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In recent years, I have written many times of the tremendous public investment deficit facing this country. Our infrastructure is old, and it isn't being replaced or maintained--we need a real commitment in order to grow a sustainable and green economy in the twenty-first century.
But resources are now harder than ever to come by, especially with the deficit hawks shrieking every time the Obama administration attempts to invest in an economic recovery.
It should come as no surprise then that poised to cash-in on our national crisis are the same private equity folks whose casino culture brought us our current economic collapse. In our public assets--our bridges, highways, airports, etc.--they see an opportunity to leverage debt all over again, throw in gobs of money, raise user fees, and gain exorbitant short-term returns at the expense of the rest of us.
"There is no way they can get those kinds of returns without hurting consumers," Andrew Stern, President of the Service Employees International Union (SEIU) told me. "What are the new twenty-first century alternative ways to solve American economic needs without continually enriching the same group of people whose only interest is not in our country but is in their company?"
Fortunately, there is at least one very smart alternative. Public pension funds.
"We're at a moment where the country is both desperately in need of funds for infrastructure in the long run, and for jobs in the short and the mid-run, until the economy does hopefully produce jobs and not just a jobless recovery," said Stern. "We're also at a crossroads as to whether the funding for infrastructure is going to put our public resources into private hands, or keep it in public hands. The good news is that these public pension funds are beginning to think about the fact that they actually are one of the places in America that really does have capital.... Here are people investing billions of dollars a year, and the only issue is where are they going to invest this money?"
In contrast to private equity firms, who usually charge a 2 percent management fee and take 20 percent of the profits, public pension funds are looking for a return of 7 or 8 percent annually over the long-term. That would make it much easier to manage a public asset in the public interest, rather than in the interest of Wall Street investors.
"All the worst instincts that got us into the financial crisis, we do not want those wrecking infrastructure," said Stephen Abrecht, Executive Director of Benefit Funds, SEIU Master Trust. "They wrecked the mortgage industry, we don't want them wrecking the infrastructure industry with the same short-term, risk-taking kinds of strategies."
"One of the advantages of public pension funds is that it doesn't need to make high rates of return on every investment," said Stern. "They can determine that this is a mid-range investment, try to [get] like 7 or 8 percent annually, which will make a huge difference on how that money can be paid back as opposed to if you're trying to make 30 to 35 percent a year."
Many public pension funds are now taking the lead on exploring this new avenue for investment. In August a consultant called Pension Consulting Alliance (PCA) issued a Request for Information (RFI) for infrastructure investment management services on behalf of its public pension fund clients. In response, PCA received over 60 proposals from infrastructure managers. Next steps include selecting the firms to work with, committing assets to a common fund, and then looking for projects to invest in.
SEIU has been stimulating discussions about this with financial professionals for the past two years and this progress is a good sign.
"We've gone from a lot of people saying this is a really good idea, to a group of funds taking leadership here, and actually going forward," said Stern. "It's exciting to us, because if you could get something going, if you appreciate public pension funds have a trillion dollars in assets or so... if they put 5 percent of their assets into infrastructure through this process, you're talking $50 billion which could be leveraged into hundred of billions of dollars... You could do something rather significant, to both improve job opportunities in this country, and at the same time keep assets in the public domain."
Stern said SEIU members are very supportive of this effort.
"When there is no money on the public side, then the only option is to go to Goldman Sachs and sell your soul. So they'd rather save their souls, than sell their souls and sell their bridges and roads," he said.
What is also key here is the opportunity to promote a dialogue about alternative ways to invest in our infrastructure and build a twenty-first century, sustainable economy.
"I do think there needs to be an American conversation about how we are going to find new ways that have public-private partnerships, that are not based upon attempts to gain extraordinary rates of return over what are really public assets," said Stern. "We just don't need our governments who are in desperate needs of cash making quick fix deals that may produce temporary relief but create permanent harm to taxpayers in terms of polls and fees and things that are used to recoup the immediate investment."
