Thursday, April 24, 2008

Thanks for the Student Loan Crisis, DEMOCRATS!

Another disastrous liberal policy based on an inability to understand basic market and economic principles hurts the people it's intended to help while lawmakers scramble to cover their behinds. As predicted by conservatives.

Truly outrageous - a must read!

WSJ: Bailout of the Year

Guess who's asking Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke for a bailout now? Hint: They are members of an exclusive club who bet wrong on the credit markets last fall. No, it's not a cabal of Wall Streeters, but Democrats in Congress.

We're referring to the "student loan crisis" now appearing in a media outlet near you. In September, Congress vowed to make education more affordable by passing the "College Cost Reduction and Access Act." [Somehow Democrats trying to make things more affordable always ends up making them more expensive] The law reduced the interest rates borrowers pay on federally insured student loans. ...

Convinced that the private lenders who make these loans were reaping too much profit, Congress also cut the yield on each loan. ...But the combination of legislative fiat and fewer investors willing to buy asset-backed securities amid the credit crunch has put the squeeze on lenders.

What's now clear is that Congress didn't merely wring the profits out of student lending. It's blown up the entire student loan market. Market leader Sallie Mae says it now loses money on every new federal education loan. ...

Others can't wait. A third of the nation's top 100 lenders to students in 2007 have temporarily suspended new loan originations or exited the business altogether. Citibank subsidiary Student Loan Corporation cited "unprecedented federal legislation" in announcing its recent withdrawal from much of the market. [Wait, if you take away the profitability of a produce, there is less incentive to provide it? Who'd have guessed!]

Usually, the law of unintended consequences takes so long to reveal itself that no one remembers the culprits. ...

Democrats would thus like to clean up the mess they created before May, when a flood of college-bound seniors will seek loans. But the pols can hardly repeal their autumn blunder mere moments after taking credit for it. No doubt many of them are still sending out taxpayer-financed mail bragging of their "achievement."

The result is that the same man who authored last year's bill to cut lenders' returns has crafted a new bill to subsidize those same lenders. ...

Daniel Akaka, Bob Casey, Tom Carper, Chris Dodd, Tim Johnson, Bob Menendez and Jon Tester are desperately seeking a bureaucrat with a large checkbook to rescue them from their self-made political disaster. ...

The Senators helpfully note in their letter that a virtue of their proposals is that they can be implemented quickly. Indeed, November is just around the corner.

Needless to say, none of this legislative history is appearing in the multiple media sob stories about students who can't get loans. But like airline passengers stranded this month due to panicky inspections, the current student loan "crisis" didn't have to happen. It is entirely a product of Congress.

This PERFECTLY embodies the great Ronald Regan quote:
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

Democrats thought the student lenders were getting "too much profit" (moving), so they regulated it. Now that has severely hurt the industry (stops moving), so Democrats want to subsidize it. How about cutting the crap and letting the market work the way it's supposed to?!

1 comment:

Anonymous said...

Thanks for the giant war, billions of dollars of debt, mortgage crisis, and torture/flouting of the Constitution in the name of "national security" REPUBLICANS. Those who live in glass houses should cast no stones.