6 It overtook manufacturing Johnson and Kwak, 13 Bankers, 59; Kevin Phillips, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (New York: Penguin Group, 2009), xiii, xv, 31. The financial sector jumped from 11–12 percent of U.S. GDP in the 1980s to 20–21 percent by the mid-2000s. See U.S. Bureau of Economic Analysis, “Gross Domestic Product by Industry,” table B-12, November 11, 2004.
7 Its profits soared Johnson and Kwak, 13 Bankers, 60–61.
8 They have lobbied successfully Multiple financial analysts have developed these themes. See, for example, Phillips, Bad Money, xii–xvii; xxxii-xxxix; Johnson and Kwak, 13 Bankers, 1–10, 75–88, 148–50.
9 Debt that dwarfed Johnson and Kwak, 13 Bankers, 59–60.
10 Financial sector poured roughly $318 million Center for Responsive Politics, “Long-Term Contribution Trends,” based on Federal Election Commission data, March 27, 2011, http://www.opensecrets.org; “Lobbying: Finance, Insurance & Real Estate, Sector Profiles 2009 & 2010,” accessed March 8, 2012, http://www.opensecrets.org/lobby/indus.php?id=F&year=2010.
11 The line between government and banking Julie Creswell and Ben White, “The Guys from ‘Government Sachs,’ ” The New York Times, October 19, 2008.
12 Former New York Fed president Jo Becker and Gretchen Morgenson, “Geithner, Member and Overseer of Finance Club,” The New York Times, April 27, 2009.
13 1,447 former government officials as lobbyists Center for Responsible Politics and Public Citizen, report, The Washington Post, June 3, 2010.
14 Finance had a lobbying team Kevin O’Connor, “Big Bank Takeover: How Too-Big-To-Fail’s Army of Lobbyists Has Captured Washington,” Institute for America’s Future, May 10, 2010. http://www.ourfuture.org/files/documents/big-bank-takeover-final.pdf. “For Lobbyists, Banks Tap Washington Pipeline, Report Finds,” The Washington Post, May 11, 2010. Center for Responsive Politics, “Lobbying: Finance, Insurance & Real Estate, Sector Profiles 2009 & 2010” http://www.opensecrets.org/lobby/indus.php?id=F&year=2010. DealBook, “Minting Bank Lobbyists on Capitol Hill,” The New York Times, April 13, 2010; Erika Lovley, “Washington Draws Ex-Lawmakers,” Politico, June 3, 2010.
15 “Effectively captured our government” Johnson, “Quiet Coup.”
16 A matter not just of people, but of ideology Ibid.
17 “Financial weapons of mass destruction” Warren Buffett, “Chairman’s Letter,” Berkshire Hathaway annual report, 2002, http://www.berkshirehathaway.com.
18 “Should serve as a wakeup call” Brooksley Born, testimony, House Committee on Banking and Financial Services, October 1, 1998, http://www.cftc.gov.
19 Greenspan, Rubin, and Summers Brady Dennis and Robert O’Harrow, Jr., “A Crack in the System,” The Washington Post, December 30, 2008; Manuel Roig-Franzia, “Credit Crisis Cassandra,” The Washington Post, May 26, 2009.
20 “Greenspan was always against Glass-Steagall” John Reed, interview, December 18, 2002.
21 Federal Reserve Board … permitted an escalating expansion Nathaniel C. Nash, “Banks Ask Fed for Power to Underwrite Securities,” The New York Times, October 26, 1988; and Federal Reserve press release announcing proposed revision of regulation, raising to 25 percent from 10 percent the percentage of total revenues that commercial banks may derive from underwriting and securities dealings, December 20, 1996, effective March 6, 1997.
22 Weill knew that his dream merger Reed, interview, December 18, 2002; Carol Loomis and James Aley, “ ‘One Helluva Candy Store!’ That’s What Sandy Weill Called the Megameld of his Travelers Group and John Reed’s Citicorp,” Fortune, May 11, 1998.
23 Come back to haunt the government Jeffrey E. Garten, “Mega-Mergers, Mega-Influence,” The New York Times, October 26, 1999.
24 The country’s largest corporate welfare “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress,” Bloomberg, November 28, 2011, http://www.bloomberg.com.
25 All that cheap money “In Obama’s Tenure, a Resurgent Wall Street,” The Washington Post, November 7, 2011.
26 A group of Democratic senators “Senate Rejects Bid to Shrink Biggest U.S. Banks,” The New York Times, May 7, 2010.
27 When reformers wanted to revive Michael Hirsh, “Bonfire of the Loopholes,” Newsweek, May 21, 2010.
28 John Reed, who apologized Bob Ivry, “Reed Says ‘I’m Sorry’ for Role in Creating Citigroup,” Bloomberg, November 6, 2009.
