies kneecap students while giving financial firms a leg up. If we truly value learning, we'll stop bankrolling profiteers and put our public money where our mouth is.
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FOCUS: Panama Papers Offer More Evidence That Free Trade Isn't Really Free |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=22195"><span class="small">Michael Winship, Bill Moyers & Company</span></a>
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Thursday, 14 April 2016 11:36 |
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Winship writes: "Maybe the Panama Papers won't reveal further offshore skullduggery by American business. But the fact is, we're already in it up to our necks. Go back to our long history with Panama, pulling it away from Colombia to dig the canal and advance the interests of corporate America."
Vernon Jordan, former US president Bill Clinton, Ron Kirk and US president Barack Obama walk off a green while golfing at Farm Neck Golf Club, in Oak Bluffs, Massachusetts, on Martha's Vineyard, August 15, 2015. (photo: Smialowski/AFP/Getty Images)
Panama Papers Offer More Evidence That Free Trade Isn't Really Free
By Michael Winship, Moyers & Company
14 April 16
As much as President Clinton and President Obama like to talk about "free trade" deals, the truth is that the working class ends up paying.
 ou might wonder what the connection is between a friendly game of golf last summer in Martha’s Vineyard and the Panama Papers. Read on.
As anyone who hasn’t been in a cave – or otherwise away from the Internet — knows, last week the German newspaper Süddeutsche Zeitung and the International Consortium of Investigative Journalists, working with more than a hundred publications around the world, broke news of the biggest data leak in history, from an anonymous source tapping into the Panamanian law firm Mossack Fonseca.
Using eleven and a half million documents sent to them via encrypted files, the reporters are revealing the dark secrets of offshore tax havens and phony shell companies favored by the mega-rich and powerful – from plutocrats and politicians to movie stars and professional athletes – who use them to hide and hoard their fortunes, even as billions live and die in poverty.
But what about the United States – why haven’t our usual suspects, the parade of moneybags we’re used to seeing flaunt their wealth even as they do their best to conceal vast portions of it – made an appearance in the leaked data? Let’s go back to that golf game in Martha’s Vineyard.
It was a sunny August afternoon at the Farm Neck Golf Club, described by Golf Digest as “a jewel on the Vineyard” where 18 holes during summer prime time currently cost $170 a head. The players: President Obama, former President Bill Clinton, their mutual friend, inside-the-Beltway wheeler-dealer Vernon Jordan, and former US Trade Representative Ron Kirk.
Start with Clinton. No sooner was “the man from Hope” in the White House than he pushed for and signed NAFTA, the North American Free Trade Agreement that outsourced countless industries and, according to the Economic Policy Institute, siphoned hundreds of thousands of jobs from the United States to Mexico.
And Vernon Jordan? This one-time civil rights leader and champion of poor folks is now one of the richest corporate lobbyists in Washington. As we wrote a couple of years ago, “Jordan is senior counsel at the powerful law firm of Akin Gump Strauss Hauer & Feld, which recently became the most lucrative lobbying operation in America, earning $8.6 million in the second quarter of 2014”
If you would know his position on “free trade,” hearken back to October 2005, and a speech by President George W. Bush at the Economic Club of Washington (Jordan was then club president). “It’s important that people in Washington not use trade as a political issue,” Bush said. “The objective is to have strong support from Republicans and independents and discerning Democrats, like Vernon Jordan.”
The Presidents Obama and Clinton were out on the links in honor of Jordan’s 80th birthday. They could just as easily have been celebrating the ways in which the three of them — and Dubya — have helped give America a trade policy that has devastated the working class but made the rich much more wealthy.
When the Panama Papers were released last week, President Obama said, “There is no doubt that the problem of global tax avoidance generally, is a huge problem… There are folks here in America who are taking advantage of the same stuff. A lot of it is legal, but that’s exactly the problem. It’s not that they’re breaking the laws, it’s that the laws are so poorly designed that they allow people, if they’ve got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by.”
And who’s responsible for that? Maybe the Panama Papers won’t reveal further offshore skullduggery by American business. But the fact is, we’re already in it up to our necks. Go back to our long history with Panama, pulling it away from Colombia to dig the canal and advance the interests of corporate America.
Bring that history right up to 2011. George W. Bush and Dick Cheney had pushed for, and Obama as president and Hillary Clinton as secretary of state consummated — as one of their first priorities when they came to power — the Panama free trade agreement, an early investment in further corporate support and further evidence that both parties are too often in league as agents of corporate interests.
