The Bismarck Bank Job, A Bungle Going Down

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House and Senate Democrats gave Republicans a gift Wednesday by including the following phrase in its summary of the new  health reform bill:

Section 2213.  Agreements with State-Owned Banks.   This section amends Part D of Title IV to direct the Secretary to enter into an agreement with an eligible lender for the purpose of providing Federal loan insurance on student loans made by state-owned banks.

There is but one bank that is state owned, the Bank of North Dakota in Bismarck, and the provision was the brain child of Budget Committee chair Kent Conrad, who like most Senators cares a great deal about fiscal responsibility, unless the irresponsibility benefits his own state. (The federal loan insurance program for student loans using third party banks is vastly more expensive than loans that are administered directly by the U.S. government.) Republicans promptly dubbed the deal the “Bismarck Bank Job.”

According to Karen Tumulty, who spoke with a Democratic leadership aide, the language was included after a heated argument last week between Conrad and George Miller, the chairman of House Education and Labor. Karen writes:

The argument was last week, and not over this provision specifically, but rather, the larger quesiton of getting the banks out of the business of making student loans. (And whether the whole thing should be put in the reconciliation bill.) It pitted Conrad against Miller, with Conrad arguing to protect jobs in his state, and Miller arguing for freeing up money to send countless kids—including a lot of minority kids—to college. Miller pointed out that Conrad comes from a not-very-diverse state.

The student loan language–which will effectively end the third-party administration of federally-backed student loans–was eventually included in the new House bill, along with the language exempting Conrad’s local bank. But since the bill was published, and Republicans began crowing about the special deal, Conrad has backed down. “I called over to say take it out,” Conrad told The Hill. “There’s no sense in having a distraction on a bill this important.”

Both a congressional leadership aide and a White House aide tell TIME that the language benefiting the Bank of North Dakota will now be scrapped before Obama signs anything into law.