<p>You should check the difference again between Umass Amherst (which is a very good school by the way) and Wesleyan. I am pretty sure its not a 2k differnce per year. More like 20k.</p>
<p>Zoo-Mass and Wesleyan are not on the same ballpark. No way a kid of mine goes to Zoo-Mass.</p>
<p>Wall Street Sold Auction-Rate Debt, Warned Issuers (Update1)<br>
By Darrell Preston and Michael McDonald</p>
<p>June 26 (Bloomberg) -- Yanping Cui, 57, says she invested in auction-rate bonds last December at the urging of a broker at UBS AG in Long Beach, California. The same month, UBS told one of the issuers of those securities, a New Hampshire student-loan agency, that the $330 billion market was in danger of failing. </p>
<p>Cui is one of dozens of investors who say they were sold auction-rate securities as a low-risk alternative to cash at the same time underwriters, including UBS and Citigroup Inc., were telling issuers that demand was softening, bond documents and interviews with investors show. </p>
<p>At least 24 proposed class-action lawsuits have been filed against brokerages since March, and a nine-state task force is examining how the firms marketed the securities. Those burned in the meltdown see it as a case of Wall Street hiding known risks from investors, much like the dot-com scandal over former Merrill Lynch & Co. analyst Henry Blodget, who once advised buying a stock while privately calling it ``junk.''
``They were selling me their junk student-loan bonds, knowing the market was going down,'' said Jimmy Walker, 53, who owns a doughnut business in Dallas and who bought $1 million of auction-rate securities on Jan. 23 from Bank of America Corp.</p>
<p>He says his banker brought in a broker who recommended the securities and never mentioned anything about auctions. <code>It took a lot of doughnuts to get $1 million in the bank,'' Walker said.</code>That's my life savings. I'll be dead by the time I collect.'' </p>
<p>Auction-rate bonds, invented about two decades ago, allowed local governments, hospitals and universities to borrow money for the long term at cheaper, short-term rates by reselling the debt at auctions held every seven, 28 or 35 days. Until mid-February, banks supported prices by bidding for bonds that went unsold.</p>
<p>Once the banks stopped buying, rates soared as high as 20 percent because the failed auctions triggered a penalty rate for issuers. </p>
<p>In Cui's case, she says her broker recommended bonds issued by the Pennsylvania Higher Education Assistance Agency, the Missouri Higher Education Loan Authority, the New Hampshire Higher Education Loan Corp. and similar agencies. UBS and New York-based Citigroup, which ran auctions for the Missouri and New Hampshire authorities, sought waivers from the student-loan lenders on how high the rates on the bonds could go in case demand was insufficient. </p>
<p>Bloomberg.com:</a> Bonds</p>
<p>A rather amazing article (it is rather long) but it presents the other side of the student loan problem. Banks sold securities to investors (individuals here and I'm sure institutions were involved) and used the proceeds to lend to students (skimming fees I'm sure). The securities are now illiquid and banks are looking at marking down the values. The bankers will, of course, loan investors money using the securities as collateral. So it looks like the situation is now in lawsuit-city. It looks like there was some amount of fraud involved in selling the securities to investors. I guess the only hope that investors have is in students paying the loans over time and getting income that way as there's no market for the bonds.</p>
<p>I have a personal story with a broker and high-pressure tactics. A broker tried to sell me GM Bonds around 2002 or 2003 (maybe a few hundred K's worth). Of course the stock market was in a bear market and I had read about problems with GM in the financial news. So I basically said that I needed to talk to a few people about it. He called every day right up to the purchase date. But I didn't bite. A day or two after the purchase date, their bond rating got downgraded - I mentioned to the broker that I was worried about that happening. He said that I could just hold them to maturity (5 years) but a bird in the hand is worth two in the bush. So I have my particular opinion of brokers.</p>
<p>The XBD (Broker/Dealer index) was down 4.21% today. It's down 44% from the highs in 2007. Citigroup led the way down at -6.26% today and down 66% from the 2007 highs. Another bank, Goldman Sachs rubbed salt in C's wounds by basically recommending that traders short C.</p>
<p>The economy feels like stagflation - rising prices for expense with falling or flat income. Not an environment for taking on debt. Rising incomes and cheaper dollars (we may get those anyways) are the time to take on debt.</p>
<p>"I guess the only hope that investors have is in students paying the loans over time and getting income that way as there's no market for the bonds." </p>
<p>BCEagle, you are likely quite correct in your assessment of where investors will go looking for hope. Problem is, the regulations and laws for student loans and debtors are already draconian because of past lobby pressure from the edudebt industry. If additional lobby pressures are brought to bear by investors who've taken large losses-these regulations could nudge proto-fascist very quickly. </p>
<p>Under current conditions because of the enhanced fees applied by some of the larger companies, its not unknown for an original SL debts to double, and sometimes triple. And that tactic was freely admitted to by the charming (in a certain Simon Legree sense) gentry of SMC, and from informal conversations I've had with state ed dept officials its a common practice with other large companies. If these people are given more venue because of financial panic by the investors class, what has been abusive conduct by some in the industry will assuredly escalate to the intolerable. </p>
<p>The problem is, in failing economy, increased or even abusive pressures brought down upon student borrowers will no longer solve the problem. Especially when the current default rates of about 10-15%, are by some sources, expected to increase to close to 20% within the next year.
