The Unnanounced Class War

[Pliny]

Carter didn't start a recession (depression!?). In fact, it started during Richard Nixon's time, as the oil crisis of 1973 led to skyrocketing energy prices over the following years, and then stagflation.

He certainly didn't do anything to help. But who cares the point is that it didn't continue under Reagan.

Now here you're closer to the truth in that the latest recession can be laid squarely at George Bush's doorstep. However, it's not easy getting out of a deep recession. There aren't a lot of government policies which will help, and given the Republican wanted and continue to want the recession to continue, and did everything in their power to hinder Obama from doing anything about it, one can't really blame Obama too much.

Bush was indeed President so he will have to wear that. There are government policies that could work but when the good times are rolling no one wants to end the party. And the Democrats new found powers in Congress, where the actual

budget is determined, made for opportunity and heady times.

Obama was really hindered by his own Democrats in the Senate. He had two years of a Democrat Congress. The Republican's were sort of irrelevant until after the 2010 mid-terms. What has he presented to heal the economy besides tax the rich

and keep spending increases level? Ask the senate why they haven't passed a budget in 4 years.

Poor Obama has been really stopped cold in his tracks - and made very ineffective - is that what you are saying?

The energy crisis started during Nixon's time, actually. You can look it up. Honest. By the time Carter took power staflation was already well implaced and the country was in a recession.

Yep. Carter wasn't able to do anything either. Also very ineffective - is that what you are saying?

I wasn't referring to Reagan in the sense the screwed up the economy as that he made the first major attacks on the middle class, in doing away with unions, in cutting taxes for the wealthy, and in helping corporate American and its oligarchs take control of the country back from the people.

When did the people get it back? When they voted for Clinton? Or Obama? Remember they voted for Reagan - twice.

Surprisingly, twenty-five years after Reagan, the middle class is still around but seems to be disappearing faster than ever under Obama? Why is that? Wall Street Execs are making hundreds of millions, The Stock Market is booming.

Washington, DC is boom-town, USA right now. Yet, unemployment remains high while 40 million Americans are on food

stamps. Not boding too well for the middle class right now, I would say. But then that's just me. After 4 years of Obama I see no real signs the economy is improving nor is the world a safer place because of his great leadership.

I'm beginning to think he is a real merchant of chaos especially with his latest rants about the fallout from

sequestration which are purely "the sky is falling" fear mongering, and releasing 4000 inmates from prison into the

general public blaming sequestration. The 85 billion in cuts are just cuts to increases in spending and only 44 billion take effect the first year the rest over the next five years.

[ReeferMadness]

He certainly didn't do anything to help. But who cares the point is that it didn't continue under Reagan. Bush was indeed President so he will have to wear that. There are government policies that could work but when the good times are rolling no one wants to end the party. And the Democrats new found powers in Congress, where the actual

budget is determined, made for opportunity and heady times.

Obama was really hindered by his own Democrats in the Senate. He had two years of a Democrat Congress. The Republican's were sort of irrelevant until after the 2010 mid-terms. What has he presented to heal the economy besides tax the rich

and keep spending increases level? Ask the senate why they haven't passed a budget in 4 years.

Poor Obama has been really stopped cold in his tracks - and made very ineffective - is that what you are saying?Yep. Carter wasn't able to do anything either. Also very ineffective - is that what you are saying?When did the people get it back? When they voted for Clinton? Or Obama? Remember they voted for Reagan - twice.

Surprisingly, twenty-five years after Reagan, the middle class is still around but seems to be disappearing faster than ever under Obama? Why is that? Wall Street Execs are making hundreds of millions, The Stock Market is booming.

Washington, DC is boom-town, USA right now. Yet, unemployment remains high while 40 million Americans are on food

stamps. Not boding too well for the middle class right now, I would say. But then that's just me. After 4 years of Obama I see no real signs the economy is improving nor is the world a safer place because of his great leadership.

