Back in September, I wrote a piece on this blog entitled Dog Food Economics and the Wall Street Bailout in which I noted that "Back in the Clinton era, I spent eight years ... trying to derail misguided efforts to privatize Social Security.
I noted then that the companies that had been pushing for Social Security privatization -- Merrill Lynch, Morgan Stanley, and Goldman Sachs -- were now insolvent and headed to the knackers knife.
How ironic was that?
What I didn't know was that while no one was looking, the right-wing ideologues had moved off of Social Security privatization in order to quietly privatize the Pension Benefit Guarantee Corporation (PBGC).
What's the PBGC?
The PBGC is the agency that was created in 1974 to make good on defined benefit pension plan committments when companies go broke.
The PBGC is funded by insurance premiums paid for by defined benefit pension plan sponsors, by the assets of pension plans that have been taken over, and by investment income; no money comes from general tax revenue.
Only one thing: the PBGC does not actually pay out all of the money the bankrupted companies once promised. Instead, the PBGC pays out 60 cents on the dollar. To put it another way, if your company goes broke, and your pension is taken over by the PBGC, you are going to live on quite a lot less than you had planned in retirement.
In the past, the PBGC's investment income has been pretty rock-solid, largely due to the fact that PBGC money put its money into bonds.
The lunatics running the show in the last days of the Bush Administration, however, decided to move much of the PBGC's asset base into the stock market. The stock market, of course, promptly crashed, wiping out scores of billions of PBGC revenue.
How much did the Bush ideologues cost the PBGC? The PBGC will not say, other than to note that they lost 23% of their stock portfolio by September 30th -- well before the stock market began an even deeper and faster rush to the bottom.
Zvi Bodie, a Boston University finance professor who is an expert on the PBGC, says PBGC stock losses may ultimately cost U.S. taxpayers several hundred billion dollars.
He likens the PBGC's investment strategy to that of a company that insures against hurricane damage taking their portfolio and investing in beachfront property.
And what genius thought this was a good idea?
None other than Charles Millard, a former executive of Lehman Brothers who was appointed by George W. Bush. Millard's former company, of course, is now insolvent, defunct, and out of business.