There are currently four bills pending in Congress to address the credit crunch in the Student loan industry. All of them were introduced in the last month in response to an acute situation that has only become apparent since the beginning of the year: lenders participating in the Federal Guaranteed student loan program do not have the money to loan to students, and as a result, more than fifty of them, including some major players, have withdrawn from it altogether, and most of the remainder have warned the government that they anticipate not being able to originate such loans at the level of previous years, because they cannot find buyers for securitized student loan bundles. The situation is very similar to what has been happening in the mortgage lending market in the last year and a half, but it is considerably more acute. Unless students planning to attend college in the fall can obtain loans, colleges will be without operating expenses, and many will be forced to shut their doors. This explains why the Democrats who have been most vociferous in opposing any government bailout to subprime mortgage lenders appear as sponsors for a set of bills providing equally unwise government sponsorship for student loan lenders and guarantee agencies.

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Over and over politicians have told us that they want to do what they can to mitigate the effects of the Foreclosure Crisis, but I haven’t seen anything other than bailouts and pleas. H.R. 1852: Expanding American Homeownership Act of 2007 has a clause in it that rids the Federal Housing Administration (FHA) qualification that requires brokers to have liquid assets, $60,000 in the bank, to get approved to do FHA loans. It replaces the liquid asset requirement with a $100k surety bond, which is a bond that a third party gaurantees that they will pay up to $100k to the federal government on demand if the broker does not live up to his/her commitments, aka fraud or regulatory fine).

This will allow more brokers to originate FHA loans for borrowers that have sub par credit and anytime you have more loans that translates to more borrowers and less of a seller market. Also keep in mind that, brokers will not be underwriting the files as the lenders will. The subprime crisis will be tapered as it will allow more origination options for homeowners to save their homes and will allow more buyers to buy homes. This is a simple fix to the problem, but it is getting jammed up.

The argument against is that allowing brokers to do FHA loans without liquid assetts and replacing it with the surety bond releases the broker from liability and you will have a bunch of fraudulent loans flying around. This just isn’t true. Every broker is still licensed by his or her respective state and does countless hours of continuing education for every state that they are licensed in. The reality is, most fraud is conducted by employees of brokers and not the broker and you are going to have fraud in any situation where there is lax supervision. A lack of liquidity doesn’t enter into the equation.

The United States Congress, like the State of South Carolina, has bills pending that address the problem of a paperless electronic voting system. We blogged about the dangers of the lack of a paper trail associated with the electronic voting system used in South Carolina, Trust But Verify.

The lack of a paper trail has also spurred Congress to action on the issue. There are currently two pieces of Democrat-sponsored legislation still alive and proceeding toward becoming law. (A Republican-sponsored House proposal, H.R. 3500: Know Your Vote Counts Act of 2007, is dead.) The Republican legislation had the beauty of simplicity. The Democrat sponsored legislation is much more detailed and will be costly for states to implement. In addition, the Democrat bill imposes detailed federal requirements on states (unlike South Carolina) even if they already have existing systems for creating an electronic voting paper trail.

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Student loan debt is a huge and growing problem for American families. As Congress rushes to patch the holes in the dike of the collapsing home mortgage industry, student loans have been shoved under the carpet. There is a widespread lack of recognition of the fact that hundreds of thousands of people are already saddled with educational loans they cannot repay, which cannot be discharged in bankruptcy, and thousands more are being added daily. Our congresspeople seem reluctant to pick up the ball. Although The College Cost Reduction and Access Act of 2007 has already become law, it provides no relief to the mass of student debtors. (See this post at BLN.)

Of the three relevant bills currently pending, only one, S. 1561 (”A bill to Amend Title 11, United States Code, with respect to exceptions to discharge in bankruptcy for certain qualified educations loans”) provides any meaningful relief. Introduced by Senator Richard Durbin (D-Il), this bill removes the paragraph in the 2005 bankruptcy “reform” act which included private educational loans in the non-dischargeability provisions of the code. Senator Durbin’s introductory remarks recapitulate what bankruptcy attorneys are discovering: that this one paragraph, which slipped unnoticed into the act, opened the door to irresponsible lending and predatory debt collection practices. This bill deserves the unqualified support of anyone concerned with just fiscal policy.

H.R. 2465: Income-Dependent Education Assistance Act of 2007, Thomas Petrie’s (R-Wis.) bill, would provide direct government funding for consolidation loans subject to income contingent repayment plans (ICRPs). Under present ICRPs, unpaid interest on guaranteed educational loans accumulates and becomes a public obligation to the lender at the end of the ICRP period. In the long run, this bill would save the government and the taxpayer some money, but it does not help the student borrower.

