Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Spring Fund Drive: Keep CounterPunch Afloat
CounterPunch is a lifeboat of sanity in today’s turbulent political seas. Please make a tax-deductible donation and help us continue to fight Trump and his enablers on both sides of the aisle. Every dollar counts!
FacebookTwitterGoogle+RedditEmail

Foxes and Pension Funds

Lurking in back of the current uproar about corporate chicanery is an argument about the management and disposition of society’s acccumulated wealth.

Read first some striking remarks about the role of pension funds by the former British Labor minister, Tony Benn, in his 1979 book, Arguments for Socialism. “The financial institutions do not necessarily use the huge sums put at their disposal in a manner compatible with the common interest. This is one area where there will have to be change These savings belong to the workers, they are their own deferred earnings. Workers want them not only as income when they retire, but while they are at work, and so to guarantee that they will retire in a buoyant economy.”

Of course we’ve been listening over the last few months to many tragic stories of workers watching helplessly as their prospective pensions, stored in some 401(k) have shrivelled overnight, while senior management in a company like Enron cashed in their chips while the going was good. As always the apex predators survive, while the small fry perish. At the end of 2000 Enron’s 401(k) had $2.1 billion in assets, but a year later had lost 94 per cent of its value.

Why didn’t Bush try to bail out Enron, just as Clinton and Rubin bailed out Long Term Capital management. Long Term Capital Management, you’ll recall, was a hedge fund that collapsed in 1998, victim of staggering wrong-way bets by its executives. Banks, even central banks, hedging their positions through LTCM stood to lose vast sums.

The Federal Reserve intervened, persuading 14 banks to put up $3.6 billion as part of the bail-out.

Now, when Enron went belly-up, the losses were vast, perhaps as much as $60 billion, but the losses were widely distributed among a lot of different institutions.
The company’s two largest creditors, Citi and JPMorgan/Chase, well aware of the dodgy state of the company, had packaged up their Enron debt as “credit derivatives” and sold them on to pension funds. So Enron’s crash was not going to bring down the big banks, or even damage their profits (which have remained good).

But if the big banks had stood to loose out big time then it would have been a different story. The Senate hearings last week confirmed that the banks knew that there were big problems with both Enron and WorldCom – in fact they helped devise the “prepays” (loans disguised as trades) and other devices which concealed how highly leveraged the companies were. The recent hearings in Congress have yielded some remarkable material. Here’s an internal e-mail exchange at Chase: One executive wrote simply “$5 bn in prepays!!!!!!!!”, the other replied “Shut up and delete this e-mail”, an exchange later variously described as “misstatements by young bankers” or simply as jokes.

These issues won’t go away because the big pension funds are taking the banks to court. Calpers and Calstrs (teachers) and Lacera (Los Angeles County Employees Retirment Association) have taken action against the large banks, including Citi and Chase, which underwrote Enron and WorldCom bonds, even though they knew the dreadful state of their finances.

Which brings us back to those basic arguments about how the accumulation of wealth should properly managed. This summer sees the publication of Robin Blackburn’s remarkable “Banking on Death” (Verso) which sets out in fascinating detail not only the scandalous misapplication of savings by the corporate giants, but also pioneering attempts to “socialize” accumulation by visionaries such as the German-born Rudolf Meidner, in Sweden.

Blackburn reminds us that back in the mid-1970s Peter Drucker, philosopher of management, published The Unseen Revolution, which focussed on the growing weight of pension funds and their role in economic development.

In Drucker’s view, Blackburn writes, “pension fund collectivism offered an alternative to both state socialism and free market individualism.” For as Drucker puts it, “The pension fund movement is not ‘individualism’ a la Herbert Hoover. Pension funds are collectives. And the agents are other collectives, the large employing organizations. But they are ‘non-government’ and, in that sense, ‘private’. They offer one example of the efficacy of using private non ­government institutions of our ‘society of organizations’ for the formulation and achievement of social goals and the satisfaction of human needs.”

Needless to say, pension fund managers tend to be fixated on shareholder value (however meretricious, as with Enron and other book-fixers) with scant regard for social goals. But Drucker’s basic point remains valid.

