By Pam Martens and Russ Martens: September 7, 2015
New York University has devolved into a dystopian model of higher education reimagined by Wall Street knaves who serve on its Boards and their kingpin attorney, Martin Lipton, who has been NYU’s Board Chairman for 17 years.
As the university has thrown million dollar pay packages and perks like vacation homes with forgivable loans at its President, John Sexton, and an elite group of faculty, students have been buried under debt by the likes of the serially charged and now admitted felon, Citigroup, and are turning to prostitution in increasing numbers to meet the obscene hidden fees and staggering tuition piled on their shoulders by NYU’s masters of the universe. It now costs over $240,000 for a four-year degree at NYU – a nonprofit university subsidized by the taxpayer.
At a protest rally in Washington Square last Tuesday against NYU’s tyrannical conduct, you could have heard a pin drop when a young woman walked onto the stage with a mask covering her face to tell her story of being the first in her family to attend college and the first to have to turn to prostitution to pay the soaring tuition demanded by NYU.
The NYU student read from a prepared statement, saying:
“I learned at the dominatrix den and at the Tantra House, almost every single girl who worked there was a student struggling to pay for school or to pay off her crippling student loans. Some were Sarah Lawrence girls, some went to CUNY or Cooper Union, but the vast majority go to or went to NYU…We came to these universities to better ourselves, to work for a better life. No girl should have to sell herself to make that better life a reality.”
This young woman’s story comes on the heels of a report in January at the New York Daily News listing NYU as the third fastest growing university in the U.S. for listings at SeekingArrangement.com, a site that matches up financially struggling women with “Sugar Daddies” who are frequently hedge fund managers or Wall Street bankers – the same financial types that dominate the Boards of Trustees at NYU and its Medical Center and have made the decisions that have buried the students under one of the highest tuition rates in the country, mountains of slippery fees and student debt.
In 2013, the Consumer Financial Protection Bureau (CFPB) asked students to send it comments on their experience with privately-offered student loans, issued typically from banks as opposed to those from the Federal government. Students who had taken out loans from Citibank to attend NYU were among the respondents.
Sarah V. wrote: “In 2004 I took out both private loans from Citibank and government loans to attend NYU to study for my MA in Art Therapy. I received a letter from NYU stating that Citibank was the preferred lender of their students and they highly recommended their services. I was offered no financial aid, but NYU ‘offered’ me $26,000 per year in loans from Citibank. They were practically pre approved…My first full time Art Therapy position in a city hospital offered monthly take home pay of about $1800 a month. My student loan payments were $800 a month approximately. Rent with three roommates was $750. Public Transportation was about $90 a month then. I went without heat for the winter, sleeping in my coats and hats with a heating pad. I wrote to Citibank and called them. I told them I wanted to pay, but asked for a reduced payment plan. They wrote back telling me that it would be ‘illegal’ to take more than 10 years to pay. They refused all of my requests.”
Citibank’s regulators testified at a Congressional hearing in 2007 that there is no regulation prohibiting banks from modifying student loans as long as it does not impact the safety and soundness of the institution.
Another NYU student and Citibank borrower, Gina K., wrote to the CFPB in 2013, stating that “I was misinformed, manipulated and the lenders were not honest with me. They estimated that my student loans would be about $200 – 300 a month. A far cry from $1,000 a month. When the economy gets better, my variable interest rate goes up, and my payments can be as high as $1,300 or $1400 a month.” Gina told the CFPB that she has a Masters Degree from NYU but because student loan payments are consuming half of her monthly income, she is forced to live from paycheck to paycheck with no hope of getting out of debt.
In 2001 and again in 2004, Citibank was named a “Preferred” student loan lender at NYU. This status came at a time when Jack Lew, the current U.S. Treasury Secretary, was working as Chief Operating Officer at NYU. During his time at NYU, Lew received a $1.3 million mortgage from NYU, signed for by John Sexton, to buy a luxury home in the Riverdale section of the Bronx. Large amounts of the loan were forgiven and Lew was further paid $685,000 in a so-called “severance bonus” when he left NYU to become Chief Operating Officer of Citigroup, parent of Citibank that made all of those loans to NYU students.
While Lew was at Citigroup, the mega bank entered a death spiral and received over $2.5 trillion in cumulative loans, equity infusions and asset guarantees from the taxpayer to prop it up so that it could go on to be charged with future serial crimes, including admitting to a felony charge for engaging in a price rigging cartel.
When Lew decided to return to Federal government service, he accepted a $940,000 bonus from Citigroup – notwithstanding the fact that the bank was insolvent and the funds belonged to the taxpayer. Despite all of this, Lew was handily confirmed by the U.S. Senate for the post of U.S. Treasury Secretary – again proving that every facet of America has been intellectually trained to participate in its own demise.
One Senator who was not cowed by Lew was Vermont Senator Bernie Sanders, now a Presidential candidate. Sanders told the Senate floor that “we need a Treasury secretary who will stand with the working families of this country and is prepared to take on an oligarchy which now controls the economic and political life of this great nation. Is Jack Lew that person? No, he is not.”
