{"id":8426,"date":"2011-01-25T11:41:44","date_gmt":"2011-01-25T16:41:44","guid":{"rendered":"http:\/\/cfif.org\/v\/freedom_line_blog\/?p=8426"},"modified":"2011-01-25T11:48:56","modified_gmt":"2011-01-25T16:48:56","slug":"collegegate-wall-street-journal-details-traders-meetings-with-education-department-officials","status":"publish","type":"post","link":"https:\/\/cfif.org\/v\/freedom_line_blog\/8426\/collegegate-wall-street-journal-details-traders-meetings-with-education-department-officials\/","title":{"rendered":"“Collegegate” – Wall Street Journal Details Short Sellers’ Meetings with Education Department Officials"},"content":{"rendered":"

The festering “Collegegate” saga that CFIF has been following for weeks today reached front-page status in The Wall Street Journal<\/em>.<\/p>\n

We’ve detailed the allegations of insider trading<\/a> against career colleges, which prompted Senators Tom Coburn (R – Oklahoma) and Richard Burr (R – North Carolina) to ask whether officials within Obama’s Department of Education, \u201cmay have leaked the proposed regulations to parties supporting the Administration\u2019s position and investors who stand to benefit from the failure of the proprietary school sector.\u201d\u00a0 We also detailed how the Government Accountability Office (GAO) withdrew, then revised and republished<\/a> a defective study originally released last summer involving undercover \u201cstudents\u201d sent to capture information on for-profit colleges.\u00a0 The GAO\u2019s revisions all slanted in one direction \u2013 the original report inaccurately cast career colleges in an unfavorable light, while the revisions indicate that the GAO\u2019s undercover students may have intended to entrap career college admissions personnel.\u00a0 According to the GAO\u2019s own estimate, only 1 percent of reports require correction, and the statistical likelihood that all<\/em> of its flaws skewed in the same direction (unfavorably toward for-profit colleges) was 1 in 65,536<\/a>.\u00a0 Tellingly, the stock value of for-profit colleges reportedly fell 14%, or $4.2 billion<\/a>, following the GAO report.<\/p>\n

Now, under the headline “A ‘Short’ Plays Washington,”<\/a> the Journal<\/em> exposes how hedge fund operators sold short their stocks in for-profit career colleges, and sought meetings with federal officials at the Department of Education:<\/p>\n

‘Hello, my name is Steven Eisman,’ began an email to an Education Department official in May.\u00a0 ‘I wanted to bring to your attention many of the unsaid or unknown aspects of this industry.’\u00a0 Mr. Eisman runs a hedge fund called FrontPoint Financial Services, whose hugely profitable 2007 bet that housing would collapse was chronicled in the book ‘The Big Short.’\u00a0 In the past year, Mr. Eisman has sold short the stocks of for-profit education companies.\u00a0 He and some other investors betting on these stocks to fall have sought meetings with Education Department officials, and in some cases gotten a hearing.\u00a0 In emails and presentations, the investors have painted the for-profit industry in a highly critical light.”<\/p><\/blockquote>\n

The Journal<\/em> also quotes Citizens for Responsibility and Ethics in Washington (CREW), which wrote Obama’s Education Secretary Arne Duncan that hedge fund managers were able to secure “direct and sustained input into the regulatory process.”\u00a0 “In what the group called ‘more troubling,'” the article states, “it said Education Department officials sought and received investors’ input despite knowing their financial motives.”<\/p>\n

Career colleges have flourished for good reason.\u00a0 They offer an education focusing on hands-on occupational training, and excel at serving non-traditional students who often have children, are working, are typically older and are more diverse than their peers at traditional schools.\u00a0 This is particularly important during the current period of job scarcity and worldwide economic competition.\u00a0 Unfortunately, the Obama Education Department seeks to cripple them by declaring them ineligible for federal aid.\u00a0 CFIF has formally petitioned<\/a> House Committee on Oversight and Government Reform Chairman-Elect Darrell Issa (R \u2013 California) to investigate the Obama Education Department\u2019s continuing campaign against for-profit colleges, and that investigation is underway<\/a>.<\/p>\n

We at CFIF do not begrudge any citizen’s First Amendment right to petition the federal government for redress of grievances.\u00a0 It is important, however, that the new 112th Congress ensure that these troubling allegations don’t reveal impropriety within the government itself.<\/p>\n","protected":false},"excerpt":{"rendered":"

The festering “Collegegate” saga that CFIF has been following for weeks today reached front-page status in The Wall Street Journal. We’ve detailed the allegations of insider trading against career colleges, which prompted Senators Tom Coburn (R – Oklahoma) and Richard Burr (R – North Carolina) to ask whether officials within Obama’s Department of Education, \u201cmay […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[2105,2193,2106,2149,1065,2146,2107,2333,2169,2334],"class_list":["post-8426","post","type-post","status-publish","format-standard","hentry","category-posts","tag-burr","tag-career-colleges","tag-coburn","tag-collegegate","tag-department-of-education","tag-education-department","tag-for-profit-colleges","tag-hedge-funds","tag-issa","tag-short-sellers"],"_links":{"self":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/8426","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/comments?post=8426"}],"version-history":[{"count":7,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/8426\/revisions"}],"predecessor-version":[{"id":8435,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/8426\/revisions\/8435"}],"wp:attachment":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/media?parent=8426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/categories?post=8426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/tags?post=8426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}