No one could ever have envisioned this, except all the people who did
Rarely do we respond to a comment on the site, but one recent comment deserves a front page reply. Specifically, a commenter with the handle 'blessedcurse' fired off a comment in response to a recent post about MOHELA's recent failure to make another scheduled Lewis & Clark payment. 'blessedcurse' wrote:
MOHELA's woes have very little to do with Lewis & Clark and are
mostly due to the colapse [sic] of the auction rate bond market and changes
in federal regulations governing student loan lenders...
In other words, 'blessedcurse' makes the case that Matt Blunt's sale of MOHELA can't be blamed for any the loan agency's current woes because those difficulties are attributable to fluctuations in the market and interceding federal action. Implicit in the argument is the idea that the events 'blessedcurse' cites were either unforeseen or unforeseeable, leaving the proponents of the sale of MOHELA's assets free from any responsibility.
Of course, the trouble with this line of reasoning is that all of the "unforeseeable" occurrences cited by 'blessedcurse' were the very same reasons pointed to by opponents of the MOHELA sale while it was being discussed in the legislature as reasons why the asset sale was a terrible idea.
Back in February 2007, audit firm Liscarnan Solutions foresaw the dangers posed to the feasibility of the sale by pending changes in federal law and made them plain:
“The modeling of MOHELA’s future business activity and the related cash
flow projects, may no longer be valid,†said Liscaman staffer Seamus
O’Neill. “We urge MOHELA not to take any further actions related to the
Cooperation Agreement until we are more confident as to statutory
changes to the Higher Education Act and their impact on MOHELA.â€
Also last February, Democratic leader Jeff Harris cited similar concerns when withdrawing support for the MOHELA initiative:
But Harris said in a letter to the Republican governor that he longer
backs the sale of MOHELA loans to finance the buildings because of
concerns the plan could jeopardize the quasi-governmental agency's
ability to continue providing low-interest loans.
Further, banker John Greer spoke up at the time to point out that the sale could foist illiquidity upon MOHELA and hamper its ability to deal with the sort of market downturn the agency now faces:
I also warned that it was essential for MOHELA to marshal its assets to
be prepared to react quickly to whatever changes occurred in federal
law regarding student loans - changes being considered by Congress at
that very moment. The governor’s plan, I said, would leave MOHELA
without financial liquidity when it would need it most.
To hear apologists for Matt Blunt and the GOP legislature tell it, nobody can bear any fault for MOHELA's current predicament because no one could possibly have known that the securities market entails risk or that Congress might pass new laws that were already being considered. But to believe their story one must also be willing to pretend that no one was pointing to those very same soft spots back prior to the MOHELA deal's consummation. Doing that requires making believe that lots of people weren't saying things that they very clearly did.
- Login or register to post comments
- Printer-friendly version
It's Like Nostradamus, but not.
If all these visionaries had forseen MOHELA's troubles, they should have told Wall Street and all the people who have money invested in auction-rate bonds they can't liquidate.
The perfect storm
There are two reasons why MOHELA is in trouble right now: 1)Changes in federal regulations that resulted in reductions in the lender subsidies and fees, and 2) The colapse of the auction rate securities market.
Had MOHELA faced either one of these situations individually, the authority would have weathered the storm and still been able to afford payments to the state under Lewis & Clark (L&C) without losing money.
One reason why MOHELA hasn't closed it's doors is that it has ten years worth of guaranteed tax exempt financing through the state as a result of L&C. This lower cost of financing allows the authority to continue to operate, although not at the level of 2007 when, according to their annual report, they purchased a record $1.66 billion in educational loans. This, interestingly enough, more than covers the assets they had to sell off to fund L&C.
I'm not saying L&C was a good idea. It caused a lot of turmoil and changes to the management and culture of MOHELA that were not in the best interest of Missouri students. I'm not defending this incompetent governor or his short-sighted policies. I'm just saying that MOHELA's current situation is not due to L&C, and the sale may have even put the authority in a better position because of the guaranteed access to tax exempt financing.
I don’t think the current economic crisis our country faces and the dire consequences it will have on our kids not being able to finance their education can be ignored in favor of partisan bickering. If you're going to write about MOHELA's current situation, focus on the real consequences and not a worthless, outbound administration.
The way things are.
There's really very little to argue about with respect to the foolishness of the MOHELA sale and the governor's insistence upon it.
The governor decided he wanted to be able to free up cash to spend on buildings that he could fly around and tout during a re-election bid.
The way to access that cash was by selling assets of the state's student loan authority.
Many people, including both elected partisans and apolitical professionals, warned that the MOHELA sale could put the agency in a precarious situation because of the changing regulatory structure and intrinsic risk of the market.
The governor and the GOP legislature ignored those warnings and went ahead anyway.
Now --just as forewarned-- events have transpired that have left MOHELA ill-equipped to provide the same benefits to prospective education borrowers that it traditionally has.
To wave away these facts as "partisan bickering" and suggest a misplaced focus on "an outbound administration" is to invite a replay of the same sort of short-sighted and oversight bereft policymaking that has landed us in our current predicament.
Actions have consequences, and when bad actors are allowed to escape those consequences by pretending accountability is just "partisan bickering" they are emboldened to try the same things over and over again, leaving us even worse off.