29 “There’s an attempt to kill this” “Resistance Bogs Down Financial Overhaul,” The New York Times, June 7, 2011.
30 Volcker later voiced his dismay Paul Volcker, lecture, “Three Years Later: Unfinished Business in Financial Reform,” September 23, 2011, graphics8.nytimes.com/packages/pdf/business/23gret.pdf; see also Gretchen Morgenson, “How Mr. Volcker Would Fix It,” The New York Times, Sunday Business, October 23, 2011; and Zachary A. Goldfarb, “In Obama’s Tenure, a Resurgent Wall Street,” The Washington Post, November 7, 2011.
31 The law’s penalties and incentives Paul Krugman, “Making Financial Reform Fool-Resistant,” The New York Times, April 15, 2010; Krugman, “Bubbles and the Banks,” The New York Times, January 10, 2010.
32 The reform was so weak Jeffrey Lacker, “The Regulatory Response to the Financial Crisis: An Early Assessment,” May 26, 2010, http://www.richmondfed.org/press_room/speeches/president_jeff_lacker/2010/lacker_speech_2000526.cfm.
33 “Such is the lobbying power” Liam Halligan, “Obama Signs a Bill That Lets Banks Have US over Barrel Once More,” The Telegraph (London), July 26, 2010, http://www.telegraph.co.uk.
34 “The government is pretty much run” Center for Political Studies, University of Michigan, cited in William Greider, Who Will Tell the People: The Betrayal of American Democracy (New York: Simon & Schuster, 1992), 23; “Poll Finds Edge for Obama over GOP among the Public,” The New York Times/CBS News Poll, February 12, 2010. See poll data, 15, question 30, http://s3.amazonaws.com/nytdocs/docs/192/192.pdf.
35 Poll after poll has recorded The September 21, 2008, Zogby poll found 82 percent thought that political parties, presidential candidates, and candidates for the U.S. Congress should be banned from receiving financial contributions from lobbyists or other representatives from those industries that are vital to the financial and national security of the country (Zogby, “Voters Not Sold on Government Bailout,” http://www.zogby.com/news/ReadNews.cfm?ID=1555). The January 2, 2007, poll from Roper recorded 81 percent saying Congress should move to enact “new regulations to reduce the power and influence of lobbyists in Washington” (The Wall Street Journal, January 3, 2007). The January 11, 2006, Pew poll found that 81 percent thought it was common for lobbyists to bribe members of Congress (PewCenter for the Press, “Americans Taking Abramoff, Alito and Domestic Spying in Stride,” http://people-press.org/reports/display.php3?ReportID=267).
36 “Institutionally trained to be passive” Greider, Who Will Tell the People, 20.
37 “The available evidence” Bartels, Unequal Democracy, 287.
PART 4: MIDDLE-CLASS SQUEEZE
1 As a lead mechanic Pat O’Neill, interview, December 21, 2010.
2 “Of course, workin’ there” Excerpt of interview of Pat O’Neill for the Frontline program “Can You Afford to Retire?,” March 13, 2006, http://www.pbs.org/frontline.
CHAPTER 11: BROKEN PROMISES
1 “The essence” Excerpt of interview of Jamie Sprayregen for the Frontline program “Can You Afford to Retire?,” February 17, 2006, http://www.pbs.org/frontline.
2 “Bankruptcy’s terrible” Excerpt of interview of Greg Davidowitch for the Frontline program “Can You Afford to Retire?,” http://www.pbs.org/frontline.
3 “It was an exciting time” Pat O’Neill, inter
view, December 21, 2010.
4 Employers were operating 114,000 Pension Benefit Guaranty Corporation databook, accessed April 4, 2012. Table S-31 shows 112,000 single employer–defined benefit (lifetime pension) plans in 1985, plus 2,000 multiemployer plans. Peak coverage at 35 percent of active workforce was achieved in 1980 (table S-33), but peak participation of 34.5 million employees was in 2004 (table S-31) because this included retirees receiving benefits as well as active workers. See http://www.pbgc.gov/res/data-books.html.
5 Pat O’Neill, who ended up making Pat O’Neill, interview, July 13, 2010.
6 Management struck a grand bargain Adam Bryant, “July 10–16: Lean, Hungry Skies; United’s Employees, After 7-Year Fight, Buy Their Own Airline,” The New York Times, July 14, 1994.
