Bill Black, a specialist in white-collar crime, discusses Betsy DeVos’ plan to dismantle the U.S. Department of Education team investigating fraud at those predatory for-profit colleges and to staff the Department with veterans of the institutions under investigation. Like many people, I have described her actions as “putting the fox in charge of the henhouse.” Black says it is far worse than that. The right metaphor, he says, is putting the vampire in charge of the blood bank. What is happening now is not just a policy dispute; it is a deliberate program to protect institutional behavior that should be treated as criminal fraud. The victims are college students who are poor and middle-class, who have every right to expect that the government will protect them against fraud, not enable the fraud.
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GREGORY WILPERT: It’s The Real News Network. I’m Greg Wilpert, coming to you from Quito, Ecuador. The U.S. Department of Education, under the leadership of Education Secretary Betsy DeVos, is halting investigations into fraudulent practices of for-profit colleges, according to a report that the New York Times released last Sunday. The Obama administration’s Education Department had placed a special team in charge of investigating false advertising, deceptive recruitment practices, and false job placement claims at for-profit colleges. One of the most prominent investigations was the DeVry Education Group, recently renamed Adtalem Global Education, which is one of the largest for-profit educational companies in the world, with nearly two billion dollars in annual revenues.
Joining me to analyze the consequences of abandoning these investigations into for-profit colleges is Bill Black. Bill is a white-collar criminologist, former financial regulator, and associate professor of economics and law at the University of Missouri, Kansas City. He’s also the author of the book, The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.
BILL BLACK: Thank you.
GREGORY WILPERT: So, one interesting aspect of the story is that Education Secretary, Betsy DeVos, hired several people from for-profit education institutions to work in the Department of Education. These include Robert Eitel, her senior counselor, Diane Auer Jones, a senior advisor on post-secondary education, and Carlos Muñiz, as the department’s general counsel. What’s going on here? Shouldn’t these appointments be considered conflict of interest and ring all kinds of ethics bills?
BILL BLACK: So first, ten seconds of personal privilege to welcome into the world, three hours ago, Heidi Weaver, our new granddaughter. Second, I made the easiest prediction of my life, after Trump was elected, that Warren Harding and Ulysses Grant could rest easy in the history books because there would no longer be a debate about the most corrupt administration in U.S. history. It would clearly be the Trump administration. There’s been a lot of focus on Scott Pruitt over at the EPA, in terms of corruption. But Betsy DeVos is giving him a consistent run for the money, just more under the radar.
So, here’s the background. First, out of the great financial crisis of 2008, one of the extraordinary things was that the most devastated people, in terms of loss of wealth, were not folks without college degrees, but actually folks with college degrees, who were either Latinx or Black. If you were Latinx, your average loss of wealth during the financial crisis, if you had a college degree, was nearly eighty percent. And it was roughly sixty percent if you were Black. That reversed the pattern for whites, where if you had a college degree, your percentage loss of wealth was lower than whites who had no college degree.
Now, part of that, of course, is the mortgage markets- being put into predatory mortgages at the worst possible time, at the peak of the bubble. But another thing, major thing, in terms of Blacks and Latinos, is that they are- disproportionately, they go to for-profit universities. And for-profit universities, characteristically- and this isn’t just recently, this goes back to World War II era, just after World War II when for-profit colleges first became a substantial deal.
And here’s the triple-whammy you get. One, they are much more expensive than regular universities. Two, you get a- statistically, a much, much worse education. That means your prospects in terms of jobs are far worse. And third, you’re left in massive debt because of the combination of the first two things. So that, instead of being the route to success, it is, as those overall statistics I cited, been an enormously good way of losing extraordinary amount of wealth between the mortgage markets and these for-profit universities.
So, long before the Obama administration came in, people have been writing about the really high incidents of fraud in these for-profit universities. The GAO actually sent undercover investigators that pretended to be people applying for college, which is, of course, really easy to send in testers of that kind. In every single case- so, I think they send them into the eight largest. In every single case, the supposed student was induced to do something that would be a false representation, which is to say, a crime.
In three of the eight cases, at least, the college counselor for the for-profit university consciously, expressly told them to lie and how to lie. Subsequent investigations under the Obama administration have documented the widespread layers of fraud, and for-profit universities have finally begun to experience what they should, which is that it’s very difficult- it’s more difficult to con people, and the government was finally cracking down. And that was- the problem was finally being reduced, and indeed there was some remedy at the federal level.
Because, after all, these are students had been induced by fraud to get into situations where they were literally driven bankrupt by the combination of expenses, debts, and limited increased employment prospects. And as viewers will, I hope, remember, the Republicans changed the bankruptcy laws so that student debt is not dischargeable in bankruptcy. So this, you know, is a cloud that stays over your entire life if it forces you into bankruptcy, from which you make never economically recover.
So, finally there was some recognition at the federal level that it was completely inappropriate to allow these entities to drive you bankrupt through what had been fraudulent misrepresentations to the students. And all for-profit universities live- I mean, and I mean almost totally live on federal grants to the students for education. Without those federal grants, no major chain of for-profit universities could exist. So, we’re really subsidizing all of these fraudulent entities through federal grants. And you would think an administration that A, promised to drain the swamp, and B, to stop these kind of rip-offs of the public sector, would crack down. But of course, none of us is surprised at this point to learn that it’s exactly the opposite.
The metaphor usually used is that DeVos has put the fox in charge of the chicken coop. But it’s really more- the way these for-profit universities operate, it’s more like you would put the vampires in charge of the blood bank, because they are basically sopping up the lifeblood of middle and working-class, and even poor people, through this device of the for-profit fraudulent rip-offs. And Betsy DeVos is now ensuring that the vampires can do this with absolute impunity from the laws.
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