Public school teachers and their supporters protest against a pension reform bill at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. (Photo: Bill Pugliano/Getty Images)
By Exploiting and Mismanaging Public Pensions, Wall Street Has Cost Taxpayers $600 Billion Over Last Decade
"Most people (including policymakers) still have no idea that skimming fees off public employees' retirement savings has become one of the largest sources of profits for Wall Street moguls."
In a frenzied bid for higher profits in the decade following the 2008 financial crisis, Wall Street pension fund managers have siphoned as much as $624 billion from Americans' retirement savings--and, as a direct result, taxpayer coffers--through a vicious combination of high fees and foolish investment strategies, according to an analysis published Thursday by Yahoo Finance.
"Because pensions are guaranteed, the underperformance has hit taxpayers in the form of budget cuts for schools, hospitals, and libraries and decreased spending on infrastructure, healthcare, and other public projects."
--Dion Rabouin, Yahoo Finance
The steepest costs to taxpayers have stemmed from Wall Street pension managers' commitment to so-called alternative funds, which invest in private equity and hedge funds rather than traditional stocks and bonds.
"The total amount pension funds could have saved by simply investing in index funds could be more than $1 trillion," notes Yahoo Finance reporter Dion Rabouin. "Because pensions are guaranteed, the underperformance has hit taxpayers in the form of budget cuts for schools, hospitals, and libraries and decreased spending on infrastructure, healthcare, and other public projects."
Responding to Yahoo's analysis in a series of tweets on Thursday, Capital & Main journalist David Sirota observed that in five years of reporting on Wall Street's investment tactics, he has found that "most people (including policymakers) still have no idea that skimming fees off public employees' retirement savings has become one of the largest sources of profits for Wall Street moguls."
Despite their continued underperformance, "public pension fund managers have thrown increasingly more money at these complex and pricey alternative funds" in pursuit of "higher gains," Yahoo notes.
Because these gains haven't materialized, public pensions have lost hundreds of billions of dollars over the past decade, and taxpayers have been left to pick up the tab.
"The sales pitch of the alternatives community is, 'We've got some kind of secret sauce. Our returns are going to be higher than stocks and bonds,'" Jeff Hooke, a lecturer at Johns Hopkins University who has authored several studies on public pensions, said in an interview with Yahoo Finance. "The only problem with the sales pitch is it doesn't work."
The Intercept's Briahna Joy Gray concluded on Thursday that Wall Street's continued abuse of public pensions in an effort to boost profits is a clear demonstration that "obscene wealth doesn't come out of the blue, but that it's a direct consequence of exploitation."
\u201cRegular people are realizing more and more that obscene wealth doesn't come out of the blue, but that it's a direct consequence of exploitation.\n\nExiting times. https://t.co/ZgjWuNzNjX\u201d— Briahna Joy Gray (@Briahna Joy Gray) 1531414941
An Urgent Message From Our Co-Founder
Dear Common Dreams reader, The U.S. is on a fast track to authoritarianism like nothing I've ever seen. Meanwhile, corporate news outlets are utterly capitulating to Trump, twisting their coverage to avoid drawing his ire while lining up to stuff cash in his pockets. That's why I believe that Common Dreams is doing the best and most consequential reporting that we've ever done. Our small but mighty team is a progressive reporting powerhouse, covering the news every day that the corporate media never will. Our mission has always been simple: To inform. To inspire. And to ignite change for the common good. Now here's the key piece that I want all our readers to understand: None of this would be possible without your financial support. That's not just some fundraising cliche. It's the absolute and literal truth. We don't accept corporate advertising and never will. We don't have a paywall because we don't think people should be blocked from critical news based on their ability to pay. Everything we do is funded by the donations of readers like you. The final deadline for our crucial Summer Campaign fundraising drive is just days away, and we’re falling short of our must-hit goal. Will you donate now to help power the nonprofit, independent reporting of Common Dreams? Thank you for being a vital member of our community. Together, we can keep independent journalism alive when it’s needed most. - Craig Brown, Co-founder |
In a frenzied bid for higher profits in the decade following the 2008 financial crisis, Wall Street pension fund managers have siphoned as much as $624 billion from Americans' retirement savings--and, as a direct result, taxpayer coffers--through a vicious combination of high fees and foolish investment strategies, according to an analysis published Thursday by Yahoo Finance.
"Because pensions are guaranteed, the underperformance has hit taxpayers in the form of budget cuts for schools, hospitals, and libraries and decreased spending on infrastructure, healthcare, and other public projects."
