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Health Care & Environment

07.20 Until Emissions Drop, Nothing Has Been Accomplished: The Climate Resistance Handbook Is Here. [Trump can't be bothered as the world turns into a large cinder. His laser focus is on personal greed.]

07.20 Babies Born Near Oil and Gas Wells Are Up to 70% More Likely to Have Congenital Heart Defects, New Study Shows

07.20 Giving 'Upper Hand to Corporate Polluters,' EPA Drops Surprise Inspections

07.20 With Petition to Congress, 100,000+ People Demand Green New Deal 'That Fixes Our Food System' [Realtime proactive response to reality—now and threatening—doesn't get attention in this greed focused administration]

07.19 Trump administration won't ban pesticide tied to childhood brain damage [There is no truth to the persistent rumor that chlorpyrifos pesticide was heavily used at Trump's childhood home in Queens]

07.19 'Unprecedented' Decline of Plants and Animals as Global 'Red List' Reveals Nearly One-Third of Assessed Species Under Threat

07.17 ‘Off-the-charts’ heat to affect millions in U.S. in coming decades

07.17 Planned Parenthood president Leana Wen forced out by board [Given that states have lost abortion rights on political grounds recently, Wen's philosophical approach to protect abortion rights based on ‘health care’ was smarter – therefore it was that smarter strategy that was killed at the secret meeting.]

07.17 Billions of air pollution particles found in hearts of city dwellers

07.17 What is happening in America's Cancertown is tragic, immoral and evil [Niggardly white government policies could change to produce better students, better jobs and net revenue instead of costs. But it seems they enjoy more cruelty—like Trump.]

07.16 US aid cuts to UN agency will hurt vulnerable women and children, critics say

07.16 Trump abortion restrictions in effect for taxpayer-funded clinics

07.15 The response to DRC’s Ebola crisis isn’t working. Here’s what we need to do

07.15 Extinction Rebellion protests block traffic in five UK cities [Non-corporate human animals make their annoying bleating sounds...]

07.14 A Glacier the Size of Florida Is Becoming Unstable. It Has Dire Implications for Global Sea Levels [The willfully ignorant needn't read more, Trump]

07.13 'Climate Despair' Is Making People Give Up on Life [Willfully ignorant governments—having fired many of their best scientists—have made themselves too stupid to despair]

07.13 Trump administration to approve pesticide that may harm bees [The worst government money can buy!]

07.12 These solar panels don’t just generate power—they produce drinking water

07.12 David Attenborough: polluting planet may become as reviled as slavery [1:34 video]

07.11 7,000+ Colleges and Universities Declare Climate Emergency and Unveil Three-Point Plan to Combat It [Fox News and Betsy DeVos never talk about this stuff so it must be Bull Shit, right?]

07.10 Plastic Has A Big Carbon Footprint — But That Isn't The Whole Story [Fixing our world begins by educating your consciousness with the best truth from trustworthy news sources—so you'll then insist truly bad things will get fixed. But if instead you are educated by untrustworthy news sources—then your consciousness could be warped to where you are hating and fighting with your best friends. Clue: untrustworthy news sources never seriously report news about the world's most critical emergency—Global warming.]

07.10 Molly Scott Cato: ‘It’s the wealthy who are causing climate change’

07.09 Judge reinstates Madrid's low emissions zone [Yeh!]

07.07 How Solar Panels Work (And Why They're Taking Over the World) [Hope they leave space between panels for wild flowers to grow so birds and butterflies can flourish!]

07.05 Tree planting 'has mind-blowing potential' to tackle climate crisis

News Media Matters

07.19 Fox News’s star names excuse the inexcusable after Trump's latest racist attack

07.18 In Sinclair's New 'Must-Run' Segment, Former Trump Adviser Tries to Defend Racist Attacks on 'the Squad'

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

07.20 Puerto Rico: top US politicians join chorus calling for governor's resignation

07.20 Fact check: Trump says Puerto Rico got $92 billion. They've seen only a fraction [If he opens his mouth, Trump's lying.]