I'm beginning to think he is a real merchant of chaos especially with his latest rants about the fallout from

sequestration which are purely "the sky is falling" fear mongering, and releasing 4000 inmates from prison into the

general public blaming sequestration. The 85 billion in cuts are just cuts to increases in spending and only 44 billion take effect the first year the rest over the next five years.

Where to start with this????

First off, I should start by saying that presidents aren't kings (and that's by design). There is this thing called separation of power that constrains presidents from just acting unilaterally. There is a tendency to attribute everything that happens to the president. Wrongly, in my view.

Second, it would be a mistake to attribute much of anything to Reagan himself. He was a second-rate actor and a doddering fool and that was before he got Alzheimers. Reagan was a figurehead who did what his handlers wanted. Bush Junior was and is a complete fool, Cheney was the real president.

Third, the entire political spectrum has slid significantly rightward (in economic terms at least) over the past 40 years. Obama has done practically nothing to slow it, much less reverse it. The loss of the manufacturing sector to globalization, the decline of unionization, the cutting of government programs - all of these things have combined to result in the evaporation of the middle class.

[Pliny]

Where to start with this????

Take another puff!

First off, I should start by saying that presidents aren't kings (and that's by design). There is this thing called separation of power that constrains presidents from just acting unilaterally. There is a tendency to attribute everything that happens to the president. Wrongly, in my view.

You mean I no longer have to listen to "It's all Bush's fault!"

Second, it would be a mistake to attribute much of anything to Reagan himself. He was a second-rate actor and a doddering fool and that was before he got Alzheimers. Reagan was a figurehead who did what his handlers wanted. Bush Junior was and is a complete fool, Cheney was the real president.

Yeah! Let'a not attribute anything to Reagan! Or Bush!

Third, the entire political spectrum has slid significantly rightward (in economic terms at least) over the past 40 years. Obama has done practically nothing to slow it, much less reverse it. The loss of the manufacturing sector to globalization, the decline of unionization, the cutting of government programs - all of these things have combined to result in the evaporation of the middle class.

Rightward? The entire political spectrum has slid rightward? Do you mean towards bigger government? I don't think it is Obama's goal to reverse that.

Time for another puff.

[Argus]

He certainly didn't do anything to help. But who cares the point is that it didn't continue under Reagan.

Yes, massive tax cuts combined with massive defense spending will do that... temporarily. But I'm not arguing about that sort of thing anyway. What I meant was that he began to process of handing more power and wealth over to the upper classes, the oligarchs. He gave them enormous tax cuts while cracking down on unions -- which had a huge part in creating and maintaining the middle class in the United States. He also began to process that would make it easier to outsource work to other countries.

Surprisingly, twenty-five years after Reagan, the middle class is still around but seems to be disappearing faster than ever under Obama? Why is that? Wall Street Execs are making hundreds of millions, The Stock Market is booming.

The middle class took a huge hammering under Bush. The tax code was made even more friendly to the wealthy, and to corporations, unions were further punished and stripped of powers, and then came that massive bail-out of financial institutions to prevent a financial collapse. You think that's something that can be fixed within a year or two? Especially with a congress which would rather kill off their own mothers than see Obama succeed in improving the economy?

As I've stated before, the Republican leadership has virtually no interest in the welfare of American citizens. It's members, by and large, could not possibly care less what happens to the people they ostensibly represent. They work for their corporate masters who fund their campaigns, and who have all-but promised them multi-million dollar jobs after office so long as they do as they're told.

[ReeferMadness]

Take another puff!

My handle is based on the movie of the same name and the lies that fascist elements of governments tell citizenry; not so much on the drug itself. When people start to make fun of it, I know they've run out of intelligent things to say. In your case, it didn't take long.

You mean I no longer have to listen to "It's all Bush's fault!"Yeah!

I don't know (or care) to what you have to listen.

Let'a not attribute anything to Reagan! Or Bush!

It wouldn't really be fair to hold them accountable for the damage their administrations wrought. I suspect they only had a vague understanding of the bills they signed into law and the decisions they claimed to have made. An over-the-hill, crappy actor (whose dementia had started well before he left office) and a pampered rich boy who constantly mangled the lines his handlers wrote. They would have made a lovely pair.

