If you’re not rich or in politics, Wall Street is not your friend. You would think this is obvious, but somehow people keep voting against their self-interest.
Wall Street does not have the best interests of the public and their employees in mind, and that should be obvious to anyone. I say “should,” because it apparently is not obvious to everyone.
And this is relevant because Wall Street’s obsession with profits in the private sector directly influences the way public sector employees are treated as well. For instance, if you think the ongoing war on public sector pensions, the continuous assault on collective bargaining rights, the coordinated blame game directed at rank-and-file employees and retirees, the phantom budget crises, the lies and errors and omissions and obfuscations being told by politicians and their media mouthpieces every hour of every day, etc. are anything but driven by the Fat Cats, you’re fucking high.
This is how Ellen Schultz’s book, Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers, starts:
In December 2010, General Electric held its Annual Outlook Investor Meeting at Rockefeller Center in New York City. At the meeting, chief executive Jeffrey Immelt stood on the Saturday Night Live stage and gave the gathered analysts and shareholders a rundown on the global conglomerate’s health. But in contrast to the iconic comedy show that is filmed at Rock Center each week, Immelt’s tone was solemn. Like many other CEOs at large companies, Immelt pointed out that his firm’s pension plan was an ongoing problem. The “pension has been a drag for a decade,” he said, and it would cause the company to lose thirteen cents per share the next year. Regretfully, to rein in costs, GE was going to close the pension plan to new employees.
The audience had every reason to believe him. An escalating chorus of bloggers, pundits, talk show hosts, and media stories bemoan the burgeoning pension-and-retirement crisis in America, and GE was just the latest of hundreds of companies, from IBM to Verizon, that have slashed pensions and medical benefits for millions of American retirees. To justify these cuts, companies complain that they’re victims of a “perfect storm” of uncontrollable economic forces – and aging workforce, entitled retirees, a stock market debacle, and an outmoded pension system that cripples their chances of competing against pensionless competitors and companies overseas.
What Immelt didn’t mention was that, far from being a burden, GE’s pension and retiree plans had contributed billions of dollars to the company’s bottom line over the past decade and a half, and were responsible for a chunk of the earnings that the executives had taken credit for. Nor were these retirement programs – even with GE’s 230,000 retirees – bleeding the company of cash. In fact, GE hadn’t contributed a cent to the workers’ pension plans since 1987 but still had enough money to cover all the current and future retirees.
And yet, despite all this, Immelt’s assessment wasn’t entirely inaccurate. The company did indeed have another pension plan that really was a burden: the one for GE executives. And unlike the pension plans for a quarter of a million workers and retirees, the executive pensions, with a $4.4 billion obligation, have always been a drag on earnings and have always drained cash from company coffers: more than $573 million over the past three years alone.
So a question remains: With its fully funded pension plan, why was GE closing its pensions?
This is one of the questions this book seeks to answer. Retirement Heist explains what really happened to GE’s pensions as well as to the retirement benefits of millions of Americans at thousands of companies. No one disputes that there’s a retirement crisis, but the crisis was no demographic accident. It was manufactured by an alliance of two groups: top executives and their facilitators in the retirement industry – benefits consultants, insurance companies, and banks – all of who played a huge and hidden role in the death spiral of American pensions and benefits.
Later on in the book:
The architects of today’s retirement mess – consultants and financial firms – have also played a non-starring role in the public pension debacle. The difference was that, while they helped private employers hide pension cuts and exaggerate their pension woes, they also helped public employers quietly boost benefits and hide the growing liabilities.
They not only helped private companies drain assets from pension plans, but also helped public employers avoid contributing in the first place, enabling legislators and politicians to conjure up cash for popular projects, without raising taxes, and look like community heroes.
And while they were helping private employers to load their retirement plans with stock, some consultants and financial firms duped many public pension managers into investing in complex and risky derivatives whose value later exploded, just like the subprime loans with low teaser rates that predatory lenders conned millions of homeowners into.
In the private sector, current and future retirees are bearing the brunt of the retirement heist; in the public sector, the carnage is being borne by the employees and by the communities around them.
The scapegoat game continues. Corporate employers are still blaming aging workers, retire “legacy costs,” and “spiraling” retiree health care costs for their financial woes – not their own actions that squandered billions of dollars in pension assets, their thinly masked desire to convert benefits earned by and promised to retirees into profits for executives and shareholders, and their willingness to sacrifice retiree plans, and the well-being of the retirees, for short-term gains.
In the public plan sector, the scapegoats are the public employees and retirees, who are beginning to have the haunted look of victims of the Salem witch hunts. The real culprits are the self-serving politicians and officials who passed the funding buck to future generations, the consulting firms that helped them do this, and the investment banks that conned local governments into investing taxpayer-funded pensions in risky, abusive investments.
I don’t make that much money, but apparently I bled my employers dry.
And, regarding bias, my favorite line of the book:
“Meanwhile, Wall Street Journal reporters, who some believe were put on earth so that they and the Wall Street Journal editorial writers would cancel each other out…”