Monday, June 17, 2013

Senator Elizabeth Warren Proves Herself as Stupid as Advertised


This is a bit off topic, but worth discussion.  With certain federal subsides for student loans set to expire in July, Senator Warren has proposed an 'interesting' idea.  From the Huffington Post:
Warren and her co-sponsor John Tierney propose that students be allowed to borrow directly from the government at the same rate that banks get from the Federal Reserve -- 0.75 percent. They argue
Some people say that we can't afford low interest rates for students. But the federal government offers far lower rates on loans every single day -- they just don't do it for everyone. Right now, a bank can get a loan through the Federal Reserve discount window at a rate of less than one percent. The same big banks that destroyed millions This is not fair. And it's not necessary, either. 
The federal government makes 36 cents on every dollar it lends to students. Just last week, the Congressional Budget Office announced that the government will make $51 billion on the student loans it issued this year -- more than the annual profit of any Fortune 500 company, and about five times Google's yearly earnings. We should not be profiting from students who are drowning in debt while we are giving great deals to big banks 
..... 
Warren and Tierney assert, "For one year, the Federal Reserve would make funds available to the Department of Education to make these loans to our students." For the Fed, completely different banking rules apply. As "lender of last resort," it can expand its balance sheetby buying all the assets it likes. The Fed bought over $1 trillion in "toxic" mortgage-backed securities in QE 1, and reportedly turned a profit on them.  It could just as easily buy $1 trillion in student debt and refinance it at 0.75 percent.
In other words, instead of joining Rand Paul to make the Federal Reserve less powerful, Senator Warren's proposed solution to Fed malfeasance in the banking sector is to give that same Federal Reserve more power over student loans.

But, of course, what did you expect?!?

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