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As Parents Struggle To Repay College Loans For Their Children, Taxpayers Also Stand To Lose

by Marian Wang, ProPublica.

Parents are increasingly struggling to repay federal loans they’ve taken out to help cover their children’s college costs, according to newly released federal data.

The Parent Plus program allows parents to take out essentially uncapped amounts to cover college costs, regardless of the borrower’s income or ability to repay the loan. As the cost of college has risen, the program has become an increasingly critical workaround for families that max out on federal student loans and can’t pay the rest out of pocket.

Education Department officials have long said that they simply don’t have figures on how many of the loans were in default. But the agency has finally run some numbers. The data shows that default rates, while still modest, have nearly tripled over the last four years. About five percent of loans originated in fiscal year 2010 were in default three years later. The default rate at for-profit colleges is much higher, at 13 percent.

Overall, there is about $62 billion in outstanding debt from Parent Plus, according to the new data. The average Parent Plus loan borrower owes about $20,300. The Education Department compiled the numbers at the request of a government committee that is working on new rules for the program.

As ProPublica and the Chronicle of Higher Education have detailed, the availability of easy money can put individual families in a difficult place, leaving them to choose between taking on debt that they may struggle to repay and curtailing what they believe to be their child’s best shot at building a future. (See: How the Government Is Saddling Parents with College Loans They Can’t Afford.)

The program can be a losing proposition not only for overburdened parents, but also for taxpayers when the government isn’t able to recoup what it loaned.

Consider Lisa, a New Jersey mother living on Social Security disability payments who nevertheless qualified for tens of thousands dollars in Parent Plus loans. (Lisa asked that her last name not be used.) Due to an accident that left her with partial paralysis and chronic pain, Lisa had no expectation that she would ever work again. Lisa took the loans with mixed feelings, but no regrets, determined to help her daughter get the college education that she’d never had.

Documents reviewed by ProPublica show that Lisa is now roughly $45,000 in debt. That’s even with her daughter — currently a junior — having attended a community college for a year, giving her a year’s reprieve from taking on more parent loans. This fall, Lisa’s younger child will start college as well.

“There was a part of me that was definitely terrified, because it’s something that in my lifetime I couldn’t pay back. Let’s be realistic. With what I get, there was no way,” Lisa said, on signing for the loans. But she also felt relief: “Like, ‘Wow, they’re going to give me this money so I can do something for my child.’…You’re like a lottery winner.”

Her daughter worries about the loans, having planned on paying for them anyway because she knew Lisa couldn’t.

“Honestly my mom never should have been accepted for a Plus loan,” her daughter told ProPublica. (She also asked that her name not be used.) “It’s ridiculous that they gave thousands of dollars a year to somebody who will never work again.”

To collect on defaulted loans, the government can garnish wages and Social Security checks. But the government is unlikely to get much back from Lisa, who gets roughly $700 per month from Social Security. Lisa may even ultimately qualify to get the loans discharged by the federal government. (Cancellations of debt due to severe and permanent disabilities have not been easy to get in the past, though that process has improved somewhat since we first reported on it.)

While both families and the government can face downsides for the loans going bad, colleges and universities benefit either way.

In the fall of 2011, a slight tightening of credit checks for Parent Plus caused consternation at a handful of colleges that were particularly reliant on revenue through the parent loan program. Several historically black colleges saw drops in enrollment, causing staff furloughs at some schools. EDMC, a for-profit college chain, felt the change enough to have to note it in regulatory filings, alerting investors to possible impacts on earnings.

Facing pressure from schools, the Education Department backpedaled, working with schools to reverse denials on a case-by-case basis. Secretary of Education Arne Duncan personally apologized to HBCU leaders, in particular, for how the changes were handled.

At the moment, there’s no mechanism in place that even loosely ties the performance of parent-loans back to the colleges that benefited from the borrowed dollars, the way there is for most federal loans to students.

To do that, the agency would first need to track default rates by individual colleges. A department spokeswoman said the agency doesn’t calculate those figures.

