Below you see what is crazy policy from a neo-con like Christie-----continuing the same Wall Street deals that were filled with bank industry fraud last decade this time sending public sector pension funds and as the article states----the promises are not met.
THE PROMISES WERE MET----CHRISTIE PROMISED TO HAND WALL STREET MORE PUBLIC WEALTH AND HE DID. THAT IS WHAT NEO-CONS AND NEO-LIBERALS DO!
Neo-liberal O'Malley and neo-conservative Rawlings-Blake did the same with the same results for the same reasons. The goal it to eliminate all public wealth and send it to global corporations. What kind of politician sits at the table with Wall Street after massive bank industry fraud?
A WALL STREET POL. WHO SUPPORTS WALL STREET NEO-LIBERALS? NATIONAL UNION LEADERS AND JUSTICE ORGANIZATIONS LIKE THE NAACP.
We are now told that since all private union benefits have be shed it is not fair to have public sector benefits and some people buy this. All that would go to pensions simply goes to corporate wealth -----no money is saved for goodness sake!
In Maryland, pensions were placed in 401K plans because that is where Wall Street wants pension money and Social Security money ----it's easier to steal there. It gets messy when raiding public trusts......more traceable.
Who are two candidates given national spotlight for running for President? Christie and O'Malley----sending all to Wall Street. Stop supporting these neo-liberals and neo-cons by running and voting for labor and justice!
THINGS WOULD NOT HAVE BEEN BETTER IF YOU VOTED REPUBLICAN IN MARYLAND----NEO-CONS AND NEO-LIBERALS WERE BOTH WORKING FOR GLOBAL CORPORATIONS.
In Maryland, it is the labor union leaders and black ministers who work hardest for neo-liberal candidates killing people of color and labor.
Gov. Christie Shifted Pension Cash to Wall Street, Costing New Jersey Taxpayers $3.8 Billion
By David Sirota @firstname.lastname@example.org on August 25 2014 8:16 AM
New Jersey Governor Chris Christie speaks during the Delivering Alpha Conference in Manhattan, New York in July 2014. REUTERS/New Jersey Governor's Office/Tim Larsen/Handout via Reuters
Gov. Chris Christie's administration openly acknowledged that more New Jersey taxpayer dollars were going to land in the coffers of major financial institutions. It was 2010, and Christie had just installed a longtime private equity executive, Robert Grady, to manage the state's pension money. Grady promoted a plan to put more of those funds into riskier investments managed by Wall Street firms. Though this would entail higher fees, Grady said the strategy would "maximize returns while appropriately managing risk."
Four years later, New Jersey has secured only half the promised results. The state has sent more pension money to big-name Wall Street firms like Blackstone, Third Point, Omega Advisors, Elliott Associates and Grady's old firm, The Carlyle Group. Additionally, the amount of fees the state pays financial managers has more than tripled since Christie assumed office. New Jersey is now one of America’s largest investors in hedge funds.
The “maximized returns” have yet to materialize.
Between fiscal year 2011 and 2014, the state’s pension trailed the median returns for similarly sized public pension systems throughout the country, according to data from the financial analysis firm, Wilshire Associates. That below-median performance has cost New Jersey taxpayers billions in unrealized gains and has left the pension system on shaky ground. Meanwhile, New Jersey is now paying a quarter-billion dollars in additional annual fees to Wall Street firms -- many of whose employees have financially supported Republican groups backing Christie’s reelection campaign.
Between 2009 and 2013, New Jersey has paid an additional $439 million in fees to Wall Street International Business TImes/Hanna Sender Those who originally opposed the state's shifting of pension funds into hedge funds, private equity, venture capital, real estate and other “alternative investments” see the below-average returns as no accident but an inevitable byproduct of the strategy: The Christie administration has effectively taken money from retired state workers and delivered the cash to Wall Street money managers.
“All the leading players on the [New Jersey State Investment Council] were from the alternative universe and all of their decisions were driven by a political agenda and an investment ideology which had no relationship to facts on the ground. And the facts were that you simply couldn’t justify these investments on the basis of what they cost in fees to generate a dollar of new returns,” Jim Marketti, one of the few State Investment Council members to vote against the Christie administration’s transfer of pension money into alternative investments, told International Business Times. In 2011, Marketti warned the council that such investments would be “a roller coaster ride on which only the Wall Street professionals and insiders are the winners.”
Grady and Christie did not respond to IBTimes' requests for comment about the higher fees and below-median returns. A spokesman for New Jersey State Treasurer Andrew Sidamon-Eristoff said New Jersey “has produced positive returns for Fiscal Year 2014 of 15.9 percent” but declined to answer questions about how those returns -- and others from previous years -- trail the median for pension funds throughout the country. He also refused to answer questions about the state paying higher fees to Wall Street firms.
In 2009, the year before Christie took office, New Jersey spent $125.1 million on financial management fees. In 2013, the most recent year for which data is available, the state reported spending $398.7 million on such fees. In all, New Jersey’s pension system has spent $939.8 million on financial fees between fiscal year 2010 and 2013. That’s only a little less than the amount Christie cut from state education funding in 2010 -- a cut that played a major role in shrinking the state’s teaching force by 4,500 teachers. That money might also have reduced the amount the state needs to pay into the pension system to keep it solvent.
Higher management fees are supposed to buy -- and therefore be offset by -- better investment performance for pension funds, but New Jersey’s pension investment performance has fallen far behind other states'. That’s likely a combination of below-market returns and the Wall Street fees the pension system wouldn’t have paid if it had followed the states that put less money in alternatives and more in stocks, index funds, bonds and other low-fee investments.
With the exception of the 2012 fiscal year, annual public pension return rates in New Jersey are significantly lower than the national median. International Business Times/Hanna Sender New Jersey’s high-fee, low-return results illustrate a larger trend. In authorizing its pension system to hand over more than a third of its $80 billion portfolio to private equity, hedge fund, venture capital and real estate firms, the state is one of many that has shifted more public money into alternative investments. The National Association of Retirement Administrators estimates that pension systems have tripled such holdings in the last dozen years, with the average system now having nearly a quarter of its funds in alternatives. And data from across the country show that shift has often been accompanied by similarly below-average returns, exacerbating pension shortfalls.
