There is increasing concern about the role that Wall Street investors, who have no in expertise in education policy, are now playing in regulatory process.
Over the past few months, Citizens for Responsibility and Ethics in Washington, the government watchdog group I started in 2003, has been criticized for questioning whether government officials should be consulting with Wall Street investors on the regulation of for-profit colleges. (A question also asked by the generally Wall Street-friendly Wall Street Journal) CREW, which also has no expertise in education policy, is taking no position here with regard to these regulations.
But questions remain. Short-sellers are Wall Street investors who bet substantial amounts of money that the stocks of publicly traded companies — in this case for-profit colleges — will plummet.
This means short-sellers may well have strong financial incentives to do or say things that might depress the stock of for-profit colleges, and in turn, increase short-sellers’ profits. These investors are not public servants, and the public interest is not their primary concern.
In June, 2010, the famed short-seller Steve Eisman appeared before a Senate committee to discuss the for-profit education industry. Given that Eisman has no background in education policy, this seemed odd and we sent two letters (here and here) to Sen. Tom Harkin (D-Iowa) questioning the witness choice.
These concerns were buttressed when the nonprofit investigative reporting site ProPublica exposed that short-sellers used underhanded methods to secure support for regulation of for-profit colleges. A woman working for a hedge fund, for example, failed to identify her employer and provided misinformation to nonprofits to persuade them to sign a letter to Education Secretary Arne Duncan that called for stronger regulations.
It occurred to us that Eisman and other Wall Street investors also might have contacted officials at the Department of Education to weigh in on regulations of for-profit colleges. The Education Department refused to respond to our Freedom of Information Act (FOIA) request. We then sued for access to the records.
This lawsuit forced Education to release records revealing that Wall Street short-sellers have had extensive contacts with high level department officials. In addition, a Government Accountability Office report strongly critical of for-profit colleges turned out to be so inaccurate that it had to reissue it, correcting a remarkable 16 of the report’s 28 findings.
So as it turns out, CREW’s concerns are well-founded. Wall Street investors are making money by insinuating themselves into the Department of Education’s regulatory process. This should worry all Americans — because logic dictates that Eisman is not alone. Or, if he is, he won’t be for long.
Yet, none of these facts seem to matter to those on the left, for whom regulation of for-profit colleges has become a totemic issue. Campus Progress, an arm of the Center for American Progress seems to have blurred the lines between political advocacy and journalism by allowing staff members to present themselves as journalists writing objective articles, but then churning out vitriolic “stories.”
This, of course, is a tactic widely and legitimately deplored by the left when used by Fox News personalities like Sean Hannity and Glenn Beck.
Campus Progress also appears to be funding an ad campaign on MSNBC and Fox to promote these regulations. The group has, in the past, suggested scurrilous profit motive on the part of those who deviate from its own position. But it’s worth noting that major ad campaigns require major donors.
Since the founding CREW in 2003, individuals on both sides of the political spectrum have lavished praise or heaped scorn on us when it suits their means. I have been commended by progressives for my work exposing the misconduct of Republicans like former House Majority Leader Tom DeLay (R-Texas), and others who abused their positions. These actions have led to strong denunciations from the right.
Yet now, because CREW is questioning the propriety of education officials consulting with Wall Street investors, some on the left are attempting to undermine my credibility using the same tactics that the right employs.
Neither political party is immune to unethical conduct. CREW always has been, and remains, a nonpartisan organization that calls things as we see them. If that angers activists on the right or the left, so be it. It must mean CREW is doing a good job.