Photo by “thisisbossi” via Flickr

George Washington University Has For Years Claimed To Be ‘Need-Blind.’ It’s Not.

by Marian Wang, ProPublica.

George Washington University — which got in trouble last year for misreporting admissions data to bolster its college ranking — is making yet another confession.

The university has been misrepresenting its admissions and financial-aid policy for years, touting a “need-blind” admissions policy while in fact giving preference to wealthier students in the final stages of the admissions process, according to the student newspaper, the GW Hatchet, which first reported on the practice. Meanwhile, hundreds of academically comparable but needier students were put on the wait-list for admission because they lacked the financial resources.

Many colleges and universities like to tout “need-blind” admissions processes, or the practice of judging their applicants’ academic qualifications strictly on their merits and making decisions without factoring in applicants’ wealth. In recent years, some colleges that have traditionally been need-blind have weighed whether to become more need-aware.

Until a few days ago, the undergraduate admissions page for George Washington University stated, “Requests for financial aid do not affect admissions decisions.” That language was removed over the weekend. (Here’s the archived version.)

The updated page now explains that the admissions committee “evaluates” candidates initially without factoring in their financial need, but then considers applicants’ financial resources “at the point of finalizing admissions decisions.”

“I believe using the phrase ‘need-aware’ better represents the totality of our practices than using the phrase ‘need-blind,'” Laurie Koehler, senior associate provost for enrollment management, said in a statement to ProPublica.

“What we are trying to do is increase the transparency of the admissions process,” said Koehler.

Top GW administrators have repeatedly stated over the years that the university is need-blind. When the student newspaper in 2011 did a story about how some colleges are moving away from need-blind admissions, one administrator told the paper, “We’re still need-blind.”

It’s worth noting that the “need-blind” label can be as much about marketing as it is about giving all applicants a fair shot.

Many schools are “need-blind” but don’t actually give out much need-based aid. We recently detailed how universities, looking to boost their bottom lines, are increasingly using financial-aid dollars to attract wealthier students.

“It sounds better to people to say, ‘We’re need-blind.’ People think that’s a badge of courage,” said Matt Malatesta, vice president for admissions, financial aid, and enrollment at Union College, a small liberal arts college that practices need-aware admissions.
Unless schools pony up the aid dollars to meet students’ financial needs, touting the need-blind label isn’t particularly meaningful for students, who may simply get the offer of admission along with an offer to take on unsustainable debt.

“There are pluses and minuses on both sides of the debate,” Malatesta said in an earlier interview. “I’m not a believer that one is better than another.”

But in contrast to GW, many of the schools that have weighed the pluses and minuses of need-blind versus need-aware have done so quite publicly.

Grinnell College, for instance, announced earlier this year that after considering whether to become need-aware, it would remain need-blind for the time being — but would still look to wealthier students in the recruitment process and use merit aid to help attract them.

Wesleyan University last year took the other route, announcing it would give up the “need-blind” label and start to consider students’ financial need once its aid dollars were given out.

Both institutions are part of a handful of colleges across the country that promise to meet the full needs of all admitted students. George Washington University has not offered any such guarantee.

Earlier this year, George Washington University was featured in the Washington Post as trying to buck its “rich-kid reputation.” “I’m not going to deny we have a lot of students that come from wealthy families,” GW President Steven Knapp told the Post in April. “But we are increasingly trying to diversify, and I think we have been diversifying compared to where we were 10 years ago.”

About 13 percent of undergraduates at George Washington University receive the federal Pell grant for low-income students. That’s low, according to a recent report by the New America Foundation that also noted that the university charges its few low-income students, on average, a high net price even after grants and scholarships.

Tuition alone is more than $47,000 a year, and room and board costs another $11,000. The majority of students at the university pay less than the full sticker price, due to the university’s strategy of offering grants as discounts.

But even after grants are applied, low-income students at GW still pay a heavy price. Federal data for the 2011-2012 school year show that students at the university coming from families making $30,000 or less paid, on average, $21,000 to attend the university.

Photo: clio1789 via Flickr

The Admission Arms Race: Six Ways Colleges Game Their Numbers

by Marian Wang, ProPublica.

