[Winstonm]

For those opposed to regulation and who still claim Fannie Mae caused the financial meltdown and Great Recession: Source

Quote

Everyone should read and understand the implications of these two sentences from the 2011 report of the Financial Crisis Inquiry Commission (FCIC).

“From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers…it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” (FCIC 2011: 18).

[awm]

kenberg, on 2013-July-13, 11:21, said:

A 2008 post? I had figured anything from 2008 had probably hit the shredder.

I have since noticed other structural features suggesting that the gov is a slow learner. A couple of weeks back the Post ran a story concerning loans the government gives to parents for college education. The article particularly spoke of HBCUs (Historically Black Colleges and Universities) but it seems to me the problem is universal. I gather many parents have great difficulty paying back the loans, and quite a few default. This needs some re-thinking. A particular college was cited where the yearly tuition plus fees is $22,700. This is not including housing. Many parents cannot afford this. It goes like this: The kid wants to go to a college he cannot afford. No problem, the parents can take out a loan. Often it is pretty clear that there is scant chance that the loan will be repaid. Effective result; The government gives $22,700 per year per student to the college. It is euphemistically called a loan, but a loan that won't be repaid is properly called a grant or a gift. The parents get stuck with bad credit, the taxpayer gets stuck with the lost funds, the college gets the money.

My oldest granddaughter will be a senior in college this fall. When she was applying, her parents sat her down and explained where they could afford to send her, and where they could not. She is going to a good school, progressing well, and she will be graduating without her parents, or her, being in debt. This is similar to my own college experience, or at least more similar than not.

Cost today for University of Minnesota: Tuition and fees $13,620 for Minnesota resident, plus $8,312 for room and board on campus, plus $1,000 for books and an estimated $2194 for miscellaneous expenses. That's $25,026/year. Of course it's possible to save a bit on that especially if you can live at home, but Minnesota's a big state and commuting may not be feasible for a lot of students. These high costs that most parents can't afford aren't just for expensive private schools. Education opens a lot of doors in life (I think Ken Berg's life is a good example!) and if we don't want to close those doors for a really significant percentage of the population we need to address this issue.

[kenberg]

Adam, I think that we could agree on a lot.here. The escalating cost of tuition at public universities is a great shame. I, for example, could not have gone.

Need based scholarships exist so the sticker price and the actual price may be different but still...

Anyway, I would like to see kids be able to afford education at a public university. If a scholarship is needed, I had one and I would hope for one for others. If a loan is needed, I hope the tuition and fees are such that the graduate is not singing "I owe my soul to the company store" when he graduates.

There is something fundamentally crazy about offering huge loans to a kid so that he can go to an unaffordable private school when he could very well manage a public university, perhaps with modest and manageable debt. I finished grad school with some debts. It took about a year to pay them off. A reasonable objective.

[y66]

Elizabeth Warren won a debate scholarship to George Washington University at age 16. John McCain went to the Naval Academy (no tuition).

I see that Warren has also introduced legislation to reform the federal college loan program:

Quote

It would tie the interest rate on federal Stafford loans to the rate banks receive from the Federal Reserve, lowering student loan rates from as high as 6.8 percent to 0.75 percent, and saving students thousands of dollars.

Warren's proposal has received a groundswell of support since she first announced the legislation on May 8, including more than half a million signatures on several online petitions: 487,000 on a MoveOn.org petition, 106,000 on a Democracy for America petition and 81,000 signatures on a Progressive Change Campaign Committee petition.

Her bill also received the endorsement of the American Association of University Professors, American Federation of Teachers, the United States Student Association and the Young Invincibles, a millennial advocacy group.

A recent poll conducted by Public Policy Poling showed widespread support for lowering federal student loan rates, with 60 percent of respondents saying they back Warren's idea, including 56 percent of Republicans.

What will she do next?

[awm]

kenberg, on 2013-July-13, 11:46, said:

There is something fundamentally crazy about offering huge loans to a kid so that he can go to an unaffordable private school when he could very well manage a public university, perhaps with modest and manageable debt. I finished grad school with some debts. It took about a year to pay them off. A reasonable objective.

