Bombshell: Plutocrats Brazenly Collude to Hurt State Economies and Screw Working People by Lynn Stuart Parramore [1]
These days, many Americans walk around feeling like no
matter how hard they work, how much they manage to save or how carefully they
plan for the future, the game is rigged against them. They suspect that behind
closed doors, CEOs and Wall Street honchos are eagerly scheming to rip them
off.
Their worst fears of corruption and collusion just came
true in Illinois, where corporate titans were caught red-handed in the act of
Rigging the Game.
Let’s step inside a recent gathering of the corporate-backed
Union League Club of Chicago, where former Illinois Attorney General Ty Fahner,
who now leads a band of plutocrats known as the “Civic Committee of the
Commercial Club of Chicago,” recently launched into an hour-long diatribe on
the evils of state pensions.
Fahner, a top GOP fundraiser, can’t abide the notion that
teachers, firefighters, nurses and other public workers in the state of
Illinois can still expect a decent retirement. Not a luxurious retirement, mind
you — the average pension is $32,000 a year, and most state employees will not
receive Social Security. But even a modest retirement for hard-working people
is too much for today’s fat cats.
Fahner is part of a virulent strain of public raiders and
economic crackpots who have become dominant in the Republican Party (and
increasingly among the Democrats, too) who are hell-bent on destroying unions
and attacking public employees. Ultimately they wish to privatize everything
and reduce their tax responsibilities down to nothing.
That’s why Fahner has declared war on pensions and is
promoting a pension crisis in order to justify it. He has called for
cost of living cuts, raising the retirement age, capping pension earnings and
shifting the cost of the pension obligation of teachers to local school
districts, many of which are too poor ever to pay. He styles
himself as a savior who wants only to protect the public from debt, when in
reality he is a brutal plutocrat who will stop at nothing to line his pockets
at public expense and reduce his and his friends' taxes.
Illinois has real problems. However, Fahner desperately
hopes the public will not catch on to the fact that states are having
difficulty paying out pensions because of the lack of revenue caused by a Wall
Street-driven financial crisis and the deep recession it set off, regressive
taxes, and the myriad bond scams financiers have already inflicted on states,
cities, towns, and municipalities which have triggered funding crises for
pensions and other programs. (See How Wall Street Fraudsters Plunder Public Finances, And 5
Ways to Fight Back [2]).
Fahner has tried a number of dirty tricks to attack
pensions in his career. But his most recent admission is absolutely
breathtaking in its brazenness: He boasted of working to scam the Illinois bond
rating.
During Fahner’s talk to the Union League Club, an
unidentified person in the audience suggested that pressuring credit agencies
to rig the state bond ratings in order to attack pensions might be a jolly good
idea. Fahner gleefully replied that he had already thought about that — and his
group has tried it.
Audience member: “Maybe sometimes you gotta be
irresponsible to be responsible. If a political solution really doesn’t produce
a favorable outcome, maybe you really need a market solution. And a market
solution, I don’t mean bankruptcy, I mean actually talking down the state
rating even further so the state’s bonds essentially become below investment
grade. And it drives up the borrowing cost to the state and all of us to a
significant level enough that you really feel the public pressure…”
Fahner: “The Civic Committee, not me, but me and some of
the people that make up the Civic Committee… did meet with and call – in one
case in person – and a couple of calls to Moody’s and Fitch and Standard &
Poors, and say, How in the hell can you guys do this?"
Fahner went on to take credit for downgrades to Illinois
credit ratings, saying, "If you watch what happened in the last few years,
it's been steadily down.”
Check out the video at minutes 46:30 to 49:43 for the
full remarks on the ratings scam: Fahner: Civic Committee helped jaw down state’s bond rating
[3].
As the audience member correctly adduced, pushing down
the bond rating is a great way to screw workers, the state and taxpayers.
Pension funds buy bonds, often from the state, to stay financially healthy. In
order for the pension fund to buy the bond, it must have a passing grade. If
the grade is lowered, say from A to B, the price of the bond goes down, and the
pension fund will suffer a loss. If the bond rating is dropped below a minimum
standard, then the pension fund must sell the bond, and take a much bigger
loss.
Lowering the bond rating also has the effect of
artificially inflating the interest rates that bond holders must pay on future
bonds, making them more expensive to buy and reducing the state’s ability to
borrow. The basic idea is to manufacture a crisis by financially starving
pension funds. Fahner & Co. know this will put political pressure on
Illinoisans to take away worker pension benefits.
In a nutshell, here’s what the video reveals:
· Corporate honchos — some of
whom may have a vested financial interest in Illinois bonds — feel perfectly
comfortable calling and exerting pressure on ratings agencies.
· Ratings agencies are political
entities whose supposedly impartial research can be influenced and perhaps even
bought.
· CEOs think nothing of
willingly and knowingly screwing the bond rating and economic standing of their
home state in order to enact their anti-worker philosophy and fatten their own
bank accounts.
· Proclaiming you are “fixing”
state fiscal problems is a great cover for potential insider self-dealing in
the bond market.
· Committing economic treason
against fellow citizens and taxpayers is simply a matter of course for today’s
American plutocrats.
The We Are One Illinois union coalition has released a statement [4] condemning Fahner and
calling for an investigation into the matter:
"Ty Fahner and unnamed members of his
corporate-backed committee have shown their true colors. Fahner bragged openly
about joining members of the business-backed group, behind closed doors, in
lobbying credit rating agencies to lower Illinois' bond ratings in an
irresponsible and unethical attempt to put the state in an even more difficult
position. They show total contempt for the taxpaying public, total disregard
for the difficult fiscal challenges the state faces, and total hypocrisy over
their alleged care for the working families of Illinois.
"In addition, a serious conflict of interest may exist if
either these unnamed CEOs or the big corporations they control profited in any
way from lobbying to make Illinois pay more interest on its bonds—bonds which
they or their corporations may hold."
All right. What the hell can be done about this shameless
hustle?
The state attorney general should immediately open an
investigation into whether any members of Fahner’s group sold bonds before the
downgrades, based on their conversations. That is plainly insider trading.
Everyone who held bonds at the time of the downgrades also took a loss.
Attorneys general and treasurers in other states whose portfolios took a hit
should also consider suing, given that political pressure seems to have played
a role in causing their losses. Ditto for private holders and other
unions—anyone who had the bonds at the time of the downgrade.
It’s time for the trustees of the pension funds to stand
up for those whose interests they are charged with protecting, and not shrug
off one more crime against the public interest that reduces pensions for
working people.
Links:
[1] http://www.alternet.org/authors/lynn-stuart-parramore
[2] http://www.alternet.org/economy/wall-street-and-municipal-fraud
[2] http://www.alternet.org/economy/wall-street-and-municipal-fraud
[3] http://capitolfax.com/2013/07/23/fahner-civic-committee-helped-jaw-down-states-bond-rating/
[4] http://www.weareoneillinois.org/news/coalition-calls-for-investigation-into-corporate-ceos-who-lobbied-for-illinois-bond-downgrades
[4] http://www.weareoneillinois.org/news/coalition-calls-for-investigation-into-corporate-ceos-who-lobbied-for-illinois-bond-downgrades
Is there money to be made in the crazy derivative market by betting an what the credit rating of the state of IL would be? Is that what they were doing--influencing the credit rating of IL so that they can cash in on the bets concerning the rating of the state of IL.?
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