Economic Warrior's Blog

(Hampton, NH August 24, 2012) Best-selling author Barry James Dyke is pleased to announce that he will be the guest of John Wells Caravan to Midnight Weekend Edition of the George Noory Coast to Coast AM show on August 25 Saturday evening/Sunday morning between 2AM and 3AM.

The Saturday host is John B. Wells, a veteran radio host with credits ranging from radio stations to television shows. He has worked at radio stations in Dallas Ft. Worth, Los Angeles, Detroit, New York, Chicago, BBC Radio 1 in London, HIT 95 Berlin, Radio ADO in Paris.  The show has become the most listened to overnight radio show program in North America since January 2012. Wells has lent his voice to Oliver Stone’s JFK and Talk Radio movies, and has also voiced promos for Discovery Channel, Deadliest Catch and Gold Rush. John will have Barry J. Dyke on his show to discuss the current state of banking fraud in the United States, of which Dyke is a recognized national expert. This should be eye-opening captivating learning experience for the national’s shows audience.

For more information about John B. Wells and the Coast to Coast AM Show with George Noory visit:

http://www.coasttocoastam.com/pages/john-b-wells

http://www.coasttocoastam.com/guest/dyke-barry-james/59115

The show will be broadcast nationally on the Premier Radio/Clear Channel Network as well as Sirius Satellite XMTalk #168. For more information about Barry James Dyke and his latest books visit: www.thepiratesofmanhattan.com. Or contact directly at 603-929-7891 or castleassetmgmt@comcast.net. Recent videos include, “Its All About the Fundamentals” & “The House Always Wins”

http://www.thewealthchannel.com/videos/its-all-about-the-fundamentals

 http://www.thewealthchannel.com/videos/the-house-always-wins

(Hampton, NH August 15, 20212). Author Barry James Dyke, in his most recent book, The Pirates of Manhattan II: Highway to Serfdom www.thepiratesofmanhattan.com documents Main Street Americans horrendous exposure to the stock market in their defined contribution retirement accounts ( IRAs,  401(k) and 403(b) accounts).Using 2010 data from the Investment Company Institute 2011 Fact Book, he found of the $4.68 trillion invested in defined contribution retirement accounts that roughly 77.4% of Americans invested in volatile stock mutual funds.  He found:

• $2.74 trillion or 44.2 % of the total was invested in domestic equity mutual funds.
• $675 billion or 14.4% was invested in foreign equity fund
• $878 billion or 18.7% was invested in hybrid securities (commonly known as target-date or life cycle mutual funds which invest in stock and bond funds).
• $710 billion or 15.2% of the total was invested in bond funds.
• $351 billion or 7.5% of the total. was invested in money market instruments

The author found that although most fund companies are seeing major outflows in stock mutual fund holdings, target-date mutual funds, now the premier default investment for 401(k) plans are still drawing in billions of new cash inflows due to lobbying interests of the mutual fund industry. Of the 8000 mutual funds Lipper tracks, 92% suffered losses in 2011. Morningstar, in tracking 8,000 mutual funds, found that the average mutual fund lost 2.9% [while the S&P 500 stock index gained 1.52% in 2011]. European stock managers did even worse, with an average loss of 13.9% in 2011.

The author commented, “Recent new issue go-go stocks sold by Wall Street into mutual fund investors—Facebook, Groupon and Zynga have been investment disasters. Facebook started trading at $38 a share in May, and two and a half months later—it is trading at $20.81, a 45% loss in value. Groupon came out at $20 a share in November 2011; in August 2012 it was trading at $6.15, a 69% loss. Zynga, another hot issue which was hyped to the heavens came out at $9.41 a share and in August trading at $2.95 a share, roughly a 70% loss.  Some of largest owners of these stocks are mutual fund companies which get their money from peoples’ 401(k)s. It is another case of rampant speculation brought to you by Wall Street funded by Main Street America’s 401(k)s.”

The author maintains that Americans want guarantees instead of rampant speculation. Dyke has plenty of research to back up his claims.

*          According to Chicago Booth/Kellogg School Financial Trust Index released in May 2012, found only 15% of the population trusts the stock market, a slight increase from 13% in 2009.

*          A survey done in 2012 by The Hartford Financial Services Group, Inc.  found that 95% of workers under age 30 want a guaranteed account. Of those between age 30 and 40, 90% want a guaranteed account. For those over age 60, 77% want guarantees.

