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Forum Post: Socialize Pensions

Posted 12 years ago on Oct. 31, 2011, 12:26 p.m. EST by Adversus (83)
This content is user submitted and not an official statement

If the government pays our pension out of it's tax revenue rather than us paying into a fund then this would remove the life blood they get from pension funds. They then wouldn't have a source of capital where they have no one to answer to.

As the problem is that we are shareholders in these companies/banks throught the pension system yet we have no control how they are run and therefore have no ability to curb management greed. Infact many of the managers of the funds sit on the boards so it's in their interest not curb board and management excess. After all it's not their money.

If shareholders or bondholders who have the power to remove excessively greedy directors don't do so or sell their shares and then later loose all the money. Well that's their own fault. There should never be bailouts as that's simply government investing our money which is far too at risk of corruption.

As most people now are worried about the future and their retirement then personally I think if only the candidates who guaranteed this where supported by the movement then it would be relatively simply to do.

Remove the pension system funding of the market and you'll remove the moral hazzard. This is the core that is rotten.

If the politicians then go back on their promises then it's time to get the guns.

Don't let ideologues take control.

I'm mostly quite a laissez faire captilist due to the fact I don't like/trust government control but the way the system is setup (almost forced pension funding aided by tax breaks etc) is neither right or left, just corrupt.

I'm a CEO of a small company and I've seen how the system works from the inside.



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[-] 1 points by sfsteve (151) 12 years ago

Invest all the state's public sector pension funds into a newly created state bank. The bank will act as a invest in the local economy by lending to residents and small businesses. The bank will not invest in the stock market. With a very large number of relatively small loans, there is reduced risk. The bank could also manage the accounts of every government agency saving huge amounts of money in interest and fees charged by commercial banks.

[-] 1 points by Adversus (83) 12 years ago

It would have been better than bailing out the banks however government is horrible at doing this kind of thing and picking winners due to again the moral hazzard principle.

What will happen is that the civil servants will invest in those that promise them a quid-pro-quo (much the same as the pension fund officers) or simply be incompetent at choosing the winners and loosers.

Simply reinstate the moral hazzard and capatilsm will work.

btw - I've been involved with government run funds to know this first hand :-)

[-] 1 points by sfsteve (151) 12 years ago

I am not familiar with the term moral hazard in the context you are using it. How does reinstating it work?

As far as having a State run bank that invests in micro and local loans, I would have it ran entirely transparently with a board appointed by public officials. There would have branches with employees who process loan papers and approve them based entirely on qualifications set forth by the state government.

As any fund it would have mixed risks, but it would be invested entirely within the state. The way a bank makes money is on fractional reserve lending. They only need $100 on deposit to lend up to $1000. With this multiplicative effect, they make 9x the interest on leveraged deposit than they would if they collected interest only on the deposit itself.

Because they leverage more than they have, banks can tolerate a large amount of defaults without loosing much. The only problem is periods where the default rate becomes significant. What happened in 2008 was such a time and correspondingly, many banks found themselves leveraged beyond the legal limits and were forced to close. Meanwhile the too big to fail banks, leveraged well beyond legal limits, are bailed out.

Why not have state bank that can enjoy the same benefits as a commercial bank at the same time, provide competition to commercial banks?

[-] 1 points by Adversus (83) 12 years ago

Because in the case of a state bank the government become the shareholders and therefore have the responsibility to make sure it's run in a competitive, efficient, non corrupt manner.

That's the moral hazzard, government employees responsible for investing public money.

They will become the new Wall Street. What you will get is either corruption or incompetence. It doesn't matter how it's set up, people will find away round it.

Infact it will be worse, Big Banks still had shareholders to answer to, in this case the shareholder would be the government and while they're answerable to the voters do you really think the voters would do a better job than shareholders did with Wall Street?

Just simply pay pensions out of everyone's taxes. Capatilism doesn't need the pension system funding to work and paying out of taxes eliminates the chance government can mess it up.

