I'll preface this with my lack of any love for ITT, but there's a piece of the story that bothers me:
"Last month, the feds demanded the company produce an additional $153 million in collateral—nearly double its $78 million in cash on hand—to cover possible losses that the government might incur if the company were to suddenly fail."
Here's how that sounds to me: "Well, ITT technically hasn't done anything illegal. But we don't like them. How much cash do they have? Double that amount and tell them we need this much for 'collateral' or we shut them down."
Can anyone fill in the blanks that Bloomberg didn't? What basis does the government have to make such demands (as it appears to me) out of the blue? Why make such demands knowing going into it that it will become a self-fulfilling prophecy? (That last question is kind of rhetorical.)
> "Well, ITT technically hasn't done anything illegal. [...]"
The DOE action is based on a risk of business failure produced by fraud lawsuits by the SEC (for securities fraud) and CFPB (for consumer fraud) against ITT, both directly and because the costs and potential fundamental issues with ITTs then-existing business model revealed by those lawsuits also led to the risk of losing the accreditation from its accreditor.
(Incidentally, that's an accreditor whose notorious laxness in enforcing standards on private universities has led to the recommendation that it be no longer accepted as an accreditor by the Department of Education, a recommendation which may result in action this month removing it as an accreditor.)
The DOE action is based on a risk of business failure produced by fraud lawsuits by the SEC (for securities fraud) and CFPB (for consumer fraud) against ITT
ITT Tech received > 70% of it's revenue from federal student loans. As soon as their business plan became "take as much money from taxpayers as possible because we know our 'graduates' will never be able to pay this back" they opened themselves up to this.
> What basis does the government have to make such demands (as it appears to me) out of the blue?
The utilitarian argument is that the taxpayers should be secured against paying for useless education. I guarantee you schools like that are a net utility loss for the public and the government obviously doesn't like that.
Here's how that sounds to me: "Well, ITT technically hasn't done anything illegal. But we don't like them. How much cash do they have? Double that amount and tell them we need this much for 'collateral' or we shut them down."
Can anyone fill in the blanks that Bloomberg didn't? What basis does the government have to make such demands (as it appears to me) out of the blue? Why make such demands knowing going into it that it will become a self-fulfilling prophecy? (That last question is kind of rhetorical.)