Even with their unprecedented abilities to harass, garnish, seize retirement and social security and etc, the back of the camel is broken. And so to try compensate for SL brokerage decisions and lending practices which could best have been described as crazed, irresponsible or simply good Lord (or Satan) what were they thinking...by increasing pressures on already strained student borrowers simply will not work. </p>
<p>From a financial sense, the more pressure they might exert the more people will simply drop out, or be driven out of the economy. So they might get a threadbare bag with thirty pieces of silver, but only at a extreme cost to the survivability of the rest of the economy. </p>
<p>From a social sense, if the pressure tactic goes beyond its already appalling levels, trouble. We will see a loss of faith, or outright hatred of our system develop amongst the very people we need to ensure its future.
And I am uneasy about mentioning this aspect, but we will unfortunately see a increase in financial related depression, and attendant suicides.
There will be other over reactions, but I think it seems best not to comment about those potentials. Any observant person can conjecture what forms those could take. </p>
<p>Perhaps rather than more direct infusions of cash into this demonstrably irresponsible and broken sector of financial industry other remedies could be considered. One would be government buyout, at properly reduced rates of these securities and attendant secondary contracts with the provision that under this buyout the large companies would agree to the settlement with the concession that student debtors would be removed from their venue. For student borrowers the understanding would be that they would agree to then repay the government under a system similar to that used in Australia.
The other alternative is already being expressed by consumer rights organizations dealing with the SL issue, is that of reinstating bankruptcy rights in regards to that condition. If this occurs we will see a massive number of bankruptcy filings likely unprecedented in American history. But as the pressures from the edudebt industry increase so will the political hue and cry to reinstate those particular rights. </p>
<p>No doubt a proposal of the aforementioned kind would be roundly shouted down by the SL companies and their brethren in the securities industry. But if the alternative was economic collapse, or massive defaults, or serious regulatory or criminal investigations of their conduct...just perhaps even the most greedy of these companies might see the necessity. </p>
<p>If something isn't done, the securities and SL industry could be one of the core causes of an economic collapse of a deeper ranging and more complex nature than that of the thirties. And as a side consequence, it will destroy American academe. </p>
<p>But somehow I don't see our representatives taking effective actions to equitably remedy this mire into which our entire economy might sink. Too much insider lobby pressure and too much interlinking of financial interests.</p>
<br>
<p>where investors will go looking for hope. Problem is, the regulations and laws for student loans and debtors are already draconian because of past lobby pressure from the edudebt industry. If additional lobby pressures are brought to bear by investors who've taken large losses-these regulations could nudge proto-fascist very quickly.</p>
<br>
<p>I don't think that investors have any recourse to further
demands on students than their regular payments. The problem
is that nobody wants to buy the securities as the value of
the securities depends on future market liquidity and the
market has already demonstrated that it can freeze up. The
investors ae mainly companies and high-net worth individuals
so there isn't a lot of public attention here. What I'm
amazed at is the financial industry has acted as a middle
man to leave the rest of the parties holding the bag.</p>
<br>
<p>The problem is, in failing economy, increased or even abusive pressures brought down upon student borrowers will no longer solve the problem. Especially when the current default rates of about 10-15%, are by some sources, expected to increase to close to 20% within the next year.</p>
<br>
<p>American Express Co. shares hit a five-year low on Thursday, one
day after the credit card lender said business conditions have
deteriorated beyond its expectations.</p>
<p>After announcing Wednesday that it will be getting $1.8 billion
from MasterCard Inc. in settlement of an antitrust suit, American
Express said it has underestimated how quickly its cardholders are
falling behind on their debt.</p>
<p>(Business Week, June 26, 2008)</p>
<p>American Express is supposed to cater to those that are reasonably
well-off and if the well-off are starting to show signs of problems
then more of the rest are probably seeing bigger problems. It's not
hard to find articles on credit card companies reining in credit
limits as they worry about the phenomena of customers racking up huge
credit card debt before filing for bankruptcy.</p>
<br>
<p>Perhaps rather than more direct infusions of cash into this demonstrably irresponsible and broken sector of financial industry other remedies could be considered. One would be government buyout, at properly reduced rates of these securities and attendant secondary contracts with the provision that under this buyout the large companies would agree to the settlement with the concession that student debtors would be removed from their venue.</p>
<br>
<p>I think that there's very little sympathy for investors as they had to
buy in $25K increments so they should be able to weather the storm
(outside of those that put their life savings into these vehicles).
