How Wall Street and the Toxic Philosophy of Ayn Rand Are Destroying Our Retirements
Continued from previous page
But this is just tip of this toxic iceberg. For every equity tranche there were dozens of “rated” slices that were pedaled by Wall Street to state and local pension funds as well. Even those with AAA ratings have gone under. This means that even the most cautious pension funds that held to strict rules prohibiting investments in risky, unrated securities got totally screwed by Wall Street and the bogus AAA ratings.
To my knowledge, no one yet has totaled up the amount of toxic crap sold to public pensions. That’s because pension fund managers don’t want to admit how stupid they were to trust Wall Street banks and the rating agencies. But the truth is starting to leak out as many states are suing Wall Street to recover some of these losses.
I’m personally familiar with one case concerning five Wisconsin school districts that invested $200 million in synthetic CDOs to help cover retiree costs. They were told by their trusted local broker that these securities were rated AAA and AA. The school districts lost their entire investment in a matter of months. The case is now moving through court. (See the first chapter of Looting of America posted on Alternet.org.)
Not only did Wall Street deliberately push their crap onto public pension funds, but when their “innovative” securities exploded, the entire economy imploded leaving state and local government finances in shambles. Forty-two of the 50 states face fiscal crises because eight million jobs disappeared in a matter of months. Tax revenues went into free-fall and public expenditures, like unemployment insurance, skyrocketed. Also, the pain of the bursting housing bubble was felt most acutely at the local level. Housing values collapsed as did property tax revenues.
The Move to Eviscerate Public Pensions
To the delight of right-wing demagogues, public sector unions and their pension funds are now extremely vulnerable. States are under such fiscal distress that they find it difficult to pay what is owed to the public pension funds, which have lost value due to the poisonous assets and the Great Recession. The stock market crash alone caused state pension funds to lose more than $850 billion in three years since 2007, according to economist Dean Baker. There would be no public pension crisis were it not for Wall Street’s greedy recklessness that took down our economy.
But, if you hate unions and their pension funds, and have no problem lying a bit, this is the ideal time to launch a full scale attack. It’s easy to whip up public resentment against these so-called “privileged” workers and their “lavish” benefits even if the facts show otherwise. Governors just love saying: “Why should you pay higher taxes for benefits for public employees that you don’t have.”
Of course, the real answer is not to cut pensions. Rather, Wall Street should pay for the damage it created. The banks we bailed out should make the states whole and replenish the pension funds that they poisoned.
Social Security in the Crosshairs
The financial crash and the ensuing bailouts also set the stage for another assault on Social Security, the most enduring legacy of the New Deal. With unemployment still unconscionably high, federal revenues are down, leading to growing concern about deficits. Of course, the sane solution would be to put America back to work and pay for job creation with taxes on Wall Street’s renewed profits. But sanity is not Washington’s strong suit. Instead, deficit hawks want the richest country in history to take an axe to “entitlements” that supposedly are unsustainable.
Congressman Paul Ryan, a devout follower of the late Ayn Rand, is resurrecting the failed Bush-era scam to turn Social Security into private investment accounts so that everyone can play in the Wall Street casino. You would think that the recent crash would have killed that idea. But Ryan feels a moral obligation to unshackle the super rich and eliminate government support for the aged. It’s pure Ayn Rand. Here’s Joshua Holland’s chilling description of her mean-spirited worldview: