the PE business model depends on a lot of discretionary financial regulation.
For example, banks are given pretty generous capital rule treatment when they loan money to PE firms to increase leverage. We could stop that. They also get a lot of tax preferences that increase returns to investors and managers.
There has been a lot of discussion about how the basic setup of banks (borrow short, lend long, collect the spread) is probably not a great idea, and we should just separate these two activities (see Money Stuff). People who want to lend long should do that with their own money, and people who just want to save should be able to do that.
But, at least in the US, regulators keep blocking the 1st step: narrow banking. Let banks offer savings accounts that just stick the money in the Fed, zero risk.
So I read the Matt Levine article on this and a couple other pieces, and I'm not getting the impression Levine or other mainstream economists think this is a good idea as it currently stands? I don't necessarily think they are suggesting its clearly bad either, but it didn't seem as positive on it as I was expecting from your comment.
Can you provide some more information, because I'm not really seeing the value in being required to interact with more financial institutions in practice.
When you deposit money in a US regulated bank, there are basically two places that can end up:
- on deposit at the Fed, in the account of a Fed member bank (which could be your bank, or a bank your bank has an account at)
- loaned out by your bank (or again, a bank your bank uses)
The Fed, so far, has refused to allow new member banks (eg that could deposit at the Fed) that don't intend to ever loan out deposits. They would take all customer deposits and stick them at the Fed. Many (most? the ones at the Fed anyway) think allowing this would siphon away money that would otherwise be used to make loans. They are, in effect, putting their finger on the scale to push you to allow your savings to be used as loans.
The rise of Private Credit, where wealthy individuals and institutions loan money to private firms for to fund loans is the new thing that could break this open. These arrangements are long term, the customer can't "call" the money back, they are committed, and (for the most part) their commitment matches the duration of the loans. So there can be no bank runs. And the people providing the money know what they are doing.
Levine is mostly arguing that with so much money in private credit, we could do without forcing small savers to fund loans.
Yes, I understand all of this. What I don't understand is why the Fed "putting their finger on the scale" (which I don't dispute they are doing, as it's part of their job) is a problem, and I still did not really pick up on Levine arguing for or against this, just saying (this is me paraphrasing, not intended to be a direct quote) "we could operate differently in theory due to all these alternative lenders that now exist in parallel with the traditional, regulated banking system, which would have some benefits and some drawbacks."
I can see some upsides (in addition to matching bank creditor and debtor duration expectations), like the implication that it would be easier in some sense to safely manage large amounts of cash because said cash is invested in T-bills instead of who knows what, but there are some obvious downsides as well concerning risk management. To quote Levine directly here, "How will the NDFIs find an extra $100 of loans to make? One obvious possibility is by making much worse loans. Another is by making fake loans."
One round of loan forgiveness is fine, but it builds an expectation of it in the future. All of the loans, growing larger and larger, just encourage universities to grow fatter and raise costs to students.
If students could not borrow enough to attend, they would be forced to lower costs (not necessarily the very top universities, but all the rest).
The student loan system is fucked up, so what should happen is an acknowledgement that it's fucked up, forgiving the fucked up loans, and also changing the system to be less fucked up so it won't have to happen again.
A major part of why it's so expensive is because of government subsidies to private healthcare insurance. No or little public option is exactly what allows insurance companies to go hog wild on their premiums.
The ACA subsidies are simply a bandaid on a broken system which allows insurance to further break the system as they adapt to what people are willing to pay for a necessity.
Healthcare is really complicated. No one factor makes up a majority of the excess (compared to other rich nations) cost.
The ACA is a bandaid, and may be making things worse over time, at least in some areas. But Americans don't see to have the appetite to really change anything. Probably because most voters are insulated from this by good (enough) employees plans.
A big part of that is also the transfers between private insurance and Medicare, with health care providers accepting far lower rates for Medicare and then subsidizing operations with the rates charged to private insurers. Hospital administration is pretty hellish. As is administering payments!