*          A survey done by Allianz Life in October 2011 found savers are shell-shocked.  51% of 1,000 surveyed are increasingly uncertain about the fate of their 401(k) and 403(b) plans. 27% thought the best to place to put their money was under a mattress.

*          In 1999, technology stocks that populated the NASDAQ gave it a composite index of 5,048. Thirteen years later, the NASDAQ is only at 3,028.

Dyke’s research reveals this hypocrisy:  certain sectors of society such as highly paid executives, bankers, the Federal Reserve System, and government employees have rich retirement plans anchored by guarantees from the taxpayer, company balance sheets and through frequent use of life insurance and annuity products with contractual guarantees.  For additional information, contact the author, Barry James Dyke at castleassetmgmt@comcast.net or 603-929-7891.  www.thepiratesofmanhattan.com

A recent interview of the author describing the severity of this rampant speculation problem is entitled “The House Always Wins”. He is interviewed Allen McLellan of The American College, to view, click here.

 http://www.thewealthchannel.com/videos/the-house-always-wins

(Hampton, NH August 1,  2012). Author Barry James Dyke maintains that main stream media, religious affinity fraud and financial celebrities misinform the public about financial risks in investing.  The author comments, “Main stream media (including non-profits) gets a large chunk of its advertising and sponsorship revenue from large Wall Street banks and huge asset managers such as Fidelity and Vanguard that sell mutual funds to fund American’s retirement plans. Regrettably you will not find any consistent investigative journalism about the multitude of financial risks involved with mutual fund investing—because these companies are a huge advertiser base who make a lot of money selling stocks and mutual funds. www.thepiratesofmanhattan.com.

Dyke adds, “Writers and commentators in financial publications and main stream media also enjoy special privileges as they are exempt from the definition of “investment advisor” under SEC regulations which pertains to the subject of offering investment advice.  As long as the information media outlets provide is considered “incidental” to their business, they receive essentially legal immunity.  Regrettably, the business cable television shows in particular often drum up hype for new public offerings such as Facebook, Zynga and Groupon. Rosy economic predictions from the media  is great for investment banking,  asset managers and venture capitalists looking to exit their investment stakes—but can be  a disaster for retail investors looking for impartial advice. “The proof is in the pudding, “claims Dyke.”Facebook the most hyped stock of all time on CNBC, in two and one half months lost 44% percent of its value or $40 billion in market capitalization.”

Misinformation and hype from main stream media is further compromised with the practice of religious affinity fraud. Affinity fraud includes investment frauds that prey upon members of identifiable groups such as religious, ethnic and professional groups. Affinity fraud often enlists respected community figures or religious leaders to exploit the scam or misinform followers. What makes religious affinity frauds troublesome is that victims of fraud or misinformation are reluctant to come forward. Joseph Borg, the Securities Regulator for the State of Alabama said an in article “Fleecing the Flock” (The Economist January 2012) that roughly half of the “affinity frauds” based in the South are faith-based.  

Ephren Taylor II used affinity fraud. He was introduced to the near Atlanta 25,000 congregation mega-church NewBirthMissionaryBaptistChurch near by Pastor Eddie Long.  Long let Taylor pitch the congregation members they could get 20% returns investing with Taylor’s promissory notes and sweepstakes machines. The $11 million that was raised by Taylor from the congregation was allegedly used to pay other investors and pay for Taylor’s personal and company expenses. [In July the SEC made a partial settlement with Taylor. Taylor, Long, the church and IRA administrators Equity Trust are being sued by investors for various claims, breach of fiduciary duties and so on].

Bernard Madoff perfected the use of religious affinity fraud using the country club to lure wealthy Jewish victims in New York, Florida and Israel into his $60 billion Ponzi scheme. To top it off, Madoff enlisted J. Ezra Merkin, a prominent Jew in the Modern Orthodox community to solicit investors. [An ultra-wealthy middleman, Merkin ran a major feeder fund Gabriel Capital Group that did business with Madoff. Nicknamed “Ezra the Wise”, Merkin was a Harvard Law grad, a Carnegie Hall Trustee, the non-executive chairman of GMAC (General Motors Acceptance Corp-now taxpayer owned Ally Bank) and a fund raiser for private equity titan Steven Feinberg of Cerberus Capital Management which once owned automaker Chrysler and GMAC].

