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How For-Profit College Lobbyists Bought Congress

The New York Times today (Dec. 10) has a story on how the for-profit college industry spent $16 million to soften government plans to rein in industry corruption. The lobbyists won, as usual. This means another debt crisis is coming. This year, student loans will total $1 trillion -- more than the total of credit card debt outstanding. For-profit colleges have 10% of students but account for 44% of loan defaults. Ashford University, which accounts for almost all the students at San Diego's Bridgepoint Education, has a dropout rate of 84% in its two-year program and 63% at its four-year programs. When the Department of Education proposed tougher rules to thwart boiler room-type abuses at the for-profit colleges, the lobbyists, such as former House majority leader Richard Gephardt, assaulted the White House, Department of Education, and the White House, reports the Times.

The Times didn't touch on one of the most interesting angles: how much money was accumulated by investors in for-profit college stocks. Throughout this year, I was saying that while Bridgepoint was a disgusting boiler room draining money from the federal government, its stock would go up. First, more than half its stock was short -- that is, the majority of investment money was hoping the stock would go down. This meant that if there was any good news -- such as the softening of proposed reforms -- the shorts would rush to cover, or buy Bridgepoint stock. That happened. The stock zoomed. How many Washington insiders raked in fat profits, knowing the rules would be emasculated and the stocks would soar? Plenty, I would bet. The manna is probably tucked away in an offshore, tax and privacy haven.

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The New York Times today (Dec. 10) has a story on how the for-profit college industry spent $16 million to soften government plans to rein in industry corruption. The lobbyists won, as usual. This means another debt crisis is coming. This year, student loans will total $1 trillion -- more than the total of credit card debt outstanding. For-profit colleges have 10% of students but account for 44% of loan defaults. Ashford University, which accounts for almost all the students at San Diego's Bridgepoint Education, has a dropout rate of 84% in its two-year program and 63% at its four-year programs. When the Department of Education proposed tougher rules to thwart boiler room-type abuses at the for-profit colleges, the lobbyists, such as former House majority leader Richard Gephardt, assaulted the White House, Department of Education, and the White House, reports the Times.

The Times didn't touch on one of the most interesting angles: how much money was accumulated by investors in for-profit college stocks. Throughout this year, I was saying that while Bridgepoint was a disgusting boiler room draining money from the federal government, its stock would go up. First, more than half its stock was short -- that is, the majority of investment money was hoping the stock would go down. This meant that if there was any good news -- such as the softening of proposed reforms -- the shorts would rush to cover, or buy Bridgepoint stock. That happened. The stock zoomed. How many Washington insiders raked in fat profits, knowing the rules would be emasculated and the stocks would soar? Plenty, I would bet. The manna is probably tucked away in an offshore, tax and privacy haven.

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Comments
41

And once again, they are playing the local PR card with their Holiday Bowl. Will they next give a fat check to Father Joe's Villages to show what great people they are?

Dec. 10, 2011

Yes, and San Diego civic leaders have been quoted saying that Bridgepoint is a great company and great boon to San Diego. This is a sorry commentary on the establishment. Best, Don Bauder

Dec. 10, 2011

I think that idiot Duncan Hunter 2.0 is the only local saying this, and I am sure he is getting paid off for doing so.

Dec. 10, 2011

No, it wasn't Duncan Hunter. It may have been the head of the Chamber of Commerce. Best, Don Bauder

Dec. 10, 2011

Sadly, Duncan D Hunter has been a critic of the efforts to curb Bridgepoint abuses. He claims that places like Ashford are providing veterans with the chance to get a college education that would otherwise be unavailable to them. He is a fellow veteran of the recent conflicts and as such has my respect. But he is mistaken at least, or may owe Bridepoint a favor or two. If he were really watching what is going on, he'd soon realize that the vets he is supporting are being abused and swindled by Bridgepoint. But once again, money talks in Washington, and our local educational conglomerate has plenty of that, nearly all of it provided by us taxpayers.

Worse yet, this Holiday Bowl sponsorship gives BP an aura of respectability that it does not deserve in the slightest.

Dec. 11, 2011

Many of the Bridgepoint abuses have victimized veterans. The company's telespielers have signed up military people with mental war injuries. Best, Don Bauder

Dec. 11, 2011

According to voiceofsandiego.org, Bridgepoint's PAC gave "$25,900 to Republican Meg Whitman's failed gubernatorial bid" and "more than $100,000 to local and state elections."

Dec. 11, 2011

Oh yes. Matt Potter has reported on Bridgepoint's lavish gifts to politicians. Best, Don Bauder

Dec. 12, 2011

Yes, it was Chamber CEO Ruben Barrales.

