Wednesday, August 31, 2016

Quantitative Easing and the Student-Loan Crisis: The Government Loans Money to Students Who Don't Have a Prayer of Paying It Back

Investipedia defines quantitative easing as the process of increasing the money supply "by flooding financial institutions with capital in an effort to promote increased lending and liquidity."  Or more simply--quantitative easing is printing new money.

The Obama administration has done a lot of quantitative easing. At the height of its QE program, the government was pumping a trillion bucks a year into the economy. But there is another type of quantitative easing that is less well known. The government has been loaning billions of dollars to students under the federal student loan program, and it is only getting about half that money back. 

Who benefits? The higher education industry has gotten this money, including the stock holders and equity funds that own private colleges and universities.  

Conner v. U.S. Department of Education, a recent federal court decision, illustrates how QE works in the education sector. Patricia Conner, a Michigan school teacher, took out 26 separate student loans over a period of 14 years to pursue graduate education in three fields: education, business administration, and communications. By the time she filed for bankruptcy at age 61, she had accumulated over $214,000 in student-loan debt. According to the bankruptcy court, Conner did not make a single voluntary payment on any of her loans.

In the bankruptcy court, Conner argued that her debt should be discharged under the Bankruptcy Code's "undue hardship" standard, citing her advanced age as a factor that should weigh in her favor. 

But a Michigan bankruptcy court refused to release Conner from her debt, and a federal district court upheld the bankruptcy court's opinion on appeal. The district court  ruled that Conner's age could not be a consideration since she borrowed the money in midlife knowing she would have to pay it back. The court also indicated that Conner should enroll in an income-based repayment plan (IBRP) that the government had offered her, which would obligate her to pay only $267 a month on her massive debt. The court did not say how long she would be obligated to make payments under an IBRP, but these plans generally stretch out for at least 20 years.

Let's assume Conner signs up for an income-based repayment plan and begins paying $267 a month on her $214,000 debt. Let's also assume, that the interest rate on this debt is 6 percent. At 6 percent,  interest on $214,000 amounts to more than $12,000 a year, but Conner will only be paying about $3,200 a year toward paying off her student loans.

This means Conner's debt will be negatively amortizing--getting larger every year instead of smaller. After making payments for one year under her IBRP, Conner will owe $223,000. After the second year, she will owe around $233,000. After three years, Conner's debt will have grown to about a quarter of a million dollars, even if she faithfully makes every monthly loan payment.

Obviously, by the time Conner's IBRP comes to a conclusion in 20 or 25 years, she will owe substantially more than she borrowed, and she will be over 80 years old. In short, the government will never get back the money it loaned to Ms. Conner.

Who benefited from this arrangement? Wayne State University, where Conner took all her graduate-level classes, got most of Conner's loan money, which it used to pay its instructors and administrators.  But what did Wayne State provide Conner for all this cash? Apparently not much because Conner is still a school teacher, which is what she would have been even if she hadn't borrowed all that money to go to graduate school.

In my view, the Conner story is an illustration of QE in the higher education sector. The federal government is pumping billions of dollars a year into the corrupt and mismanaged higher education industry, and it is getting only about half of it back. Moreover, in far too many cases, the students who are borrowing all this money aren't getting much in value.

How long can this go on?  I don't know, but it can't go on forever.

Image result for "quantitative easing"


Note: I am indebted to my friend Richard Precht for pointing out the relevancy of Quantitative Easing to the student loan crisis.

References

Conner v. U.S. States Department of Education, Case No. 15-1-541, 2016 WL 1178264 (E.D. Mich. March 28, 2016).

Monday, August 29, 2016

ITT Tech is teetering on the brink of collapse due to pressure from the U.S. Department of Education: Why did DOE wait so long to aggressively regulate the for-profit college industry?

ITT Educational Services, owner of ITT Technical Institute, is on the verge of collapse. A few days ago, the U.S. Department of Education issued a directive barring ITT from enrolling any students who rely on federal financial aid to pay their tuition.

DOE's recent action may be the coup de grĂ¢ce for this tottering for-profit chain of technical schools. ITT gets 80 percent of its revenues from federal student aid monies.  Now that DOE has turned off the spigot of federal funds, ITT's days are numbered. In fact, if you want to measure ITT's pulse, just look at its stock price.   The company's stock was trading today at about 51 cents a share. In 2009, the stock sold at more than 200 times today's price--$128!

Shahien Nasiripour, a Bloomberg reporter, argued recently that the Department of Education does not know what it is doing when it comes to regulating for-profit colleges. Nasiripour wrote that DOE bungled the regulation of Corinthian Colleges and was surprised when the college chain filed for bankruptcy, leaving thousands of students in the lurch.   Nasiripour quoted an observer who said that "[t]he Education Department hasn't been a good analyst of corporate balance sheets."

Now, Nasiripour maintains, DOE is repeating its mistake with ITT and may "unwittingly exacerbate ITT's financial woes."

I disagree with Nasiripour. I think DOE knows exactly what it is doing to ITT and is fully mindful that its recent regulatory actions will likely drive ITT out of business. DOE surely knows that cutting ITT off from federal student aid money will shut off most of its revenues. And not long ago, DOE ordered ITT to almost double its cash reserves--from $124 million to $247 million, which ITT almost certainly is unable to do.