In a front page New York Times article in June 2013, Ariel Kaminer and Alain Delaqueriere reported that NYU President John Sexton had received over $1 million in loans from NYU to buy a luxurious vacation home on Fire Island with some of the loans at less than one-quarter of one percent interest and others being forgiven over a five-year period. (The university was already providing Sexton with the use of an apartment on campus.) According to NYU financial statements, Sexton received a $2.5 million bonus in January of this year. On top of his typical annual pay of approximately $1.5 million in total compensation (based on the latest 2013 public tax filing with the IRS) that would mean that John Sexton will receive $4 million in compensation from NYU in one year while hundreds of young women turn to prostitution to meet their crushing debt and tuition loads.
That $4 million pay package also comes two years after five schools at NYU passed no confidence votes in Sexton’s leadership of NYU.
NYU has been in the constant glare of the media for the past three years as endless scandals have surfaced over its financial and real estate dealings. Trying to find words to capture NYU’s brand of management is becoming challenging, even for those who have carefully watched its defective moral compass repeatedly run it into the rocks. Financial writer Yves Smith of NakedCapitalism.com called NYU a “real estate development/management business with a predatory higher-education side venture.”
That sounds spot on. Wall Street On Parade conducted an in-depth investigation of NYU deals in 2013. One finding was that from 2006 through 2010, a scant five years, NYU’s five highest paid independent contractors received over $568 million for real estate construction work and an eye-popping $173 million went to clean its buildings according to its public IRS tax returns. (NYU is one of the largest owners of real estate in Manhattan.)
At the rally last Tuesday, Deborah Glick, a member of the New York State Assembly, said that NYU was “ripping off a generation” and “impoverishing adjunct professors.” Glick said the battles against NYU are enormous because “It’s like a viper at your breast, nestled close to you, trying to kill you.”
Glick’s statement called to mind economist Michael Hudson’s New Book, “Killing the Host,” which characterizes Wall Street as a parasite devouring the U.S. economy while tricking us all into propping it up so it can continue its rapacious wealth grab. Hudson writes:
“A parasite’s toolkit includes behavior-modifying enzymes to make the host protect and nurture it. Financial intruders into a host economy use Junk Economics to rationalize rentier parasitism as if it makes a productive contribution, as if the tumor they create is part of the host’s own body, not an overgrowth living off the economy. A harmony of interests is depicted between finance and industry, Wall Street and Main Street, and even between creditors and debtors, monopolists and their customers.”
Where better to indoctrinate the idea of a parasite as a do-gooder than an institution of learning – or relearning. Wall Street On Parade’s 2013 investigation found the following:
“On February 2, 1999, law professor Noel Cunningham and his partner, adjunct professor Laura Cunningham, received a $1.4 million mortgage for a brownstone in the Park Slope section of Brooklyn. The loan went to $1.5 million 11 months later. The nonprofit that arranged the deal was the NYU School of Law Faculty Retention Assistance Corporation. Noel Cunningham had already been a law professor at the school for 24 years, suggesting retention was not an issue.
“In 2008, Noel Cunningham wrote a paper on carried interest — the scheme under which billionaire hedge fund managers on Wall Street pay a paltry 15 percent income tax [now 20 percent] – less than most struggling middle class Americans. Cunningham’s paper came in response to a Congressional proposal to tax hedge fund managers at 35 percent, in line with other high income earners at the time. Cunningham advocated for a ‘more moderate legislative fix.’ ”
The carried interest wealth transfer scheme is now a hot topic among Presidential hopefuls. The Boards at NYU, crammed to the gills with hedge fund titans, must be getting a little nervous again.
A “harmony of interests” as described by Michael Hudson is how parasitism has burrowed so deeply into the culture at NYU that it now passes for the status quo. In April of this year, Lipton and Sexton announced that the hedge fund billionaire John Paulson, who sits on the NYU Board of Trustees, would receive the “Albert Gallatin Medal for Outstanding Contributions to Society” at NYU’s 183rd Commencement ceremony. Albert Gallatin was one of the founders of NYU and a former Treasury Secretary under Thomas Jefferson and James Madison.
Paulson is the founder and head of Paulson & Co., infamously known on Wall Street as the firm that conspired with Goldman Sachs to create “Abacus,” – an investment Paulson & Co. helped to structure so that it would collapse in value. In 2010, the SEC brought charges against Goldman Sachs and one of its young vice presidents, Fabrice Tourre, for “defrauding investors” in the sale and marketing of Abacus. Paulson & Co. slipped through the net because it didn’t sell or market the product – it simply shorted it based on its inside information that it was designed to fail.
The Abacus deal closed on April 26, 2007. Nine months later, according to the SEC, “99 percent of the portfolio had been downgraded.” The SEC adds: “As a result, investors in the ABACUS 2007-AC1 CDO lost over $1 billion. Paulson’s opposite CDS positions yielded a profit of approximately $1 billion for Paulson.”