--Dion Rabouin, Yahoo Finance
The steepest costs to taxpayers have stemmed from Wall Street pension managers' commitment to so-called alternative funds, which invest in private equity and hedge funds rather than traditional stocks and bonds.
"The total amount pension funds could have saved by simply investing in index funds could be more than $1 trillion," notes Yahoo Finance reporter Dion Rabouin. "Because pensions are guaranteed, the underperformance has hit taxpayers in the form of budget cuts for schools, hospitals, and libraries and decreased spending on infrastructure, healthcare, and other public projects."
Responding to Yahoo's analysis in a series of tweets on Thursday, Capital & Main journalist David Sirota observed that in five years of reporting on Wall Street's investment tactics, he has found that "most people (including policymakers) still have no idea that skimming fees off public employees' retirement savings has become one of the largest sources of profits for Wall Street moguls."
Despite their continued underperformance, "public pension fund managers have thrown increasingly more money at these complex and pricey alternative funds" in pursuit of "higher gains," Yahoo notes.
Because these gains haven't materialized, public pensions have lost hundreds of billions of dollars over the past decade, and taxpayers have been left to pick up the tab.
"The sales pitch of the alternatives community is, 'We've got some kind of secret sauce. Our returns are going to be higher than stocks and bonds,'" Jeff Hooke, a lecturer at Johns Hopkins University who has authored several studies on public pensions, said in an interview with Yahoo Finance. "The only problem with the sales pitch is it doesn't work."
The Intercept's Briahna Joy Gray concluded on Thursday that Wall Street's continued abuse of public pensions in an effort to boost profits is a clear demonstration that "obscene wealth doesn't come out of the blue, but that it's a direct consequence of exploitation."
\u201cRegular people are realizing more and more that obscene wealth doesn't come out of the blue, but that it's a direct consequence of exploitation.\n\nExiting times. https://t.co/ZgjWuNzNjX\u201d— Briahna Joy Gray (@Briahna Joy Gray) 1531414941
In a frenzied bid for higher profits in the decade following the 2008 financial crisis, Wall Street pension fund managers have siphoned as much as $624 billion from Americans' retirement savings--and, as a direct result, taxpayer coffers--through a vicious combination of high fees and foolish investment strategies, according to an analysis published Thursday by Yahoo Finance.
"Because pensions are guaranteed, the underperformance has hit taxpayers in the form of budget cuts for schools, hospitals, and libraries and decreased spending on infrastructure, healthcare, and other public projects."
--Dion Rabouin, Yahoo Finance
The steepest costs to taxpayers have stemmed from Wall Street pension managers' commitment to so-called alternative funds, which invest in private equity and hedge funds rather than traditional stocks and bonds.
"The total amount pension funds could have saved by simply investing in index funds could be more than $1 trillion," notes Yahoo Finance reporter Dion Rabouin. "Because pensions are guaranteed, the underperformance has hit taxpayers in the form of budget cuts for schools, hospitals, and libraries and decreased spending on infrastructure, healthcare, and other public projects."
Responding to Yahoo's analysis in a series of tweets on Thursday, Capital & Main journalist David Sirota observed that in five years of reporting on Wall Street's investment tactics, he has found that "most people (including policymakers) still have no idea that skimming fees off public employees' retirement savings has become one of the largest sources of profits for Wall Street moguls."
Despite their continued underperformance, "public pension fund managers have thrown increasingly more money at these complex and pricey alternative funds" in pursuit of "higher gains," Yahoo notes.
Because these gains haven't materialized, public pensions have lost hundreds of billions of dollars over the past decade, and taxpayers have been left to pick up the tab.
"The sales pitch of the alternatives community is, 'We've got some kind of secret sauce. Our returns are going to be higher than stocks and bonds,'" Jeff Hooke, a lecturer at Johns Hopkins University who has authored several studies on public pensions, said in an interview with Yahoo Finance. "The only problem with the sales pitch is it doesn't work."
The Intercept's Briahna Joy Gray concluded on Thursday that Wall Street's continued abuse of public pensions in an effort to boost profits is a clear demonstration that "obscene wealth doesn't come out of the blue, but that it's a direct consequence of exploitation."
\u201cRegular people are realizing more and more that obscene wealth doesn't come out of the blue, but that it's a direct consequence of exploitation.\n\nExiting times. https://t.co/ZgjWuNzNjX\u201d— Briahna Joy Gray (@Briahna Joy Gray) 1531414941