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Katrina vanden Heuvel
Thoughts on politics, current affairs, riffs and reflections on what’s in the news and what’s not--but should be.
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Off topic, but well worth it...
www.counterpunch.org/zeese10202009.html
Excerpt:
The leadership of the Democratic Party is on the verge of passing health insurance reform. The centerpiece of the "reform" is requiring Americans to buy overpriced insurance from private corporations. But, it is evident that many in the Democratic voting base see the insurance industry as the problem – not the solution – and are getting angry about a new law that will force people to buy from corporations they don't trust.
Just a few weeks ago the Mobilization for Health Care for All was announced (www.MobilizeForHealthCare.org). The Mobilization focuses on the denial of doctor-recommended care by the insurance industry. Sit-ins were planned at health insurance companies with demands that insurance corporations stop the denials. The Mobilization sought 100 people willing to sit-in at insurance corporations and risk arrest as people sat in at lunch counters two generations ago.
The response has been e, nearly 800 have signed up to risk arrest and thousands have signed up to join the protests. In the last 20 days 78 people have been arrested protesting the real panels – the private insurance industry – who according to a California study deny doctor recommended care 20% of the time.
The Mobilization hoped to have "patients not profits sit-ins" in three cities last week, and instead it had them in nine cities. On the next Mobilization day, October 28th, there is likely to be twice as many cities protesting the insurance industry – just as Congress considers forcing Americans to buy insurance. This may be developing into the largest campaign of non-violent civil resistance since the Civil Rights era....
End quote.
Posted by b_kool_66 at 10/20/2009 @ 5:11pm
b_kool_66 I'd be willing to sit in if a sit in is near where I live, how do I find out?
Posted by Denise29 at 10/20/2009 @ 6:24pm
sorry b kool, duh, I guess I can read, sarcasm off.
Posted by Denise29 at 10/20/2009 @ 6:26pm
Since the blogs are I'll take the liberty to link a lengthy, but damned fascinating Matt Taibbi Rolling Stone rocker:
tinyurl.com/yzwkjth
Excerpt:
On Tuesday, March 11th, 2008, somebody -- nobody knows who -- made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness -- "like buying 1.7 million lottery tickets," according to one financial analyst.
But what's even crazier is that the bet paid.
At the close of business that afternoon, Bear Stearns was trading at $62.97. At that point, whoever made the gamble owned the right to sell huge bundles of Bear stock, at $30 and $25, on or before March 20th. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history.
The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money to marry its hunchbacked new bride) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…
A must read:
tinyurl.com/yzwkjth
Enjoy...
And get angry, very angry.
Posted by b_kool_66 at 10/20/2009 @ 6:28pm
"Since the blogs are "
This crazy 'puter I'm on is dropping words and bits of words from my posts. I suspect the NSA.
Posted by b_kool_66 at 10/20/2009 @ 6:30pm
I guess % " is a verbotten word?
Posted by b_kool_66 at 10/20/2009 @ 6:31pm
Wow, weird stuff, man.
Posted by b_kool_66 at 10/20/2009 @ 6:31pm
D E A D
Missing word from my first post.
Posted by b_kool_66 at 10/20/2009 @ 6:32pm
Peace out, Denise, and my best regards to you and your fam.
~B
:-)
Posted by b_kool_66 at 10/20/2009 @ 6:36pm
I try not to laugh at well intentioned, but very misguided people; but
This is hardly a national movement.
from their own website
<Within the past 18 days, over 750 people have signed up to risk arrest by sitting down in an insurance company office and refusing to leave, demanding the immediate approval of lifesaving doctor-recommended treatment and an end to denial of care.>
The LA sit-in had 12 people.
Sorry BK, but there is no public outrage.
Posted by antisocialist at 10/20/2009 @ 6:36pm
said Stern. "... if they put 5 percent of their assets into infrastructure through this process, you're talking $50 billion which could be leveraged into hundred of billions of dollars... You could do something rather significant....."
