Will Brehm  1:05
Charlie Eaton, welcome to FreshEd.

Charlie Eaton  1:07
Thanks. Thanks for having me.

Will Brehm  1:09
Richard Blum. He’s the husband of Senator Dianne Feinstein, the senator of California. He’s also this regent of the University of California. How did Richard Blum change the University of California system when he became a regent since 2002?

Charlie Eaton  1:27
Well, he’s a little bit unusual. Public university systems do not tend to have private equity billionaires like Dick Blum on their board. Typically, it’s elite private universities where we see those kinds of private equity and hedge fund billionaires increasingly populating the board. So, he’s a little bit unusual as a banker in the ivory tower in that way. He’s also in a different context than at a private university. So, he came into this context where tuition, compared to the rest of the country, was very low in the University of California system when he was appointed to the board in 2002. And the University of California already enrolled a lot of students. A lot more students as a system than our elite private institutions. So, by way of example, just the flagship of the UC system, UC Berkeley, enrolls more Pell Grant recipients routinely in a given year than the entire Ivy League combined. And that’s partially because UC Berkeley is bigger, but it’s also because historically, UC Berkeley has had about twice as large a share of its students -around 30% or higher- who are from low-income enough backgrounds to receive the main kind of financial aid that the federal government gives low-income students, which are known as Pell grants in the US. It’s only about 15% of students historically, who have been from that low-income background in the Ivy League. So, he came into this very different context. And there was pressure on the university system to grow and to meet increasing enrollment demands from state lawmakers and from governors. And the biggest thing he did is he said, “Okay, the way we can do that is we can radically expand our bond borrowing”.

Will Brehm  3:13
So, what does that mean? How does a university have bond borrowing? And I don’t know if the average student or anyone listening to this podcast might know what that would even mean for a university to be engaged in the bond market.

Charlie Eaton  3:26
So, and historically, you know, a lot of the investment a university borrows using bonds is typically to build something. So, one famous example at UC Berkeley is they decided they had to rebuild the sports stadium, Memorial Stadium, and they decided it was going to cost a half billion dollars to rebuild it. And so, they borrowed that half billion dollars from the bond market. Historically, you go back to big expansions of US higher education, a lot of that bond borrowing was done by the federal government on behalf of universities. Or rather it was a direct investment where the federal government gave capital to universities to build more buildings so that they could house more students, and so that they could have big enough classrooms and enough classrooms for all their students. Or state governments borrowed on behalf of universities so that historically, the state of California did a lot of the borrowing on behalf of universities. But we were in this context in 2002 with a state budget crisis and with declining tax revenue as a share of the economy for the state. And so that kind of investment was not forthcoming. And so, Dick Blum said, “Well, we can borrow more of that directly from the bond markets. And that’s something that I do all the time as a private equity investor. I borrow from bond markets to increase the capital that I’m investing”. And he hired some consultants from Lehman Brothers, which you might know collapsed in the largest bankruptcy in US history in 2009. And these consultants said, “Oh, yeah, you can borrow way more. And the reason you can borrow way more is because you have lots of market power to increase your tuition revenue by increasing your tuition rates. You’re such a prestigious university, people will be willing to pay higher tuition. And you could also enroll more international students or out-of-state students from wealthy backgrounds who will pay the higher rate because we have a higher rate of tuition for students not from California than we do from California. And so, because you’ve got that huge room to grow your revenue, you can go to the bond markets, and you can borrow 10 times more than you’re currently borrowing”. And so that’s basically what the University of California did under Dick Blum. And those consultants from Lehman Brothers, they ultimately -one of them came in house. A guy named -I don’t know if he was on the consulting team, but he worked in the public finance division of Lehman Brothers. His name was Peter Taylor. He himself had been on the UCLA Board of Regents as an alumni regent. He’s a UCLA alumnus. And he got hired under Dick Blum’s tenure on the board to be the Chief Financial Officer for the UC system. So, after Lehman Brothers collapsed, we said, “Oh, well come work for us. Maybe you can work some of your magic here”. And so, the bond borrowing during that time -my recollection is that it roughly tripled from around $5 billion to around $15 billion in outstanding bond debt. It’s now I think, over $20 billion and the cost of servicing that debt increased substantially. And the question then is, well, were we able to use that to enroll more students? And the thing I show in the book is that we certainly ended up increasing tuition and student debt for students to pay for that bond borrowing. But if you do a regression analysis, and you look not just at the UC system, but you look at all university systems in the US, when they do more of this bond borrowing, they don’t actually enroll meaningfully larger numbers of students. So, it can create these market pressures to increase revenue and to increase student debt for students. But it doesn’t necessarily help meet the increasing enrollment demands of folks who want to get a college degree because we don’t have the same type of economic opportunity for somebody who works in a factory or works in a blue-collar job to have the kind of economic security that we used to have in the US when we had a strong labor movement and stronger union contracts, stuff like that.