Why is the Obama's DOE acting so aggressively against the for-profit college industry now that Obama has less than three months left in his final term? Is DOE moving against the for-profits now because Obama no longer cares about the political consequences of cracking down on a powerful industry?

Or is DOE pressuring the for-profits to drive down their stock prices so that friendly investors can snap them up for a song and make a killing? Martin Nesbitt, a close confidant of Barack Obama, is leading a group of equity funds to purchase Apollo Education Group, the University of Phoenix's owner. If the deal goes through, Nesbitt's partners will only pay around $9 a share for the stock--about a tenth of Apollo's all-time-high share price.

If ITT gets bought up by financial vultures, it will be interesting to see if the new owners have ties to the Obama administration.

But let's give Obama's DOE the benefit of the doubt and assume that it is finally doing what it should have done a long time ago, which is aggressively regulate the for-profit industry in order to protect students from disreputable operators.

But DOE officials should remember that shutting down reputedly shady for-profit colleges is only half the job.  Corinthian Colleges had about 300,000 former students at the time it filed for bankruptcy and most of them took out federal student loans. All those people should have their student loans forgiven.

If DOE shuts down ITT--which it is apparently trying to do with its recent regulatory actions, it needs to provide relief for all of ITT's indebted students--both current enrollees and former students.

If  ITT closes and DOE forces all these hapless student-loan debtors into a tedious administrative process in order to get their student loans forgiven, then we will know that the Obama administration doesn't really care about the students who attended for-profit colleges.  Rather, knowingly or unknowingly, DOE may simply be driving down the value of for-profit colleges in a way that allows new investors to swoop down and scoop them up at bargain prices.

References

Shahien Nasiripour. The Obama Administration Could Cause the Next Big For-Profit College Collapsehttp://www.bloomberg.com/news/articles/2016-06-09/the-obama-administration-could-cause-the-next-big-for-profit-college-collapse. Bloomberg.com, June 9, 2016.  Accessible at http://www.bloomberg.com/news/articles/2016-06-09/the-obama-administration-could-cause-the-next-big-for-profit-college-collapse

Josh Mitchell. Education Department Orders ITT Educational to Bolster Finances. Wall Street Journal, June 6, 2016. Accessible at http://www.wsj.com/articles/education-department-orders-itt-educational-to-bolster-finances-1465246531

Mark Muckenfuss. New Sanctions Against ITT Tech will limit enrollment. Press Enterprise, August 26, 2016.  Acessible at http://www.pe.com/articles/students-811674-itt-school.html






20-year Income-Based Repayment Plans for Student-Loan Debtors: A Return to Feudalism

Paul Craig Roberts wrote a chilling essay a couple of months ago in which he argued that Greece is being looted by its corporate creditors. According to Roberts, the banks don't want Greece to pay off its debts because the banks ultimately intend to strip Greece of its national assets, including its ports and nationally protected islands.

Here is the core of Roberts' argument:
The banks don't want Greece to be able to service its debt, because the banks intend to use Greece's inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. Neoliberalism intends to reestablish feudalism . . . . The way Germany sees it, the [International Monetary Fund] is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF. As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principally the banks themselves or their major clients. (emphasis supplied)

In essence, Roberts is predicting that Greece will eventually cease to be a sovereign nation; it will become a feudal serfdom controlled by private investors--principally German banks.

Something similar is occurring in American higher education. Private investors are operating for-profit colleges for the purpose of looting American taxpayers, who provide the federal student loan money that naive students use to pay the colleges' outlandish tuition prices. Almost half the students who take out student loans to attend for-profit colleges default within five years, but the for-profit colleges doesn't care. They got their money upfront.

How does this equate to feudalism? The Obama administration knows that student-loan default rates are shockingly high, but it is covering up this problem by forcing students into long-term income-based repayment plans--plans that require former students to pay a percentage of their income to the government for 20, 25, or even 30 years. In a very real sense, these long-term debtors have become feudal serfs, indebted for almost their entire working lives for the privilege of attending a shitty for-profit college. (Perhaps I should have used a different word than shitty--just can't think of one right now.)

And it's not just the for-profit college owners who benefit from this scam. The public colleges and the not-for-profit private colleges are collecting their share of the loot--jacking up tuition prices, knowing that students will simply borrow more and more money to pay their escalating tuition bills.

In fact, college presidents have become the 21st century equivalents of feudal lords--living in palatial presidential homes, flying around the world in private jets to hob nob with donors, and collecting unseemly salaries, while low-paid adjuncts teach the classes much like the serfs of the middle ages.

So, student-loan debtors, you aren't the only ones being raped by the transnational financial oligarchs. The Greek people are your companions in misery.



References

Adam Looney & Constantine Yannelis, A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising default ratesWashington, DC: Brookings Institution (2015). Accessible at: http://www.brookings.edu/about/projects/bpea/papers/2015/looney-yannelis-student-loan-defaults

Paul Craig Robert. We Have Entered the Looting Stage of Capitalism. Infowars, May 27, 2016. Accessible at http://www.infowars.com/we-have-entered-the-looting-stage-of-capitalism/

Friday, August 26, 2016

We don't need no stinkin' families (until our homes are flooded): More notes from Redneck Katrina

Children can be such a nuisance. They're noisy. They're expensive. They have absolutely no appreciation for Thai food. It's a good thing we have a constitutional right to abort them.

