Investment

What Judges Know: The Fault for Underfunded Pensions Lies With Politicians, Not Workers

We can’t count on politicians to stick to their word. It’s promising that judges are forcing them to.

(AP Photo/Mel Evans)
(AP Photo/Mel Evans) Union members carry protest signs as they march outside the Mercer County Criminal Courthouse before arguments Wednesday, June 25, 2014, in Trenton, N.J., over New Jersey Gov. Chris Christie's plan to use pension payments to balance the budget. Public employee unions on Wednesday tell the court the current budget has unspent funds that could go toward pensions. A dvocates of gutting public pensions are running into the same wall over and over again. From California to Illinois to New Jersey and beyond, pension gutting efforts are being overturned by judges who recognize that breaking promises to workers isn’t just regrettable, it’s illegal. Pension opponents castigate the courts as the enemy while conveniently ignoring why legal protections exist in the first place—to protect public employees from politicians who spent years playing politics with their retirement savings. For decades, elected officials across the country skipped pension payments, often while...

Too Big to Fail. Not Too Strong.

Nomi Prins’s new book traces America’s propping up of banks since the robber barons.

F rom Andrew Mellon’s nearly 11 years as Treasury secretary under Presidents Warren G. Harding, Calvin Coolidge, and Herbert Hoover to our time, when Timothy Geithner went from financial regulator at the New York Federal Reserve to Treasury secretary to investment executive, journalists have often employed the image of a revolving door to describe the flow of bankers between Wall Street and the U.S. Department of the Treasury. But few know that the White House and the Treasury are, arguably, a single building. A tunnel connects 1500 Pennsylvania Avenue with 1600. Presidents use this passageway to slip visitors in and out of the Oval Office. Nomi Prins, in her new history All the Presidents’ Bankers , does not say it in so many words. But she shows that the tunnel from the White House to the Treasury extends, metaphorically, for 226 miles to Lower Manhattan. Prins digs into presidential libraries and national archives and mines a shelf of books. She also knows Wall Street from the...

Can the Koch Brothers Be a Political Asset for Democrats?

Flickr/Donkey Hotey
For while there, conservatives saw the hand of George Soros behind every conspiracy. It was always a little strange, not because there wasn't a certain truth underneath it—Soros has, in fact, given lots of money to liberal political causes (and he is an actual international Jewish financier, which certainly set a certain type of mind buzzing)—but because the idea of a billionaire using his money to shape America's politics isn't something conservatives object to. Quite the contrary; they think there ought to be a lot more of it. Democrats, on the other hand, are not so friendly to the idea, which is why it's understandable that Charles and David Koch have taken on a larger role in the liberal imagination than Soros had in the conservative one (they've also spent a lot more money on politics than Soros ever did). But can Democrats convince voters who are not already liberals to be mad at the Kochs? That's how they're responding to the brothers' involvement in multiple Senate races this...

Robbing Illinois's Public Employees

I n the span of a few hours on December 3, two Midwestern states changed America’s relationship to its public employees, perhaps irrevocably. If courts approve plans for bankruptcy in Detroit and a new law in Illinois, retirees who worked their careers as sanitation engineers and teachers, firefighters and police officers, public defenders and city clerks, under a promise of pension benefits protected by state constitutions, will not receive their promised share. “This is a bipartisan collection of politicians who essentially don’t respect democracy,” says Steve Kreisberg, director of Research and Collective Bargaining for the public-employee union AFSCME. “They authorized a violation of their own state constitutions.” The implications for the future of public pensions are grave. Michigan and Illinois are two of just seven states with clauses in their state constitutions prohibiting cuts to public pensions. If they can nevertheless slash benefits, cities, and states with less...

Obamacare's Critical Moment

And to think, we actually thought the hard part was over.
At times like this, with the Obama administration weathering yet another controversy regarding the stumbling beginnings of the Affordable Care Act, it's useful to remind ourselves that this too shall pass. I've been plenty critical of how Healthcare.gov has been handled (see here , or here , or here ), but eventually it will get fixed, at least to the point at which it works well enough. Likewise, the fears now being experienced by people with individual insurance policies will, by and large, turn out to be unfounded. There will be some who have to pay more than they've been paying, but in almost all cases they'll be getting more too. But there's no doubt that this is an escalating problem for the administration. The person who got sold a cheap insurance policy on the individual market because the insurer was confident that either a) they probably wouldn't get sick any time soon, or b) the policy was so stingy (whether the customer knew it or not) that the insurer wouldn't have to pay...