As college-bound students weigh their options, they often look to the various statistics that universities trumpet — things like the high number of applications, high test scores, and low acceptance rate.

But students may want to consider yet another piece of info: the ways in which schools can pump up their stats.

“There’s no question about it,” said David Kalsbeek, senior vice president for enrollment management and marketing at DePaul University. “There are ways of inflating a metric to improve perceived measures of quality.”

Some of these tweaks — such as a more streamlined application — can actually benefit students. Others serve to make the admissions process more confusing. Here’s a rundown.

1) Quickie, often pre-filled applications

Express applications — sometimes known as “fast apps,” “snap apps,” “VIP applications” or “priority applications” — are often pre-filled with some student information and require little, if anything, in the way of essays. And especially when they’re accompanied by an application-fee waiver, what’s a student got to lose? Not much, fans of fast apps argue.

The school, meanwhile, has a lot to gain. The tactic, designed to broaden the pool of applicants, can help super-charge application numbers. Drexel University and St. John’s University — the only two private colleges among the top 10 for most-applied-to colleges in 2011 — both market broadly and use fast apps.

Both schools received roughly 50,000 applications in the fall of 2011, according to U.S. News & World Report data. Both schools enroll roughly 3,000 freshmen.

Getting in more applications can also boost the appearance of selectivity. Critics contend that some schools use fast apps specifically for this purpose — luring students in to apply to institutions they hadn’t heard of and ultimately rejecting a portion of them. Neither school, when contacted, responded to requests for comment.

2) Shorter applications, Common Applications, and shorter Common Applications

Another way to get more applications is to adopt the Common Application, as nearly 500 colleges have since its inception in 1975. The form, which lets students apply to multiple schools at once, has fueled the long-term rise in applications. And as more colleges have adopted it, other schools have felt pressure to start using it too.

Many schools have long required that students submitting a Common Application include additional answers or essays. Dropping the extra requirements can result in a spike in applications. That’s what happened for Skidmore College, which saw a 42 percent jump in applications this cycle after it stopped requiring supplemental essays to the Common App. (Skidmore College’s dean of admissions did not respond to a request for an interview.)

3) Dipping into early-application pools

Another statistic schools often try to control is their “yield” — that’s admissions parlance for the percentage of students offered admission who choose to attend.

Though it’s no longer statistically factored into U.S. News’ ubiquitous rankings, yield rates are still a data point made available to prospective students. They’re also inextricably tied to acceptance rates because schools use previous yields to calculate how many students they should admit to fill a class. Schools with low yields must extend lots of acceptances, knowing many accepted students will go elsewhere.

One way to increase yields is to draw heavily from the pool of applicants who chose to apply through early action, or to encourage early decision, which is binding. At the University of Pennsylvania, for instance, nearly half of the spots in the freshman class are filled through the university’s binding early decision process.

Penn is hardly alone in leaning heavily on early decision. Many schools accept early-decision applicants at a higher rate than students who apply later. American University, for instance, accepts about 75 percent of early-decision applicants, though its overall acceptance rate is far lower.

One other thing to note: Because early decision involves committing before any financial aid is offered, it generally attracts wealthier families. Students who need financial aid or want to be able to make cost comparisons between different schools are typically advised not to apply early — which can hurt their chances.

4) Rejecting good students universities think are just using them as a backup

While opening up early-decision and early-action programs is a way for colleges to force students to demonstrate that they’re their top choice, schools use a variety of ways to divine the same information from regular-decision students as well. This is perhaps the most common — and in some ways, common-sense — method used by colleges to improve yield: simply to admit only those students who they perceive as likely to enroll.

“There are so many silent electronic footprints they’re leaving nowadays,” said Sundar Kumarasamy, vice president for enrollment management and marketing at the University of Dayton.

Kumarasamy said that his institution tracks many of these subtle signals of interest from applicants: They can tell whether individual applicants clicked to open email communications, logged into the system to check the status of an application, and not only whether they called the school, but how long that phone call lasted. If the school gets the sense that an applicant isn’t interested, that’s factored in. Kumarasamy calls it “recruiting for fit.”