There was a time when people needed children. Someone had to milk the cows, feed the chickens, and churn the butter.  And children would be such a comfort to us in our old age--remember that quaint old observation?

But now we live in cities. We get our food at the grocery store. When we are too old to live alone, we go to a Golden Age retirement home to play checkers with the other geezers. We rely on Medicare, pensions, and Food Stamps to see us through old age or hard times.  If we do have a couple of children, they most likely live on one of the coasts--far away from Mom and Pop.

And that's just fine until the Amite River starts flowing through the wall sockets of our lovely ranch-style homes, and the power goes out while we're watching CNN News.  And when we call 911, the Emergency Dispatcher puts us on hold with 150 other people.

And so we decide to wait for the National Guard to arrive in their big trucks to rescue us from the flood, but the Guard doesn't know where we live.  And when the National Guard finally shows up, their truck drops us off at an emergency shelter where we can sleep on a cot with 200 other flood victims; and some of those people snore.

That's when it would be nice to have a family. Or more particularly, that's when it would be nice to have a relative with a boat.

Believe me, I know. My wife Kim and I were trapped by flood water last week along with thousands of other people. A lot of those people were milling around on Route 16 hoping the water would subside or a National Guard truck would rescue them.  And the National Guard did rescue a lot of people.  But some people waited a long time before being evacuated.

Our family was more fortunate. My stepson Charlie has a shallow-draft boat, and he rescued my wife Kim, her brother Jim, Kim's parents, and me. And he didn't dump us off at an emergency shelter. He delivered us to my brother-in-law's house in Baton Rouge, where we celebrated our escape by eating jambalaya and drinking Crown Royal on the rocks.

So families can be handy when you need to be rescued from a flood.

Families can also be handy when you are cleaning up after a flood. My wife's parents lived in a subdivision of around 40 homes.  With one exception, every home in the subdivision was flooded.

People who have been through this know that it is vital to "gut" a home as soon as possible to remove all wet sheet rock and insulation. Mold appears incredibly fast after a flood. In just two weeks, a flooded home can become permanently uninhabitable because of mold.

My wife's parents have a big family; and at least ten family members worked four full days to gut their house.  Four generations participated: Ivy and Kitty, the home owners;  all five of their children; at least a half dozen grandchildren; and three great grandchildren.

The home flooded on Saturday night. By the following Friday, Kitty and Ivy's home was completely stripped of all wet sheet rock and insulation; mold treatment had been applied; and the house was ready for a contractor to install new flooring and sheet rock.

Most of Kitty and Ivy's neighbors were not so fortunate. Some were able to do nothing themselves and had to hire demolition contractors. Others had relatives and friends dribble in to help, but not enough volunteers to get the gutting job done quickly.

As debris piled up in front of Ivy and Kitty's home, I could see we were far ahead of the rest of the neighborhood in the demolition process.  By the end of the week, more than half of the homeowners had no debris in their yards, an indication that the demolition process had not even started.

At first, I reveled in my family's progress compared to the neighbors, but as the week wore on it made me sad to see so many homeowners who had absolutely no one to help them cope with the tragedy of this historic flood.

Most of my family are Catholics or lapsed Catholics; and for Catholics, family is a sacred concept. After all, we celebrate the Feast of the Holy Family on the first Sunday of every year; and the Church itself is understood as being part of a family--she is the Bride of Christ.

Blah, blah, blah! How I run on.  If you live in a city and have no family, you will do just fine in postmodern America.  After all, you've got insurance; you've got your pension; you've got your golf buddies; you've got President Obama.

You'll do just fine until you experience a major disaster of some kind--like a flood or a fire, the loss of a job, a serious illness.  And then you might wish you had a family.

Of course, we love our family members, whether they live close to us or far away. My own children live on the East Coast, and I love them dearly. But I often wish I lived closer to my children, not because they could help me, but because I would like to help them.  The older I get, the more I appreciate how hard it is to be young in the United Sates; and I wish I could help my children more.




Middle-Aged People Should Probably Not Go to Graduate School: Conner v. U.S. Department of Education (March 28, 2016)

Wages for American workers have been stagnant for more than 20 years; everyone knows that. In fact, many American workers have seen a decline in their real wages as inflation eats away at their paychecks.

A college degree supposedly enhances earnings, but not for everyone More than a third of college-educated workers are holding jobs that do not require a college degree.

As we drift into middle age, we search for ways to make more money. So why not go to graduate school? Maybe job opportunities will open up if we get an MBA. Or maybe we can unleash our creative capacity if we obain a master's degree in creative writing. Why not go to law school?

Of course, American colleges want people to think that going to graduate school is good career option. Undergraduate enrollments are declining at many universities--especially the second-tier liberal arts schools. The colleges have got to keep the money flowing, and many have been rolling out new graduate programs to enhance their revenues.   Juicing up MBA programs has been a favorite strategy.

Graduate programs can be expensive, and most people who pursue graduate degrees have to take out student loans to finance their studies.  But, hey--what could go wrong?

At least three things:

Age discrimination. Although federal laws protect people from age discrimination in the workplace, many employers discriminate against older workers. So if you are 45 years old and recently obtained a law degree or an MBA, you will be competing against much younger workers.

