What Did They Know and When Did They Know It?

[Secretary of Treasury Henry Paulson]

[Secretary of Labor Elaine Chao]

[Secretary of Commerce Carlos Gutierrez]

[PBGC Director Charles E. F. Millard]

The Pension Benefit Guaranty Corporationis a federal agency which insures that companies can continue to pay pensions even if the companies go bankrupt. It is pension insurance.

From today's NY Times -

blah blah blah.....

Last year, the agency’s board — made up of the secretaries of the Labor, Treasury and Commerce Departments — voted to allow it to shift its investment strategy to put more money into stocks, private equity and real estate, in an effort to reduce the deficit.

If that shift had taken place, the losses would most likely have been larger. But a relatively small amount of the funds had already been shifted to stocks, so the losses on the investment portfolio were responsible for just $3 billion of the jump in the deficit in the last six months.

The agency’s more aggressive and risky investment strategy, the rising deficit and questions about possible improprieties by its former director, Charles E. F. Millard, will all be addressed at a Senate hearing scheduled for Wednesday afternoon.

Mr. Millard, who resigned in January, has been accused by the agency’s inspector general of having inappropriate contact with companies including BlackRock, JPMorgan Chase and Goldman Sachs as they competed last year for the right to manage $2.5 billion worth of the agency’s portfolio, contracts that may now be canceled.

So they were just about to switch the pension guarantee money from treasury bonds to the stock market? And there were "improper contacts" between the now-former director and the biggest investment banks on Wall Street? And the Secretaries of Treasury, Labor, and Commerce were in on it? Was Millard just the fall guy? How much of the money would have disappeared if the transfer to the stock market accounts had happened?

More and more, it appears that the "bad mortgages" cover story is just that - a cover story. A cover story for seemingly global criminality of the business class. As to the current generation, a great many of them should spend a lot of time in rooms with "Martha Stewart was here" carved in the wall above the bunk.

As to how it is to prevented in the future, the answer will have to come from Congress and the Supreme Court. The Supreme Court effectively quashed so-called "strike suits" where a shareholder sues management for mismanagement or improprieties. The Court's reasoning was that these suits were always a scam because management were never really guilty of anything. That is more or less what they actually said.

Thereupon, the foxes were guarding the henhouse. There was no one, no one, between corporate managements and the vast hoards of wealth they were managing, ostensibly on behalf of the shareholders to whom it belonged. Curiously, vast quantities of that wealth have turned up missing. None of this would have come to light but that the economic slide had the effect of turning over the rock and exposing the creepy-crawlies under it to the light of day.

When judges like Scalia, Thomas, Roberts, and Alito are said to be deeply conservative, that is what is meant -- willing to twist the law to defend corrupt businessmen. Notice that one doesn't have to be Karl Marx to favor fiduciaries not stealing from shareholders. In this case the money was the pension funds of the American working class.

I would point out that the paragraphs I have quoted from the Times above are from bottom of the article, that they don't expect many people to read. Most of the article was the "nobody is at fault, it is just a bad economy" paragraphs at the top. Which I have, rightly I think, condensed to "blah blah blah blah blah ...."