Bailout of the Year

To summarize: Congress mandated a return on student loans that is too low to attract private capital in the current market. So Congress will now use your money to create artificial investor demand. Taxpayers will bear more risk so that Congress can fashion a new business model to replace the one it just destroyed. The Bush Administration, unwisely but typically, has endorsed this approach.

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Daniel Akaka, Bob Casey, Tom Carper, Chris Dodd, Tim Johnson, Bob Menendez and Jon Tester are desperately seeking a bureaucrat with a large checkbook to rescue them from their self-made political disaster. Last Thursday they wrote Mr. Bernanke asking him to accept student loans as collateral under the Fed's new Term Securities Lending Facility. They sent a similar letter to Treasury Secretary Paulson asking him to order the Federal Financing Bank to buy student-loan-backed securities.