Law firms in particular are looking for bright young attorneys who have the drive and energy to work 80 hours a week.  The firms like to mold their new hires into the firm's corporate culture, and it is easier to mold a 25-year old than a 45-year old. And the firms definitely discriminate in favor of people who graduated from top-ranked law schools.

So if you graduated from a second- or third-tier law school at age 45, the chances of landing a high-paying job at a blue-chip law firm are virtually zero. And if you borrowed $140,000 to get your law degree (the average amount of debt for new law graduates), you are in real trouble.  In fact, your decision to borrow money to go to law school was probably a mistake.

Many graduate programs don't give students useful skills. Second, a lot of graduate programs do not teach skills that will enhance their students' marketability in the workplace.  The United States now has hundreds of MBA programs, but I have talked with people who got MBA degrees from non-elite colleges, and several told me they didn't learn much.

I myself was a sucker. I enrolled in the doctoral program at Harvard Graduate School of Education, thinking a doctorate from Harvard would open doors for me that I couldn't open with just my law degree.  In fact, I learned virtually nothing useful during my two years of study at Harvard other than the fact that HGSE is a pretty mediocre place.

Unsympathetic bankruptcy courts.  Several recent bankruptcy court decisions have involved middle-aged people who accumulated a lot of debt going to graduate school.  Some of these people argued that their advanced age should be considered--that they simply didn't have enough working years left to pay off their enormous student-loan debt.

But not all bankruptcy courts are sympathetic. In Conner v. U.S. Department of Education, for example, Patricia Monet Conner accumulated  $214,000 in student-loan debt to pay for graduate education in three fields: business administration, communications, and education.

Conner was a school teacher who had an annual income of about $60,000 during the years before she filed bankruptcy, and she never made a single voluntary payment on her student loans. When she came before the bankruptcy court, Conner was 61 years old, and she argued that her advanced age should be considered in her favor.

But the bankruptcy court rejected Conner's argument and refused to discharge her student-loan debt.. Conner appealed, and a federal district court, was equally unsympathetic."[C]ourts have regularly held that one's age cannot form the bases of a favorable finding for a debtor who chooses to pursue an education later in life," the court ruled.

Conclusion: Middle-aged people should be very cautious about going to graduate school.  Many Americans enter middle age not having achieved the goals they set for themselves when they were young. I myself am such a person. Going to graduate school may seem like a way to expand life opportunities--a second chance to obtain success.

But be very cautious. Gamblers who lose at the gaming tables often double down, hoping a big win will nullify their earlier losses. But unlucky gamblers who keep betting generally wind up losing more money. Universities, like the casinos, want you to think the odds are in your favor; but in fact they are not.

I do not give this advice out of a sense of superiority. As I said, I made a big mistake going to Harvard in midlife only to find that some of my professors were not as smart as I am. I wound up with a mediocre education and a lot of debt.

References

Conner v. U.S. States Department of Education, Case No. 15-1-541, 2016 WL 1178264 (E.D. Mich. March 28, 2016).










Thursday, August 25, 2016

Student Loans, Bankruptcy, and Creditors' Lawyers: If Auschwitz Comes to the United States, Will Attorneys Handle the Paperwork?

I was a child when I learned about the Nazi concentration camps. I was a voracious reader when I was young, and I often wandered around our town library, browsing through the books. One day, I pulled a book off a shelf because I was intrigued by the title, and the pages fell open to a photo of one of the German concentration camps. It might have been Auschwitz, but I don't remember.

The photo showed dozens of naked and emaciated corpses piled in a heap, and that was all. I remember being viscerally shocked and frightened by what I saw, and I immediately realized that the dead people who appeared in the photo were the victims of human monsters.

I thought about that photo for weeks, and I finally comforted myself with the childish conviction that the death camps would never come to America--that Americans could never commit such savage acts.

Image result for auschwitz death camp
I hope I get off work in time to see my kid's soccer game

I was naive of course.  As I grew older, I realized there are plenty of Americans who will do anything they are directed to do--no matter how much pain they inflict on other human beings.

The people who operated the Nazi death camps were, after all, ordinary people.  They probably read their morning newspapers over breakfast and played with their children after work in the evenings. They labored for the Nazi death machine for a variety of mundane reasons--maybe they just needed a paycheck.

And this brings me to the lawyers who work for Educational Credit Management Corporation, perhaps the federal government's most aggressive debt collector against student-loan borrowers. ECMC's attorneys have gone into bankruptcy court time after time to oppose debt relief for distressed student-loan debtors.  In the Roth case, for example, ECMC's legal counsel opposed bankruptcy relief for Janet Roth, an elderly debtor with chronic health problems who was living on less than $800 a month. ECMC harried Ms. Roth all the way to the Ninth Circuit's Bankruptcy Appellate Panel.

In a letter dated July 7, 2015, Lynn Mahaffie, a Department of Education bureaucrat, issued a letter advising creditors like ECMC not to oppose bankruptcy relief for student debtors if the cost of fighting a bankruptcy discharge did not make the effort worthwhile.

But that letter was just bullshit. The Department of Education and its loan collectors almost always oppose bankruptcy relief for student-loan debtors--whether or not it is cost effective to do so.  For example, in Acosta-Conniff v. Educational Credit Management Corporation, an Alabama bankruptcy judge discharged Alexandra Acosta-Conniff's student loan debt. Conniff was a single mother of two children working as a school teacher, and the court reasoned quite sensibly that Conniff would not be able to pay off her student loans.

