Monday, June 29, 2020

Coronavirus update: The Fed bought $428 million of corporate debt while distressed student-loan debtors get diddly squat

Perhaps you have noticed, as I have, that a high percentage of the George Floyd protestors are young White people.

 Youthful White men and women helped pull the ropes that brought down statues of Confederate figures across the South. And it is Millenials--White Millenials--who joined in the vandalism and destruction that damaged many American cities.

Why is that? Are White protestors merely standing in solidarity with their Black brothers and sisters over the residue of racism in the United States? Or do they have their own grievances?

I think it is both. In this season of discontent, we should remember how many Americans have been thrown out of work--tens of millions.  And we should never forget that 45 million Americans--more young than old--owe $1.7 trillion in student debt, and only about half can pay it back.

This nation has been in lockdown for four months now due to the coronavirus epidemic.  Public employees--professors, teachers, administrators, etc.--are still getting paid.  Workers in the private sector have been laid off by the millions, especially in the service industry. And many of these unemployed workers have student loans.

What has our federal government done to assist laid-off student-loan debtors?  Diddly squat.  The Department of Education has granted a brief reprieve from making monthly loan payments and is abstaining from charging interest, but that is about it.

Oh, yes, DOE said it would stop collection efforts against defaulted college-loan borrowers until the coronavirus crisis had passed. But last May, DOE was sued for allowing employers to continue collection efforts.

Meanwhile, the Federal Reserve Bank is buying up corporate debt--over $400 million. So far, the Fed has bought corporate debt owned by Berkshire Hathaway Energy, Coca-Cola, AT&T, Boeing, Exxon-Mobile, Ford and Walmart. And it has distributed more than $350 million in forgivable loans to businesses that promise to maintain their payrolls.

Who has benefited from the Fed's helicopter money over the last few months?  Corporate executives and corporate stockholders, that's who.  And--in case Fed Chair Jeremy Powell hasn't noticed--the people protesting on America's streets don't own stock.

I don't mean to question the motives of White protestors who join the Black Lives Matter demonstrations. I feel most are expressing real and legitimate anger about race relations in the United States.

But I also believe that White protestors feel a kinship with Black protestors on economic issues and consider themselves to be fellow victims of corporate America.  And I agree with them about that.

Many White demonstrators have racked up thousands of dollars in student debt and are not holding down jobs that will allow them to pay back what they owe. Some have come to realize that their college education was way too expensive and didn't prepare them for decent jobs. 

Now, these student-loan debtors are out of work and struggling to make their loan payments. They realize that our federal government has been spewing out billions of dollars to corporations to help them deal with the coronavirus while it has done virtually nothing for distressed college borrowers.

They are angry. I would be angry too--very, very angry. 





Sunday, June 28, 2020

NYU professor describes second-tier universities as higher education's Walking Dead, predicts "hundreds, if not thousands" will fail

Zero Hedge posted an article yesterday by Maria Copeland on the precarious condition of America's second-tier colleges.  Copeland quoted NYU professor Scott Galloway's dire prediction:
What department stores were to retail, tier-two higher tuition universities are about to become to [higher] education and that is they are soon going to become the walking dead.
 Galloway predicts that "hundred, if not thousands" of non-elite college will close within the next five to ten years.

I think Professor Galloway is right. We will soon see the mass closures of colleges and universities. Small institutions in New England, the mid-Atlantic states and the upper Midwest have already begun closing.

Why is this happening?

Sky-high tuition. First, small private colleges allowed their tuition to creep up to unreasonable levels.  Until recently, students and their families absorbed these tuition increases passively because they could always pay college costs by taking out more jumbo student loans.

But the coronavirus pandemic, which forced colleges to shift to online instruction, prompted many students to question the value of their educational experience. It is one thing to pay $50,000 a year to listen to a pompous professor's lecture when the student is sitting in an ivy-covered campus building surrounded by sexually active classmates. It is quite another to hear the same lecture on a home computer.

Colleges tried to reverse declining enrollments by drastically slashing tuition costs. Net first-year tuition at the private liberal arts colleges is now about half the sticker price.  But for many small schools, tuition cuts did not attract enough new students to maintain their revenues.

Fewer international students.  It's all about the money, and private American colleges aggressively recruited Asian (mainly Chinese) students who generally paid the full cost of tuition--no discounts for these kids.  But Asian enrollments have dropped off dramatically.

The colleges say that Chinese students are opting not to go to college in the U.S. because they are frightened by America's "gun culture" and Trump's so-called xenophobic foreign policy.  But I disagree.