New Jersey’s pension fund is currently $47.2 billion short of what it needs to fulfill benefit promises to retirees. Christie has been defending his May decision to skip this year’s required payment to keep up with pension obligations, thereby increasing the gap between the system’s assets and its liabilities. As justification for the move, the governor has argued that retirement benefits for New Jersey police officers, firefighters and teachers are unaffordable and therefore must be reduced.
Christie and his appointees defend their investment strategy by contending that recent returns justify the higher fees. "The return on investment this year for the pension fund is 12.9 percent, nearly 5 points above the assumed rate of investment," Christie told a radio caller critical of the state's pension investment strategy. He said the state's investments have "overperformed" and been "outstanding." "There are certain things you can complain about about state government, but [investment returns] ain't one of them," he said.
That kind of rhetoric has succeeded in shaping the political narrative, and it is true that returns this year have been better than those projected by Christie officials. But this year and over the last four years as a whole, the returns have been below the median for similarly sized public pension systems throughout the country.
Had New Jersey’s pension system simply matched the median rate of return, the state would have reaped roughly $3.8 billion more than it did between fiscal years 2011 and 2014, says pension consultant Chris Tobe. Those unrealized gains represent more than New Jersey’s annual budget for its entire higher education system, and more than 10 times what the state spends each year on environmental protection. It is also more than enough to cover the required pension payment that Christie cut. To make up for that $3.8 billion return-on-investment gap, every household in the state would have to cough up roughly $1,200.
Had New Jersey followed the median public pension return rate from 2011 to 2014, pension funds would have earned nearly one billion dollars more. International Business Times/Hanna Sender Tobe says about $1 billion of the $3.8 billion billion gap can be attributed to the higher Wall Street fees that eat into pension returns -- an estimate that roughly tracks New Jersey State Investment Council documents showing $939.8 million in financial management fees since Christie took office.
“We certainly cannot afford to pay higher fees for below-average returns,” said Wendell Steinhauer, president of the New Jersey Education Association, the union representing teachers whose pensions are on the line. “That doesn’t just hurt people in the pension systems; it hurts every New Jersey taxpayer.”
Christie officials have periodically boasted about their efforts to negotiate fee reductions with specific firms. But in fact the total overhead costs of managing New Jersey’s pension system -- including fees and administrative costs -- have jumped. New Jersey financial records show that in 2009 pension management costs were 19 cents for every $100 of money in the pension fund; in 2013 those costs were almost 50 cents per $100, according to state documents. For comparison, a joint study of 2012 data by the Maryland Public Policy Institute and the Maryland Tax Education Foundation found that the median rate of overhead costs for state pension funds is 39 cents per $100 under management.
The above-average costs for New Jersey are a direct result of Christie administration officials moving more pension money to Wall Street firms. The management fees those firms charge are far more expensive than the fees for passive index funds and the costs associated with equities being managed by in-house pension staff. Investments with Wall Street managers comprise less than half of New Jersey's pension portfolio -- but those investments’ attendant fees account for 96 percent of the pension system’s total overhead expenses, according to State Investment Council documents.
Overhead costs as percentage of assets under management have increased from .078% in 2007 to nearl .5% in 2013. International Business Times/Hanna Sender Billionaire investor Warren Buffett advised San Francisco pension officials in May to avoid alternative investments such as hedge funds. But Orin Kramer, a hedge fund manager who preceded Grady as chairman of the State Investment Council, told IBTimes that New Jersey’s move into alternative investments was necessary to diversify the state’s portfolio and protect against stock market volatility. He suggested that the strategy needs to be given more time to show its full results.
“Assuming you have an intelligent portfolio mix, over a 3 to 5-year period, stupid people can look really good and smart people can look really stupid,” he said. “Over any four-year period, the very best managers and strategies will look bad and managers and investment strategies you should find scary can look terrific. And obviously alternative investments have higher fees than managing pension money internally. But that’s the political risk you take.”
In a 2013 interview with a financial trade magazine about his push for more alternative investments, Grady criticized other pension systems’ problems with "pay-to-play or people who knew board members getting allocations." He said he aimed "to protect the staff from political influence." But as Grady's strategy has generated ever-higher fees for Wall Street firms, many executives of those firms have poured money into groups supporting New Jersey Republicans.
As previously reported by IBTimes, campaign finance records show that employees and others affiliated with firms managing New Jersey pension money made $167,000 worth of donations to New Jersey Republicans since 2009. Employees of those firms have also donated more than $11 million to the Republican Governors Association and the Republican National Committee. Christie is the chairman of the RGA and both organizations spent heavily to support his 2013 reelection campaign.
Despite federal and state pay-to-play rules restricting campaign contributions from employees of firms doing business with public pension funds, many of the donations were made around the time that pension investment contracts were awarded by Grady's State Investment Council. At least one of those contracts went to a venture capital firm after one of the firm’s partners made a $10,000 contribution to the New Jersey Republican Party. That sequence of transactions is now under investigation by New Jersey officials.
As IBTimes also reported last week, at the time many of those campaign contributions were made, Grady was not only changing New Jersey's portfolio in ways that benefited many of the donor firms, he was also in close contact with Christie campaign fundraisers. Grady, a former managing director of the Carlyle Group, still maintains an ownership stake in private equity funds managed by Carlyle, according to New Jersey financial disclosure documents. That firm and its subsidiary received $450 million worth of New Jersey pension investments since Christie took office. Carlyle is one of the top fee generators on Wall Street.
Grady recused himself from the final votes on those Carlyle investments, and he told IBTimes that pension business was not discussed during his communication with Christie’s campaign.
As Christie continues campaigning for a new round of pension benefit cuts, and as more pension money flows to Wall Street, Pat Provnick, a retired educator from Camden County, said retired teachers, firefighters and police officers no longer trust that the pension fund is being managed with their best interests in mind.
“Retirees are terrified,” she told IBTimes. “When you elect people, you hope that they are going to do what’s in the best interest of the people they represent, not just what’s in the best interest of their political aspirations, and when you find out that they may be thinking only of their own interests, you lose faith in any of their decisions.”
