Later On

A blog written for those whose interests more or less match mine.

Wall Street sees how much money is in pension funds, decides to siphon off as much as they can

with 2 comments

Murtaza Hussain reports at The Intercept:

Coverage of the midterm elections has, understandably, focused on the shift in political power from Democrats toward Republicans. But behind the scenes, another major story has been playing out. Wall Street spent upwards of $300M to influence the election results. And a key part of its agenda has been a plan to move more and more of the $3 trillion dollars in unguarded government pension funds into privately managed, high-fee investments — a shift that may well constitute the biggest financial story of our generation that you’ve never heard of.

Illinois, Massachusetts, and Rhode Island all recently elected governors who were previously executives and directors at firms which managed investments on behalf of state pension funds. These firms are now, consequently, in position to obtain even more of these public funds. This alone represents a huge payoff on that $300M investment made by the financial industry, and is likely to result in more pension money going into investments which offer great benefits for Wall Street but do little for the broader economy.

But Wall Street’s agenda goes beyond any one election cycle. It has been fighting to turn public pensions into private profits for quite some time, steering retirement nest eggs into investments that are complex, charge hefty fees, and that generate big profits for management firms. And it has been succeeding. Of the $3 trillion in public assets currently in pension funds throughout the country, almost a quarter of that has already found its way into so-called “alternative investments” like hedge funds, private equity and real estate. That translates to roughly $660 billion of public money now under private management, invested in assets that are often arcane and opaque but that offer high management and placement fees to Wall Street financiers.

Our recent financial crisis demonstrated just how risky and potentially destructive these types of assets can be — so the question becomes, why is so much money going into them?

David Sirota has been one of the few journalists to cover this story in depth, and to expose the widespread political corruption that’s gone along with it. “It’s one of the biggest economic stories in the world because the amounts of money are so huge” says Sirota. “It is happening in every state and every city in the country.”

In 2011 the Wall Street Journal reported that the Blackstone Group — one of the largest private equity firms in the world, with an investment pool of $111 billion dollars — saw “about $37 of every $100” of its funds come from investments from state and local pension plans. That’s a huge sum, and it’s therefore unsurprising that Blackstone lobbies state governments to help steer more pension money its way. . .

Continue reading.

Stopping this would require a functional Congress that wants to protect citizens. Thus it will be hard to stop.

Written by LeisureGuy

20 November 2014 at 11:17 am

2 Responses

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  1. Reblogged this on Citizens, not serfs.

    prayerwarriorpsychicnot

    20 November 2014 at 10:07 pm

  2. How else are they supposed to prop up the Wall Street ponzi schemes in order to avoid another 2008 collapse. Oh yeah, dump social security funds into the stock market. Hedge funds- make two bets against each other with odds favoring both and win no matter which bet pays off. How is that legal or ethical?

    Arne

    21 November 2014 at 5:12 am


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