The Looting of the Pension Funds

So much of what’s really criminally wrong with the system is exemplified by the recent treatment of retirement funds. You have the insane exchange of the promise of defined benefit pensions for the sham of 401(k)s dependent on the Wall Street casino. And for those that still have pensions, the looting and under funding of those funds. Matt Taibbi’s Rolling Stone piece “Looting the Pension Funds” details a lot of the problems created by dishonest manipulation of the funds, often under the radar, and the actions of miscreant politicians and hedge fund Ayn Randites.

It’s amazing how similar the stories are to the legions of capitalist titans pushing the charter school privatization agenda. Ambitious financial types with the backing of right wing billionaires manipulating data to achieve an end nobody would be in favor of if these people were completely open about what they were doing. 

  • The underfunding of public pension funds by politicians who promise the moon during elections and then either fail to fund, underfund, or flat out loot the pension funds to pay for their promises.
  • The scandal of underfunding. The Detroit Public Employee Pension Funds that are in mortal danger in bankruptcy, are actually a relatively healthy 77% funded while others around the country are as little as 27% funded! 

Among the worst of these offenders are Massachusetts (made just 27 percent of its payments), New Jersey (33 percent, with the teachers’ pension getting just 10 percent of required payments) and Illinois (68 percent). In Kentucky, the state pension fund, the Kentucky Employee Retirement System (KERS), has paid less than 50 percent of its ARCs over the past 10 years, and is now basically butt-broke… 

 

  • Pension Fund Administrators who are encouraged to make “alternative investments” 

[a]n investigation by the Toledo Blade revealed that the Ohio Bureau of Workers’ Compensation had bought into rare-coin funds run by a GOP fundraiser named Thomas Noe. Through Noe, Ohio put $50 million into coins and “other collectibles” – including Beanie Babies… 

The scandal had repercussions all over the country, but not what you’d expect. James Drew, one of the reporters who broke the story, notes that a consequence of “Coingate” was that states stopped giving out information about where public money is invested. “If they learned anything, it’s not to stop doing it, but to keep it secret,” says Drew.

Of course!! Pension fund administrators under the thrall of rapacious manipulators have discovered what politicians, priests and child rapists have long known – If you are ethically incapable of doing the right thing the best you can do is do it in the dark.

Which brings us to the real manipulation that is the turning over of people’s retirement funds to hedge fund managers that charge ridiculous fees to ultimately under perform the S&P 500. Or the monies paid to placement agents and consultants that charge for the privilege of recommending their own damn funds.   

In Kentucky, Tobe and Siedle found that KRS, the state pension funds, had paid a whopping $14 million to placement agents between 2004 and 2009. In Atlanta, a member of the city pension board complained to the SEC that the city had hired a consultant, Larry Gray, who convinced the city pension fund to invest $28 million in a hedge fund he himself owned.

It’s crony capitalism at it’s absolute worst because it’s all gambling with other people’s hard earned money and privatizing the gains while socializing the losses.

What’s going on with public pensions is a more confusing modern version of that local graft. With public budgets carefully scrutinized by everyone from the press to regulators, the black box of pension funds makes it the only public treasure left that’s easy to steal. Politicians quietly borrow millions from these funds by not paying their ARCs (annual required contributions), and it’s that money, plus the savings from cuts made to worker benefits in the name of “emergency” pension reform, that pays for an apparently endless regime of corporate tax breaks and handouts.

These are the kinds of stories that make me feel real old fashioned gather a crowd with pitch forks blood lust to get the bastards. Lord knows, the justice system will NEVER deal with them and the politicians will NEVER stop them – until we take money out of the election system.

Government Actively Using its Power for Good – Richmond, CA Mortgage Relief

Richmond, CA was one of those places incredibly hard hit by the implosion of the housing bubble. Median house prices fell over 50% and over 50% of the houses are underwater. 16% of the houses were foreclosed on, which means many, many more homeowners still live with the possibility of foreclosure hanging over their heads. It’s a disaster for the community.

But somebody came up with a plan to deal with it using eminent domain to HELP homeowners.

Richmond has proceeded by offering to purchase 624 mortgages held in private-label securities, offering a price as determined by an independent appraisal. The offer explained that they would attempt to negotiate first, but if they failed they would use their eminent domain powers.