Now, O'Malley defunded these public pensions and then sent them to localities knowing that they would be sent to private 401Ks-----IT WAS THE PLAN. As I said, Maryland has a huge budget and tons of corporate fraud that would easily keep these pensions healthy but THE BOND LEVERAGE WILL WIPE THEM OUT.
Labor union leaders all not only support neo-liberals like O'Malley and Brown----they give them advertisements like 'O'Malley supports families and the middle-class' and it is all hogwash. They do it to keep union rights and I know how important that is to unions but you are being taken to the abyss and taking the American people with you.
WE NEED LABOR UNIONS AND JUSTICE ORGANIZATIONS EDUCATING THE DAMAGE NEO-LIBERALS ARE DOING. IT DOES NO GOOD ORGANIZING THE POOR WHILE SELLING OUT THE WORKERS THAT WERE THE UNIONS FOR DECADES.
This handling of public sector pensions is wrought with public malfeasance and we need unions to step up before this coming bond market crash------
Why a 401(k) is No Replacement for a Pension
March 23, 2012 by twalker
By Cindy Long
Longtime friends Brenda Brum and Dolores Townsend have a lot in common. They both like antiquing and poking around flea markets. They both care for an elderly parent. They both taught at the same school. And they both avoided a financial debacle that would have forced them to keep working well past retirement age.
Brum and Townsend live in West Virginia, the state that until a few years ago had the worst-funded pension plan in the entire country. By the early 1990s, the plan was on the verge of collapse with just 14 percent of the money needed to cover the pensions it owed teachers.
In 1990, then-Governor Gaston Caperton signed legislation to pay off the pension liabilities over a 40-year period. But it also changed the plan from a defined benefit (DB) pension to a defined contribution (DC) 401(k)-type plan.
Effective July of 1991, West Virginia’s new teacher hires were placed into the DC plan. Educators hired prior to that date were able to choose to enroll in the new 401(k)-type plan or to stay with the pension. Lured by the possibility of huge investment returns instead of a lower, but steady, pension income, many made the switch.
But not Brenda Brum or Dolores Townsend — they opted to stick with the pension, and now they’re counting their blessings rather than the number of years to retirement.
Dolores Townsend and Brenda Brum
“I have colleagues who changed to the DC plan and they have to keep on working,” says Townsend, who retired in 2009. “They’ve been ready to retire, but they lost all their 401(k) savings in the crash of 2008, and now they can’t afford to retire.”
Turns out they wouldn’t have been able to afford to retire before the crash either.
By 2008, according to a study done by West Virginia’s Consolidated Public Retirement Board, most teachers age 60 or older who participated in the 401(k) had only $100,000 or less in their accounts – a fraction of what the pension would have provided them, and not nearly enough to retire on and remain self-sufficient.
“In West Virginia, a lot of people think $100,000 is a lot of money. Teacher salaries have always been so low, people have a distorted view about how much is enough to live on,” says Brum, who retired in 2011. “But most people live 18 to 20 years after they retire, and how can you stretch $100,000 over that time? The only option is not to live as long!”
According to West Virginia Education Association Executive Director David Haney, the DC plan “failed in every way, shape and form.”
He gives an example of a woman who retired on the pension plan at age 60 after 30 years of service. Over those 30 years, she’d contributed $51,604 to her pension (despite common misperceptions that taxpayers fund pensions, they’re actually a shared responsibility with employee contributions and investment earnings doing most of the work). The plan’s benefit formula is 2 percent of final average salary times years of employment. The woman’s final salary was about $45,000 a year, so her pension is $2,261 a month. To earn the same amount in the DC plan, she would have had to amass $323,400 in her 401(k) – a hefty sum compared to $51,604, and a long shot given the ups and downs of a volatile market.
401(k)s Weren’t Meant to Replace Pensions
Defined contribution 401(k) plans were never intended to be a pension replacement for employees. They were originally created as a perk for highly paid executives, and were originally called “salary reduction plans” before being renamed for the tax code that makes them possible. The thinking was, the more these executives were paid, the more they could afford to contribute from their paychecks, and the more they had for retirement – on top of the old stand-by pension and Social Security. Another perk was that DC plans are portable – convenient for executives who climb the corporate ladder from one company to another.
It all sounds pretty good when the markets are hot and delivering high returns, which is why so many working Americans – executives or not — clamored to get in on the 401(k) action starting in the 1980s. But what happens when the bottom falls out like it did in 2008?
People lose money. Lots of money. And moderately paid public employees like teachers who spent their entire careers serving the public in the classroom are suddenly unable to retire after their 401(k) has been decimated by a market crash.
Pensions Provide Secure – and Higher — Retirement Benefits
For years, David Haney and WVEA members lobbied the West Virginia government to overhaul the plan and return to a pension system that provided secure retirement benefits and was managed – and funded — properly. They pointed out the discrepancies between the defined benefit and defined contribution plans, showing why the pension plan offered a much better retirement benefit for employees and major cost savings for the state.
Finally, the retirement board’s actuary provided some facts that backed them up.
The actuary discovered that savings rates in the DC plan did, in fact, lag far behind monthly benefits that the DB plan would pay. The DC plan members, including new hires and those who made the switch in 1991, had an average of $33,944 in their accounts by June of 2005. Those over age 60 had an average of just $23,193 – a trifling amount to spread out over the rest of their lives in retirement. On the other hand, teacher participants in the DB plan, earning the average salary after 30 years of service, would receive an annual pension of $27,000. They wouldn’t have to figure out how to make it last. They’d get that $27,000 each and every year of their retirement, whether they lived to be 68 or 108.
The government saw the red ink writing on the wall, and in 2008, West Virginia agreed to switch back to a DB plan.
Here’s why they made the switch and why other states should follow suit.
DB Plan Investments Are Managed By Financial Experts
Over a 30-year period, according to a study by the National Institute for Retirement Security and consulting firm Milliman Inc., defined benefit plans delivered an almost 25 percent greater return to participants than defined contribution plans.
One reason for the higher returns is because DB plans ’ investments are professionally managed day-to-day by investment experts rather than individually managed by people whose investment tools consist of little more than a crystal ball and a lot of luck – which is all West Virginia investors had to rely on.