Will Brehm  7:17
The investors, the people who bought these bonds, they are still getting their return on investment. That hasn’t necessarily disappeared, right? I mean, so the University of California is borrowing or selling all of these bonds to investors using that money to build estates that might not actually increase the number of students who can enroll. They increase the tuition for all the students as by way of then being able to service the interest on these bonds in the future. So, the financiers in a way, or those who are buying the bonds, they are still getting returns on investment to this day, is that right?

Charlie Eaton  7:53
Yeah, that’s right. And in order to make sure they get the lowest interest rate on the bonds possible, the University of California promises that it’ll pay these bonds before it pays any of its other obligations. And so, there’s a very strong commitment to pay these bonds. And we don’t have many cases of a public university system or a state government defaulting on bonds like this. So, the odds that investors will not get this is very low. People who tend to invest in these bonds tend to be very wealthy people. Some of the largest investors in the US economy are pension funds. But pension funds don’t tend to invest in these types of bonds because one of the benefits of investing in these bonds is that essentially the interest, or the yield, that’s paid on them is tax exempt because that gives us a lower interest rate. So, if the investor doesn’t have to pay tax on the yield that they gain from this then they’re willing to give us a lower interest rate. And pension funds don’t care about that because their returns are already tax exempt. They don’t need that. And that’s a good thing that pension funds are tax exempt in that way because it means we’re passing on larger retirement benefits to workers.

Will Brehm  9:10
So, it’s the super high-net-worth individuals who are able to buy these bonds that the University of California and other universities are selling. Dick Blum seems to be key here in many ways because of his connections to banks like Lehman Brothers and his history of being in private equity. But also, his relationship to Dianne Feinstein and the halls of Washington. Did his connection to Washington DC help in any way with his vision for the University of California?

Charlie Eaton  9:42
I don’t know how much it helped for his vision. It certainly helped him get appointed to the board, his political connectedness. He gave these extraordinary interviews with historians at UC Berkeley with an archive about his time involved in the University and he explained how he got appointed to the board. Which is that Gray Davis, a Democrat in the state said, “Hey, thanks for all your support for my campaign. Let me know if there’s anything I can ever do”. And Dick Blum said, “Well, you know, I’d like to get on the board of regents” and it’s what Dick Blum said in the interviews. You can go read the transcripts. If you read the book, it’s well footnoted where you can find the transcripts online. And Gray Davis didn’t actually appoint him at first. Dick Blum was like, “Why do I want to be appointed to the Board of Regents”. He’s like, Well, being appointed to the Board of Regents in California is the closest thing to a knighthood in California, which is a kind of revealing thing about why people like to be on university boards. Financiers, especially, like to be on university boards. So, there’s a certain social status associated with it. “The closest thing to a knighthood”, according to Dick Blum. So, Gray Davis didn’t do it. But then Gray Davis got into some political trouble. And we had a recall election to remove Gray Davis from office and Gray Davis went around promising everyone everything and Dick Blum said again, “Well, I’d like to be on the Board of Regents”. And Gray Davis then appointed him. Gray Davis didn’t actually survive the recall. So, Dick Blum wasn’t actually able to save Gray Davis from this situation. It certainly helped him to get on the board. For what he actually did on the board, I don’t know how much it helped him to move the agenda.