The interest — or lack thereof — can ultimately mean that the school rejects some candidates who on paper are more than qualified but failed to demonstrate interest.

5) Making tests optional

One admissions trend within the past decade has been the test-optional movement. Colleges that have stopped requiring standardized test scores often cite equity and diversity as reasons to make the move, noting the strong correlation between socioeconomic status and test scores.

But going test-optional can also help universities’ stats. Critics note that in addition to attracting more applicants, the move ultimately skews the average test scores that institutions report: Lower-scoring applicants are the most likely to withhold their scores and higher-scoring applicants are the most likely to submit them.

6) Making stuff up

Some colleges actually cross the line with their creative number-crunching. Since the start of last year, five colleges have acknowledged overstating their admissions statistics: Bucknell University, Claremont McKenna College, Emory University, George Washington University, and Tulane University’s business school.

Admissions data is self-reported and no outside party is responsible for verifying it. The recent scandals involving falsified data have only come to light after colleges disclosed the problems themselves.

U.S. News‘ Robert Morse has said there is “no reason to believe that the misreporting is widespread.” But a survey by Inside Higher Ed last fall suggests that even admissions directors are skeptical of the reporting, with 91 percent of those surveyed saying believe they believe there’s more misreporting than has been identified.

Of course, some colleges resist the pressure to pump up admissions numbers. Doing so is unusual enough that it attracts notice and media coverage.

Boston College made “a strategic decision” this cycle to raise the admissions bar by adding an essay. It got the expected drop in applications — and a recent write-up in the New York Times. A handful of others, including Ursinus College, have done the same. In addition to requiring essays again, they dropped the fast app.

But for many other colleges, what’s been called the admissions “arms race” is on — with these strategically achieved statistics as the scoreboard.

Course Load: The Growing Burden Of College Fees

by Marian Wang, ProPublica.

At the University of California Santa Cruz, where tuition runs to nearly $35,000 for non-residents, students every year pay more than 30 additional fees — including a small charge for what’s billed as “free” HIV testing. Students at Oklahoma State University pay a handsome sum to attend one of the state’s flagship schools, but they are also responsible for covering 18 different fees, including a “life safety and security fee.”

The $100 “globalization fee” at Howard University is listed — without explanation — in the school’s tuition and fees brochure. A school spokeswoman said the fee “supports internationalization initiatives” such as study abroad. Students pay the fee even if they have no intention of studying abroad themselves.

Worcester State University in Massachusetts, however, might have one of the most arresting fees. Students fortunate enough to be admitted face the challenge of paying the required tuition. But before they step foot on campus, they also will be hit with a fee to, well, step foot on campus. A portion of the school’s “parking/pedestrian fee” goes to the upkeep of the sidewalks on campus.

Student fees have been something of a known irritant for years, often criticized as a kind of stealth, second tuition imposed on unsuspecting families. But such fees are still on the rise on many campuses. And though their names can border on the comical — i.e., the “student success fee” — there’s nothing funny about how they can add up.

“It’s a way for colleges to increase the cost that may not be as apparent to as many students,” said Mark Kantrowitz, a financial aid expert and the founder of finaid.org and fastweb.org. “You focus in on tuition and when you get the bursar’s bill, there are lots of little lines for all these fees, but because each is a relatively small amount, you may not notice it as much. You focus in on the big figure but not on these little figures that collectively add up to a lot.”

This week, anxious high school seniors will be opening letters and emails of acceptance or rejection. For them, there will be a mix of joy and disappointment. But for those students and their parents, there will also be an initial reckoning with the expensive, often opaque issue of college fees.

Lauren Vaughn, a senior at UMass Amherst, is also an organizer for the UMass Students Against Debt coalition. She said appreciating the collective cost of additional school fees is often critical to determining whether any particular school is, in fact, affordable.

“It does seem as though we are not informed about these fees often until it is too late,” Vaughn said, noting that such fees “can be the thing that puts some students who are financially strained over the edge.”