ECMC dispatched six attorneys to appeal the bankruptcy court's decision: David Edwin Rains, Kristofer David Sodergren, Rachel Lavender Webber, Robert Allen Morgan, Margaret Hammond Manuel, and David Chip Schwartz. Six attorneys--and Conniff didn't even have a lawyer!

Not surprisingly, ECMC won its appeal.  Six lawyers against a single mother of two who can't afford an attorney--it was hardly a fair fight.

Conniff has a lawyer now, and she is appealing the district court's unfavorable decision to the Eleventh Circuit Court of Appeals. ECMC has a platoon of lawyers to represent it before the Eleventh Circuit, and who knows how much that costs?

But ECMC apparently doesn't care how much the appeal will cost, and the Department of Education obviously doesn't care either. Otherwise it would direct its loan collectors not to harass insolvent student-loan debtors in the bankruptcy courts.

Now I am not comparing ECMC's lawyers to Nazi death-camp workers. Being a debt collector's attorney is not intrinsically evil; and any misery inflicted on a student-loan debtor in a bankruptcy court is trivial compared to the horrors of Auschwitz. I feel sure ECMC's lawyers are all decent people.

Nevertheless, I personally could not sleep at night if I were representing ECMC in the bankruptcy courts against people like Janet Roth or Alexandra Acosta-Conniff.  I would ask myself whether I am serving the interests of justice by helping ECMC deprive honest but unfortunate college-loan borrowers of a fresh start in life.

But I don't imagine ECMC's attorneys ask themselves that question. And I doubt whether they have trouble sleeping at night. After all, the lawyers have their own student loans to pay off; and everyone has to make a living.


Note: A quick search in the Westlaw data base turned up 557 cases in which Educational Credit Management Corporation appeared as a named party.


References

Fossey, R. & Cloud, R. C. (2015). Tidings of comfort and joy: In an astonishingly compassionate decision, a bankruptcy judge discharged the student loans of an Alabama school teacher who acted as her own attorney. Teachers College Record Online, tcrecord.org. ID Number 18040. 

ECMC v. Acosta-Conniff, 550 BR 557 (M.D. Ala. 2016).

In re Roth, 490 B.R. 908 (9th Cir. BAP 2013).

Natalie Kitroeff. Loan Monitor Is Accused of Ruthless Tactics on Student Debt  New York Times, January 1, 2014.






Monday, August 22, 2016

Paul Krugman exploits the Great Louisiana Flood of 2016 (Redneck Katrina) to promote Hillary Clinton: Krugman's cynicism knows no bounds

Who do you have to sleep with to get a Nobel Prize?

Or perhaps that's the wrong question. Why do the Swedes award Nobel Prizes to arrogant fools like Paul Krugman?

Krugman won the Nobel Prize for Economics, but everyone knows he's nothing more than a shill for the transnational financial oligarchs and a zombie cheerleader for the Clinton campaign.

So I was enraged this morning when I read his New York Times column trying to turn South Louisiana's catastrophic flood (which I have dubbed Redneck Katrina) into a political story that favors Hillary Clinton.

I've got a couple things to say about Krugman's shameless sycophantic journalism. First, Krugman claimed that President Obama's FEMA response to Redneck Katrina was "infinitely superior" to Bush's FEMA response to the 2005 Katrina disaster.

I'm not so sure about that. Our recent flood only took place about a week ago, and at least 110,000 homes and business were damaged. Let's see how FEMA does over the next couple of months before we hand out accolades to FEMA. How many refugees will be back in their homes 60 or 90 days from now?

Moreover, speaking as a person who was rescued by the Cajun navy, I think South Louisianians are in a much better position to judge the quality of Obama's FEMA than Mr. Krugman, who is snugly safe in Manhattan.

Second, Krugman has no right to criticize Donald Trump for coming to Louisiana to lend his support to our flood victims. Where does Krugman get off labeling Trump's gesture as "boorish, self-centered behavior"?  After all, President Obama is visiting Louisiana tomorrow.  I suppose Krugman will characterize Obama's gesture as the act of a magnanimous and caring President, when in fact Obama was playing golf on Martha's Vineyard while Louisianians were clinging to to their roofs.

Krugman mocked Trump for handing out toys to Louisiana children,  which he described as a"hamhanded (and cheapskate) effort to exploit Louisiana's latest disaster for political gain." I don't think Louisianians would agree. On the contrary, I think we are all grateful for any assistance we receive, whether it is a toy for our kids, a case of bottled water or a FEMA grant.

Finally, Krugman cynically turned our natural disaster into a campaign ad for Hillary Clinton. Krugman suggests that our flood is a consequence of global warning and that Hillary would make a better President than Trump because she yaks on and on about how she is going to counteract global warming  if she  becomes president while Trump doesn't say much about it.

Well, global warming may be a factor in Louisiana's recent floods and hurricanes.  I can buy that. But Hillary's gassy rhetoric about climate change doesn't change the fact that she is a scheming, money-grubbing political hack who is totally owned by Wall Street.

Personally, I am glad Trump visited Louisiana. I look forward to Obama's visit, and I hope Hillary will visit as well. If she does visit the Pelican State, I hope her advisers tell her not to wear her orange pantsuit. She might get mistaken for an escaped  prisoner from St. Gabriel's Women's Prison, and that would be awkward.