Notice the Stern's word "leveraged"! Boiled down, this scheme of using public employee pension fund as the EQUITY slice of leveraged infrastructure projects is no different than a GE or Goldman Sach doing the same leveraged deal.
The difference is, if such infrastructure, once built, fails to generate the revenue projected, say a bridge or toll road, would Congress let public pension funds eat their losses or would the Gubbers bail them out.....UAW at GM & Chrysler ring a bell, anyone?
From another finance POV, even borrowed by the Gubbers to build infrastructure, as is being done in a portion of the Pork Bill, the Gubber's borrowing rate will be lower than the 7~8% return desired by Stern. And, when inflation and rates rise, as they will, Stern will raise his equity return expectation accordingly.
Sounds slick, Ms. KvH, but just a way for the devastated & grossly underfunded public pension funds to generate some damn-near guaranteed, and long-term returns at taxpayers' risk!
Posted by Happy at 10/20/2009 @ 6:38pm
bkool, went there and didn't find it??
Posted by Denise29 at 10/20/2009 @ 6:41pm
Well, let me debunk Stern's fancy talk about avoiding "permanent harm to taxpayers" by using public pension funds instead.....folks, public pension funds themselves, ARE the "permanent harm"!!!!
For various public pension funds to go into direct deals with the Feds would provide the ultimate guarantee that they will take ALL taxpayers to the cleaners when these deals inevitably go south!
Steep Losses Pose Crisis for Pensions
Two Bad Choices for Funds: Cut Benefits Or Take Greater Risks to Rebuild Assets
By David Cho
Washington Post Staff Writer
Sunday, October 11, 2009
The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees....
The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.
Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.
After losing about $1 trillion in the markets, state and local governments are facing a devil's choice: Either slash retirement benefits or pursue high-return investments that come with high risk....
Posted by Happy at 10/20/2009 @ 10:38pm
Sounds slick, Ms. KvH, but just a way for the devastated & grossly underfunded public pension funds to generate some damn-near guaranteed, and long-term returns at taxpayers' risk!
Posted by Happy at 10/20/2009 @ 6:38pm | ignore this person | warn this person
The surest way to lose your money is a "union pension fund" run by our marxist communist friends who redistribute wealth to their leaders and politicians as they have in the past. Just one look at the history of union pensison funds should deter anyone foolish enough to consider this idea.
Posted by BigPasture at 10/20/2009 @ 10:39pm
The problem with public pensions is the same problem that came with Social Security. States, like the Federal Government, use the excess funds to supplement state budget and/or underfund their pension liabilities. As a consequence, it postpones the problem down another election cycle - until ultimately, the pensioners are left holding the bag.
The only real advantage of private systems is that you know you are being charged up front. With many public systems, you don't learn you are not going to get your benefits or that they have been dramatically shrunk until it comes time to collect them.
The solution is not public/private partnerships. The solution is to make these programs into many non-profit entities that cannot be plundered by states in a budget crunch or Wall Street - while at the same time keeping them small enough so that you don't have large public investments swaying the marketplace to their benefit. Ideally, these organizations would also invest in the local community. I think models like Shorebank are a good start.
http://tinyurl.com/2q8o7a http://www.shorebankcorp.com
Posted by srjenkins at 10/20/2009 @ 10:57pm
"Sorry BK, but there is no public outrage."
just wait a few years.....you'll see.
katrina, thanks! another great article....
when are you guys gonna come out to san francisco? why doesn't the nation do more sf events?
i know, we're not LA, but it's far prettier here. and the food is superior to LA's. and you don't need a car. and the women are better looking up here.