That this mentally challenged pair could get elected just speaks to just how deeply large swaths of the American public distrust intellectualism.

Rightward? The entire political spectrum has slid rightward? Do you mean towards bigger government? I don't think it is Obama's goal to reverse that.

If by bigger government you mean more military spending and corporate handouts, I agree.

[ReeferMadness]

Yes, massive tax cuts combined with massive defense spending will do that... temporarily. But I'm not arguing about that sort of thing anyway. What I meant was that he began to process of handing more power and wealth over to the upper classes, the oligarchs. He gave them enormous tax cuts while cracking down on unions -- which had a huge part in creating and maintaining the middle class in the United States. He also began to process that would make it easier to outsource work to other countries.

The middle class took a huge hammering under Bush. The tax code was made even more friendly to the wealthy, and to corporations, unions were further punished and stripped of powers, and then came that massive bail-out of financial institutions to prevent a financial collapse. You think that's something that can be fixed within a year or two? Especially with a congress which would rather kill off their own mothers than see Obama succeed in improving the economy?

As I've stated before, the Republican leadership has virtually no interest in the welfare of American citizens. It's members, by and large, could not possibly care less what happens to the people they ostensibly represent. They work for their corporate masters who fund their campaigns, and who have all-but promised them multi-million dollar jobs after office so long as they do as they're told.

In fairness, the Democrats have not much more interest in the welfare of American citizens. The billion or so dollars that it takes to get elected ensures that anyone who seriously intends on tipping the rich-poor balance will never get close to holding power.

[kimmy]

Laugh as you may. They were contributors and not about to demand an end to the easy money ride.Fractional reserve banking works just fine for bankers and the elite. It isn't so good for the rest of us.

It works fine.

Firstly kimmy, can a housing bubble be created by low interest rates? Ask Paul Krugman who in 2002 was calling for another bubble and suggested the fed should start a housing bubble by lowering interest rates. Greenspan gladly did so. The real cause of the bubble is in fact the Federal Reserve.

If the the Federal Reserve or fractional reserve banking caused the housing bubble, how come it happened in the 2000s and not 100 years earlier?

Secondly, with lower interest rates many more people with lower incomes can qualify for a mortgage. The "irrational exuberance" followed that when investments in housing were realizing excess profits. The result was an increase in already malinvested development. Anyone who could fog a mirror could have made some money.

On the first day of economics class, they show you a graph with a great big "X" in the middle. It's the most fundamental principle of a market system, and the banks messed with that graph by lending to everybody without regard for whether they could actually pay it back.

Paint it whatever way you like. Fannie and Freddie are not mortgage issuers they purchase mortgages from mortgage issuers. They buy "conforming mortgages".

http://www.mtgprofessor.com/a - secondary markets/what_do_fannie_and_freddie_do.htm

I don't know who told you they issued sub-prime mortgages but I would cross him off my list of advisors.

Yes, Fannie and Freddie are not primary issuers of mortgages, they buy mortgages from primary issuers and "securitize" them. Big deal. The point still stands. They don't buy mortgages sight-unseen, and they had higher standards for what they bought than their private-label counterparts did.

Even so, the default rates on GSE mortgages were far lower than on those bought and issued in the private market. In 2004, the GSE default rate was 4.3 percent of their mortgages compared to a default rate in private industry of 15.1 percent of mortgages. In 2005, the GSE default rate was 7.8 percent—high and disturbing; but in private industry it was 28.7 percent, the source of the severe crisis. In 2006 and 2007, default rates reached 13.2 and 14.9 percent in the GSEs and 45.1 and 42.3 percent in the private market.

Source

So why did the GSEs have such a dramatically lower default rate than the PLSs?

Of course wars existed, how do you arrive at the fact that I said they didn't exist? It is a matter of how they are paid for. You will notice with fractional reserve banking in full force and the establishment of central banking that wars are more common place than they used to be. Pretty much every decade since the federal reserve was created there has been a war, from WWI to the present War in Afghanistan never mind the Cold War and in between wars there has been recessions and depressions. That might lead one to conclude that war is necessary to our prosperity and some have made that conclusion but it isn't true.

