Will Wall Street's Fleecing of Main Street Citizens Never Cease?

Matt Taibbi

I am growing weary of the ways that Wall Street manufactures wealth and "growth" from thin air,
providing no real public good, but rather re-routing cash flow to elite bankers while engaging in voodoo economics.  The latest incarnation of Wall Street's duplicity and fleecing of Main Street workers is through the recent nationwide trend of moving pension fund deposits into the hands of hedge fund financiers, all the while casting dispersions on workers and pension funds as the "cause" of crisis-like budget conditions in states the nation over.

Matt Taibbi, in his latest exposé, describes the looting of pension funds across the country by Wall Street bankers and hedge fund executives providing no real value, but collecting hundreds of millions of dollars in fees.  In "Looting the Pension Funds," Taibbi describes that astonishing audacity of Wall Street in refusing to accept any blame for the financial crisis of 2008 as the leading reason that state's across the country have been plunged into budget crises, and instead fingering pension fund existence and funding as the reason for state shortfalls while lobbying states to turn the investment dollars in pension funds over to Wall Street, through hedge fund investment and the collection of billions of dollars of fees, simultaneously exposing pension funds to the inordinate risk associated with hedge funds, rarely the type of risk that pension funds should assume.

Per Taibbi:  "This is the third act in an improbable triple-f***ing of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios - remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.  

Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn't just about money. Crucially, in ways invisible to most Americans, it's also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops - not bankers - as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities.

Not only did these middle-class workers already lose huge chunks of retirement money to huckster financiers in the crash, and not only are they now being asked to take the long-term hit for those years of greed and speculative excess, but in many cases they're also being forced to sit by and watch helplessly as Gordon Gekko wanna-be's like Loeb or scorched-earth takeover artists like Bain Capital are put in charge of their retirement savings. 

It's a scam of almost unmatchable balls and cruelty, accomplished with the aid of some singularly spineless politicians. And it hasn't happened overnight. This has been in the works for decades, and the fighting has been dirty all the way."

And why select hedge funds to oversee investment of pension fund deposits?  Surely it cannot be about performance.  Again, from Taibbi:  "On Wall Street, people are beginning to clue in to the fact - spikes notwithstanding - that over time, hedge funds basically suck. In 2008, Warren Buffett famously placed a million-dollar bet with the heads of a New York hedge fund called Protégé Partners that the S&P 500 index fund - a neutral bet on the entire stock market, in other words - would outperform a portfolio of five hedge funds hand-picked by the geniuses at Protégé.  

Five years later, Buffett's zero-effort, pin-the-tail-on-the-stock-market portfolio is up 8.69 percent total. Protégé's numbers are comical in comparison; all those superminds came up with a 0.13 percent increase over five long years, meaning Buffett is beating the hedgies by nearly nine points without lifting a finger."

Can it be that the only real reason that pension deposits are being redirected to hedge funds and Wall Street, is so that Wall Street cronies can bilk investors out of millions of dollars of fees while cozying up to the politicians that direct the pension investments their way?  Seems so.

The Business of Human Rights: Moving Forward, Looking Back

Professor Jena Martin

A cutting edge conference hosted by Professor Jena Martin entitled "The Business of Human Rights: Moving Forward, Looking Back" is being held at the West Virginia University College of Law on September 23-24, 2013.  The conference features Bill Richardson, former U.S. Ambassador to the United Nations, as a keynote speaker.  The symposium also includes a variety of interesting panels, presentations and workshop sessions aimed at examining the role that multinational corporations play in global human rights.  The two-day symposium "will examine the United Nations’ recent work on business and human rights issues, an area that has grown substantially in the last ten years. Highlights of the subject’s growth include the United Nations’ establishment of a Working Group on Business and Human Rights and its adoption of the Guiding Principles for business and human rights. Participants will use these two major events as a focal point for discussing the roles that corporations, civil society, and states can all play in advancing the cause of human rights."

Bill Richardson

Day one focuses on a "Practicum on Human Rights and Risk Management" facilitated by Roger Branigin, the Executive Director of the Global Corporate Community of Practice for Business and Human Rights.  Day two features a "Symposium Exploring Some Themes for Business and Human Rights, featuring academics and corporate representatives from across the United States and around the world.

The conference agenda can be viewed here.

The live webcast can be viewed here.

Is the Current American Economy and Recovery a House of Cards?