It really sounds like there was some level of fraud involved for some
customers and that's a law enforcement issue with brokers.</p>
<p>I don't think that there's any interest in a government bailout of
investors. At the moment Congress is dealing with a mortgage bailout
bill and even that is a tough sell. It's basically moving the mortgage
risk of those underwater from the banks, insurers and investors to the
taxpayer.</p>
<br>
<p>The other alternative is already being expressed by consumer rights organizations dealing with the SL issue, is that of reinstating bankruptcy rights in regards to that condition. If this occurs we will see a massive number of bankruptcy filings likely unprecedented in American history. But as the pressures from the edudebt industry increase so will the political hue and cry to reinstate those particular rights.</p>
<br>
<p>I think that I like this idea the best but it would need to apply to
those that already have a lot of debt. This would provide considerable
distress to investors holding student loan bonds (the normal kind) and
it would probably result in higher interest rates for student loans in
addition to new loan practices but it would make it harder to get
loans which should ultimately result in lower costs of education. The
easy availability of loans distorts markets - especially when the
market is for something that everyone agrees is good. We had the
mantras of home ownership and stock ownership which works until it
doesn't. We had people borrowing money to buy assets and they were in
deep trouble when the assets stopped going up like clockwork.</p>
<br>
<p>No doubt a proposal of the aforementioned kind would be roundly shouted down by the SL companies and their brethren in the securities industry. But if the alternative was economic collapse, or massive defaults, or serious regulatory or criminal investigations of their conduct...just perhaps even the most greedy of these companies might see the necessity.</p>
<br>
<p>Introspection in corporate life is rare. Those at the top have a good
life and they want to perpetuate that in addition to wanting to
believe that they are providing value to society. I think that the
saga of former-Countrywide chief Mozilo provides the best example
of the modern villain.</p>
<br>
<p>But somehow I don't see our representatives taking effective actions to equitably remedy this mire into which our entire economy might sink. Too much insider lobby pressure and too much interlinking of financial interests.</p>
<br>
<p>Bernanke is under considerable pressure from inflationary concerns
right now and this pressure can be seen in the charts of financial
institutions. Congress is moving at a glacial pace and it appears
to me that they are trying more to prop up existing systems instead
of making radical changes.</p>
<p>"The investors are mainly companies and high-net worth individuals
so there isn't a lot of public attention here." </p>
<p>Quite true, although that is largely the fault of the press and our five minute cultural attention span and the unfortunate fact that our education system has conditioned people to tend not to want to critically analyze. In regards to the corporations and high net individuals and their role in the SL mess the information does bubble through sometimes. Chronicle of Higher Education covers the scandals as they blow out, but the Chronicle is expensive and limited in circulation. Obviously various consumer rights organizations cover the people and the scandals but these are organizations which tend to be marginalized in the mainstream press. And when word does get out, usually the lawyers follow it quickly. For example a interior document recently leaked which implicated some of the biggest SL corporations and a securities companies in regards to what could be interpreted as questionable FFELP loan bundling-and often along with such information is included the various threats made to the revealing consumer rights group by various lawyers. Hence the reason for not specifically listing (or pasting) that information here on this forum. </p>
<p>"I don't think that there's any interest in a government bailout of
investors." </p>
<p>Quite true, as the speculative investor class is increasingly perceived by the common man in a manner hauntingly similar to the early thirties. Problem is that the government has already done a bailout, with the massive flow of sureties and cash to 'save liquidity in student loans'. That very much was a bailout although it wasn't called as such. </p>
<p>"It really sounds like there was some level of fraud involved for some
customers and that's a law enforcement issue with brokers." </p>
<p>Which seems to be a state of conduct and morality distressingly common in the SL industry and its associated satellites. The Chronicle seems to have small exposes and news on the matter with quite regular frequency. But somehow it seems to not cause any serious action by investigators.
