There’s been plenty of coverage of the First Amendment implications of President Trump’s proposed “Compact for Academic Excellence in Higher Education” that was offered to nine universities in exchange for supposedly gaining preferential access to federal grants. But the proposal also has a pair of tuition regulation requirements that have not gotten so much attention, but are in some ways equally troubling.
The “deal” being offered would require, among other things, that university signatories agree to freeze tuition for U.S. students for five years and, if endowments exceed $2 million per undergraduate, grant free tuition for students pursuing “hard science” programs.
This sort of federal price regulation is, as far as I’m aware, completely unprecedented. It’s also completely half-baked policy thinking. The impulse to control the cost of higher education is commendable, but the President’s proposal shows a complete lack of understanding of higher education economics and of the science education in particular. Instead, what he has proposed are faux cost controls and a bizarro nerd subsidy that would apply to almost no schools. In other words, rather than serious policy proposals to deal with costs of higher education and to encourage the study of the sciences, the administration has put forth a set of meaningless headline grabbing proposals that would only make things worse.
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Faux Tuition Freezes and Nerd Subsidies: Trump’s Half-Baked Ideas for Higher Education Reform
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Singapore’s “Debt Relief Agency” Proposal and Flashbacks to BAPCPA
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The Singapore Ministry of Law has launched a public consultation on some proposed personal insolvency amendments, and one in particular struck a nerve based on the disaster of BAPCPA: “MinLaw proposes to introduce a new criminal offence which criminalises the soliciting and canvassing, in the course of any business, of any person to make a bankruptcy application.” The proposed punishment is a S$10,000 fine, three years in jail, or both! The justification for this aggressive proposal is a supposed “increase in the number of debtor-initiated bankruptcy applications where debtors borrow irresponsibly to pay for … consultancy firms’ services in helping them apply for bankruptcy” with the supposed intent of “abusing the [debt repayment scheme] to obtain a discount off their debts.” Sound familiar? This is reminiscent of section 526(a)(4) of the US Bankruptcy Code, introduced in the 2005 disaster, that forbids “debt relief agencies” to “advise an assisted person … to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer” for preparing such a filing. (more…)
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Follow Us on Bluesky
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With the move to WordPress, we can now connect the blog to our Bluesky account. Our posts should now automatically post there. A good way to keep updated on our content is to follow us on Bluesky — @creditslipsblog.bsky.social. No promises, but if there are other social media sites on which you like to see our content, I would be interested to hear your comments.
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Welcome to the New Credit Slips
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This is the new Credits Slips! A few things have changed, and most things are the same. Most importantly, you will continue to find us here at this same URL. We hope you like the new, cleaner design. If you are reading us on an RSS feed, you will need to change the feed URL to our new one (https://creditslips.org/feed/). All of the old posts have been imported to this new site. Linked files and images might have disappeared on old posts.
Most significantly, the author team has changed a bit. We welcome Professor Christopher Odinet from Texas A&M. He is another of our commercial and insolvency law junkies, and he adds significant expertise to the blogging team with his knowledge of digital assets.
Thank you for being a reader. We look forward to bringing you the same content here as we always have.
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Hotel California (Deposit Account Edition)
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You can checkout anytime you like, but you can never leave. That’s how I’m feeling about one of my banks. I recently decided to close a particular bank account. Turns out that the bank, which allows me to open new accounts on-line, won’t allow me to close accounts except in person. Having to go into a branch is a minor inconvenience, and I’m sure that’s the point: the added friction makes it that much harder to break up with the bank and gives the bank another opportunity to try to sell me additional services. What’s more, it gives the bank another shot at levying some fees on the account for one reason or another.
If pressed, I’m guessing that the bank would claim some security issue means that they need to verify my identity in-person. That’s nonsense: they had no problem letting me clear out the balance via an on-line transaction. This is just about making the deposit account relationship stickier and therefore less competitive.
So if there’s still anyone home and listening at CFPB, this should be low-hanging non-partisan fruit: use your UDAAP authority to put out a Hotel California rule that will make it easier for consumers to voluntarily close their deposit accounts. Think of this as the deposit account version of click-to-cancel. If the consumer is able to transfer all funds out of the account on-line—that is if the bank offers on-line funds transfers and there’s no hold on the account at the time—the consumer should also be able to close the account entirely on-line.
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Bill Pulte’s Looking for Mortgage Fraud in the Wrong Place
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Reuters is reporting that Lisa Cook scheduled her Atlanta property as a vacation home on a loan estimate from her lender. That indicates that the lender was aware that the property was not going to be used as Cook’s principal residence. It’s going to be pretty hard to sustain a mortgage fraud prosecution in the face of the loan estimate.
