03.26
Do You Know Where Your 401(k) Is?
I saw this article linked on Drudge over the weekend and couldn’t help remembering back to the story earlier in the year about government seizure of private retirement accounts. I think everyone eventually let the story fade, but it’s the first thing I though of when I saw this. The thrust of the article – and it was all over the news – is how the administration is lobbying Congress to grant Treasury Secretary Geithner broad powers to sieze non-bank financial companies. Here’s the money quote:
The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.
The government at present has the authority to seize only banks.
Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.
The first thing you need to do when you see an article like this is ask yourself, why would they want this authority? Some have said that it’s because so many companies had to switch from investment banks to traditional banks in order to qualify for bailout money. Thus, this plan would allow the government to sieze companies as is, without the extra paperwork or whatever. That might be a reason, but it’s not logical. In reality, there are no more investment banks. From what I understand they all switched over by the end of last year in order to comply. That’s purely technical anyhow. It doesn’t feel right in my mind. Also remember, what allows the government to essentially take over a bank is the fractional reserve nature of that company. It’s already borrowing against a government credit line anyhow – The Fed.
This isn’t the case with other types of financial institutions. And that’s the rub. Remember the language here. This isn’t talking about bailouts to reserve banks. It’s talking about “large insurers, investment firms and hedge funds”. And it tells us why right in the article: “whose collapse would damage the broader economy”. Now, we have to assume that rules are coming down the pike on these exotic securities like credit default swaps and securitized debt securities. So things like that should, theoretically, not be an issue any more. What’s left?
Again, I think it’s right here in the article:
The government also would assume the authority to seize such firms if they totter toward failure.
Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts…”
So the picture is of an “investment firm” that is “totter[ing] toward failure”. The government, under control of the White House, would swoop in and seize it’s assets. This is all proof enough that some major shenannigans are going on, but the real key is the last part of the above quote. The government would be able to “break contracts”. That is code for moving your 401k or IRA out of that company and into some kind of government plan. It fits so nicely with the article from a few months ago describing the potential takeover plan. Here’s the skinny:
Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.
Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.
If that language doesn’t qualify as a “collapse [that] would damage the broader economy” then I don’t know what would. Do you see where this is going? They can’t just come in and flat out take it without a crisis to back it up and give it some semblance of legitimacy. And when this confiscation of billions of dollars of private savings is complete, what will happen to it? The same thing that happened to the social security “trust fund”. It will vanish, and all that will be left is a bunch of IOU’s and a Hallmark card. And this all fits in so perfectly with the ideological goals of the Obama administration. Redistributing the wealth of producers to non-producers to bring about “equality” in everything. Don’t believe me? Well, I’ll explain it next time. This is getting long.
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