Political MoJo

On Monday night, Sen. Elizabeth Warren held a briefing on student debt with the progressive policy group MoveOn.org, taking calls from students, parents, and graduates struggling with student loan debt. Warren discussed the the current fight in Congress over student loan interest rates, and what kinds of fixes would work best for the 37 million Americans with student loan debt. And she called on Americans to take matters into their own hands.

Over the past decade, student loan debt has nearly quadrupled, and now stands close to $1 trillion. On July 1, rates for federal need-based student loans are set to double from 3.4 percent to 6.8 percent. The deadline has lawmakers scrambling for a fix. There are a bunch of proposals out there, including Warren's call for students to be allowed to pay the low, low rate that big banks pay the Federal Reserve for their short-term borrowing; a plan President Barack Obama laid out in his budget in April; and the GOP plan that recently passed the House, which Warren and Obama hate.

The GOP bill would allow interest rates on student loans to rise or fall from year to year with the government's cost of borrowing, ending the current system under which rates are fixed by law. Because market rates are low right now, the initial rate for the loans envisioned by the Republican bill  would be about 4.4 percent, but the legislation would allow them to rise to as much as 8.5 percent. Warren says the plan would turn students into "a profit center": "Already the government is scheduled to make $51 billion in profits in loans it makes next year. That's 36 cents in profit for every dollar they lend out. And the House bill would make even more money off students," Warren said at the briefing.

She touted her own plan, the Bank on Students Loan Fairness Act, which would act as a one-year patch, cutting student loan rates to the same rock-bottom interest rate that banks pay to the Federal Reserve for short-term loans. "If a big bank wants to take out a loan from the Fed, it can get .75 interest rate. These are the same banks that cost millions of Americans their jobs and nearly broke the economy. But next year, a student would have to pay nine times as much on her debt," Warren said, referring to the scheduled jump in interest rates to 6.8 percent. "It isn't right. It isn't fair. And it isn't good economic policy."

The ultimate solution, Warren said, is not her one-year fix. It's Americans demanding a fair student loan system. "You can't do this by having a few people stand up in the US Senate and the House and say 'this is important,'" she said. "This is test of whether we can organize something at the grass roots and move it forward. It will take us... and a whole lot more people to show [Congress]... that it does matter and they have got to respond."

• Print
• Email
• Tweet

Police can force suspects arrested for serious crimes to give DNA samples, a divided Supreme Court ruled, 5 votes to 4, on Monday (PDF). Law enforcement officials in 28 states already routinely collect DNA from alleged criminals, but privacy advocates had argued that taking suspects' DNA without a search warrant is a violation of the Fourth Amendment's protection against unreasonable searches and seizures. The high court's decision could lead to a massive national DNA database, conservative Justice Antonin Scalia warned in a dissent joined by three of the more liberal justices.

The case, Maryland v. King, originated from the arrest of Alonzo King, whose DNA was taken against his will after he was picked up for a gun-related assault charge. King was convicted of the gun charge, but officials also matched his DNA to evidence from an unsolved rape case. That, King argued, violated his Fourth Amendment rights. Maryland's Supreme Court agreed. (For more background on the case, read our report from February.)

The Supreme Court's five-justice majority struck down the Maryland court's ruling, noting that DNA sampling is routine police procedure. "Taking and analyzing a cheek swab of the arrestee DNA is, like fingerprinting and photographing, a legitimate police booking procedure that is reasonable under the Fourth Amendment," Justice Anthony Kennedy wrote for the majority.

The other four justices didn't take the decision so lightly. "Make no mistake about it: because of today’s decision, your DNA can be taken and entered into a national database if you are ever arrested, rightly or wrongly, and for whatever reason," wrote Scalia, who sometimes splits with his right-wing colleagues on civil liberties issues. Justices Ruth Bader Ginsberg, Elena Kagan, and Sonia Sotomayor joined Scalia's dissent.

• Print
• Email
• Tweet

lastplatform/Flickr

When we use the term "dark money," we're usually referring to politically active nonprofit groups—like the kind at the center of the recent IRS scandal—that spend millions on political campaigns yet don't disclose their funders. Think Karl Rove's Crossroads GPS, Koch-backed Americans for Prosperity, and pro-Democrat Patriot Majority. Rarely, if ever, does the public learn who bankrolls these organizations.

