Six years after the financial crisis, the economic aftershocks are still rattling the halls of Congress -- this time in a debate over an esoteric pension provision tucked into an end-of-year budget bill. Though that legislation, known as the “cromnibus,” is supposed to be about annual appropriations for government agencies, lawmakers have inserted language that would give private pension plans the power to cut benefits to thousands of current retirees whose pension savings were decimated by investment losses from the financial collapse of 2008.
If the initiative is enacted, experts say, it would be the most consequential change to retirement policy in the United States since the passage of landmark pension legislation 40 years ago. Altering the 1974 Employee Retirement Income Security Act to permit benefit cuts could prompt a slew of efforts to chip away at formerly untouchable guarantees of income to millions of retirees.
The $1.1 trillion spending bill that includes the pension provision was made public Tuesday night and a vote is expected on Thursday. Lawmakers are under pressure to pass the cromnibus by Thursday at midnight to avoid a government shutdown, so there is little time for further changes or negotiations.
The debate over the bill's pension language centers around multiemployer retirement plans -- the large, union-backed funds created in the explosion of labor unions after the Great Depression. The government-insured plans cover an estimated 10 million Americans from the private sector workforce. Many of those funds now face unfunded liabilities.
Lawmakers pushing to allow benefit cuts are citing the example of the $18.7 billion Teamsters' Central States Fund, which has 410,000 members and is the nation’s second-largest multiemployer pension plan. There’s an estimated $22 billion gap between assets in the Central States Fund and promised benefits to the system’s current and future retirees -- a shortfall that legislators point to as a rationale to pass a new law permitting multiemployer plans to slash promised retirement benefits.
“We have to do something to allow these plans to make the corrections and adjustments they need to keep these plans viable,” said Democratic Rep. George Miller in pushing the plan.
But critics of the provisions say the plight of the Central States Fund is not a cautionary tale about unsustainable benefits but an example of Wall Street mismanagement. They note that Central States is the only major private pension fund where all the discretionary investment decisions are made by financial firms rather than by the fund’s board. Roughly a third of the pension system’s shortfalls -- or almost $9 billion -- can be traced to investment losses accrued during the financial industry’s 2008 collapse. Those losses were in addition to more than $250 million in fees paid by the plan to financial firms in just the last 5 years.
Many pension funds followed strategies that involved high fees for Wall Street companies while producing “financial returns that trailed plain vanilla investment strategies,” said Jay Youngdahl, a fellow with the Initiative for Responsible Investment at Harvard University. Central States appears to be a prime example, he said. “Before cutting benefits, we need to examine what exactly has happened.”
Financial firms came to manage the Central States Fund thanks to a 1982 federal consent decree that stripped the Teamsters of its power to oversee retirees’ money. In recent years, the decree divided a portion of the pension assets into low-cost index funds, and gave the rest of the fund’s assets to firms including Morgan Stanley, Northern Trust, JPMorgan Chase and Goldman Sachs.
From 2009 to 2013, Goldman Sachs and Northern Trust collected over $31 million in fees from the fund. In all, the fund paid more than a quarter-billion dollars in fees during that period. At the same time, firms like Goldman Sachs and Northern Trust have delivered investment returns that dragged down the fund’s performance.
“The 1982 consent decree created what is arguably the clearest conflict of interest in an industry that is riddled with them,” said Edward Siedle, a former SEC attorney and a leading expert on pensions. “The Wall Street fiduciaries have a clear interest in pursuing investment strategies that will generate fees for themselves.”
As with many cash-strapped pension systems, 2008 was the moment the Central States Fund found itself in crisis. That year, the fund’s portfolio dropped by more than 29 percent -- a bigger decline than the median large pension fund, and one that effectively converted a stable system into one on the brink of insolvency. In total, the fund lost more than $8.8 billion during the 2008 financial crisis.
The decline was fueled by huge losses in the assets managed by the financial industry at the center of that crisis. For example, the holdings managed by Goldman Sachs and Northern Trust lost more than a third of their value. Had the accounts controlled by Goldman Sachs and Northern Trust delivered returns similar to the median for large pension plans from 2008 to 2012, there would be at least $500 million more in the system.
Goldman Sachs and Northern Trust did not respond to IBTimes request for comment.
“The extreme underperformance of the Goldman and Northern Trust portfolios in 2008 alone has had a major negative impact on the plan that continues to this day,” said Chris Tobe, an investment consultant and a former pension trustee in Kentucky.
