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ttemple
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Platinum
Re: regulated vs unregulated
ttemple   3/18/2012 6:38:27 PM
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Jeff,

Would any bank 50 years ago have made the loans that unregulated banks were making in 2007?

If not, why not?

 

ttemple
User Rank
Platinum
Re: You've got to be kidding!
ttemple   3/18/2012 6:27:36 PM
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Dave,

Your assertion is that "federal loans" are the only culprit here.  My assertion is that readily available money is at the root of the issue, and that the government is directly, and indirectly at the root of the readily available money.

jeffbiss
User Rank
Gold
regulated vs unregulated
jeffbiss   3/18/2012 6:24:54 PM
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The problem with your argument is that the regulated banks were not the ultimate cause of the subprime crisis, the unregulated banks were. While regulated banks do make bad loans they are under guidelines that unregulated banks are not. That certainly doesn't mean that regulated banks didn't make bad loans or fail, but not near the rate that unregulated banks did. The Fed reports go into detail on that.

The lesson is that proper government regulation, as was Glass-Steagall, prevented this crisis prior to Gramm-Leach-Bliley and other Acts written to allow the financial industry to "innovate", which is never a good idea. Free markets fail to control crises because the market, people, think that the party will never end, until it does.

ttemple
User Rank
Platinum
Re: What pressure to make loans?
ttemple   3/18/2012 5:48:39 PM
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jeffbiss,

I will concede that "pressure" might be too strong of word.  "Allowed" might have been a better choice of words.

 

jeffbiss
User Rank
Gold
What pressure to make loans?
jeffbiss   3/18/2012 4:46:10 PM
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You allege without an y support that the government pressed banks to make bad loans. Where do you get that? As you don't provide any information as to what you're referring to I can only assume that you are referring to the Community Reinvestment Act. This had no role in the recent subprime loan crisis that setup the recent recession. Also, "Did the CRA cause the mortgage market meltdown? Two Federal Reserve economists examine whether available data support critics' claims that the Community Reinvestment Act spawned the subprime mortgage crisis." found that the CRA had not contributed substantively to the subprime mortgage crisis.

The source of the recession can be traced to the unregulated mortgage brokers and Wall Street that bought mortgage backed securities and then protected their speculation with unregulated credit default swaps, that were also used by people with no interest in the mortgage backed securities.

Dave Palmer
User Rank
Platinum
Re: You've got to be kidding!
Dave Palmer   3/17/2012 7:53:00 PM
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@ttemple: Once again, the universities which charge the highest tuition have the fewest students receiving federal loans. Do you really think the 3% of Harvard undergraduates who receive federal loans are the reason why Harvard's tuition is so high? As to for-profit colleges, there are already plenty; just turn on your TV and you'll see ads for them. For the most part, they charge more than equivalent public colleges, and provide less value. You're welcome to send your kids to one if you want.

ttemple
User Rank
Platinum
Re: You've got to be kidding!
ttemple   3/17/2012 8:32:45 AM
NO RATINGS
Dave,

The operative words are "easily available money".  The institutions saw this and ran with it.

If you read the rest of the document you referernced, it explains what happened when the government created the atmosphere of (too) easily available loans.

They also allude to how the universities created "future earnings" as a revenue stream.  I find this practice predatory at least, criminal at worse.  Certainly immoral in my opinion.

It also explains that the private universities were able to basically manipulate their price by elevating their tuition to a very high level, then "lower" their price to exactly what each student could pay, using what you are calling "institutional aid".  I call it running a college like a jewelry store.

Someone here pointed out the similarity to the housing crisis, where fundamentally the same thing was done.  The government pressed financial institutions to make loans, with the qualification being that the recipient was breathing.  Most of us recognize where that took us.

I feel that a similar situation could occur with student loans (the government stepping in and bailing out the financial institutions) when the "future earnings" are not there for many people.

I find great hope in some of what was in the document.  While the writer sees the "corporate invassion", or whatever he/she calls it, as being bad, I see a silver lining in it for the consumer.  It appears that it is creating competition (to the writer's institutions).  Competition is always good for the consumer.  I think the corporate takeover of education will do for education what Japan did for the car industry in the US.  It will save it from itself.

The fact that the corporate world is stepping into the education arena is all the evidence anyone should need that there is far too much money in it.  I hope that the competition will force serious evaluation of the cost side of providing education.  (did you notice that the article completely avoids a cost analysis?)  Corporations must run like a business, colleges don't.  Competition from corporations will force institutions to run more like businesses, which will force them to bring their prices in line.

 

Greg M. Jung
User Rank
Platinum
Re: Colleges need to get "Lean"
Greg M. Jung   3/16/2012 10:31:06 PM
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Dave:  Further adding to your support of community college is the fact that they can also offer additional options and a better value for the aspiring 4-year college student through a transfer program.

Case in point, my daughter's best friend was denied admission to a highly-selective university after she graduated from high school.  Instead, she attended the local community college and finished her first year with a very high GPA.  She then transfered to the very same highly-selective university as a Sophmore and is doing well.  In this case, community college not only gave her a savings on her first year of college expenses (living at home, lower tuition), it also gave her another route to get inside her initial first choice university.  In the end, she can have the same diploma, but at a better value.

Charles Murray
User Rank
Blogger
Re: Colleges need to get "Lean"
Charles Murray   3/16/2012 7:03:45 PM
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Rob: I agree that it would make sense for textbook publishers to go digital, largely because the small sales numbers wouldn't seem to justify the huge print editions of some of these textbooks. So why would the academic publishers resist this? Is it because they're getting a big mark-up on those printed editions?

Dave Palmer
User Rank
Platinum
Re: You've got to be kidding!
Dave Palmer   3/16/2012 5:15:25 PM
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@ttemple: There's a difference between institutional student aid -- which comes from private sources -- and federal student aid.  The passage you cite is referring to institutional student aid.

As I pointed out before, the universities with the highest tuition rates actually have far fewer students who receive federal student aid than other universities.  So it's hard to make a case that federal student aid is responsible for high tuition rates.

On the other hand, the universities with the highest tuition rates do receive huge sums of money from the federal government, mostly in the form of research grants.  I don't think President Obama is entirely out of line to suggest that eligibility for some of these grants might reasonably be made contingent on more affordable tuition rates.

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