Coburn: Education Department ‘tipping hedge funds’ on for-profit colleges

Oklahoma Republican Sen. Tom Coburn blasted the Education Department Wednesday for what he called “very significant inappropriate behavior in tipping hedge funds on short selling private education” and called on a key Senate panel to investigate the matter.

Coburn was referring to documents released last week by Citizens for Responsibility and Ethics in Washington (CREW), a watchdog group that has called for federal authorities to investigate market manipulation by famous Wall Street short-seller Steven Eisman.

Coburn said the charges even could result in jail time for Education Department officials.

“Utilization of facts in the Department of Education in advantaging investors in one segment to make significant dollars over something the government’s thinking about doing is highly unethical and if proven to be the case, some people ought to be going to jail in the Department of Education,” Coburn said at a Homeland Security and Government Affairs Committee hearing.

Justin Hamilton, a spokesman for the Education Department, defended his agency’s work. “We have been committed to integrity and transparency and are very proud of the process we’ve put in place in our efforts to help protect students and taxpayers,” Hamilton said in an interview.

Coburn was referring to documents obtained by CREW that show collaboration between top Education Department officials and Wall Street short sellers hoping to profit from the demise of the for-profit college sector.

At issue is a push by the Education Department to strictly regulate for-profit colleges, including many “career” colleges that prepare students for a specific vocation.

Critics of the schools say they trick unprepared students into enrolling with false promises of high wages from the jobs they’ll get after graduation.

Industry representatives say the charges are overblown and warn the regulations will decimate the sector, rather than reform it.

The regulation at issue is still being finalized at the Education Department.

The House passed an amendment denying funding for the regulation in its continuing resolution bill, but whether the rider is included in the final deal between the House, Senate and President Obama remains in question.

  • Pingback: The Other For-Profit College Scandal | Cato @ Liberty

  • MRichardson

    Another hearing on for profits only points to the conspiracy against for profit colleges. The real conspiracy is the role of Short Sellers like Steve Eisman’s collusion with the Obama Administration. In a new complaint to the SEC, “I know you cannot respond,” Eisman wrote July 19 to a top Education bureaucrat, “But just fyi. Education stocks are running because people are hearing DOE is backing down from gainful employment [regulations].” Eisman’s email was forwarded to a top aide to Education Secretary Arne Duncan, Phil Marten, with the request, “Let’s discuss.”
    Read more: http://dailycaller.com/2011/03/01/crew-pushes-sec-to-investigate-short-seller-obama-administration-partnership-on-education-regs/#ixzz1FXu5nrgN

    • Parx

      The DC article you linked has this: “Trading on inside information about the government’s regulatory actions is not illegal.”

      I certainly don’t know if that’s true or not, and I don’t know what Mr. Eisman said, but IIRC, Mr. Eisman foresaw the mortgage market collapse. If he was called to give his views on why he believes the student loan market was headed for the same fate, that would make perfect sense to me.

      I also don’t know if these for-profit colleges are issuing worthless degrees, but they certainly wouldn’t be the only ones. At issue would appear to be the entire concept of government-backed student loans, and if that is as fragile as government-backed mortgages. They both appear to violate the law of unintended consequences. Costs are inflated, loans defaulted at a high rate, and collapse becomes imminent.

      If there are other views, I would very much like to hear them.

      –Mr. P.

  • Kurtis D. Davis

    Thanks for the article Mr. Strong. And we should all be thankfull for the Honorable Senator Tom A. Coburn, M.D. This man is a gentleman, husband, father, medical doctor, and successful businessman. He is offering sound leadership which will help restore fiscal discipline to our government, thus helping preserve the value of currency for all of us. In order for our fiat currency to maintain purchasing power, it must be properly managed—the Senator is providing that management which is required.

  • http://www.facebook.com/people/Rush-Youngberg/1695695248 Rush Youngberg

    Let the market place determine which programs and schools go out of business. Subject them to the same lawsuits of misrepresentation and so forth that already exist. Get the U.S. government out of regulating and taking over yet another segment of the private sector.

  • Dakota54

    If Paul Ryan is looking for a quick $80Billion in savings…here is a quick remedy. What good are they?

  • truebearing

    Defund the Department of Education. They don’t educate, they indoctrinate.

    Make all schools subject to efficacy standards that are comprised of input from the various places that hire the graduates. Publish the results and the education providers will suddenly start producing relevant educations at affordable costs, or they’ll die.

    This is just more evidence of the cancer that is the left. As with all things they corrupt, their goal is to turn education into an instrument of indoctrination for the single purpose of totalitarian political power.

  • adamincalifornia

    Some may not realize why the democrats are making a war on vocational for-profit education : money.

    A quick look at population trends shows the number of college age students is about to start falling off. Rapidly. This while 4 year universities receive unprecedented federal subsidies both directly and via student aid. Couple those facts with the fact that university educations have outpaced inflation for over 20 years while receiving more and more federal money.

    Rather than allow all of that to collapse with a fall off in students, these 4 year universities want the competition shut down. Eliminated. Outlawed.

    At stake are the jobs of a huge contribution base to the democrats – universities give a lot to campaigns and they give $7 to democrats for every $1 to republicans. 7 to 1. Over $50 million dollars in 2008 alone.


    That is why they want to destroy vocational education – so your kid has to go to college, has to sign up for outrageous loans and pay hundreds of thousands of dollars to get a piece of paper that says he is educated. And the quality of that education? the ability to get a job with that degree? the department of education isn’t trying to regulate that – only the vocational schools.

    • truebearing

      Good points, all.

    • GeniousIQ

      And I can’t even count how many people I know who went through one of these vocational schools who can’t even use their degree because it’s not worth the paper it’s printed on. These vocational schools have among the highest rates of student loan defaults because many people coming out of them are simply not employable.

      • Jess Thinkin

        GeniousIQ, Not only have you demonstrated that you can’t spell, but now you admit you can’t count! Keep posting though, I have hope that you’ll make a breakthrough one of these days and stumble on a kernel of quantifiable rational thought.

  • barryaz

    As long as the Senator is calling for jail time for these inside traders and Wall Street manipulators, I hope he feels the same way towards those who work at Goldman Sachs and those other lying cheaters, fellow congress members, who have brought this economy down.

  • notalone

    Good for Senator Coburn. This is definitely a reason to get rid of the Department of Education and the unions and stop throwing away taxpayer dollars when our kids are left behind totally. Stop funding the Race to the Top programs which only line the pockets of the administrators and it needs to be stopped and I hope Coburn is serious about this.

  • alpha_male

    Sounds like just another reason to disolve the Dept of Education.

    • Iowa48

      “another reason to disolve the Dept of Education”???
      Can you give me one reason why this $77Billion Boondoggle even exists
      in the first place?

      • Brutus2

        The department only exists as Jimmy “Malaise” Carter’s payoff to the Teacher Unions that elected our previously Worst President in History. It’s continued existence is attributable to the cowardice of regular Republican majorities since that time.