However, in a technique argued since the beginning of the crisis by Cornell law professor Robert Hockett, rather than use eminent domain on the house itself, the city would seize the mortgage. A private investment company, Mortgage Resolution Partners (MRP), would in turn write down the mortgage amount to something closer to the current value. They would collect a profit and refinance the loan. The homeowner would be less likely to default with a lower loan amount, or would be able to sell without a short-sale, leaving him or her with more money to spend locally.

The City of Richmond would use municipal funds to buy the mortgages, keep the owners in their houses, write down the principal on the mortgages and become the mortgage holder for these houses. Of course, it won’t be easy. The banks don’t want to cooperate with an activist government. The courts, populated with those living oxymorons “activist conservatives”, may also not go along for the same reason: activist government is their enemy. 

Government getting involved to relieve people suffering from the financial meltdown that made them collateral damage? Government using its power for good, instead of evil, to serve the community and the greater good?

Yeah, it actually happens all the time, but used to happen way more and was something people believed in.

The Greatest Generation and the Baby Boomers grew up in times when government was not something to be scorned and reviled, it was the communal expression of our democracy.  It could build roads, bridges, tunnels, and infrastructure. It could defeat fascism. It could put a man on the moon. It could alleviate the suffering of citizens with programs like Social Security, Medicare, Medicaid, Welfare, Unemployment Insurance, etc. It could force school districts in the South to desegregate and pay for the education of veterans. There are innumerable positives that government (executive, legislative and judiciary) can do and have done FOR “the people” to level the playing field in the struggle for happiness and equal opportunity.

Of course, our government has had its lapses, does not always express our wishes, act to effectuate our hopes or alleviate our fears. The people we elect to wield power on our behalf also represent another less benign infrastructure comprised of big business interests, the military-industrial complex and the conflicting interests propounded by some people against “the people.” 

The modern Republican Party decided that a winning strategy was to accentuate the cynicism against government to stop government from being active on behalf of the people, which would, in fact, restore a balance of power to the powerful – the Republican natural constituency. Without a government that defends individuals, workers, consumers, that empowers unions and other associations of individuals (the Democrats natural constituency), then the already powerful have overwhelming sway over the lives of the powerless.

The argument against government is the most cynical of all because you have politicians, claiming not to be politicians, getting elected running against government, then taking a government pay check to fulfill their claims that government doesn’t work. Who does it benefit to do nothing to help people under the rubric that “government governs best that governs least?” Clearly, the already powerful benefit most. 

So Wall Street stops the re-regulation of the finance sector or the effort to institute a financial transactions tax or change the tax code so hedge fund managers pay the same rates as their secretaries. And your representative, if they don’t believe in government, helps Wall Street to derail these common sense actions, through inaction.

They don’t even have to be actively captured by deep pocketed Wall Street interests making campaign contributions to them with a wink and a nod. No, these anti-government types are a cheap date for Wall Street, or the fossil fuel industry’s climate deniers, or the prison and school privatization lobbies. Just do nothing and they win.

You don’t need big new ideas, just fight everyone else’s ideas while calling them job killers and the malefactors of great wealth have their cake and eat it too. And your cake as well. 

Downside of Power by Gerrymandering: 18% of Country Steering Entire Boat, Blindly

With a h/t to Don Brancaccio who sent me this Ryan Lizza piece on Where The GOP’s Suicide Caucus Lives we explore the extreme downside to the GOP’s 2010 win and subsequent gerrymandering to set themselves up with phony baloney jobs in Congress, for life. 

The ability of eighty members of the House of Representatives to push the Republican Party into a strategic course that is condemned by the party’s top strategists is a historical oddity. It’s especially strange when you consider some of the numbers behind the suicide caucus. As we approach a likely government shutdown this month and then a more perilous fight over raising the debt ceiling in October, it’s worth considering the demographics and geography of the eighty districts whose members have steered national policy over the past few weeks.

These 80 tea partiers from the reddest of red districts represent just 18% of the country, mostly from the South, almost all from white, rural districts drawn up to make them oh so cushy safe for Republicans to have and to hold so that the wackiest gun totin’, anti-government, Ayn Rand-loving, Red Dawn-watching weasels can go to D.C., trash the country and still be (theoretically) reelected. 

