School budgets are being slashed across the country in a crisis of state  funding. In California, students were arrested for protesting tuition hikes.  Even Arnold Schwarzenegger called them a “tipping point,” and urged a constitutional amendment to divert money from prisons to schools.

But in Washington DC, lobbyists like Tony Podesta and Jamie Gorelick proudly try to grab billions in education funding so Citibank, JP Morgan, Sallie Mae and other banks can cover their gambling losses on credit default swaps:

Since last March, Democratic insider Tony Podesta and a bipartisan team from his firm — including Lauren Maddox, who was assistant secretary for communications in President George W. Bush’s Education Department, and Paul Brathwaite, former executive director of the Congressional Black Caucus — have been lobbying lawmakers and mobilizing support among Sallie Mae employees who fear losing their jobs.

They have been trying to persuade Congress to approve a compromise measure that would allow Sallie Mae to compete to administer the lucrative student loan business. Under Sallie’s plan, the government would own the student loans.

Administration officials have criticized the lobbying effort, with one official noting that Podesta was running a “war room” to kill the White House plan.

President Obama wants to pass the Student Aid and Fiscal Responsibility Act (SAFRA), which cuts out these bankster middle men so the government can save $8.7 billion a year administering the loans directly.  The bank lobbyists claim that 35,000 jobs will be lost if that happens.  But that 35,000 figure is dubious — the entire student loan industry employs 30,000 people in total, and as Pedro de la Torre writes in The Nation, the number of actual jobs lost could actually be in the hundreds.  Hard to tell, because those who promote the 35,000 figure are so vague about its sourcing.  It comes from a survey conducted by the National Council of Higher Education Loan Programs, but they don’t seem to document it anywhere on their site.

The notion that all of those jobs will be lost — as the Senate Republican Policy Committee suggests — is ludicrous.  These banks will continue to service the hundreds of billions in loans they already have, and they’ll also be able to compete (yes, compete) to service future loans.

JP Morgan was the sixth biggest student loan originator in the country in 2008.  They received $25 billion in TARP funds.  Jamie Dimon, head of JP Morgan, received a $17 million bonus for 2009. They spent another $8 million lobbying, to make more money by protecting their business model, which seems to be socializing their losses and ripping off taxpayers for services nobody needs.

How many community colleges are supposed to shut down, how many kids are supposed to forgo job training and higher education just so JP Morgan can have themselves another bailout good earnings quarter?

Jane Hamsher

Jane Hamsher

Jane is the founder of Her work has also appeared on the Huffington Post, Alternet and The American Prospect. She’s the author of the best selling book Killer Instinct and has produced such films Natural Born Killers and Permanent Midnight. She lives in Washington DC.
Subscribe in a reader