Erika Eichelberger

Erika Eichelberger


Erika Eichelberger is a reporter in Mother Jones' Washington bureau. She has also written for The NationThe Brooklyn Rail, and TomDispatch. Email her at eeichelberger [at] motherjones [dot] com. 

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Elizabeth Warren: Why is the Government Backing Expensive Private Student Loans?

| Mon Jun. 24, 2013 4:00 PM EDT

On Monday, Sen. Elizabeth Warren (D-Mass.), demanded that Ed DeMarco, the head of the Federal Housing Finance Agency (FHFA), justify why his government agency is supporting the super-high-interest rate private students loans that are drowning many Americans in debt.

For the past few years, one of the Federal Home Loan Banks that DeMarco's agency oversees has been funding Sallie Mae, the largest provider of private student loans in the country. Warren wants DeMarco to explain why.

The Federal Home Loan Banks were "intended to bolster the banks' support for the housing market—not to be a backdoor way to subsidize highly-profitable private student lenders," Warren wrote in a letter to DeMarco sent Monday. "It is deeply worrisome that the Federal Home Loan Banks may be undermining their mission by extending billions of dollars in cheap credit to private student lenders."

Sallie Mae has an $8.5 billion credit line from one of the FHL Banks at an interest rate between 0.23 and 0.34 percent. But Sallie Mae charges students taking out loans a rate that is 25 to 40 times higher. Sallie Mae "was able to borrow at less than one-quarter of one percent interest because the government's sponsorship of the Federal Home Loan Banks allows them extraordinarily cheap access to capital," and yet took in about $2.5 billion in student loan interest last year, Warren noted.

In the letter, Warren asked for documentation detailing FHL banks' funding of Sallie Mae and other private student lenders, and any analysis the FHFA has on the impact of student debt on homeownership. (A Consumer Financial Protection Bureau report found that student loan debt is a huge barrier for Americans trying to buy their first homes.)

Total student loan debt in this country currently stands at close to $1 trillion. Most of that is federal student loan debt, not private, which means those loans have lower interest rates. But that may change soon; student loan interest rates are scheduled to increase from 3.4 percent to 6.8 percent on July 1. Members of Congress—including Warren—and the president have come up with a bunch of different schemes to avoid that interest-rate jump; Warren's year-long fix would give students the same close-to-zero rate that banks pay to the Federal Reserve for short term loans. But no deal is nigh.

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GOPers Want to Keep Food Stamps From People Who Have a Cheap Car or $2,000 in Savings

| Thu Jun. 20, 2013 5:50 AM EDT

If Republicans in the House get their way, poor people who have a couple thousand dollars in savings or a modest car would not be able to receive food stamps.

On Friday, the House will vote on its version of the farm bill (a giant piece of legislation that provides federal funding for nutrition programs and farm subsidies), which calls for over $20 billion in cuts to the government's food stamp program, known as the Supplemental Nutrition Assistance Program, or SNAP. Part of the way the bill would accomplish this savings is through an amendment backed by Reps. Paul Ryan (R-Wis.) and Frank Lucas (R-Okla.) that would force states to make food stamp applicants undergo "asset tests" to show that they do not have more than $2,000 in savings, and do not own a car worth more than $5,000.

"Forcing families to choose between a small emergency cushion and putting food on the table is beyond counter-productive," Reid Cramer, director of the New America Foundation's Asset Building Program, said in a statement Wednesday. The program advocates for policies enabling low-income Americans to save. "We're forcing them to accept long-term poverty in exchange for short-term assistance," Cramer says.

To be eligible for food stamps, you have to take in less than $931 a month; a family of four must a have a net income of less than $1,921. Individuals can receive about $200 in food stamps per month—or $50 a week—enough for bare bones groceries. Despite Ryan's talk of the government safety net "hammock" that "lulls able-bodied people into lives of complacency and dependency," people don't get stuck in poverty because the food stamp program is so generous, but rather because of policies like asset tests that force people to live on the margins. Jennifer Brooks, director of state and local policy for the Corporation for Enterprise Development, and Jeremie Greer, the group's director of government affairs, explain at The Hill:

The Congressional Budget Office (CBO) estimates that 1.8 million people would lose food assistance if [asset tests are required].  Most of these would be low-income seniors and working families with children. These families typically live paycheck to paycheck. Denying them the ability to save for emergencies, such as fixing a car, or unexpected expenses, such as buying a uniform for a new job, only makes them more dependent on government resources, not less.

More Americans than ever live in poverty. And millions more subsist on the margins. 3.6 million people make the minimum wage these days, up from 1.7 million in 2007, and the minimum wage is at a thirty-year low. Food stamps play a big role in keeping many out of extreme poverty (which is defined as living on less than $2 a day). 

So, it's a good thing that the asset test provision is unlikely to become law. It has a bad track record, for one: Thirty-six states have done away with their asset tests, and five others have raised the asset limit. In May, the Senate rejected an asset test amendment to its version of the farm bill (which cuts food stamps by $400 million a year). And President Barack Obama has threatened to veto the entire House GOP farm bill, because he objects to the massive food stamp cuts.

VIDEO: Elizabeth Warren Opposes Obama's Nominee for Trade Representative

| Wed Jun. 19, 2013 4:23 PM EDT

Update: On Wednesday evening, the Senate approved Michael Froman as US Trade Representative by a vote of 93 to 4. Sen. Elizabeth Warren (D-Mass.) voted against him, as did Sens. Carl Levin (D-Mich.), Joe Manchin (D-W.Va.), and Bernie Sanders (I-Vt.). Sen. Barbara Boxer (D-Calif.) voted present.