7 United had a strong spurt Roger Lowenstein, “Into Thin Air,” The New York Times Magazine, February 17, 2002.
8 Those were phantom gains Ibid.
9 Union leaders said they had heard Davidowitch, interview, “Can You Afford to Retire?”
10 United filed for bankruptcy Edward Wong, “Airline Shock Waves: The Overview; Bankruptcy Case Is Filed by United,” The New York Times, December 10, 2002.
11 “The stock went zippo” Pat O’Neill, interview excerpt from Frontline, “Can You Afford to Retire?”
12 Finally, his pension was cut O’Neill, interview, July 13, 2010.
13 Probably one million workers and retirees Pension Benefit Guaranty Corporation databook, table S-5, reports that 1,897,253 employees and retirees were affected by companies’ terminating their pension plans between 1975 and 2010. The ten largest pension plans with 543,825 participants were closed down through bankruptcy, and PBGC officials reported that was also true of 85 percent of 102 of the largest plans, with more than 1 million participants. PBGC officials say that is a typical pattern. If so, roughly 1.6 million participants would have had their benefits diminished by corporate bankruptcies or by companies on the verge of bankruptcy. Marc Hopkins and Jeff Speicher, PBGC press officers, emails and briefings, April 10 and 13, 2012; PBGC databook, 2010, http://www.pbgc.gov/res/data-books.html.
14 In one year alone PBGC background briefing, December 8, 2010.
15 Overall, the percentage U.S. Bureau of Labor Statistics. “National Compensation Survey: Employee Benefits in the United States, March 2011,” accessed January 31, 2012, http://bls.gov/ncs/ebs/benefits/2011/ownership/private/table01a.htm; Hacker, Great Risk Shift, 14.
16 Bankruptcy became the typical route Since 2000, there have been waves of corporate bankruptcies in the airline, steel, automotive, energy, and financial industries. PBGC background briefing, press spokesman, December 8, 2010; PBGC databook, table S-5, reported 4,140 corporate pension plans terminated and more than 90 percent of the time, PBGC officials said, bankruptcy was the vehicle for companies’ dumping their pension plans. Speicher, email, April 14, 2010.
17 “The efficient working of American capitalism” Jamie Sprayregen, interview excerpt, from Frontline, “Can You Afford to Retire?”
18 “Bankruptcy,” retorted Elizabeth Warren Excerpt of interview of Elizabeth Warren for the Frontline program “Can You Afford to Retire?,” February 6, 2006, http://www.pbs.org/frontline.
19 “It’s an absolutely horrific experience” Greg Davidowitch, interview excerpt from Frontline, “Can You Afford to Retire?”
20 “It says right here” Excerpt of interview of Hugh Ray for the Frontline program “Can You Afford to Retire?,” February 28, 2006, http://www.pbs.org/frontline.
21 “Certain players have been made irrelevant” Ibid.
22 “That’s the norm” Ibid.
23 CEO Glenn Tilton Wong, “Airline Shock Waves.”
24 “No way to exit” Sprayregen, interview, “Can You Afford to Retire?”
25 United’s pension funds were … in the red Pension Benefit Guaranty Corporation background briefing, December 8, 2010.
26 Corporate pensions were underfunded Excerpt of interview of Bradley Belt for the Frontline program “Can You Afford to Retire?,” February 10, 2006.
27 “I wouldn’t call it cheap” Jamie Sprayregen, interview excerpt from Frontline program “Can You Afford to Retire?”
28 Tilton preserved his own $4.5 million retirement benefit Glenn Tilton, testimony responding to Sen. Ron Wyden, Senate Finance Committee hearing, June 7, 2005. http://finance.senate.gov/hearings/hearing/download/?id=d028276c-611f-447e-a266-f3b1cd6a62c6.
29 “You are juggling all the time” Robin Gilinger, interview, August 5, 2010.
30 By Gilinger’s calculations … United’s bankruptcy Gilinger, interview, August 5, 2010.
31 The uncertainty Excerpt of interview of Robin Gilinger for the Frontline program “Can You Afford to Retire?,” March 15, 2006, http://www.pbs.org/frontline.
32 “I feel very uneasy” Gilinger, interview, August 5, 2010.
33 “You’d do six hundred miles a day” O’Neill, interview, July 20, 2010.
34 “Twenty-two years on [the] graveyard shift” Ibid.
