Dear Treasury Secretary Paulson
Dear Secretary Paulson,
You're already spending $700 billion of our money to bail out big players in the financial sector after they made huge, costly and potentially destabilizing mistakes.
Please accept this request that MOHELA be included in the federal bailout as Matt Blunt has made huge, costly and destabilizing mistakes in the sale of the student loan agency's assets that have left it consistently unable to pay its bills. MOHELA will apparently again miss a scheduled payment at the end of this month --an occurrence which has become a quarterly tradition.
Due to Matt Blunt's utter failure, a failure not unlike the ones perpetrated by execs at Bear Stearns and Lehman Brothers, MOHELA's viability is threatened and should therefore be included in your bailout, Mr. Secretary. What's a few hundred mil in the context of a $700 billion package, anyway?
Your friend,
- Howard Beale's blog
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You Still Don't Get It
Give me the factual reasoning why you believe MOHELA would be better able make the L&C payment if they had those "assets" (actually outstanding student loans) on their books right now.
Fact is, you can't. You cannot pose an argument with any financial basis as to why you believe this to be the case. Because of the way MOHELA is structured, they do not have large sums of cash (or liquid assets) available to make these payments because any extra money they have goes into making more loans or fullfilling bond requirements.
MOHELA's "assets" are actually outstanding student loans, the cash flow from which it uses to back securitized bonds. The funds generated from the sale of these bonds to investors give the agency the ability to make more student loans.
The long and short of the current national financial crisis is that nobody wants to buy these securitized bonds (be they backed by mortgages, student loans or other forms of debt). This means banks and lenders like MOHELA have lost the ability to generate money to opperate.
Earlier in the year, MOHELA and many other student loan companies were aided by Secretary of Education Margaret Spelling and Sec of Treasurey Henry Paulson (Education Agency’s Plan Shores Up Market for Loans to College Students) when they agreed to buy up outstanding student loans which would free up cash for lenders like MOHELA to continue making loans to students.
Your cute little posts about MOHELA have become very tiring to those of us who actually know about what is going on in the student loan industry. Another fact that you fail to mention, despite it being readily available through MOHELA's website, is that the agency had one of its best years ever in FY 2007 despite selling the loans to cover the L&C payment.
MOHELA is not in its current situation because of anything Matt Blunt did. I think the sale of the assets was a HORRIBLE idea for a variety of other "bulletproof" reasons, which are much more incidious and long-lasting than the financial issue you're bringing up. But there is no reason for you to keep pinning MOHELA's current financial troubles on the L&C plan.
I hope you will rise to the challenge issued in my first paragraph, but judging by your response to my last comment about MOHELA, you will probably try to shoot me down with shallow arguments and by using other people's words. But then again, maybe we can have a substantial discussion as to why MOHELA is worse off than before the sale.
You're right.
The MOHELA sale was the most awesomest idea EVAR!!! Thanks for opening my eyes to that.
Guaranteed Access to Tax Exempt Bonds
I've had more than one MOHELA officer say to me that the only reason they're able to stay afloat in this mess is the stipulation resulting from L&C which gives MOHELA a guaranteed access to state issued tax-exempt bonds.
So, yes. Many see it as the most awsomest deal evar!