Pension Pincher

...Without bidding, the deal was given to Stephens Inc., which collected an estimated $88o,000 in fees...

...And the trustee for the bonds...

...Typical of the high-minded notions of the progressive left, Shearer's scheme placed agenda idealism ahead of the practical concerns of human beings: The basic purpose of a pension fund is to keep money safe and sound, with the best possible return, for the retirements of the people it belongs to...

...She categorically denied that the Clinton administration would impose investment choices on the private funds...

...If you care and want to do something about it, please call us...

...He called for union members and public employees to put these funds, which in effect were their deferred wages, at the service of a progressive agenda...

...26 January 1996 • The American Spectator...

...Reich went one step further that fall...

...It prohibited federal support for social investing and forbade the use of taxpayer money for the ETI Clearinghouse...

...Saxton introduced a Pension Protection Act to thwart what he called the "pension grab...

...I know the daddies of these girls," ATRS fund manager Bill Shiron told a local writer, "and there is no way they would have allowed that loan to go bad...

...JAMES RING ADAMS is an investigative writer for The American Spectator...

...economy than ,any conceivable tax-and-spend legislation could produce...

...According to Schriver, Bill Clinton's pension reforms actually mandated the kind of deal that made Stephens so much money...

...Writing in the name of the Peoples Business Commission, he issued the (forthrightly socialist) tract The North Will Rise Again in 1978, predicting that the power of workers' pension fund assets would revive the economy of the industrial "grayhelt...

...With jobs disappearing out of state due to Gov...

...The fund also bought $5 million in Wal-Mart bonds, just as that firm named Hillary Clinton to its board...

...Clinton's crony-targeted investments may have cost his state's pensioners at least $z4 million...

...If 50 million smokers can lose their rights, anyone can...

...The bill required that five to ten percent of the state's pension funds, which were then holding about $1.5 billion, were to go to "Arkansas-based investments...

...Shearer argued that pension-fund investments, even those of union workers, were largely controlled by the trust depai to cents of a few large banks...

...APERS was lucky enough to earn $5oo,000 on the deal...

...In 1985 Clinton sponsored legislation to help get his hands on the money...

...This is the wonderful world of ETIs, which Clinton and his coterie of "progressive" advisers want to bring to the nation's pension funds...

...When pension fund managers diversified their portfolios, they were obliged to consider two factors: the level of risk, which had to be as low as possible, and the best possible return at that level...

...The idea was developed further by buttoned-down, Yale-educated guru Derek Shearer in his 1980 manifesto, Economic Democracy...

...A serious Senate effort to pass a separate pension bill is expected next year...

...THE AMERICAN SPECTATOR JANUARY 1996 IN HIS CAMPAIGN MANIFESTO Putting People First, Bill Clinton proposed dipping into pension funds as a way to "grow the economy...

...But the potential for mischief in the public funds, which total $1.2 trillion nationwide, is dwarfed by the far more massive resources—$3.6 trillion—of the private sector...

...NOWHERE DO THE DOCUMENTS reveal the cautious standards assistant secretary Berg testified would obtain...

...The Clinton administration's first major threat to private funds came in June 1994, when Labor Secretary Robert Reich performed a quiet bureaucratic maneuver...

...Derek Shearer contributed to Clinton's first campaign for Congress, and cited Clinton's term as state attorney general as the sort of grass-roots action that was keeping progressive politics alive...

...This was one campaign promise, it turned out, that Clinton has been very interested in keeping...

...The clearinghouse idea dated to George Bush, she claimed, adding that Hamilton Securities is run by Republicans, including a former aide to Senator Alfonse D'Amato...

...Not surprising to anyone who has watched this president closely, the plan is a product of the theorists of the 1970's left in which Clinton cut his political teeth, and was honed on the cronyism of his years as governor of Arkansas...

...The memo mentions them as possible sources of money "to help stimulate the economic development of . . . Arkansas...

...The Republicans didn't buy it...

...Why couldn't the funds have done the deals themselves...

...As luck would have it, the legislature had held up both ADFA and the Arkansas-based investment bill on a technicality...

...But a group of extremists isn't getting the message...

...The problem with the third criterion is that the economic benefits would be defined by government officials, bringing politics into the pension funds in a big way...

...It gave ADFA nearly $io million in loans and commitments, to help that agency pursue its own fascinating career...

...NATIONAL SMOKERSALLIANCE THE WANT Riour To T-IINK YoZE L F Vs...

...The theme of pension fund power showed up in Clinton's first campaign for governor in 1978...

...But who's next...

...For handling the arbitrage, it pocketed a quarter-million dollars in fees...

...A campaign memo to Clinton has now surfaced that gave him a The American Spectator • January 1996 23 run-down on the six state-employee pension funds of Arkansas...

...Instead, the two pension funds bought $75 million in discounted Ginnie Maes — bonds issued by the Government National Mortgage Association...

...State Auditor Julia Hughes Jones, then a Democrat, questioned whether these bonds counted as an Arkansas investment, since Wal-Mart was incorporated in Delaware...

...But that doesn't qualify as an Arkansas-related investment...

