Whenever I drive past UCLA, with its Romanesque buildings and banners of blue and gold; whenever I see the steps and street lamps that line the campus; whenever I follow the red-orange road that criss-crosses the grounds; I ask myself: How do they do it? How do college students control their workload––and not lose control of the load of debt they carry, like a stack of books prior to exams? The answer is: They do not.
More than 44 million Americans have student debt. For many, default is their own personal default mechanism: It begins when college commencement ceremonies end, and commences when lenders try to collect payment on unpaid loans, while investors fret and potential investors flee. These private loans total some $108 billion, and among its holders the National Collegiate Student Loan Trusts (NCSLT) is the country’s largest owner of private student loans.
And no, I did not arrive at these numbers or uncover this organization by way of a series of late-night meetings, in a parking garage, with an anonymous source. Instead of the smell of cigarette smoke and the air of suspense, or stories about spies and tales of dirty tricksters, I had to settle for the stirring of a computer mouse. I followed the money by going online, one click at a time, until the time came when a rule revealed itself through the marine layer and the mist from my open window by the sea: When we substitute names for initials, when VCG (Vantage Capital Group) seizes control of the NCSLT and strikes a deal with the CFPB (Consumer Financial Protection Bureau), everyone else gets a raw deal.
Stay with me, please, because what follows is better than what some traffic court reporter may have conceived—after smoking a doobie and playing “Chopsticks” on his typewriter.
The NCSLT has $5 billion in bad loans. Retrieving that money involves filing a lot of lawsuits. But some argue NCSLT does not have the proper titles to these loans. Enter VCG, the beneficial owner of the 15 trusts that comprise the NCSLT. VCG gets the CFPB to intervene on its behalf, making it the de facto administrator of the NCSLT.
The CFPB then issues a consent agreement, in a deal with VCG, thereby neutralizing the trusts and their investors, in addition to imposing $19 million in penalties and borrower refunds from the NCSLT.
To recap: A government agency (CFPB) that should not even exist bypasses the courts—it writes its own laws—and then awards private student debt collection to a hedge fund called VCG. This same agency, whose very name renders the words it contains meaningless, proves we have two branches of government.
One branch features the institutions that symbolize our democratic republic and the republican virtues of due process of law. The other, where power resides and the powerful preside, is on no list of must-see attractions in Washington, D.C. Its headquarters look plain, making it easy for us to overlook what is in plain sight; a permanent government of the unelected, by the unaccountable, for the unconscionable.
If only students would take the time to see what we know. If only they understood basic finance, so they could understand how their finances are of great interest—at sometimes onerous rates of interest—to a combination of crony capitalists. If only they would take the time to learn the difference between economic theory and political fact; because when an agency evades the disinfectant of sunlight, and eludes the electric light of the most efficient policeman, darkness not only pervades—it prevails.
Congress should dismantle the Consumer Financial Protection Bureau, so President Trump can begin to drain this political swamp. The bureau’s moral debts far exceed its monetary assets. It has no assets, period. Not when it does as it pleases by pleasing one at the expense of many. Not when millions of people default on billions of dollars in loans. Not when debtors doubt they have to pay anything, while any payouts go to an entity that owns everything. Not when markets crash and investors cash out of the market. Not when bureaucrats break our trust by busting legitimate trusts.
We’ve got to stop this racket.
Image copyright: samuraitop / 123RF Stock Photo