Wars are more common since the advent of modern banking, therefore modern banking causes wars? Seems about as logical as saying wars are more common since the invention of electricity; electricity causes wars; ban electricity.

It also seems like an anecdotal analysis, not one based on real information. The current "War in Afghanistan" really only qualified as a "war" in the historical sense for a few years (or less, perhaps); if the ongoing NATO presence in Afghanistan qualifies as a war, then European powers, particularly England and France, were at war continuously from the dark ages right up to the first half of the 20th century. Maybe it just seems like we're at war more often to you. There was a "cold war" between the USA and the USSR from the 1950s to the 1990s? Couldn't one equally say that there was a cold war between between England and France from the 1500s to the 1900s?

Is war necessary to our prosperity? I don't think so. It does seem that continually increasing consumption is necessary to our prosperity, and a war consumes more than just about anything else.

-k

[Pliny]

Yes, massive tax cuts combined with massive defense spending will do that... temporarily. But I'm not arguing about that sort of thing anyway. What I meant was that he began to process of handing more power and wealth over to the upper classes, the oligarchs. He gave them enormous tax cuts while cracking down on unions -- which had a huge part in creating and maintaining the middle class in the United States. He also began to process that would make it easier to outsource work to other countries.

Outsourcing work to other countries...let's see....uh isn't that like sharing the wealth. I know Unions especially don't like that.

I could complain about Obama trying to give too much power to the Unions but this tit for tat won't really get us

anywhere because it is a red herring. The system is designed to keep power out of the hands of the people. Unions don't really represent the people or the middle class. They lobby government the same as corporations for their share in

power. It can swing either way and that's the pity. Does corporate or labour hlep the nation the most? The truth is they are symbiotic so is government just playing them?

The middle class took a huge hammering under Bush. The tax code was made even more friendly to the wealthy, and to corporations, unions were further punished and stripped of powers, and then came that massive bail-out of financial institutions to prevent a financial collapse. You think that's something that can be fixed within a year or two? Especially with a congress which would rather kill off their own mothers than see Obama succeed in improving the economy?

Bush cut taxes. So what. What happened was the Fed created a bubble that burst.

As I've stated before, the Republican leadership has virtually no interest in the welfare of American citizens. It's members, by and large, could not possibly care less what happens to the people they ostensibly represent. They work for their corporate masters who fund their campaigns, and who have all-but promised them multi-million dollar jobs after office so long as they do as they're told.

Perhaps there are some Republicans like that just as there are Democrats that couldn't care less what happens to the

people they represent. But why call a movement for limited government "extremist"?

[Pliny]

My handle is based on the movie of the same name and the lies that fascist elements of governments tell citizenry; not so much on the drug itself. When people start to make fun of it, I know they've run out of intelligent things to say. In your case, it didn't take long.

But a little on the drug itself.

It wouldn't really be fair to hold them accountable for the damage their administrations wrought. I suspect they only had a vague understanding of the bills they signed into law and the decisions they claimed to have made. An over-the-hill, crappy actor (whose dementia had started well before he left office) and a pampered rich boy who constantly mangled the lines his handlers wrote. They would have made a lovely pair.

That this mentally challenged pair could get elected just speaks to just how deeply large swaths of the American public distrust intellectualism.

Intellectualism tends to be quite arrogant at times.

If by bigger government you mean more military spending and corporate handouts, I agree.

That's what I mean so we do agree. I am not a conservative politically. I find myself on the right side of the spectrum by default. I am not an advocate for big government left or right.

[Pliny]

In fairness, the Democrats have not much more interest in the welfare of American citizens. The billion or so dollars that it takes to get elected ensures that anyone who seriously intends on tipping the rich-poor balance will never get close to holding power.

The motion is a progressive centralization of power.

[Pliny]

Hey kimmy, What's with the Commando avatar?

Are you a left wing revolutionary or right wing fascist? It's hard to tell the difference since either way the people end up in a totalitarian state.