Merkin used his connections to defraud institutions such as New YorkLawSchool, BardCollege, Harlem Children’s Zone, Homes for the Homeless, YeshivaUniversity, Kehilah Jeshurah Synagogue, the MaimonidesSchool, Ramaz , the SARAcademy and the Metropolitan Council on Jewish Poverty.  In June 2012, Merkin paid a $410 million settlement to Madoff victims for Gabriel Capital’s  role in Madoff’s Ponzi scheme.

R. Allen Stanford,  now in jail,  used affinity fraud to sell his bogus high-yield certificates of deposit in a $7 billion Ponzi scheme. Stanford  used religious groups as well as South Baptists to promote his scams.

Monroe Beachy—for decades a respected figure in Ohio Amish and Mennonite communities has become the Amish Bernie Madoff.  Beachy claimed that he was investing peoples’ money in plain vanilla government bonds. Bankruptcy filings in 2011 revealed that Beachy was investing in risky mutual funds including T. Rowe Price Spectrum Funds, The Pioneer Fund, Fidelity Magellan and $1.4 million in high-yield junk bond funds.

Finally, the author documents in his new book, The Pirates of Manhattan II: Highway to Serfdom how pop-star financial celebrities routinely misinform the public about mutual fund investing by dismissing or side stepping the multitude of financial risks.  Notable financial celebrities such as Suze Orman, Jane Bryant Quinn and Dave Ramsey routinely  misinform the public about the possible downsides of mutual fund investing.

Evangelical Christian Dave Ramsey takes misinformation about mutual funds to new heights, using the Christian community church platform to spread the misinformation. On his website  www.daveramsey.com, about The Lampo Group, his company,  it states, “The  Lampo Group, Inc.  is providing biblically based, common-sense education and empowerment which gives HOPE to everyone from the financially secure to the financially distressed.” Ramsey claims, “Millions of people have gone through Dave Ramsey’s Financial Peace University (FPU). They’ve worked a plan, rewritten their stories, and changed their futures.”

Ramsey who is reportedly worth $55 million, is a master marketer. He uses a national syndicated radio show which claims 4 million listeners each week. His book Financial Peace claims it has sold over a million copies.  From 2007 to 2010, Ramsey was a financial commentator on Fox Business News. He uses his Endorsed Local Providers (ELPs) and his Financial Peace University (FPU) to promote his agenda which amongst other things sells actively managed mutual funds to his followers.

Dyke admits Ramsey has some good insight about getting out of debt. Ramsey, however, is fleecing the flock about the mutual funds projected rate of returns. Ramsey claims again and again in his books and teachings that people can get 12% on their mutual fund returns.

The truth is quite different. The author states, “The idea that a retail investor in an actively managed mutual fund can get a 12% rate of return is an illusion of biblical proportions. Dalbar of Boston found that actively managed mutual funds have only yielded returns of 3.6% over a twenty year period. The S&P 500 Stock Index over the past twelve years has gone nowhere. A recent study 2012 study by Bill Gross of PIMCO found that since 1912, stocks had returned at best 6.6%, and  that is with a boat load of risks,  headwinds, uncertainties and other factors.” The author continues, “a giant pension plans such as the $248 billion California CalPERS pension plan only got a 1% rate of return for the last fiscal year ending June 30, 2012. Ramsey’s prophesy about 12% rates  of return in mutual funds is a pipe dream.”

The author concludes with the irony that one of  Ramsey’s publishers Thomas Nelson was involved in the orgy of debt-propelled private equity Wall St. finance a few years back. “Dave Ramsey preaches against debt, yet fails to inform his vast audience how his Thomas Nelson, the publishing company of Total Money Makeover was weighted down with $307 million in new debt in  2006 with the $473 million leveraged buyout by InterMedia Partners. [Thomas Nelson founder  Sam Moore alone made $62.7 million in the buyout financed  with debt]. I wonder how Ramsey’s listeners would feel if they really knew that when they purchased his Total Money Makeover that earnings on book sales  were being used to pay for junk bond interest payments  which enriched insiders as well as Wall Street financiers.”  In July 2010, Thomas Nelson was sold a second time to another private equity titan, Kohlberg & Company. In 2011, Kohlberg & Co. sold Thomas Nelson a third time to Rupert Murdoch’s News Corp which also owns Christian publishing  giant Zondervan and Harper Collins. The transaction makes News Corp—which is embroiled in an enormous illegal phone hacking scandal in Great Britain—the world’s largest Christian publisher.