“The DC plan participants received absolutely no education on how to manage their investments,” says Haney.
Like many public employees in states with DC plans, the West Virginia educators received no web-based courses, no seminars, no written materials, and no access to consultants. They couldn’t even get reports on how their investments were doing more than once a quarter, and then had only a very short window in which to change their allocations.
“Do most classroom teachers, bus drivers, and cafeteria workers know what their risk tolerance is, or about their time horizons? Do they know the difference between fixed securities and equity securities, or max cap versus mid cap? Do they know whether they should they invest internationally, or in growth stocks, or derivatives?,” asks Haney.
We can’t reasonably expect the average employee to effectively manage her savings with absolutely no training when even some winners of the Nobel Prize in Economics admit to making mistakes, either by not paying enough attention to their own retirement arrangements or by making bad decisions when they do.
“I think very little about my retirement savings, because I know that thinking could make me poorer or more miserable or both,” 2002 Economics Nobel Prize winner Daniel Kahneman of Princeton University told the Los Angeles Times .
DB Plans Lower Costs With Pooled Risks
DB plans are pooled and therefore have “built-in” savings that allow them to deliver retirement benefits at a lower cost to the employer as well as the employee.
First, they average risks over a large number of participants. Instead of requiring contributions substantial enough to provide retirement income through a person’s maximum life expectancy, which, with the miracle of modern medicine, could be upwards of age 90 or even 100, defined benefit plans only need to fund benefits through the average life expectancy of the group. So when a pension member or their designated beneficiary dies prematurely, the assets that have been accumulated on their behalf are used to provide benefits to the remaining employees.
Also, with pooled funds, the management fees are lower than maintaining hundreds or thousands of individual accounts, which result in a 26 percent cost savings, according to the National Institute on Retirement Security.
DB Plans Don’t Age
Also, unlike defined contribution plans, pension assets can be diversified for optimal returns throughout an employee’s lifetime. People with 401(k)s, on the other hand, are advised to move their investments into safer, lower-returning assets as they age and approach retirement. But because DB plans pool the risks of losses, they can maintain an investment mix that is diversified among stocks, bonds, and other investments, increasing the investment returns and lowering required contributions.
DB Plans Boost the Economy
According to an analysis of 20 million 401(k) participants conducted by the Employee Benefit Research Institute and the Investment Company Institute, the median account balance of a worker in his or her 60?s, making between $40,000 and $60,000 a year was $97,588 at the end of 2006. That amount would generate about $8,000 a year in retirement income.
“How can someone live on that amount,” asks Haney. “They’d struggle just to pay utilities and to put food on the table. They’d probably become wards of the state.”
In fact, research shows that when older Americans can’t be self-sufficient in retirement, taxpayers face higher public assistance costs.
But when they’re on a fixed income pension, retirees represent a vital, continuous source of spending. A National Institute for Retirement Security study shows that public employee retirees pump $358 billion into local economies and help to create 2.5 million jobs.
They can afford home maintenance , they can buy a new car, or, like West Virginia retired educator Dolores Townsend, they can go on a vacation.
“I don’t have to scrimp and save because I’m worried my retirement benefit will run out,” says Townsend. “When everything else fluctuates, like gas, groceries, and prescriptions, it’s nice to know my paycheck won’t, so I can plan for my expenses and then spend what’s left on the fun stuff, like a new pair of shoes or a ski trip with my nephews.”
Haney says the rest of the country can benefit from what West Virginia learned the hard way – that individual 401(k) accounts. which were only intended to supplement pensions, have proven to be an insufficient primary source of retirement income, that pensions are more economically efficient, and can provide the same retirement benefit at half the cost.
“Given the growing level of retirement insecurity, our nation should be looking at ways to get back to basics and ensure that all Americans have access to adequate and secure pensions,” he says. “Part of the American dream is that after a life of hard work and playing by the rules, people should be able to retire with dignity and security.”
That is exactly what is happening------pension funds robbed to finance corporate subsidy-----courtesy of neo-liberals and neo-cons!
The article below is long so please glance through. We all know the story----we simply need our labor and justice leaders to fight to protect public wealth by running and supporting labor and justice candidates in all primaries!
KNOW WHO SUPPORTS RAWLINGS-BLAKE AND O'MALLEY EVERY ELECTION CYCLE-----BLACK MINISTERS IN BALTIMORE AND MARYLAND. LABOR UNION LEADERS.
'Politicians quietly borrow millions from these funds by not paying their ARCs, 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'.
Looting the Pension Funds All across America, Wall Street is grabbing money meant for public workers
By Matt Taibbi | September 26, 2013
In the final months of 2011, almost two years before the city of Detroit would shock America by declaring bankruptcy in the face of what it claimed were insurmountable pension costs, the state of Rhode Island took bold action to avert what it called its own looming pension crisis. Led by its newly elected treasurer, Gina Raimondo – an ostentatiously ambitious 42-year-old Rhodes scholar and former venture capitalist – the state declared war on public pensions, ramming through an ingenious new law slashing benefits of state employees with a speed and ferocity seldom before seen by any local government.
Called the Rhode Island Retirement Security Act of 2011, her plan would later be hailed as the most comprehensive pension reform ever implemented. The rap was so convincing at first that the overwhelmed local burghers of her little petri-dish state didn't even know how to react. "She's Yale, Harvard, Oxford – she worked on Wall Street," says Paul Doughty, the current president of the Providence firefighters union. "Nobody wanted to be the first to raise his hand and admit he didn't know what the fuck she was talking about."
Soon she was being talked about as a probable candidate for Rhode Island's 2014 gubernatorial race. By 2013, Raimondo had raised more than $2 million, a staggering sum for a still-undeclared candidate in a thimble-size state. Donors from Wall Street firms like Goldman Sachs, Bain Capital and JPMorgan Chase showered her with money, with more than $247,000 coming from New York contributors alone. A shadowy organization called EngageRI, a public-advocacy group of the 501(c)4 type whose donors were shielded from public scrutiny by the infamous Citizens United decision, spent $740,000 promoting Raimondo's ideas. Within Rhode Island, there began to be whispers that Raimondo had her sights on the presidency. Even former Obama right hand and Chicago mayor Rahm Emanuel pointed to Rhode Island as an example to be followed in curing pension woes.