07.20 "Trump Says Go Home, Ilhan's Community Says Welcome Home": Rep. Omar Greeted With Cheers of Love and Support in Return to Minnesota

07.20 WATCH: Amid Extreme Anti-Refugee Push, Trump Displays Neither Interest Nor Knowledge of Asylum Seekers' Plight in Oval Office Meeting

07.20 Trump Denies Being at North Carolina Rally [Not sure if Trump supporters 'get' satire, but here goes....]

07.19 Are progressives working on a climate plan for 2021? You bet.

07.19 House Democrats demand Hope Hicks clarify testimony after Cohen document dump

07.19 The 51 most outrageous lines from Donald Trump's repugnant North Carolina rally

07.19 The Real Meaning of ‘Send Her Back!’

07.18 Alexandria Ocasio-Cortez on Breaking up Homeland Security

07.18 Deadly Delays in Jail Construction Cost Lives and Dollars Across California

07.18 Inside Trump's DC hotel, where allies and lobbyists flock to peddle their interests [Also, too much ignored by media, the $millions "donated" corrupting moderate Democrats and Republicans every election cycle must stop]

07.18 This Republican's Case for Medicare for All [A well-informed Republican is rare, so let's hold him in the light so others may learn]

07.18 Trump rally crowd chants 'send her back' after president attacks Ilhan Omar [1:03 video shows Trump pandering to his ignorant idolaters, and together they're making America a greater shit-hole country]

07.18 "Can't Change a Corrupt System by Taking Its Money": Sanders Urges All 2020 Democrats to Reject Insurance, Big Pharma Cash [49:02 video w/ lousy sound]

Justice Matters

07.19 UN urged to act over 'purge' of Turkey's lawyers by Erdogan

07.19 DOJ Releases Strong Evidence of Trump’s Campaign Finance Violations But No Explanation of No Charges [The statement]

High Crimes vs. Human Rights

07.19 Conscientious objectors of first world war – their untold tales [The record proves they were morally right by avoiding violent early deaths of their cousins and themselves]

Economics & Corrupt Capitalism

07.18 Corporate tax cuts blocked at least 15,000 affordable homes in California. Here’s how

07.15 China’s Economic Growth Hits 27-Year Low as Trade War Stings

International & Futurism

07.20 US to deploy troops to Saudi Arabia in face of 'credible' regional threats [Working with Osama bin Laden's godfathers, Trump wants to profit like Erik Prince (for-profit education secretary Betsy DeVos' brother) of Blackwater infamy (hurriedly renamed ‘Academi’), the U.S. taxpayer to pay inflated costs while Trump siphons off long-term emolument largesse]

07.20 Iran on 'dangerous path' with seizure of Stena Impero, says UK [Which is this, a tit or a tat?]

07.20 'Dark satanic mills': Tony Abbott continues his crusade against wind turbines [Too much CO2 air pollution makes you stupid, and turns your country into an “Idiocracy” (1:36 video clip)]

07.20 Bolsonaro declares 'the Amazon is ours' and calls deforestation data 'lies' [Lazy and willfully stupid whenever it serves his purpose, just like Trump. “And the rest of you can all go to hell.” Again, just like Trump. Has your country turned into an “Idiocracy”? (1:36 video clip)]

07.19 U.N.'s Bachelet says Congresswomen opposing Trump are 'fantastic'

07.19 Iran makes 'substantial' nuclear offer in return for US lifting sanctions [Was barbaric Saudi Arabia—whose citizens were more involved in the 9-11 attacks—the wrong ally all along?]

07.19 “The Task Ahead Is Enormous, and There Is Not Much Time” [Read this and learn. Or read Donald J. Trump (@realDonaldTrump) | Twitter and/or President Trump (@POTUS) | Twitter. Are you serious? Or are you in hideously criminal denial?]

07.18 Foreign purchases of American homes plunge 36% as Chinese buyers flee the market

07.18 There are 16 million slaves around the world making our stuff

07.18 ‘No rioters, only a tyrannical regime’: Thousands of Hong Kong seniors march in support of young extradition law protesters [Most people around the world have more in common with these Hong Kong Chinese protestors than with the ignorant people at Trump rallies]

07.18 Dozens Arrested as Over 1,000 Jewish Activists and Allies Shut Down Entrances to ICE Headquarters Demanding Closure of Trump Detention Camps [Obviously these are not the immoral and less educated right-wing jews who support Netanyahu, Trump and ICE, and who slowly exterminate Palestinians when no one is looking]

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  Student Loans: The Government Is Now Officially In The Banking Business

ANALYSIS:

Student Loans: The Government Is Now Officially In The Banking Business

by Ellen Hodgson Brown, J.D.
Earlier published on her website on March 31st, 2010.
“We say in our platform that we believe that the right to coin money and issue money is a function of government. . . . Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson . . . and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business.”
— William Jennings Bryan, Democratic Convention, 1896
Under the Student Aid and Fiscal Responsibility Act (SAFRA), the federal government will lend directly to students, ending billions of dollars in wasteful subsidies to firms providing student loans. The profits will be used to help impoverished students.

William Jennings Bryan would have been pleased. The government is now officially in the banking business. On March 30, 2010, President Obama signed the reconciliation “fix” to the health care reform bill passed by Congress last week. Slipped into it was student loan legislation the President calls “one of the most significant investments in higher education since the G.I. Bill.” Under the Student Aid and Fiscal Responsibility Act (SAFRA), the federal government will lend directly to students, ending billions of dollars in wasteful subsidies to firms providing student loans. The bill will save an estimated $68 billion over 11 years.