And guess who was at the pivot? The other fellow in that Martha’s Vineyard foursome, Ron Kirk. As US Trade Representative, he was key to those Panama negotiations when Obama became president.
Barack Obama insists the White House did the right thing when the administration pushed the deal and maintains that in fact he brought greater transparency to Panama’s financial transactions by insisting on a tax information exchange agreement on the side. But, as David Nakamura wrote in The Washington Post last week, “Consumer advocates who have fought U.S. trade policies said the administration and its allies are trying to claim credit for reforms in Panama without accepting responsibility for the revelations in the unfolding Panama Papers scandal about potentially widespread tax avoidance.”
Nakamura quoted Lori Wallach, director of Public Citizen’s Global Trade Watch: “The Panama Papers just show once again how entirely cynical and meaningless are American presidents’ and corporate boosters’ lavish promises of economic benefits and policy reforms from trade agreements… [I]nvestor protections and official U.S. stamp of approval made it safer to send dirty money to Panama.”
In 2011, Hillary Clinton praised the Panama free trade agreement, and similar deals with Colombia and South Korea, saying they would “make it easier for American companies to sell their products… The Obama administration is constantly working to deepen our economic engagement throughout the world, and these agreements are an example of that commitment.”
But as she, President Obama and Ron Kirk applied the thumbscrews to get the Panama deal passed, Bernie Sanders made a powerful speech on the floor of the Senate against the Panama deal saying that the pact “would make this bad situation much worse” and keep the United States from cracking down on abusive and illegal offshore tax havens.” Those remarks are now viral on the Web because it shows how much longer on this key issue Sanders has been right — just as the Panama Papers reveal how toothless our trade rules have been.
If Sanders were not around today, Hillary Clinton would still be the supporting TPP, the Trans Pacific Partnership. It’s the Panama deal on steroids. Until now the Democratic Party has been just as culpable as Republicans on talking “free trade” while using these trade agreements to rig the market for conglomerates. The main reason the Panama Papers probably haven’t revealed as much on US corporations is that the technicalities of the agreements effectively mask and “legalize” the hidden wiring that benefits the big boys and confuses the public.
These trade deals hide a lot, and our public officials, especially the Democrats who should know better, must not blindly buy into them. If Hillary Clinton wonders why so many working people are supporting Bernie Sanders – and Donald Trump, for that matter — she needs look no further than the closet where her husband keeps his golf clubs. It is, after all, a rich man’s game.
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Clapper Backs Congress Down Again, Feinstein Helps |
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Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=36478"><span class="small">John Kiriakou, Reader Supported News</span></a>
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Thursday, 14 April 2016 08:35 |
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Kiriakou writes: "Feinstein, who actually showed some courage when she took on CIA director John Brennan over the CIA spying on Senate staff members and over the Senate Torture Report, should be ashamed of herself. At least, she should be embarrassed that the DNI humiliated her by essentially telling her to go fly a kite."
Director of National Intelligence, James Clapper. (photo: Getty)
Clapper Backs Congress Down Again, Feinstein Helps
By John Kiriakou, Reader Supported News
14 April 16
 irector of National Intelligence (DNI) James Clapper recently fought off Congressional attempts to require the CIA and other U.S. intelligence agencies to disclose more information than currently called for on the promotions and firings of high-ranking employees, despite earlier promises to do so. A bill in the Senate Select Committee on Intelligence would have required the DNI to “regularly provide names of those being promoted to top positions and disclose any significant and credible information to suggest that the individual is unfit or unqualified.” Clapper opposed that language, according to the Washington Post.
Clapper reportedly objected to the bill because of the “bureaucratic workload” that it would have generated. But the Post added that other sources said that U.S. “spy chiefs chafed at the idea of subjecting their top officials to such congressional scrutiny” and threatened that some candidates could drop out of contention for senior positions because of the reporting requirement.
As a result, the bill that passed called for the DNI to provide only “the information the Director determines appropriate.” The original language had been written and submitted by the CIA’s biggest cheerleader and apologist on Capitol Hill, Senator Dianne Feinstein (D-Calif.).
Feinstein lauded the final legislation and said that it would ensure that oversight committee members would “know the names of senior intelligence community leaders.” She added that the language is a “good first step.” Wow. Senate overseers will now know the names of the people they’re supposed to oversee.
