Sen. Al Franken from the Oct. 29th Senate Committee on Health, Education, Labor, and Pensions hearing titled Pensions in Peril: Helping Workers Preserve Retirement Security Through a Recession. Video of the full hearing is available there.
Keep up the good work Senator.
(Sen. Paul Douglas D-Ill. - Stuck in the middle of warring factions)
By 1949 Social Security had become hopelessly out of date, with no cost of living increases since before World War 2 and a system that had largely in place since 1935. While a general revamping and updating the system was before Congress, there was also a movement to make Social Security and Pensions private, one which appeared to be favored by management and certainly not favored by labor.
On October 6, 1949, the program America United featured a panel discussion on the Social Security and Pensions funding issue with Senator Paul Douglas (D-Ill), Emerson P. Schmidt of the U.S. Chamber of Commerce, James B.Carey of the CIO and Lloyd Halvorsen of The Grange.
Douglas acknowledged that something needed to be done.
Sen. Paul Douglas: “I think the demand for private supplementary pensions has arisen because the public old-age pension and old-age insurance laws give very inadequate sums to aged people. For example; men who have been employed in private industry are only entitled to $26.00 a month, on the average, under the federal Social Security law. And with the additions for a wife the total for a man and wife is only brought to $40.00 a month. This was inadequate in 1935 with the 70% increase in the cost of living which has occurred since then, it is still more inadequate now. And it is this inadequacy of the public system, which in my judgment has forced the unions to demand a larger amount of private insurance.”
But the solutions were anything but unanimous.
Michael Moore joined the set of the Larry King Live for the full hour. Here's part of the first segment where Michael talks about how much richer the upper one percent have gotten, how much Wall Street loves corporate welfare when they get into trouble and why Wall Street and large corporations are happy when they lay off workers in the United States.
KING: Are you saying capitalism is a failure?
MOORE: Yes. Capitalism. Yes. Well, I don't have to say it. Capitalism, in the last year, has proven that it's failed. All the basic tenets of what we've talked about the free market, about free enterprise and competition just completely fell apart. As soon as they lost, essentially, our money, they came running to the federal government for a bailout -- for welfare, for socialism. And it -- it -- I thought the basic principle of capitalism was that it's about a -- it's a sink or swim situation. And those who do well, the cream rises to the top and, you know, those who invest their money wrongly or, you know, don't run their business the right way, then they don't do well.
And if you run your business the wrong way, where does it say that you or I or anybody watching this has to bail them out?
I understand -- I understand why everybody seemed to get behind it, because a lot of people were afraid, because these people down on Wall Street had taken our money and made bets with it. I mean, they essentially created this invisible virtual casino with people's money -- people's pension funds, people's 401(k)s. They took this money and they made bets. And then they made bets on the bets. And then they took out insurance policies on the bets. And then they took out insurance against the insurance -- the credit default swaps.
So now we know who the real death panelists are!
After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.
The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
And really, who could possibly have a problem with that? Why would we think that enormously powerful financial interests would want to, you know, protect their investments by making sure our health care is less than optimal?
Such poetic irony, don't you think? The deaths of the little people working for corporate behemoths goes to pay bonuses to their company's top earners. Hey, it may be legal - but it sure lacks class.
Banks are using a little-known tactic to help pay bonuses, deferred pay and pensions they owe executives: They're holding life-insurance policies on hundreds of thousands of their workers, with themselves as the beneficiaries.
Banks took out much of this life insurance during the mortgage bubble, when executives' pay -- and the IOUs for their deferred compensation -- surged, and banking regulators affirmed the use of life insurance as a way to finance executive pay and benefits.
Bank of America Corp. has the most life insurance on employees: $17.3 billion at the end of the first quarter, according to bank filings. Wachovia Corp. has $12 billion, J.P. Morgan Chase & Co. has $11.1 billion and Wells Fargo & Co. has $5.7 billion. (Wells Fargo acquired Wachovia at the end of last year.)
The insurance policies essentially are informal pension funds for executives: Companies deposit money into the contracts, which are like big, nondeductible IRAs, and allocate the cash among investments that grow tax-free. Over time, employers receive tax-free death benefits when employees, former employees and retirees die.
Though not improper, the practice is similar to what is known as "janitors insurance," an insurance-on-employees technique that has long been controversial. Critics say the banks' insurance contracts are a way for companies to create tax breaks for funding executive pensions. And some families have complained that employers shouldn't profit from the deaths of their loved ones.
Apparently you weren't the only one living on the "get it now, pay later" plan, huh?
Last year's stock market collapse left the nation's largest private pension plans with a deficit of more than $200 billion, a study released Wednesday said, which could force companies to invest more money in their plans when they can least afford it.
The nation's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008, holding only 79% of the assets needed to cover estimated long-term liabilities. That compares with an $86 billion surplus — 109% of estimated liabilities — at the end of 2007, according to Watson Wyatt, a human resources consulting firm.
Pension plans' assets fell 26% last year, primarily because of investment losses, the study said. A separate study released Wednesday by Milliman said the nation's largest plans lost an additional $54 billion in February.
It's not unusual for companies to have underfunded pension plans, and the deficit typically doesn't affect payouts to near-term retirees. But to avoid future problems, companies with underfunded pensions are required to increase contributions.
Companies are also facing stricter federal funding requirements for pensions, says David Speier, senior retirement consultant at Watson Wyatt. "This combination will require employers to make staggering pension contributions over the next couple of years, at a time when they can least afford them."
