Wall Street Looting Pensions

Matt Taibbi has a comprehensive takedown on of how Wall Street has combined with irresponsible state politicians to steal public workers’ pensions. It’s the latest iteration of the Wall Street war to increase profits by undermining the working and middle classes. At the heart of it is former Enron billionaire John Arnold, the same man recorded bragging about manipulating energy prices in California during their corporate created energy crisis. Here’s the skinny.

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

The politician most complicit with this stealing of public pensions is Rhode Island treasurer Gina Raimondo, who has turned the state’s pension program into a giant feeding frenzy for Wall Street capitalists like Arnold. She’s the one Democratic politician in this country who is clearly worse than Andrew Cuomo. How bad is Raimondo? She was attacked from the left in the pages (or website anyway) of Forbes. Say that again. Forbes attacked her for being too beholden to Wall Street.

She is running for Rhode Island governor. To say the least, I hope she loses to Providence mayor Angel Taveras. Still, she has the name in this very Italian state and there’s a tremendous amount of dislike of public workers in this supposedly union-friendly state. So we shall see if the Ocean State rejects a politician so clearly supportive of the New Gilded Age.