The Money Managers have come up with a new way to lose your money. Recall that Wall Street banks are sitting on, perhaps, a gazillion dollars worth of trash assets, and that our government has so far lent, spent, or provided guarantees to them in an amount recently calculated at $23.7 trillion.) A big chunk of the government’s largesse has gone to provide much deserved bonuses to the geniuses who have so far lost forty or fifty percent of the value of your pension. Wall Street knows that makes you angry. You have only experienced the downside costs of an economy run by and for the money managers: you lost your pension, your job, and your house.
So here is what BlackRock (NYSE:BLK) proposes to do for you: it will let you buy into a new fund that will purchase garbage assets from Wall Street. The federal government will kick in some more money to capitalize the fund (that way Black Rock won’t need to put its own money at risk). If the trash then sends out some green shoots, you win twice: once as a taxpayer with capital at risk and once as an investor with your remaining life’s savings at risk. Please don’t think about the alternative scenario, in which your trash assets continue to rot on the vine. Wall Street is optimistic and you ought to be, too. Its bankers will sleep a whole lot better if you would just buy the assets they do not want to hold.
After all, what is good for Wall Street is good for you. Isn’t it?
The government still has to approve Black Rock’s plan. But that should be a done deal because no firm save Goldman Sachs (NYSE:GS) is so well connected to Washington. As reported in today’s NYT, those two firms essentially controlled the Federal Pension Benefit Guarantee Corporation when it was headed by Charles Millard—who is now being investigated for improper conduct. Black Rock was pretty confident it would get a contract to invest PGBC funds in toxic waste: “It sounds like we may have a tiger by the tail here,” one Black Rock executive purred in an e-mail message, referring to Millard. Not to be outdone with metaphors, another Black Rock executive wrote, “This is a very big fish on the line.” Even as Millard was rewarding Goldman and Black Rock with the lucrative contracts they expected, he was looking for jobs with the firms. On one hand, it is comforting to learn that it is not just Goldman that benefits from what James Galbraith calls our Predator State. On the other, as Arianna Huffington says, it is yet another example of more pigs at the government trough.
Now, that is the real swine flu we ought to be worried about—a pestilence that some years from now will be remembered as the worst scandal in human history. Assuming that we can somehow wrest control of our government and our economy from the clutches of Wall Street so that there will be a future from which we can look back to the past with amazement.