Submitted by Higher Ed Veteran on March 27, 2008 - 12:21pm.
Not only were lenders short-sighted in relying too much on the auction-rate securities markets, several of the non-profit and state loan agencies may have trouble getting back into these and other capital markets if potential investors take a closer look at their offerings and operations.
VSAC, for example, in its July, 2006, offering, casually omitted telling investors what would happen in "other than an auction rate mode" and misleadingly referred to private loans in the offering as "statutory loans." VSAC gave no assurances that the mix of loans would not subsequently be changed to the disadvantage of investors. That's hardly reassuring.
Others experiencing market failures have not been models of probity or transparency. PHEAA, Iowa Student Loan, and Montana tried to operate out of public view until forced to open their records. PHEAA is in trouble with the federal inspector general and its state auditor general. Iowa is under scrutiny from its attorney general. Brazos is organized opaquely, which may hurt its efforts to return to the markets. All of this came before CCRAA. Congress is likely to re-regulate the lending industry as a response to the sub-prime crisis. The student loan industry must be included, as opposed to undoing CCRAA and throwing good money after bad.
Providing Student Loan Capital
Not only were lenders short-sighted in relying too much on the auction-rate securities markets, several of the non-profit and state loan agencies may have trouble getting back into these and other capital markets if potential investors take a closer look at their offerings and operations.
VSAC, for example, in its July, 2006, offering, casually omitted telling investors what would happen in "other than an auction rate mode" and misleadingly referred to private loans in the offering as "statutory loans." VSAC gave no assurances that the mix of loans would not subsequently be changed to the disadvantage of investors. That's hardly reassuring.
Others experiencing market failures have not been models of probity or transparency. PHEAA, Iowa Student Loan, and Montana tried to operate out of public view until forced to open their records. PHEAA is in trouble with the federal inspector general and its state auditor general. Iowa is under scrutiny from its attorney general. Brazos is organized opaquely, which may hurt its efforts to return to the markets. All of this came before CCRAA. Congress is likely to re-regulate the lending industry as a response to the sub-prime crisis. The student loan industry must be included, as opposed to undoing CCRAA and throwing good money after bad.