The federal government has made efforts in recent years to make true college costs more transparent. U.S. Department of Education data shows that in more than half the states across the country, degree-granting institutions reported that fees comprised a greater portion of combined tuition and fees in the 2010-2011 school year than they had in 2008-2009.

But fees for specific programs and courses typically get left out of that data. The same goes for fees that apply to specific pockets of students, such as honors students or international students.

Many school officials say they do their best to make sure the necessary information about tuition and fees is clear to students and their parents. But there’s no one definition that schools stick to when deciding what’s covered by tuition and what falls under fees, and the very structuring of tuition and fees can vary wildly between different schools.

“It’s all smoke and mirrors in some ways, the issue of tuition and fees,” said Terry Meyers, a professor of English at the College of William and Mary. “It seems to be one area of the academic world where no one is looking and no one wants to look too closely.”

To best appreciate how confusing — even upside-down — the world of college costs can get, consider this: At state schools in Massachusetts, where the state board of higher education has held tuition flat for more than a decade, “mandatory fees” wind up far outstripping the price of tuition. At the University of Massachusetts Amherst, the flagship of the UMass system, mandatory fees are more than six times the cost of in-state tuition.

And that isn’t the end of it: Students are then hit with still more charges — the $300 “freshman counseling fee,” the $185 “undergraduate entering” fee, and several hundred dollars more if your parents or siblings attend freshman orientation. Honors college and engineering students face still more fees.

A number of forces are driving fees upward. For public institutions, declining state support has left many schools scrambling to find other types of revenue. As well, since the notion of straightforward tuition hikes is often politically toxic, there is considerable appeal to using fees to make up shortfalls.

But it has all required ever-greater attempts at creativity. In the last few years, a number of public colleges across the country have added fees with vaguely pleasant names — “academic excellence and success fees,” or “student enhancement fees,” for instance.

Some school officials admit openly that these fees aren’t all that different from tuition.

Since 2009, students at Georgia’s public colleges have been paying hundreds of dollars a year in what are called “special institutional fees,” separate from tuition. The fees vary, depending on the campus; at the Georgia Institute of Technology, which charges the most, they now top $1,000 a year. All of it goes straight into schools’ general funds.

“The special institutional fee goes to the exact same things your tuition goes to,” said John Millsaps, spokesman for the state Board of Regents.

The charges are simply called “fees” instead of “tuition,” he said, because at a time when the state slashed funding, several classes of entering students had already been promised that their tuition would be locked in at the same rate as part of a “guaranteed tuition plan.” Calling any increase “tuition” would break that promise. The intent was also that the fee would be temporary, Millsaps said. Instead, the fees have grown on every campus.

College administrators also acknowledge that sometimes a “fee” is easier for students to stomach than a “tuition” increase — even if the difference is more about semantics than substance.

“Unfortunately, the word tuition is a little bit of a lightning rod these days,” said Colette Sheehy, vice president for management and budget at the University of Virginia. “And not just here, but in other places as well.”

This year, the university began imposing two new charges on students taking engineering courses or enrolled in the nursing school in order to better reflect the higher costs of running those programs. But rather than take the step of raising tuition on certain students, the school opted to implement the new charges as fees, as many other schools have already done. For an engineering major, the new fee typically adds up to an extra $750 per year, Sheehy said.

Within the 23-campus California State University system, six schools have adopted some form of what’s called a “student success fee” since the beginning of 2011. The annual fees, which different campuses have been using to cover a broad array of things from technology to mentoring programs to athletics, range from as little as $162 to as much as $430 a year depending on the school.

At Auburn University in Alabama, mandatory fees have been steadily increasing for several years. They now make up 16 percent of an in-state student’s combined tuition and fee costs. Part of this increase stems from self-imposed fees that students voted for because they wanted a new recreation center, said Mike Reynolds, executive director of student financial services.

But a major component of the increase is Auburn’s new $400 “proration fee,” also introduced in 2011 to make up for a loss of state support. Reynolds said the charge was labeled a fee because it was intended to be temporary.