S. 511: A bill to provide student borrowers with basic rights, including the right to timely information…, is the brainchild of Hilary Clinton (D-NY). This bill purports to address the inadequate truth in lending disclosure requirements on educational loans, and a long litany of loan servicer abuses. If the bill had any teeth in it, it might help curtail mushrooming fees and penalties due to questionable lender practices. Otherwise it’s just an impressive-looking conglomeration of empty platitudes. In the mortgage sector, the government relies on private attorneys to bring action for violations, usually in conjunction with a home sale, and compensates them if the prosecution is successful. Nothing in S. 511 provides a comparable mechanism for sanctioning educational lenders for violating borrower’s “rights”.

Student loan obligations, bloated with unpaid interest and penalties, hover like a raptor over the incomes of working Americans. Every month adds to the growing pool of people trapped in this cage, as college-bound young folk and their parents are lured into signing contracts whose implications they do not understand, recent graduates, working full time, find they cannot pay down the principal, large numbers of people experience personal crises during the long repayment period and find their obligations doubled by penalties and interest, and older workers are downsized or forcibly retired with substantial obligations still in place. Given the magnitude of the problem while the economy is still considered to be healthy, the prospects should a real recession occur are frightening to contemplate.

Thanks for the report, Martha!

H. R. 5036: The Emergency Assistance for Secure Elections Act of 2008

This bill was introduced into Congress on January 17, 2008, by Representative Rush Holt of New Jersey.

HR 5036 provides reimbursements which can help states, counties and other jurisdictions to  improve some of the problems that have emerged from the Help America Vote Act of 2002 (HAVA). The bill emphasizes paper ballots and audits. All the improvements are to be in place for the November 2008 election.
The bill does not have mandates. Its four areas of reimbursement are optional. No state or other jurisdiction is required to participate.
Its first two offers of reimbursement are in Section 2 of the bill.  Both offers are available only to “certain jurisdictions”: namely, states or other jurisdictions which in 2006 had voting machines which did not use  paper ballots, or did not even produce a paper record that could be verified  by the voter.
OPTION NUMBER ONE: If one of these “certain jurisdictions” obtains  precinct-based equipment that tabulates paper ballots or scans paper  ballots, the costs will be reimbursed.
(The bill frequently uses the word “ballot” in two ways– to refer to a  real, voter-marked, paper ballot, and also to the paper trail inside an  electronic voting machine, which voters may view (through a plastic cover)  to verify that the machine has understood their intentions.

However the bill is clear in stating that replacement equipment which it  will pay for must be “a voting system that uses a paper ballot marked by the voter by hand or a paper ballot marked by the voter with the assistance of a non-tabulating ballot marking device…..accessible for individuals with disabilities…”)

OPTION NUMBER TWO, also in Section 2 of the bill, is intended for jurisdictions which continue to use Direct Recording Electronic voting  machines (DRE’s) that lack any paper trail. The bill offers reimbursement of  costs “to obtain, deploy, and tabulate emergency paper ballots….that may  be used in the event of the failure of a direct recording electronic voting system in the regularly scheduled general elections for federal office to be held in November 2008.” These emergency paper ballots must be counted as regular ballots. (The bill does NOT require that paper ballots be available to all voters on request, and it does not describe what constitutes a “failure” of the DRE.)

Five hundred million dollars ($500,000,000) is authorized for payments under  Section 2. (Wisconsin jurisdictions will not qualify to apply for any of the Section 2 money, because we already have some form of paper involved in our elections.

The third and fourth options for reimbursement in HR 5036 appear to be available to any state, county, or equivalent location which would choose to apply, including Wisconsin.
Reimbursement OPTION NUMBER THREE is in Section 3 of HR 5036. This offers reimbursement for the costs of manual audits of any of the regularly scheduled general elections for Federal office in November 2008.      Reimbursement may also include costs for audits of other elections, referenda, or initiatives that are held at the same time.
The bill spells out one format for conducting an audit, and also offers the choice of using an alternative sampling mechanism which would be at least as statistically effective. Plans for an alternative mechanism must be submitted to and approved by the Director of the National Institute of Standards and Technology (NIST) prior to the election.

One hundred million dollars ($100,000,000) is authorized for reimbursement  of audits under Section 3.

