Whose Asset? Whose Debt?

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You and I think of our loans as debts or a minus. But banks consider them an asset, a plus—as in money in the bank. The bank or creditor has gotten you to sign on the dotted line. You have promised to repay the borrowed money, plus more, with extra charges called interest added in. Whether mortgages, car loans, or student loans, these interest charges are paid upfront, with the principal, or money owed, barely touched. In that way, loans are worth a lot to the loaner

So here is something to keep you up at night. Wall Street has begun securitizing student loans, a phenomenon they have newly named SLABS (Student Loan Asset-Backed Securities). Ellen Brown has been writing about this extensively, and if you want the wonky details, read her at Common Dreams. should you care? Do you remember the 2008 mortgage crisis that led to a global financial meltdown? Back then, Wall Street had securitized the nation’s mortgages to re-sell to investors. To securitize means to take an asset, like a bank’s mortgage loans, and through “financial engineering,” as Investopedia puts it,, transform those into a more liquid and fast-traded “asset-backed security.” An even bigger global Wall Street bank then sells them to big-time investors.

This financial re-engineering first began in the 1990s, hailed by Washington.Wall Street made so much new money that everyone tried to cash in on the nations’ bank assets, namely US  citizens’ debts. Real estate prices soared! Loans were easy! You remember what happened then? Fraud, subprime liar loans, and a huge crash, which citizens then bailed out with their taxes, rescuing the biggest banks, instead of letting them fail from their fraud and bad judgement.

So now with student debt liabilities amounting to $1.7 trillion for 44 million borrowers (the 2016 student average was over $37,000 each), says Forbes, ( )—are we seeing another crash in the making?  College tuitions, so necessary for any kind of survivable future,  may create assets and soaring numbers for Wall Street. But thinking of this unprecedented burden on an entire generation as an “asset” accrues only to the wealthiest few. For the many who face an indebted future of laying golden eggs for the SLABS omelet, their goose is already feeling cooked.  

Look for #unscrewed student debt stories in future.