The main problem is the size (and hence lobby power) of the large companies in this industry, and their almost incestuous relations with the government (or certain government officials rather). </p>
<p>Concerning the restorations of bankruptcy protections and the SL mire. There's a certain irony in the whole situation. When these protections were ripped away by the special interest lobby, actual default rates were quite low. What they did was use what amounted to as a very few high profile cases of default and actually a manipulated form of urban legend about the matter which misled some in congress to remove the bankruptcy option. (Others weren't misled but rather quite happily snuggling in a vest pocket) Having achieved the removal of proper consumer rights in the context of SL's; actual default rates began to climb, and are expected to go even higher this year. But since the regulations have been written overtly in the SL companies favor they actually want the increased default rates. Because of the way in which defaults actually increase their already incredible profits. And unfortunately the situation has exponentially increased their attendant ability to abuse student lenders. As professor Warren (and others) had stated in regards to this situation they have a power the mob would envy.
So although restoration of bankruptcy protections would be the most equitable and reasonable alternative the edudebt industry will fight such proposals with all the lobby power they've got. Which unfortunately is quite formidable. </p>
<p>And if proper bankruptcy and other consumer protections are restored what we will see is an large portion of an entire generation desperately trying to use provisions which never should have been taken in the first place. Could be quite a time in the courts. Plus bankruptcy is a adversarial situation and people who been effectively sharecroppers for this industry for a decade or more would be in a poor position to protect their restored rights. As such we could see class action suits brought by various consumer rights groups to counterbalance the power of the edudebt cabal. </p>
<p>"Congress is moving at a glacial pace and it appears
to me that they are trying more to prop up existing systems instead
of making radical changes." </p>
<p>Quite true, and so the band played on...perhaps Congress should play the hymn "Autumn" before each session opens...</p>
<p>A little more on the investor side from the New York Times today:</p>
<p>Suit Claims UBS Misled Investors</p>
<p>The top securities regulator in Massachusetts has sued UBS on the grounds of fraud, saying that the firm misled clients when it sold them auction-rate securities and that it pushed the increasingly risky instruments on individual investors to reduce its own potential losses.</p>
<p>In the complaint, William F. Galvin, secretary of the Commonwealth of Massachusetts, cited numerous and sometimes urgent e-mail messages indicating that as early as last August UBS executives knew the market was imperiled. As sellers began to outnumber buyers, the messages show, UBS executives urged the sales force to promote the notes and shares as aggressively and widely as possible.</p>
<p>The thing that is most amazing to me is what a comprehensive and deliberate strategy this was by UBS, Mr. Galvin said. They wanted to reduce their inventory, so they decided to gear up their sales campaign using cashlike arguments deliberately. </p>
<p>The Massachusetts complaint identified David Shulman, UBSs global head of fixed income distribution, as a major participant in the firms effort last fall to unload its inventory of auction-rate securities. But in August, even as he was urging employees to drum up clients to buy the securities, Mr. Shulman began selling his personal stake in the instruments, the complaint said. By Dec. 12, Mr. Shulman had sold his entire position in the securities.</p>
<p>The internal UBS documents released by Mr. Galvin show that the stress in the market for auction-rate securities began last August and continued through the fall as the firms institutional customers moved to sell their holdings. This required UBS to find buyers for the securities or to take them onto its books.</p>
<p>The firms individual investor clients were a target, the complaint contends. An August e-mail message said: We have encouraged wealth management partners to mobilize the troops internally to focus on value so that we can move more product through the system.</p>
<p>This is, again, from the investor side of the equation but it shows that the banks have no problems dumping distressed securities on their own clients (which presumably pay them for their advice) calling them safe and secure.</p>
<p>Right now, I'm listening to an interview with Richard Bitner who wrote Confessions of a Subprime Lender: An Insider's Tale of Greed, Fraud and Ignorance. I wonder if we'll see a similar book in the future on the SL industry.</p>
<p>"Right now, I'm listening to an interview with Richard Bitner who wrote Confessions of a Subprime Lender: An Insider's Tale of Greed, Fraud and Ignorance. I wonder if we'll see a similar book in the future on the SL industry." </p>
<p>Very likely as some have already written in a great deal about the manner. And they may chose to write more complete presentations. </p>
<p>John Oberg (former department of education administrator, the one who revealed the massive NNC overbilling) for On Point Radio. </p>
