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View Diary: HI-Sen: Brian Schatz (D), "I stand with Senator Warren & Students" (10 comments)

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  •  Although the Fed rate of .75% is a gimmick (0+ / 0-)

    (because that rate is for short term (30 days or less) loans I fully support both Senators even though we would have to subsidize those student loans to accommodate longer repayment periods.

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Mon Jun 10, 2013 at 04:19:51 PM PDT

    •  Yes, but can you think of a more worthy cause (0+ / 0-)

      to subsidize than educational opportunities for the leaders, teachers, doctors, scientists, engineers, etc. of tomorrow, because I cannot.

      "Too often we enjoy the comfort of opinion without the discomfort of thought." - John F. Kennedy -7.8., -6.6

      by helpImdrowning on Mon Jun 10, 2013 at 06:15:31 PM PDT

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    •  This is a gimmick as you note (0+ / 0-)

      Fed loans to member banks are for 30 days or less and are backed by 100% collateral. The notion that the same rate should apply to student loans is comical.

      However, the Fed has never made direct loans to a department of federal government. All of its federal government loans are done through the purchase of Treasury securities at market rates. Why would the Fed even consider participating in this idea? The Fed receives no funds from any government source and is free to set the terms of its loans. Congress can't force the Fed to make these loans and I don't think the Fed would agree. In addition, how would the capital markets react if they though that Congress could set monetary policy by dictating the terms of Fed loans?

      I support subsidizing student loans but the Warren idea makes no sense. The all-in costs to the federal government for student loans is 6-7%, so anything less than that is the amount of the subsidy.

      "let's talk about that"

      by VClib on Mon Jun 10, 2013 at 06:25:40 PM PDT

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      •  So we give a break to banks but not students? (0+ / 0-)

        The U.S. government can use its money supply to shape the kind of country we want.

        I'm assuming that there is a LOT more value in educating our kids than creating huge profits by bailing out the banks who crashed our economy.

        But that's just me....

        •  It's not "we" the Fed is independent (0+ / 0-)

          Neither the executive branch or Congress can dictate to the Fed the terms and maturity of its loans. It only loans to the Federal government through the purchase of Treasury securities that are open market transactions. The federal government can't borrow at the overnight rates provided to member banks. The Federal Reserve is completely independent. Why would it loan any money to the Department of Education at a huge discount rather than the Treasury Department at market rates? If you were on the board of governors of the Fed why would you even consider it? It would be a breach of the Fed's independence and a violation of their fiduciary duty.

          It's a clever gimmick by Warren with the hopes that the student loan interest rate can stay in the 3-4%, by suggesting something less than 1%.

          "let's talk about that"

          by VClib on Tue Jun 11, 2013 at 12:21:23 PM PDT

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