Congress Says Banks Can Gamble With Retirement Funds
Congress has passed – and President Obama has said he would sign – a budget bill that allows banks to use your savings when they make giant financial bets called derivatives.
And because those savings are insured by the federal government, you, the taxpayer, would be on the hook if those bets go south.
If this sounds familiar, it is. It’s the exact thing that was going on before the world’s economy collapsed in 2008. The Dodd-Frank reform law that was passed in the wake of that crisis forbade this from ever happening. But here we go again.
This is the kind of thing that Brian Marvel, president of the San Diego Police Officers Association, and others have been warning about and why they worked so hard to defeat Congressional candidates who were going to vote for banks over people who work for a living.
Tess Vigeland, writing for the Guardian in the U.K., had this to say:
“Where is the outrage? America seems sound asleep. Nothing is permanent in this wicked world except banks getting whatever they want, whenever they want, regardless of the risk to their own customers and the two major provisions in the U.S. budget bill spell doom for U.S. savers and retirees.
“[In December 2008] . . . I was at my post as the host of a personal finance show on national radio, and I was taking calls from people all over the country who were a) furious that their tax dollars were siphoned off to pay for a massive bank bailout that crashed the world economy, and b) outraged that the stock market was responding by wiping out their already-meager retirement and college education savings funds.
“In December 2008, the number of jobs shrank by 533,000, the worst monthly loss in more than 30 years. Construction permits fell by more than 12% as people stopped buying houses. And retailers got a giant lump of coal from consumers, who decided that buying a bunch of worthless junk to put under a tree was probably not the best idea when their bank accounts – not the mention the country’s – were circling the drain.
“Pension plans were promises to employees that they could count on a certain income in retirement. Unlike the 401k that most of us are familiar with, where we have to rely on our own savings and our own strategies for investing that money, pensions were a guaranteed payout.
“That’s why pensions don’t really exist anymore except in the public sector: because they’re expensive, and if a company doesn’t plan correctly, it’s easy to run out of money. The Pension Benefit Guarantee Corporation, or PBGC, has to take over the plans from employers who go bankrupt or bust or simply can’t make the payments.
“That has happened over and over again, and workers with those pensions have found their benefits cut in half or even more.
“Now there’s a real pension crisis. The PBGC itself is now in something of a hole, and warned recently that it doesn’t have the reserves to pay even the reduced amount of the income that was promised to millions of workers.
“And a proposal in this same budget bill would allow some pension plans to cut current benefits to employees who are retired – if those plans can show that they’ll otherwise run out of money in the next 10-20 years. The proposal applies to multi-employer pension plans, which cover a diverse cross-section of blue-collar workers such as truck drivers and people in construction.
“This isn’t supposed to be legal.”