To contact Barry James Dyke  may email him at castleassetmgmt@comcast.net or via telephone 603-929-7891. www.thepiratesofmanhattan.com  For the latest video about the author, “The House Always Wins” by the AmericanCollege, how Wall Street always wins, click here.

http://www.thewealthchannel.com:80/videos/the-house-always-wins

(Hampton, NH June 18, 2012).  Barry James Dyke, author of the new book The Pirates of Manhattan: Highway to Serfdom reports that while Main Street net worth has been pummeled, Wall Street asset managers’ compensation is soaring. In his new book, the author documents the explosion of the investment asset management business—which he calls the “asset management industrial complex” where managers are guaranteed Olympian paydays and consumers are left holding the bag with poor investment performance. www.thepiratesofmanhattan.com

The current financial report card for Main Street Americans is grim. In June 2012, the Federal Reserve reported that the median net worth of families plunged by 39% in just three years from $126,400 in 2007 to $77,000 in 2010.  According to the Fed, the financial crisis, which began in 2007, wiped out nearly two decades of wealth—with middle class families bearing the brunt of the decline. This puts Americans roughly in the financial position they were in 1992. In three years, Americans saw two decades of economic efforts vaporize.

Much of Americans’ wealth resides in retirement plans managed by the asset management industrial complex (mutual funds, private equity, hedge funds, banks, etc)—which the author estimates to be a minimum $18 trillion. However, management fees eat up investor returns—creating headwinds virtually impossible to overcome. The author, citing Morningstar data, estimates that mutual fund shareholders—where most 401(k) funds resides—pay a minimum of 0.90 percent for every $10 thousand invested (and much higher when trading costs and other costs are factored in). Private equity and hedge fund managers—extract  a much higher fee schedule, commanding 2 to 3% manager fee, plus 20 to 30% incentive compensation fee known as “carried interest.” [Private equity is where Presidential Candidate Mitt Romney made his fortune].

The author comments, “On a whole, investment performance from highly paid investment managers has been horrible over extended periods of time. According to Morningstar, over 61 percent of stock mutual funds have lagged the S&P 500 index over the past five years.  In 2011, only 20 percent of funds beat the Standard & Poor’s 500-stock index, the worst showing for active fund manages in over a decade.  Returns for private equity and hedge funds [both get much of their money from state pension funds] have been inconsistent, opaque, self-serving and hard to measure.”

However, asset managers saw their compensation soar. According to reports filed with the SEC in 2012, in reporting to go public,  the private equity firm The Carlyle Group [which gets a great of  investment money from state  pension giant CalPERS] reported that three billionaire founders David Rubinstein, William Conway and Daniel D’Aniello reported a combined payday of $402 million in 2011.  Most of this compensation was in cash dividends, where financiers enjoy a highly favorable 15% capital gains taxation rate on income.

Dyke notes while 401 (k) mutual fund investors were hammered, fund managers compensation soared. 

• Gregory Johnson, CEO of Franklin Resources made $5.3 million in 2008 despite that many Franklin funds lost -16% of their value in 2008. His pay increased to $6.7 million in 2010. Johnson’s father Charles Johnson is worth $4 billion.
• Duncan Richardson, CIO of Eaton Vance of made $3.7 million in 2008 despite the family of funds losing -38% in 2008.
• Bill Miller, of Legg Mason bet heavily on financial stocks which would lose 50% in 2008. Miller made $5 million in 2008 and made as much as $30 million per year. In 2006, Miller bought the yacht Utopia, a 235 foot Feadship yacht, then the 9^th largest yacht in the United States.
• Laurence Fink, CEO of BlackRock, the world’s largest asset manager—thanks to financial backing from Uncle Sam, saw his compensation increase to $21.9 million in 2011. [Fink still has a considerable way to go to the $41.8 million he got in 2007]. Robert Kapito of BlackRock made $18.3 million in 2010, up 53% from the previous year.
• Richard Weil, CEO of Janus Capital, a mutual fund company noted by Morningstar as one of the worst wealth destroyers over a decade losing -$58.4 billion for its investors, earned $20 million in 2010.
• Martin Flanagan of Invesco Ltd saw his compensation rise 48% in 2010 to $11.5 million despite Invesco share price being lower than 2008.
• Sean Healy, of Affiliated Managers took home $19.9 million in 2010 despite a share price which was 30% lower than 2007.
• Abigail Johnson and Ned Johnson, owners of privately held Fidelity Investments are worth $10.3 billion and $5.8 billion according to Forbes in 2012—making them one of the wealthiest families in America while their investors have seen half-baked performance.