Dec. 11, 2011

Now I remember. It seems to me I read that in Voice of San Diego. Best, Don Bauder

Dec. 12, 2011

Duncan Hunter 2.0 was lucky Daddy was already in the Congress, and he is AN IDIOT if he thinks Bridgepoint is ANYTHING but a fraud, they bring NOTHING to the table.

Here, read this, best article I have seen on student loan scams in some time;

Any serious policy reform has to start by considering a heretical idea: Federal subsidies intended to make college more affordable may have encouraged rapidly rising tuitions.

It’s not as crazy as it might sound.

As veteran education-policy consultant Arthur M. Hauptman notes in a recent essay:

“There is a strong correlation over time between student and parent loan availability and rapidly rising tuitions. Common sense suggests that growing availability of student loans at reasonable rates has made it easier for many institutions to raise their prices, just as the mortgage interest deduction contributes to higher housing prices.”

http://www.bloomberg.com/news/2011-12-09/u-s-universities-feast-on-federal-student-aid-virginia-postrel.html

Dec. 11, 2011

I've wondered why college tuition and fees have risen so fast, more rapidly than the overall cost of living, in the past couple decades, and thought that one reason might be that more and more money was flowing in that direction. So, we are in agreement. But where does all that extra funding go, compared to years past? Salaries? Undoubtedly, because pay at such institutions was once Spartan. But there's more to it than just that. Empire building, the construction of edifices that don't really support the educational mission, vast bureaucracies, and image building all can sop up huge amounts of funds.

When students were generally poor, few schools could demand high tuition and fees. Now that the students have "Uncle Sugar" picking up part or all of the tab, the sky is the limit on what some can charge.

A bubble about to b

Dec. 11, 2011

I have noted that the salaries of college and university presidents have escalated. Why, some presidents make as much as half what the football coach makes. Best, Don Bauder

Dec. 12, 2011

That is a very interesting observation, SurfPup, worth some study. Best, Don Bauder

Dec. 12, 2011

(cont'd) . . . about to burst? What will we call it? The Edububble of the "teens?" "Teens" for the victims and teens for the decade?

Dec. 11, 2011

There is a distinct possibility that the student debt bubble will burst almost as ignominiously as the mortgage bubble did. Best, Don Bauder

Dec. 12, 2011

It is not a possibility-it is 100% happening right now. I have worked with the biggest student loan group in the nation, addressing the scams by Sallie Mae, Nell Net and others and the bubble is here right now, and it is bursting right now- the loans are not being paid back in full b/c they cannot be paid in full because the jobs do not support the loan payments.

Once the loans get to the point of no return then it is just folley to pretend they will be repaid.

Dec. 12, 2011

There are a lot of people who agree with your assessment, SP. Best, Don Bauder

Dec. 12, 2011

Don, Investigative reporter Peter Byrne has exposed University of California Regent Richard Blum and his wife California US Senator Dianne Feinstein as members of the aristocracy of greed who have been betraying California taxpayers with this kind of California public education killing larceny and corruption for many years:

"Investor’s Club: How the UC Regents Spin Public Funds into Private Profit - Senator Dianne Feinstein's Education Conflict"

http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/updates/590-senator-dianne-feinsteins-education-conflict

Dec. 12, 2011

Blum receives a large chunk of his business from sweetheart deals with wifeys work in the Senate.

Back in the late 1990's he had the federal gov feeding his firm CB Richard Ellis HUGE chunks of commercial real estate that the gov had taken possession of.

When I commented to a Board Director of CBRE that this was "steering" (and illegal) he went into full on defense spin about the work "steering" whihc is a major no no in real estate.

Dec. 12, 2011

What did you expect? A confession? Best, Don Bauder

Dec. 12, 2011

Now that's a real eye-opener. My opinion of Sen. Feinstein just dropped a whole lot. I had no idea this sort of corruption was going on with her and her husband. As Turko would say: It ain't right!

Dec. 12, 2011

Yes, dwbat, it's an eye-opener. Best, Don Bauder

Dec. 12, 2011

I have heard about this before. I will look it up. Best, Don Bauder

Dec. 12, 2011

I remembered this so clearly, and I just did a Google search and this is a similar deal that came up in 2001, the deal I was speaking if happened in 98 or 99, so there must have been multiple deals Blum, CBRE and Wifey cooked up together;

EXCLUSIVE:

On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband’s real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms. http://www.washingtontimes.com/news/2009/apr/21/senate-husbands-firm-cashes-in-on-crisis/?page=all

Dec. 12, 2011

One would think California papers would pursue that story. Best, Don Bauder

Dec. 13, 2011

SurfPuppy619, it's actually much deeper than that. The Feinstein-Blum-Special Interests aristocracy is proving once again what Lincoln said, "you can't fool all the people all the time, but you can fool enough of them to rule a large country."

