Thursday, March 15, 2007

New York Next State to Ask for Student Loan Sunshine

Attorney General Andrew Cuomo warned schools to immediately disclose their conflicts of interest in choosing preferred lenders:

“There is an unholy alliance between banks and institutions of higher education that may often not be in the students’ best interest. The financial arrangements between lenders and these schools are filled with the potential for conflicts of interest. In some cases they may break the law.”
Among the offenses catalogued are
Kickbacks, free trips to Pebble Beach, lines of credit, outright payments , and call centers so that when you call up the school's financial aid office, you actually get the lender.
Similar to stuff that's been unfolding recently in Pennsylvania.

1 comment:

Anonymous said...

From the NY Times:

Two years ago, Andrew M. Cuomo put more than half of his campaign treasury into a hedge fund, making him one of the few New York politicians to invest campaign money in anything riskier than a sure bet.

In the case of Mr. Cuomo, the Democratic candidate for attorney general, the hedge fund was directed by one of his largest financial backers, a man who also handled Mr. Cuomo’s personal money. The investment of $750,000 turned out to be all upside, with a return of nearly 20 percent after one year.

Mr. Cuomo’s experience is a rarity in an arena where most campaigns, focused on their short-term needs, keep their money in conservative vehicles like savings accounts.

Investing campaign money in hedge funds also presents special concerns, government watchdogs say, because of their unregulated nature. Given the secrecy of such funds, who can say, they ask, whether a high return reflects a smart bet or simply a campaign supporter’s efforts to evade contribution limits by padding the return of a favored campaign account.

"There’s no way to know what’s going on with a hedge fund," said Fred Wertheimer, president of Democracy 21, a Washington-based nonpartisan group that works to reduce the influence of money in politics. "The candidate knows, and the hedge fund manager knows, but the public doesn’t."

In Mr. Cuomo’s case, one of the hedge fund’s three founders, his wife and officers of the fund — known as EnTrust Capital Partners L.P. — have donated nearly $175,000 to the last two Cuomo campaigns.

Mr. Cuomo’s campaign said that the EnTrust fund was "low volatility," adding that Mr. Cuomo had not received any guarantee of positive returns.

Wendy Katz, a spokeswoman for the campaign, wrote in an e-mail message to The New York Times, "The rationale for investing campaign funds in a hedge fund is the same rationale employed by nonprofits, universities (for example, Harvard and Columbia), state and city public pension funds and charitable foundations for investing in hedge funds, which is to grow the asset and maximize returns."

The Cuomo campaign, however, was given special consideration by EnTrust. It gave the campaign one of 35 slots in the fund that federal regulations allow for investors who do not meet minimum total asset requirements, which in the case of the campaign would generally be $5 million. EnTrust also waived its usual minimum investment requirement of $1 million.