Want secure pensions? Get tough on big banks

Much discussion about the condition of our state pension systems has been taking place this legislative session. A number of bills have been proposed to alleviate the shortfalls and make the systems solvent. Most of that debate has centered on the merits of two styles of retirement plans: defined benefit and defined contribution. I contend that the debate is not broad enough.

John Musgrove

Gary Buchanan recently wrote an op-ed piece about state pensions. He noted that our state pension systems were actuarially sound by the end of the 1990s.

The recession of 2001 changed all that. According to the experts, the 2001 recession lasted eight months, from March to November of that year, and it impacted our ability to keep our state pensions sound without action from the Legislature. The 2003 legislative session, still feeling the effects of the recession, did not have the funds to address pensions. The 2005 session had the funds but not the will to resolve the pension issue. House Bill 181, which I carried in that session, would have made the Teachers' Retirement System actuarially sound out to 30 years, but it died in a Senate committee. In the 2007 session everything worked and by the session's end all the state pensions were on track to be actuarially sound.

Almost as if by design, in December 2007 the actions of Wall Street mega banks took our country into the Great Recession. Experts say the recession lasted for a year and a half, but for many it is still going on. Needless to say, our state pensions were dealt a crippling blow, and just like the discussions fostered by the 2001 recession many ideas have been put into discussion by the 2013 Legislature. In fact, you could probably look up the minutes for those past hearings and use them again.

What's that definition of doing something over and over and expecting different results? I'm not suggesting that we stop shoring up pensions. That has to be done, but that isn't all we should do to protect our pension systems.

The point that is common to all pension plans nationwide is that some component of growth depends on investments. Investments inherently have some element of risk. That is expected. What is not expected are fraudulent actions by too-big- to- fail, too-big-to-jail entities on Wall Street that put our pensions at risk.

And those same entities are going to do it again because they are morally bankrupt. Unless we petition Congress to address the practices and culture of the Wall Street banking industry for the protection of individual taxpaying investors, the mega banks will continue their malicious, oftentimes criminal behavior.

Why is it that we treat a criminal who robs a few hundred dollars from Main Street differently from one who robs several billions of dollars on Wall Street? The one when caught is tried and sent to prison. The other if caught, with a few exceptions so egregious that they can't be ignored, goes unpunished, is allowed to keep the ill-gotten gains, and is probably given a bonus. Simon Johnson said in an article on Bloomberg.com, "It's official, no mega bank will ever face meaningful prosecution," inferring this from the actions thus far by the U.S. Justice Department.

Having the immunity of a crown corporation like these mega banks seem to have has taken many years to achieve by lobbying Congress to strip away at the protections put in place after the Great Depression. Will the Dodd-Frank Act give as much protection as those laws that were repealed, such as the Glass-Steagall Act? Laws for the protection of the individual — if enacted — are deliberately not funded or under-funded and thus the entity cannot be properly staffed. Isn't it clever for a congressman to say he voted for a protection bill, under-fund it and blame the administration because it doesn't work?

Last month Great Falls Tribune business editor Jo Dee Black wrote about Attorney General Tim Fox joining 10 other attorneys general in a challenge to the Dodd-Frank Act. I'm going to take a chance here and assume that all those attorneys general are Republican. Fox asserts that Dodd- Frank will further harm state pension plans if the Treasury secretary has to take over any of the large banks or insurance companies.

This seems to me to be a rather thin, spurious argument. Hello? The greedy practices of those large corporations have already harmed our state investments. Dodd-Frank was put in place to prevent the excesses of those malefactors. That means that for any one of those companies to come under the scrutiny of the government, there must be a reason to suspect that they have broken the law.

I would be more impressed with Attorney General Fox if he and the Main Street bankers would condemn the illegal or questionable actions of those mega financial corporations. I would be further impressed if Attorney General Fox and the other 49 attorneys general would work in concert and help the Justice Department bring one mega bank CEO to trial, and then demand that Congress create a method to bring those too big to fail down to a size that is just right to fail if the investment companies don't follow good and legal investment practice.

In addition to downsizing big banks, we need to find a way to get the industry to refocus its business plan to again place emphasis on long-range investments. One problem that individual or state pension plans must contend with is that they by necessity have to have at least a 30-year plan in place. Those investors are forced to compete in an environment that has morphed into instantaneous trades. One way to protect the long-range investor is to implement a transaction tax like that proposed by U.S. Sen. Tom Harkin and U.S. Rep. Peter DeFazio in a bill called the Wall Street Trading and Speculation Tax Act of 2013. That would give pension investors a modicum of protection from instantaneous investors who are skimming the system.

With putting fully staffed protection agencies in place, downsizing the big banks, taxing their transactions, and putting the lawbreakers in jail, only then will retirees have a minimum chance of a secure future.