Student Loans

A recent Wall Street Journal article highlighted a problem caused by the intervention of Congress into the free market. It seems that some Democrats in Congress felt that lenders were taking advantage students who wanted to go to college and needed loans. So last September they passed the "College Cost Reduction and Access Act' ostensibly to make college more affordable. It probably would have been quite attractive to the younger voters.

The law reduced the interest rates borrowers pay on federally insured student loans. Backed by the Federal Family Education Loan Program, these loans account for more than 70% of education lending. Taxpayers will fork over $7 billion by 2012 to pay for the rate cuts.
But Congress didn't stop there. Convinced that the private lenders who make these loans were reaping too much profit, Congress also cut the yield on each loan. The return on the popular Stafford loan for undergrads was reduced by 70 basis points. For loan consolidations, Congress cut returns by 65 basis points.

Then along comes the credit crunch with lenders like market leader Sallie Mae saying it now loses money on every new federal education loan. As a result, some lenders are backing out of this loan market. A third of the nation's top 100 lenders to students in 2007 have temporarily suspended new loan originations or exited the business altogether.

So to not look weak especially on big bad business, the same man who authored last year's bill to cut lenders' returns has crafted a new bill to subsidize those same lenders. ,Education and Labor Chairman George Miller got a bill passed to give the Department of Education new authority to purchase loans directly from lenders. Of course the Senate needs to approve the bill as well. In the meantime, to show they are doing something faster, some Democratic Senators are asking the Fed to accept student loans as collateral under the Fed's new Term Securities Lending Facility. They sent a similar letter to Treasury Secretary Paulson asking him to order the Federal Financing Bank to buy student-loan-backed securities.

So Congress has tangled with the free market and really messed it up. The cover-up is in process that costs the taxpayer even more money. Don't trust Congress to watch your money like you would.

Moral: If you mess with the free market, it will bit you.

http://online.wsj.com/article/SB120899430294839827.html

Cost of Gasoline

I received a newsletter from Rep Chris Murphy about his efforts on the cost of gas. He stated their is little that can be done and touted the mandating of renewable energy generation as a good thing and that the President as opposed that. Just like ethanol, renewable energy cost more than current forms of energy to produce. Mandating the use of energy generated by renewable sources will drive the price of energy to the consumer. These forms of energy generation will need to be subsidized until they are large enough to compete with current forms of generation. Ethanol is a giveaway to big farmers which is a popular tactic in an election year. But it only drives up food costs. Other ideas form Rep. Murphy include not adding to the Strategic Petroleum Reserve which I can't argue with at this time. Also stop gas price gouging which all studies seem to indicate is not occuring. And prevent price fixing by OPEC. A lot good that will do. What are going to do not buy from them?
Since the 70's, Democrats controlled Congress for all but 8 years. During that time there was little done to get us of the oil addiction. Environmentalists have prevented refinery construction since '76. Drilling offshore and in ANWR have been turned back. Windfall profits tax has been threatened even though the oil industry average profit is 8.3% which is comparable to other industries. But facts never stop a good thrashing during an election year and big oil is the target. The gov't needs to back nuclear plant construction which has been used extensively by France for electricty generation but has been stalled here by costs and environmental reviews. We need a group of experts to establish a path to energy independence.
The Democrats have no new ideas. Senator McCain has suggested rolling back the Federal Gas Tax for the summer. If the state legislature added their tax it would cut 62 cents from a gallon. Sounds like a good idea to me.

CT Legislature's Ideas

In the last couple of weeks the Connecticut legislature has come up with some interesting ideas. The first was the package tax. No one seem to know how it works, what would be taxed, how it would be collected, or just how much it would bring in.

The other idea is the fine for idling a gas engine for greater the 3 minutes. The latest idea would move enforcement from DEP to the police. Just what our police need to be doing. I don't know if it also includes my lawnmower.

It really makes me wonder what our Democrat controlled legislature is thinking. Maybe they should be thinking of reducing the taxes on gasoline to make it affordable to travel. Or maybe they can think about reducing the budget so Connecticut can stop the flight of businesses. Maybe they can look into why the UCONN campus at Storrs has fire code violations.
Instead they look for more revenue which will be passed on to the consumer and more work for the local police to do. Just think of what they could think of if they were full time lawmakers.