Sen. Elizabeth Warren (D-Mass.) asked her colleagues Wednesday to oppose Michael Froman, President Barack Obama's pick for US Trade Representative, charging that he is not committed to giving the American public information about a sweeping trade deal now being negotiated between the US and 11 other countries.

The massive free trade agreement, called the Trans-Pacific Partnership, would affect everything from intellectual property rights, to product safety standards, to financial regulations. Many lawmakers criticized the previous trade representative, Ron Kirk, for the secrecy surrounding the deal; certain members of Congress can see the proposed text of the deal, but the public cannot. Warren has called on the office of the US Trade Representative to release the full text of the TPP deal to the public. But in a floor speech Wednesday, she said Froman has made clear he would not release the text of the deal and is not interested in making the negotiations more transparent: 

I asked the President's nominee to be Trade Representative—Michael Froman—three questions:  First, would he commit to releasing the composite bracketed text [the full text of the TPP as it currently stands]? Or second, if not, would he commit to releasing just a scrubbed version of the bracketed text that made anonymous which country proposed which provision...

Third, I asked Mr. Froman if he would provide more transparency behind what information is made [available] to the trade office's outside advisors. Currently, there are about 600 outside advisors that have access to sensitive information, and the roster includes a wide diversity of industry representatives and some labor and NGO representatives too.  But there is no transparency around who gets what information and whether they all see the same things, and I think that's a real problem.

Mr. Froman's response was clear:  No, no, no.

Warren has raised concerns that Wall Street is trying to weaken financial regulations through the TPP. Rep. Darrell Issa (D-Calif.) is worried that the deal could imperil an open internet. Sen. Sherrod Brown (D-Ohio) says the trade agreement could move jobs overseas. The TPP is not final yet, so no one can say for sure what will be in it. But Warren says the American public deserves to be a part of the discussion.

"The American people have the right to know more about the negotiations that will have dramatic impact on the future of the American economy," Warren said. "I believe in transparency and democracy, and I think the U.S. Trade Representative should too." A vote is expected Wednesday afternoon.

Study: Poor People More Likely to Get a Job If They Work for Free First

| Tue Jun. 18, 2013 1:03 PM EDT

The current share of the American population with a job is still far below what it was before the recession, stagnating at a level not seen since the 1980s. And the jobs that have been regained since 2008 have overwhelmingly been low-wage. But now there's good news for unskilled unemployed people who are interested in getting one of those low-wage jobs—working for free can help them eventually land a paid gig.

A new study to be released Tuesday by a federal agency called the Corporation for National and Community Service found that jobless Americans can increase their chances of finding work by 27 percent if they volunteer first. People without a high school diploma and people in rural areas can increase their chances by more than 50 percent, the Washington Post reports.

Volunteering is useful for people at the bottom of the socio-economic ladder, Christopher Spera, the lead author of the study, explained to the Post, because they don't have the same opportunities as better-off Americans: "Folks with lower levels of education tend not to have the networks and social capital enjoyed by folks with higher levels of education," he says. Here's the Post on how volunteering can help:

The report builds on other research that has found that volunteering helps people learn skills, be presented with leadership opportunities, enhance their résumés and—perhaps most crucially—develop a network of contacts that can help them find work...

The link between volunteering and reducing joblessness was endorsed by former labor secretary Hilda L. Solis, who last year issued a guidance to state workforce agencies emphasizing that volunteering may be one strategy that can help put the unemployed—particularly the 4.4 million Americans who have been out of work for more than six months—back to work.

"In a complex 21st-century economy that demands new skills of American workers, volunteerism is not a substitute for job training," Solis said. "But it can be an important complement."

Now we know that poor, less-educated people can benefit from unpaid work in the same way that their more well-heeled, highly-educated counterparts can. After all, unpaid internships have exploded in recent years; over half of the class of 2012 had an internship during college, and half of those were unpaid. The only difference is that when poor people work for free, their parents probably won't be able to help them get by.

Want to Know How Your Rep. Voted on Wall Street Regs? Check the Campaign Cash.

| Mon Jun. 17, 2013 2:18 PM EDT

Last week, the House of Representatives passed a bill that would allow US banks to get out of new financial regulations by operating through their overseas arms. Financial reformers say this is dangerous because markets are global, and a bad bet made by a US bank operating in another country could easily affect banks in the US and cause the US economy to crash again. Bad for America, but good for banks that want to avoid tough new rules. Perhaps that's why lawmakers who received more money from banks and the finance industry in recent years were more likely to vote in favor of the bill. House members who supported the bill received more than twice as much in contributions from the financial industry over the past two years as lawmakers who voted against it, according to a new analysis from the MapLight Foundation, an independent research group that tracks campaign finance.

Interest groups supporting the bill, including securities and investment companies, banks, and chambers of commerce, contributed an average of 102 percent more to House members who supported the bill than to those who voted no. Check it out:

Democratic House members who voted yes on the bill received 75 percent more money from from the financial services industry than Democrats who voted no.

In 2011 and 2012, groups that supported this bill gave five times more to House members than groups that opposed the bill did. The gap was even larger for donations to Democrats. Over those two years, House Democrats received less than $250,000 from interests that opposed this measure. During the same time period, groups in favor of allowing the banks to skirt regulation gave Dems 28 times as much—close to $7 million. Here's what that looks like:

What's remarkable is that some Democrats held firm. Although the bill passed the House last week by a vote of 301 to 124, most Democrats voted against it, which financial reformers say is a significant turn of events. "A majority of Democrats voted against a pro-Wall Street bill...even though it was co-sponsored by Democrats… that was heavily lobbied by Wall Street and everyone had predicted would win by a landslide," Marcus Stanley, policy director at Americans for Financial Reform, told Mother Jones after the vote last week. "I'm pretty psyched."

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