Posted by darladoon at 10/21/2009 @ 01:01am
Economic decencies, where growth is slow and sure
Eliminates discrepancies, and yields to the demure
Casino Royale plundering, captives all at risk
Constantly but wondering, the broken obelisk
Where savings meet with leverages in homeopathic brew
We can't decant our beverages, but still our thirst is true
The high stakes game of Wall Street fame, abhors respectful living
Too many blame the same old same, responding to forgiving
Common people, gifted lives, with little need for riches
Do not precipitate the dives, the bubbles or the glitches
Limelight on security, stable unrelenting
Set the stage for purity, in matters all consenting
Gamblers can pull their sway, in cliquish restive sport
And stocks and toxic assets may, indulge their last resort
Let it be known the people need, and wish for fruitful labors
But treadmills for the slaves of greed, Can not make plows from sabers
We need to keep the coffers sound, the public trust accruing
Let dollars sense a firmer ground, renew redo reviewing
Posted by ttr at 10/21/2009 @ 01:53am
by darladoon at 10/21/2009 @ 01:01am...
I agree! I grew up in Orinda... better looking... nicer...
...and Bay Area Women are smarter too!
...which makes them even better looking...;^)
Posted by ttr at 10/21/2009 @ 02:04am
Katrina, You mean like selling bridges and roads to other countries and the like under W's helm. Remember that the GOP and the neocons wet dream is to privatize everything and their God Milton Friedman's goal was to strip the government down to anything that couldn't be run at a profit in the private business world.
Wallstreet is the problem. The SEC being on the take is the problem. The fact that the tarp funds aren't bailout funds aren't being tracked is the problem. Elliot Spitzer pointed out that tracking the money was actually quite easy. All the government has to do is subpoena the bank records to see where the money went. The money isn't the banks money, it's federal tax dollars and the tax payers have a right to know how Goldman Sachs is spending our effing money!!
Your idea about public pensions and investment into infrastructure is great, as long as the investments into these things is overseen or run by the government directly instead of the private sector. We've seen what businessmen do when nobody is looking over their shoulders.
Posted by Wolfgang1 at 10/21/2009 @ 07:05am
tarp funds aren't bailout funds...sorry, should be tarp funds and bailout funds.....
Posted by Wolfgang1 at 10/21/2009 @ 07:10am
Posted by b_kool_66 at 10/20/2009 @ 6:28pm
Thanks for the link b. Geithner, Bernanke, Paulson and the rest of those aholes should be in prison right now. So, either Obama is an idiot or he's corrupt too. If half of this article is true, we are going to be in for one hell of a rough ride.
The last part of the article leads into the new target. If these institutions are counterfitting T Bills, guess what happens to our economy? Maybe Goldman Sachs, Morgan Stanely and JP Morgan can whet their corrupt beaks while the rest of the country goes into depression... just marvelous.
Posted by Wolfgang1 at 10/21/2009 @ 08:41am
Nice article. The Ayn Rand Neocon fantasy holds that the gazillions the top tiers have is "earned" through their rugged individualistic, heroic effort. You can't dissuade them of this. You can essentially prove that they couldn't have done it without regulations "rule of law", for ex., in a corrupt African wasteland. So public investment for the Bradgelina-Rev.Larry-Happy-Rio types is something heroically earned and owned and personal and 'mine' and only a socialist would have them 'give it back'.
A few, like Buffet and Gates know better.
Posted by winyahn at 10/21/2009 @ 5:27pm
The surest way to lose your money is a "union pension fund" run by our marxist communist friends who redistribute wealth to their leaders and politicians as they have in the past. Just one look at the history of union pensison funds should deter anyone foolish enough to consider this idea. Posted by BigPasture at 10/20/2009 @ 10:39pm |
As opposed to say....Bernie's hedge fund?
Get a clue.
Posted by snowball777 at 10/21/2009 @ 9:21pm
Posted by Wolfgang1 at 10/21/2009 @ 08:41am |
I read the article too, and, while I find Taibbi moderately amusing to read, I find his analysis of the fall of Bear Stearns to be missing some very important elements....like their getting hip-deep in CDOs.
Naked short selling is a problem, but blaming the guy that threw the cigarette after dousing yourself in gasoline is disingenuous.