Any functioning health care system is going to have a "band-aid" exactly ACA subsidies: make sure that those with the lowest incomes can still afford health care. Something in between Medicaid and the full cost. But as we rein in the costs and get healthcare to be a smaller fraction of GDP, the size of the band-aid can shrink.
There has, for 30+ years, been a real problem with politicians refusing to speak truth, or anything close to it. They tell voters what they want to hear. This is often "truth adjacent", and they thus offer partial solutions that tend to not work out.
The US has real problem that require real changes, but the political system is not responding.
IMO, people sense this, grow frustrated, and become willing to take a chance on someone who seems to speak (more) truth, and claims to be willing to pursue real changes.
We are starting to see more moderate mainstream politicians willing to speak more truthfully, and propose policy changes that may not appeal to everyone. But I'm not sure it's happening fast enough.
Population trends are a pretty big factor in enrollment. Most enrollment is by fresh high school grads. And there are significantly fewer of those then there were 10 years ago; you can make up some of that by expanding eligibility and encouraging more young people to go to college (even those that would be better served doing something else), or expanding international admissions (but maybe not in this administration).
Cost is certainly also a factor, but I suspect population is a bigger factor.
The solution to that is rebuilding the state and federal funding for higher education with added regulations on where and how that money can be spent (perhaps even putting tuition caps in play).
The reason universities are so expensive is there is no limit on how much they can charge for tuition and no requirements on how much they pay their professors. It allows them to dump a huge portion of their funds into the marketing and athletic departments.
I know of a few religious universities who's mission is mainly to educate (so their well educated members can pay back more money to the church). While they do subsidize the educational costs, it isn't by as much as you'd think and it does result in some very cheap education.
There's no reason the government couldn't do exactly the same thing. It did right up until reagan.
I'm not an expert, but a lot has been written on this.
Some areas:
- more and more administrative staff and "middle management". The assistant to the assistant vice chancellor for elm trees.
- Building and running very expensive science research operations. These may well be worthwhile efforts, but conflating them with undergraduate educations is a problem.
- more and more student amenities. Fancy dorms, student centers, rec centers, etc
- competitive athletics
A big part of this, is that they need to attract students, ideally ones who can pay or borrow. And students are putting a lot of weight on the research programs (they impact public ratings), fancy dorms, rec centers, football teams, etc. And they are spending loan money, and don't seem to fully grasp the economics. But even if they did, the highest rated schools are the ones spending all this money, and thus charging more, it's a cycle. And this propagates down to mid- and lower tier schools.
And then people in the leadership ranks of these schools are in part evaluated on how the ranking of their school changes. So if you can go from spot 150 to 140 by raising fees to build stuff you don't really need to teach (but improve your ranking), that is good for you.
Also, I should mention: highly competitive employers do filter based on school ranking, both in recruiting (acting looking for people), but also in hiring. For example, requiring extra approvals to hire someone who did not attend a top N school for their major. So it can be rational for a student to stretch hard to get into a higher ranked school.
(I know this from being personally involved in this at more then one company)
Just can't help humming in my head reg yoo la toe ree cap chur
Any system that can juice itself by increasing both funding and cost will scale both until the natural incentive gradients (are you smart? do you actually want to do stuff or do you just want a desk job?) vanish into the noise. When everyone went to college, nobody learned anything.
University is one of those things you always want to be capability rather than means gated, but those of means will always want their kids to get in regardless of how they were raised. After all, they worked hard. Why should their kids? They will ally with every convenient rationalization in order to moralize for the politics, taking advantage of arguments about "disadvantaged backgrounds" etc to treat everything as a means problem, but the goal is to dilute the capability aspect, and that robs talent.
If you have exceptional talent, you need to know the truth. Systems naturally try to optimize the dumb-rich to smart ratio so that there's a lot of subsidy available for anyone who actually needs to be there, but consequent GPA inflation demands that we make the education somewhat meaningless, so you're really on your own to set goals, and any good ones are way higher. Check the boxes, take the free lunch, and then treat the overall coddling like a charade that must be ignored. Then again, isn't self direction always that way?
