Cause and effect at First Marblehead?
Like many companies in the student loan business, First Marblehead (FMD) has had a rocky year, falling over 40% so far this year as questions over industry practices grew. In the 10Q that First Marblehead filed late Friday, it used some new and blunt language about the scope of those problems and how the legislation will impact their business:
The regulatory actions described above have also prompted state and federal legislation governing the marketing of student loans could impose material additional costs on our operations and restrict the that will affect our operations. The State of New York has enacted legislation that may impede accepted marketing practices of our clients. In addition, the New York legislation will require additional disclosures that will increase our costs. Similarly, proposed legislation in the United States Senate and The Student Loan Sunshine Act already passed by the U.S. House of Representatives would impose significant additional disclosure and processing burdens on our loan origination operations. Other proposals, which have not yet passed in either house of Congress, would reduce protection of the loans may affect the ability of some of our clients to market loans through schools.
Given all of this new legislation swirling about, perhaps it’s not entirely coincidental that First Marblehead executives seem to be much more generous when it comes to donating to politicians at the federal level, based on this data from Open Secrets. Of the 22 donations made by First Marblehead executives and directors since 1999, half have been made this year, when political outrage seems to be focusing particularly intensely on the student loan industry. (I couldn’t find a similar database for donations to New York state politicians, but if you know of one, I’m all ears).
A quick scan of the Open Secrets list shows that Sen. Chris Dodd (D-Ct) received about a third of that money. Coincidentally, or, perhaps not, Dodd, who is also running for President, happens to Chair the Senate Committee on Banking where he held this hearing earlier this year. Another coincidence? The donations to Dodd were made two weeks after the hearing. Now, what would prompt First Marblehead executives to dig into their wallets much more frequently than they have in the past, especially for a Presidential candidate, who, by all accounts, is running far behind the pack.
With the elections now a year away, footnoted.org will periodically look a bit more closely at the ties between money and politics. Rest assured that it will be a bi-partisan poke, since the problems exist on both sides of the aisle.