...The story of Clinton's Arkansas pension grab is now emerging from a newly available cache of documents in the hands of the GOP staff of the Joint Economic Committee...

...As reported in these pages last September, Jackson T. Stephens of Stephens Inc., then Worthen's largest local shareholder, personally made good the loss and helped cover up the scandal...

...One of the leading proponents of the pension fund diversion was Jeremy Rifkin...

...The group of Americans that sailed to England in 1968 included Strobe Talbott, whom Clinton biographer David Maraniss says was Shearer's best friend at Yale...

...some circles in years past," that pension plans should try to solve social problems at the expense of competitive rates or return...

...The 1990 list of state-related investments from the Arkansas Teacher's Retirement System (ATRS) includes obvious "friends" like the Little Rock Athletic Club, which received a loan of $4.9 million...

...But it concludes that further study was "worth doing...

...A bit over $3 million went into the Ten-Three-Ten Building in Little Rock, whose managing general partner, a grandson of the late U.S...

...I ww, 01995 National Smokers Alliance Defending smokers' rights protects everyone's...

...And it did this over and over, for a total of $200 million in arbitrage deals, until growing criticism brought the practice to a stop...

...Why you should be worried he might keep his promise this time...

...This may be small potatoes compared to national possibilities, but it shows the real spirit behind the administration's plans for the security blanket of the country's retirees...

...If they succeed, we lose our basic right to free choice...

...But Arkansas pension-fund documents, from Clinton's tenure as governor, have fallen into the hands of the Joint Economic Committee staff...

...to establish an ETI Clearinghouse...

...This put the state in the dubious role as part-owner of a manufacturing concern that made assault weapons the state legislature had voted to ban...

...Jim Saxton, now vice chairman of the Joint Economic Committee, predicted that the next steps would be federal guarantees and subsidies to make up for the inevitably higher loss rate on the ETIs, which would wind up charged to the taxpayer, just as the savings and loan debacle had been...

...BY JAMES RING ADAMS 22 January 1996 • The American Spectator QUIETLY BUT STEADILY, Bill Clinton is pushing a stealth raid on the private economy of the United States...

...Maraniss sees their influence in a paper Clinton wrote for a law school class, attacking the American corporate system...

...In 1987 ATRS and APERS both put up $25 million for Ginnie Mae arbitrage deals...

...THE GIANT POT of money in pension funds started beckoning to New Left theorists in the lean years of the 1970s, when the public mood had turned decisively against massive new spending programs...

...But the biggest deals raise serious questions about whose benefit was really served...

...This economic package also set up the Arkansas Development Finance Authority (ADFA), now a center of controversy over Bill Clinton's dealings with his friend Dan Lasater, a bond trader and later convicted drug-dealer...

...The bills did not get voted on until after the Worthen crisis had blown over—much to the benefit of both the governor and Stephens Inc...

...The memo also reminds Clinton of the "prudent man" rule and possible problems if Congress were to extend ERISA to public employee funds...

...improvement," as in subsidized housing...

...But the profits went to the bond-dealer—Stephens Inc...

...Another shipmate was Robert Reich from Dal h i south, now Clinton's labor secretary and the administration's point man on the pension issue...

...It is essentially a repeat of his own failed experiments with the pension funds of the Arkansas public employee retirement systems—but with far greater dollars to be made, and far more people at risk of being hurt...

...Roy Drew, the Little Rock bond analyst and Stephens gadfly, called the fees "about four to five times what it should be...

...In spite of the problems, however, Shearer's program sounded good to a friend of his—Bill Clinton...

...Clinton's connection with Shearer goes back to his Rhodes Scholar days...

...The town needed to raise $1 million in matching funds, so it went to the pension funds...

...This creep toward ETIs raised the hackles of House Republicans...

...ETIs were acceptable, Berg said, only if they produced the same return as other investments...

...In 1974 it had passed the Employment Retirement Income Security Act (ERISA), a response to self-dealing and pension plundering by corporations engaged in their own version of "social investing...

...On September 12, 1995, the bill passed the House by a vote of 239-179...

...They confirm Saxton's worst suspicions—and to the degree that Reich's proposed pension policy is an extension of Clinton's Arkansas maneuverings, Saxton is right to be worried about a money grab...

...Lowell Weicker's tax increases, Connecticut invested $25 million in pension funds in Hartford's own Colt Industries...

...She expressly repudiated the idea, "favored in 24 January 1996 • The American Spectator 1II V ti It`' lb( u I 414,u, 1.kw Ire R16hrr To EAT BAc0N and EGGS t sPEEIgigr gRE . , Rjor to MAKE CNOIC YoOR OWN IIITiER1411- to SPEAK , Youk MINDZ Pme„, 1 Defending smokers' rights protects everyone's...

...Clinton bragged about the results of this economic package in his 1992 presidential campaign, but for good reason didn't give many specifics...

...Assistant Labor Secretary Olena Berg, head of the Pension and Welfare Benefits Administration, told the Joint Economic Committee last May 18 that Reich's bulletin was merely a restatement of the department's official position since the beginning of the Reagan administration...

