Looks like the Justice Department is settling cases with banks responsible for the 2008 financial meltdown. Citigroup is next up: and reported to be paying $7 billion to end Justice Department investigations.
But I don’t see any of that money headed back to public pension systems.
…like, say, New Hampshire? In June 2007, the New Hampshire Retirement System Trust Fund held $29.7 million in Citigroup stock. Within two years, that stock had lost 94% of its value. (That’s a lot of retirees’ COLAs, right there.)
…like, maybe, Detroit? In June 2007, the two retirement systems covering Detroit public employees had a total of $343 million invested in mortgages. But after the crash, the systems’ “unfunded pension liability” was one of the main justifications for declaring that Detroit was “bankrupt.” (Read “Detroit’s Pension Systems: not ‘unaffordable’, just battered by Wall Street” here.)
State and local pension funds lost a total of $1 Trillion (yes, with a “T”) in value between 2007 and 2008. NOT a coincidence: those state and local pension funds are now “underfunded” by $1 Trillion.
And now the Justice Department is wrapping up its investigations, with fines to the federal government and assistance to homeowners…
… and nothing, as far as I can tell, in the way of restitution to all those public employees whose retirement dreams were destroyed.
Meanwhile, Wall Street broke more records last week…
…and Governor Chris Christie has decided not to pay New Jersey’s pension system more than $2 billion in employer contributions.
New Hampshire public sector retirees haven’t received a cost-of-living adjustment since 2010.
Detroit’s retirees are voting on whether to accept benefit cuts.
And so far, only one banker has gone to jail (compared to 839 people who were convicted for crimes during the savings-and-loan scandals of the 1980s)…
…and as far as I can tell, nothing whatsoever in the way of restitution to public pension funds.
Does that $7 billion settlement sound like a lot to you? Here’s some context:
- That’s just slightly higher than the $6.4 billion Citigroup had originally planned to spend next year to buy back corporate stock. (Why would a company buy its own stock? “To counteract the dilution of bank shares when executives are awarded stock as incentives.”)
- It’s roughly equal to six-months’ profit for the corporation.
- It’s less than 2% of what Citigroup received in the federal bailout.
- It’s less than one percent of what public pension funds lost in the meltdown.
Read the Rolling Stone’s “Looting the Pension Funds” here.
Read “The Plot Against Pensions” here.