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      *One vial of insulin cost $21 in 1996, compared to $320 in 2018. The cost of Big Pharma’s outrageous greed is American lives. If they will not end their greed then we will end it for them.* —Bernie Sanders Corporations are bundles of rights. The most important right is a shield from liability. Corporation rights […]
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Reviving the Wooly Mamouth or Surviving the 401(k) Scam

It’s just a drop in the bucket of mostly misleading information but this post deserves attention:

The 401k Scam by By Nathaniel Downes

The Demos report is an eye opener as to the hidden costs which cause 401k programs to not only fail to keep up with inflation, but to fall behind even the base amount invested into these funds.

What they found was that, for the projected samples that the 401k would lose over $155k for its entire lifetime. Since the entire sample fund at the time of retirement would be $320k, that means a full third of the money which was put into the system was taken by the 401k itself in the guise of fees.

How does this work you may ask? The report goes into detail, but we shall give a simplified example here.

First, your 401k funds are typically put into mutual funds, so let us first address those.

If you put $10,000 into a mutual fund which lists a 3% return, it sounds good, yes? But that is after the fees are deducted. These fees are listed as a percentage of your total investment, but they are deducted from the revenue generated. You get $300 added to the $10,000, but that was after the $150 in “expense ratio,” mutual fund fees such as marketing fees, management fees, and administration feeds, as well as $150 in direct transaction fees have been removed. Your $10,000 had earned $600, but half of that was eaten up in fees. And it does this each and every year. $300 every year for 40 years gives you $12,000 in total fees deducted, more than your original investment.

After some easy to follow charts and more explanation he goes on to describe how pensions are different:

By comparison, a pension plan is a form of insurance, similar to what you would find for your automobile or your healthcare. Money taken in is used to pay out for those who have met the qualifications for payment. Many of these systems use surplus funds to invest in stable, fixed investments, such as treasury bonds. Social Security works in this manner, surplus funds paid in go into a special trust fund filled with US Treasury Notes, pre-paid cash in effect. The trade-off for this is that the amounts paid out are not directly owned by the individual, they are a large pool that all tap into.

(post title stolen from a comment following the post)

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The NYTimes finally puts LIBOR on the frontpage

It took long enough.  This article even starts poking around the edges at the Federal Reserve Bank of NY:

As big banks face the fallout from a global investigation into interest rate manipulation, American and British lawmakers are scrutinizing regulators who failed to take action that might have prevented years of illegal activity.

Politicians in both London and Washington are questioning whether regulators allowed banks to report false rates in the run-up to the 2008 financial crisis and afterward. On Monday, Congress stepped into the fray, requesting information about the role of the Federal Reserve Bank of New York, according to people close to the matter.

 […]

On Monday, the oversight panel of the House Financial Services Committee sent a letter to the New York Fed seeking transcripts from at least a dozen phone calls in 2007 and 2008 between central bank officials and executives at Barclays.

“Some news reports indicate that although Barclays raised concerns multiple times with American and British authorities about discrepancies over how Libor was set, the bank was not told to stop the practice,” Representative Randy Neugebauer, a Texas Republican and the head of the House oversight panel, said in the letter, which was reviewed by The New York Times.

Tim Geithner was the head of the Fed in NY during the time frame in question.  It is hard for me to imagine that he didn’t know that LIBOR was being manipulated.  We have already heard the panic defense, that if the true LIBOR rate was known, a financial apocalypse would have swiftly followed.  But it’s the aftermath of the manipulations when the panic had subsided that intrigue me.  Tim Geithner gave a lot of advice to Obama that was very friendly to bankers.  But he must have known that a couple of banks, like Citigroup, were insolvent.  Yet instead of nationalizing those failed banks, we merely stress tested them, bought their toxic assets and bailed them out.

Much of our current unemployment woes and struggling economy can be traced back to those early days of the Obama administration when we saved the bankers and ignored everyone else’s needs.  There were many smart people who were in favor of being more aggressive with the bankers and making a strong case for a bigger fiscal stimulus package.  They were ignored.  You can blame the Republicans, if you are so inclined.  But let’s remember that the Democrats were in charge in the first two years.  We can only speculate how they might have come together to push financial reforms and New Deal programs if we had only known how serious the situation was.

Hiding the true nature of the financial collapse from our elected officials amounts to a coverup, in my humble opinion.  It’s a coverup that cost many of us our houses, jobs and security.  Heads have got to roll for this one and THIS time, we have to demand that the parties responsible are held fully accountable.  There has to be real reform and perp walks or our present economic environment will never get better.

Yes, it sucks for the White House that it all comes to light in an election year.  What can I say? When you sell your soul to a bunch of people who have more money than God, they usually expect something significant in return. It looks like they got it.

Has someone found a smoking gun?  Reuters reports that Geithner had a “Fixing LIBOR” entry on his calendar in 2008.  Does that mean fix the rate or fix the problem with banks manipulating the rate?  Such ambiguity.

In early 2008, questions about whether Libor reflected banks’ true borrowing costs became more public. The Bank for International Settlements published a paper raising the issue in March of that year, and an April 16 story in the Wall Street Journal cast doubts on whether banks were reporting accurate rates. Barclays said it met with Fed officials twice in March-April 2008 to discuss Libor.

“FIXING LIBOR”

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a “Fixing LIBOR” meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

It is unclear precisely what was discussed at this meeting or who attended. Among those invited, along with Geithner, was William Dudley, who was then head of the Markets Group at the New York Fed and who succeeded Geithner as its president in January 2009. Also invited was James McAndrews, a Fed economist who published a report three months later that questioned whether Libor was manipulated.

It doesn’t look like LIBOR got fixed.  But clearly, Geithner knew what was going on.  And if he didn’t have a come to Jesus meeting with politicians right after he took office to explain how dire the situation was, then what can we conclude except that he was operating in the bankers’ interests at the expense of ours?

This s^*( is serious.  It affects mortgages, credit card rates, student loans and economic health and every decision that has been made in the past 4 years.  The timing is even crucial.  These meetings were taking place in the middle of the primary season when money was pouring into Obama’s campaign coffers from Wall Street and crazy Obots were screaming for Hillary Clinton to quit the race even as she was still winning big state primaries.  We know from other sources that the meltdown started in 2007.  So, even our primaries might have been affected by the shaky bank situation.

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were “on the case reasonably quickly” after questions were raised in 2008.

“It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting,” Duffie said. “I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior.”

Surprise!

One last thing: If Geithner want to fix LIBOR in April of 2008, why did it take the CFTC to launch an investigation about it in March of 2011?  You’d think something as big and potentially litigious as a LIBOR scandal would have prompted swifter action. The fact that that didn’t happen suggests there is some bigger thing that is being covered up.  I can’t imagine what it is but it must be huge.