Will Brehm  11:19
As a sociologist, what do some of these social ties that you can see between hedge funds, and politics, and financiers and university boards -like it just seems like these social ties are so important to this development of basically finance inside higher education. It seems like it’s a very important feature of this phenomenon that you document so clearly in the book.

Charlie Eaton  11:45
These ties are really important. They’re more important, I would say, with private universities. The share of board members at top private universities who are from finance, and increasingly in recent years from private equity or hedge funds is much, much higher than at public universities. And that way, Dick Blum on the UC Board of Regents is kind of an edge case. And he actually behaved differently as a financier on that board than a lot of the financiers on the other boards. One thing that the book explains is that it’s not just that financiers put their stamp on elite private universities, but elite private universities also help restore financiers to a new level of power and prestige in the US. And one of the ways that they did that, in the 1980s and onward, is they were some of the earliest largest investors in private equity and hedge funds. And it was their alumni, who typically worked in investment banking, who formed some of these private equity and hedge funds in the late 1970s and 1980s, because investment banking was overwhelmingly an Ivy League enterprise at that time. So, those folks formed these new funds and their relationships with each other as they drew on those to form the funds. And then they drew on those ties to raise money from endowments. A great example of this, Baupost, one of the largest hedge funds in the world founded by Seth Klarman, and a couple of lectures in the business school at Harvard in the early 1980s. They’ve sat on the board of Harvard at various times and had capital invested in them from Harvard at various times. Another very public example is that Tom Steyer, who’s kind of well known for having run for president in the US as a Democrat, and for being a climate change advocate. He is a Yale alumnus, and he in the mid-1980s, at a Yale homecoming football game, learned that David Swensen, a fellow Yale alumnus was now managing the Yale endowment and was starting to make internal investments at Yale that were hedge fund-type investments. And so having learned this from a friend -from a social tie at a homecoming football game- Steyer, told The New York Times that then went and got a meeting with Swensen to ask him to invest in his hedge fund. And Swensen at first was like, “I don’t know. I don’t know if I want to invest in you because if you have a bad year, you might close”. And according to Steyer, he then swore a blood oath through his fellow Yale alumnus, “We won’t shut down if we have a bad year, and I’ll hold off on taking my 20% cut of the investment returns for a few years so that you know that we’re not going to walk away with the money that we’ve made”. And after making that handshake deal, David Swensen and the Yale endowment gave Tom Steyer $300 million, which was a third of his initial capital. Steyer then went on to become one of the wealthiest hedge fund billionaires in the world.

Will Brehm  14:41
And what about Yale’s endowment did that grow substantially as well?

Charlie Eaton  14:45
Yale’s endowment did very well. And so, the benefits were mutual. And one of the things that we’ve seen is that endowment investment returns for the bigger endowments and the more elite endowments have been much higher than for smaller endowments. Thomas Piketty in Capital showed that part of that is related to size. If you’ve got a bigger endowment, you can demand a higher rate of return. And you can pick the best performing investment fund to be the one that you’re going to give your capital. But one of the things that I show is that investment returns for private equity and hedge funds seem to have been more reliably above market rates in the earlier years -the 80s and 90s. It’s less clear that they are consistently above average market rates of return in the last couple of decades. So, another kind of vehicle here of the mutual benefit, is that because of the social ties Yale, Harvard, Princeton, and then other privates that copied them got in earlier than public universities. Today, basically, any kind of institution in the US has an endowment and invests a large share of their endowment with private equity and hedge funds but the benefits of that are less substantial. And there’s, sort of, people even at a lower-status state university that can’t raise as much money from donors to invest in an endowment. People like to think, “Well, we can solve our resource problems by copying what Harvard and Princeton and Yale did”. But the thing is, you can’t. You can’t copy what they did.

Will Brehm  16:12
It’s not the 1970s anymore.