Image result for hillary clinton in pantsuits
Hillary, please don't wear orange around St. Gabriel's Women's Prison

References

Paul Krugman. The Water Next Time. New York Times, August 22, 2016. Available at http://www.nytimes.com/2016/08/22/opinion/the-water-next-time.html?_r=0

Sunday, August 21, 2016

"Looters Will Be Shot"--Except for hedge fund managers, shoddy manufacturers, and owners of for-profit colleges

I passed by a low spot on Highway 16 a few days after the Great South Louisiana Flood of 2016, and I saw a house that had obviously been inundated with water.  Nailed to a tree in the front yard was a spray-painted sign: "Looters will be shot."

But of course, the sign isn't quite accurate. Some looters might get shot: the scumbags prowling flooded subdivisions looking for something to steal. It wouldn't bother me if someone nailed one of them with a Bushmaster assault rifle. That's what those rifles are for, after all.

But other looters are perfectly safe from any kind of vigilante justice.  Hedge fund managers, for example, get a special tax break for the ultra wealthy. President Obama--that hopie change guy--didn't bother to clean up that scam, which he easily could have done.

Other corporate looters run for-profit colleges. In fact, Martin Nesbitt, chairman of the Obama Foundation, is CEO of an equity fund that plans to get into the for-profit-college scam business.

In fact, the working people of America get looted all the time, whether or not they are victims of a natural disaster.  For example, I was pushing a wheelbarrow load of wet sheet rock to a trash pile yesterday, and the axle of the wheelbarrow broke. It couldn't handle the modest load that it was supposedly designed to carry.

A co-worker examined the damage and told me to throw the wheelbarrow on the trash pile along with the sheet rock, which I did. This was a new True Temper wheelbarrow! I'd say whoever bought that wheelbarrow was looted.

And today, I was reminded of another corporate looter. I took some time off from flood-damage cleanup to smoke a rack of ribs in my Cabala's electric smoker--which is a piece of shit. For one thing, Cabala didn't make the smoker; Masterbilt did. Cabala's just put its name on the thing to deceive buyers into thinking they were buying a quality product.

The thermometer on the smoker's lid (marked Masterbilt) registers temperatures up to 700 degrees, but I've never gotten the damn thing hotter than 250.  The plastic handle broke the first time I dropped the lid, and the little wooden side tray is busted. Do you think I was looted when I bought that piece of junk? You're damned right I was.

In fact, the Great South Louisiana Flood of 2016--Redneck Katrina--reminded me again and again of how much cheap crap the multinational corporate looters sell to working Americans. Thousands of tons of debris line the streets of Denham Springs, Louisiana--piles of worthless stuff. Microwave ovens, refrigerators, freezers, fake-wood furniture: all crap.

In fact, I don't think many flood victims mourn the loss of their chattel. They knew it was junk when they bought it. They know the Chinese are making more crap for us right now and that they can buy their new crap at the Denham Springs Walmart just as soon as it cleans up its own flood damage and reopens.

Even our homes are crap, sold to us by looters. The doors on new spec houses aren't made out of wood anymore; they're made from some kind of laminate. If the bottom six inches of one of these fake-wood doors is subjected to water for just 24 hours, the whole door is ruined. I know; I tossed out about 30 of them.

But at least you can save the hinges, you might think, and the door frames. But no--these cheap faux-wood doors are sold new with hinges and door frames already attached. When you throw your ruined door on the trash heap, you might as well toss in the hinges and the door frame.

So--to return to my main point--not all looters will be shot. So if you are a looter who wants to rip off your neighbor, don't steal his home generator. You might get your ear shot off.

No, do what Martin Nesbitt is doing; buy a for-profit college.

Image result for martin nesbitt and president obama


References

Blake Neff. America's Largest For-Profit College Sold to Group Led By Obama's Best Friend. Daily Caller, February 28, 2016. Available at http://dailycaller.com/2016/02/08/americas-largest-for-profit-college-sold-to-group-led-by-obamas-best-friend/

Gretchen Morgenson. Ending Tax Break For Ultrawealthy May Not Take Act of Congress. New York Times, May 6 2016. Available at http://www.nytimes.com/2016/05/08/business/ending-tax-break-for-ultrawealthy-may-not-take-act-of-congress.html?_r=0

Wednesday, August 17, 2016

Red Neck Katrina: The Great Louisiana Flood of 2016 demonstrates that the people of South Louisiana are better than their President

I remember reading awhile back that some Harvard law students petitioned for an extension to take their final exams. They said they were so so upset by racial tensions in Ferguson, Missouri that they were unable to prepare for their tests.

It is a good thing that the people of South Louisiana are made of sterner stuff--otherwise we would all be dead.

Torrential rains--unprecedented in modern times--fell on South Louisiana last week, swelling rivers and bayous and flooding thousands of homes.  The Tickfaw, the Amite, the Comite, the Tangipahoa, Bayou Manchac, Bayou Paul--the list of streams goes on and on; and the people who lived along these waters lost their homes.  A few of them died.

But most were rescued.  Last Sunday, helicopters flew over Livingston Parish continuously, rescuing people off their roofs and ferrying medical emergencies.  National Guard trucks came in by the dozens and evacuated thousands.

