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| Wall Street and their brokers want our social security accounts. What could go wrong? |
In "Retirement Scams, Straight From Wall Street (Part I)" I discussed Wall Street's penchant for putting their interests above their clients. I wrote the post not just to "let the clients beware" of how their accounts are used by others. I wrote about Wall Street scamming clients because we are being told - once again - that Wall Street is the best place for your money since, you know, market players are rational and know what they're doing.
Never mind that Wall Street has been rescued so often since the 1980s that it's hard (for me, at least) to keep a straight face when anyone discusses the discipline and magic of the market today.
Never mind that Wall Street has been the beneficiary of so much artificially cheap money from the Federal Reserve that the once mocking reference to the "Greenspan Put" has been replaced with a confused sounding "Quantitative Easing" so ordinary Americans never catch on to the financial welfare.
Never mind that after a string of market bailouts that Wall Street still needed the Mother of All Bailouts, which included an infusion of well over $4 trillion after 2008 - plus additional guarantees of $14 trillion - for their market bets.
So, yeah, don't pay attention to the financial wizard behind the curtains.
With neither history nor market fundamentals on their side, one has to wonder why we're being asked to trust Wall Street one more time.
The reason why is built on a retirement scam for the ages, straight from Wall Street.
THE SMOKE & MIRRORS BEHIND PRIVATIZATION
The suggestion that market players know what they're doing is part of a larger strategy designed to transfer money in the social security trust fund over to Wall Street. To do this the Republicans need to talk about protecting social security. The problem is there's nothing wrong with social security. The reality is "protecting social security" is a deliberate scare tactic, and a GOP Trojan Horse.
The GOP needs you and me to believe that social security is going broke. It's the only way they can propose their solution, which is to "privatize" the program. Don't be confused by the pitch. In real simple terms privatization is another way of saying let's transfer your social security account over to Wall Street.
The problem with this plan is that - with the exception of Paul Ryan a few years back - no one in the GOP is saying, "Let's hand over the trillions we have in the social security accounts to Wall Street." That would be political suicide. Even Donald Trump isn't crazy enough to say it (then again, who knows about tomorrow).
So it's all smoke & mirrors for the GOP, and begins with the scary sounding plan to protect social security since it's going broke.
THE SMOKE ...
Here's the problem with the GOP plan. It's based on a lie. Actually, it's based on many lies. I'll discuss just two here.
Lie #1: Social security is going broke.
I've written and spoken about this lie so often it's just easier for me to list several op-eds and other social security posts for you to review.
"The 'Social Security Is Going Bankrupt' Lie" (Bakersfield Californian, 12-17-12).
"The Stock Market vs. Social Security" Part I (Which Pays More?), Part II (Worse Case Scenarios), and Part III (Privatization ... A Bailout in Perpetuity).
"No 'Crisis' in Social Security: National Leadership in 'Crisis' as it Attempts to Dupe America" (Bakersfield Californian, 3-27-05)Not only is the social security program good, but our nation owes the "trust fund" trillions of dollars. Why do we owe it trillions? Because the program is self funding, and has generated such a large surplus that successive presidents - both Republican and Democrats - have raided the surpluses to run the country.
There's more. Much more. So let me repeat. Social security is not going broke. The only "protecting" it needs is from the financial sycophants in Congress who want to hand social security over to Wall Street.
This brings us to our second lie.
Lie #2: We can rescue and protect social security by letting private market players - and especially those on Wall Street - manage "private" social security accounts.
Incredibly, we've done something like this before. Let's take a look.
Incredibly, we've done something like this before. Let's take a look.
THE MIRRORS ... WE'VE 'PRIVATIZED' BEFORE
In 2009 I wrote about Bush administration appointee Charles E.F. Millard. He was put in charge of the Private Benefit Guaranty Corporation (PBGC), the federal agency that manages the retirement fund of 44 million retirees.
The PBGC is a government managed pension program that has absorbed retirement plans from collapsed industries and bankrupt companies. The goal of the PBGC is to make sure people who worked and paid into company sponsored retirement accounts get what they paid for, even if the company or industry went bankrupt or no longer exists.
Here's where it gets fun.
For years the PBGC embraced a very conservative market strategy. They didn't go after "can't lose" or high paying "double your money" derivative markets. They played it safe and purchased boring but stable products, like government bonds.
Then Charles E.F. Millard - who came from the financial sector - was appointed as head of the PBGC. Then he had a market epiphany.