CHAPTER 12: 401(k)’S:DO-IT-YOURSELF
1 Can you really afford to retire? “Can You Afford to Retire?” PBS Frontline, May 16, 2006, http://www.pbs.org.
2 “A million people” Teresa Ghilarducci, interview, December 22, 2010.
3 “Left to their own devices” Eric Schurenberg, “The 401(k) Has Failed. Admit It,” Huffington Post, July 14, 2009.
4 “I would blow up” Ted Benna, quoted in Jeremy Olshan, “ ‘Father’ of the 401(k)’s Tough Love,” WSJ Smart Money, November 22, 2011, http://blogs.smartmoney.com.
5 Like many arcane technical provisions Excerpt of interview of David Wray, president, Profit Sharing/401(k) Council of America for the Frontline program “Can You Afford to Retire?,” February 17, 2006, http://www.pbs.org/frontline.
6 It was a classic Washington move Excerpt of interview of Dallas Salisbury, EBRI president for the Frontline program “Can You Afford to Retire?,” December 1, 2005, http://www.pbs.org/frontline.
7 “The technology and methodology” Excerpt of interview of Bob Reynolds, vice president of Fidelity Funds, for the Frontline program “Can You Afford to Retire?,” http://www.pbs.org/frontline.
8 “It had a lot of sex appeal” Excerpt of interview of Brooks Hamilton for the Frontline program “Can You Afford to Retire?,” February 23, 2006, http://www.pbs.org/frontline.
9 401(k) plans grew from 7 million people U.S. Department of Labor, “Private Pension Plan Bulletin Historical Tables and Graphs,” December 2011, table E20, “Number of 401(k) Plans, Total Participants, Active Participants, Assets, Contributions, and Benefits Payments, 1984–2009,” http://www.dol.gov/ebsa/pdf/historicaltables.pdf.
10 “There was a sea change” Brooks Hamilton, interview, December 8, 2010.
11 Their secret was Excerpt of interview of Brian Conner for the Frontline program “Can You Afford to Retire?,” February 26, 2006, http://www.pbs.org/frontline.
12 “If I had started earlier” Excerpt of interview of Gil Thibeau for the Frontline program “Can You Afford to Retire?,” February 22, 2006, http://www.pbs.org/frontline.
13 When he retired Gil Thibeau, interview, August 5, 2010.
14 “My assumption was” Excerpt of interview of Winson and Bess Crabb for the Frontline program “Can You Afford to Retire?,” February 22, 2006, http://www.pbs.org/frontline.
15 “In every case, the 20 percent” Brooks Hamilton, interview excerpt, from Frontline program “Can You Afford to Retire?”
16 “I label this [the] ‘yield disparity’ ” Ibid.
17 The 401(k) track record Jack VanDerhei, email, January 5, 2012.
18 The typical 401(k) nest egg Ibid., January 12, 2012.
19 The Center for Retirement Research
Andrew Eschtruth, Center for Retirement Research at Boston College, email, October 31, 2011.
20 Seriously “at risk” VanDerhei, interview, December 10, 2010. See also Jack VanDerhei, “Measuring Retirement Income Adequacy: Calculating Realistic Income Replacement Rates,” EBRI Issue Brief No. 297, September 2006, http://www.ebri.org; and VanDerhei, “Evaluation of the Adequacy and Structure of U.S. Voluntary Retirement Plans, with Special Emphasis on 401(k) Plans,” Employee Benefits Research Institute, Benefits Quarterly (Third Quarter 2010).
21 More than half of American families Alicia Munnell, interview, July 9, 2010; and Andrew Eschtruth, emails, January 23 and October 30, 2011. Economists and other experts at Boston College created the National Retirement Risk Index (NRRI) to measure the adequacy of retirement savings by individual households in their 401(k)’s, IRAs, Social Security, and other savings. The index compares the ability, at retirement age, of individuals and households to generate 70 percent of the final pre-retirement income, a target chosen because the financial industry estimates that is what is needed to maintain one’s standard of living after retirement. Munnell describes the NRRI as a conservative index, not intended to exaggerate the problem. It uses average life span expectations and average market returns on a balanced bond-stock retirement account. See Alicia Munnell, Anthony Webb, Francesca Golub-Sass, et al., “Long Term Care Costs and the National Retirement Risk Index,” Brief No. 9–7 (Chestnut Hill, MA: Center for Retirement Research at Boston College, March 2009); and Alicia Munnell, Anthony Webb, and Francesca Golub-Sass, “The National Retirement Risk Index: After the Crash,” Brief No. 9–22 (Chestnut Hill, MA: Center for Retirement Research at Boston College, October 2009).
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