Time to Investigate Those Insurance Company Letters

As a follow-up to this post , I want to talk about the thing that spawns some of these phony Obamacare victim stories: the letters that insurers are sending to people in the individual market. People all over the country are getting these letters, which say "We're cancelling your current policy because of the new health-care law. Here's another policy you can get for much more money." Reporters are doing stories about these people and their terrifying letters without bothering to check what other insurance options are available to them. There's something fishy going on here, not just from the reporters, but from the insurance companies. It's time somebody did a detailed investigation of these letters to find out just what they're telling their customers. Because they could have told them, "As a result of the new health-care law, your plan, StrawberryCare, has now been changed to include more benefits. The premium is going up, just as your premium has gone up every year since forever...

Big Bank Punishments Don't Fit Their Crimes

AP Images/Richard Drew
With the Justice Department desperate to rehabilitate its image as a diligent prosecutor of financial fraud, securing headlines along the lines of “the largest fine against a single company in history” is a lifeline. In a tentative deal , the Department would force JPMorgan Chase to pay a $9 billion fine and commit $4 billion to mortgage relief, to settle multiple investigations into their mortgage-backed securities business. The bank stands accused of knowingly selling investors mortgage bonds backed by loans that didn’t meet quality control standards outlined in its investment materials. JPMorgan Chase wants to “pay for peace” in this deal, ending all civil litigation around mortgage-backed securities by state and federal law enforcement, though at least one criminal case would remain open. But for the Justice Department to truly start fresh, and fulfill their mission of stopping corporate fraud and preventing it from occurring again, they will have to compel JPMorgan to admit full...

Tom Friedman’s Worst Column Ever

AP Photo/Mark Lennihan
Sometimes, Tom Friedman writes a column that is such complete baloney it makes you want to retch. Rather than risking soiling my shoes, here is a point-by-point rebuttal to Friedman’s opus du jour, titled: “ Sorry, Kids. We Ate It All .” Friedman’s column swallows whole the budgetary malarkey of the corporate Fix-the-Debt lobby and its Wall Street sponsors. Namely, the reduced horizons of the next generation are the result of the gluttony of old folks—and of unions. But what makes this piece especially appalling (and emblematic) is that the hero of Friedman’s piece is one Stanley Druckenmiller, a hedge-fund billionaire who has appointed himself as the Paul Revere of deficit reduction to warn America’s college students that The Seniors Are Coming. In passing, Friedman discloses that Druckenmiller is also “a friend.” So on top of the absurd logic of the piece, Friedman is guilty of a conflict of interest—using the most valuable real estate in American journalism to do a favor for a chum...

Hey, Wall Street—The Club for Growth Is Not Your Friend

Here we go again: Financial markets are plummeting thanks to the threat of a government shutdown and, beyond that, another debt ceiling crisis. One of the great bull markets of recent years is being derailed by a bunch of extreme conservatives in Congress. But Wall Street shouldn't just blame the Tea Party for ruining a good thing. It should blame big donors from its own ranks who are bankrolling groups like the Club for Growth who are also responsible for the crisis. As I have noted here before, the Club has been fanning shutdown brinksmanship by urging members of Congress to toe the far right line on Obamacare. This is no passing suggestion, given that the Club has been a main funder of primary challenges to moderate Republicans. So the story here, in part, is the Club for Growth vs. stable financial markets and an ongoing economic recovery. That's pretty ironic given the group's name. But it also points to an important internecine conflict within America's wealth elite. In fact,...

Have Too Many Cooks Spoiled Obamacare?

AP Images/J. Scott Applewhite
It's safe to say that if Americans don't understand the Affordable Care Act (ACA) by now—and they don't —they never will. The slightly better news is that consumers don't have to understand it in order to benefit from it, but even so, almost all the problems the ACA has encountered or will encounter are a result of the law's enormous complexity. That complexity grew out of early decisions made by Barack Obama, but along the way Congress added their own layers of complexity in order to pass it, then conservatives on the Supreme Court added some more. There were reasons, most of them perfectly good, for each of these decisions; everyone thought they were responding to reality or doing what was in the best interests of the country. But as full implementation of the law is upon us, we should acknowledge how much damage has been done by all this complexity. In a recent article in National Affairs , Johns Hopkins political scientist Steven Teles bemoans the rise of "Kludgeocracy." The term...