I think the point wound be to eliminate all borrowing for tuition. It would be drastic and universities would complain the whole time but band-aid has to be ripped off at some point. I don't think a solution other than welding shut the money font will have a meaningful effect.
* Eliminate the entire federal student loan program. Just gone. No more loans.
* Make it so that private loans for tuition and related expenses can be trivially discharged. Like just fill out a form and it's auto-approved. You can just decide to not pay your student loans with no repercussions whatsoever. There's probably a better way to accomplish this legally but make it so that they're toxic to private lenders.
Once the money officially dries up and less than 1% of families could pay out of pocket for current tuition rates then we watch as jobs stop requiring degrees, apprenticeships become popular, and schools belt-tighten to focus on student ROI. Watch magically as GE requirements evaporate and we find out they weren't ever necessary in the first place. Watch as high schools get pressured to teach actually useful things instead of being grade school the sequel.
Your argument is basically that current university costs are intrinsic and can't possibly be reduced but we know that isn't true. We have not two generations ago people paying for their college tuition with money from their part time jobs.
My grandpa paid his way to a PhD as a line cook. Got no financial support from family who were only slightly above dirt poor.
Like I don't want to be completely reductive but a good chunk of university classes are 30-100 people paying for a single dude and a room with chairs to lecture for 5 hours a week. This doesn't have to be ruinously expensive.
Right, so broadly the solution you're proposing is subsidies. University will be cheaper from the perspective of the student but we don't actually undergo any meaningful cost cutting it's just the money comes from somewhere else. I don't know about you but I don't think this actually solves the problem of the cost of university ballooning out of control and becoming unaffordable to almost every American if they had to pay for it with what was in their bank account.
I mean it can work so long as the government can bully the university into keeping a lid on the per student costs but large public universities have massive amounts of political capital to sell the cost increases to the government.
Forgive me, are you not proposing to roll these subsidies out everywhere? Because yeah, someone can afford their tuition on minimum wage if they get a full ride scholarship too but that's hardly a solution to the student loan crisis unless we're handing them out to all our undergrads.
My PhD program, in CS (top 20 school), for an American, was basically free back in the early 2000s. At times it seemed like there were more fellowships than students. I'm not sure if that has changed.
My CS PhD was not only free, I got a decent stipend, and that's still common, but it often depends on grant funding, which has been less stable lately.
I feel like I maybe should've been more explicit about him having gone all the way from undergrad to a PhD was all paid for by being a line cook. Yeah, he didn't actually pay for his PhD program because he got a fellowship but that's also not really the point. He was still able to pay for the expensive part on what was barely over minimum wage for the time.
I think this is the strongest disagreement I have gotten from someone who understands my point completely and agrees with it.
This is exactly why I'm saying that university can be made orders of magnitude less expensive is because the primary educational value you get which comes from professors lecturers, and TA's is not expensive at all. Everything else is negotiable and an opportunity to make cuts.
This is true, state gov does own many universities, though there was a concerted effort to bring the idea of privatization and deregulation there too since at least the 1990s by cutting subsidies.
I met a Polish student a number of years ago who was attending a U.S. Ivy League institution. She said people made fun of her back home for "buying her degree". That has stuck with me ever since.
I like this aphorism someone once stated on bothsides-ism: When an arson burns down your home you don't pause to consider their side of the situation. Standing up to a bully doesn't mean the bully is being treated unfairly. They're just not accustomed to pushback on their BS and quickly don the caul of victimhood whenever their position is exposed.
I thought of Israel because the parent comment was about Israel and I read that comment. I thought that was quite obvious. There's no need to get hostile.
For the same reason that the Russian province of Donbass has been attacked by Ukraine for its entire existence. Explaining it in great detail would be far too off–topic.
I understand from your comment, please correct me if I misunderstood, that you oppose Jews building houses in the West Bank.
The West Bank is a part of the state of Israel that was occupied by Jordanian forces from 1948 to 1967. It was then captured by Israel and many Israelis, many of whom lived there before it was occupied by Jordan, moved (back) there.
