Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
DOUBLE YOUR DONATION!
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. A generous donor is matching all donations of $100 or more! So please donate now to double your punch!
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.

October 22, 2018
Henry Giroux
Neoliberalism in the Age of Pedagogical Terrorism
Melvin Goodman
Washington’s Latest Cold War Maneuver: Pulling Out of the INF
David Mattson
Basket of Deplorables Revisited: Grizzly Bears at the Mercy of Wyoming
Michelle Renee Matisons
Hurricane War Zone Further Immiserates Florida Panhandle, Panama City
Tom Gill
A Storm is Brewing in Europe: Italy and Its Public Finances Are at the Center of It
Christopher Brauchli
The Liars’ Bench
Gary Leupp
Will Trump Split the World by Endorsing a Bold-Faced Lie?
Michael Howard
The New York Times’ Animal Cruelty Fetish
Alice Slater
Time Out for Nukes!
Geoff Dutton
Yes, Virginia, There are Conspiracies—I Think
Daniel Warner
Davos in the Desert: To Attend or Not, That is Not the Question
Priti Gulati Cox – Stan Cox
Mothers of Exiles: For Many, the Child-Separation Ordeal May Never End
Manuel E. Yepe
Pence v. China: Cold War 2.0 May Have Just Begun
Raouf Halaby
Of Pith Helmets and Sartorial Colonialism
Dan Carey
Aspirational Goals  
Wim Laven
Intentional or Incompetence—Voter Suppression Where We Live
Weekend Edition
October 19, 2018
Friday - Sunday
Jason Hirthler
The Pieties of the Liberal Class
Jeffrey St. Clair
A Day in My Life at CounterPunch
Paul Street
“Male Energy,” Authoritarian Whiteness and Creeping Fascism in the Age of Trump
Nick Pemberton
Reflections on Chomsky’s Voting Strategy: Why The Democratic Party Can’t Be Saved
John Davis
The Last History of the United States
Yigal Bronner
The Road to Khan al-Akhmar
Robert Hunziker
The Negan Syndrome
Andrew Levine
Democrats Ahead: Progressives Beware
Rannie Amiri
There is No “Proxy War” in Yemen
David Rosen
America’s Lost Souls: the 21st Century Lumpen-Proletariat?
Joseph Natoli
The Age of Misrepresentations
Ron Jacobs
History Is Not Kind
John Laforge
White House Radiation: Weakened Regulations Would Save Industry Billions
Ramzy Baroud
The UN ‘Sheriff’: Nikki Haley Elevated Israel, Damaged US Standing
Robert Fantina
Trump, Human Rights and the Middle East
Anthony Pahnke – Jim Goodman
NAFTA 2.0 Will Help Corporations More Than Farmers
Jill Richardson
Identity Crisis: Elizabeth Warren’s Claims Cherokee Heritage
Sam Husseini
The Most Strategic Midterm Race: Elder Challenges Hoyer
Maria Foscarinis – John Tharp
The Criminalization of Homelessness
Robert Fisk
The Story of the Armenian Legion: a Dark Tale of Anger and Revenge
Jacques R. Pauwels
Dinner With Marx in the House of the Swan
Dave Lindorff
US ‘Outrage’ over Slaying of US Residents Depends on the Nation Responsible
Ricardo Vaz
How Many Yemenis is a DC Pundit Worth?
Elliot Sperber
Build More Gardens, Phase out Cars
Chris Gilbert
In the Wake of Nepal’s Incomplete Revolution: Dispatch by a Far-Flung Bolivarian 
Muhammad Othman
Let Us Bray
Gerry Brown
Are Chinese Municipal $6 Trillion (40 Trillion Yuan) Hidden Debts Posing Titanic Risks?
Rev. William Alberts
Judge Kavanaugh’s Defenders Doth Protest Too Much
Ralph Nader
Unmasking Phony Values Campaigns by the Corporatists
FacebookTwitterGoogle+RedditEmail