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While the most salient demographic fact about America is that it is becoming more diverse, Republican districts actually became less diverse in 2012. According to figures compiled by The Cook Political Report’s David Wasserman, a leading expert on House demographics who provided me with most of the raw data I’ve used here, the average House Republican district became two percentage points more white in 2012.

In short, these eighty members represent an America where the population is getting whiter, where there are few major cities, where Obama lost the last election in a landslide, and where the Republican Party is becoming more dominant and more popular. Meanwhile, in national politics, each of these trends is actually reversed.

This phenomenon flummoxes the mainstream media because explaining how screwed up this situation is, by definition, is going to upset conservatives and look like liberal bias – the thing they have bent themselves into pretzels not to look like.  Also, while these 80 crackpots are dead set to (1) shut down the government and (2) deny increasing the debt ceiling and crash the economy ALL TO STOP OBAMACARE, for these 80 nuts, its RATIONAL. In fact, if they didn’t do it, some drooling cro magnon even nuttier than them would primary challenge them, accuse them of going squishy, and probably win!

 

GOP pees in its own pool with food stamp nonsense

Timothy Egan in the NYT notes the Red State Pain coming the GOPs way as they continue to aimlessly float away from reality like a lonely helium balloon that has escaped the party. 

Very specifically I note that of the 254 counties in America that saw their food stamp use double since the 2008 financial meltdown, 213 of them are in red districts. 

The gross immorality of a national political party that has no plans for jobs, will not raise the minimum wage, fights against any help for workers at all and is dismissive of inequality, but feels compelled to deny healthcare and food to the uninsured and hungry is a true scandal and should be the breaking point of that party. 

They are emboldened because of the corner they’ve painted themselves into. By winning in 2010 they took over state houses and gerrymandered the hell out of those states so that the tea party – the most rock ribbed Republicans – are the only people that matter in those districts. The path they have chosen is literally off the cliff. To ignore math and science and, of course, economics, and push the ideological agenda of Ayn Rand down everybody’s throats.

Egan notes the incredible turn of events that would make professional RWNJ Rick Santorum the voice of reason on anything:

Earlier this summer, Santorum said Republicans look like the party of plutocrats, stiffing working people and the poor. The 2012 convention, he noted, was a parade of one-percenters, masters of the universe and company owners.

“But not a single — not a single — factory worker went out there,” he said. “Not a single janitor, waitress or person who worked in that company! We didn’t care about them.”

The lemmings of the GOP, with their crazy blinders on, will march proudly over the cliff believing they’re taking back their country. 

The only answer is to make sure that the word is spread and everyone knows what responsible government used to be like from FDR to Nixon and what lunatics are running the GOP today. The young, the poor, the under served by our plutocratic government must come and vote and drown out the rich, old, foolish and increasingly delusional voices that often dominate off-year elections like 2010. Losing the WH and Senate in 2012 did nothing to diminish their crazy because they still held the House and in effect could hold us all hostage. A situation that must be rectified.

The people in those 213 counties who would be left to go hungry have to understand that the GOP is not on their side – Democrats are.

The workers looking for a living wage everywhere have to know have to understand that the GOP is not on their side – Democrats are. 

The people who need health insurance who either will be helped by Obamacare and/or will still not be helped because of their Republican governors have to understand that the GOP is not on their side – Democrats are.

Women, looking for the respect due them, the economic and reproductive freedom due to them as citizens have to understand that the GOP is not on their side – Democrats are.

People who fair minded, who respect facts, science, education, the rational idea that intelligence is taking stock of situations on the ground and acting in accordance with what would serve the greater good should understand that the GOP is not on their side – Democrats are.

If we don’t make the GOP a laughingstock in 2013 and show up in 2014 in droves, like 2008 and 2012, it’s going to be a long horrible period for this country till 2016… and beyond.

How Ya’ll Been?

Going through one of those periods where I’m really busy at work and then when I get home I just want to sit on the couch in my comfy shorts and watch some comedy. Of course, the blog suffers for my stress induced sloth.

On the other hand what did I miss? We’re still on the road to government shutdown. The Syrian distraction didn’t help but probably didn’t hurt either.