I'm not convinced this is really the case. Private schools are somewhat more expensive than public ones, but it's not the massive gap that it may once have been. Is the federal government giving way more in loans to people attending private schools than they would need to attend a comparable public school? Many private schools themselves offer aid, in order to get a more diverse student population or to attract the best and brightest. Sometimes this aid takes the form of loans. Basically schools (like many other businesses) want to move towards a model of charging people "what they can afford to pay" -- this is usually done by having a high "sticker price" and then offering discounts to "desirable" people who can't afford it.

Anyway I will agree that it'd be nice to have a publicly funded system of high-quality universities which qualified students can attend at a very low cost (i.e. a cost they could afford by working part-time at a minimum wage job). We seem to have had such a system back when Ken Berg was in college, but we have been moving away from it for quite some time now. If we had such a system, then the government could be out of the business of providing student loans.

[awm]

y66, on 2013-July-13, 13:30, said:

Elizabeth Warren won a debate scholarship to George Washington University at age 16. John McCain went to the Naval Academy (no tuition).

I see that Warren has also introduced legislation to reform the federal college loan program:

What will she do next?

Sadly, even these sorts of very popular proposals are unlikely to become law. The extreme gerrymander in the house of representatives has lead to a situation where Republican legislators routinely oppose such things (even with a majority of Republicans in support) because they only need to appeal to enough ultra-right-wing evangelicals (who "get out the vote" in primaries) and moneyed interests (to keep a more moderate Republican from getting the funding needed to have traction in the district) in order to guarantee re-election. The vast majority of Americans' opinions simply don't count for much any more.

[kenberg]

in response to Adam: The article that I read, and I will try to find it, referred to a plan to discontinue giving loans to the people who were the least likely to be able to pay them back. There were interviews with college administrators discussing how this would cut into the budget of the colleges. It seemed pretty clear to me that these administrators wanted the bucks to keep flowing from the government to the colleges, and if the mechanism was to funnel the money through loans that would most likely not be repaid, well that wasn't their problem.

Needy students can sometimes get help to attend private schools, they can also get help to attend public schools. I would love to see a solid study on this. My expectation is that, at least for most students, they can keep their indebtedness substantially lower by attending good public universities instead of private colleges. I would be very very surprised if a solid study showed otherwise.

Most unfortunately, many people seem to not understand the concept of a loan. The repayment part simply doesn't register. I have seen enough examples up close enough so that I can say this with confidence. A loan is money today, repayment is far away. This attitude twists everything. College tuition is high and getting higher? No problem, get a loan. We are making a mistake approaching it this way.

And by the way, reducing student loan interest rates to 0.75% sounds to me like a terrible idea unless you want to encourage everyone to borrow to the hilt. I might sign up for a few classes and take out one of those loans myself.

[mike777]

I strongly agree with you.

btw Oregon has a novel suggestion.....free college you pay for the next 30 years or so some fixed%(3%) of your future earnings. Make a lot the state wins.

In any event I like innovation and trial error for new ways to finance college.

---

" My expectation is that, at least for most students, they can keep their indebtedness substantially lower by attending good public universities instead of private colleges. I would be very very surprised if a solid study showed otherwise."


I was surprised as a 21 year old and later to find such discrimination against state colleges compared to the ivy league in hiring practices. I still to this day remember my interview with Northern Trust Bank..ugg. In some cases the insults or attitudes by those who hire was extreme. I speak as one who from first grade dreamed of getting into U of I.
----
---


btw my student loans were my debt, my parents had nothing to do with it. I worked but the student loans were a big help.

sidenote when I went back for my MBA much later in life I found scholarships going for the begging......I got a couple for no reason other then I think/assume I was the only person who asked for them....wow.

[kenberg]

How to get along with people from other backgrounds is, for me, a side issue. I seldom have issues, but my wife says it is because I am oblivious. Obliviousness is a useful trait sometimes. Anyway, this is not my focus.