Asian students and their parents have figured out that American higher education is not worth what it costs.  Secondary education in China and other Asian countries is generally more rigorous than U.S. high school programs. What must Chinese students think when they discover that many of their American classmates come to college without knowing the basic rules of grammar and diction?

Declining interest in the liberal arts. The small private colleges nestled in rural New England and small Midwestern towns specialize in the liberal arts: history, philosophy, literature, etc.  But young people aren't interested in getting a classical college education--especially when it will cost them a quarter-million dollars and doesn't prepare them for a job.

Second-tier colleges have tried to rebrand themselves by offering programs that are more vocationally oriented. But they are burdened by battalions of professors who got their Ph.Ds in the humanities and are unwilling or incapable of retooling.

Most of these professorial dinosaurs are tenured, entitling them to paychecks, health insurance, and pension plans.  The inability to jettison low-value faculty is bringing many private colleges down.


What does this mean to students and professors? Second-rung colleges have been in trouble for years, but the coronavirus pandemic may be the straw that breaks the camel's back.  Now may be a good time for high school graduates to take a gap year while the turmoil in higher education gets sorted out.  College students should also consider transferring from expensive private schools to cheaper public universities.

Humanities professors at struggling private colleges need to formulate their Plan B.  There is an excellent chance their institution will shut down within the next few years.   And graduate students in the humanities need to rethink their career plans. In the coming years, the United States will need a lot more plumbers, electricians, and medical technicians and a lot fewer historians specializing in the Ming dynasty.

Second-tier private colleges: Are they the Walking Dead?

Saturday, June 27, 2020

Planning on going to college this fall? Why not wait a year or two?

Since time immemorial, middle-class parents have urged their children to get a college education. A college degree, parents believed, was the indispensable ticket to a good life.  College was where young people prepared for the world of work, where they often met their future spouses, and where they formed lifelong ties to classmates.

But listen carefully. Times have changed. The coronavirus, campus unrest, and a troubled economy have undermined the value of a college degree. If you are thinking about enrolling for college this fall, you might want to postpone that plan--at least for a year. And here is why:

The coronavirus pandemic. First of all, the COVID-19 epidemic forced virtually every American college to close last spring and to shift from live instruction to a distance-learning format.  Most schools have announced that they will be teaching their courses online this fall. 

Moreover, dorm life, college sports, and extracurricular activities will all be negatively impacted by the coronavirus.  In short, going to college next year may not be much fun.

Colleges and universities will learn to adapt to a post-pandemic world, but it will probably take a couple of years before they figure it out. Why not postpone college for a year or two while this transition is ongoing?

Less police protection.  Colleges have a legal duty to keep their students safe on campus and in the dorms. Most colleges meet this responsibility by maintaining a campus police force.

In the wake of George Floyd's killing, however, many colleges and universities are facing intense pressure to dismantle their police forces. As Insider Higher Ed recently reported:
 Student organizations, workers’ unions and individual activists at dozens of universities are calling on administrations to cut ties with local police or disband campus police departments, saying that policing institutions enact violence upon black people and uphold white supremacy.
So if you go to college this fall, there is a good chance that police protection on your campus will be diminished from what it was a year ago or even eliminated.  In my view, this is another reason to postpone going to college. Wait until the debate about campus law enforcement is resolved before embarking on your college career.

Growing uncertainty about the worth of a college degree. Although the higher-education industry tirelessly touts the value of college education, that mantra is becoming shopworn.

Without question, the cost of going to college is far too high.  In particular, students who take out student loans to major in "soft" disciplines (social sciences, humanities, gender studies, etc.) are finding that their degrees leave them with massive debt and no job.

Some young people go to college with a clear idea about how their degree will qualify them for vocations in such fields as engineering, business, computer sciences,  or medical technology. But others are clueless about why they are on campus.

If you have only a hazy notion about how you want to make a living, you should strongly consider working for a year after graduating from high school. You should use the time to reflect on your future and explore alternatives to chasing a college degree.

In my state, thousands of people have gotten technical training at vocational and community colleges and gone on to get good jobs with six-figure salaries.  If you ask these people whether they are sorry they didn't acquire a bachelor's degree, I think most will tell you no.

So think long and hard before going to college this fall, especially if you plan to finance your studies with student loans. Your chosen university will still be around in 2021 if you decide to pursue a college education. 



Friday, June 26, 2020

Shaun King Threatens Catholic images of Jesus, Mary and the Saints: Where is Bishop John Hughes When We Really Need Him?