More goverment isn't the answer.

[-] 1 points by bronxj (150) 12 years ago

Each share of stock has generally one vote. XYZ pension fund is currently funded by contributions from XYZ (the employer) and XYZ’s 1000 current employees. Beneficiaries of the fund are XYZ’s current 750 retirees (fully vested, collecting, no longer contributing).

XYZ Pension fund buys 1,000 shares of ABC. Who gets the 1000 votes?

[-] 1 points by Adversus (83) 12 years ago

Sorry when I say socialization it just means that the government pay for it out of taxes.

[-] 1 points by MattLHolck (16833) from San Diego, CA 12 years ago

so contributions to pensions would give voting rights to the members?

[-] 1 points by Adversus (83) 12 years ago

Sorry when I say socialization it just means that the government pay for it out of taxes.

[-] 1 points by Adversus (83) 12 years ago

It wouldn't work.

If you mean voting rights for the companies they invest in: Pension funds invest in many companies and probably do so via financial instruments which would make that impossible.

If you mean voting rights for the board of the pension funds themselves: It wouldn't work either because the people would need to be aware of how the system works to be able to judge if a manager is doing a good job. Plus there would still be too many degrees of separation to avoid moral hazzard.

The market should be for those that choose to play it, not financed by those that don't.

Regulation also won't work as currently pension funds are required to only invest in safe investments however the regulators are in on the game too.

[-] 1 points by MattLHolck (16833) from San Diego, CA 12 years ago

I mean voting rights for the workers of the company

but this about pension funds

[-] 1 points by Adversus (83) 12 years ago

I watched something where people did that by Michael Moore.

I tried to do that with my company however what I found was that employees don't want to be shareholders. They don't want to take the risks i.e. providing capital (even if that just means reduced salaries).

They simply want to be paid which is absolutely fine but you can't expect to have a say or share the rewards if you don't stand to loose anything other than your job if things go wrong.

Plus the capital to fund the company has to come from somewhere and then if the company starts doing badly then as shareholders they would either be expected to invest more money (pay cuts or even giving money) or expect to have their share diluted and then if that happens it's pretty much the system we have.

You are free to buy shares in most companies you work for and it's actually something that's really encouraged.

It's a left wing idea that sounds good but doesn't work in practice. I tried it.

[-] 1 points by MattLHolck (16833) from San Diego, CA 12 years ago

point taken

[-] 1 points by Bambi (359) 12 years ago

Again.........it's YOUR money.....NO ONE has a gun to your head what to do with YOUR money. Don't like the way pension funds work? Go find a better way for YOUR MONEY. Take charge.

[-] 1 points by Adversus (83) 12 years ago

Actually that would be acceptable to me however then the tax system would have to be rewritten to not give pensions any tax breaks.

The problem with doing this is that most people wouldn't save or invest and we would have a huge problem with old age unemployment and poverty. You could make the argument sure that's their fault and I can't disagree however it would be bad for society so socialization is a better way to go.

"Free from ideology"

[-] 1 points by Adversus (83) 12 years ago

I forgot to say, if this is done then the pension funds could be immediately paid to their customers injecting a lot of disposable income into the system for people to start buying stuff.

It wouldn't increase public debt and it would go to the very people it needs to, the 99% who create the demand for the economy.

[-] 1 points by Bambi (359) 12 years ago

The problem here is that EVERYONE has to do a "protest" or nothing will work or change.

[-] 1 points by Adversus (83) 12 years ago

Not true, just enough people here have to agree with my argument and make this their one reason for voting for an elected official. It's the best thing about our democracy, we have 99% of the votes. We don't need to protest, just simply vote smartly.

This is more important than anything as it's the corruption that needs to be broken first and this will do that plus with the added advantage of creating demand for the economy.

After that we can return to party lines.