Historically, most governments have been oligarchies because it is appears to be unnatural for a majority to rule. Today, We The People don't seem to be able to organize ourselves for united, specific action to keep the greediest and most powerful from taking over in Washington, Sacramento and San Diego. The current debates, with candidates owned and controlled by special interests, are proving that on a daily basis.

So we are losing access to education and opportunity because of the destruction of California education by the latest version of aristocracy.

It is most certainly time for all We The People to Fight Back Together or lose everything to whichever corrupt political party can fool the most people.

And we had better replace all UC regents and executives with people who really give a damn about saving long-term quality of life for our children while we are at it.

Dec. 12, 2011

Well, at least John Moores is no longer a UC regent. Best, Don Bauder

Dec. 12, 2011

In the meantime American education is being destroyed by political corruption at federal, state and San Diego levels, and that is most definitely a worst case scenario for the future of democracy that is turning into an oligarchy as current presidential debates prove.

Dec. 13, 2011

P.S. I know for a fact that far too many Berkeley professors are afraid to speak out because of their fears of political backlash by Regents, UC executives and the power of money.

So the reality is that our politicians are attacking American education and our scholars are afraid to speak out to save American education.

Without equal and affordable access to quality education, American Democracy is in grave peril.

Again, Ike warned us about the threat by the power of money in his 1961 Farewell Address, it just took 50 years for things to get completely out of control.

Dec. 13, 2011

Agreed, Anthony -- and our education problems are far down most people's lists. After all, pro sports teams have thought nothing about grabbing redevelopment money, a process that steals funds directly from education. And the public and most media support the subsidization of teams owned by billionaires, thus, in effect, cheering for the weakening of education so the team can rake in more money. Best, Don Bauder

Dec. 13, 2011

Yes, not many people scream and cheer at high school graduation ceremonies, nor wear large foam fingers. And they don't buy beer and hotdogs.

Dec. 13, 2011

And the speakers should not pray, at least at public schools. Best, Don Bauder

Dec. 13, 2011

The Washington Times Feinstein hit piece reveals more about Republican smear tactics than government corruption. The picture of Obama tells the motivation of the Moonie rag, not to reveal corruption but to smear their way to Republican resurgence. Bush was running things when the alleged fraud occurred, and if there was collusion, it must have been with unnamed Republican help. Before alleging conspiracy one should be willing to name two people. The deals don't seem that sweet either, given that property hasn't sold well, and the firm was required to do maintenance. A followup article now, two and a half years later, detailing the profits, and specifying how the deal went down, could change my my mind.

When Republicans can't come up with better scandals than this, or the birth certificate idiocy, they suggest that my Democrats are completely honest. This is not so.

DO YOUR DUTY REPUBLICANS, FIND A REAL DEMOCRATIC SCANDAL.

Dec. 14, 2011

Regardless of which newspaper did the report, Sen. Feinstein should recuse herself from introducing/supporting ANY legislation that might benefit her husband's business, because that is unethical conduct. A lot of voters have switched to Independent, as they are sick of the corruption in both parties.

Dec. 14, 2011

That would be an obvious ethics move. There should be no question that she should avoid such conflicts. Best, Don Bauder

Dec. 15, 2011

The properties that Blum was "steering" to his firm, CBRE, were ALL bank owned, and the bansk were taken over b the FDIC or some other gov agency. These are GIFTS to commercial real estate brokers. GIFTS!!!. You don not have to do the hardest part of the job, which is dig up deals all day long on a telephone.

In many cases there are kickbacks between the bank/gov officer steering the properties to specifi brokers and the same with the RTC or the other gov run agencies-essentialy holding companies.

Don't get me wrong, it is not just Blum and his Senator wife, but everyone on both sides of the isle. I did not want to imply it is democrats who are the only ones who have special inetrest money and fingers in their pockets.....

Dec. 14, 2011

That is so true. Both parties have sticky fingers. Best, Don Bauder

Dec. 15, 2011

It is true that the Washington Times is often not considered a reliable source. Best, Don Bauder

Dec. 15, 2011

The FDIC is important to every bank, one can"t do business without touching it. Honestly, I would prefer to replace Feinstein with someone trustworthy on matters of war and peace, but the article is unsubtle propaganda, building a smear on coincidence, and placing it underneath a picture of Obama.

As the Gingrich slouches towards Bethlehem to be born, we should stop pretending that Democratic corruption equals Republican corruption. We need to stand together or the country will be run by a depraved sociopath, who loves war.

Dec. 14, 2011

The odds of a depraved sociopath running the country seem to be rising. Best, Don Bauder

Dec. 15, 2011

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