Saturday, April 25, 2009

Senator Ben Nelson loses to Obama

The conservative democratic Senator Ben Nelson from Nebraska just got played.

It might not be the most glamorous hill, but it's the one that Sen. Ben Nelson (D-Neb.) has vowed to die on. President Obama, however, isn't going to give him that chance.

Nelson is perhaps the Senate's fiercest protector of subsidies for student lending institutions, which, not coincidentally, are an engine of job growth in Nebraska. He has vowed to block any effort to reduce those subsidies. And given that Democrats have 58 members and generally need 60 to break a GOP filibuster, he can enforce his will on his colleagues.

An agreement struck between the president and House and Senate negotiators won't give Nelson that chance. A process known as "reconciliation" allows budgetary measures to be moved through the Senate with a simple majority, rather than 60. Multiple congressional sources say that congressional Democrats have decided to use reconciliation to go after student-lending subsidies, specifically to get around Nelson.

Student loans were once under government conservativeship, but when Bush got in office he threw this to the banks, who then, of course, jacked up rates on students and families.
I think the public needs to know exactly what the current student loan program does and why it is such a giveaway to the banks. I think people don´t know, probably because most of the news coverage is about whether or not a bill will pass rather than what it means.

Simply, the current system forces all student loans to be made through banks. The banks charge a medium range of interest--not terribly high, but not terribly low, either. The government GUARANTEES the loans so there is absolutely no risk for the banks.

During Clinton´s term, the student loan plan allowed universities to offer much lower loans by borrowing directly from the government. Students did not have to go through a bank and this shaved 2 or 3 percentage points off the cost of the loan. Neither did it cost the government anything since the money was repaid. But when the Bushies came in, they forced all loans to go through banks, jacking up the interest rates and guaranteeing a profit with no risk for the banks. The government still backed all the loans.

It is a classic example of how lobbying creates direct subsidies for businesses who win their lobbying efforts.

The above is exactly what the effects of lobbying does. Who profited off of this? Not the government, nor the students, but banks. And Nelson's main contributors are the banks.

At this time it is a lose-lose situation for Nelson, especially in these times. Siding with the banks is a bad idea, just look at the mortgage mess and who is the main culprit in that? And lastly....
Without a requirement for 60 votes in the Senate, it's likely the subsidies to voracious student lenders will be trimmed considerably, since there won't be any reason to accommodate the banks' defenders in the GOP -- and Bad Nelson. Most Democrats view the huge federal subsidies, alongside the 100% federal guarantee, as one of the most egregious examples of corporate welfare: banks skim federal money that if allocated to student loans directly would get lots more people educated and lifted out of poverty.

nuff said...


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