What few people knew at the time was that Raimondo's "tool kit" wasn't just meant for local consumption. The dynamic young Rhodes scholar was allowing her state to be used as a test case for the rest of the country, at the behest of powerful out-of-state financiers with dreams of pushing pension reform down the throats of taxpayers and public workers from coast to coast. One of her key supporters was billionaire former Enron executive John Arnold – a dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation's Koch brothers, and who for years had been funding a nationwide campaign to slash benefits for public workers.
Nor did anyone know that part of Raimondo's strategy for saving money involved handing more than $1 billion – 14 percent of the state fund – to hedge funds, including a trio of well-known New York-based funds: Dan Loeb's Third Point Capital was given $66 million, Ken Garschina's Mason Capital got $64 million and $70 million went to Paul Singer's Elliott Management. The funds now stood collectively to be paid tens of millions in fees every single year by the already overburdened taxpayers of her ostensibly flat-broke state. Felicitously, Loeb, Garschina and Singer serve on the board of the Manhattan Institute, a prominent conservative think tank with a history of supporting benefit-slashing reforms. The institute named Raimondo its 2011 "Urban Innovator" of the year.
The state's workers, in other words, were being forced to subsidize their own political disenfranchisement, coughing up at least $200 million to members of a group that had supported anti-labor laws. Later, when Edward Siedle, a former SEC lawyer, asked Raimondo in a column for Forbes.com how much the state was paying in fees to these hedge funds, she first claimed she didn't know. Raimondo later told the Providence Journal she was contractually obliged to defer to hedge funds on the release of "proprietary" information, which immediately prompted a letter in protest from a series of freaked-out interest groups. Under pressure, the state later released some fee information, but the information was originally kept hidden, even from the workers themselves. "When I asked, I was basically hammered," says Marcia Reback, a former sixth-grade schoolteacher and retired Providence Teachers Union president who serves as the lone union rep on Rhode Island's nine-member State Investment Commission. "I couldn't get any information about the actual costs."
This is the third act in an improbable triple-fucking of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.
Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn't just about money. Crucially, in ways invisible to most Americans, it's also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities.
Secrets and Lies of the Bailout
Not only did these middle-class workers already lose huge chunks of retirement money to huckster financiers in the crash, and not only are they now being asked to take the long-term hit for those years of greed and speculative excess, but in many cases they're also being forced to sit by and watch helplessly as Gordon Gekko wanna-be's like Loeb or scorched-earth takeover artists like Bain Capital are put in charge of their retirement savings.
It's a scam of almost unmatchable balls and cruelty, accomplished with the aid of some singularly spineless politicians. And it hasn't happened overnight. This has been in the works for decades, and the fighting has been dirty all the way.
There's $2.6 trillion in state pension money under management in America, and there are a lot of fingers in that pie. Any attempt to make a neat Aesop narrative about what's wrong with the system would inevitably be an oversimplification. But in this hugely contentious, often overheated national controversy – which at times has pitted private-sector workers who've mostly lost their benefits already against public-sector workers who are merely about to lose them – two key angles have gone largely unreported. Namely: who got us into this mess, and who's now being paid to get us out of it.
The siege of America's public-fund money really began nearly 40 years ago, in 1974, when Congress passed the Employee Retirement Income Security Act, or ERISA. In theory, this sweeping regulatory legislation was designed to protect the retirement money of workers with pension plans. ERISA forces employers to provide information about where pension money is being invested, gives employees the right to sue for breaches of fiduciary duty, and imposes a conservative "prudent man" rule on the managers of retiree funds, dictating that they must make sensible investments and seek to minimize loss. But this landmark worker-protection law left open a major loophole: It didn't cover public pensions. Some states were balking at federal oversight, and lawmakers, naively perhaps, simply never contemplated the possibility of local governments robbing their own workers.
Politicians quickly learned to take liberties. One common tactic involved illegally borrowing cash from public retirement funds to finance other budget needs. For many state pension funds, a significant percentage of the kitty is built up by the workers themselves, who pitch in as little as one and as much as 10 percent of their income every year. The rest of the fund is made up by contributions from the taxpayer. In many states, the amount that the state has to kick in every year, the Annual Required Contribution (ARC), is mandated by state law.
Chris Tobe, a former trustee of the Kentucky Retirement Systems who blew the whistle to the SEC on public-fund improprieties in his state and wrote a book called Kentucky Fried Pensions, did a careful study of states and their ARCs. While some states pay 100 percent (or even more) of their required bills, Tobe concluded that in just the past decade, at least 14 states have regularly failed to make their Annual Required Contributions. In 2011, an industry website called 24/7 Wall St. compiled a list of the 10 brokest, most busted public pensions in America. "Eight of those 10 were on my list," says Tobe.
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 – the fund is 27 percent funded, which makes bankrupt Detroit, whose city pension is 77 percent full, look like the sultanate of Brunei by comparison.
Here's what this game comes down to. Politicians run for office, promising to deliver law and order, safe and clean streets, and good schools. Then they get elected, and instead of paying for the cops, garbagemen, teachers and firefighters they only just 10 minutes ago promised voters, they intercept taxpayer money allocated for those workers and blow it on other stuff. It's the governmental equivalent of stealing from your kids' college fund to buy lap dances. In Rhode Island, some cities have underfunded pensions for decades. In certain years zero required dollars were contributed to the municipal pension fund. "We'd be fine if they had made all of their contributions," says Stephen T. Day, retired president of the Providence firefighters union. "Instead, after they took all that money, they're saying we're broke. Are you fucking kidding me?"
There's an arcane but highly disturbing twist to the practice of not paying required contributions into pension funds: The states that engage in this activity may also be committing securities fraud. Why? Because if a city or state hasn't been making its required contributions, and this hasn't been made plain to the ratings agencies, then that same city or state is actually concealing what in effect are massive secret loans and is actually far more broke than it is representing to investors when it goes out into the world and borrows money by issuing bonds.
