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A few days ago, I posted about the odd circumstance that friends of President Obama had bought one of the nation’s largest for-profit corporations that provide higher education, even though it is generally known that these “colleges” have abysmal graduation rates and are known for predatory practices.
Now, the Wall Street Journal is pointing out the irony that the Obama administration harassed these institutions, drove down their value, and former Obama staff and current friends are taking them over at a fire sale price. We know, based on the actions of the Department of Education under Arne Duncan, that the administration has no objection to for-profit charter operators. We know, from Arne Duncan’s selection of Joanne Weiss, CEO of NewSchools Venture Fund as his chief of staff, that he has a fondness for the corporate sector. We know, from Arne Duncan’s selection of Ted Mitchell, also a CEO of NewSchools Venture Fund, as Under Secretary of Education, that the Department favors entrepreneurs. NewSchools Venture Fund underwrites charter chains and education businesses. It is at the epicenter of the corporate ed reform biz.
So, I am not so sure I agree with the WSJ’s characterization of the Obama administration as hostile to for-profit ventures. I think the collapse of for-profit higher education value is due to its poor performance and its lack of value or values. The dropout rates are higher than those in nonprofit institutions, and some employers will not recognize degrees from these diploma mills.
In an editorial titled “Regulating Education for Profit,” the WSJ writes:
Check out last week’s proposed sale of Apollo Education, parent company of the University of Phoenix. When Mr. Obama was preparing to take office in January 2009, Apollo stock hit a multiyear high above $78 per share. Seven years later, after Washington’s regulatory onslaught that favored nonprofits over for-profits in doling out federal subsidies, the shares had recently fallen below $7.
The University of Phoenix was once educating close to half a million students but last month reported an enrollment below 180,000. And with Apollo recently trading below book value, it might be a real bargain—especially for an investor betting that the next Administration might go easier on for-profit colleges. Now comes news that Apollo will be sold to several private equity firms. And coincidence of all coincidences, after the sale closes the company will be run by a former top official in the Obama education department, the same outfit that led the attack on Apollo.
The Vistria Group is a Chicago private-equity firm. The company was founded around the time that Mr. Obama was beginning his second term and its founders include Marty Nesbitt, who began playing pick-up basketball with Mr. Obama years before he became President, and Tony Miller, who was the second highest-ranking official in the Department of Education from 2009 until 2013.
Once the sale closes, Mr. Miller will become chairman of Apollo’s board….
By the way, the Obama education department will have to approve Vistria’s purchase of Apollo, and we’re told the guidelines for approval are notably vague. What better way to win a regulatory blessing than have a former senior education official like Mr. Miller commune with his old regulatory comrades. Hey, Tony, great to see you; any job for me after, say, Jan. 20, 2017?….
To summarize, an Obama pal is the day-to-day boss of a department that succeeds in destroying 90% of the value of a politically targeted company. Then he leaves government, buys the company at a fire-sale price and announces that the problems that attracted so much negative government attention are ending—just in time for a new Administration that might not hate for-profit education as much as this one. Government mediation sure can be a lucrative business model.