Just when you thought Wall Street couldn’t get any lower, they go after teachers’ and firefighters’ pensions.
Matt Taibbi, the 21st-century muckraker, continued his work on the “vampire squids” of humanity in his most recent article in Rolling Stone, “Looting the Pension Funds.”
He discussed the piece on Democracy Now!. Highlights follow below (emphasis mine).
MATT TAIBBI: … I think everyone realizes that states are in fiscal crises or having trouble paying out their obligations to workers. One of the reasons is that at least 14 states have not been making their annual required contributions to the pension fund for years and years and years. So essentially, they have been illegally borrowing from these pension funds, sometimes going back decades. Another focus of the piece was the solution that a lot of sort of Wall Street funded think tanks are coming up with now is to get higher returns by putting these funds into alternative investments like hedge funds. In a lot of cases what I’m finding is that the fees that states are paying for these new hedge funds and these new types of alternatives investments are actually roughly equal to the cuts that they are taking from workers. Like in the state of Rhode Island, for instance, they have frozen the cost of living adjustment and the frozen cola roughly equals the fees that they’re paying to hedge funds in that state. So essentially it is a wealth transfer from teachers, cops, and firemen to billionaire hedge-funders.
JUAN GONZALEZ: You know, decades ago, pension funds used to invest conservatively, basically in bonds, because they knew that this was retirement money of workers that they couldn’t risk. But increasingly then over the last 20 to 30 years, they have shifted more of their money into the stock markets, to the gambling of the stock market, so when the market went down then suddenly the investment returns of these pension funds went down and they were stuck then because they were projecting continued increases on those returns.
MATT TAIBBI: … If you look on the prospectuses of a lot of these investments, they say right in the front, in huge letters, these are high risk investments, you may lose everything. It is exactly the opposite of what you want to put public money into.
this is sort of the new formula, you have in the Citizen’s United age you have some person, a hedge fund guy like John Arnold, who gives a whole bunch of money to some shadowing organization which advertises this crisis that we can’t afford to pay workers any more so we have to do things differently. We gotta make cuts and then we gotta put all the money in Wall Street managed funds. That is sort of his playbook.
JUAN GONZALEZ: I would like to ask you about Detroit, obviously he biggest bankruptcy we know of in recent modern times for a municipality, and you have the situation of the pension funds there under threat. Big front page story in the New York Times today; but the average retiree from the Detroit government is receiving a pension of $19,000 a year. We’re not talking about golden parachutes here, yet these are the very pension funds that are now under attack.
MATT TAIBBI: Sure, there is a huge corruption case that just broke open this morning. What I would say about that, is what did Willie Sutton say about why he robbed banks? That’s where the money is. Look, pension funds are sort of the last great big unguarded piles of money in this country and there are going to be all sorts of operators who trying to get their hands on that money. During the crisis era, it was Wall Street banks who were essentially looting these funds by selling them toxic, fraudulent mortgage backed securities.
This is what capitalism does to you.
The problem isn’t that Wall Street is filled with a bunch of amoral greedy business people, and, once we get rid of them, things will be peachy. People don’t become greedy in a vacuum. Greed is the most basic force of capitalist society; greediness is a systemic symptom–it’s learned; it’s cultural. We have to change the system if we ever wish to eliminate greed.