Day: January 18, 2016

According to CNN/Money, John Arnold is “the second-youngest self-made multibillionaire in the United States.” Only Mark Zuckerberg is younger and richer – but that’s not the only difference between the two. Whereas Zuckerberg made his fortune building a brand-new social media technology, Arnold made his the old fashioned way: through the kind of financial speculation that destroys economies, harms taxpayers and wrecks public pension funds… Underscoring the potential corruption surrounding the pension system, Siedle also reports that state pension officials became the target of “pay-to-play” allegations and a Securities and Exchange Commission inquiry. Meanwhile, the Economic Policy Institute reports that the Pew/Arnold-backed pension system “actually increases costs to state and local governments and taxpayers while making retirement incomes less secure.” Specifically, because of the comparative inefficiencies of the defined contribution part of the state’s new hybrid pension plan, state taxpayers will be forced to make “upwards of $15 million a year in additional contributions while providing a smaller benefit for the average full-career worker. [Emphasis added]

All this obviates a simple question, why?

The answer is relatively easy. The over-hyped Dodd-Frank Act and recession backlash has made the typical practice of bailing out the Too-Big-To-Fail banks untenable. After 2008, it is simply impossible to carry on with business as usual. There was the logical and sane option of breaking up the banks and reinstating the Glass-Steagall Act, the law dating back to the aftermath of the 1929 crash that segregated risky Wall Street investment from typical consumer depositor banking. But President Obama, who has always been up to his eyeballs in money from firms like Goldman Sachs and Blackstone, an outfit that makes Goldman seem like child’s play, could not do that. So instead, Wall Street had to find a new source of revenue.

And what is perhaps the most trustworthy reservoir of cash to be found in America? The pension funds! Consider this line from Dan Pedrotty of the American Federation of Teachers: “Today, nearly $4 trillion is held in defined-benefit pension funds in our country on behalf of American workers for their retirement.” KA-CHING!

As with any fishing expedition, first you create the bait. Arnold has financed a “pension crisis” narrative through traditionally-dispassionate, objective venues that the public trusts immensely. For example, there was the shady report put out by the Brookings Institute that raised alarm bells. Or there was the nonsense news he financed for broadcast by the PBS division out of New York. There are all kinds of instances where Arnold’s plot is being rolled out. But you do not need me to tell you, just watch this delightful animated short created by the good union folks at AFSCME:

This of course helps to explain the motivation of why these folks are into education and push the charter school agenda. Besides the fact that it would break a major pillar of the union movement that could theoretically help union drives in the businesses of the Waltons (Wal-Mart and Sam’s Club) or the Gateses (Microsoft), it generates tons of revenue that goes into the pockets of the Wall Street investment firms! Consider also this point raised in The Plot Against America’s Pensions by David Sirota:

Like President George W. Bush’s proposal to radically alter Social Security, many of these plans would transform stable public pension funds into individualized accounts. They also most often reduce millions of Americans’ guaranteed retirement benefits. In many cases, they would also increase expenses for taxpayers and enrich Wall Street hedge fund managers…The goals of the plot against pensions are both straightforward and deceptive. On the surface, the primary objective is to convert traditional defined-benefit pension funds that guarantee retirement income into riskier, costlier schemes that reduce benefits and income guarantees, and subject taxpayers and millions of workers’ retirement funds to Enron’s casino-style economics…The bait-and-switch at work is simple: The plot forwards the illusion that state budget problems are driven by pension benefits rather than by the far more expensive and wasteful corporate subsidies that states have been doling out for years. That ends up 1) focusing state budget debates on benefit-slashing proposals and therefore 2) downplaying proposals that would raise revenue to shore up existing retirement systems. The result is that the Pew-Arnold initiative at once helps the right’s ideological crusade against traditional pensions and helps billionaires and the business lobby preserve corporations’ huge state tax subsidies. [Emphasis added]

It is worthwhile here to consider in closing some verbiage from Ted Siedle’s 2013 forensic audit:

Rhode Island’s state pension fund fell victim to a Wall Street coup. It happened when Gina Raimondo, a venture capital manager with an uncertain investment track record of only a few years—a principal in a firm that had been hired by the state to manage a paltry $5 million in pension assets—got herself elected as the General Treasurer of the State of Rhode Island with the financial backing of out-of-state hedge fund managers. Raimondo’s new role endowed her with responsibility for overseeing the state’s entire $7 billion in pension assets. In short, the foxes (money managers) had taken over management of the hen-house (the pension).

Indeed.