Thursday, July 12, 2012

Mitt Romney's "Gift" -- You Pay

The Oxen Who Draw the Corruption Cart

Plenty of Americans have come to realize that they are mired in an economic world quite removed from the atmospheric phantasm where banksters and Congressmen dwell.  However, when the actual details of their dilemma are trotted forth, their faces glaze and their eyes turn hollow.  They'd like to understand, but the things are made as incomprehensible as possible before being "revealed" as causes.

There are, specifically, two important issues among these purposefully "incomprehensible things."  We can mention both, but this posting is entirely centered on just one of the two.

Two Primary Mechanisms for Looting the Treasury

1.  Tax Expenditures

To create a tax expenditure, a law must be passed which excepts somebody, some business or some business practice from the taxes which would, in the absence of the tax expenditure, be normally collected.  The entire body of tax expenditures is often called "corporate welfare."  No astonishing genius or insight is required to understand the mischief such "tax expenditures" can precipitate when they are "running loose" in a sympathetic Congress under the "watchful eye" of an equally sympathetic President.

Tax expenditures can also be created at state and municipal levels, although usually with less egregious largesse than when done federally.  At the local levels, tax expenditures are often referred to as "economic incentive packages" designed to bribe new businesses and their subsequent hiring to attend the particular location.

2.  Loan Guarantees

Loan guarantees are typically a legislative method to induce banks to perform in certain ways which they would otherwise not consider good business practices.  When a state of federal government interests require that some of the "cash on hand" being held by banks be "forked over" as loans, the "loan guarantee" means that the government has "counter signed" the note, guaranteeing repayment even if the primary signatory should default or fail.

Massive loan guarantees, for example, were added into the bail out of AIG during the onset of the Great Republican Depression in 2008.  These guarantees made all the "bad debts" that AIG had accumulated "as good as gold," preventing the massive corporation's judgment troubles from bankrupting scores of investors.  In the casually reassuring parlance of the banksters, this was referred to as "making these investors whole."

This posting is about loan guarantees.

And not just fairly reasonable loan guarantees with at least theoretical legitimacy, outrageous ones.  And, where might MeanMesa find such outrageous loan guarantees being proposed?  Why, in the Romney For President campaign, of course.  And further, the proposing itself was not a mere "fly by" gaffe by one of Mitt's paid campaign servants.  It was actually formed in Mitt's brain and written into a tasty little, 35 page proposal which entered into the Fourth Estate presses under Mitt's very own signature.

This little trick didn't get enough attention in the luridly tame press releases, so MeanMesa finds it necessary to "step up to the plate" and honor the plan with  the "good dose of squawking" it deserves.  It deserves plenty.

How Congress Can Help Banksters
 Have High Profit, Risk Free Banking

Let's imagine for a moment that we are a bank.  To make it even simpler, let's imagine that we are a bank before the "depression proofing" Glass-Steagall Act was vaporized a few decades ago.  

Because we were a traditional bank, we made our living from the interest which we charged on loans.  The rate of interest which we charged was, again put simply, "what the market would bear."  Of course we were capitalists, but we were competitive capitalists.  If our loan policies became too expensive or too strict, borrowers would visit another bank.

Still, we were, naturally, a little strict.  If a borrower could not or would not repay our loan, we had to do whatever we could to recapture the capital by foreclosure or bankruptcy.  In fact, one part of the calculation of a particular interest rate was factoring in how likely it would be for the loan to fail.  Riskier borrowers would have to pay higher interest rates to make our part of the bargain worthwhile.

We knew that big losses from failed loans could "break the bank," so we were very insistent that risk be a part of any interest rate calculation.  What losses we inevitably did suffer simply ate away a chunk of our bank's profits, and as such, became part of the "cost of doing business."

However, if the loans you are making are guaranteed by the US Government, the  part of this "cost of doing business" caused by loan failures is removed.  And, also important, the cost of doing whatever is possible to recover any failed loan amounts is also removed.  Your profits go up quickly.

Now, on to student loans.

The abbreviated WIKI explanation isn't bad.  (Read the whole WIKI article  here.)

Prior to 2010, Federal loans included both direct loans--originated and funded directly by the U.S. Department of Education--and guaranteed loans--originated and funded by private investors, but guaranteed by the federal government. Guaranteed loans were eliminated in 2010 and replaced with direct loans because of a belief that guaranteed loans benefited private student loan companies at taxpayers expense, but did not reduce costs for students.

If you were a bank which was making lots of students loans, Obama's 2010 policy change pretty much slid you out of the picture.  Accompanying your trip "out of the picture" was a sudden decrease in your bank's interest revenues because you were no longer collecting interest on the student loans you used to make but which were then being made directly by the government.

