History’s Greatest Heist

As through this world I travel, I meet lots of funny men,
Some rob you with a six-gun, some with a fountain pen. -- Woody Guthrie

When I became counsel to the Senate Committee on Finance in May 1980, U.S. money managers oversaw funds totaling ~$1,900 billion. By 2003, they held ~$17 trillion, with more than half those funds (~55 percent) subsidized with tax incentives for retirement security, my specialty as counsel from 1980-87. At present, those tax subsidies reduce federal revenues by ~$110 billion per year, ranking the commitment to retirement security second only to national security (and interest on government debt) as a fiscal expense. To date, pension trustees have allowed senior executives to extract ~$500 billion in cash and capital from firms where these retirement funds are invested.[i] By 2000, their investments had helped put $1,540 billion in the hands of just 400 people, according to Forbes magazine’s annual tally of the nation’s most well-to-do.[ii] The size of the funds at stake helps explain why the scale of this heist dwarfs any previous swindle.

By relying on law and economics theory, fiduciaries charged with oversight of retirement funds allowed them to be ransacked by Wall Street, by Wall Street’s most well-to-do clients, and by a highly paid cabal of complicit service-providers, including brokers, bankers, investment bankers, attorneys, accountants, stock analysts and pay consultants. None of the reforms either enacted or proposed help retirees recover the pilfered funds. No pension trustee has been indicted. No one of consequence has gone to jail. And none of the fines imposed for this multi-year heist have exceeded two percent of annual revenues for any of the Wall Street firms fined.[iii] Instead, retirement plans continue to be plundered by an investment model based on law and economics theory that’s guided by an ethic best described as “drink your fill and thirst for more.”