Education Stocks Rise as Dept. of Education Cracks Down On "For-Profit" Schools, Moody's Puts Big Banks on Downgrade Review, War Powers Resolution May Be Enforced, and Charles Hugh Smith Nails GDP

The continual effort to abolish private education continues as the Department of Education has announced it will stop offering federal student loans to students of for-profit schools such as the University of Phoenix.  From Yahoo! Finance:

The government is moving forward with its crackdown on the country's for-profit schools, aiming to protect students from taking on too much debt to attend schools that do nothing for their job prospects.The Department of Education has finalized its "gainful employment" rule, which will ban for-profit schools like DeVry University or Apollo Group Inc.'s University of Phoenix from accessing federal financial aid dollars if too many of their graduates are unable to find jobs that pay enough to allow them to afford their student loan payments. If graduates owe too much relative to their income, or too few former students are paying back their tuition loans on time, schools stand to lose access to Pell grants and federal student aid.

Students at for-profit institutions such as technical programs and culinary schools represent just 12 percent of all higher education students but 46 percent of all student loan dollars in default. The average student earning an associate degree at a for-profit school carries $14,000 in federal loan debt versus the $0 debt burden of most community college students.

"We're asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective," Duncan said. "This is a perfectly reasonable bar and one that every for-profit program should be able to reach."

Perfectly reasonable?  What would be perfectly reasonable would be scrapping the student loan program all together because it's not just for-profit schools that make students debt slaves.  And where does the arbitrary number of 35% come from anyway?  In the name of fairness and helping students, education continues to be socialized.

Big news today as Moody's puts Bank of America, Wells Fargo, and Citi on downgrade review:

Moody's Investors Service has placed the deposit, senior debt, and senior subordinated debt ratings of Bank of America Corporation (A2 senior), Citigroup Inc. (A3 senior), Wells Fargo & Company (A1 senior), and their subsidiaries on review for possible downgrade. Each of these ratings currently incorporates an unusual amount of "uplift" from Moody's systemic support assumptions that were increased during the financial crisis. The review will focus on whether these ratings should be adjusted to remove this unusual uplift and include only pre-crisis levels of government support.

Does this imply that perhaps the banks aren't too big to fail anymore?  Or perhaps it has something to do with Dodd-Frank:

Regulatory authorities continue to make progress in rulemaking, however, the final shape of the landscape remains uncertain. Today's rating actions reflect Moody's view that, in light of developments on the Dodd-Frank Act that have occurred to date, the unusual levels of uplift incorporated into the ratings of Bank of America, Citigroup, Wells Fargo may no longer be appropriate.

Hmm...what does Moody's know that we don't about Dodd-Frank?

Some good news today as a Dennis Kucinich-sponsored resolution is making its way through the House of Representatives which would invoke the 1973 War Powers Act to force Pres. Obama to stop all military operations in Libya.  Finally someone in Congress gives a crap about limiting the President's powers.  And of course the Pentagon is worried:

Approval of a resolution in the U.S. House of Representatives directing President Barack Obama to withdraw from NATO operations against Libya would send an "unhelpful message of disunity" to allies and foes alike, the Pentagon said on Thursday. Pentagon Press Secretary Geoff Morrell said that "once military forces are committed, such actions by Congress can have significant consequences," particularly on relations with members of the North Atlantic Treaty Organization.
"It sends an unhelpful message of disunity and uncertainty to our troops, our allies and, most importantly, the Gaddafi regime," Morrell said in a statement in Singapore, where Defense Secretary Robert Gates arrived on Thursday to attend a security dialogue with Asian allies.

Yes pulling the troops from harm's way would be undignified.  And weren't we all told that the operation would be swift and purely humanitarian?  The whole thing is a joke, plain and simple, and Obama's excuse that the U.S. isn't leading the effort gives him an excuse not to follow the Resolution is equally pathetic.

Speaking of jokes, Charles Hugh Smith has a great post on the idiotic belief that GDP is growing:

The Federal government borrowed and spent $6.1 trillion over the past four years to generate a cumulative $700 billion increase in the nation's GDP. That means we've borrowed and spent $8.70 for every $1 of nominal "growth" in GDP.
In constant dollars, GDP is flat: we got no growth at all for our $6.1 trillion: zip, zero, nada. In constant dollars, the GDP in 2011 might return to the 2007 level, if the economy continues "growing" at the same pace reached in the first three months of 2011. If not, then the GDP will actually be lower than pre-recession levels.
If you borrowed $8 to get $1 in your pocket, would that strike you as a good deal? How long do you reckon you could borrow $8 to get $1 of "growth" in your finances?

Here are the numbers, drawn from these sources: U.S. GDP by year and U.S. GDP in constant (2005) dollars.
Total public debt in 2007 (pre-recession) was $8.95 trillion.
Total public debt in 2010 was $13.53 trillion. This is an increase of $4.58 trillion. Add in the 2011 deficit of $1.6 trillion and the total is $6.1 trillion in additional debt in the four years from 2008 to 2011.
GDP in 2007 (pre-recession): $14.08 trillion
GDP in 2008 (recession starts): $14.44 trillion ($364 billion gain)
GDP in 2009 (recession officially ends in mid-2009): $14.12 trillion ($322 billion decline)
GDP in 2010: $14.51 trillion ($390 billion gain)

In constant (2005) dollars:
GDP in 2007 (pre-recession): $13.23 trillion
GDP in 2008 (recession starts): $13.31 trillion
GDP in 2009 (recession officially ends in mid-2009): $12.88 trillion
GDP in 2010: 13.04 trillion
GDP in 2011 (assuming 1.8% annual real growth): $13.3 trillion

Here are the deficits of the past three years, and the estimated shortfalls for fiscal year 2011:
2008: $458 billion
2009: $1.4 trillion
2010: $1.3 trillion
2011: $1.6 trillion (est.)

These don't include "supplemental appropriations" for war costs, losses in Fannie Mae and Freddie Mac, etc., which is why the debt has risen by more than the sum of the "official" deficits.
Notice the trend here? The deficits keep getting larger as the "recovery" continues. If we keep "recovering" at this pace, we'll soon be borrowing 50% of the Federal budget each and every year.

And of course this doesn't include the $2 trillion increase in the Federal Reserve's balance sheet--trillions squandered on propping up the housing markets--(look how successful the Fed was in propping up housing valuations), nor does it include TARP and other "off-balance sheet" Treasury bailouts and guarantees.

I bet all those deficits sound like heaven to Keynesian ears.