In the coming months, amid public indignation, there may be a few modest reforms seeking to curb accounting “excesses” and kindred shenanigans. Then, when the dust settles, the foxes on Wall Street will be attacking the chicken coop again, trying to capture all the money going into Social Security.

Now’s the time to outmaneuver the foxes by taking the debate over pensions and pension fund management to a higher level, recognizing that with an aging population this is indeed one of the crucial discussions about this society’s priorities and direction in the new century.

More articles by:

Alexander Cockburn’s Guillotined! and A Colossal Wreck are available from CounterPunch.

May 24, 2018
Gary Leupp
Art of the Dealbreaker: Trump’s Cancellation of the Summit with Kim
Jeff Warner – Victor Rothman
Why the Emerging Apartheid State in Israel-Palestine is Not Sustainable
Kenn Orphan
Life, the Sea and Big Oil
James Luchte
Europe Stares Into the Abyss, Confronting the American Occupant in the Room
Richard Hardigan
Palestinians’ Great March of Return: What You Need to Know
Howard Lisnoff
So Far: Fascism Lite
Matthew Vernon Whalan
Norman Finkelstein on Bernie Sanders, Gaza, and the Mainstream Treatment
Daniel Warner
J’accuse All Baby Boomers
Alfred W. McCoy
Beyond Golden Shower Diplomacy
Jonah Raskin
Rachel Kushner, Foe of Prisons, and Her New Novel, “The Mars Room”
George Wuerthner
Myths About Wildfires, Logging and Forests
Binoy Kampmark
Tom Wolfe the Parajournalist
Dean Baker
The Marx Ratio: Not Clear Karl Would be Happy
May 23, 2018
Nick Pemberton
Maduro’s Win: A Bright Spot in Dark Times
Ben Debney
A Faustian Bargain with the Climate Crisis
Deepak Tripathi
A Bloody Hot Summer in Gaza: Parallels With Sharpeville, Soweto and Jallianwala Bagh
Josh White
Strange Recollections of Old Labour
Farhang Jahanpour
Pompeo’s Outrageous Speech on Iran
CJ Hopkins
The Simulation of Democracy
Lawrence Davidson
In Our Age of State Crimes
Dave Lindorff
The Trump White House is a Chaotic Clown Car Filled with Bozos Who Think They’re Brilliant
Russell Mokhiber
The Corporate Domination of West Virginia
Ty Salandy
The British Royal Wedding, Empire and Colonialism
Laura Flanders
Life or Death to the FCC?
Gary Leupp
Dawn of an Era of Mutual Indignation?
Katalina Khoury
The Notion of Patriarchal White Supremacy Vs. Womanhood
Nicole Rosmarino
The Grassroots Environmental Activist of the Year: Christine Canaly
Caoimhghin Ó Croidheáin
“Michael Inside:” The Prison System in Ireland 
May 22, 2018
Stanley L. Cohen
Broken Dreams and Lost Lives: Israel, Gaza and the Hamas Card
Kathy Kelly
Scourging Yemen
Andrew Levine
November’s “Revolution” Will Not Be Televised
Ted Rall
#MeToo is a Cultural Workaround to a Legal Failure
Gary Leupp
Question for Discussion: Is Russia an Adversary Nation?
Binoy Kampmark
Unsettling the Summits: John Bolton’s Libya Solution
Doug Johnson
As Andrea Horwath Surges, Undecided Voters Threaten to Upend Doug Ford’s Hopes in Canada’s Most Populated Province
Kenneth Surin
Malaysia’s Surprising Election Results
Dana Cook
Canada’s ‘Superwoman’: Margot Kidder
Dean Baker
The Trade Deficit With China: Up Sharply, for Those Who Care
John Feffer
Playing Trump for Peace How the Korean Peninsula Could Become a Bright Spot in a World Gone Mad
Peter Gelderloos
Decades in Prison for Protesting Trump?
Thomas Knapp
Yes, Virginia, There is a Deep State
Andrew Stewart
What the Providence Teachers’ Union Needs for a Win
Jimmy Centeno
Mexico’s First Presidential Debate: All against One
May 21, 2018
Ron Jacobs
Gina Haspell: She’s Certainly Qualified for the Job
Uri Avnery
The Day of Shame
FacebookTwitterGoogle+RedditEmail