The financial firms that managed the Central States Fund not only raked in management fees from the fund, they also invested retiree money in their own companies.
In 2009, for example, the Central States Fund had purchased $20 million of Goldman securities, when Goldman shared in the running of the fund with Northern Trust. By 2010, Goldman’s last year as a named fiduciary, the Fund owned $43 million in Goldman stocks and bonds. Similarly, this past year, Northern Trust directed the Central States Fund to purchase $400,000 in Northern Trust corporate bonds.
While Congress responded to the 2008 financial crisis by rescuing the banking industry with an $700 billion bailout, there's no rescue on the way for retirees. Lawmakers are offering no bailout to close multiemployer plans’ aggregate $42 billion deficit. Instead, sponsors of the legislation want to empower pension trustees to make pension funds whole exclusively by cutting promised retirement benefits. Retirees and members would lose their right to contest such cuts in court. Though the proposed language in the cromnibus bill would give retirees the right to vote on any reductions in benefits, it would empower the Secretary of the Treasury to overrule them and to slash benefits if the secretary deems the plan to be “systemically important.”
The original consent decree that removed Teamsters representatives from the Central States Fund’s board came in the wake of corruption allegations, and was supposed to rid the pension system of self dealing. But Greg Smith, a Teamsters retiree who has analyzed the Central States Fund, said the opposite has happened.
“The fund pays out over $60 million a year in fees,” he told IBTimes. “The Justice Department seems only concerned about whether or not the pension fund is caught up in casino investments, like in the '70s. The Justice Department doesn’t seem interested in looking into whether or not Wall Street is on the take.”
Ken Paff, the national organizer for Teamsters for a Democratic Union, which has been pressuring the Teamsters union for a more aggressive stance against the “cromnibus” changes, says attaching the pension provision to a larger must-pass bill is an underhanded way to harm retirees.
“We regard this as a sneak attack for a major change to pension laws,” Paff told IBTimes. “The problems of the pension funds should not be solved on the backs of people who worked their whole life and earned these pensions.”
Democratic Sen. Tom Harkin, the chairman of the Senate Health, Education, Labor and Pensions Committee, issued a statement Tuesday opposing the pension language.
“More than one million people could see their pensions cut,” Harkin said. The legislation “asks retirees to take potentially enormous cuts to benefits that were earned and promised, without effectively preserving the pension system going forward.”
"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".
Read more: http://www.rollingstone.com/politics/news/looting-the-pension-funds-20130926#ixzz3lTCCkNrz
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The holy trinity of Bank of America, Countrywide and Merrill Lynch represented the worst conceivable team of financial powers to get hold of this scam. It was a little like the Wall Street version of Michael Bay's nonclassic Con Air, in which the world's creepiest serial killer, most demented terrorist and most depraved redneck are all thrown together on the same plane. In this case, it was the most careless mortgage lender (the spray-tanned huckster Angelo Mozilo from Countrywide, who was named the second-worst CEO of all time by Portfolio magazine), the most dangerous mortgage gambler (Merrill, whose CEO was the self-worshipping jerkwad John Thain, the ex-Goldman banker who bought himself an $87,000 area rug as his company was cratering in 2008) and the most relentless packager of mortgage pools (Bank of America), all put together under one roof and let loose on the world. These guys were so corrupt, they even shocked one another: According to a federal lawsuit, top executives at Countrywide complained privately that Bank of America's "appetite for risky products was greater than that of Countrywide."
Read more: http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314#ixzz3lTDWATkI
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One of the things we were promised by the lawmakers who passed the Dodd-Frank reform bill a few years back is that this would be a new era for whistleblowers who come forward to tell the world about problems in our financial infrastructure.
Read more: http://www.rollingstone.com/politics/news/j-p-morgan-chases-ugly-family-secrets-revealed-20120313#ixzz3lTFOhuTJ
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Eliot Bernstein • 3 years ago
Matt ~ Please, allow me to retort. This article fails to call for two important things, a CRIMINAL/CIVIL RICO (Racketeer Influenced and Corrupt Organizations Act) and a FULL RECOVERY of the estimated 47 TRILLION of LOOT STOLEN from the American People and People of the World by these CRIMINALS, please do stop calling them bankers. This reporting you are doing is like arriving at the crime scene of a bank, seeing the bank robbers rob the bank, chasing them down and then getting all the details of the crime and reporting on that, while saying goodbye to the bankers and paying them fifty dollars for their time as they cart of the Peoples monies.