“That fee could go away. Whether that will happen, I don’t know,” Reynolds said.

Critics suggest that some schools likely keep their fee costs fuzzy as a way of seeming more financially attractive to prospective students. But if students are still paying for the additional costs in the end, any marginal marketing benefit on the front end may engender bad feelings after the bill arrives.

“It is hard not to feel a little misled,” said one parent of a student at UMass Amherst who did not want to be quoted by name. “Yes, they are on the web somewhere, but they are not always easy to find. Unless you dig out the list and closely analyze it, you don’t realize there are all these extra expenses. Schools don’t go out of their way to publicize it.”

School spokesman Ed Blaguszewski said in an email that the school makes an effort to be clear about total costs.

“In publications and [on] our website, extensive details about the tuition, fees and the estimated overall cost of attendance are shared with students in advance,” Blaguszewski said. “Our admissions and financial aid staff believe prospective students are well informed about cost, and the info is publicly posted.”

Banks’ Lending Frenzy Left Borrowers Buried In Student Debt, Report Details

by Marian Wang, ProPublica.

 

Much like the mortgage market, the market for private student loans has gone through a big boom and a messy bust. Some banks and lenders played fast and loose with student loans, aggressively marketing them to borrowers who couldn’t afford that amount of debt, according to a new government report.

“Borrowers who took out loans at the height of the boom are still suffering from those excesses,” said Consumer Financial Protection Bureau Director Richard Cordray in remarks to reporters on Thursday. The report, released jointly by the U.S. Department of Education and the CFPB, is the government’s first major study of the murky private student loan market, for which there has long been little regulation or reliable data.

American borrowers currently owe more than $150 billion in private student loans, according to the report. Default rates soared in the years since the financial crisis, and more than $8 billion in private loans are in default.

In the run-up to the financial crisis in 2008, the boom in risky private student loans was fueled by Wall Street investors’ demand for securities backed by bundles of student loans, the report said. See this graph, which draws from proprietary loan data collected from major lenders:

After the crisis, investor interest in all manner of loan-backed securities — including student-loan-backed securities — collapsed. And with less packaging and reselling of loans to fund the creation of new loans, the private student loan market has since dialed back and raised its lending criteria.

The result: private loans are now much harder for borrowers to get.

According to the report, more than 90 percent of the dollar amount of private student loans originated last year were co-signed — so if the primary borrower is unable to repay the loan, the cosigner will also be responsible for payment. That’s up from 55 percent in 2005.

Much of what the report describes — private student loans originated by financial firms often for immediate sale and securitization — is helpful context for understanding the quandary of many borrowers and their cosigners.

In June, we detailed the plight of Francisco Reynoso, a gardener in California who cosigned on several private student loans for his son between 2005 and 2007 — in the very heyday of the lending boom. His son later died in a car accident and now the bereaved father is saddled with the debt. Since his debt was resold several times over, its not even clear to whom Reynoso owes the money or may appeal to for forgiveness.

“For the relatively high number of [private student loan] borrowers currently having difficulty with repayment, it is hard to avoid default and equally hard to escape it, as compared to options available to federal borrowers,” the report explains.

Federal loans offer more flexibility and protections than most private loans — such as deferral and forbearance options or lenient repayment plans for low-income borrowers. Federal loans also are discharged if the borrower dies or suffer permanent disability. (See our reporting on the federal system for disability discharges.)

Some private student lenders, within the past year, have started to offer fixed-rate student loans, touting interest rates that are in some cases competitive with federal rates. But as Education Department and CFPB officials note, these loans are only a good deal for borrowers with exceptional credit who can qualify for the lowest interest rates and are willing to forgo the additional protections offered by federal loans.

Check out the full report. And if you’re a borrower who sees your own student loan story mirrored in this report, email us at education@propublica.org to let us know.

You can also check out the CFPB’s new tool if you’re struggling with your loan payments, or file a complaint with the agency for problems specific to private student loans.

