Democrats in Congress don’t like middlemen; at least they don’t like middlemen in the private sector. The Obama administration and Democrats – exclusively – banned private banks and financial institutions from the student loan business, and 2,500 employees at Sallie Mae will lose their jobs.
Keep in mind they have not gotten rid of the middleman, rather they have replaced the middleman with federal government bureaucrats. The changes to the student loan industry, tied directly to the health care reform legislation – simply denies the ability for banks and other financial institutions to have anything to do with student loans.
From AP earlier today.
A new law that cuts banks out of the federal student loan business is costing 2,500 workers at Sallie Mae their jobs.
The nation’s largest student lender has told 1,200 staffers in service centers in Killeen, Texas, and Panama City, Fla., they will lose their jobs by year-end. The remaining cuts will follow in 2011.
The cuts result from changes made to the federal student loan program as part of the health care reform signed by President Obama last month.
The law strips the middleman role in student lending away from banks. It’s expected to save at least $60 billion. But it will also mean a drastic reshaping of Reston, Va.-based Sallie Mae, which wrote a record $7.7 billion in federal student loans in the first quarter.
Rep. John Carter from Texas released the following.
Sallie Mae informed the 500 employees at its Killeen call center this week that it would begin shutting down in 60 days as a result of President Barack Obama’s federal takeover of the student loan industry.
The news that these Central Texans will soon be unemployed shows how out of touch the current administration is with America, says Congressman John Carter (TX-31).
“I have been saying for months now that this takeover of the student loan industry would devastate local economies, and would cost people their jobs,” Carter said. “This is exactly the sort of thing we don’t need at a time when unemployment is near 10 percent.”
The student loan reform, which was attached to the Democrats’ health care takeover as a way to improve the budget score, prohibits private companies from making federal student loans.
Let’s look at the history of Sallie Mae. First of all, the company – which started off as a government sponsored entity before it was fully privatized in 2004 – has less than 9,000 employees in the United States. During the hay-day of student loans and consolidation, Sallie Mae was making good money partly due to the fact the federal government was underwriting the risk by guarantying loans. They were also diversifying; I did not know they owned Upromise until today.
During the Clinton administration, this was not sitting well with politicians. At the time, it would not be politically popular to take over the private loan industry, so they just created a fully government-backed “competitor.”
Is any of this sounding at all familiar?
So by 2005, we had a government loan program that was competing with Sallie Mae. Want to guess who was getting the business? That’s right, the government’s lending program was having customer service issues and Sallie Mae was getting most of the business and doing quite well.
Congress didn’t like this at all, so they changed the rules which caused major issues for private lenders. Sallie Mae’s stock tanked. Of course, the economic crash did not help Sallie Mae, but the pressure from Congress and the upcoming election cycle – which included a strong candidate who wanted complete control of student loans – was just around the corner.
Now, thousands in the private sector will have their positions eliminated. 2,500 employees. Almost one-third of the Sallie Mae team – whose employer has received accolades for being excellent corporate citizens and top philanthropists – will soon be looking for work elsewhere.
There really is no Constitutional authority for the federal government to do this, but that does not seem to stop the lefties who think the government is the solution to everything. All of that said, what will stop the federal government from taking over the mortgage business? I’m serious, they already have a couple of GSEs are not being targeted by the banking reform legislation in Congress, while President Obama is in New York today attacking the big bad Wall Street greedy people.
Why not just get rid of the middlemen who provide mortgages now? It’s obvious Democrats care little or nothing about the jobs that would be lost. You think that won’t happen?
There is much more to this story, including gimmicks and tricks lefties want to use to get students to work in public service to help pay off their student loans. But for the life of me, I can’t figure out who will be paying those loans back. 😉