Some states have been caught in the act of doing this, but the penalties have been so meager that the practice can be considered quasi-sanctioned. For example, in August 2010, the SEC reprimanded the state of New Jersey for serially lying about its failure to make pension contributions throughout the 2000s. "New Jersey failed to provide certain present and historical financial information regarding its pension funding in bond-disclosure documents," the SEC wrote, in seemingly grave language. "The state was aware of . . . the potential effects of the underfunding." Illinois was similarly reprimanded by the SEC for lying about its failure to make its required pension contributions. But in neither of these cases were the consequences really severe. So far, states get off with no monetary fines at all. "The SEC was mistaken if they think they sent a message to other states," Tobe says.
But for all of this, state pension funds were more or less in decent shape prior to the financial crisis of 2008. The country, after all, had been in a historic bull market for most of the 1990s and 2000s and politicians who underpaid the ARCs during that time often did so assuming that the good times would never end. In fact, prior to the crash, state pension funds nationwide were cumulatively running a surplus. But then the crash came, and suddenly states everywhere were in a real, no-joke fiscal crisis. Tax revenues went in the crapper, and someone had to take the hit. But who? Cuts to corporate welfare and a rolled-up-newspaper whack of new taxes on the guilty finance sector seemed a good place to start, but it didn't work out that way. Instead, it was then that the legend of pension unsustainability was born, with the help of a pair of unlikely allies.
Most people think of Pew Charitable Trusts as a centrist, nonpartisan organization committed to sanguine policy analysis and agnostic number crunching. It's an odd reputation for an organization that was the legacy of J. Howard Pew, president of Sun Oil (the future Sunoco) during its early 20th-century petro-powerhouse days and a kind of australopithecine precursor to a Tea Party leader. Pew had all the symptoms: an obsession with the New Deal as a threat to free society, a keen appreciation for unreadable Austrian economist F.A. Hayek and a hoggish overuse of the word "freedom." Pew and his family left nearly $1 billion to a series of trusts, one of which was naturally called the "Freedom Trust," whose mission was, in part, to combat "the false promises of socialism and a planned economy."
Know where you hear Pew Charitable Trust the most right now? PUBLIC MEDIA FOUNDATION SUPPORT! MARKET PLACE RULES ON PUBLIC MEDIA!
Still, for decades Pew trusts engaged in all sorts of worthy endeavors, including everything from polling to press criticism. In 2007, Pew began publishing an annual study called "The Widening Gap," which aimed to use states' own data to show the "gap" between present pension-fund levels and future obligations. The study quickly became a leading analysis of the "unfunded liability" question.
In 2011, Pew began to align itself with a figure who was decidedly neither centrist nor nonpartisan: 39-year-old John Arnold, whom CNN/Money described (erroneously) as the "second-youngest self-made billionaire in America," after Mark Zuckerberg. Though similar in wealth and youth, Arnold presented the stylistic opposite of Zuckerberg's signature nerd chic: He's a lipless, eager little jerk with the jug-eared face of a Division III women's basketball coach, exactly what you'd expect a former Enron commodities trader to look like. Anyone who has seen the Oscar-winning documentary The Smartest Guys in the Room and remembers those tapes of Enron traders cackling about rigging energy prices on "Grandma Millie" and jamming electricity rates "right up her ass for fucking $250 a megawatt hour" will have a sense of exactly what Arnold's work environment was like.
In fact, in the book that the movie was based on, the authors portray Arnold bragging about his minions manipulating energy prices, praising them for "learning how to use the Enron bat to push around the market." Those comments later earned Arnold visits from federal investigators, who let him get away with claiming he didn't mean what he said.
As Enron was imploding, Arnold played a footnote role, helping himself to an $8 million bonus while the company's pension fund was vaporizing. He and other executives were later rebuked by a bankruptcy judge for looting their own company along with other executives. Public pension funds nationwide, reportedly, lost more than $1.5 billion thanks to their investments in Enron.
In 2002, Arnold started a hedge fund and over the course of the next few years made roughly a $3 billion fortune as the world's most successful natural-gas trader. But after suffering losses in 2010, Arnold bowed out of hedge-funding to pursue "other interests." He had created the Arnold Foundation, an organization dedicated, among other things, to reforming the pension system, hiring a Republican lobbyist and former chief of staff to Dick Armey named Denis Calabrese, as well as Dan Liljenquist, a Utah state senator and future Tea Party challenger to Orrin Hatch.
Soon enough, the Arnold Foundation released a curious study on pensions. On the one hand, it admitted that many states had been undercontributing to their pension funds for years. But instead of proposing that states correct the practice, the report concluded that "the way to create a sound, sustainable and fair retirement-savings program is to stop promising a [defined] benefit."
In 2011, Arnold and Pew found each other. As detailed in a new study by progressive think tank Institute for America's Future, Arnold and Pew struck up a relationship – and both have since been proselytizing pension reform all over America, including California, Florida, Kansas, Arizona, Kentucky and Montana. Few knew that Pew had a relationship with a right-wing, anti-pension zealot like Arnold. "The centrist reputation of Pew was a key in selling a lot of these ideas," says Jordan Marks of the National Public Pension Coalition. Later, a Pew report claimed that the national "gap" between pension assets and future liabilities added up to some $757 billion and dryly insisted the shortfall was unbridgeable, minus some combination of "higher contributions from taxpayers and employees, deep benefit cuts and, in some cases, changes in how retirement plans are structured and benefits are distributed."
What the study didn't say was that this supposedly massive gap could all be chalked up to the financial crisis, which, of course, had been caused almost entirely by the greed and wide-scale fraud of the financial-services industry – particularly with regard to state pension funds.
A study by noted economist Dean Baker at the Center for Economic Policy and Research bore this out. In February 2011, Baker reported that, had public pension funds not been invested in the stock market and exposed to mortgage-backed securities, there would be no shortfall at all. He said state pension managers were of course somewhat to blame, but only "insofar as they exercised poor judgment in buying the [finance] industry's services."
In fact, Baker said, had public funds during the crash years simply earned modest returns equal to 30-year Treasury bonds, then public-pension assets would be $850 billion richer than they were two years after the crash. Baker reported that states were short an additional $80 billion over the same period thanks to the fact that post-crash, cash-strapped states had been paying out that much less of their mandatory ARC payments.
