The Hightower Report
Time to End a Banker Boondoggle That Hurts Students; and Making a Mockery of U.S. Representational Democracy
Time to End a Banker Boondoggle That Hurts Students
What do you call it when arrogance, avarice, and absurdity combine? Well, one name for it would be "Sallie Mae."
Despite the sweet name, Sallie is not a person. It's a giant financial corporation that is America's largest provider of student loans. It began in the 1970s as a government entity, but in 1997 it was privatized. Along with other private lenders such as Wells Fargo and Discover, Sallie Mae has used the Family Education Loan Program to milk windfall profits from college students. The program is a corporate boondoggle, because the only thing it privatizes are the profits the lenders pocket through hefty fees they levy on students. The industry's losses, on the other hand, are socialized, for the government covers 97% of any loans that students fail to pay.
Because this absurd subsidy of private lenders rips off taxpayers while overcharging students, Obama has proposed ending it in favor of expanding the government's far more efficient and less costly program that loans directly to students. Cutting out the middleman would save taxpayers more than $9 billion a year while giving college kids a much better deal.
Going through private lenders is all the more absurd today, because a government bailout is all that is keeping them afloat. Any money they lend is not private capital but ours. Why keep subsidizing them to loan our money? Logic, however, is not a concept that bankers even want to grasp, so they are hiring top-gun lobbyists and rallying anti-government ideologues to oppose Obama's plan – and keep their boondoggle going.
Obama is right to halt this multibillion-dollar rip-off and redirect it to help students. For more information, contact the U.S. Public Interest Research Group, a national grassroots group: www.uspirg.org.
Making a Mockery of U.S. Representational Democracy
Would you like to get a 22% return on the money you invest? Wow, that would be awfully good in today's sorry market!
Well, how about a 2,200% return? No way, you say, that would be a Ponzi scheme. Now, try a 22,000% return on your investment. If you think that percentage is the silly stuff of fantasyland, you've been playing in the wrong market, for that is the level of payoff that corporations have received by investing in a sure thing: Washington lobbyists.
Three University of Kansas professors recently issued a report on a corporate lobbying effort to win a special tax break in 2004. Pushed in the name of creating jobs, this bill (which drastically cut corporate taxes on foreign profits) actually created no job gains for workaday folks, but it did produce a job boom for lobbyists. Focusing on 93 major companies – including such giants as Pfizer, IBM, and Hewlett-Packard – the study found that the firms spent $283 million on lobbyists to slide the bill through Congress. In return, the special break they won produced a financial windfall for the 93 corporations, allowing them to dodge $62.5 billion in taxes they otherwise owed – a 22,000% dividend on their investment in lobbyists.
Not every lobbying campaign produces such eye-popping results, but Washington influence-peddlers now promise corporate clients that they'll get returns of 100 to 1 or better on every dollar invested in professional lobbyists. What we have here is an admission – a boast, really – that legislation is for sale and that you have to pay to play.
It's the golden rule – those with the gold rule – and it mocks America's pretension that ours is a system of representational democracy. To help push for lobbying reform, visit www.uspirg.org.