April 1, 2010
Breaking news from Wall Street. Today the chief executives of the six largest Wall Street banks admitted to reaping profits at the expense of higher education institutions from high interest loans, and pledged to end the practice. The move will save schools billions nationally, staving off further layoffs, furloughs, cuts to student services and student fee hikes.
Since the financial meltdown that a majority of Americans blame on Wall Street, the Federal Reserve reduced its interest rate for bank borrowing to as low as one half of one percent. Yet the Wall Street firms charged interest rates up to and sometimes exceeding 5 times that when lending to state and local governments and educational institutions, scraping profit off the top for themselves instead of stimulating the economy as they were expected to.
This morning, Citigroup CEO Vikram Pandit [VICK-rum PAN-ditt] said, quote: “These schools were so strapped for cash they would take any deal they could get. It was working out for us because we could charge them 5 times the interest rate we’ve been getting money from the federal government for.” End quote.
Perhaps even worse, banks have kept schools and state and local governments in long-term interest rate swap deals with rates consistently 10 times the current Federal Reserve rate, scraping exorbitant profits off the struggling institutions.
Brian Moynihan, President and CEO of Bank of America told reporters, quote: “We were making a handsome profit keeping schools locked into these long-term interest rate swap deals. We could have continued siphoning resources from these students had they not called it to the attention of their administrators with noisy demonstrations.” End quote.
With devastating budget cuts in both public and private colleges across the nation, the banks’ decision means billions in additional funds – enough to make education affordable for students whose families have been devastated by the economic crisis, restore critical programs and services and ensure essential staff’s job security so that they will continue to be able to afford to provide for their families.
A statement from Russell Gould, Chair of the University of California Board of Regents and Senior Vice President of Wells Fargo, said, quote: “Today I am proud to be a Wells Fargo executive. The actions we’ve taken today will allow the University of California to freeze fees for the coming school year, rehire laid off support staff, remove the current furlough programs, and to remain a shining example of public higher education in this country.” End quote.
We asked college students for their reactions to the Wall Street CEO’s decision. Let’s hear what they had to say.
Student organizer: It would be great if all of this were true and today weren’t April Fools Day. Students and workers on college campuses are hurting, and it’s time for Wall Street to stop making money at our expense. But since it’s not true, we’re launching a national student campaign to make this a reality. If I were a bank CEO, I wouldn’t be fooled: we’re coming after the money you’re stealing from our schools.
Students in at least 20 cities around the U.S. today will march on branch offices of the six largest banks to “thank” their CEOs for doing exactly what they haven’t done – start fixing the college budget crisis they caused. In many more places, students will move their money out of the big banks and into local community banks, and calling on their colleges and state and local governments to do the same. Today’s activities mark the launch of a national student campaign arguing for the banks to lend to colleges and government bodies at the same interest they get from the Fed, and to renegotiate existing interest rate swaps and high interest loans with these entities to those same rates. These savings, matched with college administrators and lawmakers putting students’ and campus workers’ budget priorities first, will solve the budget crisis devastating higher education across the nation.