Wednesday, September 16, 2015

Biden Backed Bills To Make It Harder For Americans To Reduce Student Debt


Student debt burden as of March 2015 (source)

by Gaius Publius

As many readers know, I'm watching the Biden phenomenon (the "Biden bulge" in media attention) with interest. Part of this attention is driven by the Biden camp, but the media is playing its role by playing up the "Joe Biden, regular guy" angle, crossed with "Joe Biden, heartbroken father," in a way that stamps his tentative entry into the Democratic primary with the Mainstream Media Seal of Approval. Heartbroken father he certainly is. "Regular guy" he's not, as you'll see shortly.

Yet if there's critical big-media reporting on Biden — CBS, (MS)NBC, CNN, New York Times, etc. — I can't find it. Even Stephen Colbert has blessed Biden in a way I can neither rewatch nor link to.

For his part, Biden's playing coy, partly because he needs more than media blessing — he needs major insider blessing — before he can announce. In addition, Biden needs:
  • Hillary Clinton to falter, either publicly or privately
  • Bernie Sanders to fail to pick up Clinton supporters if she exits
About the first, Clinton faltering, several things could cause that. Clinton could lose the support she now enjoys among insiders who will never endorse Sanders. That loss of endorsement could occur publicly (she could stagger in the polls or in the first four or five races) or privately (a reason "she can't win," true or not, might spread among Democratic insiders, a reason that would not be shared with the public).

About the second, Sanders remaining unacceptable in Clinton's absence, Biden needs to look "better than Clinton" to some Sanders- and Warren-supporting voters so that he can present himself to everyone as the acceptable "mainstream" alternative to Clinton. (Definition: Mainstream alternative means "someone who will keep the insider game going, making changes only at the margins, while appearing to be a populist.")

One aspect of the insider game, for example, is high-speed Wall Street trading. It's a license to print money, to steal from the trading floor. No "acceptable to insiders" candidate would offer to ban or tax that operation. Another is the racket called "student debt," a license to steal huge amounts from college students and their parents. No "acceptable to insiders" candidate will do anything but offer forgiveness at the margins, as Obama has recently done.

This piece is about Joe Biden and the insider-protected student debt racket. (If you wish, you can help Sanders here; adjust the split any way you like at the link.)

Joe Biden and the Student Debt Crisis

As I write, the total student debt burden in the U.S. is $1.2 trillion. For comparison, total credit card debt in the U.S. is expected to be "just shy of $900 billion" by the end of 2015. How did total student debt get so large? Joe Biden helped.

Before Biden was rebranded as the kindly, well-liked Vice President, he was a long-serving senator from Delaware, the "senator from MBNA" as he was often called for a number of very good reasons. Delaware is the state that attracted a great many credit card company headquarters by offering little in the way of usury laws — limits to interest rates that banks could charge their customers. As a result, one of Delaware's most important industries is those who profit from debt-creation.

Being in the consumer debt business, especially student debt and credit card debt, is a license to print money, and protecting that lucrative source of money is the job of Delaware senators like Biden, just as protecting Boeing's access to government money via the Export-Import Bank is the job of senators like Washington's Patty Murray, the so-called "senators from Boeing."

Joe Biden is, and has been for years, a friend and enabler of his state's debt industry. How much a friend? International Business Times (my emphasis throughout):
Joe Biden Backed Bills To Make It Harder For Americans To Reduce Their Student Debt

Jennifer Ryan did not love the idea of taking on debt, but she figured she was investing in her future. Eager to further her teaching career, she took out loans to gain certification and later pursued an advanced degree. But her studies came at a massive cost, leaving her confronting $192,000 in student loan debt.

“It’s overwhelming,” Ryan told International Business Times of her debts. “I can’t pay it back on the schedule the lenders have demanded."

In the past, debtors in her position could have used bankruptcy court to shield them from some of their creditors. But a provision slipped into federal law in 2005 effectively bars most Americans from accessing bankruptcy protections for their private student loans.

In recent months, Democrats have touted legislation to roll back that law, as Americans now face more than $1.2 trillion in total outstanding debt from their government and private student loans. The bill is a crucial component of the party’s pro-middle-class economic message heading into 2016. Yet one of the lawmakers most responsible for limiting the legal options of Ryan and students like her is the man who some Democrats hope will be their party's standard-bearer in 2016: Vice President Joe Biden.
Note the phrase "private student loans" in the next-to-last paragraph above. To understand why that's important, you have to understand how the whole plunder operation works. Of the $1.2 trillion student debt, most is backed by the government in one form or another. That is, issuers of that debt have a guarantee from the government that if a loan goes bad, the government will make them whole with taxpayer money.

Thus, for lenders in the government-guaranteed loan program, there's no way to lose money. In fact, the incentives make them issue as many student loans as they can, to as many people as they can, for any educational program under the sun — even, or especially, for programs at for-profit mills like Corinthian Colleges, Inc., where students almost never graduate with a degree.

It's a racket all around, but especially at places like a Corinthian "campus." As I wrote earlier, the plan at a place like that is simple:
Offer the least education you can get away with ...
To the greatest number of students you can enroll ...
Carrying the greatest debt burden you can saddle them with ...
Then hope they drop out.
The faster students drop out (leave without a degree), the more classroom space is left for the next batch of debt-saddled enrollees.