Consistent with the indication that the Atlanta property was a vacation home, Cook didn’t claim a primary residence tax deduction for it (unlike what Pulte’s own parents did for their properties!).
If Reuters was able to unearth the Cook loan application materials, surely Pulte should have been able to do so. Either Pulte was wildly reckless by making the referral without pulling the loan file, including the application materials, or he proceeded despite having the loan file, which suggests that he acted maliciously. Regardless of whether Pulte acted recklessly or maliciously, his actions here are more than cause for his removal.
The Cook’s declaration of the property as a second home also suggests that if there was fraud—and it’s far from clear that there was—that it wasn’t by Cook, but by either the loan officer or her credit union. The loan officer might have wanted to facilitate the loan closing, while the credit union would have gotten a better price from Fannie/Freddie for a principal residence mortgage than for a second home mortgage. We’d need a lot more information to know if there was fraud and by whom, but if Cook had alerted the credit union that the property was a second home, I can’t see how this could rise to a criminal issue for her.
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Typepad and the Future of Credit Slips
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As many of you have seen, Typepad is closing down on September 30. They have hosted this blog since 2006.
The good news is that we are moving the blog to a WordPress site. The URL, creditslips.org, will remain the same. We hope the new format is a little cleaner than our current site. We hope that work is done in a week or two. Until then, it seems that Typepad is having more problems as we get closer to the shutdown date. In fact, it ate the first draft of this posit. Please have patience if the Typepad site suffers from periods when it is not accessible.
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Russell Vought Is Wasting Government Resources
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The CFPB has proposed a rule to constrain when it can designate non-banks as subject to supervision. The rule is one of very narrow application: only 20 institutions have ever been so designated over 14 years.
There’s a lot of silliness with the proposed rule, which eliminates none of the uncertainty it claims to address, but here’s what’s really galling: the rule is expected to reduce the total number of exams conducted by the CFPB by no more than one! What’s more the Bureau estimates that an exam costs a non-bank about $27,000 in labor costs. So the Bureau has undertaken the promulgation of an entire rule in order to save one entity $27,000/year. It will cost the Bureau more than $27,000 to promulgate this rule, which will also increase the Bureau’s litigation risk. Talk about a waste of government resources. This might well be the most inefficient regulation I’ve ever seen.
I thought this administration was about getting rid of needless regulations. And here it is creating one. Perhaps instead of a comment letter, I should have filled out the form on Regulations.gov to “Submit Your Deregulatory Recommendations.” smh.
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Revision of Chinese Enterprise Bankruptcy Law Leaves Natural Persons Waiting
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The Chinese National People’s Congress yesterday began reviewing a set of major revisions to the 2007 Enterprise Bankruptcy Law. Details on this first major reform effort in nearly 20 years are not publicly available (!), but Xinhua reports that it involves more than 160 new and revised provisions on such topics as post-filing property transfers, optimizing reorg provisions, “and enhancing judicial cooperation in cross-border insolvencies”. This all sounds promising. What’s not mentioned? A long-awaited and much-debated national rollout of personal bankruptcy. Pre-eminent bankruptcy scholar Li Shuguang has characterized the current enterprise-only approach as “only half of a bankruptcy law,” and he had earlier noted that “c]onditions for introducing a personal bankruptcy system are now largely in place, [including] improved institutional frameworks, shifting societal views, and local pilot programmes” in such places as Shenzhen and Wenzhou, among others. Nonetheless, despite a worrying rise in consumer debt and accompanying social tensions, national authorities continue to resist introducing proper treatment protocols for the personal (and small business) side of the bankruptcy hospital.
Another pre-eminent Chinese bankruptcy scholar years ago taught me a proverb that captures this situation perfectly (as 4-character chengyu distillations of Chinese wisdom so often do): 因噎废食 (yin ye fei shi), meaning “not eat for fear of choking.” This phrase encapsulates the danger of being overly conservative about engaging in beneficial behavior due to fear of some possible but unlikely bad outcome. Personal bankruptcy reformers around the world have faced these very fears over and over during the past 30 years (especially but not exclusively in Europe), and the bad outcomes have been muted if not entirely absent. It’s time for China to stop starving its increasingly consumer- and small-business-dependent economy due to fear of bad societal effects of treating natural persons’ insolvency. But for now, it seems China’s overindebted consumers and small entrepreneurs will have to continue to wait.
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That Mortgage Document Doesn’t Say What You Think It Says
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I’ve been getting a lot of emails and on-line comments in recent days from people who work in the mortgage industry about the Lisa Cook mortgage situation. What I’m seeing in these comments is a serious gulf between lawyers and non-lawyers. The non-lawyers tell me that “This is how it is supposed to work.” To which my response is “Have you actually read the legal documentation?” (more…)