Charlie Eaton  16:13
Yeah. You’re too late to the party. They had a big endowment to begin with, they had access to the funds that have the most access to private information to know how to beat the markets. And they don’t enroll people at the scale that public universities do. So, they can do a lot more with their endowments relative to their enrollments than a public university can. So, I always -when a public university is like, “Well, maybe we could fund some more scholarships with an endowment”. I’m like, let’s not go down that rabbit hole. Let’s work on restoring state appropriations and federal spending on higher education to the level it reached in the late 1970s on a per student basis, and let’s maybe even go beyond that. That’s how we’re going to end the student debt crisis in America. It’s not via more universities getting into the endowment game because you just can’t copy what the elites do.

Will Brehm  17:09
And going back to those elites. I mean, it’s such a fascinating story to realize how some of these elite universities benefited from, you know, you said private information. I mean, there is this sort of element of insider trading happening. You know, meeting someone and talking about what’s happening because they’re your buddy. And then of course, it is mutually beneficial, maybe not so much anymore. But regardless, that history, sort of reshaped, as you said, the boards of a lot of these higher education institutions -elite institutions. And so, can you talk a little bit about the power that financiers have today on a lot of elite boards of universities? And of course, other boards, like the University of California, where Dick Blum becomes a regent as well. It’s this really interesting phenomenon where financiers end up taking so much power across US higher education.

Charlie Eaton  17:56
Yeah. I mean, at one level, you can ask a deep question: what is power? Right? So, you know, I use this kind of language from sociology, particularly from Fred Wary and from Viviana Zelizer about intimacy and social circuits that involve intimate ties. And there’s some translational work that I’m doing here because if you talk to say an economist, economists actually do pay a bit of attention to who has access to private information, and how is private information used to beat public markets, to invest capital more efficiently, which is the obsession of economists. They don’t necessarily think in terms of intimacy. But what is intimacy? Intimacy really involves sharing of private information. And the sharing of private information is kind of essential to building power. You know, if you know something, there is power in knowing something that somebody else does not know. So, financiers gain power from being on these boards in that they get social ties to other elites from whom they can get private information that is powerful. And so, you know, the Tom Steyer and David Swensen as an example. They weren’t on the board, but it was their elite Yale University ties that gave them both some private information that was highly valuable here. How are universities run differently? Well, the biggest thing that the book shows is that elite private universities have been run differently in that they’ve just amassed so much money that they are able to spend huge sums on a per-student basis on what they do as a university.

So, if you look at Princeton: Princeton is a good example because they have no business school, no law school, and no medical school, which kind of can make thinking about per-student spending a little bit trickier to think about. But their enrollment since the 1970s they increased roughly by 25% for their undergrad enrollments. Their endowment increased during the same period by over 850%. So, that means that today, Princeton can spend more than $100,000 per-student on everything they do. So, how do we conceptualize what that is? Well, I would call it hoarding resources for the benefit of a relatively small number of students who look a lot like the bankers in the ivory tower who helped amass endowment war chests. That’s been the biggest difference. I don’t, in the book, uncover anything about how financiers on those types of boards have made private universities run themselves differently other than they’ve just had a lot more money. So, they’ve done some wild things with that money. One thing that those universities haven’t done, and I wouldn’t pin this just on the financiers on the boards of these schools, but one of the things that the universities haven’t done is substantially increase their enrollments either in total or from more diverse social and economic backgrounds. So, as I mentioned earlier, you know, Berkeley alone has enrolled in many years in the last couple of decades more low-income students than the entire Ivy League combined. Raj Chetty, an economist at Stanford and his collaborators have similarly shown that there are 38 top private universities in the US that enroll more students from the top 1% of the income distribution than from the bottom 60% combined.

So, you know, why do they do that? Well, one of the ways we rank universities is how many students do you reject admission to. So, if you enroll more students, it has a perverse or negative impact on the ranking and status that these universities crave. And it’s not just financiers who crave that. Any of us who have been on a university campus in the US, have heard people celebrate improvement of the school in the rankings or lament a fall in the rankings. Everybody thinks about it. But financiers have locked that in. One thing I would like to see changed that I do not think will happen unless there are tax and regulatory pressures to do so is I’d like to see Princeton enroll not 25% more students, I’d like to see them double their undergraduate enrollment. They have the resources. What if they only spent $50,000 per-student just from the endowment. That doesn’t even count what they spend from tuition revenue, or from other revenue sources on what the university does. They could probably provide one of the greatest educations in the world still to every student, but to twice as many students, if they doubled their enrollment, and they just spent $50,000 per student from the endowment every year.