<p>Investigative senior reporter for the Chronicle Paul Baskin ...who recently was awarded the 2008 National Press Club award for investigative reporting for his expose regarding conflict of interest, influence peddling ad nauseum etc by a education department official who'd been a SMC shill. </p>
<p>One who is very definitely writing a book about the socially destructive aspects of the edudebt industry is Alan Collinge. His "The Student Loan Scam, the Most Oppressive Debt in US History and How We Can Fight Back" is due to be released early next year. Apparently Amazon is already taking reservations and pre-orders on this book. And its very probable that this book will be widely read and very controversial because Collinge has a high profile due to his being the founder of one of the largest consumer rights groups dealing with the SL issue. And because of the popularity of Collinge's PAC (and his routine exposes about abusive companies) his book is probably the one which the edudebt industry is going to be most concerned about counteracting. </p>
<p>Harvard's Dr. Warren has also included mention of the SL industries detrimental effect in her writings about the decline of the American middle class and how that correlated to the rise of the debt economy. </p>
<p>So the information is out there, and when a book presenting a full expose is published it will be incredibly influential. After all the edudebt industry has turned a large portion of an entire generation into educated sharecroppers, and now apparently has sent investors into a panic and may play a role more detrimental than the sub prime situation in causing a potential depression. </p>
<p>Up to now much of the information about the edudebt industries machinations has been in specialist journals such as Chronicle or business publications, or in insider conversations in academe or business...but it does seem its about to go mainstream. </p>
<p>When it does and people realize how detrimental the situation actually has been various government people and corporate CEO's are going to have a difficult time defending their decisions.</p>
<p>Sounds personal. Did you have a bad experience with UMass Amherst? From a status perspective, I'd say you are right. From a practical and functional perspective, I'd say your emotions are clouding your judgment. Depends on what you want to pay for status.</p>
<p>Hawk@15
Not sure who you were responding to in your query.
However, in my case never having had an association with Amherst would have little to specifically say about them.</p>
<p>I spoke to a coworker yesterday about his mortgage application and student loans and he told me that on two mortgage applications (for two different homes), one of the first questions that he was asked is what they had for student loans. He and his wife both have terminal degrees but it was done without any debt. The applications people were floored that they didn't have any student debt. I guess that it's the norm that those buying houses have student debt. And it appears that it can be a mortgage killer.</p>
<p>On another note, Challenger and Gray announced that there have been 475,948 corporate layoffs announced in 2008 running well ahead of 2007. 85,258 of those jobs were in the financial sector.</p>
<p>I have a friend that puts out a "small bank death watch" which contains charts of banks that he believes will go bankrupt soon. He should know as he's in the business. ClearStation</a> : Member Discussion : _COMPX</p>
<p>It feels like Banks are where the tech stocks were in 2001. It should be interesting to see if majors shift out of finance in the next few years.</p>
<p>The SL situation and home loans are indeed problematic. And its a circular trap, for many to have the professions which make it possible to make the personal and social investment to own a home, they had to take out those cursed student loans. </p>
<p>From the individual perception of bank loan officers, being insiders to the financial industry they are quite aware just how inequitable and predatory the SL situation has become. So many from a personal assessment might prefer to ignore the SL problem, provided the borrower can make the payments. But from a policy point of view this is something the head office will generally not allow. </p>
<p>I have had some interesting informal conversations with local bank people about the matter. And many express a profound dislike of the SL industry, in part because of the abuses of power inherent to much of the edudebt industry is anti-ethical to their sense of propriety as bankers. Others have come to view the edudebt people with contempt because it causes their respectable wing of financial trade to be unable to serve customers, and to lose those same customers. And to have their sector of the financial trade being conceptually equated to the moral abuses of the edudebt industry really grates with these same bank officers. </p>
<p>The whole situation is yet more evidence of exactly how parasitic and socially destructive the edudebt industry actually has become. In the higher echelons they have support, because their undeserved profits are spread throughout the financial arena. But in the lower and middle echelons their power and activities are economically and socially detrimental. And seem to be perceived as immoral and destructive. </p>