Feinstein, who actually showed some courage when she took on CIA director John Brennan over the CIA spying on Senate staff members and over the Senate Torture Report, should be ashamed of herself. At least, she should be embarrassed that the DNI humiliated her by essentially telling her to go fly a kite.
Feinstein knows exactly what the CIA’s personnel problems are. She’s even spoken about them in the Intelligence Committee. These problems include the fact that “numerous CIA officers had serious documented personal and professional problems – including histories of violence and records of abusive treatment of others – that should have called into question their suitability to participate in the CIA’s detention and interrogation problem,” according to Senate Intelligence Committee investigators.
In fact, in the Senate Torture Report, committee investigators wrote that “CIA Headquarters managers seem to be selecting either problem, underperforming officers, new, totally inexperienced officers, or whomever seems to be willing and able to deploy at any given time.” Qualifications have nothing to do with promotion or assignment. Indeed, the old adage that those officers who could get on their knees in front of the director fast enough would be the first to be promoted appears true.
Certainly, no intelligence service would want problem, underperforming, or inexperienced officers running things. But what about officers who beat their wives? What about officers who sexually harass subordinates? What about officers who play fast and loose with their accounting and who spend taxpayer money on prostitutes for themselves and their sources? All of these things happen. I know because I worked for some of these “leaders.”
Not all blame for this sorry state of affairs rests with the CIA. I also blame the oversight committees. The CIA has proven over the decades that it needs adult supervision. Otherwise, CIA officers and leaders will seek to get away with whatever is possible, without thought to legality, ethics, or the wisdom of doing what they’re doing. Congress has to stand up.
Former oversight committee chairmen who had the guts to stand up to the CIA are gone. Frank Church is dead. Pat Moynihan is dead. It’s time for Congressional leaders to put their foot down on DNI and CIA intransigence and lead.
John Kiriakou is an associate fellow with the Institute for Policy Studies. He is a former CIA counterterrorism officer and a former senior investigator with the Senate Foreign Relations Committee.
Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.
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Coal Companies' Secret Funding of Climate Science Denial Exposed |
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Thursday, 14 April 2016 08:29 |
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Negin writse: "Peabody Energy - the nation's largest investor-owned coal company - declared bankruptcy Wednesday. Among the many consequences: the company's court-ordered disclosures are likely to yield hard evidence of Peabody's direct links to climate science denial."
Oil platform. (photo: Tim Rue/Bloomberg)
Coal Companies' Secret Funding of Climate Science Denial Exposed
By Elliott Negin, Union of Concerned Scientists
14 April 16
 eabody Energy—the nation’s largest investor-owned coal company—declared bankruptcy Wednesday. Among the many consequences: the company’s court-ordered disclosures are likely to yield hard evidence of Peabody’s direct links to climate science denial.
After all, that’s what we learned from the bankruptcy filings of two other major U.S. coal companies, Arch Coal and Alpha Natural Resources. The companies’ lists of creditors accompanying their chapter 11 bankruptcy filings both cited known climate science deniers. So far, the bankruptcy cases have not revealed the details of these financial relationships. But there is now no doubt the coal companies contracted with these groups and individuals to either make a donation or pay for services.
This new evidence is important at a time when coal and oil and gas companies are under increased scrutiny about their ongoing climate science disinformation campaigns. ExxonMobil, for example, currently faces state and possibly federal investigations into whether the discrepancies between what the company knew about climate science and what it told their shareholders and the public amounted to fraud.
Of course, there’s no shortage of historical evidence of the coal industry’s track record of deceiving the public about global warming. In 1991, for example, coal trade associations formed a short-lived front group called the Information Council on the Environment that ran a national public relations campaign downplaying the known risks of climate change. All through the 1990s, coal trade groups also were members of the Global Climate Coalition, an alliance of companies and business groups that disputed the findings of the U.N. Intergovernmental Panel on Climate Change (IPCC) and, later on, helped scuttle the Kyoto Protocol climate treaty. And, more recently, the American Coalition for Clean Coal Electricity paid a lobbying firm to send forged letters to members of Congress from actual nonprofit groups, including the NAACP and the American Association of University Women, espousing fabricated opposition to a 2009 climate change bill.
But such coal company connections have been harder to pin down in the current era of so-called dark money. That’s what makes the latest disclosures so noteworthy: They indicate that coal industry disinformation campaigns have continued even as the scientific evidence that burning fossil fuels is driving climate change has only become stronger.
