Workers’ Savings Bankroll A War On Workers
The untold story of how politicians and Wall Street executives use pension money to crush the working class.
by DAVID SIROTA
As the private equity industry launches ads to protect its lucrative tax preferences, we should remember that this industry is the unseen man behind the curtain driving many social ills — from high hospital prices to surprise medical bills to nursing home deaths to media layoffs to a housing crisis that has become a human rights emergency. A Businessweek cover put it best: You live in private equity’s world, even if you don’t know it.
But a series of new reports remind us that there is another person behind the monocled, mustache-twirling oligarch running the Emerald City’s secret control panel — and that person isn’t a billionaire. It is the faceless pension official in a state capital or city hall who is using workers’ retirement savings to finance the Wall Street takeover of Oz.
In the process, teachers, firefighters, sanitation workers, and other government employees are being fleeced. Their retirement savings are being skimmed by finance industry executives, who are using the cash to lobby for self-enriching tax breaks while waging a class war on everyone else. All that money could end up bankrolling a new round of housing profiteering and infrastructure privatization, using workers’ money to wage a war on workers themselves.
The relationship between the finance industry and public pensions has become one of this gilded era’s biggest schemes to redistribute wealth from workers to Wall Street - but the theft barely gets any attention outside the business press. I’ve been reporting on it for a long time (and I’ve faced the wrath of politicians like Chris Christie for doing so). So I know well that the term “pension” is considered a mind-numbing, cure-for-insomnia kind of topic that corporate media mostly ignores.
In the popular imagination, a pension is known, if at all, as a shitty European hotel, a pool of extra cash that Gordon Gekko tried to pilfer in the Bluestar Airlines deal, or a small bit of subsistence pay that grandpa used to get back in the day, when times were different.
But here’s the thing you need to know: Public pensions are a huge business and quite exciting to the world’s richest people in the here and now.
That’s because while fewer and fewer workers today get pension benefits, there is now $5 trillion in public pension systems that have accrued government workers’ retirement savings over decades. That giant pool of capital, overseen by appointees tied to Wall Street-bankrolled politicians, is the fuel behind the finance industry’s conquest of America.
Pension money is deferred compensation: Millions of public-sector workers — who are often paid less than their private-sector counterparts — have accepted lower up-front wages in exchange for pension contributions to fund their future retirement benefits. Two decades after pension officials began funneling more of that money into private equity, hedge funds, and real estate, roughly one fifth, or about $1 trillion, of the cash is now in these opaque “alternative” investments. These investments generate outsized fees for financial firms, bankroll the Wall Street’s political machine, and capitalize the corporations that are pillaging the middle class.
This is a wildly lucrative business - and money managers are now trying to rake in even more from public pensions and also break into the even larger 401(k) market. You can see investment firms’ desperation in Wall Street’s cynical ad campaign trying to convince Americans that private equity firms are consistently delivering outsized investment gains for pensioners (they’re not).
The question is: Will this racket continue and get even bigger?
Spoiler alert: The following piece is a deep dive — but it has to be. In many ways, the tale of the unholy union between public pensions and the shadowy world of alternative investments connects much of the reporting my colleagues and I have been pursuing for the past several years.
This is it, the big heist, the rigged game that connects corrupt local officials, soulless Wall Street robber barons, rapacious corporate CEOs, and the public sector workers who may be unaware that their pension contributions are financing a giant scam that harms us all.