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They (Will) Know Nothing!

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If Jim Cramer was mad at the prospect of millions of Americans losing their homes, who knows what Krakatoa-esque calamity awaits when he finds that millions of Americans may lose their student loans. In the current credit crunch, student loans have been flying under the radar, at least coverage-wise.
Like mortgages, student loans often get bundled by the major banks into ABS and bought by pension funds and other institutional investors. Like subprime mortgages, there’s a lot of speculation involving people with questionable credit (ABS of student loans funding liberal arts degrees clearly need a ratings cut).
The banks get an added perk from large federal subsidies to the lenders of federally guaranteed student loans. The scope of the student loan ABS market is substantial - more than $350 billion in student loan ABS have been issued since 1998, including a record $79 billion in 2006.
In response to the current market, many new student loan financings have been shelved and loan financing costs are rising. Next week, lawmakers and industry groups are finalizing a student loan reform proposal to send to George W. Bush, in response to recent scandals involving “kickback schemes and conflicts of interest among lenders and college officials.” One of the primary reforms is a subsidy cut. Rumor has it that the White House is on board and that the only argument involves the size of the subsidy cut.
A large subsidy cut would exacerbate the squeeze placed on lenders and the banks bundling student loans into ABS.
Securitizing student loan debt [Reuters]