[-] 1 points by Bambi (359) 12 years ago

That's very true. I just meant with this protest everyone has to do it to even make a dent....VOTING is the BEST way but unfortunately not 99% vote....There is the problem. OR they go into the booth and just check the first name they see.They vote because that is how their family and friends vote. Heck I did that for YEARS..voting the way my family did. I don't know why other than it was tradition to be on the same "team". Finally one day I got smart and said hey wait a minute......and vote the way I want to vote. I do my homework to figure out who I want to represent me.

Perhaps instead of fighting Wall Street why not take that energy and get people to vote the bad out and the good in?????

[-] 1 points by Adversus (83) 12 years ago

Because there is no good. It doesn't matter who you vote for. We tried voting in Obama who was as close to a grass roots movement and as seemingly trustworthy as you could hope.

What did he do? Put Goldman Sach's on his team :-)

People are naturally corrupt and selfish, what we have to do is design a system that can't be corrupted. That's why voting on a single issue is the only power we have.

Which means elminated instances which are open to abuse and the pension system is the main one.

btw - I'm not attacking Wall Street, I'm a capatalist. I understand the function that Wall Street provides. This is about corruption.

[-] 1 points by Bambi (359) 12 years ago

Wish I had an answer how to get rid of corruption. People are strange when it comes to money. A local woman who worked for an agency to assist those who were going to lose their homes to foreclosure, stole over $300,000 from 125 clients that came to the agency for HELP. Instead they got ripped off by her. Allegedly she is a "good person" but the opportunity was there to steal money. BTW this agency is part of HUD. Obviously HUD does a crappy job of watching their employees.

In government you know the people in it have HUGE egos. Some are there to help US but the majority could care less. They are interested in money, bribes, fancy cars, fancy homes, etc. Some might even start out corruption-free but then it begins to look like a good idea to..........

[-] 1 points by Adversus (83) 12 years ago

Capatilism reduces corruption if left alone by government.

In your case you came to the conclusion that HUD does a crappy job watching their employees.

If that's a privately owned company then they would go bankrupt due to this however if it's government run then that wouldn't happen and the corruption would grow. Infact the government officials would simply tax us more to cover up their incompetence.

If it's a private company and gets bailed out, well that's worst of both worlds. Private profits and public loses and we're back to Wall Street ;-)

[-] 1 points by Bambi (359) 12 years ago

I believe in Capitalism and throughout the years you can see it works.

I think that company was privately owned. It does have insurance that SHOULD be paying these victims back but so far that hasn't happened. They blame it on the employee that took the money and have shrugged and said "oh well" to the victims. The government is the one that arrested her and has taken her to court so that leaves a bit of confusion in my mind. This happened back in this past January and is STILL in court. Now we know the government is involved L

I do know that the company she worked with combined their services with another company. I haven't read if they filed bankruptcy or not. Need to check into it.

[-] 1 points by Adversus (83) 12 years ago

If an employee acts on behalf of a company then the company should be liable. As you said it's their responsibilty to monitor their employees.

But you don't know the actual facts of the case.

The perpetrator might have said to the client, "I'll do this off the books as a private individual, that way they won't take a cut". The victims may have agreed and therefore it wouldn't be the company's fault.

You just don't know until it goes through the courts and the whole facts are known.

Either way it sucks for the victims.

[-] 1 points by Bambi (359) 12 years ago

For sure.I happen to know one of the victims. The "perp" would tell the victims give her 5-grand to "get things moving faster"....and that they would get it back "in a check at the end". She was very convincing.....pretending to care about the victim and family..Offering to do things for them to "make it easier". She gambled all the money away (according to the "perp"). Can't tell me the company didn't know this? The "perp" said to the FBI when they knocked at her door that she knew why they were there and that she is "guilty as charged".

[-] 1 points by Bambi (359) 12 years ago

How about taking charge of YOUR money and stop being a shareholder?

[-] 1 points by Adversus (83) 12 years ago

You can't leave a pension fund, they tie you into retirement. That's how they work.

We're shareholders through them.

If shareholders loose their money I agree it's their own fault and I have little sympathy.