The author details one of the greatest compensation crimes in 2008 when Citigroup and Merrill Lynch blew up and had to be bailed out by taxpayers for their failed cataclysmic bets in subprime mortgages. Citigroup lost $27.7 billion yet paid its top bankers $5.33 billion in bonuses. [In the same year Citigroup froze its cash balance pension plan for rank-and-file employees]. Merrill Lynch lost $27.6 billion and paid its top bankers $3.6 billion in bonuses. In 2011, Robert P. Kelly, CEO of Bank of NYMellon, a giant asset manager,  got $33.8 million in severance and benefits as an exit package in 2011 just prior to the bank being sued by the U.S. Justice Department for allegedly overcharging pension clients as much as $2 billion over a ten year period. Prior to this, Kelly was CFO of Wachovia, a failed bank which is now part of Wells Fargo. Not only were the banks bailed out during the crisis, most of the mutual industry was bailed out by the Federal Reserve. For further information, contact the author Barry James Dyke at castleassetmgmt@comcast.net or via telephone 603-929-7891. The author’s new book The Pirates of Manhattan II: Highway to Serfdom, The Hijacking of America’s Savings is available exclusively at www.thepiratesofmanhattan.com

(Hampton, NH) June 9, 2012.  Barry James Dyke, author of The Pirates of Manhattan II: Highway to Serfdom concludes that social media initial public offerings (IPOs) are the latest bubble brought to you by Wall Street and connected executives.  www.thepiratesofmanhattan.com .

The author comments, “Like the high-tech dot.com and subprime mortgage bubbles, social media new share issues—IPOs—have the ingredients for another financial bubble. With sleight of hand media coverage, perennial false optimism and truckloads of hype, Wall Street continues to dump questionable companies onto an unsophisticated public. Facebook is the poster child for pump and dump. The company came out at $38 a share on May 18^th, went to $42 and by June 5^th Facebook trades at $25.87. Insiders and institutional investors pocketed a cool $16 billion payday and bankers pocketed $150 million in fees—while investors lost 32% of their investment in three weeks. It is a circus brought to you by Wall Street and connected insiders, and the circus has already left town.”

Some Facebook insiders sold big chunks of ahead of the IPO. Sean Parker sold 3.6 million shares in a private transaction on March 31. Morgan Stanley, Goldman Sachs and JPMorgan Chase [which just lost $2 billion in the “London Whale” derivatives trade] raised $16 billion for Facebook.  

Other recent initial public offerings (IPOs) contribute to bubble investing—where shaky companies with questionable business models are sold to the public. Zynga, the company that supplies Facebook with games is down 38% from is December 2011 IPO. Groupon, the daily deals website, and Pandora, the streaming music company, are down 41% and 34% respectively from their recent IPOs. Ren-Ren, the Chinese Facebook is down 67% from its May 2011 IPO. Zipcar, Inc.—the car sharing network is another bonehead IPO. In April 2011 Zipcar was $25.79 a share, by June 5^th it is $9.10 a share, which means the company lost more than 60% of its value. [LinkedIn, the professional marketing website—appears to be the exception to the bubble].

 “Facebook valuations were insane,” claims Dyke. “Bankers were valuing the company 100 times earnings while a company like Apple is only 13 times earnings. “This is Monopoly money and Facebook is Boardwalk. Insiders and early investors made a fortune, while consumers are fleeced like sheep.”

The author continues, “What makes Facebook an incredible fleece is that the company issued two classes of stock. After the May IPO, founder Mark Zuckerberg owned 18 percent of the company but owned 57 percent of the voting shares—putting him in total control of the company. Two types of shares is a way insiders vacuum money from the public while keeping control in private hands. Zuckerberg was able to buy Instagram—the photo sharing company for $1 billion two weeks prior to the IPO without board approval. It is insane.”

Facebook is not alone in this dual class ownership—which favors family and founders. The New York Times and The Washington Post (whose CEO Don Graham is on the board of Facebook), also have dual class shares—where families and founders retain control. Google, LinkedIn, Groupon, Yelp and Zynga have this ownership structure as well.