Further, the national totals of student loan debt had grown immense -- surpassing even the personal [credit card] debt of the country.  That much debt paid plenty of interest.  The colleges and universities had also contributed their part.  The cost of an advanced education had skyrocketed.

(image source - Huffington)

Of course, the new loan policy made great sense to students and families faced with paying for such an education.  And naturally, the dismal reaction to these policies on the "lending side" was nothing less than an hysterical kind of eschatological obituary for the demise of free enterprise and, predictably, also for the demise of liberty itself.

Remember, these were not simply "run of the mill" loans made hilly nilly from your bank's urban branch offices.  These were very sweet, federally insured,  "guaranteed loans."

We're Finally Ready for ROMNEY'S GIFT

So far, of course, it's only a "Romney Promise" of a gift, but it looks like one he would actually hand over gladly to his, uh, friends -- perhaps to show his gratitude for the billion dollars they gave him for his campaign.  Here, we will turn over the reins to some excerpts from a report by a tasty site called - courtesy of The Boston Globe.  (Read the entire article here.)

Romney student loan plan criticized

Would allow private lenders back into market

  By Tracy Jan Globe Staff / July 9, 2012
 WASHINGTON — Mitt Romney promises to usher private lenders back into the federal student loan market in a bid to decrease default rates and increase efficiency if he becomes president, but such a move could cost taxpayers tens of billions of dollars over a decade without saving students money, according to several higher education analysts.
The prime beneficiaries, critics say, would be banks and loan companies that stand to reap a financial boon through subsidies to make nearly risk-free, government-backed loans. They are the same firms that benefited from the system that existed for decades before 2010, when President Obama required that the government issue all federal student loans.

“The old guaranteed loan program was rife with lobbyists and will go down in history as a system that existed far longer than it needed to simply because it was enriching private companies,” said Jason Delisle, director of the Federal Education Budget Project at the New America Foundation, a nonpartisan think tank. Inviting private lenders back into the program, he said, appears misguided: “What’s in it for students or taxpayers? Nothing.”
Private lenders, however, argue that Obama’s move in 2010 cost the industry thousands of jobs as companies went out of business or shut down divisions that dealt with the servicing of such loans. And the Romney campaign says reintroducing private competition would spur innovation that could help prevent students from borrowing more than they should.
The current market for loans to help students and parents pay skyrocketing tuition rates is dominated by government-backed loans made exclusively through the Department of Education’s federal direct loan program. In addition, the private market offers more loan options with no such backing — typically at higher interest rates. Before 2010, private firms also made government-backed loans.
Romney has long had financial ties to the student lending industry, a lucrative sector that has come under intense scrutiny in recent years because of some questionable practices.
The sector has contributed more than $29,500 to Romney’s campaign this election cycle, making him the top recipient of all candidates, presidential and congressional, according to the Center for Responsive Politics. In comparison, Obama, who ranks ninth, has received $5,250 from student loan companies.
The industry’s top campaign contributors — SLM Corp., NelNet Inc., and College Loan Corp. — have donated to Romney but have not given to Obama. SLM Corp. owns Sallie Mae, a former government-sponsored enterprise that began to privatize in 1996. Though it now provides only private loans, it remains the largest originator of federal loans that until 2010 made up the bulk of its business.

A Few "Fly By" MeanMesa Conclusions

Quick Game of Monopoly, anyone? (image source)

This tasty little piece of Romney campaign policy -- and, such actual, substantive policy statements are as rare as daisies in a Kansas blizzard in the Romney campaign -- paint the picture of what the candidate intends to do if elected.  Of course we can expect grand looting schemes to be hatched behind the closed doors of the Romney White House, but it will be these smaller, quieter peccadillos which will signal the true regression at America's kitchen tables.

Voters will be so busy stuffing legislative "lobsters through the keyholes" of Congress as they try to keep food on the table, the sheer number of these lesser schemes will flood any attempt to rectify details.  This has been the pattern of Republican controlled enterprises.

It wasn't the Iraqi oil Cheney's little energy session decided to purloin, it was the oil field service contracts. It wasn't innovative economic programs to raise the money to pay for Medicare Part D, it was surreptitiously invisible borrowing. It wasn't an argument presented to voters for anti-Roe action, it was a state by state decimation of abortion clinics.  It wasn't some persuasive campaign to win this election, it was voter suppression.  On and on the pattern repeats itself.

If a Republican controlled government emerges from the November election, we can expect more of the same -- much more.  The crony corruption with include big pieces everyone can see, but also a horde of lesser insults we'll be too busy to fix.

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