October 3, 2016 | No Comments
When Barack Obama announced plans to crack down on federal subsidies to companies like Sallie Mae — calling them a “big racket” — one Democrat quietly helped the lender make its case to keep billions in taxpayer money flowing: then-Virginia Gov. Tim Kaine.
Early in Obama’s first term, email records reviewed by POLITICO show that Kaine used his White House connections to advance the agenda of the nation’s largest student lender. Kaine took the position that he was helping a home-state employer, with headquarters at the time in Reston.
But what Sallie Mae wanted to preserve was widely criticized as a taxpayer boondoggle — and the company has drawn the ire of progressives like Massachusetts Sen. Elizabeth Warren.
Kaine’s little-known intervention on behalf of Sallie Mae, as detailed in about a half dozen emails in 2009, reveal a pragmatist who, in this case, was willing to forward a special interest’s concerns to the right people — albeit without his full-throated endorsement.
While the Clinton campaign has cast her vice presidential pick as a fighter on progressive issues, his involvement with Sallie Mae suggests a more conventional politician willing to carry water for a constituent dangling hundreds of local jobs — even if progressives might criticize it as working against the interests of taxpayers and needy students who would get additional financial aid under Obama’s proposal.
Kaine’s involvement with Sallie Mae is not the only time he has supported the agenda of banks: This summer, just before Clinton tapped him as her VP nominee, he came out in favor of loosening some regulations for regional banks — a move that drew fury from progressive groups.
The 2009 emails show that Kaine scheduled a phone call with then-Education Secretary Arne Duncan about the student-loan issue — a call for which Sallie Mae provided “talking points” about how Obama’s plan would harm Virginia.
“Mr. Secretary, as you may know, Virginia is home to hundreds of student-loan industry jobs …” the talking points began.
Records show Kaine and his staff discussing their planned call to Duncan the night before it was scheduled, but a Kaine spokeswoman would not confirm if the phone conversation took place. Duncan did not respond to requests for comment.
The campaign said there was nothing wrong with Kaine’s actions.
“As governor, it was Sen. Kaine’s job to help ensure all sides were heard on an issue that affected many Virginia jobs,” said Amy Dudley, Kaine’s national spokeswoman. “He made clear that his efforts were not an endorsement of any proposals.”
Barmak Nassirian, director of federal relations at the Association of American State Colleges and Universities, described Sallie Mae’s lobbying push as a play “to keep crony capitalism going.”
While it’s hardly unusual for a politician to go to bat for a home-state employer, Nassirian said of Kaine, “It certainly speaks to his mindset and his tendencies politically to balance things. He wants to be able to truthfully tell Sallie Mae he intervened on their behalf, but he’s not going to fall on their sword.”
Neil Sroka, communications director at Democracy for America, a progressive group that supported Bernie Sanders’ candidacy, called the emails “an expert example of how even good, decent and fair people are impacted by the role and power that big business has over our political process. … It’s a reflection of a world in which lobbyists have so much more access to people in power than do regular folks.”
Rick Castellano, a spokesman for Sallie Mae, said in an email: “As a good corporate citizen, we work with leaders at the federal and state level in those states where our employees live and work and where we operate, to keep them informed on matters that could affect our business.”
Kaine eventually touted Obama’s proposal as a victory for students when he became the chairman of the Democratic National Committee a year later.
But his help for Sallie Mae offers an awkward counterpoint since combating student debt has become a rallying cry of the Democratic left — and Sallie Mae and its loan servicing spin-off, Navient, have been favorite liberal punching bags.
Warren, for instance, has railed against Navient over allegations that it overcharged military service members, and the senator has slammed the Education Department for continuing to hire the company. Navient paid $97 million to resolve the allegations from government authorities, though it did not admit any wrongdoing, and the company argued it had interpreted the requirements of federal law differently.
A Navient spokeswoman, Patricia Christel, said in a statement that the company’s “focus has been and will continue to be on helping borrowers succeed, and that focus has resulted in a default rate 31 percent lower than peers.”
Clinton herself echoed the left’s concerns about Navient on the campaign trail. She said at a campaign stop earlier this year that Navient’s “behavior is outrageous” and that she was “totally appalled” by the company.
But years earlier, Kaine had helped Navient’s predecessor gain access to decision-makers. Records show the governor emailed Sallie Mae’s “alternative” proposal directly to a then-top White House adviser, Jim Messina. Though Kaine noted that he couldn’t “vouch” for the proposal, the company’s plan would have largely continued private lenders’ involvement in federal loans, an arrangement that was criticized as wasteful.
In April 2009, as the debate over the plan kicked into high gear, Kaine relayed some concerns to his staff that Sallie Mae was planning to move jobs out of Virginia. In an email, he said that Sallie Mae CEO Al Lord’s “chief concern” was the Obama administration’s plan and that the company was looking for some “allies in Congress.”
“Al mentioned that he does not know [Sen.] Mark Warner or [then-Sen.] Jim Webb and would really like to meet them and talk to them about his concerns,” Kaine wrote, directing his staff to see whether the two Virginia senators could meet with the Sallie Mae chief.
He added that “this kind of follow-up may well help us keep this sizable employer here in the state.”
A year later, Warner and Webb were among a handful of Senate Democrats to sign onto a letter opposing the Obama administration’s plan.
Such efforts notwithstanding, the Obama administration convinced Congress to end the student-loan bank subsidies by including the provision in the budget reconciliation bill to amend the Affordable Care Act. The change freed up more money to fund Pell grants, which go to needy college students. Several months later, Sallie Mae announced plans to move its headquarters from Virginia to Delaware, taking several hundred jobs with it. The bank cited “the need to dramatically restructure our operations.”
At the bill’s signing ceremony, Obama hailed the legislation as a victory against the “army of lobbyists” hired by Sallie Mae and other lenders. But Virginia’s new Republican governor, Bob McDonnell, issued a sharply worded public statement that criticized what Congress had done, while citing the importance of Sallie Mae jobs to his state.
A Virginia newspaper, The Roanoke Times, responded with a blistering editorial that faulted the GOP governor for supporting a “$60 billion giveaway to banks.”
The legislative change, the newspaper wrote, “ends a longtime sham in which banks raked in billions of dollars in profits from student loans while the federal government assumed all of the losses if borrowers defaulted.”
The newspaper made no mention of Kaine, who had quietly assisted Sallie Mae behind the scenes. By that point, Kaine had become chairman of the Democratic National Committee, and was publicly supporting ending the subsidies.
In an October 2010 interview on NBC’s “Today” show, Kaine cited the elimination of the bank subsidies as evidence of the Democratic Party serving the needs of young voters.
“We’ve done the largest expansion of the student-loan program in American history without spending an additional penny,” Kaine said. “We took it away from banks, who didn’t need it.”