“Banks cannot manage their own finances or share price, but they are continuing to dump over-hyped stocks onto the public. UBS, Citigroup, Citadel and Knight Capital—have combined underwriting losses of $100 million on Facebook; investors have lost over $10 billion in three weeks. This type of behavior is reminiscent of 1929 before the stock market crashed. And with the imminent failure European Union brought to you by Europe’s central bankers and the euro; the world could be 1931 before you know it. Woe is us.” Barry James Dyke is author of The Pirates of Manhattan II: Highway to Serfdom, The Hijacking of America’s Savings. In his newly released book, he warns of another financial bubble in the social media industry—which is highly reminiscent of the 1999 high-tech dot.com meltdown and the subprime crisis. He may be reached at castleassetmgmt@comcast.net or 603-929-7891. For further information about the author and his work, please visit www.thepiratesofmanhattan.com  

(Hampton, NH) May 30, 2012. Laurence Barton, PhD CEO of The American College and Sharen L. King, MSM, Executive Director of The American College, the nation’s preeminent school in financial education for securities, banking and insurance professionals has appointed Barry James Dyke to serve on the advisory board on the New Northwestern Mutual Granum Center for Financial Security. www.theamericancollege.edu

TheAmericanCollegewas founded as The American College of Life Underwriters in 1927 by Solomon S. Huebner of theWhartonSchoolat theUniversityofPennsylvania. Huebner was a professional involved in the development of economic theory. His theory of human life value is used in the field of insurance. It was his vision for a college-level professional education program for insurance agents that led to the creation of The American College. Today the college offers professional training to all types of financial practitioners.

Larry Barton, PhD says this about Dyke’s appointment, “Barry Dyke’s research is outstanding. He is fearless about telling  consumers about how markets really work. Protecting consumers’ financial security was the main concern for Solomon S. Huebner, The American College throughout its history and is a passion for Barry Dyke who understands the hurricane speculation of Wall Street as well as anybody. He will be a welcome voice in helping Americans build better foundations for their savings and retirement plans—which is a cornerstone concern of The American College.”

On June 5, 2012, Dyke will be doing a book signing and talk at 7 PM at The RiverRun Bookstore, 142 Fleet St.Portsmouth, NH03801www.riverrunbookstore.com.

Barry James Dyke is author of The Pirates of Manhattan which warned about the financial crisis before it began in 2007. The book explains why banks have been unstable throughout history and why mutual funds—the core retirement products for Americans savings and retirement plans—generally do not work over extended periods of time. In 2012, the sequel, The Pirates of Manhattan II: Highway to Serfdom was released. The book is selling briskly in the U.S as well as Europe, England, Canada, South America and the Pacific Rim. Dyke consults with individuals and industry groups, and frequently speaks about the incestuous interconnected nature of Wall St—and  how consumers can prepare themselves better in the days ahead. He is a frequent guest on talk radio shows throughout the U.S.,  and has written for or been written about in Al Jazeera, The New York Times, Yahoo, CNN,  The San Francisco Chronicle, The International News Observer, Advisor Today, The Daily Reckoning, Business Week, Medical Economics, The Houston Chronicle, Press TV, The National Underwriter, The Huffington Post and others. For additional information about Barry Dyke, you can visit www.thepiratesofmanhattan.com or his award winning blog, www.economicwarrior.org . You may contact the author at castleassetmgmt@comcast.net or 603-929-7891. Castle Asset Management, LLC, 2 King’s Highway, P.O.B. 95,Hampton,NH03843-0095.

(Hampton, NH, May 22, 2012). Barry James Dyke, author of The Pirates of Manhattan II: Highway to Serfdom predicts that student loans, in excess of $1 trillion, will likely be one of the country’s next financial infernos. www.thepiratesofmanhattan.com.

Federal student loans interest rates will rise to 6.8% on July 1^st 2012 from their current 3.4% base if Congress does not act. Banking lobbies oppose any reduction in interest rates. If Congress does nothing, the average student $23 thousand subsidized loan costs will increase an additional $5,000 over a ten year period.

