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Saturday, July 20

Gapers Block

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In order to promote market stability, the treasury department has proposed that the federal government buy up to $700 billion in "troubled" assets from securities firms. Although the bill that would make this possible was not passed in its first attempt through Congress, lawmakers are making changes to garner more support for the "bailout bill." This bill, if passed into law, will effectively increase the role of the federal government, which has been the modus operandi of the Bush administration.

I would like to invite Wall Street into a world that educators have known since the signing of the No Child Left Behind Act. This was when the Feds stepped up the regulation game in the schools. It hasn't been an easy journey for educators, but all students are expected to be functioning at grade level by 2014. That's nothing to scoff at, considering teachers, administrators and educational bureaucrats are addressing the issue of the "achievement gap." All students, including those who are poor, have special needs, and those who have only been speaking English for a short period of time will have equal access to the American dream by 2014. Of course, to make it fair, all of the students in a given state are evaluated using the same assessments. To achieve its goal, the federal government has granted schools money, just like they are about to give to these securities firms.

The bad news is, if the federal government gives investment bankers the same deal as it gave educators, there will be some heavy strings attached. This means a lot of oversight and attention to accountability. These firms shouldn't start counting their monies before they have been hatched.

If this program is implemented as it was with the "failing schools" under No Child Left Behind, the firms can't bank on the entire $700 billion. They should feel fortunate to receive half of it. If a particular operation's clientele is mainly poor or minority, then its piece of the pie will actually be much smaller. No Child Left Behind has taught us some possible stipulations that the Feds may impose.

First, all of the investments are to make extremely high yields by 2020. Congress will give 12 years to turn this debacle around. This should be easy because there are benchmarks to be met at every year in the interim. Although the market has "natural fluctuations," every single investment made must make some sizeable gains each year, or the Fed will sell back some of the "troubled assets" at their value at the time of purchase. Offsetting this should be no problem — just start firing associates. If all of the investments aren't making gains each year, it must be the fault of the associates anyway, so their inability to invest wisely makes them dead weight. Also, their salaries will be taxing on the firms' budgets. It's never the CEO's fault. There just needs to be a plan in action to know who to fire first. Without the setback of unions and the tenure system, this is will be easy. The CEO can just increase the workload of his or her best investors, since they do so well anyway.

Sub-prime loans can continue to be sold. Every client has the ability to own a mansion. This goal will be dubbed "closing the McMansion gap." If a broker cannot get every client into a mansion, regardless of his credit history or income, that banker is not doing his or her job. It will cut costs if the "not highly qualified" associates are replaced with fresh-out-of-business-school neophytes. If there is a shortage of these workers, "alternative certifications" can be made for college grads of any discipline. All they need is a crash-course internship and some night school. Remember, all of the investments need to have made benchmarks by 2020, regardless of any extenuating circumstances.

If implementing these changes proves to be too difficult for these managers, there will be bureaucrats in place to design ad hoc programs that will make this transition smooth. If these programs are shown ineffective, they will be discontinued immediately and replaced with new programs. Don't forget, all investments are to be highly profitable by 2020. If these changes are shown to be too drastic for the bankers, perhaps teachers who lost their jobs under the parochial constraints of No Child Left Behind can be hired on as consultants.

For a primer in what the investment bankers can expect, one must not look any further than Chicago. The Chicago Public Schools' "Turnaround" program may be a good fit for these securities firms. This school year, students at six CPS schools (Orr and Harper high schools, and Fulton, Howe, Copernicus and Morton elementary schools) were welcomed back with an entirely new teaching staff. These schools were dubbed "chronically underperforming" by the Chicago Public Schools, based upon standardized test scores. The Academy of Urban School Leadership (AUSL) will manage these schools with funding from the Bill and Melinda Gates Foundation.

Under AUSL's management, the entire faculties were fired and replaced with new teachers. There were no parachutes for these teachers; golden or otherwise. The students, many of whom knew their teachers for years, were faced with having to adjust to what were basically brand new schools within the confines of their old ones. In theory, this program will be another vehicle to bring all students up to speed by 2014. If the common business sector practice of "turnarounds" works in the public sector, why shouldn't it work for in the world of the MBAs who invented it?

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Vinny / October 1, 2008 4:37 PM

A bitter post from a teacher (sorry, "Educator") angry that he gets judged on whether or not his charges learn anything.

There are plenty of smart things to say about govt. purchase of distressed CDSes (for or against). None of them are in this column here.

