The American Spectator's Mark Hyman believes that the government is selling career colleges short -- literally. In a recent article he writes that "there is no end to what once started as a relatively straight-forward story. The U.S. Department of Education embarked on an effort to impose new regulations that would severely restrict access to various federal loans and grant programs to students attending career colleges."
Hyman points out that there "may have been a financial motive involved in the Department of Education's rulemaking."
What was this financial motive? According to Hyman, its nothing more than old-fashioned insider trading. He reports that
emails and related correspondence obtained from a series of Freedom of Information Act requests suggest stock market short-sellers including at least one who was a major donor to the 2008 Obama campaign had unusually strong involvement in the Ed Dept's process of crafting new regulations impacting career colleges. Advance knowledge of the agency's intention to write harsh regulations would benefit anyone shorting career college stocks with the exception stock prices would plunge.
Hyman is not the only one writing about the possibility of short selling. The National Legal and Policy Center has asked the Securities and Exchange Commission "to investigate the activities of short sellers [...] who profited from the collapse of share prices of companies that are in the for-profit education field."
The NLPC goes on to report that
[a] major feature of the short-seller effort has been to promote Department of Education policies that would result in draconian new standards for education loans applicable to student at for-profit schools. This intended slashing of fund would have the effect sought by short-sellers: a collapse in the share prices of the listed for-profit trade school companies resulting in a direct monetary benefit to the shorts.
It looks like another storm -- one with enormous financial implications for career colleges -- is brewing in the world of higher education. What the outcome will be of the latest scandal is anyone's guess, but it looks like the Department of Education has much to answer for.