According to Sanjay Sanghoee the current American economic recovery is deeply flawed and unsustainable.  Emerging evidence indicates that while the mortgage crisis of 2008 wiped out nearly 40% of wealth in the United States, nearly all of the economic recovery since that time has been reaped by the top 1% (fully 95% of the recovery gains have gone to the most wealthy Americans).  Inequality is growing and at it worst rate since the 1920s. From Sanghoee at the Huffington Post:

"Here are the hard facts:

• Unemployment in the United States, at 7.3 percent, is declining but only because people are giving up and leaving the work force completely.

• Income inequality in our nation is the worst it has been since the 1920s and almost double that of other developed nations.

• The average income of those in the top 1 percent is $717,000 compared to $51,000 for everyone else.

• The same top 1 percent also owns 42 percent of America's wealth, with the next 4 percent claiming another 30 percent.

• The financial crisis of 2008 wiped out 39 percent of the wealth in the United States, but the top 1 percent have reaped 95 percent of all income gains since that time.

• The average CEO of an S&P 500 company makes 204 times the income of rank-and-file employee and this ratio has increased by 20 percent since 2009.

• Two-thirds of minimum-wage earners in America live below the poverty line.

• Major companies like Walmart refuse to pay a living wage to most employees, make it impossible for workers to unionize, and deny them benefits by labeling full time workers as contractors (even as healthcare costs rise).

• Our Treasury loses $150 billion in revenues every year because of offshore tax shelters and $200 billion because of other loopholes that disproportionately benefit the wealthy, which then necessitates cutting public services and welfare.

• Social Security and Medicare, which low-income Americans and seniors rely on heavily for financial support, are projected to run out of money by 2033 and 2026 respectively, which will trigger a sharp reduction in benefits for both programs."

That the United States, with so many resources and creative intellects at its disposal, cannot get it together when it comes to inequality and poverty is a deeply disturbing proposition.

He’s baaaack: Viacom gives Michael Richards another chance.

 

    I stopped watching reruns of the sitcom Seinfeld about seven years ago when I heard about Michael Richards’ racist tirade in 2006 at Laugh Factory, a Los Angeles comedy club.  When heckled by two Black people attending his show, he called them “nigger” at least six times and said “Fifty years ago we’d have you upside down with a…fork up your ass.”  Richards played Cosmo Kramer - a buffoon - in Seinfeld.  It turned out that Richards himself is a buffoon – a racist one.  (After the incident, a spokesperson for Laugh Factory said that Richards was no longer welcome on their stage.)

     Richards apologized for his rant.  “I’m not a racist”, he said.  “That’s what’s so insane about this…and yet…it fires out of me.”  The insanity of this incident, however, is found in the fact that in his apology he denied being a racist.  Michael Levine, a publicist, predicted that Richards’ outburst would be “a career ruiner.” 

     Why am I blogging about this now?  The publicist was wrong.  It seems that Richards’ career may not have been ruined after all.  It was derailed for a while but he will be costarring in a pilot for TV Land with Kirstie Alley and Rhea Perlman this fall.  TV Land is owned by MTV Networks Entertainment Group.  MTV Networks is part of a division of the global media company Viacom.  Consumers who are offended by the revelation of Richards’ blatant racism should do all that we can to make sure that the prediction that Richards’ career would be ruined remains true.  It is not enough to avoid or boycott TV Land.  Consumers should communicate with decision makers at MTV Networks, and even Viacom, to express concern about a company willing to advance the career of an overt racist.

Momentum Shift in the Failed War on Drugs

Important news last week out of Washington D.C.:  The Justice Department will not challenge state laws in Colorado and Washington that legalize marijuana and will abruptly change focus in the prosecution of the War on Drugs.  In what is no doubt bad news to the private prison industry, federal enforcement will now shift focus from scooping up low level, non-violent drug offenders and instead prioritize stopping large drug cartels and kingpin operations.

From CNN:  "Under the new guidelines, federal prosecutors are required to focus on eight enforcement priorities, including preventing marijuana distribution to minors, preventing drugged driving, stopping drug trafficking by gangs and cartels and forbidding the cultivation of marijuana on public lands. . . .

Nineteen states and the District of Columbia allow some legal use of marijuana, primarily for medicinal purposes.  The attorney general told the Washington and Colorado governors that the Justice Department will work with the states to craft regulations that fall in line with the federal priorities, and reserves the right to try to block the laws if federal authorities find repeated violations."

As private prison profiteers have raked in billions of dollars of taxpayer money warehousing low level marijuana users, this shift in focus will now harm bottom line profitability.  Private prison corporations, perhaps anticipating the impending sea change, have already re-focused efforts to fill prison beds and maintain profitability by lobbying furiously for detention policies that imprison immigrants.  The next battle against the perverse incentives that motivate private prison corporations is shaping up to take place along immigration reform lines.

cross posted on the Hip Hop Law Blog