Shaun King, a "writer-in-residence" at Harvard Law School, delivered this thuggish online threat to destroy Christian images of Jesus, Mary, and the saints:


Yes, I think the statues of the white European they claim is Jesus should also come down. They are a form of white supremacy. Always have been…. All murals and stained glass windows of white Jesus, and his European mother, and their white friends should also come down. They are a gross form of white supremacy. Created as tools of oppression. Racist propaganda. They should all come down.

As Casey Chalk pointed out in Crisis Magazine, Mr. King is a pretty influential guy. Time Magazine named him as one of the 25 most influential people on the Internet in 2018. He and Bernie Sanders are buddies. In fact, King introduced Bernie at the kickoff rally for Sanders' presidential campaign.

Nevertheless, King is a jackass, and his call for the destruction of Christian images is a direct attack on the Catholic Church. After all, it is Catholics who believe that images of Mary and the saints help the faithful communicate with God's most holy people, who intercede for us from heaven.

King's threat brings to mind the Philadelphia Bible riots of 1844. Nativists rioted in response to a mild request by the local Catholic bishop to excuse Catholic children from reading from the Protestant (King James version) of the Bible in the public schools.  The riots stretched over several months.  Two Catholic Churches were burned down, and around fifty people were killed or wounded.

Irish immigrant John Hughes was the Catholic Bishop of New York during these events, and he feared anti-Catholic violence would spread to New York City. Hughes organized Catholic laymen to guard the parish churches and sent a message to the City's municipal leaders: “If a single Catholic Church were burned in New York,” he warned municipal officials, “the city would become a second Moscow.” 

Bishop Hughes was referring to the destruction of Moscow after Napoleon captured the city in 1812. Shortly after Napolean's troops marched into Moscow, fires erupted that destroyed vast swaths of the town. Napolean himself barely escaped the flames.

Today's Catholic bishops are too busy trying to fend off bankruptcy to confront bigots like King, which is a pity.  We could use some bishops embued with Archbishop Hughes' militant spirit.

Bishop John Hughes threatened to turn New York City into a "second Moscow."


Wednesday, June 24, 2020

Consumer Financial Protection Bureau v. National Collegiate Student Loan Trusts: A Window into the World of Private Student Loans

CFPB v. NCSLT: A Settlement is Scuttled

In 2017, the Consumer Financial Protection Bureau (CFPB) sued the National College Student Loan Trusts (NCSLT) and their debt collector, Transworld Systems, accusing the two defendants of illegal student-loan debt collection. Specifically, the CFPB accused NCSLT and Transworld of collecting on private student loans after the statute of limitations had expired and of suing debtors for unpaid student loans even though NCSLT could not prove it owned the debt.

CFPB and NCSLT  quickly entered into a settlement agreement subject to a federal court's approval. These are the essential terms of the settlement:



  • National Collegiate and Transworld must conduct an independent audit of all 800,000 student loans in its various trusts.

  • National Collegiate will stop trying to collect on student loans if it cannot prove it owns the debt.

  • NCSLT will stop filing lawsuits on student loan debt after the statute of limitations has expired.

  • NCSLT and its debt collecting agency will stop reporting negative credit information on borrowers that NCSLT improperly sued.

  • NCST will stop filing false or improperly notarized legal documents.

  • NCST will pay substantial monetary penalties.

Unfortunately for the litigants, Federal Judge Maryellen Noreika refused to approve the settlement because the parties involved did not have the authority to settle the lawsuit.

If this glitch gets worked out and the deal is finally approved, it could lead to $5 billion in debt relief for people who defaulted on private student loans. In the meantime, the lawsuit provides a window into the world of private student loans.

The Securitization of Private Student Loans

Most students finance their college education through government loans, and the total amount of outstanding federal student-loan debt is now $1.74 trillion. The private student-loan market is much smaller. According to Nerdwallet, college borrowers only owe about $125 billion in private student-loan debt.

Private banks and financial institutions (Sallie Mae, SoFi, Wells Fargo, etc.) issue student loans, but private lenders generally do not hold the loans on their books for very long. Instead, the loans are securitized. In other words, the loans are packaged and sold to investors as securities called student-loan asset-backed securities (SLABS). 

SLABS is attractive to institutional investors because they produce a reasonable return rate and are considered low risk. Historically, default rates have been lower for private student loans than federal loans because the banks usually require the student borrower to find a guarantor to co-sign a private student loan—often a parent or grandparent. Thus, if a student borrower defaults on a private loan, the lender can sue Mom or Granny. 

Also, student loans are difficult to discharge in bankruptcy because the same "undue hardship" standard that applies to federal loans also applies to private student loans.

Nevertheless, defaults on private student loans have shot up recently. National Collegiate Student Loan Trusts owns 800,000 private student loans. According to Bloomberg,  more than half of the principal on those loans was in default at the time of the proposed settlement between CFPB and NCSLT in 2017.