I had to write another post or I can't answer your post. So it seems. The thread column isn't long enough to take it, I am guessing. I may have to wait until a new column starts.

[Pliny]

It works fine.

Many bankers agree.

If the the Federal Reserve or fractional reserve banking caused the housing bubble, how come it happened in the 2000s and not 100 years earlier?

There was the Y2K bubble. There was the S & L bubble. There was the 1929 bubble. There were lots of bubbles and just as many busts.

On the first day of economics class, they show you a graph with a great big "X" in the middle. It's the most fundamental principle of a market system, and the banks messed with that graph by lending to everybody without regard for whether they could actually pay it back.

The question is why? And if your answer is greed. Then what was the opportunity for greed. Relaxed regulations? If so

who relaxed them and why?

Yes, Fannie and Freddie are not primary issuers of mortgages, they buy mortgages from primary issuers and "securitize" them. Big deal. The point still stands. They don't buy mortgages sight-unseen, and they had higher standards for what they bought than their private-label counterparts did.

Source

So why did the GSEs have such a dramatically lower default rate than the PLSs?

Did they need a bailout? If not then I fold my position.

Wars are more common since the advent of modern banking, therefore modern banking causes wars? Seems about as logical as saying wars are more common since the invention of electricity; electricity causes wars; ban electricity.

Modern banking facilitates war. Anyone that can create money out of nothing can pay for whatever they want.

It also seems like an anecdotal analysis, not one based on real information. The current "War in Afghanistan" really only qualified as a "war" in the historical sense for a few years (or less, perhaps); if the ongoing NATO presence in Afghanistan qualifies as a war, then European powers, particularly England and France, were at war continuously from the dark ages right up to the first half of the 20th century. Maybe it just seems like we're at war more often to you. There was a "cold war" between the USA and the USSR from the 1950s to the 1990s? Couldn't one equally say that there was a cold war between between England and France from the 1500s to the 1900s?

Colonization and Imperialism were more the cause of war prior to 1900. Monarchs had to spend a lot of their own money or borrow from the bankers to do this. Democracies with central banks meant governments could borrow against future production of the citizens.

Is war necessary to our prosperity? I don't think so.

I'll agree with that.

It does seem that continually increasing consumption is necessary to our prosperity, and a war consumes more than just about anything else.

-k

Continually increasing our production is necessary to our prosperity, without that production there is little to

consume.

Consumption is necessary to the prosperity of government, they will consume more than just about anything else, war

being simply a part of their consumption.

[kimmy]

There is another interesting lawsuit going on right now involving Goldman Sachs. It's interesting because it shows that the bankers weren't just ripping off "the little guy", they were also ripping off John Galt. You know, the hallowed hero of American idealism, the guy who goes out and builds a company with his bare hands and ingenuity to create jobs and create prosperity with his entrepreneurial spirit? Yeah, Goldman Sachs is in court right now because they ripped off that guy too.

Here's how it goes:

A company is ready to go public and sell shares. They are selling a portion of their company, in exchange for operating capital to expand, as well as a chance for the founders to reap some equity for the work and investment they've put into building the company to this point. It's called an IPO. They hire a company-- Goldman Sachs in this instance-- to manage the IPO, in exchange for a 7% commission. And obviously, if Goldman Sachs helps the founders of the company get the most out of their IPO, then Goldman Sachs profits too.

So far so good. Win-win for everybody, right? Well, not so fast.

In the lawsuit in question, the founders of an online retailer called "eToys" allege that Goldman Sachs deliberately screwed them out of hundreds of millions of dollars in their IPO, and documents obtained from Goldman Sachs back them up. Goldman Sachs privately believed that the shares would be trading at $80 by the end of the first day... but they priced the shares at just $20. The IPO raised $164 million for eToys... but the shares they sold were worth over $630 million by the end of the day! The shares immediately shot up in price from $20 to $77, as Goldman Sachs believed they would.

