This blog started year ago partly in reaction to George Bush’s attempt to “privatize” (read “destroy”) Social Security after he received a mandate to do so by never mentioning the subject during his 2004 campaign. Luckily, that didn’t work out so well, at least for George, and Social Security escaped his tender ministrations.
There were probably lots of reasons that Bush wanted to divert our money away from the Social Security program, but one, often remarked at the time, was that it would result in a staggering amount of money being dumped into the clutches of the Wall Street gamblers who have so effectively destroyed our economy. Had Bush has his way, they could have destroyed our futures as well as our present.
Josh Marshall note today that what the Bushies could not do with our Social Security money, the could do with the Pension Guaranty Fund, the government fund that is supposed to protect workers with pensions at companies that fail, or otherwise become incapable of fulfilling their obligations.
The Boston Globe reports that just before the markets tanked, the Bush appointee in charge of the Pension Guaranty Fund shifted its investments from low risk bonds to high risk stocks, hedge funds, and real estate and private equity funds. The Fund has lost a sizable percentage of its value, just when it will probably be needed as numerous companies collapse. As the Globe points out, this was an extremely stupid thing to do:
“The truth is, this could be huge,” said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. “This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities” in pension plans that would be passed on to the agency.
… Bodie, the BU professor who advised the agency, questioned why a government entity that is supposed to be insuring pension funds should be investing in stocks and real estate at all. Bodie once likened the agency’s strategy to a company that insures against hurricane damage and then invests the premiums in beachfront property.
Since he issued that warning, he said, the agency has gone even more aggressively into stocks, which he called “totally crazy.”
The genius behind this investment strategy was Charles E.F. Millard, a Bush appointee who defends his “strategy” by pointing out that in twenty years, it might all look pretty good. That ignores the fact, of course, that we might very well need the non-existent money now.
The fund is yet another governmentally established entity, such as Fannie Mae and Freddie Mac, that is not entitled to full faith and credit. Nonetheless, the government will be under enormous pressure, this time justifiably so, to rescue it.
It may come as no surprise that in his former life, Millard was a former managing director at Lehman Brothers, where he undoubtedly learned all he had to know about making wise investments. He must have been like a kid in a candy store, drooling at the prospect of giving the money of the American worker away to his friends on Wall Street.
Lest we forget, this is what would have happened to Social Security, the only pension the affected workers may now have, if Bush had gotten his way. And, lest we also forget, it was not the politicians who stopped this raid on our money, it was the grassroots, including Marshall very prominently, who pushed the spineless Democrats into holding firm and not “compromising” with Bush, as so many of them (Lieberman especially) were wont to do.