Money for the program will come from the U.S. Treasury, which will lend it to the Education Department at 2.8% interest. The money will then be lent to students at 6.8% interest. Eliminating the middlemen will allow the Education Department to keep its 4% spread as profit, money that will be used to help impoverished students. If the Education Department were to set up its own bank, on the model of the Green Bank being proposed in the Energy Bill, it could generate even more money for higher education.

A Failed Experiment in Corporate Socialism

The student loan bill may look like a sudden, radical plunge into nationalization, but the government was actually funding over 80 percent of student loans already. Complete government takeover of the program was just the logical and predictable end of a failed 45-year experiment in government subsidies for private banking, involving unnecessary giveaways to Sallie Mae (SLM Corp., the nation’s largest student loan provider), Citibank, and other commercial banks exposed in blatantly exploiting the system.

Under the Federal Family Education Loan Program (FFELP), the U.S. government has been providing subsidies to private companies making student loans ever since 1965. Every independent agency that has calculated the cost of the FFELP, from the Congressional Budget Office to Clinton's Office of Management and Budget to George W. Bush's Office of Management and Budget, has found that direct lending could save the government billions of dollars annually. But the mills of Congress grind slowly, and it has taken until now for this reform to work its way through the system.

 In the sixties, when competing with the Soviets was considered a matter of national survival, providing the opportunity for higher education was accepted as a necessary public good. But unlike Russia and many other countries, the U.S. was not prepared to provide that education for free. Loans to students were necessary, but students were notoriously bad credit risks. They were too young to have reliable credit histories, and they did not own houses that could be posted as collateral. They had nothing but a very uncertain hope of future gainful employment, and banks were not willing to take them on as credit risks without government guarantees.

The result was the FFELP, which privatized the banks’ profits while socializing losses by imposing them on the taxpayers. The loans continued to be “originated” by the banks, which meant the banks advanced credit created as accounting entries on their books, the way all banks do. Contrary to popular belief, banks do not lend their own money or their depositors’ money. Commercial bank loans are new money, created in the act of lending it. The alleged justification for allowing banks to charge interest although they are not really lending their own money is that the interest is compensation for taking risk. The banks have to balance their books, and if the loans don’t get paid back, the asset side of their balance sheets can shrink, exposing them to bankruptcy. When the risk is underwritten by the taxpayers, however, allowing the banks to keep the interest is simply a giveaway to the banks, an unwarranted form of welfare to a privileged financier class at the expense of struggling students.

Worse, underwriting these private middlemen with government guarantees has allowed them to game the system. Under the FFELP, banks actually profit more when students default than when they pay back their loans. Delinquent loans are turned over to a guaranty agency in charge of keeping students in repayment. Pre-default, guaranty agencies earn just 1 percent of the loan’s outstanding balance. But if the loan defaults and the agency rehabilitates it, the guarantor earns as much as 38.5% of the loan’s balance. Collection efforts are also much more profitable than efforts to avert default, giving guaranty agencies a major incentive to encourage delinquencies. In 2008, 60.5% of federal payments to FFELP came from defaults. An Education Department report issued last year found that only 4.8% of students who borrowed directly from the government had defaulted on their loans in 2007, compared to 7.2 percent for FFELP; and the gap widened when longer periods were taken into account.

In 1993, students and schools were given the option of choosing between FFELP and the Direct Loan program, which allowed the government to offer better terms to students. The Direct Loan program was the clear winner, growing from just 7% of overall loan volume in 1994-1995 to over 80% today.

The demise of the FFELP was hastened in early 2007, when New York Attorney General Andrew Cuomo began exposing the corrupt relations between firms lending to students and the colleges they attended. Lenders that had been buying off college loan officials were forced to refund millions of dollars to borrowers.

Congress responded by cutting the private lenders’ subsidies. But after the 2008 economic crash, the lenders claimed they could no longer afford to lend to low-income (high-risk) borrowers without these subsidies. Congress therefore acquiesced with a May 2008 law requiring the federal government to give banks two-thirds of the funds lent to students. The bill also required the Education and Treasury Departments to buy loans from lenders made between May 2008 and July 2009 for the full value of the loans plus interest. To comply with this bill, the Department of Education projects that it will eventually have to buy $112 billion in FFELP loans.

Despite all this government help, lenders have continued to turn their backs on riskier borrowers, driving students to the government’s direct lending program. With the banks enjoying heavy subsidies while failing in their mission, Obama campaigned in 2008 on a promise of eliminating the middleman lenders; and with the new SAFRA, he appears to have fulfilled that goal.