But there were simply to many victims for the official first responders to rescue them all. Livingston Parish alone has 141,000 residents; and I estimate that a hundred thousand of them were threatened by flood waters. And Livingston Parish was just one of a dozen parishes that were flooded.

Fortunately, the cajun navy mobilized, and hundreds of South Louisiana men and women launched their boats and prowled the waters of the flooded parishes over the weekend. Who knows how many people they saved. I know one man who launched his duck hunting boat and ferried out 67 people from the town of Central in East Baton Rouge Parish, including two pregnant woman.

In my own family, my wife and her parents were stranded by high water in the town of Denham Springs. My stepson talked his way past police barricades and launched his boat at the Denham Springs exit on Interstate 12.  He managed to get everyone to safety and back to Baton Rouge without the assistance of any government official.

The great Louisiana flood of 2016 was not triggered by a named storm, so I'll call it the redneck Katrina. This deluge does not rank with the original Katrina of 2005; far fewer people were killed. Nevertheless, it was a catastrophe on a monumental scale. At least 40,000 homes were flooded; and I think that tally is likely to grow higher.

But the national news gave us very little coverage. Perhaps the demographics are wrong--most of the victims were working-class white people. Or maybe we had the misfortune to be flooded at the same time people in Milwaukee were rioting.  Or perhaps Anderson Cooper and Andrew Cuomo simply don't give a damn about the nameless Southerners who inhabit the water country of South Louisiana.

I was one of the people who was rescued out of Livingston Parish on Sunday night. As our party motored home driving down the wrong side of Interstate 12, I was deeply moved to see a long line of pickup trucks and boat trailers parked behind the police barricade that kept the highway closed. Obviously, they were waiting for daylight to go into Livingston Parish to rescue more stranded families.

And I realized that the people of South Louisiana are a great people, and they deserve a better President than the one they have.  Barack Obama has no clue about the courage, grit, and spirit of these amazing people.

 President Obama was playing golf on Martha's Vineyard while people were clinging to their roofs. He was sipping chardonnay with the moneyed fat cats while the Cajuns were rescuing their neighbors out of their homes.

Barack can cry real tears when a policemen shoots a black man--even a black man carrying a gun. But I'll bet he didn't give Southerners any thought at all during our flood. After all, most of the flood victims were white people who didn't vote for him.

Incredibly, and to the world's shame, the Europeans gave the Nobel Peace Prize to a man who thinks about no one but himself, a man who has not done a single generous thing in his entire life.  The nameless men of the Cajun navy displayed more courage, more self sacrifice, more humanity in one hour than Barack Obama has displayed over his entire life.

Barack Obama despises the people of South Louisiana. He despises their courage, their religious values, their respect for human life. He obsesses on gun control, not realizing that guns serve a useful function in our part of the world.  After all, Barack doesn't need a gun--he has the Secret Service.

And another thing: The people of South Louisiana are better than the media elite who control our news and our culture. These people who only show up to cover disasters that are photogenic--that make them look courageous because they stand in the rain on Bourbon Street after a hurricane.

I picture Barack Obama, Hillary Clinton and Erin Burnett all perched together on the roof top of a double-wide in Ascension Parish with the water rising and the snakes slithering about.

I'll bet they would very happy to see a Cajun skimming over the water in a mud boat. And if the Cajun who pulled up to rescue them had a Glock in his dry box, well that would probably be OK. Barack would probably skip his lecture on gun control and just scamper into the boat.


Friday, August 12, 2016

Parents who take out PLUS student loans to pay for their children's college education: Don't be such a fool

I'm sorry, so sorry
That I was such a fool

I'm Sorry (1960)
Sung by Brenda Lee
Lyrics by Dub Allbritten & Ronnie Self

Most country and western songs are about regret: I'm sorry I cheated on my wife; I regret mouthing off to a biker in the honky-tonk, I wish I hadn't shot a man in Reno.

I don't know of any C & W song about student loans, but there should be. A recent survey reported that about 50 percent of student-loan debtors regretted how much they borrowed to go to college. More than a third said they would not have gone to college had they realized what it would cost them.

But the people who are really, really sorry are the parents who took out loans to pay for their children's college education.  If they co-sign a private loan for a child, they are on the hook for it even if their child dies.  And parents will find it is virtually impossible to discharge a co-signed student loan in bankruptcy, whether it is a private loan or a a federally subsidized loan.

In fact, I say this unequivocally: Parents should never borrow money to pay for their child's college education.

Yet our federal government peddles Parent Plus loans--student loans taken out by parents--as a good way to help finance a child's college costs. DOE recently posted a blog telling parents that "PLUS loans are an excellent option if you need money to pay your child's educational expenses," although it cautions that parents need to make sure they understand the loan terms before they take out a PLUS loan.

And what are those terms? DOE's blog posting says that the current interest rate is 6.31 percent and that monthly repayment begins immediately. Monthly PLUS loan payments are not postponed while the child is still in college.

DOE then summarizes various PLUS loan repayment plans, including an income-contingent plan (ICR) that allows parents to pay 20 percent of their discretionary income for 25 years.

Of course it is madness for parents to pay a fifth of their discretionary income for 25 years in order for their child to go to college. There are lots of college options that don't require that kind of sacrifice.