If King Henry gets his money, expect him to have made a profit, Yes. a profit on his buyout in under 5 years.

He shall be judged on the success or failure of his work--the very thing this column not so subtly rails against.


Oh, and didn't you buy a condo through a loan that came with strings attached? Suddenly that is a bad thing?

Or is this a case of do as I say...

Kenzo / October 1, 2008 6:11 PM


I suppose if you left a last name, I could also "Google" you, add up a few random facts and create a straw man to attack. You left out the fact that I've run a few 5Ks(and from my recent decline in performance- I could use some more time on the treadmill). Other than the fact that would be creepy of me, it's intellectually dishonest. I will not address the ad hominem.

You are correct when you write "There are plenty of smart things to say about govt. purchase of distressed CDSes (for or against). None of them are in this column here."

If the focus of the column were whether or not the purchase of distressed CDSes was good policy, it would have behooved my argument to include more "smart things" about the proposal.I actually have a lot of "smart things" to say about the issue, but I'll leave economic experts to publish writing on that.

However, my argument was that when the Fed steps into new territory, the rules should be consistent.

Although much of my proposals were steeped in satire, the fact that NCLB has been chronically underfunded is a reality. No attack on me or my lifestyle can change that fact.

"If King Henry gets his money, expect him to have made a profit, Yes. a profit on his buyout in under 5 years."

Sorry, you lost me on the "King Henry" part, but if that is your proxy for X investment banker, your argument holds little water.

Can you really guarantee that all of X's investments will see a return in five years? That takes a lot of faith and frankly, not all factors are under X's control.

Just as all taxpayers have the right to know that their monies are being used wisely in the schools, they also have the right to know that their monies are being used wisely when invested in the private sector.

Rick / October 1, 2008 8:23 PM

This is a great article. It may upset some people, but Kenzo has done a great job illustrating the double standard that exists when government funding is distributed. Somehow, unions seem to be at fault when any system they support fails, but when the boot-strap pulling industrialists need a helping hand, suddenly we can't get the checkbook out fast enough.

I happen to know that Kenzo is an excellent educator, and any assumptions about his bitterness as a professional could be proven false within moments of examining his work ethic. Well done.

mike-ts / October 3, 2008 1:08 PM

I do not know Kenzo, and frankly it doesn't matter if the apple on my table wrote this article, if it makes good or bad points, address them, not the fact that an apple wrote this.

Anyway, like NCLB, this bailout is not the realm of the federal government. Saying that the feds have no business getting involved is NOT the same as saying that no one should. Only the people in the school districts know what their kids need to succeed, and no federal unfunded mandate size 10 shoe will fit all feet.

Wachovia decided to go with a privately arranged buyout by Wells Fargo rather than the fed sponsored one with Citibank. The FDIC midwifed the Chase buyout of WaMu, but Chase is the WaMu backer, not you and me.

Whenever someone is yelling at me to hurry, and there's disaster if I don't by reflex jump into a big decision without thinking or negotiating, I know it's a bullying tactic to hurry me into a decision that's bad for me. I see the same here.

End user credit is not locked by this crisis, but by Congress. If banks are frozen and not lending to each other, it's because all are waiting, holding their breath, to see what the bill does today, no other reason. If the bill dies, they'll unfreeze, determine who's got their act together and who's about to fail, then only do business with A+ fellow banks. Finally, all of these "bad" loans are secured loans. If this was all unsecured credit card debt, I'd say it'll collapse, but at the end of the day, these "failed banks" are still hugely landed gentry, worth billions.

Keep your head about you while those around you are losing theirs. - Kipling, paraphrased

Kenzo / October 4, 2008 10:08 AM

Good point, Mike.

"if the apple on my table wrote this article, if it makes good or bad points, address them, not the fact that an apple wrote this."

I like that rule a lot.Let's call it the "apple rule" and use it to ensure good debate.

spudart / October 6, 2008 8:32 AM

Do you think there will be less students choosing to go into investment finance in the future because of all these regulations and pressure?

And if so, is that a good or bad thing?

Jerry Simpson / March 19, 2009 6:59 PM

"NO BANKER LEFT BEHIND" free bumpersticker available from

check it out


About the Author(s)

Kenzo Shibata is a full-time educator who moonlights as a graduate student of public policy at Northwestern University. He writes about education, labor, and prison policy. Most importantly, he's a North Side White Sox fan who won't stop believing. You can reach him at

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