All these private student loans are managed by loan servicing companies, and when borrowers default, collection companies usually file suit on the creditors' behalf in a state court. In recent years, there have been thousands of lawsuits filed against private student-loan defaulters all over the United States. Transworld Systems alone has filed 38,000 debt-collection lawsuits.

Unfortunately for the creditors (the owners of the SLABS), statutes of limitation apply to collection efforts on private debt. Unless the creditor sues before the statutory limitation period expires, it cannot legally recover on student loans in default.

Moreover, the SLABS owners must prove they own the debt. In some cases, creditors have gone to court and found themselves unable to produce the paperwork that shows they are the legal owners of the debt they are trying to collect. 

Why is CFPB v NCSLT important?

If you've seen the movie The Big Short, you know that the financial crisis of 2008 was triggered by a wave of defaults on home mortgages. Financial institutions had bundled thousands of home loans into securities call ABS (asset-backed securities), which were represented as being low-risk investments.  

In fact, many of the underlying mortgages were subprime loans on homes that had been overvalued. When the housing market collapsed in 2008, millions of homeowners defaulted on their mortgages, and the ABS investors lost tons of money. 

Also, when creditors sued the defaulting homeowners, they often could not prove they owned the debt. A lot of the paperwork on these mortgages had been "robo-signed" and improperly notarized. In many instances, the courts refused to hold defaulting homeowners liable on their home loans.

Something like that is happening now in the private student-loan market. People who have private student loans are defaulting at a surprisingly high rate. Creditors are filing suit against defaulters but often cannot show they own the debt. In some instances, paperwork has been improperly"robo-signed," causing some judges to rule in favor of debtors. 

Financial commentators have warned for years that the student-loan program is in a bubble, much like the housing bubble of 2008, and that a major financial crisis in the student-loan industry is on the horizon. The coronavirus has put millions of Americans out of work, leaving them unable to make monthly payments on their federal and private student loans. In other words, the bubble may be about to burst.  

What this means is hard to say. In the private student-loan market, investors in SLABS will undoubtedly lose money, but the federal government holds more than 90 percent of all student loans. The Department of Education can maintain the status quo in the short term by merely continuing to issue student loans as it has for the past 50 years. But even Education Secretary Betsy DeVos admitted publicly in 2018 that only a minority of student borrowers are current on their loans.

Presumptive Democratic Presidential nominee Joe Biden has proposed forgiving all federal student debt acquired to attend public colleges. But a more straightforward way to deal with this massive debt crisis is to allow insolvent student-loan debtors to discharge their debt in the bankruptcy courts.


Education Secretary Betsy DeVos: What, Me Worry?



Texas A & M ponders removal of the statue of its 7th president: Please don't throw Sul Ross into the ashcan of history

Texas A & M University is thinking about removing the statue of Sul Ross (Lawrence Sullivan Ross) from its campus. Ross served as the university's seventh president from1891 until 1898. What did Sul do to deserve having his statue pulled down?

Well, according to his critics, Sul was a naughty boy.  Although he was twice elected Governor of Texas and did a stellar job as president of Texas A & M, he also served in the Texas Rangers and was a general in the Confederate Army.

Let's look at Sul Ross's record with the Texas Rangers. The Rangers have been discredited in recent years as brutal racists towards Mexicans and Native Americans. Indeed, the Rangers shocked fellow Union troops during the Mexican War by their ruthlessness.  In fact, General Zachary Taylor wrote his superiors and asked them not to send him any more Texas units.

But Ross didn't participate in the Mexican War. As a Texas Ranger, he fought the Comanche Indians. He first rode with the Rangers in 1858 when he was on a summer break from college. Quite a summer internship, wouldn't you say?

After graduating, Ross went back to the Rangers. In December 1860, he led an attack on a Comanche camp on the Pease River in West Texas. The battle was a small affair, but it became famous for the fact that the Rangers rescued Cynthia Ann Parker, who had been kidnapped by the Comanches in 1836 when she was a child.

By the time the Rangers repatriated Parker twenty-four years later, she had become the wife of  Peta Nocona, a renowned Comanche warrior. She was also the mother of Quanah Parker, who grew up to be the last Comanche war chief.

 Cynthia lived ten years after being rescued by the Rangers. According to legend, she starved herself to death. After almost a quarter-century with the Comanche, Cynthia felt no familial affection for the Parker family. She was, in truth, a Comanche.

Before dumping Sul Ross into the dustbin of history, we should remember that as a Ranger, he was part of a long blood feud between the Comanches and the Texans that lasted two generations. No matter what they are teaching at Brown University, the Comanche were not gentle vegans who lived in unity with nature and harmed no living thing.

