In his weekly “Stories I’d like to see” column, journalist and entrepreneur Steven Brill spotlights topics that, in his opinion, have received insufficient media attention. This article was originally published on Reuters.com.
1. How high are universities flying?
I was amazed to see this sentence in the piece The New York Times’s ever-amazing Jo Becker wrote last week about all the goodies outgoing Penn State football coach Joe Paterno negotiated in a new contract even as the Jerry Sandusky scandal was imploding around him: “He would also have the use of the university’s private plane ”
Penn State has a private plane? Sure, the school probably charters a jet when the team travels. But do the university executives have their own jet? How many other universities have perks like this?
As this article from Bloomberg documents, the relentless rise in higher education tuition and other costs has trapped students in debt from readily available student loans backed by us taxpayers. It is fast becoming a national scandal akin to the mortgage crisis. Which means we need some tough, fresh reporting finally holding university leaders accountable for spending and management efficiency.
According to news reports Penn State trustees raised tuition on the main campus last week by 2.9 percent. University officials bragged that this was the “lowest percentage tuition boost in 45 years and one of the smallest in the nation.” However, that raise followed a 4.9 percent increase the year before, and it exceeded the pace of inflation in any event. Sure, state aid to the school was cut, but a check of the university’s website reveals that the overall expense budget for the coming school year is still up $131 million, or 3.2 percent, over the year before, again outpacing inflation and despite those cuts in state aid. The overriding reality is that higher education remains a gold mine for reporters looking for waste and lack of accountability.
Air Paterno may be a good hook to get people interested. Which other schools have planes?
2. Scrutinizing the New York Fed:
The Federal Reserve Bank of New York has now taken center stage in the swirling scandal of who knew what about the manipulation of Libor rates. And I can report from experience that center stage is not where the New York Fed likes to be. In 2010, while writing in The New York Times Magazine about the work of Kenneth Feinberg - the Treasury Department-designated pay czar appointed to curb the compensation of executives at banks bailed out by TARP - I discovered that the New York Fed played a key, behind-the-scenes role in protecting AIG executives from having to accept AIG stock as part of their compensation. New York Fed officials told Feinberg that they agreed with these AIG executives that the stock of their own company was “worthless” and urged him to think of a different way to compensate them.
Because the stock was selling for approximately $40, this seemed a curious position for the New York Fed to take, and it raised questions about why AIG would not be required to disclose that its own executives, not to mention the Federal Reserve Bank of New York, were taking the position in negotiations with the Treasury Department that a $40 stock was worthless.
However, when I tried to get comment from the New York Fed, a spokesman told me that officials there “never” speak on the record. He was serious. And his claim seemed borne out when I looked through news clips about the organization and found that quotes of any substance were unattributed or on background.
With its cathedral-like building in the heart of the financial district and a board made up of elite Wall Street figures such as JPMorgan CEO Jamie Dimon, the New York Fed is the epitome of the financial establishment - yet it’s a government-funded agency, which should seemingly be open to public scrutiny. Its central role in TARP (Treasury Secretary Timothy Geithner was its president at the time) never produced the kind of full portrait of how it works and what its full influence is that it deserved. The new Libor scandal should get the financial press on the case.