The West Bank was settled by both Arabs and Jews before 1948 - for literally thousands of years Jews had lived there. In 1856 many more Jews and Arabs began moving there due to changes in Ottoman law meant to encourage settlement of the area (the Ottomans needed tax revenue). It should be noted that Jerusalem was Jewish majority even before the Ottoman land laws changed in 1856. In 1936 there was a large Arab slaughtering of Jews in Hebron, so many Jews were evacuated from Hebron. In 1948 the Arabs rejected the UN partition plan, and started a war. Israel won that war, and thus became the sole successor state of Mandatory Palestine. Jordan occupied part of that successor state (the West Bank). In 1952 (I may have the year wrong) the Arab league declared that no Arab assistance would be provided to those displaced in the war, because only the suffering of those displaced will cause the destruction of the Zionist Entity. In 1964 the Soviets advised a group to represent the Arabs of the West Bank, the Gaza strip, and those displaced in 1948, and that group adopted the name Palestinians to refer to the populations it represents. Israel conquered the Jordanian-occupied territory in 1967 after Jordan attacked Israel, two months later the Arab League adopted it's policy of No Peace,
No Negotiation, No Recognition of Israel. In 1995 the West Bank was divided into separate areas. Predominantly Arab areas were given autonomy for self rule, under the Palestinian Authority (mostly PLO) with the intention of all parties to see the establishment of an Arab state called Palestine after final borders and other issues are agreed. Predominantly Jewish areas have Israeli rule redeclared in three year cycles, pending final border agreements. Every single final border solution has been rejected by the Arab side, who have also employed extreme violence both in rhetoric and in actions.
Where in all this are the Jews who live in the West Bank a reason to "lose all faith" that Israel has good intentions. Israel's first intention is to secure the safety of her citizens, just like any other nation. Israel has committed to, and taken reasonable steps to, establish a separate state for those who demand Arab rule.
Or the other side of at what point into ending capitalism in favor of socialism should that stop?
Yes, I enjoy "both sides" coverage when it's done in earnest. What passes for that today is two people representing the extremes of either spectrum looking for gotcha moments as an "owning" moment. We haven't seen a good "both sides" in decades
They are just lazy / understaffed. It's hard to make $ in journalism. A longstanding and popular way to cut corners is to let the industry you cover do most of the work for you. You just re-package press releases. You have plausible content for a fraction of the effort / cost.
Unfortunately, government is like that were most bills are written by lobbyists and barely if at all modified by the actual congress critter sponsoring it.
Plus in Nov or 2026, get out and vote, no matter how hard it is to get to the polls. This happened because people sat on their behinds and did nothing in Nov 2024,
And, try to talk to people who don't agree with you. Have an open mind, listen, avoid being judgmental and critical. It's not easy, but you can change minds.
Won't matter. Donny put the epstein files out, redacted, to remind every single influential person in the blast radius that unless he keeps holding the redaction pen, all their lives will be over.
One thing to consider: it’s clear he was very widely connected in American elite circles. It’s likely that almost all prominent people (in finance, business, the arts, science, government, etc) all came across him. We know he worked pretty hard to get intertwined with everyone he could.
And yet, although the list of his connections is large, it’s very far from most of these people. It seems plenty of people saw him for who he was and steered clear.
Not sure what that means. Mostly ordinary citizens go to protests. Not aware of any group paying felons to protest. Speaking of, is Trump allowed to vote?
Attending public (peaceful) protest is valuable. It shows that people with that view point (whatever it is) are not alone. It encourages more people to get involved.
Yep. And even a world of perfect good faith, "forgiving in what you receive" has both costs and scaling problems - from researching what "spec" you'll need to design to, to customer service when the added complexity and permissiveness cause interesting stuff to happen.
For example, banks are given pretty generous capital rule treatment when they loan money to PE firms to increase leverage. We could stop that. They also get a lot of tax preferences that increase returns to investors and managers.
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