Posted by snowball777 at 10/21/2009 @ 9:24pm
You lacy liberals just want to smoke weed and get a government handout. Well I've got your number(s). Pick one: Maoist Socialist Racist Un-Americanist Baseball-hatest Apple pie-hatest
Posted by winyahn at 10/21/2009 @ 10:30pm
Posted by winyahn at 10/21/2009 @ 10:30pm |
"You lacy liberals just want to smoke weed and get a government handout."
You're half right.
"Well I've got your number(s). Pick one: Maoist Socialist Racist Un-Americanist Baseball-hatest Apple pie-hatest"
What could be more socialist than baseball?
Everyone gets to take a swing.
If you miss, you get a couple more tries.
Stealing things is wholeheartedly encouraged.
Anyone who gets tired out or can't run all that well (Willie Horton, we're looking at you) can call in help in a "pinch" when they need "relief".
Posted by snowball777 at 10/22/2009 @ 12:10am
Posted by snowball777 at 10/21/2009 @ 9:24pm |
snowball, What's your take on these guys short selling T bills? If that's going on, our economy is toast.
Posted by Wolfgang1 at 10/22/2009 @ 06:15am
I support public pensions, especially since the group of people in control of our investment industry have proven to not be up to the task. Most of our peer nations have that system and it works wonders for them. This would require a restructuring of how money flows in our country. That restructuring would be resisted by every legal and illegal means at the disposal of the false entitlement class who is currently at the reins of the private investment industry. A grass roots demand on a huge scale would be required, and laws would have to be changed, a whole lot of them.
Posted by Milhaus at 10/22/2009 @ 07:10am
Something just occurred to me. If Geithner, Paulson and Bernanke are all students or disciples of Milt Friedman and they believe in laissez faire capitalism, everything they've done makes perfect sense.
They don't believe in government intervention into business affairs....ok so the bailouts weren't an intervention in their minds, they were transfers of government wealth to the banking industry.
Now, go one step further. They have no strings attached to what the banks did with the money with no oversight. The SEC hasn't enforced anything on wallstreet aside from nailing Madoff who is small potatoes compared to the rest of what has happened. The combination of these events have made the fed powerless so to speak and the banks now directly control the value of the dollar. Bernanke, Paulsen and Geithner take their marching orders not from the president, but rather the banking cartel.
To sum things up, they transferred government wealth to private companies. They've weakened what regulating control the government had on banks and wallstreet. These men were instrumental in the causing of the financial meltdown and the bailout money as was their boss Larry Summer.
Friedman probably has a hard on in his grave over all of that has taken place over the last two years. The shock doctrine has been applied to the U.S. via a planned financial meltdown. They have all but succeeded in placing full control of the government in the hands of big business. We have the Bush and Obama administrations to thank for the little push the neocons needed to finalize the deal.
Posted by Wolfgang1 at 10/22/2009 @ 07:47am
snowball, What's your take on these guys short selling T bills? If that's going on, our economy is toast. Posted by Wolfgang1 at 10/22/2009 @ 06:15am |
I don't think its possible to short bonds, but I guess they could run their game on currency index securities or something.
This scam is unique to equities (thankfully), but the Big 5 have even better methods of devaluing our currency in the form of credit bubbles.
Posted by snowball777 at 10/22/2009 @ 08:24am
Posted by snowball777 at 10/22/2009 @ 12:10am
LOL yeah yeah baseball is such a sick socialist Leftist trap -- Why all the ingenuity entrepreneurial capitalist choking rules?
Why do socialists insist baseball have the same # out, same # bases, same # players over and over? If my company wants to score 600 homers in an inning, maybe I need to just change things up a bit. Use a 8o foot high atomic power assist bat which my guys operate from the Fidel Inn in Havana.
Posted by winyahn at 10/22/2009 @ 09:41am
Public pension are for the most part underfunded. It makes no sense to increase the funding problems by mandating that pension investments be dictated by political considerations rather than economic one. Make no mistake. Required investments in infrastructure determined by politicians we result in inferior returns.
Posted by jfg123 at 10/22/2009 @ 11:21am