The Commodities Market: A Big Bank Love Story

The Fed loosened rules to allow banks to buy commodities, driving up everyday prices for consumers. Who the next chair is matters if these kinds of practices are ever to be stopped. 

AP Images/Carolyn Kaster
AP Images/Charles Dharapak W ho becomes the next Federal Reserve chair matters, not only because of the implications for economic and monetary policy, but because the Fed remains one of the nation’s chief financial regulators. There are dozens of policies, some we don’t even know about, over which the Fed wields critical influence. While the past year has seen a small but important shift toward tighter controls, particularly on the largest Wall Street institutions, all of that could change if President Barack Obama selects another deregulator in the Greenspan tradition. A perfect example of the Fed’s centrality to the financial regulatory space came last week, when a Senate hearing focused on an unseemly practice that the Fed perpetuated and has the power to stop. As reported in The New York Times and elsewhere, large investment banks like Goldman Sachs have purchased warehousing facilities for aluminum and shuffled the product from one facility to another. When a purchaser buys the...

George Packer's U.S.A.

AP Images/David Samson
In the quest to understand what has happened to the U.S. economy since the 2008 meltdown and the recession that followed, the challenge has been figuring out how far back to pull the lens. Early books on the crisis zoomed in on airless rooms occupied by panicked CEOs and government officials during the pathetic last few months of the Bush administration and the beginning of this one. More expansively reported accounts looked at lower-level traders and fly-by-night firms, expanding the scope to recognize a decade of mortgage fraud and exploitation of would-be homeowners and investors, along with the Washington corruption that allowed the profiteers to thrive unpunished. As time passed, it became clearer that this was not a story that began in 2008 or just a story of the Bush years. It was the inevitable last act of the period since the late 1970s, when the nation became dramatically wealthier but median wages stagnated, economic insecurity worsened, and debt became a means to paper...

Dimon Forever

flickr/757Live
The main item of business before JP Morgan Chase’s annual shareholder meeting, which will convene today in Tampa, is whether JPM CEO Jamie Dimon will be stripped of his additional post as chairman of JPM’s board of directors. A range of institutional investors concerned about the over-concentration of power atop the nation’s most powerful institutions, and upset by the $6 billion loss JPM took last year at its London trading desk, won roughly 40 percent shareholder support last year to separate the two positions. This year, they hope to do better, even though the bank’s public-relations offensive on Dimon’s behalf has made the prospect of winning a majority more difficult. Dimon —the closest thing America has to a celebrity banker— was the one major financier whose reputation came through unscathed in the 2008 financial meltdown. JPM had steered clear of the worst of the mortgage market, and had managed its risks well enough so that, alone among the nation’s leading banks, it was...

The Shame of Pension-Advance Loans

http://rapidpensionadvances.com/
The financial services industry is second to none in dreaming up ways to rip off Americans. Show me a a financial product—credit cards, mortgages, checking accounts, 401(k)s, annuities—and I'll show you a stack of consumer complaints documenting how banks and other firms have sought to bleed dry the American public. The latest alarming example are "pension-advance loans." Never heard of these nifty loans? Well, I hadn't either until The New York Times ran a shocking expose Saturday about firms that offer workers and retirees a chance to "convert tomorrow’s pension checks into today’s hard cash"—but with annual interest rates that have "ranged from 27 percent to 106 percent—information not disclosed in the ads or in the contracts themselves." The story focused on loans against defined benefit pensions, the kind you get if you serve in the military or civil service. Unlike 401(k)s, which are a failed retirement vehicle in part because so many people borrow against their nest eggs, DB...

Wall Street's Grand Bargain

Flickr/ White House
Three developments in finance cropped up in the last days that must be read as a single story. First , Blankfein, Dimon, and the rest of the Wall Street bigwigs visited the White House to meet with the president and his team. That team consisted of Denis McDonough (Chief of Staff); Valerie Jarrett (Senior Adviser); Cecilia Munoz (Domestic Policy Adviser); Gene Sperling (National Economic Council Director); and Alan Krueger, (Chairman, Council of Economic Advisers). The meeting was secret, but we can deduce much from its attendance. The White House appears to want Wall Street support in the policy/politics battles to come. This is not far fetched, especially coming on the heels of steak dinners served to Republican Senators earlier this week and the Obama budget that grabbed the “third rail” issue of Social Security. But every conversation has two sides. What did the power brokers of Wall Street want in return? High on the list is a roll back of financial reform. Industry...

Pages