Book Review: Bankers in the Ivory Tower

Bankers in the Ivory Tower: The Troubling Rise of Financiers in US Higher Education, by Charlie Eaton (2022). Chicago: University of Chicago Press.

Charlie Eaton’s Bankers in the Ivory Tower: The Troubling Rise of Financiers in US Higher Education is a necessary if not timely analysis for understanding the higher-education crisis in the contemporary United States. Although some researchers have begun to study this crisis by examining rising student debt, few have linked the debt crisis to the role of financiers in higher education and their investments in elite private universities. Eaton sheds light on how financiers have influenced and restructured the U.S. higher-education system by examining the relationship between student debt and the financial endowments of elite private universities.

While primary data on financiers’ involvement may be difficult to access over the course of seven years (12), Eaton’s methodology of limited primary interviews, secondary studies, and publicly available documents nonetheless reveal what he describes as the “social circuitry of finance” (3) in higher education. To this end, the introductory chapter lays out the book’s thesis of how financiers have benefitted from the student debt crisis and the “endowment cultures” of elite private universities. Eaton shows how financiers are involved in building social ties and networks through their investments on behalf of university endowments. Since such investments make financiers eligible for tax exemptions worth billions of dollars, there are not enough leftover funds to support public higher education. This “squeezing” of funds in public higher education (4) has also contributed to the rise of subsidies for for-profit colleges, which are often backed by the same financiers. Eaton outlines how this financier-driven strategy has created a hierarchical system (in three layers) in which the elite private universities occupy the top position, public universities the middle, and for-profit colleges the bottom of the overall U.S. higher-education system.

The second chapter, “Our New Financial Oligarchy,” explains how financiers have established their influence in higher education. In the past, financiers relied on banking cartels to assert their monopoly on markets. Eaton describes how the new financial oligarchs do not have to rely on such organizations, but instead can rely on their social connections to increase their collective status and wealth. For instance, Eaton points out that in 2002, a group of Yale and Harvard alumni used insider knowledge on planned steel tariffs to bolster their income and influence on state policy vis-à-vis steel tariffs. While such favors boost these insiders’ wealth and power, their monetary gains also resulted in generous donations to the endowments of said institutions.

The third chapter, “Bankers to the Rescue,” observes how the new financial oligarchs’ interest in higher education has also deepened the student-debt crisis. Since tax exemptions for financial endowments have depleted much of the funding allocated for public higher education, the U.S. federal government has been unable to meet concurrent demands for better education. However, instead of taxing the rich, politicians and policy makers have allowed said bankers to become benefactors of their elite alma maters. In this capacity, these bankers have expanded federal student loan programs and increased students’ collective dependence on loans.

In the fourth, fifth, and sixth chapters, Eaton explains how the infusion of capital into elite private institutions has catapulted them to the top rung of the higher-education ladder, while pushing public universities to the middle, and for-profit institutions to the bottom. The fourth chapter, “The Top,” describes how elite private institutions have become hedge funds of sorts by cementing social ties with financiers, while strengthening their prestige, wealth, and power.  Evidently, endowments have enabled their managers to be entrusted with access to information, what Eaton describes as the “high-finance advantage” (56), which has led to “philanthropic homophily” (56), whereby financiers inevitably promote the endowment wealth of their own alma maters.

In the fifth and sixth chapters, entitled “The Bottom” and “The Middle,” Eaton demonstrates how financiers have expanded their reach into the middle and the bottom layers of higher education. In “The Bottom,” Eaton shows how the expansion of federal loan programs and the rise of the “shareholder value movement among investors and corporate managers” (77) have encouraged the “Wall Street takeover” (77) of for-profit colleges. Although takeovers have long been common among private-equity managers wishing to control shares in targeted businesses, such actions have also had far-reaching implications in higher education. For instance, for-profit educational institutions are often driven toward increasing enrollments and tuition fees. They have also been left largely un-regulated and -evaluated for quality. Eaton explains this dynamic through the case study of the now-defunct New England Institute of Art (NEIA), a for-profit institution managed by Educational Management Corporation (EDMC). Soon after the takeover of EDMC by financier Jonathan Nelson, NEIA attracted the scrutiny of the U.S. Department of Justice by committing fraud, illegally paying its recruiters to “[misrepresent] placement rates” (85) and “financial aid” packages (85).

In “The Middle,” Eaton looks at the middle strata of the public higher-education institutions in the United States. While financiers have systematically amplified the wealth of those institutions at the top, they have simultaneously increased their shareholder wealth in poor-quality for-profit institutions, which has also resulted in cuts to the funding of public universities. Even as financiers have benefited from subsidies and tax cuts and have received more resources through their connections with elite institutions, legislatures have systematically underfunded the public higher-education institutions in their states. These factors, along with an increase in graduation rates at secondary schools, have led to an increased dependency on external financing, as opposed to state funding. An emphasis on student loans and direct bond-market borrowing has further decreased the amount of funding for public higher education. In this sense, financiers have leveraged their personal and impersonal connections to secure power and prestige, leaving others (outside these circles) to be dependent on expensive and less-advantageous educational experiences.

Although the nexus between financiers and universities would be near impossible to sever, Eaton explains how this relationship can be utilized towards generating gains for higher education. In the final chapter, “Reimagining (Higher Education) Finance from Below,” Eaton draws from his personal experience and explains how the University of California-Berkeley organized a large-scale, student-run movement to tax millionaires. Since many working-class students from diverse backgrounds have incurred debt, the movement effectively mobilized different coalitions and lobbied legislators to support their demand for taxation. In other words, their shared identity as debtors unified the protestors and legislators to initiate reforms that could allocate additional funds to public higher education.

According to Eaton, such strategies of “bargaining with the bankers” can engender reforms that are far more sustainable than the “financial big bang” strategy of cancelling student debt (123). Although this initiative to mobilize students is illuminating, the strategy depends heavily on the good faith of legislators and policymakers who are empathetic to the experience of student debt. However, it is also true that the “big bang” strategy to cancel student debt has led to more resistance from state governments as well as from the financiers themselves. It is in this context that Eaton’s book gestures toward a new form of political mobilization, one involving the public stakeholders in the management of higher education. In sum, Eaton’s short but well-argued book may be of interest to pedagogues, sociologists, and political scientists. Although the book is not supported by significant primary evidence, it does make a valid case toward understanding the extensive reach of financiers in higher education in the contemporary United States.

Author Biography:

Deepti Sreeram is a third-year doctoral student of sociology and anthropology at Ashoka University, India. Her research examines the question of quality in higher education in Kerala.