Student Aid And Fiscal Responsibility Act Of 2009
Floor Speech
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Mr. SOUDER. I thank our ranking member.
The loud sound you hear is the big gulp of the public option swallowing the private option. We hear all kinds of excuses why it's not the same, but here are some of the key business points to remember here: There has already been confusion in the quotes here on the floor about this 7 percent that the private sector has between revenues, which is the loan income that the banks receive, and their profits. There's also confusion between the net profit and the gross profit. The gross profit has all the expenses coming out, whereas the net profit is the bottom line, which is a relatively small number.
The reason this is important is that government, if they take this over and swallow the whole public sector into the public option, will have basically the same costs. Only when you compare cost to cost, the government can't deliver at the same price as the private sector. It never has, it never will in any category in the history of the United States.
Now in this expense question--and we've argued about this for years--one of the things that's clear is that the Federal Government doesn't depreciate. So fixed expenses, like buildings, aren't counted in their expenses that come off of the net profit, because that's a different budget. We do buildings in one appropriations bill, in one lump sum. It is not something that you would amortize over time.
Mixed expenses--for example, the expenses at the Department of Education, such as lighting in the building, even in many cases staff--aren't assigned to the student loans. They're assigned to the Department of Education. But even then when you ask the private sector to compete, even paying in that profit, 80 percent of the colleges chose the private sector because the service delivery was better. In fact, hopefully, the government is going to be wise enough here that they're going to contract out with the private sector at the end of the day to deliver much of these services because there is no capability in the Federal Government to deliver this.
Now the proposal, on the face of it, isn't even plausible that we're hearing about all these new funding programs when the net profit out of the private sector is minimalist compared to the new program. So where does this money come from? The best I've been able to determine is it's a different method of borrowing. Banks have to use the LIBOR rate, the interbank lending rate, whereas we are apparently going straight to the Fed and Treasury. That's merely a transfer of government funds that are off budget onto budget but still reduces the liquidity in the banking system, and it's being used to subsidize the new programs in the student loans.
Now why does this become important? Why won't the same grounds apply to SBA? Because if SBA goes directly into this same fund, there's no reason to use a bank. On what grounds do we use banks for farmers' loans? If they're going to borrow the money directly from the Treasury and the Fed, they can borrow it cheaper than any bank, and that we should eliminate any loans that are going through anywhere in the private sector where there is a government alternative.
The CHAIR. The time of the gentleman from Indiana has expired.
Mr. KLINE of Minnesota. I yield the gentleman an additional 30 seconds.
Mr. SOUDER. Thank you.
The key question here is, the constitutional authority of the Federal Government is to regulate interstate commerce. Then we have the Federal Reserve System that was set up to provide a balance and stability in the funding of the United States. What we did not create is a national bank.
This bill is the beginning of the creation of a national bank, and that there is no logical reason why every other lending category won't become a national bank, too. That's the big gulp we are hearing here and in many other areas, a massive government takeover in category after category.
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