on 401k

The 401Ks are the most painful manifestation of the Bush strategy as directed by wealthy interests in this nation to redistribute wealth back to turn-of-the-twentieth century standards of a bifurcated United States: the Rich and the Rest of Us.

Remember the first initiative of the Bush II regime: “Reform Social Security” - by privatizing it and essentially converting it to Wall Street managed 401 Ks. It failed. But, the chaos that ensued in the days that followed the attack on the World Trade Center allowed the Milton Friedman acolytes who bridged the Treasury (Greenspan) and the White House (Cheney’s cadre) to run the money out the back door by waging a $1Trillion enterprise in Iraq funded with artificially low interest. Sooner or later, the pressure would find its release in a second shock: decreased valuation by 42%. That is what Americans are suffering now in their equity holdings, mostly suffered in 401 Ks.

But, even those who attempted to manage their funds through bank and investment fund pools that advertised safe hedges, such a “Municipal Bond Funds” that were billed as “safer than owning individual bonds with the same tax advantages,” have seen their funds tank while those funds let money out via holding and trading ‘fees’ and pooled - largely unaudited claimed holdings that seem to have been stuck with a disproportionate share of bonds where municipalities are hardest hit by invisible shrinkage and non-enforced compliance reporting.

Meanwhile - the average Joe is being given the privilege of going into a talk-show driven rage over the AIG executive compensation bonuses totaling $65million. That’s a cheap scam considering the Republicans and their fellow tax cheats The Rich have skimmed at least $13 Trillion out of the rest of us.

The Republicans are depending on your continued stupidity in harping on about the ‘deficits for your grand children’ represented by the current propose budget. Those deficits will be their along with wars and misery if you don’t act. Look at the “War with China” story plants coming out of the Pentagon already.

It is time to realize that Murdock is the evil twin of Hearst and represents everything that Hearst was accused of and more. It is the unremitting propaganda that is delivered via Fox News as ‘free’ or ‘basic’ cable news throughout the trailer camp economy of middle America that is driving the ’story of the day’ of Rove politics and which robbed your 401K and then gave you “Joe the Plumber.” If you want to think about what to do about it - shove this budget and a rich tax down the throat of a fat, white, middle aged, millionaire, Republican today who insists that he has your ‘best interests and that of your little unborn granddaughter or son closest to his heart.”
— jwp-nyc





If I could have taken my 401k money when I stopped working and invested it in bigger first home, or a beach house, I’d have doubled my investment. But the laws require that it be “protected” by some custodian like Merrill Lynch or Lehmann Bros or Bernie Madoff or CitiGroup or….

Just as Jack said above, the managers profit, and we pay.
— Deb




401k’s are a basically a government requirement that workers hand over retirement savings to the crooks on Wall Street. The only way most workers can get an employer to contribute to their retirement is through these vehicles. The law MUST be changed to get rid of these things.
— Rob Levine


I clearly remember the days when fixed pensions converted to 401K plans. At the time, I was making about $24,000 a year and would have been fully vested in the company fixed pension scheme in another six years. ERISA meant my pension would have been protected even if my employer disappeared before retirement. The truth is that 401K plans were never set up to benefit workers, rich or otherwise. At the time, employers like the U.S. auto industry were screaming about being uncompetitive with Japan because of the burgeoning liability of fixed pension reserves . Workers like me were handed glossy brochures and told to pick our poison. And the rest is history.

— Retiring on air

On Geithner-Obama's plan

1) Obama's housing plan will not stop the avalanche of foreclosures, which means the toxic assets the taxpayers will be on the hook for will become more, not less, toxic. See my op-ed with Professor Geanakoplos, Matters of Principal (NY Times 3/5/09) and Congressional Oversight Panel's finding (3/6/09 p.32) both finding that negative equity --not addressed by Obama housing plan-- is the single best indicator of default. IMF report supports this position too. The data is just irrefutable.

2) Winstar! Both the President's housing plan and this new bank plan are based, not on legislation, but on contracts between the government and private actors.

Winstar is a Supreme Court case, coming out of the savings and loan crisis, which says that when the government enters into a contract with a private party to induce it to do x (here buy these assets), Congress cannot -- when the plan fails -- legislate to adopt a more sensible plan without being potentially liable for HUGE damages to the private parties whose expectations were thwarted. This case, a bad decision but one this conservative Supreme Court will stand by, puts executive agencies (those who write these deals with private parties) above Congress and in effect renders future elections to change policy near meaningless as it allows private contracts made by unelected agency officials to make legislation to change course too expensive to adopt (because it would require paying massive damages to compensate private folks who acted on the basis of the contracts about to be entered into to implement Geithner's plan and the near useless housing plan).