OPTION NUMBER FOUR, in Section 4 of HR 5036, offers to reimburse states, counties, or equivalent locations for the costs of conducting hand counts of votes cast on paper ballots for Federal office in November 2008. In this part of the bill, “paper” includes both real paper ballots marked by voters  and also paper printouts produced by Voter Verified Paper Audit Trail (VVPAT) equipment attached to DRE’s.
Procedures for the hand count, including public observation, are spelled out  in the bill.

It is not clear whether rural portions of a county which already do hand counting, or choose to do so in November 2008, can apply for the reimbursement, or whether the entire county must use that method.

Thirty million dollars ($30,000,000) is authorized for payments of hand counting costs under Section 4.
Section 5 of the bill authorizes study, testing, and development of products  to ensure accessibility of paper ballot verification for individuals with disabilities, voters whose primary language is not English, and voters with difficulties in literacy. The Director of the     National Institute of Standards and Technology (NIST) is to report to Congress by June 30, 2009, on the results of the study.
Three million dollars ($3,000,000) is authorized for this study.
Throughout the bill, the Administrator of General Services is given authority. In a couple of places, determination of whether costs are reasonable “shall be made by the Administrator in consultation with the Election Assistance Commission.”

H.R. 3793: Veterans Guaranteed Bonus Act of 2007 was introduced in the House on Oct 10, 2007, sponsored by Rep. Jason Altmire [D-PA]. S. 2400: Wounded Warrior Bonus Equity Act was introduced in the Senate on Dec 3, 2007, sponsored by Sen. Jefferson Sessions [R-AL]. Neither has been scheduled for debate.

The purpose of these bills is to correct a possible oversight in the current Department of Defense rules. These rules state that enlistees must complete their entire military obligation in order to receive their enlistment bonuses in full. At first this sounds quite reasonable, after all we do not want the military paying out bonuses to people who willingly or maliciously abandon their duties. However, over the past months there have been various reports of injured servicemen and women receiving collection notices, demanding repayment of these bonuses. These members of the Armed Services were badly wounded while on active duty and thus had their service cut short. The Pentagon has called these incidents administrative errors and has implemented revised wording in their own documentation to avoid future lapses. Reports vary from thousands to only a handful of affected soldiers.

These two bills would amend Chapter 17 (Miscellaneous Rights and Benefits) of Title 37 (Pay and Allowances of the Uniformed Services) of the United States Code in order to insure that injured servicemen and women receive the accession, special pay, enlistment and reenlistment bonuses due to them under Chapter 5 (Special and Incentive Pays) when they are unable to continue active duty due to a combat related injury.

The two bills differ only slightly in text. The House bill sets a maximum period of 30 days from the date of discharge from the military to the payment of any bonus that is due while the Senate bill sets a longer 90 day maximum. The Senate bill has additional text that would cease the collection of previously paid bonuses and make the amendment retroactive to September 11, 2001.

We all know that government documents can be hard to understand. Tax forms and legalese befuddle the best of us. Finally, Congress is poised to pass good legislation to outlaw government gobbledygook.

The Plain Language in Government Communications Act of 2007 (HR3548/S2291) will require government agencies to write many future documents in plain language: language that is clear, concise, and easy to understand. Specifically, it mandates plain language for new government documents related to: (more…)

Also, a quick plug for “Computing in the Cloud”, a conference at Princeton, January 14-15 where I’ll be a panelist.

And if you’re bored and looking for something to read, you might be interested in The Open House Project blog for some news on congressional transparency, open data, and related issues.

One can’t help but notice that the different candidates are not getting the same amount of speaking time. Clinton spoke more than 3.5 times more words, and the same for speaking time, than Biden. For that matter, basically so did the moderator, who held the floor for more time than anyone but Clinton. It’s no wonder that Clinton is considered “the Democrat to beat” considering she’s in our face more.

If the numbers weren’t so vastly different between the candidates, we’d chalk it up to some random variation that happens from debate to debate. But, from the numbers, the speaking times are clearly planned. It’s so clear that I feel like maybe I missed something. Is it common knowledge that the debates are proportioning time out to the candidates based on their poll numbers (or something equivalent)? It’s not just that the front-runners are getting more time. The statistical correlation is ridiculously high (speaking time versus FOX News/Opinion Dynamics Poll. Oct. 23-24: r=.96). That is, the debate organizers are basically using this formula to determine how much time each candidate should get:

Speaking Time = 8:26 minutes + 25 seconds * Latest Poll Number (%)

Of course, debate organizers can’t control exactly how long each candidate talks for, but the candidates only deviated from the formula by at most two minutes and twenty seconds (Biden, who spoke less, and Edwards, who spoke more).