Thursday, April 5, 2007

What Happens When Government Shrinks

You have scandals like this one:

Citibank, one of the largest providers of student loans, as well as five universities have agreed to pay $5.2 million to students and the New York State attorney general to resolve an investigation into student loan practices, Andrew M. Cuomo, the attorney general, announced yesterday.

Citibank, which at year's end had $33.7 billion in student loans outstanding, agreed to pay $2 million into a fund to educate students and parents about student loans. [...]

Mr. Cuomo has singled out in particular a practice he called "egregious," in which loan companies give universities back payments that rise along with the volume of private student loans from the schools. Private loans are not secured by the federal government.

and this one:

The directors of financial aid at Columbia University, the University of Texas at Austin and the University of Southern California held shares in a student loan company that each of the universities recommends to student borrowers, and in at least two cases profited handsomely. [...]

Government filings show that the three officials sold shares in a stock offering by the parent company of Student Loan Xpress in 2003 and held additional stock options in the company, known as Education Lending Group. One of the officials made more than $100,000, according to documents and lawyers in Mr. Cuomo's office. In one case, that of Texas, the official says he was invited to invest in the company.

The joys of privatization, and lack of federal regulation, this time in the student loan field. Need I say more?