The Government Is the Problem, Part Five Million

Wesley Messamore
Jun 8, 2010 at 2:16 PM

If anything has made my blood pressure spike this week (and it's been a bad week), it would be today's Huffington Post article reporting the collusion of corporate banks and colleges across the country to exploit students' private information and push credit cards on them:

Some of the nation's largest and most elite universities stand to gain millions of dollars from selling the names and addresses of students and alumni to credit card companies while granting the companies special access to school events, the Huffington Post Investigative Fund has found.

The schools and their alumni associations are entitled to receive payments that multiply as students use their cards. Some colleges can receive bonuses when students incur debt...

"The fact that schools are getting paid for students to rack up debt is a disgrace," said congressman Patrick Murphy, a Pennsylvania Democrat and former professor at the U.S. Military Academy at West Point. He said that banks' payments to schools amount to "kickbacks."

While the typical statist spin on this would be to disparage the evils of unfettered capitalism and call for more regulations, it's important to remember that the biggest culprit here is the government. Many of the universities complicit in exploiting their students' financial soundness for a quick buck are state universities (like the University of Michigan, which featured prominently in the article) -- i.e. government-run and funded institutions.

And the worst corporate culprit here is Bank of America:

Bank of America, which dominates the market, said it has affinity contracts with some 700 schools and alumni associations, where marketing practices vary. At least 100 schools are believed to have affinity agreements with other financial institutions.

Would you like to guess who Bank of America's largest shareholder is?  That's correct:  the U.S. federal government. Not only is the bank owned by the government, it is a highly regulated institution in a highly regulated industry, and recieves an alarming amount of direction from government executives in Washington. This collusion between state-sponsored schools and state-sponsored banks to fleece college kids is a textbook example of what Ron Paul calls "corporatism" run amok.

After a record like this -- of exploiting students and violating their privacy for profits -- I find myself more resentful than ever at the billions of dollars in bailout money that Bank of America received from those students and their parents as a reward for this kind of behavior.

Maybe the Tea Partiers are on to something with their outrage at this kind of thing. If you're not a outraged, you're not paying attention.

Great Job again Wes!

I have to say - that hardly ANYONE is paying attention!

I'm "part" of the student group "Student Association of Michigan" (check out the google group if there are any Michiganders here). They have been around for 3 years in order to advocate better quality and affordability in education. 

Now that I joined - I had to ask them what causes tuition prices to rise. They all seem to think that my idea of Federally Backed Loans causing tuition to rise was some sort of propaganda put out by banks so that banks would or could make these loans from now on(to which I offered Peter Schiff's explanation that "no bank would give an unskilled person w/ no collateral that kind of money w/ out extremely high interest rate" - they don't understand that the government backing means there is no more Risk involved (the kind usually needed for someone to make good decisions on what degree program they want)). 

The point is - after 3 years of existence - this group does not even have a clue as to why tuition prices rise  - and they formed to curve this very problem. 

 

Raggedy Andy's picture

Wow- that is an excellent story. Economic illiteracy might be our number one barrier to overcome as champions of liberty.

Wes Messamore's picture

Why do credit card companies push credit cards onto students so aggressively? Two reasons, 1) they know they're broke, and the allure of "free money" is just too great of a temptation for a broke student eating Top Ramen out of his dorm, and 2) College students are almost guaranteed a higher than median paying job when they graduate so they're "good for it".

I work for a non profit credit counseling organization and too many times I see credit reports with $50k in student loan debt and then on top of that $15k to $45k in credit card debt that they accumalated while in secondary schooling.

The government really needs to jump in here!

's picture