DOE assures parents that any unpaid balance on their PLUS loan will be forgiven after 25 years. But note that DOE doesn't tell parents that they could have a big tax bill for the amount of the loan that is forgiven.

And DOE didn't warn parents that they will find it almost impossible to discharge a PLUS loan in bankruptcy should they run into financial trouble due illness, job loss, or some other financial calamity.

DOE ends its deceptive blog on this cheery note. "Yes, there's lots to consider when it comes to taking out a Direct PLUS loan, but there are many benefits to getting one if you need help paying your child's education."

In fact, there's nothing to consider. If your children can't finance their college education without you going into debt, then they need to develop another plan.

My guess is that a lot of parents take out PLUS loans to help their kids go to some fancy East Coast private school, which is foolish.  If your children cannot afford to go to Harvard or Dartmouth or Amherst without putting you into debt, then they need to enroll at a nearby public university and take a part-time job at McDonald's.

Trust me. You and your children will be better off if you avoid all college options that force Mom and Pop to go into debt. Johnny Cash was sorry he shot that guy in Reno, but he was not any sorrier than you will be if you take out a loan to send your child to college.

Johnny Cash: He shot a man in Reno, but he's really, really sorry.
References

Jessica Dickler. Buyer's College buyer's remorse is real. CNBC News, April 7, 2016. Accessible at http://www.cnbc.com/2016/04/07/college-buyers-remorse-is-real.html

Jessica Dickler. College costs are out of control. CNBc News, July 16, 2016. Accessible at http://www.cnbc.com/2016/07/12/college-costs-are-out-of-control.html

Citizens Bank. Millennial College Graduates with Student Loans Now Spending Nearly One-Fifth of Their Annual Salaries on Student Loan Repayments. April 7, 2016. Accessible at http://investor.citizensbank.com/about-us/newsroom/latest-news/2016/2016-04-07-140336028.aspx

Lisa Rhodes. PLUS Loan Basics for Parents. Homeroom, August 8, 2016. Posted on the Official Blog Of the U.S. Department of Education. Available at http://blog.ed.gov/

Restaurant chains can file for bankruptcy if they borrow too much money--but the bankruptcy courts are virtually closed to distressed student-loan debtors

A least four large restaurant chains have filed for bankruptcy this year--a sign perhaps that the economy is slipping back into recession. Companies that own Logan's Road House, Fox & Hound, and Johnny Carino's are among the casualties.

Craig Weichmann, an investment consultant who specializes in restaurants, said the bankrupt restaurant chains were burdened by high debt loads and lagging same-store sales.  Restaurant chains took advantage of low interest rates to borrow a lot of money, but older restaurants are losing customers to new chains. Now the old chains can't manage their debt.

But, hey, bankruptcy can be a good thing for businesses that borrow too much money.  “In [the] old days, filing for bankruptcy was the end of the world," Weichmann explained.  "In reality, there comes a time when filing for bankruptcy permits a group to come out sustainable and healthy.” In fact, Weichman said, a lot of companies come out of bankruptcy "with a new life.”

Is this a great country or what? Business owners who borrow money recklessly while paying themselves fat salaries can stiff their creditors by filing for bankruptcy without changing their lifestyles at all.

In fact, restaurant owners can file for bankruptcy repeatedly. John Carino's owners filed for bankruptcy a second time only three months after emerging from an earlier bankruptcy.    According to the Austin Business Journal, the company owed $19 million to its creditors and roughly $905,000 in back wages, vacation time and bonuses to its employees, plus back taxes and lease obligations."

Yes, America is truly a great country--unless you are a student-loan debtor.

Although some bankruptcy respond humanely when destitute student-loan debtors file for bankruptcy, other courts give them a chilly reception. Even college borrowers who received no benefit from their college experiences and can't land a decent job often find it very difficult to discharge their student loans in bankruptcy.

Remember Brenda Butler, whose bankruptcy case was decided earlier this year? She borrowed a modest amount of money to get a degree from Chapman College (a reputable institution), and she made good faith efforts to pay off her loans for almost 20 years. But a bankruptcy court in Illinois refused to discharge her student loan debt, which had more than doubled in size since she graduated, and forced to her to remain in an income-based repayment plan that obligates her to make loan payments until 2037!

Poor Ms. Butler. Instead of going to college, she should have borrowed money to start a restaurant.

References

Butler v. Educational Credit Management Corporation (In re Butler), Adv. No. 124-07069, 2016 WL 360697 (Bankr. C.D. Ill. Jan. 27, 2016). Available at  http://www.leagle.com/decision/In%20BCO%2020160127751/IN%20RE%20BUTLER

Korri Kezar. Why a Dallas restaurant company's bankruptcy is part of a trend. WFAA.com. August 10, 2016. Available at http://www.wfaa.com/news/local/dallas-county/why-a-dallas-restaurant-companys-bankruptcy-is-part-of-a-trend/293988701?utm_campaign=Daily%2BBankruptcy%2B%26%2BRestructuring%2BNews%2Bfrom%2BChapter11Dockets.com&utm_medium=email&utm_source=Daily_Bankruptcy_%26_Restructuring_News_from_Chapter11Dockets.com_24

Michael Theis. Italian restaurant chain again files for bankruptcy. Austin Business Journal, July 27, 2016. Available at http://www.bizjournals.com/austin/news/2016/07/27/italian-restaurant-chain-files-again-for.html