Winstar means that it is not just public bailout fatigue,as Paul Krugman says, that may prevent us from later adopting sensible policy. The costs of sensible policy are likely to become prohibitively high once we walk down this path of inducing private parties to "help" us out of this mess with the Geithner plan to be adopted today (and the housing plan, which also involves private contracts with the big banks, who are the servicers of most subprime mortgages).

A number of years ago, I wrote an article with David Dana, Asooc. Dean of Northwestern Law School, about the anti-democratic nature of Winstar and government policy implemented by private contract instead of legislation. The title was Bargaining in the Shadow of Democracy, published in the University of Pennsylvania Law Review, for anyone interested in learning more about the "tax" that the executive branch can levy on future Congresses by contracts that make future sensible legislation to costly to pass.


Susan P. Koniak, Professor of Law, Boston University

— Susan P. Koniak, Boston University School of Law

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Treasury puts in $1,000,000,000,000. (Looks bigger and more real when one types it out all the way.) It goes in as this: 12% straight up freebie by handing over the money to the banks in exchange for trash and 85% in low-interest non-rcourse loans.

Private investors put in $309,273,835,050 - 3% of the purchase price.

And what price do they pay for this toxic waste that the 'markets' can not value - or at least 'value' high enough so the banks are willing to sell?

The price will be whatever the PRIVATE investors decide - all by themselves to pay for it! Treasury doesn't have a thing to say about it.

And if it turns out that these mortgages really are toxic waste and the private investors bid too high? (And they will since Treasury wants them to bid as high as possible to get the banks to sell their trash.)

Oh well, not a problem. The loans to them are non-recourse and they can walk away and Treasury can't collect a penny from them and the taxpayers lose 85% of what was paid for the loans; the taxpayers lose thier 15% of direct money (now a grand total of 97% of the purchase price) and the investors are out their 3%.

This is NONSENSE! It is Paulson recyled and disguised to pretend that it is a public-private partnership.

Prof Krugman has frequently quipped that Paulson, Bernanke and Geithner suffer from the delusion that there "are no bad mortgage loans or assets - that there are only misunderstood - and thus undervalued -loans and assets" He is depressingly correct.

The markets have already put a price on these so-called assets - and that price is pennies on the dollar. This whole proposal is nothing more than an thinly veiled effort to hand even more taxpayer money over to insolvent - insolvent, not illiquid - banks and take junk that isn't worth even close to what these banks and the Bernanke/Paulson/Geithner want the value to be.

This is more robbery of the taxpayers to prop up walking dead insolvent banks.

Below is the real meaing of all the money that has been thrown at these banks and the financial ssytem:

"The government through bailouts, fiscal stimulus, monetary programs, and every other imaginable bailout has committed over $9 trillion to the cause. You know how many $50,000 a year jobs we can buy with that for one year? 180,000,000. Even with the $1.2 trillion committed by the Fed with the TALF and buying treasuries to lower the interest rate, we could have literally bought 24,000,000 jobs at $50,000 for one year. We could have put everyone back to work for the price of making mortgages go back down to 4% and giving Wall Street another crony capitalist present. "

And now Treasury wants to toss in another $1,000,000,000,000. That would create 20,000,000 jobs paying $50,000 a year!

And in the end, all this propping up of zombie banks won't matter even if they finally start being willing to lend. Aunt Tilly and Uncle Jake out in the real world are broke, busted and flat tapped out. They are in hock to their eyeballs. Household debt (not including mortgages) is now 140% of household income and it hasn't been that high since 1929...... Aunt Tilly and Uncle Jake can not afford to pay the debts they have now let alone borrow more money. And Tilly and Jake don't have a hope of their income increasing as their jobs have been shipped to China and India, their wages cut and their health insurance keeps going up and up. Retraining for a new job is a joke as the wages of college grads have been falling for the past 8 years since there are more college grads then there are jobs that require such education. The jobs in real estate, housing retail suppliers, construction, retail, insurance and finance are gone and are not coming back.

Obama is giving Larry 'Don't regulate the deriviatives market' Summers and Timothy 'I helped create the Paulson palns in '08' Geithner their heads and letting them plow ahead and put into effect the same nonsense proposed by Paulson just dressed up in new trimmings. Welcome to Republican-lite economics.....

We are toast.

— AnnS, MI