By deliberately underpricing the shares, Goldman Sachs cost the founders of eToys $470 million. Even if they'd priced them at just half of what they expected them to trade for, eToys would have had an extra $160 million dollars. And Goldman Sachs' share of that $160 million would have been $11 million. Why would Goldman Sachs deliberately miss out on $11 million or more?

That's where the story gets really interesting. Why deliberately underprice the shares so badly? The answer to that lies in who had the dibs on these underpriced shares: friends and clients of Goldman Sach were allocated most of the shares that hit the market. Goldman Sachs calls up their friends, says "we've got a hot IPO about to hit the market, you want in?" These friends buy up big blocks of shares, then sell them later the same day at a massive profit. And then they repaid Goldman Sachs through commissions. One person has testified that "70 percent of his trading activity in May 1999 was done to generate commissions for Goldman, pursuant to an understanding with his Goldman broker that he needed to generate money for Goldman in order to receive I.P.O.s. " In other words, they understood that they had to give kickbacks to Goldman Sachs if they wanted to be allocated shares in the next IPO.

It's a scheme that sounds like something Quebec mayors and construction contractors would hatch. Or Chretien staffers and Quebec ad agencies.

The guys who founded eToys made $164 million dollars for 2 years of work that they'd put in. Which is pretty good. But the friends of Goldman Sachs made $470 million for one day of flipping shares. Which is utterly absurd. The documents recovered from Goldman Sachs indicate that they felt that they should receive about 50% of that to be returned to them in the form of kickbacks.

So assuming that 50% figure, here's how it breaks down:

$164 million for the guys who built the company.

$235 profits for the guys who were sold underpriced shares by Goldman Sachs, then immediately flipped them at 4x the price they paide for them.

$235 million worth of kickbacks for Goldman Sachs.

Goldman Sachs' defense in this lawsuit is not that they didn't do this. Their defense is simply that none of this was actually against the law. They argue that they had no "fiduciary duty" to eToys to maximize the return from their IPO. They feel that eToys might have hired them to run the IPO, but eToys had no right to expect Goldman Sachs to act in the best interest of eToys.

This might just be one case, but it's the one case that's in court right now. There's no reason to assume that Goldman Sachs handled other IPOs any differently. Indeed, the same documents indicate that they felt entitled to receive "secondary business" in exchange for letting big clients in on hot IPOs, and that they felt that IPOs were "a currency" that they could use to please valued clients and acquire new customers. In short, this case might be about eToys, but there is plenty of reason to assume that Goldman Sachs (and probably their competitors as well) exploited other IPOs in the same way.

The story:

http://www.nytimes.com/2013/03/10/opinion/sunday/nocera-rigging-the-ipo-game.html?pagewanted=all

The documents:

http://www.nytimes.com/interactive/2013/03/10/opinion/sunday/nocera-goldman-sachs-etoys.html?_r=0

Lots more available from Google, as always.

-k

[TimG]

By deliberately underpricing the shares, Goldman Sachs cost the founders of eToys $470 million. Even if they'd priced them at just half of what they expected them to trade for, eToys would have had an extra $160 million dollars.

Except there is no way a me-too online retailer was really worth even $100 million (never mind $630 million) if it was not for the hype generated by brokers by Goldman looking to pad the bottom line of the richest clients by convincing masses of retail investors to buy into a Ponzi scheme.

IOW - the eToys founders are really partners in crime rather than victims.

These kinds of practices are actually the norm for the industry and it is not limited to the big brokers. If you deal with a stock broker that tells you there is a hot opportunity you should assume that the friends and big clients are already fully invested and the broker is only looking for suckers to unload the shares.

Edited March 17, 2013 by TimG

[Argus]

Except there is no way a me-too online retailer was really worth even $100 million (never mind $630 million) if it was not for the hype generated by brokers by Goldman

These kinds of practices are actually the norm for the industry and it is not limited to the big brokers. If you deal with a stock broker that tells you there is a hot opportunity you should assume that the friends and big clients are already fully invested and the broker is only looking for suckers to unload the shares.

So what you're saying is that Goldman Sachs are basically criminal scum, and so is the rest of the brokerage industry?

