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Wall St. and the 'Triple-Fucking' of US Workers, Taxpayers
'All across America,' reports Rolling Stone's Matt Taibbi, 'Wall Street is grabbing money meant for public workers'
In his latest feature-length piece for Rolling Stone magazine, the eloquently foul-mouthed financial reporter Matt Taibbi takes a close look at what he terms the "improbable triple-fucking of ordinary people" by exploring how Wall Street financiers and hedge fund barons have managed to convince those who control state workers' pensions to hand over hundreds of millions of dollars in public funds to hedge fund billionaires while simultaneously demanding huge cuts to the earned benefits of current and retired public employees.
Published online Thursday, read the whole piece here.
Using the story of Rhode Island state treasurer Gina Raimondo as a jumping-off point, Taibbi tells the tale of the "ostentatiously ambitious 42-year-old Rhodes scholar and former venture capitalist" who in 2011 became the darling of right-wing ideologues and Wall Street vultures by "allowing her state to be used as a test case for the rest of the country, at the behest of powerful out-of-state financiers with dreams of pushing pension reform down the throats of taxpayers and public workers from coast to coast."
Why a "triple-fucker"? Taibbi explains:
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.
He goes on to explain that officials in Rhode Island, impressed by Raimondo's Yale and Harvard resumé and wooed by her promises of large returns, were unaware of the massive financial cost of doing business with the largely unregulated hedge funds.
"One of [Raimondo's] key supporters was billionaire former Enron executive John Arnold," writes Taibbi, describing him as "a dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation's Koch brothers, and who for years had been funding a nationwide campaign to slash benefits for public workers."
And the beneficiaries? Some of New York's top hedge funds, including, Dan Loeb's Third Point Capital, which received $66 million; Ken Garschina's Mason Capital which got $64 million; and Paul Singer's Elliott Management that nabbed $70 million in fees. Collectively, reports Taibbi, those financial firms will be paid "tens of millions in fees every single year by the already overburdened taxpayers" of a "flat-broke" Rhode Island.
According to Taibbi's reporting, what was not mentioned during the sales pitch to take public pension fund dollars and hand them over to Wall Street were nearly $1 billion in associated fees—"14 percent of the state fund"—and returns that ultimately equaled nearly the same amount of money that pensioners would be asked to give up when their benefits were put up on the chopping block. The report continues:
In public finance, hedge funds will sometimes give slight discounts, but the numbers are still enormous. In Rhode Island, over the course of 20 years, [former SEC lawyer Edward]Siedle projects that the state will pay $2.1 billion in fees to hedge funds, private-equity funds and venture-capital funds. Why is that number interesting? Because it very nearly matches the savings the state will be taking from workers by freezing their Cost of Living Adjustments – $2.3 billion over 20 years.
"That's some 'reform,'" says Siedle.
"They pretty much took the COLA and gave it to a bunch of billionaires," hisses [Stephen T.] Day, Providence's retired firefighter union chief.
What's striking and maddening, according to Taibbi, is that:
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 [and] 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.
In the end—after a deeply and well-reported look at the complex issues surrounding public pensions, state budgets, and Wall Street malfeasance—the conclusion that Taibbi arrives at is a simple one. "It just ain't right," he writes.
"Asking cops, firefighters and teachers to take the first hit for a crisis caused by reckless pols and thieves on Wall Street is low, even by American standards."