Revealing Creditor Lists
The creditor list for Alpha Natural Resources—which filed for bankruptcy last August—indicates that the company has been especially active in supporting the denier network. As first reported by The Intercept, Alpha—the fourth largest U.S. coal company—has financial ties with a half dozen denier organizations, some which have direct links to billionaire brothers Charles and David Koch, owners of the coal, oil and gas conglomerate Koch Industries. The Koch-affiliated groups include Americans for Prosperity, the Institute for Energy Research and Freedom Partners Chamber of Commerce, a de facto Koch bank that disburses donations from anonymous, wealthy conservatives to groups that advocate rolling back public health, environmental and workplace protections.
Other Alpha creditors include the U.S. Chamber of Commerce, which questions the legitimacy of climate models; the Heartland Institute, which is probably best known for its billboard likening climate scientists to the serial killer Ted Kaczynski; and the American Legislative Exchange Council (ALEC), which convenes conferences for its state legislator members featuring speakers who distort climate science and disparage renewable energy. One of the speakers at a summer 2014 ALEC conference, for example, was Heartland Institute President Joe Bast, whose slide presentation falsely claimed: “There is no scientific consensus on the human role in climate change” and “The Intergovernmental Panel on Climate Change … is not a credible source of science or economics.”
The Alpha creditor list also includes at least two individuals with links to denier groups. Particularly noteworthy is Chris Horner, an attorney who is closely associated with a number of nonprofit denier groups, including ALEC, the Competitive Enterprise Institute (CEI), the Heartland Institute, the Energy & Environmental Legal Institute (E&E Legal), formerly the American Tradition Institute, and the Free Market Environmental Law Clinic, another Alpha creditor.
Arch Coal, the second largest U.S. coal company, listed ALEC and E&E Legal in its list of creditors when it filed for chapter 11 protection in January. Just last month, the Wall Street Journal reported that the company donated $10,000 to E&E Legal in 2014. E&E Legal’s executive director, Craig Richardson, told the Journal the contribution was for “general support.”
Chris Horner’s Coal Ties Disclosed
The exposure of Horner’s financial ties to coal companies is significant because he is a regular guest on Fox News Channel, which identifies him by his affiliation with CEI or E&E Legal but not by his connection to the coal industry.
Despite his lack of scientific expertise, Horner routinely critiques scientific findings, has called for spurious investigations of climate scientists affiliated with the IPCC and the National Aeronautics and Space Administration and has harassed scientists by filing intrusive open records requests with the universities where they work. As legal counsel for the Energy & Environmental Legal Institute and the Free Market Environmental Law Clinic—which work in tandem—Horner has targeted a number of leading climate scientists, including James Hansen and Katharine Hayhoe. Perhaps his most notorious lawsuit was against the University of Virginia to obtain emails, draft research papers, handwritten notes and other documents related to the work of Michael Mann, lead author of the famous “hockey stick” study demonstrating the link between increased fossil fuel use and rising global temperatures. The Virginia Supreme Court ultimately ruled in favor of the university and Mann, affirming the school’s right to protect the privacy of its researchers from overly broad open records requests.
According to the Wall Street Journal, Alpha paid Horner $18,600 before it declared bankruptcy. Meanwhile, the Free Market Environmental Law Clinic—an Alpha creditor—paid him $110,000 in 2014, $115,865 in 2013 and $60,449 in 2012, according to the clinic’s tax filings.
Besides Alpha and Arch Coal, Horner has ties to other coal companies. Last summer, he was a featured speaker at a private $7,500-a-person golf and fly-fishing retreat sponsored by Alpha, Arch Coal and four other coal companies: Alliance Resource Partners, Consol Energy, Drummond and United Coal. After the event—the 2015 annual Coal & Investment Leadership Forum—attendees received an email from the coal company CEOs praising Horner, according to the Center for Media and Democracy, a nonpartisan political watchdog group that first reported the connection between Arch Coal and E&E Legal. “As the ‘war on coal’ continues,” the email stated, “I trust that the commitment we have made to support Chris Horner’s work will eventually create a greater awareness of the illegal tactics being employed to pass laws that are intended to destroy our industry.”
Given the recent spate of bankruptcies, the companies’ commitment to Horner likely will create a greater awareness of something quite different: that the coal industry—along with the likes of ExxonMobil and Koch Industries—is still funding denier groups to spread disinformation about climate science and delay government action. It is time we held these companies accountable.
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or years, the Supreme Court’s 