And thus ends a 45-year experiment in subsidized student lending. In the laboratory of the market, direct lending from the government has proven to be a superior alternative for both taxpayers and borrowers.

The U.S. is not the only country exploring government-sponsored student loan programs. New Zealand now offers 0% interest loans to New Zealand students, with repayment to be made from their income after they graduate. And for the past twenty years, the Australian government has successfully funded students by giving out what are in effect interest-free loans. They are “contingent loans,” which are repaid if and when the borrower’s income reaches a certain level.

Where Will the Money Come From?
The Green Bank Model

Eliminating the middlemen can reduce the costs of federal lending, but there is still the problem of finding the money for the loans. Won’t funding the entire federal student loan business take a serious bite out of the federal budget?

The answer is no – not if the program is set up properly. In fact, it could be a significant source of income for the government.

The SAFRA doesn’t mention setting up a government-owned bank, but the Energy Bill that is now pending before the Senate does. Funding for the energy program is to be through a Green Bank, which can multiply its funds by leveraging its capital base into loans, as all banks are permitted to do. According to an article in American Progress:

"Funding for the Green Bank should be on the order of an initial $10 billion, with additional capital provided of up to $50 billion over five years. This capital could be leveraged at a conservative 10-to-1 ratio to provide loans, guarantees, and credit enhancement to support up to $500 billion in private-sector investment in clean-energy and energy-efficiency projects."

Banks can create all the credit they can find creditworthy borrowers for, limited only by the capital requirement. But when the loan money leaves the bank as cash or checks, banking rules require the bank’s reserves to be replenished either with deposits coming in or with interbank loans. The proposed Green Bank, however, is apparently not going to be a deposit-taking institution. Presumably, then, it will be relying on interbank loans to provide the reserves to clear its checks.

The federal funds rate – the rate at which banks borrow from each other – has been maintained by the Federal Reserve at between zero and .25% ever since December 2008, when the credit crisis threatened to collapse the economy. A Green Bank qualified to borrow in the interbank market could acquire funds at that very low rate as well, and so could a Student Bank. The spread could give the Education Department more than 6.5% gross profit annually on student loans.

The Treasury, by contrast, paid an average interest rate for marketable securities in February 2010 of 2.55%, which explains the 2.8% interest at which the Education Department must now borrow from the Treasury. The interbank rate is obviously a better deal, but it could go up. The cheapest and most reliable alternative would be for the Treasury itself to become the “lender of last resort,” as William Jennings Bryan urged in 1896.

The Treasury Department and the Education Department are arms of the same federal government. If the government were to set up a government-owned bank that simply lent “national credit” directly, without borrowing the money first, it could afford to lend to students at much lower rates than 6.8%. In fact, it could afford free higher education for all. Such a program could actually pay for itself, as was demonstrated by the G.I. Bill, considered one of the government’s most successful programs. Under the Servicemen's Readjustment Act of 1944, the government sent seven million Americans to school for free after World War II. A 1988 Congressional committee found that for every dollar invested in the program, $6.90 came back to the U.S. economy. Better-educated young people got better-paying jobs, resulting in substantially higher tax revenues year after year for the next forty-plus years.

Taking Back the Credit Power

Winston Churchill once wryly remarked, “America will always do the right thing, but only after exhausting all other options.” More than a century has passed since William Jennings Bryan insisted that issuing and lending the credit of the nation should be the business of the government rather than of private bankers, but it has taken that long to exhaust all the other options. With student loans, at least, government officials have finally come around to agreeing that underwriting private lenders with public funds doesn’t work.

We are increasingly seeing that underwriting banks considered “too big to fail” doesn’t work either. Banks are borrowing at near-zero interest rates and speculating with the money, knowing they can’t lose because the government will pick up the losses on any bad bets. This is called “moral hazard,” and it is destroying the economy.

Issuing the national credit directly, through a federally-owned central bank, may be the only real solution to this dilemma. Today the government borrows the national currency from the privately-owned Federal Reserve, which issues Federal Reserve Notes and lends them to the government and to other banks. These notes, however, are backed by nothing but “the full faith and credit of the United States.” Lending the credit of the United States should be the business of the United States, as William Jennings Bryan maintained. The dollar is credit (or debt), just as a bond is. Both a dollar bond and a dollar bill represent a claim on a dollar’s worth of goods and services. As Thomas Edison said in the 1920s:

“If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People.”


Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include Forbidden Medicine, Nature's Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are www.webofdebt.com and www.ellenbrown.com, and www.public-banking.com.

Ms. Brown's stories are republished in the Baltimore Chronicle with permission of the author.



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This story was published on April 1, 2010.
 

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