Investigative Reporting on this matter would require you to first call the Police and detaining the suspects if you could and certainly demanding that the Police detain them and FREEZE THEIR ASSETS and CONFISCATE ALL THEIR STOLEN LOOT IN HAND and then SEIZE/AUCTION THEIR ASSETS to cover any shortfall. Yet, suspect, is the lack of such call from you. Kind of like saying, here is how they did it folks, here is whom they are, here is how much they stole and there they go. Oops, we forgot to ask for EVERY LAST CENT back from them or DEMAND THE DOJ PUT THEM IN PRISON for Market Rigging, Price Fixing, Antitrust Violations, Document Forgery and more, all forms of Economic Warfare, which is also a crime of EUGENICS.
Eugenics you say, how can that be, well all those folks who have lost say 50% of their home values or been foreclosed on or lost their companies and jobs and pensions, well they are suicidal and homeless and despondent, not from Organic Economics but from F***ING CRIME. Yet, your article tells them they are forever at a lost and the crooks got away with it (or are rewriting laws to make it ok or buying AG’s to work for them), not to get REVENGE, in the form of a DEMAND FOR CRIMINAL PROSECUTIONS and more importantly a DEMAND FOR RECOVERY OF ALL THEIR FAT AS* BONUSES and ALL THEIR PERSONAL ASSETS and ALL THEIR TRUST FUNDS and ALL THEIR OFFSHORE ACCOUNTS and on and on. Then these bankers will need a bailout from CLUB FED PRISON and with all the RECOVERED LOOT, the world will be back in financial black overnight and the CRIMES WILL CEASE. DO NOT FORGET TO INCLUDE THE LAWYERS IN THE RICO for they orchestrated these crimes and financial WEAPONS OF MASS DESTRUCTION and keep in mind that most of the CEO bonuses are to LAWYERS running, I mean ruining these companies. Therefore, the lawyers and accountants must be defendants in the RICO and put out of business and charged with drafting all these toxic frauds and their ASSETS SEIZED and their PARTNERS and PARTNERSHIPS destroyed.
Finally, please stop referring to the crime of DOCUMENT FORGERY AND BANK FRAUD, two very serious FELONY CHARGES, which would put lots of lawyers and judges in PRISON too, as Robosigning, which is not even a word, let alone a felony with a 20yr sentence. If you or I Robosigned aka DOCUMENT FORGERY and committed BANK FRAUD for a 10,000 loan we would be sitting in Prison for 20 yrs, as the banks remember prosecute these crimes to the FULLEST EXTENT OF THE LAW and thus the PEOPLE should DEMAND EQUAL JUSTICE…what’s good for the goose… So where are our PROSECUTORS and JUDGES, more lawyers, and why are they not busy filing a RICO on the largest financial crime and criminal organization in the world??? Why are they instead working for the bankers drafting GET OF JAIL FREE CARDS and holding the door open and their pockets out? NOT A SINGLE PRISON SENTENCE and they allow the criminals to KEEP ALL THE BOOTY, except a small fine, a day’s interest on the STOLEN BOOTY, yet where oh where is Matt Taibbi to DEMAND THE LOOT BACK and trail the money like a GREAT REPORTER would? Have you sold out Matt? I mean really I thought at this point with all those soliloquies of Vampire Squids (aka CRIMINALS) you would be writing how the PROSECUTORS and AG’s who sign any deal should be arrested for AIDING AND ABETTING A CRIMINAL RICO ORG, Imagine AG’s not preparing a RICO but drafting the settlement for the criminals free of CRIMINAL CHARGES or SEIZING THE ILLEGAL ILL GOTTEN GAINS from their CRIMES AGAINST HUMANITY.
Can you hear any longer Matt, the HUNDREDS OF MILLIONS OF FAMILIES AND CHILDREN whose lives destroyed? Barely able to eat at night or feed or cloth the kids, the cities failing around them that you cite, yes Matt, all those people in the world markets and countries are very real people, crying. Wondering, how the THREE BRANCHES OF GOV have failed and CONSPIRE TO HARM THEM and FAIL TO PROTECT THEM and their last hope is the Right Arm of Anarchy, the PRESS, YOU and when reading this article I fear you have lost hearing them and are reporting for the criminals and in your face to the readers who need your RALLYING CRY FOR THEIR MONEY BACK AND THE RESPONSIBLE IN PRISON. The only way for the US and WORLD to survive this debacle of crime is for JUSTICE to be RESTORED by ObamaRenegOrama and Eric HoldOff Holder, if they fail to do their jobs, arrest them too for their failure to PROSECUTE FELONY CRIMINAL ACTS and instead benefiting from them by AIDING AND ABETTING and PAYOLA. Matt, when you get a forensic accountant to help your reporting, who howls “SHOW ME THE MONEY” and then demand a REAL LIFE PROSECUTOR scoop up their RUGS, THREE HOUSES, COMPANIES and wives, well then I will know you are really a PRESS FOR THE PEOPLE, not a half as* crime story writer.