But the predation isn't limited to places like Corinthian. The whole system is a racket, which accounts for what's shown in the chart at the top. Because of the highly profitable nature of the student loan program in general (loans earn interest until they are paid regardless of graduation or post-grad jobs), and because of the government guarantees and the number of loans issued, college tuition is encouraged to rise, which further encourages loan amounts to rise, which further increases profit from interest payments, in a near-endless cycle.

In fact, no one loses in this trillion-dollar operation but the students. Far too many students leave college with:
  • Sometimes a degree, sometimes not
  • Debt often as high as Jennifer Ryan's in the example above ($192,000)
  • Little hope of discharging that debt with a service- or retail-sector job (iPhone sales, Starbucks coffee-puller, all the cool jobs in this left-behind economy)
  • Interest payments for the rest of their working lives, or most of it
It's a predatory racket, and the government is part of it, in fact, its chief enabler.

"Private" Student Debt and Joe Biden

Not all student debt is government-guaranteed. Some students make the mistake of going directly to a private lender for education loans, bypassing the government-guaranteed system. Of the $1.2 trillion in total student debt, about $150 billion is private debt — at-risk debt, from the standpoint of the issuer, since if the borrower (the student) could discharge that debt via bankruptcy, the lender would lose the principal of the loan. No government guarantee as a backstop against failure to pay.

For lenders of private education loans, that was a problem that needed solving. Which is where Joe Biden comes in. Biden helped close the bankruptcy loophole in 2005 by making sure borrowers couldn't discharge their private student debt via bankruptcy court. IBD again:
As a senator from Delaware -- a corporate tax haven where the financial industry is one of the state’s largest employers -- Biden was one of the key proponents of the 2005 legislation that is now bearing down on students like Ryan. That bill effectively prevents the $150 billion worth of private student debt from being discharged, rescheduled or renegotiated as other debt can be in bankruptcy court.
Joe Biden, senator from MBNA, served the money that kept him in office. Here's Howie, writing in 2007, about that 2005 law:
One of the most hated pieces of legislation to come out of the heinous Bush Regime was the 2005 Bankruptcy Bill, a law put together by the credit card industry and pushed primarily by corrupt members of Congress-- on both sides of the aisle-- who get gigantic payoffs from these same companies. The bill poisoned progressives against bought-off reactionary Democrats like Joe Biden (D-DE) and Al Wynn (D-MD).
Back to IBD:
Biden's efforts in 2005 were no anomaly. Though the vice president has long portrayed himself as a champion of the struggling middle class -- a man who famously commutes on Amtrak and mixes enthusiastically with blue-collar workers -- the Delaware lawmaker has played a consistent and pivotal role in the financial industry's four-decade campaign to make it harder for students to shield themselves and their families from creditors, according to an IBT review of bankruptcy legislation going back to the 1970s.

Biden's political fortunes rose in tandem with the financial industry's. At 29, he won the first of seven elections to the U.S. Senate, rising to chairman of the powerful Judiciary Committee, which vets bankruptcy legislation. On that committee, Biden helped lenders make it more difficult for Americans to reduce debt through bankruptcy -- a trend that experts say encouraged banks to loan more freely with less fear that courts could erase their customers’ repayment obligations. At the same time, with more debtors barred from bankruptcy protections, the average American’s debt load went up by two-thirds over the last 40 years. Today, there is more than $10,000 of personal debt for every person in the country, as compared to roughly $6,000 in the early 1970s.

That increase -- and its attendant interest payments -- have generated huge profits for a financial industry that delivered more than $1.9 million of campaign contributions to Biden over his career, according to data compiled by the Center for Responsive Politics.
This is "retail" politics, as in "retail sales" — things bought and sold. People like Joe Biden sell their services to the very wealthy — in Biden's case, to the consumer debt industry and their CEOs — for almost $2 million in "campaign contributions," and they in turn become even wealthier, all at the expense of people like you and me.

See why I say Joe Biden's no "regular guy" or friend of working women and men? He's in fact the opposite. He worked for the people who prey on them. He's the reason so many of them are as deep in debt as they are. Biden helped keep them in debt.

The senator from MBNA in action

Yet if Clinton falters, the party may turn to him. If so, he will turn to "Bernie Sanders Democrats" for their blessing. Will they remember enough about Biden to withhold it (like his role in putting Clarence Thomas on the Supreme Court)? It's an interesting question.

Will "Bernie Sanders Democrats" Be Taken in by "Bankruptcy Joe" Biden?

It would be incredibly ironic, wouldn't it, if the very people savaged by the industry Biden served — the consumer and student debt industry — were to fall for Biden's "man of the people" shtick and turn to him as the acceptable mainstream alternative to Hillary Clinton.

Clinton has a "friend of money" tag on her, one she's trying (I think) to get rid of. Biden should wear that tag as well, on his forehead, despite the public media blessing he gets from (I shudder to recall it) people like Stephen Colbert, who really should know better.

"Bankruptcy Joe" Biden, has a ring to it. Maybe someone should tell Colbert about this stuff. He may want to "correct the record" with an interview do-over.


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At 4:55 PM, Anonymous OldVet said...

While it may be a bit narrower in scope that the complete reality, Joe Biden should be rightfully labeled 'The Senator From MasterCard'. Much more understandable for the American sheeple to comprehend.


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