[Shady]

So what you're saying is that Goldman Sachs are basically criminal scum, and so is the rest of the brokerage industry?

And certain levels of government too.

http://www.sec.gov/news/press/2013/2013-37.htm

[Shady]

Sach's wishes they had Ponzi schemes as profound as public pension plans, Medicare, and social security.

[kimmy]

Except there is no way a me-too online retailer was really worth even $100 million (never mind $630 million) if it was not for the hype generated by brokers by Goldman looking to pad the bottom line of the richest clients by convincing masses of retail investors to buy into a Ponzi scheme.

IOW - the eToys founders are really partners in crime rather than victims.

These kinds of practices are actually the norm for the industry and it is not limited to the big brokers. If you deal with a stock broker that tells you there is a hot opportunity you should assume that the friends and big clients are already fully invested and the broker is only looking for suckers to unload the shares.

The fact that Dot-Com shares were over-rated in the late 1990s doesn't have any bearing on the case. Whether the eToys shares should have been trading for $77 at the end of the first day on the market is irrelevant, the fact is, they were. Buyers thought they were worth that much. Trying to excuse Goldman-Sachs' ethics based on hindsight information about the eventual fate of eToys is a no go.

If GS had set the price at $20 and bought most of the shares themselves, it would be an obvious conflict of interest. No way on earth the client-- eToys-- would have agreed to that arrangement. Setting an artificially low price for the shares, selling to collaborators who are in on the scam, and being repaid in the form of kickbacks, clearly just boils down to a con-game to abuse a position of trust while avoiding the appearance of conflict of interest. That's really all there is to it.

They exploited a position of trust as an opportunity to line their own pockets and reward their cronies, and their internal correspondence indicates they believed they were entitled to do so.

And certain levels of government too.

http://www.sec.gov/news/press/2013/2013-37.htm

"Uh-oh! Somebody is saying something bad about Muslims bankers! Better change the topic by posting something negative about Israel government programs!"

The Naomi Glover Gambit returns.

-k

[Argus]

Another big way in which, as Business Insider puts it, Wall Street screws Main Street, involve investments. Middle class Americans (and Canadians) who don't have gold plated pension plans, and that's most, need to invest savings in some sort of retirement plan. Now big business through their bought and paid for spokespersons in media and government have been very active the last some years in trying to persuade people that they're better off managing their own retirements, that government and company pension plans are wrong, and that instead, people should have the "right" to take care of their own money. We've seen people parroting that view here before, as well.

Why is big business, why is corporate America, and to a slightly lesser degree corporate Canada, intent on giving people such 'freedom'? Why, first, because it absolves the corporation of financial liability or responsibility for pensions. Second, of course, because then they can screw them! Wall Street and Bay Street both know the vast majority of people have neither the time, inclination or ability to really understand how investments and money work. Thus they have to trust "the professionals" to do that for them. And Wall/Bay street are happy to oblige, for a huge, fat, usually well-hidden fee, of course.

As Business Insider points out in its writeup on a recent PBS Frontline episode, Americans lacking a company pension plan have to resort to much more risky equity investments, and have to trust Wall Street to manage them. That gives Wall Street the opportunity to take almost a third of that money for themselves. Of course, the big difference in Canada is that mutual fund fees and investment commissions are MUCH higher than in the US, so Canadians get screwed even worse by Bay Street than Americans do by Wall Street. The end result is that unlike pension funds, which are carefully managed by experts, the majority of those who have to take care of their own investments get taken to the cleaners by the slick shysters of big business.

CBC pointing out some of the high fees Canadians pay.

