Does the Messenger Matter?

Sen. Tom Harkin (D-Iowa) began what many foes of for-profit higher education consider long-overdue Congressional scrutiny of the sector here late last month with a hearing questioning the business model, student value proposition and role of federal funding at for-profit colleges.

But some of the loudest shouting surrounding Harkin’s inquiry as chairman of the Senate Health, Education, Labor and Pensions Committee is not about any of those substantive issues. Rather, it’s about Harkin’s decision to include Steven Eisman — an investor who has bet that higher education stocks will tumble in the coming months — on the panel of witnesses at the hearing and in the senator’s attempts to line up support for a stringent examination of for-profit higher education.

In a statement, Harkin said he has relied on Eisman because “he is a well respected analyst with a track record of making unpopular, but correct, observations about American industries.”
Either directly or indirectly, Eisman and other short sellers — people who make investments betting that a certain stock price will fall — have been lobbying Congress and U.S. Department of Education officials for months, seeking out greater regulation while not necessarily being being transparent about their financial interests. Some are also said to be behind news stories and whistleblower lawsuits against the sector with the idea that bad publicity — and tougher federal regulation — will drive down higher education stock prices and help short sellers rake in profits.

In at least one instance, reported last week by ProPublica, a woman working for an investment firm sought out signatures of homeless shelter workers for a letter to Education Secretary Arne Duncan that decried for-profit colleges’ alleged recruiting of homeless students. The signatories said they didn’t know that the woman worked for an investment firm and most said they had no firsthand knowledge of recruiting in homeless shelters. The woman has not revealed who she was working for, though Eisman denies she worked for him.

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