A Bailout? A Fraud? or Both?

Conn Carroll /

Great editorial from the Wall Street Journal exposing the mendacity of liberals trying to pass a bill that will allow the federal government to buy student loans directly from privately lenders. The WSJ links to a letter from Rep. George Miller (D-CA) claiming his bill “will carry no cost for taxpayers” and responds:

How can he be so sure? Because his legislation instructs the Bush Administration not to lose any money on the program. Well, that was easy. Officials at the Department of Education, Treasury and the White House budget office will now spend the next few weeks trying to calibrate purchase prices that are just high enough to entice lenders to come back into the market, but just low enough to protect taxpayers.

Mr. Miller, who makes a habit of lambasting Bush economic policies, has suddenly found an inordinate faith in the ability of the administration to play the credit markets. There is also the issue of the double standard. If someone hawking an investment strategy in the private markets claims that clients can invest without risk of loss, the SEC charges him with fraud. But when the financial pitchmen run Congress and their clients are American taxpayers, apparently the rules are different. In fairness to Mr. Miller, the taxpayer is already on the hook for almost all of the default risk of this federally insured debt, so poor judgment by the Bush Administration will simply mean that Treasury overpays for these loans.