Alex Soojung-Kim Pang, Ph.D.

I study people, technology, and the worlds they make

One of the greatest quotes of all time

Steve Eisman, “the outspoken investor whose huge wager against the subprime mortgage market was chronicled by author Michael Lewis in his bestselling book The Big Short, talking about the for-profit education industry:

Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task.

As Mother Jones elaborates,

Driving much of the growth, Eisman explained, was the sector’s easy access to federally guaranteed debt through Title IV student loans. In 2009, he said, for-profit educators raked in almost one-quarter of the $89 billion in available Title IV loans and grants, despite having only 10 percent of the nation’s postsecondary students.

Eisman attributes the industry’s success to a Bush administration that stripped away regulations and increased the private sector’s access to public funds. “The government, the students, and the taxpayer bear all the risk and the for-profit industry reaps all the rewards,” Eisman said. “This is similar to the subprime mortgage sector in that the subprime originators bore far less risk than the investors in their mortgage paper.”…

Another similarity between subprime lending and for-profit education is this, Eisman said: Both push low-income Americans into something they can’t afford…. [Finally], the industry’s era of massive profits—ITT is more profitable on a margin basis than Apple, he notes—are about to end, thanks to new government regulations in the pipeline.


[To the tune of Pink Floyd, “Shine On You Crazy Diamond (Parts I-V),” from the album Wish You Were Here (a 4-star song, imo).]


  1. Oh dear.

  2. One virtue of this prediction is that we'll now get closer to knowing if Eisman is smart, or just lucky. If the former, we can maybe stop taking the "who coulda known?" argument about the financial crisis seriously. People who paid attention DID know.

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