Monday Morning Cup of Coffee takes a look at news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.
Yahoo News broke a story on Sunday revealing that the Federal Reserve Bank of New York — which was the victim of a spectacular $81 million heist in February — had actually blocked 35 requests for money transfers earlier on the day of the heist, but then approved five of those transfers when they were resubmitted later.
"Of course we asked the Fed why the repetition of the names did not create red flags," the source said. "They are saying they rejected 35 badly submitted ones," the source said. But when the requests were resubmitted, they "paid five of them and stopped 30. Why? They can give no answer."
Read the whole story here.
The shockingly low job report on Friday, which showed an increase of only 38,000 for the month, was good news for no one, although it certainly appeared to put the kibosh on the Fed's chances of raising interest rates any time soon. But the report could indicate something even more menacing: despite a trillion-dollar investment by the government to finance college education, students — and the country itself — are in worse shape for it.
An article by Josh Wilson in the Wall Street Journal on Sunday outlines the problem the jobs report brings into focus.
The government helped finance tens of millions of tuitions as enrollment in U.S. colleges and graduate schools soared 24% from 2002 to 2012, rivaling the higher-education boom of the 1970s...
The government financed a large share of these educations through grants, low-interest loans and loan guarantees. Total outstanding student debt—almost all guaranteed or made directly by the federal government—has quadrupled since 2000 to $1.2 trillion today.
The grand plan to invest in "human capital" seems to have backfired, because so many of those students took out loans and then dropped out of college. With more debt but no degree, they are struggling to pay any of it back. That's ringing alarm bells for some in the administration, who see a parallel to the housing crisis.
Treasury Deputy Secretary Sarah Bloom Raskin compares the 7 million student-loan borrowers in default—and millions of others who appear on the same path—to homeowners who found themselves underwater and headed toward foreclosure after the housing crash.
The article cited recent research showing the high college dropout rate, especially among for-profit universities, and the fact that these dropouts earned less after higher education than when they started college. In addition, they had accrued an average of $8,000 to $13,000 for the privilege. Read the whole article here.
That news on the high dropout rate of for-profit colleges, and the ensuing havoc wreaked on students' post-college life, comes at a particularly bad time for presidential candidate Donald Trump amid increased scrutiny of for-profit Trump University, which offered courses in real estate investing. After days of revelations from lawsuit records against Trump U, the Associated Press reported Thursday that attorney generals from Texas and Florida, who dropped investigations against the school, received donations from the university.
Texas Attorney General Greg Abbott received $35,000 from Trump for the governor's race which he ultimately won, and Florida Attorney General Pam Bondi received $25,000 for her re-election campaign. Both public officials were considering or pursuing legal action against Trump U similar to the lawsuit filed by New York Attorney General Eric Schneiderman, according to the article.
Abbott's probe was quietly dropped in 2010 when Trump University agreed to end its operations in Texas. Trump subsequently donated $35,000 to Abbott's successful gubernatorial campaign, according to records...
Three days after Bondi's spokeswoman was quoted in local media reports as saying the office was reviewing the New York lawsuit, the Donald J. Trump Foundation made a $25,000 contribution to a political fundraising committee supporting Bondi's re-election campaign. Bondi, a Republican, soon dropped her investigation, citing insufficient grounds to proceed.
On Saturday, the AP followed up with a story that quoted former Texas Deputy Chief of Consumer Protection John Owens on the oddity of dropping what appeared to be a strong case:
According to the documents provided by Owens, his team sought to sue Trump, his company and several business associates to help recover more than $2.6 million students spent on seminars and materials, plus another $2.8 million in penalties and fees.
Owens said he was so surprised at the order to stand down he made a copy of the case file and took it home.
On Friday, Texas' current attorney general, Ken Paxton, issued a cease-and-desist order against Owens for that revelation.
(Read the take on Trump U from HousingWire's Editor-in-Chief, Jacob Gaffney, here, along with the comments, and decide for yourself if it shows that there's a communist plot among HousingWire reporters, or if real estate courses generally tend to be greed-driven.)
This week promises a host of interesting developments. Janet Yellen speaks Monday at the World Affairs Club in Philadelphia, her first opportunity to comment on the effect of Friday's job report.
Tuesday sees the last hurrah for the craziest primary season anyone can remember, and it looks like it won't disappoint, with Vermont Senator Bernie Sanders still in play in California. Other states holding primaries are: Montana, New Jersey, New Mexico and South Dakota, along with a Democratic caucus in North Dakota.
The Federal Deposit Insurance Company reported no banks closed for the week ending June 3.