So on my way to watch Up with Steve Kornacki I noticed the 56th annual German-American Steuben Day Parade on WLIW 21. Of course, growing up in NY, where everyone has their day and gets a parade down Fifth Avenue, I knew of this shindig, but I don’t think I’d heard or seen of it in 30 years.

Baron Friedrich Wilhelm von Steuben was a Prussian General who as Major General of the Continental Army was key to the creation and training of that nascent force alongside George Washington.

People don’t realize it but German-Americans are the largest ethnic group in the USA, bigger than Italian-Americans or Irish-Americans or even the Scotch-Irish that settled Appalachia. But in the 20th century, because of WWI and WWII, more than any other ethnicity, they felt the need to put their heads down and homogenize. Beer Gardens and oompa bands became verbotten, almost antagonistic to the general population whose main images of Germans became Hitler and genocide.

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Check out all the light blue. Germans came in the 19th century in huge numbers and spread everywhere. Their tremendous concentration in Texas has always seemed incongruous to me, but really, the out sized German sense of self fits in perfectly in Texas. It’s the Germans who brought smoked meats which are the backbone of Texas barbecue. Texas A&M Heisman Trophy winning QB Johnny Manziel – German. After Mexicans, Germans are the largest heritage group down there by far.

Home Health Care Workers Finally Part of Minimum Wage Law

Did ya know they weren’t covered? That people who care for the housebound, elderly or disabled, one of the toughest jobs around, both physically and emotionally, were exempt from minimum wage laws (The Fair Labor Standards Act of 1938) until the Obama Administration approved a rule change today. As of Jan. 1, 2015 they’ll be guaranteed protections by federal law for minimum wage and overtime rules.

Home care aides have been exempt from federal wage laws since 1974, when they were when they were placed in the same category as neighborhood baby sitters. But their ranks have surged with the aging population and the field is now one of the fastest-growing professions. Labor Secretary Thomas Perez said the workers deserve the same legal protections as most other employees.

This is supposed to cover about 2 million workers, one of the fastest growing segments of workers in the country. With the aging of the baby boomers, people willing to do this difficult work are in demand. They should be decently paid, no?

Let’s Not Kid Ourselves We Are in a New Gilded Age

As we’ve noted over and over again inequality is growing and it is a very bad thing, not just for those screwed over folks who are living the old Woody Allen joke “Money is better than poverty, if only for financial reasons.”

Mike Konczal has been go-to on these issues at the Next New Deal blog. The numbers are in and The 1 Percent Took Home the Largest Share of Income Since 1928 Last Year.

In 1928 19.6% of all income went to the top 1%. In 2012 it was an alarmingly similar 19.34%, and growing.

This is something we all have to internalize and talk about and take pains to explain to everyone who will listen. In 1928 this hoard of income so concentrated at the top presaged the Great Depression and then in response to it FDR and The Great Expansion – 30 years of policies that expanded the middle class, flattened the gap between the top and the bottom and grew the strongest economy in world history.

Then starting with Carter, and greatly exacerbated by Reagan and the conservative economic unraveling of the policies that created the Great Expansion came The Great Dismantling. Tax cutting, deregulation, deindustrialization, anti-unionism, offshoring, outsourcing, free immigration, free trade and monetary policies that favored international business interests at the expense of domestic industry. In short, for 30 years we did almost everything right to bolster manufacturing, positive trade and a vibrant middle class, and then for 30 years we did almost everything we could to dismantle those policies. And we now live with the repercussions of that.

History dictates that a new generation of activists will pull us back leftward to correct the rightward move. And guess what? Peter Beinart says “here it comes.” A new generation is coming up that is not beholden to Reagan’s version of anti-government trickle down 1 percentism or Clinton’s version of triangulating that anti-government sentiment into further deregulation and market solutions.

 Millennials are more willing than their elders to challenge cherished American myths about capitalism and class. According to a 2011 Pew study, Americans under 30 are the only segment of the population to describe themselves as “have nots” rather than “haves.” They are far more likely than older Americans to say that business enjoys more control over their lives than government.  And unlike older Americans, who favor capitalism over socialism by roughly 25 points, Millennials, narrowly, favor socialism.