I am looking at the loan program and asking whether the current approach makes sense.

Let me tell you about my scholarship. It was for four years, $600 a year, usable at any college in Minnesota. Note what it did not do: It did not tell me to pick a college, find out how much the tuition was, and then they would adjst the funding upward to suit my tastes. This makes enormous sense to me. The money was a great help, but I was given the responsibility to use this set amount in a manner that I thought best. Carleton College is a good private college in Minnesota. Macalester is a good private college that was (longish) walking distance from my home. The University was eight miles away and very definitely my choice. The scholarship was for $600 whether I chose one of the privates or picked the U. Duh. And more duh. I thought, and I have never seen a reason to change my mind, the U was the best choice and it left me with some cash to rent a boat for water skiing. Later it helped pay the bills when I decided to move out of my parent's home.

Perhaps my point is unclear, so let me try. Some younsters will need financial assistance in getting to college. Maybe a scholarship, or regrettably maybe a loan. I think a reasonable approach is to decide on how much help is needed for the kid to get a decent education, and key the support to that. Maybe then a rich uncle will add something to it and the kid can go to Yale. Or maybe not. That's for him/her and his/her family to work out. The support is designed to be very helpful in allowing the kid to get to some reasonable place, everything else is his/her responsibility.

Among other things, this will help the parents. Parents are supposed to be able to say no but it seems that many just are unable to say "No we cannot afford to send you to X and no we are not going to take out loans that it would take us decades to repay so than we can send you there. Go to Y, it's a good place and with a little help that we can pay back over not too long a time, we can manage that."

[blackshoe]

My experience: my parents divorced when I was in junior high. Part of the divorce agreement, I found out years later, was that my father, who at the time (early 60s) was making about 100K a year, would pay for college for all four kids. I don't know if a dollar limit was set on that. I went to Cornell. I was a National Merit Scholarship Finalist, but did not get a scholarship there. I would have received a NYS Regents Scholarship, but... "no financial need". So Dad paid for my first two years. Then I went in the Army. Came out, went back to school on the GI Bill. By this time, Dad was making considerably less (basically by choice - he moved away from the city). GI Bill wasn't enough. So, some work, some loans, a bit from Dad. And the Bill. Add two years of grad school (all on my dime, plus loans, the Bill and an assistantship) and I owed quite a bit by the time I was done. Took me six years to pay off the debt, but I did it. My oldest sister never went to college, the younger one did two years community college. My brother did a year or two at some small school in NH. I have no idea what financial arrangements were made or how much it all cost. I'm pretty sure four kids at Ivy League schools would have been tight for Dad, even before the pay cut. BTW, he (and both his brothers) went to Princeton.

[onoway]

I think that one thing that none of this discussion is addressing is that University education doesn't mean a whole lot anymore. Saw an ad a year or so ago requiring applicants for a traffic person for highway construction projects (the person holding the sign saying alternatively stop or slow) had to have a B.A. When so many graduates are unable to find work in their chosen field and end up at home again with a huge debt, a nicely framed piece of paper and a job delivering pizza or some such, perhaps a rethink of the whole system is in order.

[barmar]

On this week's "Real Time with Bill Maher", one of the guests was Mike Rowe, the host of "Dirty Jobs", a cable TV program where each week he profiles people working in disgusting professions. His message was that there are millions of jobs out there, but they go unfilled because Americans aren't interested in them. He's not even talking about the extremely unpleasant jobs from his show, or the grunt work that's filled by (mostly illegal) immigrants, but ordinary blue collar jobs: mechanics, plumbers, factory workers.

[blackshoe]

Inflating job requirements to add in unnecessarily high levels of education, or skills, or whatever, makes absolutely no sense to me.

[onoway]

blackshoe, on 2013-July-14, 22:41, said:

Inflating job requirements to add in unnecessarily high levels of education, or skills, or whatever, makes absolutely no sense to me.

When there are a bunch of applicants for a job then employers tend to use criteria which on the face of it has little to do with the job in order to filter out the number of people they have to deal with. Education level is a quick and easy way of doing that and is very common here.

