Strange Bedfellows Explained

Hillary's Plan to Loot Your 401k Account

tony-james-blackstone-groupInternational Business Times and Yahoo Finance just posted headline stories on the plan created by Hillary’s Wall Street masters to loot your future retirement savings. Today’s voluntary 401k savings plans will be replaced by mandatory retirement taxes on all private sector workers – and their employers – which would be turned over to Wall Street hedge funds for investment:

Hillary Clinton And Wall Street: Financial Industry May Control Retirement Savings In A Clinton Administration
By David Sirota and Avi Asher-Schapiro, IBT, 10/19/16 at 12:50 AM

While Hillary Clinton has spent the presidential campaign saying as little as possible about her ties to Wall Street, the executive who some observers say could be her Treasury Secretary has been openly promoting a plan to give financial firms control of hundreds of billions of dollars in retirement savings. The executive is Tony James, president of the Blackstone Group.

It is a plan that proponents say could help millions of Americans — but could also enrich another constituency: the hedge fund and private equity industries that Blackstone dominates and that have donated millions to support Clinton’s presidential bid.

The proposal would require workers and employers to put a percentage of payroll into individual retirement accounts “to be invested well in pooled plans run by professional investment managers,” as James put it. In other words, individual voluntary 401(k)s would be replaced by a single national system, and much of the mandated savings would flow to Wall Street, where companies like Blackstone could earn big fees off the assets. And because of a gap in federal anti-corruption rules, there would be little to prevent the biggest investment contracts from being awarded to the biggest presidential campaign donors.

A Washington power player who reportedly turned down a slot in President Barack Obama’s cabinet, James first outlined the retirement savings initiative in a speech a year ago to the Center for American Progress (CAP). The liberal think tank was founded by Clinton’s current campaign chairman, John Podesta, and is run by her former top policy adviser Neera Tanden. James and Blackstone made six-figure donations to CAP that year, and the group gave him a platform to propose a new payroll tax that he said would fund guaranteed retirement benefits.

Rather than funneling the hundreds of billions of dollars of new tax revenue into expanding Social Security benefits, as many Democratic lawmakers have called for, James proposed something different: A decade after George W. Bush’s failed attempt to divert Social Security revenue into private retirement accounts, the Blackstone president outlined a plan to create individual retirement accounts, some of whose assets would be managed by private financial firms.

Nowhere in these stories do they indicate whether government employees’ 403b accounts (the government sector equivalent of 401k accounts) will be similarly looted. Government employees are the cornerstone of the Democratic base, so they probably won’t be forced to bite this bullet.  And most government workers still enjoy defined benefit retirement plans (conventional pensions) which are but a distant memory for private sector workers.

At first blush, one might think that getting a hedge fund retirement account would be a great deal. After all, hedge funds are now only available to the very wealthy. Hedge funds have been on a long losing streak, however, and are actually looking for fresh sheep to shear:

Investors Yank Money from Hedge Funds after Poor Performance
By Laurence Fletcher and Gregory Zuckerman, MarketWatch/WSJ, Aug. 17, 2016, 7:25 a.m. EDT

Hedge funds and actively managed mutual funds have been underperforming since financial markets began their rebound in early 2009. The average hedge fund is up 3% this year through the end of July, according to researcher HFR Inc., less than half the S&P 500’s rise, including dividends.

Funds in the $2.9 trillion hedge-fund sector have now experienced three consecutive quarters of withdrawals for the first time since 2009, according to HFR.

Beyond their lousy performance, hedge funds have rapacious fees which make it very difficult for an investor to actually realize any net profits.  Why investors are abandoning them in droves and why the hedge funds are looking for fresh victims.  Their standard fee model is the ‘2 and 20 fee structure’.  Divestopedia explains 2 and 20 fee structure:

2 and 20 Fee Structure

The 2 and 20 fee structure is the way that most private equity firms are compensated. The 2 represents the 2% annual management fee on capital deployed that is used to pay salaries, cover overheads and generally “keep the lights on.” The 20 represents the 20% carry over of a certain return threshold that the private equity firm gets to keep.