So even if Pew's numbers were right, the "unfunded liability" crisis had nothing to do with the systemic unsustainability of public pensions. Thanks to a deadly combination of unscrupulous states illegally borrowing from their pensioners, and unscrupulous banks whose mass sales of fraudulent toxic subprime products crashed the market, these funds were out some $930 billion. Yet the public was being told that the problem was state workers' benefits were simply too expensive.
In a way, this was a repeat of a shell game with retirement finance that had been going on at the federal level since the Reagan years. The supposed impending collapse of Social Security, which actually should be running a surplus of trillions of dollars, is now repeated as a simple truth. But Social Security wouldn't be "collapsing" at all had not three decades of presidents continually burgled the cash in the Social Security trust fund to pay for tax cuts, wars and God knows what else. Same with the alleged insolvencies of state pension programs. The money may not be there, but that's not because the program is unsustainable: It's because bankers and politicians stole the money.
Still, the public mostly bought the line being sold by Arnold, Pew and other anti-pension figures like the Koch brothers. To most, it didn't matter who was to blame: What mattered is that the money was gone, and there seemed to be only two possible paths forward. One led to bankruptcy, a real-enough threat that had already ravaged places like Vallejo, California; Jefferson County, Alabama; and, this summer, Detroit. In Rhode Island, the tiny town of Central Falls went bust in 2011, and even after a court-ordered plan lifted the town out of bankruptcy in 2012, the "rescue" left pensions slashed as much as 55 percent. "You had guys who were living off $24,000, and now they're getting $12,000," says Day. Though Day and his fellow retirees are still fighting reform, he says other union workers might rather settle than file bankruptcy. Holding up an infamous local-newspaper picture of a retired Central Falls policeman in a praying posture, as though begging not to have his whole pension taken away, Day sighs. "Guys take one look at this picture and that's it. They're terrified."
Such images chilled many public workers into accepting the second path – the kind of pension reform meagerly touted by one-percent-friendly politicians like Gina Raimondo. Anyone could see that "reform" meant giving up cash. But the other parts of these schemes were murkier. Most pension-reform proposals required that states must go after higher returns by seeking out "alternative investments," which sounds harmless enough. But we are now finding out what that term actually means – and it's a little north of harmless.
One of the most garish early experiments in "alternative investments" came in Ohio in the late 1990s, after the Republican-controlled state assembly passed a law loosening restrictions on what kinds of things state funds could invest in. Sometime later, an 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.
In fact, in recent years more than a dozen states have carved out exemptions for hedge funds to traditional Freedom of Information Act requests, making it impossible in some cases, if not illegal, for workers to find out where their own money has been invested.
The way this works, typically, is simple: A hedge fund will refuse to take a state's business unless it first provides legal guarantees that information about its investments won't be disclosed to the public. The ostensible justifications for these outrageous laws are usually that disclosing commercial information about hedge funds would place them at a "competitive disadvantage."
In 2010, the University of California reinvested its pension fund with a venture-capital group called Sequoia Capital, which in turn is a backer of a firm called Think Finance, whose business is payday lending – a form of short-term, extremely high-interest rate lending that's basically loan-sharking without the leg-breaking, and is banned in 15 states and D.C. According to American Banker, Think Finance partnered with a Native American tribe to get around state interest-rate caps; someone borrowing $250 in its "plain green loans" program would owe $440 after 16 weeks, for a tidy annual percentage rate of 379 percent. In a more recent case, the pension fund of L.A. County union workers invested in an Embassy Suites hotel that is trying to prevent janitors and other employees from organizing. California passed a law in 2005 making hedge-fund investments secret.
The American Federation of Teachers this spring released a list of financiers who had been connected with lobbying efforts against defined-benefit plans. Included on that list was hedge-funder Loeb of Third Point Capital, who sits on the board of StudentsFirstNY, a group that advocates for an end to these traditional plans for public workers – that is, pensions that promise a guaranteed payout based on one's salary and years of service. When Rhode Island union rep Reback complained about hiring funds whose managers had anti-labor histories, she was told the state couldn't make decisions based on political leanings of fund managers. That same month, Rhode Island moved to disinvest its workers' money from firearms distributors in the wake of the Sandy Hook shooting.
Hedge funds have good reason to want to keep their fees hidden: They're insanely expensive. The typical fee structure for private hedge-fund management is a formula called "two and twenty," meaning the hedge fund collects a two percent fee just for showing up, then gets 20 percent of any profits it earns with your money. Some hedge funds also charge a mysterious third fee, called "fund expenses," that can run as high as half a percent – Loeb's Third Point, for instance, charged Rhode Island just more than half a percent for "fund expenses" last year, or about $350,000. Hedge funds will also pass on their trading costs to their clients, a huge additional line item that can come to an extra percent or more and is seldom disclosed. There are even fees states pay for withdrawing from certain hedge funds.
In public finance, hedge funds will sometimes give slight discounts, but the numbers are still enormous. In Rhode Island, over the course of 20 years, Siedle projects that the state will pay $2.1 billion in fees to hedge funds, private-equity funds and venture-capital funds. Why is that number interesting? Because it very nearly matches the savings the state will be taking from workers by freezing their Cost of Living Adjustments – $2.3 billion over 20 years.
"That's some 'reform,'" says Siedle.
"They pretty much took the COLA and gave it to a bunch of billionaires," hisses Day, Providence's retired firefighter union chief.
When asked to respond to criticisms that the savings from COLA freezes could be seen as going directly into the pockets of billionaires, treasurer Raimondo replied that it was "very dangerous to look at fees in a vacuum" and that it's worth paying more for a safer and more diverse portfolio. She compared hedge funds – inherently high-risk investments whose prospectuses typically contain front-page disclaimers saying things like, WARNING: YOU MAY LOSE EVERYTHING – to snow tires. "Sure, you pay a little more," she says. "But you're really happy you have them when the roads are slick."