Eliot Ivan Bernstein
US Inventor (in the comments section ) http://www.rollingstone.com/politics/news/j-p-morgan-chases-ugly-family-secrets-revealed-20120313
A. Overall Condition of the Funds
The total available assets of all of the District Council’s affiliated Benefit Funds are approximately $5.4 billion as of March 31, 2015. Total available assets in the Pension Fund have grown from $2.76 billion as reported in the Review Officer’s Final Report to $2.89 billion as of March 31, 2015. The Pension Fund is predicted to be 93.9% funded as of July 1, 2015, up from 89.1% as of July 2014. Similarly, total available assets in the Welfare Fund have grown from the $371 million reported in the Review Officer’s Final Report to $419 million as of March 31, 2015. The Annuity Fund has approximately $2 billion in [member] assets as of March 31, 2015. The Board of Trustees and a special Welfare Fund Subcommittee continue to devote time and attention to ensuring that the Welfare Fund remains viable while prudently considering whether any benefit changes are possible. As previously reported to the Court, the Trustees have reduced retiree premiums by 50% and reinstated both dental and vision benefits within the last year.
The Annuity Fund has approximately $2 billion in assets as of March 31, 2015. McFly - it's the members money; re: every account is a private account set aside for the specific individual - period; thus, it is not the Annuity Fund or the Funds dough - get it!
The members directly control the investment of their money.
Given the Obama December 2014 NCCMP raid in the back door to sh-it can the 1974 ERISA protections for Pensioneers; members through the lead of the new Executive Director of the Pension & Welfare Funds should be allowed to convert all of their Pension Credit(s) and assets in hard currency (U.S. dollars) directly to their Individual Annuity Accounts and the trusteest/fiduciairies (alleged, yet never proven) should vote accordingly to do so.
Large Pension Funds and the appointed hack attorneys & so called investment fund advisors have one thing in mind - lining their own pockets at 'member' expense. The entire program needs to change & every cent going forward previously designated to be put aside into a phony Pension Fund and the hourly cost incorporated into every contract (CBA) / PLA should go directly into the members Annuity Account.
Let the member manage his or her own money & the results will reflect each man or woman's personal tolerance for risk/reward and they will then & only then retire with dignity and their fair share of what is contractually owed to them.
Short of this immediate need for permanent change, said Pension dollars should go directly into the man or womans weekly paycheck - each week; no side deals with Signatory Contractors who refuse to honor their contracts or to pay Benefits owed; no side deals for re-payment Plans when the hacks at the Pension, Annuity or Welfare Funds or the Funds self dealing attorneys accept 50-cents, 25 cents or 10-cent on the dollar re-payment plans in lieu of full payment when they intentionally screw current working members and those already retired. This phony shell game has to end. It's been a scam from day one and it is the primary source for corruption, the money & power grab within the entirety of the UBCJA & all of its subordinate District Councils.
Face it, the majority of appointed hacks & D.C. employees are too freaking stupid to manage billions of dollars in assets and in the dreaded private sector, none would ever qualify to be seated on a Board of Trustees or as a Trustee or Fiduciary as most are all but illiterate and most could not balance their own damn check book.
The control of these hourly wages (and all benefit monies are part of the contracted for hourly wage) has to be put directly in the hands of the individual members; no if's, and's or's or but's about it). When that occurs then & only then will democracy under the phony Consent Decree be achieved. Until that time, all the rest is nothing but smoke & mirrors and pure blarney!
This post was updated on .
This phony shell game has to end. It's been a scam from day one and it is the primary source for corruption, the money & power grab within the entirety of the UBCJA & all of its subordinate District Councils. Until and when the rank and file bring suit against McCarron and his illegal team of scammers for misappropriation of funds- it will continue.
"I am just a lawyer. I am not a carpenter," Mack told them. His mission, he said, was "as a truth seeker."
Mack was the last man to get to McCarron and his underhandedness, and was about to expose the tools used to separate hardworking rank and file from their money.
He was fired for doing his job too well.
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