<p>And to some extent what is developing with the edudebt industry and all the unwarranted privileges granted to it by shills in the government is not dissimilar to the disasters caused by situations like the Enron and Bear Stearns debacles. In both of those cases what made their expansion and initially massive profits possible were loopholes in legal protections. And especially in the case of the subprimes, what brought them down was the fact that the common upon which the whole bubble was based, could no longer bear the unreasonable burdens. We are close to reaching the same state in regards to the edudebt industry. </p>
<p>So what we have in regards to the edudebt industry is essentially a financial monster which can only exist by co-opting other systems and by the exploitation of absent or compromised legal protections. And like any other rapacious entity ultimately it wrecks the stability of institutions which do have a right and proper place in society.</p>
<p>keep your loans in perspective it's not free money. Otherwise I would say just make sure you are getting every dime out of the loan money while you are studying. You don't want to worry about taking the loans as much as you want to make sure that you are learning enough to be able to make them negligable</p>
<p>Quite true that loans need to be kept in reason. However the mere fact that US higher education has become a state wherein people have to borrow for learning is indicative of a social malaise. </p>
<p>The core reality is the edudebt industry has essentially piggybacked itself onto systems which had been and are either governmentally supported or privately funded. And as such, yes some of the loan money does go to indirectly support higher education. But since those same loans are enhanced and the risks minimized by governmental resources all that's happened is a unnecessary redirection of a undue proportion of those resources. And because this sytem has been so subtly undermining what had been functional systems of higher education funding, we now think it is a normal need to take out loans for learning, a condition that other civilized countries view as surreal. </p>
<p>And making sure one is learning enough to make such a debt worthwhile, could be a very difficult assessment. In that light how does one learn enough to make the 6% yearly increases in college costs justifiable? Especially given that these increases have been largely a condition of the period when our governmental gurus decided to transition American higher education away from a largely grant based model to that of subsidized or privatized loans. </p>
<p>And making such debts negligable, would be difficult or impossible as these same debts are under special provisions unique to that sector of the financial industry. If these are to be made a trivial problem by studies in heretofore safe fields, that's increasingly and obviously a situation which no longer exists. </p>
<p>And no matter how much propaganda certain factions of academia project about college degrees and lifelong earnings, lifelong learners and etc its very evident the reality is very, very different. As mentioned before, the AMA has begged the government to reinstate deferments and loan forgiveness for their contingent. If it isn't working for doctors, for the less well paying fields exactly how does one ensure they are learning enough to make such debts negligable?</p>
<p>And ultimately the concept that education can make the debts incurred to obtain it, not important has disturbing implications. As more people find that this equation cannot be reconciled it will increasingly destroy the bond of trust which once held between academia and the populations which it served.</p>
<p>BC Eagle,
On your quite revealing and disturbing information on the securities markets and troubles for investors it appears that murky swamp is about to become deeper. It's going to get more complex as some of the largest SL providers and linked securities companies also seem to have had some issues relating to the securities trade and propriety. </p>
<p>Its hard to comment directly because the documents relating to the matter are complex and are outside of my field-and so what I have read of these is of limited use. And since these were released without the consent of the involved companies its better to with hold comment until the situation is fully published by the specialist media within the financial industry. </p>
<p>But from what is implied in these documents, and the overt reactions to their being made accessible to the public (albeit in a unusual manner), it seems very indicative that something strange in the SL situation is happening which may adversely affect the already shaken securities market. </p>
<p>Lord knows a proper book and expose needs to be written about these issues. But given the complexity of the intermeshed interests and their seeming contempt for normal protocols it would take a combination of Upton Sinclair, a very proficient narc, Thomas Nast, Portia and a mob of lawyers to get it all figured out.</p>
<p>Those of us in academia will perhaps then watch in a state of bemused shock to find out how many leaves from the Ivy Halls have been sold, resold, and bundled into financial compost. </p>
<p>Apples and pencils anyone?</p>
<p>I was just doing a little surfing at a few of my trading sites and came across a post by a friend at ClearStation</a> : Member Discussion : _HUI.X which shows the charts of Fannie and Freddie, two GSEs (Government Sponsored Enterprises) like Sallie Mae. You can get a feeling for how a company is doing from a chart, even if you're not familiar with how to read charts.</p>