"Every year, a certain per cent comes off it. And over 20, 30 years what people don't realize that what sounds like 2½ per cent really can reduce the amount you're going to get by half."

http://www.cbc.ca/news/canada/saskatchewan/story/2013/02/28/sk-mutual-fund-fees-1302.html

Business Insider has a nice, straight writeup on it

http://www.businessinsider.com/the-retirement-gamble-pbs-frontline-exposes-how-wall-street-screws-main-street-2013-5

This is a simple Frontline chart showing the scheme. There's a link at the top if you want to watch the show.

http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/retirement-gamble/how-retirement-fees-cost-you/

Edited May 5, 2013 by Argus

[bush_cheney2004]

Of course, the big difference in Canada is that mutual fund fees and investment commissions are MUCH higher than in the US, so Canadians get screwed even worse by Bay Street than Americans do by Wall Street. The end result is that unlike pension funds, which are carefully managed by experts, the majority of those who have to take care of their own investments get taken to the cleaners by the slick shysters of big business.

Too bad....millions of Americans have self managed retirement accounts that provide very favourable tax treatment. Americans don't know and don't care what happens to Canadian pensions or "Bay Street". Lots of things cost more in Canada.

Edited May 5, 2013 by bush_cheney2004

[TimG]

The end result is that unlike pension funds, which are carefully managed by experts

ROTFL. Pension funds are largely restricted to government bonds. It does not take a lot of work. On top of that there is no pressure to meet investment goals because if they fall short the company or taxpayer will make up the difference. People saving for their own retirement don't have a sugar daddy to look after them if they make bad choices.

I also find it ironic that you make an artificial distinction between pension fund managers and 'Wall Street' mutual fund managers. They are drawn from exactly the same group of people. If you distrust mutual fund providers you should distrust pension fund managers.

[Argus]

Too bad....millions of Americans have self managed retirement accounts that provide very favourable tax treatment. Americans don't know and don't care what happens to Canadian pensions or "Bay Street". Lots of things cost more in Canada.

Canadians have RRSPs too. Taxes are not the point. The point is Americans are getting screwed by Wall Street, losing a third of their potential pensions to high fees, and for the most part, don't even know it.

[bush_cheney2004]

Canadians have RRSPs too. Taxes are not the point. The point is Americans are getting screwed by Wall Street, losing a third of their potential pensions to high fees, and for the most part, don't even know it.

No problema....as they apparently have vigilant souls in Canada to worry about it for them. Nobody is getting "screwed" as long as they manage their accounts in a responsible way. Enron employees weren't whining when their stock value had increased ten fold.

For many Americans, taxes are the point.

[Argus]

ROTFL. Pension funds are largely restricted to government bonds. It does not take a lot of work. On top of that there is no pressure to meet investment goals because if they fall short the company or taxpayer will make up the difference.

Tim, really, just stop. You're embarrassing yourself. You clearly haven't a clue how major pension funds are run in this country.

Btw, the federal public servants pension plan was run so well the government scooped $28 billion out of it to pay down the debt.

People saving for their own retirement don't have a sugar daddy to look after them if they make bad choices.

Bad choices? As I said, very few people are able to really understand how investments work. Very few. I've been doing well managing my own investment, but I know damn well how little I know compared to insiders. I steer clear of anything but straightforward long-term investments. Your dismissing blue collar workers with high school educations for not doing a multi-year cost analyses on mutual fund fees is just cold hearted "I'm all right jack" sentiment.

I also find it ironic that you make an artificial distinction between pension fund managers and 'Wall Street' mutual fund managers. They are drawn from exactly the same group of people. If you distrust mutual fund providers you should distrust pension fund managers.

Except there's the question of what their goals and incentives are. Wall/Bay street provide a wide variety of investment options to a largely credulous and unknowing public, and stick on high fees most people don't know about or understand. Private investment dealers try to steer people into the investments which will earn the dealer the highest profit, often without regard to what is the best fit for the poor client.

That doesn't happen with pension funds. They're managed by people on salary, and those people don't get a percentage cut of the client's money, and have no personal interest in trying to entice them into any particular type of investment because everyone is in the same fund.

Edited May 5, 2013 by Argus

[TimG]

the federal public servants pension plan was run so well the government scooped $28 billion out of it to pay down the debt.

Almost every pension fund was running a surplus in the 90s. It is no measure of the competence of the managers. Companies/governments took the surpluses because they are legally entitled to them since they are responsible for deficits.