Raimondo recently criticized the high-fee structure of hedge funds in the Wall Street Journal and told Rolling Stone that "'two and twenty' doesn't make sense anymore," although she hired several funds at precisely those fee levels back before she faced public criticism on the issue. She did add that she was monitoring the funds' performance. "If they underperform, they're out," she says.
And underperforming is likely. Even though hedge funds can and sometimes do post incredible numbers in the short-term – Loeb's Third Point notched a 41 percent gain for Rhode Island in 2010; the following year, it earned -0.54 percent. On Wall Street, people are beginning to clue in to the fact – spikes notwithstanding – that over time, hedge funds basically suck. In 2008, Warren Buffett famously placed a million-dollar bet with the heads of a New York hedge fund called Protégé Partners that the S&P 500 index fund – a neutral bet on the entire stock market, in other words – would outperform a portfolio of five hedge funds hand-picked by the geniuses at Protégé.
Five years later, Buffett's zero-effort, pin-the-tail-on-the-stock-market portfolio is up 8.69 percent total. Protégé's numbers are comical in comparison; all those superminds came up with a 0.13 percent increase over five long years, meaning Buffett is beating the hedgies by nearly nine points without lifting a finger.
Union leaders all over the country have started to figure out the perils of hiring a bunch of overpriced Wall Street wizards to manage the public's money. Among other things, investing with hedge funds is infinitely more expensive than investing with simple index funds. On Wall Street and in the investment world, the management price is measured in something called basis points, a basis point equaling one hundredth of one percent. So a state like Rhode Island, which is paying a two percent fee to hedge funds, is said to be paying an upfront fee of 200 basis points.
How much does it cost to invest public money in a simple index fund? "We've paid as little as .875 of a basis point," says William Atwood, executive director of the Illinois State Board of Investment. "At most, five basis points."
So at the low end, Atwood is paying 200 times less than the standard two percent hedge-fund fee. As an example, Atwood says, the state of Illinois paid a fee of just $57,000 last year on $550 million of public money they put into an S&P 500 index fund, which, again, is exactly the sort of plain-vanilla investment that Warren Buffett used to publicly kick the ass of Wall Street's cockiest hedge fund.
The fees aren't even the only costs of "alternative investments." Many states have engaged middlemen called "placement agents" to hire hedge funds, and those placement agents – typically people with ties to state investment boards – are themselves paid enormous sums, often in the millions, just to "introduce" hedge funds to politicians holding the checkbook.
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. Raimondo says she never hired placement agents, but the state did pay a $450,000 consulting fee to a firm called Cliffwater LLC.
Doughty says the endless system of highly paid middlemen reminds him of old slapstick comedies. "It's like the Three Stooges," he says. "When you ask them what happened, they're all pointing in different directions, like, 'He did it!'"
Even worse, placement agents are also often paid by the alternative investors. In California, the Apollo private-equity firm paid a former CalPERS board member named Alfred Villalobos a staggering $48 million for help in securing investments from state pensions, and Villalobos delivered, helping Apollo receive $3 billion of CalPERS money. Villalobos got indicted in that affair, but only because he'd lied to Apollo about disclosing his fees to CalPERS. Otherwise, despite the fact that this is in every way basically a crude kickback scheme, there's no law at all against a placement agent taking money from a finance firm. The Government Accountability Office has condemned the practice, but it goes on.
"It's a huge conflict of interest," says Siedle.
So when you invest your pension money in hedge funds, you might be paying a hundred times the cost or more, you might be underperforming the market, you may be supporting political movements against you, and you often have to pay what effectively is a bribe just for the privilege of hiring your crappy overpaid money manager in the first place. What's not to like about that? Who could complain?
Once upon a time, local corruption was easy. "It was votes for jobs," Doughty says with a sigh. A ward would turn out for a councilman, the councilman would come back with jobs from city-budget contracts – that was the deal. 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, 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.
A notorious example in Rhode Island is, of course, 38 Studios, the doomed video-game venture of blabbering, Christ-humping ex-Red Sox pitcher Curt Schilling, who received a $75 million loan guarantee from the state at a time when local politicians were pleading poverty. "This whole thing isn't just about cutting payments to retirees," says syndicated columnist David Sirota, who authored the Institute for America's Future study on Arnold and Pew. "It's about preserving money for corporate welfare." Their study estimates states spend up to $120 billion a year on offshore tax loopholes and gifts to dingbats like Schilling and other subsidies – more than two and a half times as much as the $46 billion a year Pew says states are short on pension payments.
The bottom line is that the "unfunded liability" crisis is, if not exactly fictional, certainly exaggerated to an outrageous degree. Yes, we live in a new economy and, yes, it may be time to have a discussion about whether certain kinds of public employees should be receiving sizable benefit checks until death. But the idea that these benefit packages are causing the fiscal crises in our states is almost entirely a fabrication crafted by the very people who actually caused the problem. It's like Voltaire's maxim about noses having evolved to fit spectacles, so therefore we wear spectacles. In this case, we have an unfunded-pension-liability problem because we've been ripping retirees off for decades – but the solution being offered is to rip them off even more.
Everybody following this story should remember what went on in the immediate aftermath of the crash of 2008, when the federal government was so worried about the sanctity of private contracts that it doled out $182 billion in public money to AIG. That bailout guaranteed that firms like Goldman Sachs and Deutsche Bank could be paid off on their bets against a subprime market they themselves helped overheat, and that AIG executives could be paid the huge bonuses they naturally deserved for having run one of the world's largest corporations into the ground. When asked why the state was paying those bonuses, Obama economic adviser Larry Summers said, "We are a country of law. . . . The government cannot just abrogate contracts."
Is the SEC Covering Up Wall Street Crimes?
Now, though, states all over the country are claiming they not only need to abrogate legally binding contracts with state workers but also should seize retirement money from widows to finance years of illegal loans, giant fees to billionaires like Dan Loeb and billions in tax breaks to the Curt Schillings of the world. It ain't right. If someone has to tighten a belt or two, let's start there. If we've still got a problem after squaring those assholes away, that's something that can be discussed. But asking cops, firefighters and teachers to take the first hit for a crisis caused by reckless pols and thieves on Wall Street is low, even by American standards.
This story is from the October 10th, 2013 issue of Rolling Stone.