 

School Of Hard Knocks: Fed Education Data Shows Racial Disparities, Unequal Opportunity

by Marian Wang, ProPublica

 

Schools serving the most black and Hispanic students are less likely to offer rigorous subjects such as calculus and physics and more likely to employ teachers with only a year or two of experience. Those findings come from a new data analysis by the U.S. Department of Education’s Office of Civil Rights.

Later today, the department will be releasing the survey data underlying this analysis 2014 the 2009-2010 Civil Rights Data Collection, which contains a wide range of school-level statistics covering course offerings, teacher salaries and absenteeism, student discipline and student outcomes.

Among the findings highlighted by the Education Department:

  • Black students were more than three times as likely to be suspended or expelled relative to their white counterparts. Racial disparities in discipline, of course, have been reported before, but according to the department’s analysis, this trend held true across all districts in the sample.
  • White and Asian students were disproportionately overrepresented in gifted and talented programs — comprising nearly three-quarters of enrollment in such programs — while black and Hispanic students were disproportionately underrepresented.
  • Students with disabilities comprised only 12 percent of students in the sample, but were an overwhelming majority of students subjected to physical restraint.

This data release from the department builds on the same dataset we used for ProPublica’s Opportunity Gap project last year, which highlighted the link between poverty and unequal access to high-level courses across the nation.

The newest data has not yet been independently verified, so in the coming weeks, we’ll be cleaning, cross-checking, and incorporating it into our interactive schools app. Meantime, you can check out how we did it the last time around and play around with the app, which we aim to have updated soon.

Fight Over Obama’s Recess Appointments Puts Stranglehold on Key FinReg, Labor Nominees

by Marian Wang ProPublica, Dec. 20, 2011, 2:39 p.m.

 

It’s no secret that Republicans don’t like the idea of President Obama exercising his power to make recess appointments. As we noted [1] earlier this year, they’ve repeatedly used a procedural move to block the president from making this sort of temporary appointment, even though it’s a presidential power laid out in the Constitution. (Of course, the tactic isn’t specific to Republicans — Democrats used it too under the Bush administration.)

But now, as winter recess approaches, Senate Republicans have been trying a different tactic: holding up other appointments as a bargaining chip [2]. Senate Minority Leader Mitch McConnell has pledged to block the confirmation of three uncontroversial nominees for key banking regulator positions. Here’s how the Wall Street Journal described those nominees and what positions they’d fill:

The three nominees — Martin Gruenberg, Thomas Hoenig and Thomas Curry — would be charged with implementing last year’s Dodd-Frank financial-overhaul law, which imposes a raft of restrictions on the financial industry. They are expected to take a tough line on the nation’s largest banks, in a climate where both political parties are increasingly embracing to efforts to rein in the power of the nation’s largest financial institutions.

All three of Mr. Obama’s nominees have long histories as regulators and there was little controversy at their confirmation hearings.

At the heart of the standoff are fears that President Obama will use recess appointments to fill key vacancies in the new Consumer Financial Protection Bureau — a consumer watchdog agency that the GOP believes has too much power — and the National Labor Relations Board, the government’s independent arbiter of labor disputes.

Earlier this month, Republicans blocked the nomination of former Ohio attorney general Richard Cordray to head of the CFPB, though other Republicans have praised his qualifications [3]. Keeping the agency without a director, as we’ve noted [4], limits its powers over payday lenders, certain mortgage servicers, and other under-regulated parts of the financial industry.

They’ve also asked President Obama not to use recess appointments [5] to fill vacancies on the NLRB, which after December 31st essentially will cease to function because it will have too few members [6] to issue regulations and decide cases.

Republicans have targeted the federal agency [7] for the better part of the year [8], and a group of GOP lawmakers wrote a letter to the president this week, warning that if Obama makes recess appointments to the NLRB, it would set a “dangerous precedent” that could “provoke a constitutional conflict.”

But why that is isn’t exactly clear. President George W. Bush managed to seat more than a half dozen nominees [9] at the NLRB through recess appointments. And overall, President Obama has made somewhat fewer recess appointments than his predecessors — 28 so far, according to a recent Congressional Research Service report [10]