Will Brehm  22:20
Do you think that would ever happen?

Charlie Eaton  22:21
I think it might happen if policymakers or a US president use the bully pulpit more to encourage institutions to do that and use policy tools like taxes. We could say, “Okay, Princeton, and anybody with an endowment over a billion dollars, or over a certain amount of assets per student. If you’ve got that big an endowment, you have to enroll this many students per endowment dollar or we’re going to tax you. And the tax is going to be expropriative, as in, we’re not just going to tax you at 1.4%. We just actually in 2018 -because there’s some resentment around this kind of stuff. Donald Trump and the Republicans of all people reimposed a tax on endowments. We had had a tax on endowment investment returns until 1984. It was then eliminated, they restored it in their 2018 tax bill. The problem was they took the revenue from the endowment tax, and they used it to budget tax cuts for other wealthy people, instead of for educational equity. But you could say, “Alright, if you’re not going to enroll students, we’re not just going to do this 1.4% tax on your investment returns, we’re going to have a tax along the lines of 40% or 50%, on your investment returns, and you’re not going to be eligible for the capital gains tax exemptions”.

Will Brehm  23:35
The other thing that you bring up in your book that I found so fascinating is the rise of for-profit schools, universities in America, are directly connected in many ways to some of these hedge fund university board members at elite universities. And there’s this really weird relationship between some of those elite private institutions that you just spoke about, and the rise of these for-profit higher education universities that rarely, if ever, service people in the elite upper class. How did that come about?

Charlie Eaton  24:12
I don’t think any endowment ever set out to invest in for-profit colleges. But many of them did. And how did that work out? Well, it started with more and more universities investing in private equity. And then private equity managers saying, “You know, we’ve made some good money doing the things that private equity did in the 80s and the early 90s- which was mainly buying up industrial corporations like RJR Nabisco- which is a food manufacturing organization, buying up famously TWA Transworld Airlines and then later breaking it up, and busting unions at these firms and closing factories, and essentially making money by expropriating labor’s share of profits from these companies. The problem was you could only do that once. And so then private equity investors started looking around and say, “Where else could we make some money”? And what private equity increasingly did was they moved into highly subsidized sectors that were very non-competitive and figured out ways to suck up federal subsidies. And it’s not just in the case of for-profit colleges but also in the healthcare sector and nursing homes and hospitals and in the pharmaceutical sector.

So, in the case of for-profit colleges, what was the subsidy? Well, it was this big increase in federally subsidized student loans that started in 1992. And so pretty quickly after that, you get private equity investors starting to buy up for-profit colleges between 1988 and 2015. Private equity investors bought up over 900 for profit colleges in the US and they drove enrollments way up in the sector. Enrollment was about 500,000 students in the early 1990s. Enrollment surged to over two and a half million at its peak around 2010. And they use these student loans to enroll students at zero upfront costs to the student. So, you could go out and you could deceptively market to a student because you can’t, like, kick the tire and know how good is the degree that you’re going to get when you agreed to get it. And you don’t have to pay anything at first. And you probably don’t even understand what you’re going to have to pay back with your student loan. Then you enroll and after maybe six months or a year, you realize they’re not providing, actually, any educational support. And for the most part, these students never attained a degree. But they get stuck with these huge debts. And in the meantime, the private equity investors extracted massive profits by pocketing the operating margins paid for by the tuition from those student loans.

