consultants are sandburs

Friday, April 03, 2009

MORE: Albert Lord & the question of student exploitation by lending interests - What's Obama doing about it, how and why, via what avenues of redress?

See Crabgrass earlier, here. Here's what Al Lord looks like. Who is he? Chief muck-a-muck of Sallie Mae is who. And there's news coverage of him and his firm.

In April, 2007, WaPo reported:

Sallie Mae, the student loan behemoth that an investor group plans to buy for $25 billion, is largely the brainchild of a single man who was once one of the company's biggest detractors: Albert L. Lord.

Lord, now chairman of the company formally known as SLM Corp., was told to leave the Reston firm in 1993 because he saw its future differently than the executives then in charge. Lord wanted the company to offer student loans and not just purchase them from banks and resell them to the capital markets.

By 1997, he had taken control of the company through successful proxy fights and was restructuring its operations. The result has a boon for shareholders and gigantic wealth for Sallie Mae executives, including Lord.

How much wealth? Lord, 61, has been building his own private 18-hole golf course on 244 acres in Anne Arundel County, an hour's drive from downtown Washington. He was well-heeled enough to spearhead a serious-but-unsuccessful bid to purchase the District's new professional baseball team, the Nationals.

People who know Lord say he is a determined, no-nonsense executive with a penchant for thorough analysis. He is also considered generous and charitable, devoting time and money to education-related causes such as charter schools.

But his money-making proclivities have repeatedly gotten him in trouble with Congress. Democratic lawmakers in particular have complained that Sallie Mae executives, including Lord, were profiting handsomely -- in some cases, too handsomely -- from programs meant to provide low-interest loans to low-income college students.

Shortly after Democrats won control of Congress last year, the Senate's leading Democratic lawmaker on education issues, Edward M. Kennedy (D-Mass.), lambasted Sallie Mae and the student loan industry for profiting excessively. "The student loan program works brilliantly for the banks, but not for the students," he said. "We ought to take the money-changers out of the temple in terms of student loans."


There's more, read the remainder online at the WaPo link. Not that Ted Kennedy is the best one to criticize overreaching by the super-wealthy.

So, Albert Lord is the face and personification of greed amok, unregulated or insufficiently so under GOP deregulation policy, bleeding the firm of enough cash to have his private golf course and to be a bidder for a hobby baseball club - major league, in the nation's capital where visibility is high. He's worth a bundle, and we know who's paid for it. Young people, screwed royally by Sallie Mae policy and practices. Bless Al Lord.

Also, how sharp is too sharp, when it comes to questionable dealings short of Bernie M's prison-bound meanderings? This additional WaPo paragraph:

Lord was singled out in February [2007] when lawmakers asked authorities to look into his sale of $18.3 million worth of company stock days before President Bush proposed subsidy cuts that caused Sallie Mae's stock to drop. A Sallie Mae spokesman said Lord did not know the administration was going to propose those cuts and called the timing of the sale "completely coincidental."

Sure. "Completely coincidental." Presumably the price per share dropped, but Albert beat the street. What a fortuitous coincidence -- for Al.

######

What's Obama doing? Well, he's apparently not yet moving publicly to allow bankruptcy norms for all other debt to apply also to student loans, but things are progressing somewhat favorably, as WSJ reported, late last month:

MARCH 27, 2009, 5:05 P.M. ET - By ROBERT TOMSHO

With the Obama administration proposing to cut private lenders out of the federal student-loan business, financial companies are intensifying efforts preserve their role.

Private lenders in the so-called Federal Family Education Loan Program, or FFELP, have lent more than $56 billion in the current school year. The federal government has lent about $20 billion directly. In his budget, President Obama says the government, which pays billions of dollars of subsidies to FFELP lenders, would save money by eliminating the program using private companies.

The latest skirmish in the contentious political battle erupted Thursday when the U.S. Department of Education released preliminary data comparing FFELP loan-default rates with those in the federal direct loan program.

The data indicated a 5.3% default rate in the direct lending program for the fiscal year ended Sept. 30, 2007, compared with a 7.3% default rate for FFELP, which has been the primary source of college financial aid since it was launched in the Johnson administration during the 1960s.

Industry analysts attributed the difference to the mix of schools in the two programs, with the FFELP program lending more to students from for-profit schools. They tend to have higher default rates than other student borrowers.

Private lenders and their trade groups were caught off guard by the data's release and portrayed it as a strategic maneuver designed to advance President Obama's plan to eliminate FFELP.

Brett Lief, president of the National Council of Higher Education Loan Programs, a trade group representing FFELP lenders and loan guarantee agencies, said he could not recall the department ever releasing preliminary default rates or separate numbers for the two programs.

"We have never seen the rates broken down," Mr. Lief said. "It's unfortunate that the rates are being released before there is an analysis of them," he added. "This is very serious stuff and I'm saddened that it has come out like this."

Some outside observers agreed that politics played a roll. Default rates "become a critical issue as folks are talking about a new model for student lending," said Tim Ranzetta, president of Student Lending Analytics, a research concern based in Palo Alto, Calif. "I'm sure that's probably why the department put these numbers out."

Department of Education officials said they released the loan-default data in response to a U.S. Freedom of Information Act request from The Wall Street Journal as well as inquiries from members of Congress.

In response to the release, SLM Corp., the mammoth student lender better known as Sallie Mae, issued a study of its own Thursday. It indicates that borrowers who took out FFELP loans through Sallie Mae were 30% less likely to default on them than borrowers who used the federal direct loan program. Sallie Mae attributed the difference to default prevention programs it uses in conjunction with state loan-guarantee agencies.


Again, there's more following that extended excerpt, at the online WSJ link.

For more of the student-unrelated Sallie saga, see here, here, and this Google.

As related news, in several aspects, Strib online reports, here, here and here.

To close, this TOLES editorial sketch, downloaded from here:



Are there any reader comments? Is there anyone out there liking Albert Lord, thinking him a true gentleman's gentleman, and wanting to say so?


________UPDATE_________
From a Google Alert set for "Sallie Mae," hits here, here, here [source of the chart, below, showing which Senators and Reps took student-lone industry campaign cash donations], here, and here.


Click chart to enlarge and read [poor resolution in original].

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