Most private equity firms work for the 20% carry since this is where most of their compensation is made. A general partnership will stipulate a set return of, say, 8% for its limited partners. If the fund delivers returns of, say, 14%, then the 20% carry kicks in on the incremental 6% return. The private equity firm keeps 20% of 6%, or 1.8%. This can be a substantial bonus when large funds are managed.

The 2 and 20 fee structure is also used in the hedge fund industry. It’s important for business owners to understand this compensation structure so he/she can better assess the motivations and strategies of financial buyers and how it will impact their own business post-transaction.

james-hillary-imageAnyone still wonder why hedge funds are financing Clinton’s campaign for President?

Wall Street for Hillary?:Clinton has $48.5M in hedge fund backing, compared to Trump’s $19K
Published July 30, 2016

Hedge fund owners and employees have so far this election cycle contributed nearly $48.5 million for Hillary Clinton, compared to about $19,000 for Donald Trump, an indication that Wall Street is clearly backing the Democratic presidential nominee.

The total amount of such campaign contributions in 2016 is $122.7 million, twice as much as in the 2012 election cycle, according to a recent federal report analyzed by the nonpartisan Center for Responsive Politics.

With the Democratic and Republican parties’ conventions over Thursday and the general election officially just a few days old, it’s no surprise that pro-Clinton groups have received more hedge fund money.

For nearly six months, Clinton primary rival Sen. Bernie Sanders railed against “big money” in politics and vowed to “reform” Wall Street, with an insurgent campaign that relied largely on small-dollar contributions.

“With a political campaign finance system that is corrupt and increasingly controlled by billionaires and special interests, I fear very much that … government … is beginning to perish in the United States of America,” Sanders said. “We cannot allow that to happen.”

In addition, Clinton, a former secretary of state and New York senator, has clear ties to Wall Street, with critics repeatedly pointing out that in recent years she has received $21 million in speaking fees from Goldman Sachs and other Wall Street firms.

This story goes far beyond Michigan, but it is going to really hurt a lot of Michigan residents if Hillary is elected.  It also explains the incestuous relationship between the Hillary Clinton campaign and the ‘Masters of the Universe’ on Wall Street.  Classic crony capitalism.  Now you know exactly what a Hillary Clinton Presidency will cost you when you retire.

Cat food, anyone?

You Betcha! (13)Nuh Uh.(1)

  2 comments for “Strange Bedfellows Explained

  1. Sue Schwartz
    October 19, 2016 at 8:47 pm

    Please get this out 10x25MM.

    Spelling Lesson: The last four letters in American ... I Can
    The last four letters in Republican ... I Can
    The last four letters in Democrats ... Rats

    Let us pray. . . . . . Dear God, please make November 8, 2016, Rodent Removal Day. AMEN.

    You Betcha! (4)Nuh Uh.(0)
  2. JD
    October 19, 2016 at 11:16 pm

    Great piece.
    I'll take one exception to the following:
    "..Government employees are the cornerstone of the Democrat base so they probably won't be forced to bite this bullet.."

    Government employees are the cornerstone of EVERY party's political base as witnessed by both Michigan establishment Republican AND Tea Party silence surrounding (you guessed it):
    "NO-VOTE-OF-THE-PEOPLE-REQUIRED" ***PENSION OBLIGATION BONDS*** (soon coming to a local unit of government near you and to state 'government' workers as well).

    There has never been an issue costing more to our children that has been more 'toxic' than POBs right her eon Right Michigan (even after Republicans/Democrats alike added the 'health care' bonding aspect to Michigan law just recently).

    Tea Partiers keeping their mouth shut on POBs (currently) would obviously rather have 'their' pension benefits 'managed' by taxpayers on a guaranteed delivery basis with NO hedge fund involved AFTER their bloated/corruptly earned checks or benefits are delivered to them in perpetuity. If this is not true, when have you EVER witnessed a TeaPartier or better yet TP (cough) "LEADER" slamming no-vote-of-the-people-required POBs???

    "YOU (Joe six pack) will be fed to the wolves of Wall Street..while WE (government pensioners) *FIRST* receive every dollar that you earn for OUR corrupt, bloated (unheard of) retirement packages BEFORE our pet wolves take the rest!.."

    If government pensioners are not the cornerstone of EVERY establishment and grassroots political movement here in America?

    I must have missed something.

    You Betcha! (0)Nuh Uh.(4)

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