When Obama released his budget proposal last week, bankers no likey.
Not content with the billions of dollars in subsidies they’re already receiving from the federal government, Obama’s proposal to cut $4 billion in subsidies to the student loan industry made them indignant. There really isn’t any need for this $4 billion taxpayer give away, mind you — the government absorbs the losses either way, so they might as well lend directly and cut out the expensive middle man who adds no apparent value other than to siphon off funds from student lending programs. But bank lobbyists have had quite a bit of success buying Democrats these days, and it didn’t take long for them to find one:
Rep. Paul Kanjorski (D-Pa.), who with $18,000 in contributions had the second-highest fundraising total from the private student loan industry, also opposes Obama’s plan to have the federal government provide loans to students. He said the best way to provide aid to students would be to find a balance between public and private lending.
“Our students would benefit the most, if we could use the best practices developed from both lending in the private sector and through direct lending in the public sector,” Kanjorski said in a statement.
Sallie May and Nelnet are the big student loan outfits, and also big campaign donors. Sallie Mae alone distributed more than $583,000 to politicians last year. They’ve got astroturf groups releasing studies saying that 35,000 jobs would be lost if the subsidies were ended, but there’s no indication why they couldn’t continue to make the loans themselves and simply absorb the losses without the corporate welfare. What exactly do they do for their $4 billion a year? I mean, weren’t we just treated to a round of auto industry hearings where we were told that any business that wasn’t "viable" on its own without government support was a "socialist" enterprise and had no reason to exist?
Republican Buck McKeon of the House Education and Labor Committee sits at Kanjorski’s side, saying that private lending firms provide a "critical backstop" for the pubic lending program, and provide students with "more choices." Some choices:
Resolving an investigation into whether they misled consumers, seven student loan companies have agreed to follow a code of conduct for their marketing, the New York attorney general’s office said on Tuesday.
The companies also agreed to put a total of $1.4 million into a fund to help educate students and their families about financial aid, Andrew M. Cuomo, the attorney general, said in a statement on Tuesday.
Those companies are Campus Door, EduCap, GMAC Bank, Graduate Loan Associates, Nelnet, NextStudent and Xanthus Financial Services.
Kanjorski has real problems in his district (PA-11: Scranton, Wilkes-Barre, Hazleton, and most of The Poconos) — he barely beat his Republican opponent last time out, riding on Obama’s coattails, and his approval numbers in his district are terrible (Survey USA, Oct. 30-Nov. 2 2008):
Kanjorski also has a history of playing footsie with bank lobbyists. His Ney-Kanjorski bill was one of the ugliest financial deregulatory bills of the Bush administration, seeking to weaken state predatory lending laws (Adam Pase, Executive Director of the New Democrat Coalition who works out of Ellen Tauscher’s office, was a lobbyist for the astroturf group promoting the bill as necessary to get more subprime mortgages into minority communities — truly disgusting). His opponent hit him hard on it, and got traction.
It would be interesting to know if there is some huge, hidden constituency in his district of pro-bank lobbyists.