The author states, “Student loans are a treacherous minefield. Faculty and admission staffs urge students to purse their dreams rather than focus on the sticker price of college. Student loans are a form of indentured servitude as student loans cannot be discharged in bankruptcy. Student loans do not die with death. Collection agencies can call day and night to collect student loan debts. Garnishment to pay student loan debt is common. Students are not getting enough well-paying jobs to pay back these enormous loans, yet The Department of Education through the Department of Treasury can attach tax refunds to pay off student loans. What is more, our Congress drove the getaway car for academia and the banks in 2005 with the Bankruptcy Abuse and Consumer Protection Act of 2005—which turned student loans  into non-dischargeable debt.”

According to the Department of Education, two thirds of students who earn a bachelor degree use some type of loan to finance their education with an average loan of roughly $23 thousand. The New York Times recently reported that as much as 94% of students borrow to get a college degree.

The taxpayer underwrites roughly $105 billion a year in Title IV student loans a year, with $24 billion going to for profit schools owned by Wall Street asset managers. Student loans guaranteed by the taxpayer are a major source of revenue for the U.S. higher educational system and if default rates accelerate, it could bring about a Greece like debt problem to the nation’s colleges.

“Excessive borrowing for an education will be a dark cloud hanging over this generation for decades,” claims Dyke. ”Default rates on student loans for traditional undergraduate and graduate rates are currently as high as 15.8%, and as high as 48% for for-profit colleges. The New York Fed reports that nearly one in four student loan holders are falling behind on their student loan payments. Make no mistake, the exorbitant cost of college coupled with large student debt loads is another financial inferno in the making—with students and regular Americans holding the bag. In many ways the student loan problem is worse than the recent real estate bubble—at least with real estate there is some tangible collateral. Please tell me, how many families in America can readily afford $50 thousand plus a year to attend one of America’s schools of higher learning?” [For the list of the highest priced colleges in the U.S. see this link. http://www.campusgrotto.com/top-100-colleges-with-the-highest-total-cost-2011-2012.html]

Like mutual funds, credit cards, subprime mortgages, derivatives, 401(k)s and other complex financial products designed, packaged and sold on Wall Street, student loan complexity, economic hazards and the true cost of college is hidden from public view.

College pricing and funding a college education is complicated by a myriad of factors; constant tuition increases, a vast array of grants and numerous opaque formulas. Financial aid letters generated by colleges for families are often confusing and misleading.

The author laments, “Our institutions of higher learning are failure factories. Higher education continues to devour a larger portion of the overall portion gross domestic product (GDP) with little improved job prospects for graduates. High college tuitions funded with large loans do not consistently create jobs. American colleges graduate only about half of their students within six years at traditional schools. Start digging into for-profit college graduation rates, and success falls off a cliff. No one is held accountable. The biggest winners in this student loan mess are Wall Street and a bloated Vichy like educational system which is more concerned about academic tenure entitlement than in living in an extremely competitive global economy.” For further information, visit http://www.collegeresults.org/default.aspx

Though the federal government is now the major direct lender for student loans, for years student loans and for-profit schools have been signature Wall Street industries. Sallie Mae—[a former Government Sponsored Enterprise (GSE) like failed Fannie Mae], is the 800 pound gorilla in the student loan industry. Citigroup, Regions Bank, JPMorgan Chase, U.S. Bank, Goldman Sachs, Nelnet, Wells Fargo, Bank of American and others have all participated in the student loan business as well debt collection for student loans.  JPMorgan Chase’s private equity arm One Equity owns The NCO Group, one of the world s largest debt collectors which specializes in collecting debts such as student loans. Goldman Sachs is a major shareholder in Education Management Corporation (EMC) the country’s second largest for-profit educator. [EMC is currently being investigated by the Department of Justice and attorney generals in four states (California, Illinois, Florida & Indiana) over an $11 billion recruiting fraud which involves student loans].

Dyke concludes, “For years I believed the Federal Reserve System in the United States to be the greatest financial scam. My views are now changing.  I now believe our antiquated inefficient educational system, coupled with the student loan tsunami, is even a greater scam than the Fed. The American educational system is not so much an educational system, but an indoctrination system which supports failed systems like the Federal Reserve System—our private central bank which is at the heart of this country’s economic woes.”  The author documents the lobbying efforts which led up to the student loan crisis in The Pirates of Manhattan II: Highway to Serfdom with U.S. Senate voting records and other research. www.thepiratesofmanhattan.com  . You can reach the author at castleassetmgmt@comcast.net or via the telephone at 603-929-7891.