They were, in fact, the Lords of the Plains (as their license plates proclaim to this day). They ranged from southeastern Colorado down through Texas and into Mexico. They typically raided Mexican and Texas settlements during the full moons of summer when there was grass for their horses, and their attacks included murder, torture, rape, and kidnapping--mainly women and children.

Why were the Comanche in the kidnapping business? Two reasons. First, they often held their captives for ransom, so they had an economic rationale for stealing white children and women. Second, the Comanche adopted some kidnapped children into their tribe, thus augmenting their numbers.

As a fighting force in the nineteenth century, the Comanche were virtually unbeatable. In fact, historian Walter Prescott Webb argued that the Comanche would never have been subdued had Samnual Colt not invented his famous six-shooter. Only the Colt revolver changed the balance of power between the Comanches and their chief foes, the Texas Rangers.

So as we scrutinize the life of Sul Ross, let us also ponder that long period in nineteenth-century Texas history when ruthless Texas Rangers fought the ruthless Comanche on the Great Plains. When Ross was a young man, Texans and the Comanche were in a fight to the death. It was "kill or be killed."

In my view, the statue of Sul Ross should remain on the Texas A & M campus to serve as a reminder of a time when the inhabitants of Texas--both Anglos and Natives--were not thinking about diversity and inclusion. Instead, white Texans and Native Americans were chiefly concerned with staying alive.

Cynthia Ann Parker





Saturday, June 20, 2020

Don't go hating on Tulsa just because President Trump willl speak there in a few hours

President Donald Trump will hold a rally in Tulsa this evening, his first rally since the coronavirus pandemic descended on the United States.

Trump's media critics often mention the fact that Tulsa is the site of one of America's worst race riots. Indeed, on June 1, 1921, white rioters rampaged through Tulsa's Greenwood District, an affluent African American neighborhood, and destroyed or damaged more than 1,000 homes and businesses. Between 100 and 300 people were killed, and 6,000 African Americans were interned by law enforcement authorities. The Tulsa race massacre may, in fact, have been the worst race riot in American history.

Trump's media enemies insinuate that Trump picked Tulsa for his first post-coronavirus rally because he is a racist, and he finds Tulsa's history of racist violence appealing.  But to say such a thing, or even to imply it, is a slander on Tulsa, one of MidAmerica's most charming and lovely cities.

Tulsa was transformed during eastern Oklahoma's oil boom of the 1920s and 1930s, which brought enormous wealth to the city and a construction boom. As anyone knows who has visited Tulsa, the city is the home of an extensive collection of Art Deco buildings. It is truly a museum of early twentieth-century architecture.

Oil wealth also made possible the establishment of two nationally acclaimed museums: The Philbrook and the Gilcrease. The Philbrook Museum is located in what was once the home of oil magnate Waite Phillip and his wife Genevieve and contains an impressive and eclectic collection of art.

The Gilcrease Museum houses perhaps the world's most extensive collection of western American art. Thomas Gilcrease, another oil magnate, donated his own art collection to form the foundation of the museum's treasurers. Born of a mixed-race family (Scotch-Irish, French, and Creek), Gilcrease was enrolled in the Creek tribe when he was nine years old.

And Tulsa has other cultural treasures. The Bob Dylan papers and the Woodie Guthrie papers are housed in the city.  Both collections were purchased by the George Kaiser Foundation.

Over the years, Tulsa has been the home of countless famous actors, sports figures, and musicians. Tony Randall--part of The Odd Couple, is from Tulsa, along with Time Blake Nelson, the actor, screenwriter, and movie director.

Tim Blake Nelson deserves special mention. He is best know for his role in Brother Where Art Thou, but he also directed The Grey Zone, perhaps the best movie ever made about the Holocaust.

Before closing my paean to Tulsa, I must also mention that Tulsa is the home of Cain's Ballroom, where Bob Wills and the Texas Playboys performed both live and on the radio during the 1930s. Cain's Ballroom helped popularize a new form of American music that blended classic swing with western themes and melodies. Even today, Cain's Ballroom is known as the Carnegie Hall of western swing.

Why am I going on so long about Tulsa?  Perhaps it is because I grew up in rural Oklahoma and always considered Tulsa as Oklahoma's most beautiful, gracious, and culturally rich city.  I still feel that way. So--whatever happens tonight at the Trump rally, please don't let the evening's events tarnish one of the great cities of America's flyover country.

Bob Wills and Texas Playboys performed in Cain's Ballroom in Tulsa, Oklahoma.