This week, though, we got one such glimpse. As the Center for Public Integrity reported, Reynolds American Inc., the corporation behind Camel and Winston cigarettes, funded several high-profile dark money groups in 2012. Reynolds doled out $175,000 to Americans for Tax Reform, conservative activist Grover Norquist's anti-tax group. The company also gave $50,000 to Americans for Prosperity, $45,000 to the US Chamber of Commerce, and $100,000 to the Partnership for Ohio's Future, an Ohio Chamber-backed group that supported restricting the worker bargaining rights.

Here's more from CPI's Dave Levinthal:

The tobacco company’s donations are just a fraction of the nearly $50 million that those two groups reported spending on political advocacy ads during the 2012 election cycle, almost exclusively on negative advertising. Federal records show that Americans for Prosperity alone sponsored more than $33 million in attack ads that directly targeted President Barack Obama.

But the money, which Reynolds American says it disclosed in a corporate governance document at the behest of an unnamed shareholder, provides rare insight into how some of the most powerful politically active 501(c)(4) “social welfare” nonprofits are bankrolled.

Reynolds American is the parent company of R.J. Reynolds Tobacco, which makes Camel and Winston brand cigarettes.

“The shareholder specifically requested that we disclose information about 501(c)(4)s, and in the interests of greater transparency, we agreed,” Reynolds American spokeswoman Jane Seccombe said.

Large corporations—tobacco companies or otherwise—almost never release information about their giving to such groups, and it’s most unusual for the groups themselves to voluntarily disclose who donates to them.

After the Supreme Court's 2010 Citizens United decision, which freed corporations to pump vastly more money into American campaigns, businesses faced two options. They could donate to super-PACs, which can raise and spend unlimited sums of money but must disclose their donors. Or they could fund politically active nonprofits, which can dabble in politics but don't name their donors. In the wake of Citizens United, we heard countless warnings about a "flood" of corporate cash into politics through big-spending super-PACs. But that flood never quite materialized: For-profit corporations accounted for just over $1 of every $10 raised by super-PACs in the 2012 election cycle. Instead, it was a small band of millionaires and billionaires that gave super-PACs most of their dough.

What the relatively small Reynolds American Inc. donations suggest is that corporations chose the nonprofit route and so avoided scrutiny of their political giving in today's big-money era. In this case, Reynolds' donations were disclosed only because a pesky shareholder asked for them to be. That's not the case for most corporations, whose giving remains a secret.

• Print
• Email
• Tweet

The nation's banks are reporting record profits, according to new numbers out Wednesday from the Federal Deposit Insurance Corporation (FDIC). Most of the rest of us aren't faring quite so well.

Bank profits topped $40.3 billion in the first three months of the year, according to the FDIC, attesting to a strong recovery... in the banking sector. "The banks are back," Moody’s Analytics chief economist Mark Zandi told the Washington Post Wednesday. "Only four years after the banking system was literally looking into the abyss, it is highly profitable again." The biggest banks, including Wells Fargo, Bank of America and Citigroup, accounted for most of the industry's profits. Here's what that looks like, via the Post:

The wider economy hasn't shared the banking sector's return to prosperity. Yes, the unemployment rate has dropped a little. Consumer confidence is up. The housing market is healthier. But the current share of the population that is employed is still well below what it was before the recession. Here is a chart from the Center on Budget and Policy Priorities:

The housing market hasn't bounced back at the same pace as bank profits, either. As Derek Thompson pointed out at The Atlantic earlier this year, overall business investment is growing, but companies are still reluctant to invest in housing. Here is what that looks like—the red curve is residential housing investment; the blue curve is non-housing investment:

The new FDIC numbers also show that loan balances at banks shrunk in the first three months of the year. As Isaac Boltansky, a banking analyst with Compass Point Research and Trading, told the Post, that's "a sign that the broader economy still has room for improvement." Indeed.

• Print
• Email
• Tweet