In July 2010, Goldman Sachs settled with the SEC for a payment of $550 million. Fabrice Tourre was subjected to a jury trial and ordered to pay more than $825,000 in gains and penalties. John Paulson and his hedge fund were not charged and kept their profits. Then the power brokers at NYU sprang into action. The 2010 Spring/Summer issue of the Alumni Magazine of the Stern School of Business at NYU carried a glowing tribute to Paulson, noting that he had made a $20 million gift to the school. There is no mention of Abacus or making $1 billion by shorting an investment designed to fail. Instead, the article engages in propping up parasitism by telling its readers that “during the recent subprime mortgage crisis, Paulson developed a contrarian strategy that included shorting mortgage-backed securities. It turned into one of the greatest trades in Wall Street history.”
The article goes on to note that “the School has named the first floor lobby of Tisch Hall and the School’s auditorium” in Paulson’s honor.
It’s not just students who are financially struggling at NYU; contract faculty are also straining to pay rent and buy food. Two years ago, when the vacation home scandal was swirling around NYU, Michael Rectenwald, a Master Teacher at the Liberal Studies Program at NYU, posted the following on his blog:
“Reading these reports might lead one to believe that NYU is home to a coddled, handsomely rewarded faculty, a knot of wriggling leeches living lavishly on the future debts of its students. However, nothing could be further from the truth. The reports refer to a tiny minority, and utterly miss the conditions attendant upon the vast majority of the faculty at NYU.”
Rectenwald wrote that contract faculty, not tenured or tenure track faculty, make up 70 percent of the teaching faculty at NYU. According to Rectenwald, as of 2013, “the average starting salary for a full-time contract faculty member is an estimated $60,000 to $65,000 per year. The average per-course compensation for part-time contract faculty is roughly $5,000. A member of the latter group, if ‘lucky’ enough to be offered them, might teach eight courses a year and accrue around $40,000 a year.” Without discounted housing, that amounts to considerably less than a living wage in New York City, says Rectenwald.
Further buttressing the idea that NYU is a real estate slush fund in drag as an institution of higher education, it is proposing a 2 million square foot commercial real estate expansion, which includes bulldozing over three community parks in the historic Greenwich Village community where much of its campus is located. Lipton and Sexton have turned deaf ears to four years of protests from community residents, hundreds of faculty members and students who say the expansion is not needed and will simply bury students under more debt taken on to appease real estate interests.
Speaking at last Tuesday’s rally, Mark Crispin Miller, NYU Professor of Media, Culture & Communication, called NYU’s financial practices “grotesque” and “off the charts.” Miller is one of the leaders of the faculty group known as FASP – Faculty Against the Sexton Plan – which includes more than 400 faculty determined to restore educational integrity to NYU.
In May, FASP published a devastating study titled “The Art of the Gouge,” which Miller described at the rally as providing the specifics on “what NYU does to milk the students out of ultimately billions of dollars and spends that money on real estate transactions and sky high pay for top administrators.”
From the stage at the Washington Square rally, Miller read a statement of support from author William Deresiewicz, who has just penned an article for Harper’s Magazine titled: “The Neoliberal Arts: How College Sold Its Soul to the Market.” Deresiewicz said in his NYU statement of support:
“We must return American higher education to the core values of shared governance, equal access irrespective of wealth, and liberal education for the sake of democratic citizenship. We must treat students like students, not ATM machines. We must treat instructors like valued professionals, not itinerant laborers. No one should be getting rich by working at a university, and no one should be made poor by going to one.”
Hedge fund titan John Paulson functioned as a Sugar Daddy to NYU. By giving the university $20 million, he got his name on a lobby and auditorium and received a commencement award for “outstanding contributions to society,” despite a repugnant record of parasitism.
The Chairman of the Board of Trustees of the NYU Medical Center, which bears his name, is Ken Langone. Langone was previously sued by the New York State Attorney General in 2004 for breach of his fiduciary duty involving an obscene compensation plan that scandalized the New York Stock Exchange.
As the scandal played out in the media, Langone had this to say to Fortune Magazine’s Peter Elkind in 2004:
“They got the wrong fucking guy. I’m nuts, I’m rich, and boy, do I love a fight. I’m going to make them shit in their pants. When I get through with these fucking captains of industry, they’re going to wish they were in a Cuisinart — at high speed.”
NYU’s Board apparently believes it can burnish its image with a new President with an Oxford pedigree. Andrew Hamilton, Oxford’s Vice Chancellor since 2009 and a former Provost at Yale, will become NYU’s President next year when Sexton retires with an $800,000 annual pension. Lipton is scheduled to turn over the Chairmanship of the Board to billionaire William R. Berkley this year – a selection that has already generated controversy.
As the battle for the soul of NYU continues to evolve, one facet is well worth watching. A new vocabulary will be needed to properly explain the tactics of the new-age robber barons who have tricked millions into believing they are a useful, integral part of our society, worthy of having their names chiseled into our taxpayer-subsidized institutions and trillion-dollar bailouts from a nation in hock to the tune of $18.3 trillion – in no small part owing to Wall Street’s brainwashing.
Correction: This article was updated to correct the name of the incoming NYU President from Alexander Hamilton to Andrew Hamilton.