First Marblehead to be investigated?

Sometimes when we get bored, we browse through the "Asset Backed Alert", http://www.ABAlert.com, it's a financing industry weekly newsletter. Sometimes there's stuff in there about student lending financing deals.

A strange bit in the April 20 episode this week though. Asset-Backed Alert is reporting gossip/rumors that First Marblehead is next on Cuomo's list. They don't cite any sources or quotes to substantiate the rumour. But we're going to perpetuate the gossip too.

First Marblehead is the mack daddy of private ed loans. They don't write loans or fund them directly, but rather they put together a network of marketers and banks to issue loans, and First Marblehead creates the secondary market by securitizing the products. They make a ton of cash doing this. They're sort of a mini-Sallie Mae during the startup days of Sallie.

Naturally, if someone is making money by lending to students, they have a big ol' target painted on them right now.

Get the popcorn....

....it's gonna be an action packed Wednesday! That's right.....on C-SPAN Wednesday, April 25, we've got Andrew Cuomo, Live In Congress.

We just checked over at C-SPAN and didn't see exactly when the excitement begins, so we're starting watching first thing in the morning. This will be good. We've been at the Capital for these hearings before. This one is to get headlines. Nothing will be decided, no good information will be disseminated, and the reporters will get all the good seats. But you don't have to be in Washington to catch the show....thanks to C-SPAN.org we can get streaming gobley-gook from the Comittee hearing room live all day right from our desk.

CNN has some good quotes from Cuomo today: 'Cuomo said Spellings' move was "too little, too late."' He's talking about Margaret Spellings' creation of a Federal Task Force To Investigate the Relationship Between Lenders and Financial Aid Offices. We surmise that Spellings' is just wrapping up the Federal Task Force to Investigate the Bribes Taken by Federal Employees Who Oversee Those Industry Participants. And the Federal Task Force To Investigate Why The Department of Education Cannot Police Any Of It's Regulations should be delivering it's reccomendations shortly as well.

But our prediction for tomorrow is: 1) Lots of headlines/soundbites/bylines on the topic; 2) No actionable suggestions that will fix all the problems; 3) a variety of pithy responses to the circus that's due in DC tomorrow.

Finally.....

...someone willing to stand up the bullying by Andrew Cuomo -- Drexel University. You see, Drexel had an exclusive arrangement with Education Finance Partners out in the San Fran area. EFP would provide private student loans to Drexel's financial aid office in return, EFP would provide revenue sharing with Drexel University.

Drexel refused to cave into Cuomo's demand for restitution. To avoid too much egg on Cuomo's face, he was forced to file suit against Drexel. To which Drexel responded with the perverbial: "Bring it on!" And there we have it. Drexel will see Cuomo in court over the matter. And we think Drexel has a better than 50-50 shot at winning.

Out in the real world we call this an "affinity marketing" arrangement. There's nothing wrong with this. Open your wallet, take a look at all your credit cards. You probably have 5 or 6. They were probably solicted to you via a group you belong to: your alumni association, NASCAR, your favorite airline, etc. You think those groups just hand over their member list to the credit card company for free? Heck no! They make a bloody fortune off of renting their member list. You can also rest assured that your alumni association, NASCAR, or your favorite airline didn't go out and establish their own credit card program. The cards are probably issued by one of three banks in, you guessed it, an affinity marketing arrangement.

So long as Drexel University officials weren't flown to exotic locations for "conferences", given stock grants, or any other payment otherwise, this exclusive arrangement is just fine. We don't know for sure, but we surmise that Drexel used the money that EFP paid to them to fund scholarship funds, the Unversity general fund, or some other fashion whereupon the University as a whole benefited.

We also cannot confirm this, but if a Drexel student decided not to get their private loan through EFP, then they were free to shop around and do business with whomever they pleased. This is America after all.

So to you, Drexel University, our hat goes off to you and CollegeLoanSearch stands in solidarity with you!