<p>In other posts, it's expected that the taxpayers would have to fork out about a trillion dollars if these two companies fail. Yes, that's with a T. A bailout would affect the credit rating of the US. Credit default swaps for their debt has doubled in price (it's like insurance against failure) implying that their bond ratings should be five notches lower than what credit-rating companies are rating them at.</p>
<p>Sallie Mae's chart SLM</a> - SharpCharts from StockCharts.com isn't looking so good either.</p>
<p>I listened to a talk given by an advisor to high-net worth folks and he's expecting a very slow recovery followed by sub-par (3%) annual growth for the next 20 years. Kind of like when I was a child. The thing is that expectations have been ingrained into most of us that normal growth rates are higher and a normal return from the stock market is 8% annually. Which is why we're generally willing to go into debt for all kinds of things when our income will be higher and dollars will be worth less. A much slower rate of growth will make it feel like it will take forever to pay off loans. In this scenario, deflation is a bigger threat than inflation.</p>
<p>When there is deflation, you want to have savings and not debt. When there is inflation (particularly in the value of your labor), you want debt. Savers lose wealth to inflation unless they can find something to keep ahead of inflation.</p>
<p>On another note, SLC (Student Loan Corporation) announced layoffs of 174 positions. They are a subsidiary of Citibank.</p>
<p>And new student loan rates and limits changed today.</p>
<p>Stephen Burd has a good article on Obama's Disappointing Omission - basically leaving Student Loans off the table for bankruptcy reform. It's at Higher Ed Watch. Lots of good stuff there on student loans including a lot of personal stories from those caught in the debt trap.</p>
<p>Interesting and appalling at the same point. SMC and like companies have been the ultimate expression of corporate socialism. And even with the billions they pressure from students and ex students, a right they never should have been given; and the recent billions to ensure 'liquidity' these people still can't keep a stable keel? </p>
<p>The SMC chart is a bit away from my personal field, but it does seem they've finally had a major market adjustment downwards in the last few weeks. Perhaps investors have had a sense that these companies bubble is about to burst. Or have gained an appreciation that the generation which has been held in bonds by these companies and such bonds that were only possible because of unprecedented influence peddling; now has no reserve left to give or to be taken . Not doubt as these companies feel additional pressures they will use their neo-governmental (nee mob) powers to pressure debtors even further. </p>
<p>But between the mortgage meltdown, drastic inflation on staples, and fuel, this class of neo-sharecroppers have no more resources which can be coerced, compelled or extorted. Not a situation which can be stable from a business aspect or a systemic aspect. </p>
<p>But perhaps stability was never the intention, perhaps it was more the matter of loot and run? Although this loot and run took a decade or more it does look like the edudebt pirates will be doing their coup de grace exit very soon. </p>
<p>As far as Obama's Disappointing Omission, well its hard to comment. But its going to be difficult to respect any politician whichever side of the aisle they inhabit-who cannot see how socially and economically dangerous the student loan mire has become. Vest pocket corruption or vest pocket cowardice are a betrayal no matter how pretty the sound bites. </p>
<p>But whoever runs the next regime, they will have to address the student loan mess, insofar as it's got the potential to be more damaging than even the mortgage mess, economically it could trash the already shaken US economy, and socially we will lose an entire generation. </p>
<p>If they don't act to relieve the pressures academia is finished and the economic and social repercussions may be well beyond reasonable projections. But a generation of the rapine of our societies most intelligent and capable, was never something which could have been thought of in reasonable projections.</p>
<p>One of those companies that I mentioned last night is down 48% right now from yesterday's price. They're down about 85% this year. The other company is "only" down 13% today. These two companies guarantee $1.45 trillion in debt. How often do you hear the word Trillion when talking about government expenditures?</p>
<p>If it became considerably easier for former students to discharge student debts via bankruptcy, wouldn't we see higher interest rates, fewer lenders, and potential blackballing of certain schools and humanities majors?</p>
<p>It wasn't a problem before the change.</p>
<p>My student loans had a 2% interest rate and I don't think that there was any government guarantee. So banks seemed to do all right with student loans back then. There is an article at the Higher Ed Watch blog that debunks that theory that allowing bankruptcy would result in higher student loan interest rates. And even if rates were higher, perhaps students would think a little harder before borrowing which could lead to lower college sticker prices.</p>
<p>We afford credit card deadbeats and subprime speculators the option of bankruptcy. Students are trying to better their lives and become productive members of society. Shouldn't we afford them better terms than those trying to scam banks or society?</p>