RSN Fundraising Banner
FB Share
Email This Page
add comment
Print

Sirota writes: "From Illinois to Massachusetts, voters effectively placed more than $100 billion worth of public pension investments under the control of executives-turned-politicians whose firms profit by managing state pension money."

Illinois billionaire and now governor Bruce Rauner is a partner in a firm that manages more than $40 million of the state's $50 billion pension system. (photo: twitter/Quinn for Illinois)
Illinois billionaire and now governor Bruce Rauner is a partner in a firm that manages more than $40 million of the state's $50 billion pension system. (photo: twitter/Quinn for Illinois)


Wall Street Won the 2014 Midterms

By David Sirota, International Business Times

05 November 14

 

o recount will be needed to declare one unambiguous winner in Tuesday's gubernatorial elections: the financial services industry. From Illinois to Massachusetts, voters effectively placed more than $100 billion worth of public pension investments under the control of executives-turned-politicians whose firms profit by managing state pension money.

The elections played out as states and cities across the country debate the merits of shifting public pension money -- the retirement savings for police, firefighters, teachers and other public employees -- from plain vanilla investments such as index funds into higher-risk alternatives like hedge funds and private equity funds.

Critics have argued that this course has often failed to boost returns enough to compensate for taxpayer-financed fees paid to the financial services companies that manage the money. Wall Street firms and executives have poured campaign contributions into states that have embraced the strategy, eager for expanded opportunities. Tuesday's results affirmed that this money was well spent: More public pension money will now likely be entrusted to the financial services industry.

In Illinois, Democratic incumbent Pat Quinn was defeated by Republican challenger Bruce Rauner, who made his fortune as one of the namesakes of Golder, Thoma, Cressey & Rauner (GTCR) - a financial firm that manages more than $40 million of the state's $50 billion pension system. Rauner -- who retains an ownership stake in at least 15 separate GTCR entities, according to his financial disclosure forms-- will now be fully in charge of the pension system.

In Rhode Island, venture capitalist Gina Raimondo, a Democrat, defeated Republican Allan Fung. Raimondo retains an ownership stake in a firm that manages funds from Rhode Island’s $7 billion pension system. Raimondo’s campaign received hundreds of thousands of dollars from financial industry donors. She was also aided by six-figure PAC donations from former Enron trader John Arnold, who has waged a national campaign to slash workers’ pensions. Fung slammed Raimondo as a tool of Wall Street, but she eked out a victory after a libertarian-leaning third party candidate, Robert Healy, unexpectedly siphoned votes away from Fung.

In New York, Gov. Andrew Cuomo, a Democrat, handily defeated his Republican opponent, Rob Astorino, after raising millions of dollars from the finance industry. The New York legislature is set to send Cuomo a bill that would permit the New York state and city pension funds to move an additional $7 billion into hedge funds, private equity, venture capital, real estate and other high-fee “alternative” investments. Assuming the standard 1 to 2 percent management fees applies, that could generate between $70 million and $150 million a year in fresh fees for Wall Street firms.

Cuomo has not taken a public position on the bill, but his party in the legislature passed it by a wide margin, and he is widely expected to sign it into law.

In Massachusetts, Republican Charlie Baker appeared early Wednesday to have secured a narrow victory over Massachusetts Attorney General Martha Coakley. Baker was a board member of mutual funds managed by a financial firm that also manages funds from Massachusetts’ $53 billion pension system. Baker is also the subject of a New Jersey investigation over his $10,000 contribution to the New Jersey State Republican Party just months before New Jersey Gov. Chris Christie’s officials awarded his firm a state pension deal. Christie, whose Republican Governors Association spent heavily to support Baker’s campaign, blocked the release of documents related to that investigation until after the election.

In all, Republicans won 18 gubernatorial races thanks, in part, to the robust fundraising of Christie’s Republican Governors Association. Some of that organization’s top donors are the financial investment firms that manage public pension systems.

Former Securities and Exchange Commission attorney Edward Siedle said campaign cash from the financial industry has fundamentally shaped the debate over how to manage state pension systems.

“Why have all pension reform candidates concluded that workers’ retirement benefits must be harshly cut, but, on the other hand, fees to Wall Street be exponentially increased?” said Siedle, who has published a series of forensic reports critical of the shift into alternative investments. “Why has no candidate dared to propose public pensions dump the costliest, riskiest underperforming investment products ever devised by Wall Street—hedge and private equity funds—in favor of proven ultra-low cost index funds, as recommended by the nation’s leading investors, Warren Buffett and John Bogle?...The answer, of course, is that more money than ever is being spent by billionaires to support a public pension Wall Street feeding frenzy.”

e-max.it: your social media marketing partner
 

Comments   

We are going to return to our original fully-moderated format in the comments section.

The abusive complaints in the comment sections are just too far out of control at this point and have become a significant burden on our staff. As a result, our moderators will review all comments prior to publication. Comments will no longer go live immediately. Please be patient and check back.

To improve your chances of seeing your comment published, avoid confrontational or antagonistic methods of communication. Really that is the problem we are confronting.

We encourage all views. We discourage ad hominem disparagement.

Marc Ash
Founder, Reader Supported News

 
+1 # artistinaspen 2014-11-05 17:35
Just say no.
 
 
+7 # PeacefulGarden 2014-11-05 18:00
I love it. It is like looking at a storm brewing. It is like rich people acting all important with large sums of money, moving it here and there, then moving it back and forth, and putting into a Wampum Fund, and then watching it vanish. I love this stuff.

Anybody gonna guess what the outcome of this is gonna be?

Ah, money managers with sticky fingers, working really hard in their offices with telephones ringing and important lunch dates... they are just so important beyond the importance that any of us can imagine... I cannot wait for the disaster rhetoric.
 
 
+10 # Ken Halt 2014-11-05 22:27
"The answer, of course, is that more money than ever is being spent by billionaires to support a public pension Wall Street feeding frenzy.” That pretty much says it all when it's combined with the disengagement of the US electorate from any kind of critical thinking. Apologies to Barnum, but nobody has ever gone broke underestimating the stupidity of the US populace. There should be a competency test for voting.
 
 
+4 # MidwestTom 2014-11-06 07:11
The Ruling Class wins again. Note that they own both parties. I am afraid, and do moot know when, that this will eventually end badly.
 
 
+1 # Helen Marshall 2014-11-06 11:50
How long before the federal government hands over its pensions, including those of the military?
 
 
+3 # Regina 2014-11-06 12:37
The corporatists didn't "win" this election -- they BOUGHT it.
 
 
+1 # socrates2 2014-11-06 16:42
Repeal of Glass-Steagall
+
a Republican/Wall Street victory
=
a generational "extension" of the 2008 second Great Depression...

Be well.
 

THE NEW STREAMLINED RSN LOGIN PROCESS: Register once, then login and you are ready to comment. All you need is a Username and a Password of your choosing and you are free to comment whenever you like! Welcome to the Reader Supported News community.

RSNRSN