These private equity investors figured out they could make money doing that. And they did it at a very large scale. And many endowments were invested in those private equity funds but weren’t saying to those private equity funds, “Hey, what, what exactly are you going to invest this in, and tell us exactly what -we don’t want you to do anything counter to our mission”. You know, those kinds of terms were not set by endowments when they did this investment. So, the classic example from the book is a guy named Jonathan Nelson. He’s been on the board of Brown University for roughly the last 20 years. He’s a Brown alumnus. He then went to Harvard Business School. And then in 1988, he founded a private equity fund, called Providence Equity Capital. Brown University is located in Providence, Rhode Island. And he first made a bunch of telecom investments that made a bunch of money by being well-timed around the deregulation of telecom sectors in the US and in Europe. And then he hired a couple of fellow Brown alumni to help him run the fund. A guy named Paul Salem, and a guy named Clinton Creamer. And then in the 2000s, they said, “Hey, this for-profit college sector looks pretty good”. And in 2006, they partnered with Goldman Sachs, with another fellow alumnus of Harvard Business School, and with a smaller private equity fund called Leads Equity Capital. And they bought the Education Management Corporation (EDMC) for $3.4 billion in the largest ever buy out of a for-profit college. That company ran this Art Institutes chain, and they then extracted huge profits and ran the enrollments way up at that chain into 2011 and 2012. And because of the opacity of reporting requirements, we don’t know exactly when they exited that investment. So, they might have exited at a relatively favorable time.

But ultimately, the company collapsed in bankruptcy because they had to pay huge settlements from lawsuits for misleading students and misusing federal student aid funds. And they also -essentially new consumer protection regulations made their business model not viable anymore. So, kind of a wild story. And well, was it really the investors that made EDMC act that way? Well, we kind of know from one of the former executives, a guy who was pushed out slightly after that buyout, he told Bloomberg BusinessWeek, he was the former chief financial officer of EDMC. He said, “Yeah, you know, I was forced out because we had resisted pressure from the Wall Street analysts to increase enrollment in ways that could negatively impact academic quality”. So, the people who ran the firms before the buyouts even said, this is the impact that it had. And then here’s the kicker, right, the real punchline: at the time that Providence Equity Capital and Goldman Sachs bought EDMC in 2006, they add in capital from 17 different college endowments, including Swarthmore, and also some lower-status endowments because all the public universities have essentially tried to copy the wealthy universities by getting into these private equity investments.

Will Brehm  30:06
It’s a mess when you lay it out like this, and it is rather complex. But you can sort of see the tentacles of financiers all over higher education from the elite, from the for-profit sector, from the state sector, that big middle bit that you talk about, like the University of California. What would you do to try and begin to untangle some of these tentacles around higher education from financiers? You brought up a few issues about regulation and some taxes. What is it actually going to take to address some of these issues? And we haven’t even really talked about the whole issue of student loan debt, which is, of course, crippling to so many people in the USA. So, how would we begin to resolve some of these problems that you’ve identified?

Charlie Eaton  30:59
Well, maybe we can come back to Dick Blum, where we started our conversation. And you asked, so what was Dick Blum’s impact on the university? Well, we kind of missed one part of his impact back then, which is that he is a private equity investor. As a private equity billionaire, he had done quite a bit to avoid paying taxes in California. And in doing so, he and his fellow private equity folks had contributed to the decline in tax revenue relative to the size of the economy in California. Tax revenue fell from a height of about 6% of GDP for the state government in California in the late 1970s, to below four and a half percent. But here’s how Dick Blum was a little bit different, I think, in part because he was connected to more ordinary people via the University of California, a public university with mass enrollments. In 2012, there were these big protests led by students connected with Occupy Wall Street in California. And those protests essentially helped lead to the state passing a tax increase that mostly hit millionaires in the state. And that tax increase in 2012, it was called Proposition 30, it stopped that decline in the share of the economy being collected as tax revenue for the first time in 30 years. And the state used a substantial portion of that revenue to reinvest in universities, to reinvest in K-12 public schools and social programs, and to freeze tuition in the state. So, this is an example of where public resources have been redirected back from finance to publics in the middle. Because one of the ways I say finance has really impacted public universities the most is by diverting resources to the top via these endowments that benefit from lots of tax exemptions, and from tax cuts for the financiers who pass along profits to them. And they’ve been squeezed by diversions of resources to the bottom, to for-profit colleges via the subsidies that went to for-profit colleges.