OTOH when jobs are much more plentiful than applicants it all goes out the window. A number of years ago I once phoned a store to ask if they had something or other in stock (as I had never been there)and got offered a job over the phone. They had no idea if I was the bride of Godzilla, and apparently didn't care.

[kenberg]

I can see how employers might think that a college education indicates some sort of ability to "stay on task", as the expression goes. But at some point this thinking may be counter-productive. A college grad who who is taking a job as a sign turner may have a couple of issues. First, he may be resentlul, believing he is entitled to something better. Secondly, he may not stay long. I don't suppose that the training [rogram is all that lengthy or expensive but still, you want some stability o the job. Quite likely he will someday just not show up, having gotten something better. Thirdly, although I would compliment any college grad who dealt with reality by taking the job he could get rather than the one he had hoped for, it seems likely, even in a tough market, that his ability to stay focused may not be all that is hoped for. Every college has students who are majoring in beer drinking, and some of them graduate.

I imagine that we all know college graduates we would not hire for any purpose, and high school graduates who are honest, hard working, effective employees. It wouold certainly be desirable to hire on relevant criteria, but perhaps employers find that shortcuts work. I think that they could do better with their selection process.

[kenberg]

Winstonm, on 2013-July-13, 11:23, said:

For those opposed to regulation and who still claim Fannie Mae caused the financial meltdown and Great Recession: Source

Quote

Everyone should read and understand the implications of these two sentences from the 2011 report of the Financial Crisis Inquiry Commission (FCIC).

"From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers…it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were 'blacklisting honest appraisers' and instead assigning business only to appraisers who would hit the desired price targets" (FCIC 2011: 18).

Winston, I apologize, I had not realized that it was you who had revived this thread. Oops, it was Y. Ok, I got that right.

Anyway, I would not draw nearly as extensive conclusions from these two sentences. First, there is the style:

"From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers

What sort ofa sentence is this? How does someone ultimately deliver something from 2000 to 2007? I suppose that he means that it was delivered in 2007 but what is the role of 2000? The date of the first signature was in 2000? Did they have, say, 8,000 signatures in 2005 but figured that they had to wait until they had 11,000? I would not want to draw conclusions from such a sentence..


More to the point, it would not surprise me at all to learn that there was some funny business going on with some appraisers and some banks. Wouldn't surprise me before 2000. between 2000 and 2007, after 2007, or today. [I should add, however, that i a recent transaction I regarded the appraisal as a thorough and professional job. He definitely did not just walk by and declare it to be a house]. Whatever the case, bad appraisal practices, through laziness or connivance, hardly constitutes proof that the actions of Fannie Mae had no effect.


Back to my riff on loans to parents for college expenses for the kids. As I mentioned, it seems that there are new rules that will result in loans not being made to people who, on the basis of their resources and their credit history, are unlikely to repay those loans. Sounds like a good idea to me, but they are taking some heat.

Smaller loans for people with lesser resources might work well. Just as people don't need ot live in McMansions on five acres, students don't need to go to high priced private colleges.

[blackshoe]

onoway, on 2013-July-15, 05:56, said:

They had no idea if I was the bride of Godzilla, and apparently didn't care.

Sheesh. Stop following the news for a while, and look what happens. When did Godzilla get married?

[barmar]

blackshoe, on 2013-July-15, 07:51, said:

Sheesh. Stop following the news for a while, and look what happens. When did Godzilla get married?

Probably some time before Son of Godzilla came out.

[kenberg]

barmar, on 2013-July-15, 08:38, said:

Probably some time before Son of Godzilla came out.

A traditional sort of guy, is he? Very reassuring.

[y66]

I posted that story about Warren and McCain teaming up to bring back Glass-Steagall here because this thread came up when I searched for Glass-Steagall and this legislation seems like a good, partial solution to the problem of banks using FDIC insured (?) deposits to make dubious loans. It is heartening to me to see Elizabeth Warren fighting for the middle class and McCain showing signs that he still occasionally remembers what responsible governing looks like.