Months before the market crashed in 2008 Millard put almost all of the PBGC's very stable $64 billion account into the market. He wanted to grow the fund, as it were.
In effect Millard was "privatizing" the PBGC's portfolio by turning it over to Wall Street. A once stable and protected multi-billion dollar portfolio account was sent to a place where market players could bet on the stock market and emerging market accounts.
Then the market collapsed. Oops.
Millard would later say that he can't be criticized for making such an ill-timed and famously bad decision because we don't know how the markets will look in the future.
Yeah, and that lemon of an automobile the used car dealer sold you actually works, as long as you let it coast down hill.
CONCLUDING COMMENTS
With investors losing 5-10 percent of their long-term savings due to "conflicted" advice from brokers and wealth managers, we know that at least $17 billion from private 401k accounts gets transferred to brokers. And it's all legal. This alone should give pause to any privatization talk.
For those of you pointing to our soaring stock market, suggesting that private accounts would be soaring too - so none of this matters - I have one thing to say: Get a life.
Wall Street's doing fine because we dumped over $4 trillion into the market in the Mother of All Bailouts, and have committed another $14 trillion. The financial magic we're seeing on Wall Street has nothing to do with market fundamentals, and everything to do with taxpayer backed bailouts, and "magically" appearing Federal Reserve credits and guarantees for market players.
By now you're probably wondering, "So if history and market fundamentals aren't on Wall Streets side, why should we dump our social security funds into Wall Street accounts?".
The answer is really simple. We shouldn't. The proposal is a scam.
Creating private social security accounts - or privatizing social security - guarantees that trillions of dollars will be dumped into the market, in perpetuity. It's designed to insure that the bailout gravy train for Wall Street that started in 2008 continues.
So, yeah, privatizing social security is a Trojan Horse. Worse, it's a retirement scam straight from Wall Street.
- Mark
The PBGC is a government managed pension program that has absorbed retirement plans from collapsed industries and bankrupt companies. The goal of the PBGC is to make sure people who worked and paid into company sponsored retirement accounts get what they paid for, even if the company or industry went bankrupt or no longer exists.
Here's where it gets fun.
For years the PBGC embraced a very conservative market strategy. They didn't go after "can't lose" or high paying "double your money" derivative markets. They played it safe and purchased boring but stable products, like government bonds.
Then Charles E.F. Millard - who came from the financial sector - was appointed as head of the PBGC. Then he had a market epiphany.
Months before the market crashed in 2008 Millard put almost all of the PBGC's very stable $64 billion account into the market. He wanted to grow the fund, as it were.
In effect Millard was "privatizing" the PBGC's portfolio by turning it over to Wall Street. A once stable and protected multi-billion dollar portfolio account was sent to a place where market players could bet on the stock market and emerging market accounts.
Then the market collapsed. Oops.
Millard would later say that he can't be criticized for making such an ill-timed and famously bad decision because we don't know how the markets will look in the future.
Yeah, and that lemon of an automobile the used car dealer sold you actually works, as long as you let it coast down hill.
CONCLUDING COMMENTS
With investors losing 5-10 percent of their long-term savings due to "conflicted" advice from brokers and wealth managers, we know that at least $17 billion from private 401k accounts gets transferred to brokers. And it's all legal. This alone should give pause to any privatization talk.
For those of you pointing to our soaring stock market, suggesting that private accounts would be soaring too - so none of this matters - I have one thing to say: Get a life.
Wall Street's doing fine because we dumped over $4 trillion into the market in the Mother of All Bailouts, and have committed another $14 trillion. The financial magic we're seeing on Wall Street has nothing to do with market fundamentals, and everything to do with taxpayer backed bailouts, and "magically" appearing Federal Reserve credits and guarantees for market players.
By now you're probably wondering, "So if history and market fundamentals aren't on Wall Streets side, why should we dump our social security funds into Wall Street accounts?".
The answer is really simple. We shouldn't. The proposal is a scam.
Creating private social security accounts - or privatizing social security - guarantees that trillions of dollars will be dumped into the market, in perpetuity. It's designed to insure that the bailout gravy train for Wall Street that started in 2008 continues.
Best of all, with the federal government insuring that the "rents" are collected Wall Street doesn't have to worry about the peasants doing something irrational, like stopping payments when market players screw things up again (and they will).
So, yeah, privatizing social security is a Trojan Horse. Worse, it's a retirement scam straight from Wall Street.
- Mark
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