At their peak, for-profit colleges were receiving about $10 billion annually in tax subsidies from the federal government. Around $20 billion is the size of the tax subsidies annually for endowments. That’s $30 billion, which would be enough annually to double the size of Pell Grant, our largest student aid program in the country, and to effectively make public community college and public university education student-debt free. So, we could do that. Not only did we see that done in California, that was also to some extent done at the federal level in 2010 on the heels of the financial crisis, when the Obama administration eliminated this subsidy to private lenders and banks to make federal student loans. We had paid this for two decades. We had paid this subsidy to these banks and to for-profit corporation called Sallie Mae and some others. We’d given them these subsidies to make student loans on behalf of the federal government, instead of just making the loans directly from the US Treasury. It costs $6 billion more to do it via these subsidies annually. And the Obama administration said, “You know what. We don’t need to keep doing that subsidy to the banks. We’ll just make the loans directly from the federal government”. And that saved $6 billion a year and they took that $6 billion a year and they budgeted an increase -the largest increase in Pell Grants since the 1970s with that. So, this is an example of how we have, and we can redirect public resources to the public. And I think universities can play a huge role in doing that because if universities are more inclusive, and more diverse, they are the kinds of places that will generate new ideas, and will generate ideas and networks that can mobilize large swaths of society.

If you’re an elite university, you’re not going to generate the kinds of connections that can mobilize a large part of society but if you’re like the University of California system or the State University of New York system, you can connect people from really huge swaths of society. And you saw that in California with that tax increase. The tax increase was negotiated by a whole bunch of alumni from the University of California system: by the UC Student Association president, Claudia Magana, by the California Federation of Teachers President Josh Pechthalt, who is also a UC alumnus. They both went to UC Santa Cruz. By John Perez, who is essentially the parliamentary speaker, our version of a prime minister, for California. He was a UC Berkeley alumnus. And Jerry Brown, the governor of the state, also UC Berkeley alumnus. These folks connected to each other by their shared University of California connections even though they come from varied class backgrounds and political positions. That’s the kind of networks that got mobilized to increase taxes on millionaires and think of new ways to reimagine higher education finance that’s more equitable. And so, I think universities are going to play a role in making finance more equitable. But we probably can’t make finance in higher education more equitable unless we make finance in general more centered on equity. Because as long as private equity managers and hedge funds can make huge profits without having to pay capital gains taxes, without having to pay their fair share of taxes, the pressures are just going to be too big on folks like endowments, and folks like private equity investors to go out and do things like what they did in the for-profit college sector. Or to hoard the returns that they get in our most elite schools. So, it’s going to take, I think, a broader reform of our financial system. But I think universities are going to play a big role in that.

Will Brehm  36:45
Charlie Eaton, thank you so much for joining FreshEd. It’s really a pleasure to talk and congratulations on your book.

Charlie Eaton  36:51
Thanks.

Want to help translate this show? Please contact info@freshedpodcast.com

Guest Project/Publication

Bankers in the ivory tower: The troubling rise of financiers in US higher education

Private equity and the spread of shareholder value strategies to US for-profit colleges

Identity obfuscation, reputational pressure and consumer predation in US for-profit higher education

When investor incentives and consumer interests diverge: Private equity in higher education

Ivory tower tax haven

Mentioned Resources

Richard Blum – An accident of Geography: Compassion, innovation and the fight against poverty

Pell Grant

Lehman Brothers Collapse 

Tom Steyer

David Swensen – Pioneering portfolio management: An unconventional approach to institutional investment

Thomas Piketty – Capital in the twenty-first century

Frederick Wherry – Performance circuits in the marketplace 

Viviana Zelizer – Circuits of commerce 

Raj Chetty – The geography of intergenerational mobility in the US

College and university endowments: Overview and tax policy options

Providence Equity Capital

Education Management Corporation (EDMC)

Toward a consumer protection framework to protect students from predatory practices

California’s proposition 30 

Related Resources

Understanding endowments

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Wealth accumulation at elite colleges, endowment taxation

Private equity in higher education 

Toward a consumer protection framework to protect students from predatory practices

How much are most colleges paying in endowment tax?

Seventy-five years of investing for future generations

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