Last week, Frontline featured a documentary on subprime student
loans. The premise being for-profit
colleges were bullying students into their programs and financing their
education with federal loans.
I have to admit, Frontline did a good job on showcasing this
outright fraud by some of these unaccredited schools. But they glossed over the real cause for this
outrage.
A famous gangster was once asked why he robbed banks. He replied, “That’s where the money is at.” Today’s grafters are more sophisticated. They rob the taxpayers.
The housing bubble wouldn’t have happened without the federal
government easing lending restrictions and guaranteeing subprime mortgages
through GSA’s. Banks wouldn’t have taken
on the risk. Fannie Mae and Freddie Mac
were the engines for that economic disaster.
Now we have another bubble that’s ready to burst thanks again to
easy money. The Obama administration’s
hostile student loan takeover is creating another economic disaster just waiting to unleash holy hell. David Stockman
wrote the following:
Now we
get to the subprimiest of subprime debt – student loans. Student loans are not
officially classified as subprime debt, but let’s compare borrowers. A subprime
borrower has a FICO score of 660 or below, has defaulted on previous
obligations, and has limited ability to meet monthly living expenses. A student
loan borrower doesn’t have a credit score because they have no credit, have no
job with which to pay back the loan, and have no ability other than the loan
proceeds to meet their monthly living expenses. And in today’s job environment,
they are more likely to land a waiter job at TGI Fridays than a job in their
major. These loans are nothing more than deep subprime loans made to young
people who have little chance of every paying them off, with hundreds of
billions in losses being borne by the ever shrinking number of working
taxpaying Americans.
Student loan debt stood at $660 billion
when Obama was sworn into office in 2009. The official reported default rate
was 7.9%. Obama and his administration took complete control of the student
loan market shortly after his inauguration. They have since handed out a
staggering $500 billion of new loans (a 76% increase), and the official
reported default rate has soared by 43% to 11.3%. Of course, the true default
rate is much higher. The level of mal-investment and utter stupidity is
astounding, even for the Federal government. Just some basic unequivocal facts
can prove my case.
Frontline interviewed the usual suspects such as Sen. Dick
Durbin who will never take responsibility for the disasters they cause. It’s
much easier for a politician to blame for-profit businesses that take advantage
of easy money spewing from Washington D.C. than to admit they’re the cause for
all this misery they manufacture.
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