The news that Matteo Fontana, a former high-ranking official at the U.S. Department of Education, has pleaded guilty to charges that he lied to the government about his ownership of stock in a student loan company he was in charge of overseeing provides a timely reminder of why the student loan industry is in such hot water now.

During the Bush administration, the loan industry went virtually unregulated. Top officials at the Education Department did not just look the other way while widespread abuses occurred in the Federal Family Education Loan (FFEL) and private student loan programs. They actually helped lenders skirt federal laws and regulations so the companies could maximize their profits -- often at the expense of students and taxpayers.

The government's case against Fontana provides the most glaring example of the type of conflicts of interest that were rife within a Department heavily staffed by former student loan industry officials. As Higher Ed Watch first revealed in April 2007, Fontana, the general manager of the Financial Partners Division of the agency's Federal Student Aid office, held 10,500 cut-rate insider shares of stock, worth over $100,000 in the parent company of Student Loan Xpress for nearly a year after he joined the Education Department in the fall of 2002. At the time, we did not know whether Fontana had fully disclosed his stock holdings to his superiors at the agency.

According to federal prosecutors, Fontana repeatedly lied about his stock holdings on financial disclosure forms -- falsely claiming, for instance, that he had sold his Student Loan Xpress stock in December 2002. In fact, he didn't sell his stock -- including an additional 1,400 shares he purchased while at the Department -- until 2004 and 2005, for a total of around $219,000.

An early draft of the House Republicans' health care bill is available at BNA. The Republican bill is much more limited in scope than the current House health reform bill, and is focused primarily on cost -- which represents only one aspect of the problems plaguing our current health care system.The bill repackages a lot of the conservative ideas that have been floating around for years -- and which didn't even get enacted when the Republicans were in control of Congress and the White House.

The bill will not end insurance company discrimination against high risk individuals nor will it provide subsidies to help the uninsured purchase coverage, according to Politico:

Boehner hasn't released the full details of the bill but has said that it would make it easier to buy insurance across state lines, impose strict limits on medical malpractice lawsuits and allow individuals and small businesses to pool their resources to buy insurance as a group. That is designed to boost their purchasing power to help lower individual premiums.

If voters had been feeling a little differently a year ago, Doug Holtz-Eakin (former Congressional Budget Office director and chief economic policy advisor to Senator McCain's 2008 presidential campaign) would be spearheading the McCain health care team.

And, if voters had been feeling differently a year ago, Holtz-Eakin would still have employer-sponsored health coverage.

But instead of a position with the McCain Administration, he is unemployed -- and the clock is ticking on his current health coverage. He will soon join the scores of Americans who are having difficulty obtaining affordable, comprehensive health insurance. "I worry about where I go next in the way many Americans do," he told the Washington Post.

Holtz-Eakin walked away from the 2008 presidential campaign without a job and therefore without employer-based health care. Since then, he has been able to keep the private health insurance plan he had during the campaign through COBRA (the acronym for the Consolidated Omnibus Budget Reconciliation Act, a 1986 federal law that allows individuals to temporarily extend group health coverage to people whose health benefits otherwise would be terminated). 

In April 2007, Higher Ed Watch revealed that Matteo Fontana, a former high-ranking official in the U.S. Department of Education's Federal Student Aid office, had held at least $100,000 of stock in a student loan company he was in charge of overseeing. Last week, the Justice Department filed criminal charges against Fontana on two counts: lying to federal officials about his ownership of stock in the company Student Loan Xpress and illegally using his position to help the corporation expand its business.

According to the Washington Examiner, which first reported on the Justice Department's action, the charges against Fontana are misdemeanors that each carry a maximum penalty of imprisonment for up to a year. However, The Chronicle of Higher Education reported this afternoon that Fontana has agreed to plead guilty to the charges and to pay a fine of up to $115,000. If the federal judge hearing the case accepts the plea agreement, Fontana will not have to serve any prison time, the Chronicle states.

We will have more details and commentary on this case tomorrow. Stay tuned...

One day after the Bureau of Economic Analysis announced that the U.S. had returned to GDP growth, the Obama Administration released new numbers about the job-creation effects of the Recovery Act. The federal stimulus program has saved or created just over 640,000 jobs through a combination of aid to state and local governments, infrastructure spending, and federal loans and grants to private businesses. (640,239 jobs to be exact, Joe Biden said this morning.)...

California's state budget gap was about $40 billion this year. New York's some $50 billion. Every state in the Union is struggling with drastically lower revenues and higher costs for services of every kind, washing state capitals with red ink. At the polls next year, governors who are facing elections - - including Governor David Patterson of New York - - may find themselves politically drowned by such gargantuan deficits.

This blog post also appears at TNR.com. For a fuller treatment of the same topic, please check out my column this week at The Daily Beast.

In the days ahead, you may hear all kinds of explanations for why San Francisco Mayor Gavin Newsom dropped out of the race for governor. Poor fundraising. Poor standing the polls. Internal problems in his campaign. But none of them were decisive. Newsom had only one problem, but it was a problem to which there simply is no solution.

That problem is the name Brown.

This state has had only three Democratic governors in the past 67 years. Pat Brown. His son Jerry. And Jerry's chief of staff Gray Davis. So when it comes to successful California Democratic gubernatorial candidates, running as a Brown is pretty much a must. Newsom's challenge against Jerry, a popular former governor who was Newsom's only opponent, was a longshot even without the history. But, more than 40 years after Ronald Reagan unceremoniously denied him a third term, Pat Brown has been thoroughly rehabilitated. Simply invoking the name of Jerry's father serves as a shorthand for California's glorious mid-century past of growth and good schools. Jerry, despite having been a very different governor from his father, basks in that reflected nostalgia.

By the looks of the September personal income data released this morning, we went back to the consumer slump in September. Cash for clunkers has officially clunked.

The decline in personal consumption expenditures was led by the decline in consumption of durables goods in the wake of Cash for Clunkers. At an annual rate, consumption of durable goods dropped by 47.2 billion, or 7% (see above). The overall decline in personal income expenditures showed a .5% decline...

My colleague Meredith and I ventured over to Capitol Hill yesterday for the unveiling of the 1,990 page House health reform bill. We sat by the steps of the West Front of the U.S. Capitol. Having arrived relatively early, we started a conversation with the couple sitting next to us. We learned that the U.S. Capitol building has some 541 rooms and 648 windows, construction began in 1793 and the new dome is built out of 8,909,200 pounds of cast-iron. (Meredith, who has lived in Washington for several years now might have known that but I, a recent Boston transplant, was fascinated.) We also learned about what has been going on inside the building over the past several months, leading us up to this very morning.

This post appears on the National Journal's Health Care Experts Blog where you can also see what other health policy analysts have to say about allowing states to opt out of a public health insurance option.

The public plan debate marches on this week as we discuss whether or not states should be allowed to “opt-out” of the public health insurance plan. Allowing states to choose not to provide the public health insurance plan as an option in their markets has its virtues. It establishes the infrastructure necessary to create a public health insurance plan nationwide, but it also makes the decision ultimately a state judgment. This may be a safer way to go for those who worry about government expansion.

While we do not know the details of what kind of public plan states would be able to “opt-out” of, we suspect the center of gravity is closer to a level playing field approach, such as that proposed by Senator Schumer (where the plan would have to negotiate payment rates with providers) as opposed to the version supported by progressive Democrats in the House (where the plan would administer prices based at least in part on Medicare rates). If the level-playing field approach is in fact adopted, assertions that the plan would simply “underpay providers” rather than “driving real reforms that bring down costs and improve quality” are unfounded.