Yes, higher education must be much more of a joint venture, for all involved.

Sir, Sheila Bair is absolutely right that “proceeds from student debts go to colleges, while the risk of repayment falls on borrowers and, if they default, on taxpayers provides little incentive for schools to contain costs [which] provides little incentive for schools to contain costs.” As a solution she refers to “income share agreements” where universities provide some funding and students pay back a small share of their income over some years. “An investment model to put US students through college”, March 15. 

Since in a 2007 Op-Ed I asked whether higher education should not be more of a joint venture, I fully agree with the orientation of these proposals. 

That said I would not leave it solely as a student to college/university level. I believe that professors should also have skin in the game, and so perhaps their retirement plans should include a clear linkage to how their students did.

And why leave it at that? Why not think of securitizing those possible future participations in earnings so as to provide some upfront money to cover expenses? And what about insurance companies investing in these? And what about some students crowdfunding their tuition fees?

Where I do part though from Bair’s opinion, is on the concept that high earning students could/should subsidize the study costs of lower earning professions. That could cause some unexpected distortions, and it is much more a general societal responsibility, which the higher earning - higher tax paying already share.

PS. Sir, over the years I have written several letters to you on this subject... but 😒

@PerKurowski

For better transparency should newspapers have a section of “Journalism” and one of “Political Activism”?

Sir, Rana Foroohar discussing the issue of ever growing student debt, ends her review of Devin Fergus’s book “Land of the Fee”, with: “Perhaps the new generation of millennial socialists rising in the US should make this the issue they tackle first”, "Slow bleed" August 18.’

What’s wrong with plain millennials? Do they have to be socialists? Or is Foroohar more than a journalist an activist?

Sir, since many years I have been arguing that higher education should be much more of a joint venture between the students and their Alma Maters; and that financing preferentially educational costs would just leave over-indebted students and enriched professors. Just as financing preferentially house purchases benefits those who have invested in houses, much more than those who want a house just to be their home.

Here below are two of my tweets that I think cut over political lines, but that therefore might not be of too much interest to redistribution or polarization profiteers.

1. “Instead of taking on debt, perhaps students should go for crowdfunding their study costs, offering to pay a percentage of their incomes during their first 15 after graduation years. If so would not investors want their professors to have some skin in the game too?”

2. “Would insurance companies be willing to invest in the future by financing students against a percentage of their first 15 after graduations years of income? Would IRS be willing to certificate the incomes of these students for the investors?”

I have now ordered, “Land of the Fee” and so I will keep my comments till after I read it. That said I am sure I will again have to ask: Where was FT when regulators risk weighted sovereigns 0% and citizens 100%? Where was FT when regulators allowed banks to leverage 62.5 times only because an AAA rating issued by human fallible rating agencies was present? Where is FT on that all the real benefits of securitization do not accrue those securitized, much the contrary securitization profits are maximized when hurting the most? 

@PerKurowski

Boris Johnson, if you want to help small digital companies in London, then you'd better travel to Basel than to New York

Sir, Gillian Tett writes about Boris Johnson, the major of London, going to New York in order to look for finance sources for small digital companies, start-ups, and who find access to finance difficult in a city like London that has so many banks, “The British tech industry needs a homegrown cash boost” February 13.

Why does not Boris Johnson travel to Basel and ask the Basel Committee to stop allowing banks to hold less equity when lending to those perceived as “safe” than when lending to “risky”, since that must clearly de-facto erode the interest of banks in lending to “risky” small businesses… like these small digital companies.

If Europe (and America) does not free itself from runaway control freaks… game´s over.

Sir, John Kay writes “Regulators will get the blame for the stupidity of crowds” March 26 though what is most urgent in the Western world, so that accountability would mean something is that regulators should be blamed for their own stupidity.

Kay writes “Naivety is as much of a problem as criminality. Most businesses plans read persuasively- until…” Indeed, but rarely have we seen something as naïve as bank regulators who thought and still think that with their trick of risk-weighing the capital requirements, they could produce safe banks without producing dangerous negative ripples in the real economy.

Kay writes about concerns “about the availability of funds to small and medium sized businesses” and holds “The flow of intermediation is blocked by the debris of bank failures”. Wrong! That flow of intermediation of funds is primarily blocked by the fact that regulators require banks to hold more capital against it than against the flow of funds to for instance the “infallible” sovereigns or to the AAAristocracy.

Kay concludes mentioning that there were some institutions which provided “the new P2P lending and equity crowdfunding services… They were called banks.” But, instead of begging for banks to return to what they were, he calls for the regulators to make sure that what´s new should be “operating in a more closely regulated environment”. Frankly!

Let me phrase it the following way. Every time a bank credit in Europe (or America or anywhere else) is not given to a small and medium sized business, only because these cannot provide the banks with a competitive return on equity as a result of higher capital requirements, a door, behind which we could find the luck needed to power our future, has been shut.