The college version of the subprime mortage mess

Investor Steve Eisman whose huge wager against the subprime mortgage market was described by Michael Lewis The Big Short has launched an assault on fast growing for-profit college industry. Here's the link at Mother Jones. According to the Eisman, for-profit colleges "raked in almost one-quarter of the $89 billion in available Title IV loans and grants, despite having only 10 percent of the nation's post-secondary students." Here is the main parallel between for-profit educators and the sub-prime lenders:

Eisman attributes the industry's success to a Bush administration that stripped away regulations and increased the private sector's access to public funds. "The government, the students, and the taxpayer bear all the risk and the for-profit industry reaps all the rewards," Eisman said. "This is similar to the subprime mortgage sector in that the subprime originators bore far less risk than the investors in their mortgage paper."
Here's another similarity between subprime lending and for-profit education

Both push low-income Americans into something they can't afford—in the schools' case, pricey programs that leave the students heavily in debt; what's more, the degrees they get mean little in the real world: "With billboards lining the poorest neighborhoods in America and recruiters trolling casinos and homeless shelters—and I mean that literally—the for-profits have become increasingly adept at pitching the dream of a better life and higher earnings to the most vulnerable."

In the Mother Jones article, Eisman pointed to the self-reported (and thus potentially under-reported) 50-plus percent dropout rate at for profit colleges as further evidence that they offer poor-quality education. After reading the above article, I referred to Wikipedia's article one of the biggest for-profit colleges: Phoenix University, subsidiary of the publicly traded Apollo Group, Inc. It offers "open enrollment," meaning that it requires "proof of a high-school diploma, GED, or its equivalent." Phoenix graduates only 16% of its students, compared to the national average of 55%. On the topic of de-regulation and quality of education, consider this:

The school was the top recipient of student financial aid funds for the 2008 fiscal year, receiving nearly $2.48 billion for students enrolled. In 2006, due largely to the efforts attributed to the Apollo group, the 50-percent rule (requiring colleges and universities to conduct at least half of its instruction in person in order to receive federal aid or collect federal student loans) was modified. It no longer classifies students receiving instruction through telecommunications methods as correspondence students.

The Wikipedia article offers a lot more information to feed the fires of my suspicion. I don't claim to know any more about Phoenix University than what I have read in these two articles. What I do bring to the table is that I investigated diploma mills as part of my job while I worked as an Assistant Attorney General for the state of Missouri; I don't like the smell of what I'm reading about these for-profit colleges. Based on what Michael Eisman has stated, it would seem to be a good idea for the federal government to tighten its standards for the types of post-secondary schools eligible for federal loans, and to take a much closer look at the quality of education received by the typical Phoenix University student. Is it really worthy of a federal loan guarantee?

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Deepwater horizon: an event horizon for the oil age?

In a speech given earlier this year, the Chief Economist for BP made his case that fears about peak oil were overblown.

"One factor is resources. They are limited, and a barrel can only be produced once. But ideas of peak oil supply are not true. Doomsayers have exaggerated the issue. The bell-shaped curve of production over time does not apply to the world's oil resources," he told the seminar in Alkhobar city. "Those who believe in peak oil tend to believe that technology and economics don't matter, and I think this is false.The application of technology, the innovation of new technology and economic forces especially mean that recoverable oil resources can increase. If there is a peak in oil, it will come from the demand side. There are always fears, but these remain overstated and exaggerated."
A barrel can only be produced once, this is true. And technology has allowed us to tap into oil reservoirs that were unthinkable a few decades ago. Yet as the catastrophic ongoing oil geyser in the Gulf of Mexico shows us, technology is not the savior the oil majors would have us believe. Advanced technology may allow us to drill for oil a mile under water, but it obviously does not offer any easy solutions when things go horribly awry as they have on the Deepwater Horizon rig, which has been spewing hundreds of thousands of barrels of oil into the Gulf of Mexico for over a month. [More . . . ]

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Rand Paul and the Libertarian Wrong

Rand Paul, senate hopeful for Kentucky, made a fool of himself with remarks about the 1964 Civil Rights Act and racism and affirmative action et cetera et cetera so on and so forth. If Kentucky votes him into office, they get what they deserve. There was a brief moment when I thought Ron Paul was worthy of some respect—he seemed willing to speak truth to power. I found that I disagreed with him on specifics, but it is useful (and rare) to have someone doing the Emperor’s New Suit schtick. However, anyone who names a child after an ideological demagogue has some serious problems with reality. (To be clear, Rand, under the circumstances, can only refer to Ayn Rand, the patron non-saint of the Libertarian Movement.) Rand’s pronouncements about the rights of business owners to deny service to anyone they see fit is perfectly consistent with Randian philosophy and politics. Basically, it says that the person whose name is on the title owns what the title describes outright and has, by dint of absolute moral dictate, dictatorial command over said property and ought to be allowed to do with it what they wish. Without explanation to anyone and certainly without anyone else’s permission. Sounds good, doesn’t it? I mean, you worked for it, you sweated, earned the means of acquisition, put your name and fortune on the line to own it, worked to make it do what you intended, you should therefore enjoy all rights and privileges in the say of what to do with it. Your home, your rules. There’s a feel-good quid pro quo to it that appeals a basic sense of fairness, suggests a rough equivalence between work and risk and rights. This is fundamental to Ayn Rand’s whole premise, that the creator, the mind behind creation, the one who brings something into existence is the one who has the only natural say in what that thing so created can and will do and who it shall serve. For an avowed atheist, Rand had a very mythic, godlike attitude toward life. And I suppose if you could somehow make the case that a single individual did indeed create something from whole cloth and by virtue of his or her singular efforts sustained it and drove it and made it successful, there might be a good and valid point to this view. But is that ever the case? Rand’s famous tome, Atlas Shrugged, makes the argument that the movers and shakers, the people who Do, are absolutely vital to the world. Nothing would exist without them and if they should withdraw their talent and genius and effort, the world would come to a halt. She makes the case for the Indispensible Man. And in the novel (for those of you who have not read it), a man named John Galt, fed up with the growing People’s Movements around the world, which he sees as essentially parasitic, calls a strike of the truly important people. He convinces the men and women who truly matter to leave the world, retire, disappear, and when they have all left, it seems no one can do what they did, and everything falls apart. The final image shows them emerging from their high-tech hideaway to assume command as the true and rightful aristocracy of ability. It is, in her narrative, a very small group. [More . . . ]

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Saving Africa’s Witch Children

I am often asked, "Why do you fight against religion?" Today my answer would be best expressed by this article from the New York Times. A new documentary called "Saving Africa's Witch Children" will be airing Wednesday May 26th on HBO2. The documentary follows Gary Foxcroft...

...founder of the charity Stepping Stones Nigeria, as he travels the rural state of Akwa Ibom, rescuing children abused during horrific “exorcisms” — splashed with acid, buried alive, dipped in fire — or abandoned roadside, cast out of their villages because some itinerant preacher called them possessed.
One of the main subjects of the documentary is Helen Ukpabio.
At home in Nigeria, the Pentecostal preacher Helen Ukpabio draws thousands to her revival meetings. Last August, when she had herself consecrated Christendom’s first “lady apostle,” Nigerian politicians and Nollywood actors attended the ceremony. Her books and DVDs, which explain how Satan possesses children, are widely known. So well-known, in fact, that Ms. Ukpabio’s critics say her teachings have contributed to the torture or abandonment of thousands of Nigerian children — including infants and toddlers — suspected of being witches and warlocks.
If ever there was a reason to continue to strive to undermine the authority of religion, this is it.

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