How For-Profit College Lobbyists Bought Congress

How For-Profit College Lobbyists Bought Congress
By Don Bauder
San Diego Reader
December 10, 2011

The New York Times today (Dec. 10) has a story on how the for-profit college industry spent $16 million to soften government plans to rein in industry corruption. The lobbyists won, as usual. This means another debt crisis is coming. This year, student loans will total $1 trillion -- more than the total of credit card debt outstanding. For-profit colleges have 10% of students but account for 44% of loan defaults. Ashford University, which accounts for almost all the students at San Diego's Bridgepoint Education, has a dropout rate of 84% in its two-year program and 63% at its four-year programs. When the Department of Education proposed tougher rules to thwart boiler room-type abuses at the for-profit colleges, the lobbyists, such as former House majority leader Richard Gephardt, assaulted the White House, Department of Education, and the White House, reports the Times.

The Times didn't touch on one of the most interesting angles: how much money was accumulated by investors in for-profit college stocks. Throughout this year, I was saying that while Bridgepoint was a disgusting boiler room draining money from the federal government, its stock would go up. First, more than half its stock was short -- that is, the majority of investment money was hoping the stock would go down. This meant that if there was any good news -- such as the softening of proposed reforms -- the shorts would rush to cover, or buy Bridgepoint stock. That happened. The stock zoomed. How many Washington insiders raked in fat profits, knowing the rules would be emasculated and the stocks would soar? Plenty, I would bet. The manna is probably tucked away in an offshore, tax and privacy haven.