As populist politicians call on “the people” to overthrow the financial establishment, they fail to take into account that it’s the people who keep those elite forces in power.
Not just by voting for Republicans but by funding the system with their pension contributions and other investments.
Public employees, for example, invest a total of $4.7 trillion (that’s not a typo, it really is “trillion” with a t) in pension funds. And the managers of the pension funds have been handing the cash over to such elite agents as hedge funds.
But it seems “the people” are waking up.
They’re wondering why their pension contributions are funding the corporations that have been oppressing them for decades. Furthermore, the hedge funds and other elite financial instruments haven’t been performing that well for them. The system really does siphon money into the bank accounts of the richest of the rich, not into the pockets of middle class savers.
An article by Spencer McAvoy, which was republished in Salon.com this morning, describes a “growing movement” to take pension money out of the hands of those hedge fund managers.
The article cites a report by Hedge Clippers, an anti-hedge fund organization launched in 2015 by the American Federation of Teachers (AFT), which found that hedge funds have cost New Jersey public employees $2.7 billion since 2007 – $1.1 billion in below-average returns and $1.6 billion in hedge fund fees.
Yes, fees. The article reports hedge fund managers pocket more than half the profits.
It tells of a pension fund that lost over $84 million and paid more than $133 million in fees in a single year.
Now, “the people” are striking back. McAvoy reports that:
Union representatives of New Jersey state employees on the New Jersey State Investment Council (NJSIC) successfully pushed through an initiative last month to cut the state employees’ pension fund’s investments in hedge funds in half, a reduction of $4.5 billion.
And, according to the article, “increasingly, both universities and public retirement funds are deciding to take their business elsewhere.”
The California Public Employees’ Retirement System (CalPERS) pulled $4 billion in 2014; the New York City Employees’ Retirement System (NYCERS), largely at the urging of the AFT, divested $1.5 billion in April. The Illinois State Board of Investment, the University of California, and the University of Maryland have also all initiated reductions in their investments in hedge funds in just the past few months, and Pennsylvania’s auditor general has called for an audit of all state hedge fund investments.
So where does all this pension money go now?
I am no financial expert, of course, but it seems obvious to me that “the people” should pool their capital in populist institutions – cooperatives and credit unions, for example.
And I wonder if Congress could be persuaded to encourage such institutions instead of enriching the prodigal hedge fund managers and their ilk through low “carried interest” rates and egregious tax code loopholes.
But I know such populist policies will remain a pipe dream as long as Republicans control Congress. And I can only imagine the havoc if they win the White House as well.