...At this writing, the budget infighting may keep a similar bill from passing the Senate, although the section eliminating the ETI clearinghouse is expected to go through...

...New Jersey Rep...

...ERISA, which is still in the books, states that private pension fund managers must invest "solely in the interest" of the fund members, "for the exclusive purpose" of providing and administering their benefits...

...But the money didn't go directly to student loans...

...1-800-224-3322...

...Today, the "lifestyle police" are targeting smokers...

...Roy Drew calculates that had the pension funds invested directly in the bonds, this would have saved $24 million in profits and fees...

...Shearer noted that "socially oriented" investing could lead to lawsuits by federal pension overseers...

...put together $75 million to raise funds for the Arkansas Student Loan fund...

...Worthen, of which the Stephens bloc then held the largest interest...

...Reich issued Interpretive Bulletin Number 94-1, allowing investments "to be selected for their economic benefits apart from their investment return...

...Senator John L. McClellan, was kicked out of the project amid a flurry of liens from his subcontractors...

...The Labor Department was adding a third factor, the general benefit to the economy, meaning regional development, as in bidding to keep industries from relocating, or even general social THE MONEY THAT SHOULD have gone into underfunded pension systems wound up in the pockets of Clinton's fundraisers and political allies...

...There was a major obstacle to implementing this plan, as Shearer noted...

...Saxton claimed that what the administration really wanted was a rule requiring all pension funds to put five percent of their assets into social investing, along the lines of those laws now in effect in the nineteen state legislatures...

...The act was essentially a reinforcement of the traditional "prudent man" rule , the common law standard for trustees who invest other people's money: Pensions were to be run the way "men of prudence, discretion and intelligence manage their own affairs...

...An odor of cronyism hangs over the list of in-state lending, and the biggest of its ETI developments looks like a downright boondoggle, making money only for the lawyers and the bond dealer—which just happens to be Stephens Inc...

...The plan was that when the bonds rose to par value, the pension funds would sell them off, and transfer the profit to the student loan authority...

...Most Americans want Big Government off their backs and out of their private lives...

...Pension fund trustees and friendly politicians would choose investments for their "social benefits" as well as their rate of return...

...The ambitious package was on the verge of passing the state legislature just weeks before Worthen Bank and Trust lost $52 million by investing state pension fund money with a fraud-plagued government securities bond trader...

...The plan, winch dwarfs even his administration's attempt to take control of the nation's health-care industry, calls for diverting a portion of the vast resources of the nation's public and private pension funds—more than $4.8 trillion—into "economically targeted investments," or ETIs...

...Congress had recently tightened the standards for pension fund management...

...These would lend money for all the political goodies — low-income housing, defense conversion, environmentally friendly industry—that Rifkin claimed were being stiffed by the profit-oriented capitalist system...

...By definition, the "social investments" Shearer was promoting were far riskier and paid less in return...

...These self-appointed "lifestyle police" believe they know what's best for all of us and they're pushing to control many aspects of our daily lives...

...The pension funds used the same arrangement, with the same players, in a scheme to build a $6o million slackwater port at the Mississippi River town of Helena, Arkansas...

...During their Yale Law School days, Bill and Hillary stayed close to Strobe and his fiancée, who was Shearer's sister...

...The pension fund even lent the sisters of Kappa Kappa Gamma nearly $300,000 to build a sorority house in Fayetteville...

...This minimum estimate is money that should have gone into the underfunded pension systems but instead wound up in the pockets of Bill's fund-raisers and political allies...

...Rifkin envisaged using this vast store of capital to fund a network of community-controlled "public banks...

...The Labor Department pooh-poohed Saxton's charge, saying that its plan contained nothing new...

...His campaign manifesto, Putting People First, proposed dipping into pension funds for his Rebuild America Fund...

...This sentence addressed the basic issue about ETIs...

...In addition to saving Worthen, the bailout also averted critical scrutiny of the state's handling of its pension funds...

...NINETEEN STATES, including Arkansas, have experimented with targeted investments in their employee funds, and a study by the Cato Institute has found the results "dismal" and sometimes embarrassing...

...The Labor Department decided to list the "socially desirable" investments it wanted to encourage, and awarded a $1.2 million contract to Hamilton Securities Advisory Services of Washington, D.C...

...Because politicians have a direct hand in their affairs, state and local public employees' pension savings are always vulnerable to political wrangling and investments of questionable judgment...

...By forcing a five-percent quota for ETIs on private pension funds alone, Clinton would put $175 billion at the disposal of his pals and their student left agenda...

...By re-routing even a small percentage of the money those funds control, Bill Clinton would have a larger lock on the U.S...

...Although private developers failed several times to go ahead with plans for an industrial park, the town fathers of Helena argued, "If you build it, they will come" —and then asked for federal money to dredge the harbor...

...It's a legitimate question," Stephens vice president Byron Schriver admitted to the Bond Buyer newspaper in 199o...

...ATRS, along with the somewhat smaller state Public Employee Retirement System (APERS), ARKANSAS PENSION-FUND documents from Clinton's tenure as governor have fallen into the hands of the Joint Economic Committee—confirming Saxton's worst fears...