Worker's Pensions: A Penny Saved is a Penny Robbed
Felice, Bill
Through a focus on Chase's pension management operations, this article will explore the conflict between labor and capital inherent in today's pension system. First it will examine the...
...House of Representatives, Select Committee on Aging, Hearing before the Subcommittee on Retirement Income and Employment, "Economic Problems of Aging Women," 94th Congress, July 15, 1975, p. 4. 6. John Brooks, Conflicts of Interest: Corporate Pension Fund Asset Management (New York: Twentieth Century Fund, 1975), p. 8. 7. Christian Science Monitor, May 1, 1973...
...According to David Rockefeller, "We don't happen to agree with that concern [the conflict of interest between the trust and commercial operations], but spinning out the division puts greater distance between the two...
...3 4 In this little publicized action, Chase revealed that in its own eyes there is no separation between the trust and commercial operations...
...And we'll take those banks of marble With their guards at every door And we' all divide that silver That the people sweated for...
...Rockefeller Speaks Out Against Critics of Chase's Investment Unit," Pensions and Investments, January 14, 1974, p. 12...
...There were wives of retirees to voice their husbands' despair, many who had never spoken in public before...
...Preaching an amalgamation of interests, Chase claims that such an outlook serves the interests of not only the bank, and the corporation, but labor as well...
...In the inflation-ridden economy not only is savings (the first "leg") difficult, but it is actively discouraged...
...Three weeks before Penn Central filed for bankruptcy, Chase sold more than 400,000 shares in the railroad...
...invest and reinvest the Fund, without distinction between principal and income, in shares of stock (whether common or preferred) or other evidences of ownership, bonds, debentures, notes...
...Over two thirds of elderly black women living alone die in poverty.Is BANK TRUST DEPARTMENTS The soaring growth in pension assets has been accompanied by intense competition among the few large financial institutions which manage these giant funds...
...As a result, many of these small firms will now refuse pension business and a company's only alternative will be the large banks and insurance companies...
...This union-management group establishes the pension plan, appoints the trustees for the plan, and delineates the power and duties of the trustees as to the investment of the funds' assets and the administration of the plan...
...Both groups receive smaller (if any) pension benefits than white male workers...
...26 Furthermore, the new law aids the big banks by not challenging their power to control pension money and invest it in their own interests...
...Edna H. Ehrlich, "The Functions and Investment Policies of Personal Trust Departments," Monthly Review, Federal Reserve Bank of New York, October 1972, p. 257...
...Control over pension funds, now the largest pool of investable wealth, has become one of the main areas of competition between major sectors of finance capital...
...44.Retired, Disability and Death Benefits Plan Trust Agreement between the Anaconda Company and the Chase Manhattan Bank N.A., Trustee...
...In 1973, the average monthly social security payment for white retired workers was $169...
...First, the law aids in the concentration of pension fund wealth within the large banks...
...Forty-seven percent of women over 65 live on incomes of less than $2000 a year...
...Chase recently conceded that this is occurring, and that small companies have already begun turning their business over to the larger institutions, and that Chase's pension business as a result has increased...
...Brooks, John,op...
...For many years, before the Supreme Court declared it illegal, companies took advantage of provisions that "allowed" women to retire early, thereby reducing their benefits...
...The potential and actual abuses of pension assets by the banks are numerous...
...Money Market Directory, 1975, op...
...NACLA Interview, November 13, 1975...
...During the first 18 months of the life of the PBGC, over 4,000 pension plans terminated and filed for insurance...
...Under the new law, pension fund managers can be held personally liable for "mismanagement" of fund assets...
...and any other property, real or personal, foreign or domestic, whether or not productive of income or consisting of wasting assets, without any duty to diversify and without regard to any restriction placed upon fiduciaries by any present or future applicable law, administrative regulation, rule of court or court decision...
...Chase benefits through the investment of worker's money in many ways, including the following: (1) through the fees it charges to manage the fund, (2) through investments in companies which are long-standing customers of Chase, (3) through investment in companies where Chase already holds blocks of stock, (4) through investment in companies where Chase directors and officers sit on the Board of Directors, and (5) the additional corporate control gained from voting the shares of stock held in the pension fund...
...Small money managers and investment houses are now faced with the possibility of costly legal suits if their investment advice proves faulty...
...A Steeper Climb Up Pension Mountain," Fortune, January 1975...
...s The other option for the small investment advisory institution is to take out liability insurance to cover potential suits...
...Pensions and Investments, January 14, 1974, p. 12...
...In 1971 $84.8 billion from pension fund portfolios (public and private) was invested in common stock...
...U.S...
...Department of Commerce, Bureau of the Census, 96th Edition, July 1975, p. 289, Chart #460...
...In addition to losing their jobs, the workers at the Gar Wood plant in Wayne took a 60 percent reduction in their pensions, had their life insurance cut by 60 percent, and were told that their hospital insurance would be discontinued...
...While all these stock holdings are not accounted for by bank-managed pension assets, occasional disclosures have confirmed the assumption that pension assets account for many of the major stock holdings...
...Without any knowledge of the transactions, General Motors workers put up 75,000 Pan Am shares, workers at Ford, Western Electric and Standard Oil of New Jersey each contributed 130,000 shares, and Westinghouse workers offered 190,000 shares.41 While the percentage of ownership held in any one major company by Chase-managed portfolios is relatively small, Congressional investigators have concluded that in large companies with widely dispersed stock ownership, five percent or even less is all that is necessary for effective control.' 2 Though bankers are reluctant to discuss the role in corporate affairs they gain through holdings managed by their trust departments, occasionally one will concede the point...
...See Washington Post, March 29, 1971...
...The only recourse available * Among the workers not protected by ERISA are the ten million public employees of the Federal, State, and local governments.19 to an employee who feels that the money has been mis-invested is to take the pension manager to court - a costly, laborious, and time-consuming action...
...Many broke down and were unable to speak...
...The pension system remains entirely voluntary...
...3 Growing old under capitalism means being labeled as an "unproductive" worker and more often than not being forced to live out one's life in degradation - struggling for survival...
...4) Guarantees that workers pension credits go with them if they leave the job after ten years of employment...
...5, p. 1073-1119...
...First it will examine the widespread poverty of the elderly and how the evolution of the pension system has failed to provide adequate security for this country's working people...
...the three legs being savings, social security, and pensions...
...A House Banking and Currency Committee staff report implied that Chase's trust department, which handles investments, received early information about Penn's precarious position from the bank's commercial department...
...NYT, September 4, 1974...
...Workers covered by the plan could not even demand an accounting: "No person interested in the Fund, other than the Company, shall have a right to compel an accounting, judicial or otherwise, by the Trustee...
...At that time most pension plans required 10 to 20 years of continuous work with the same employer.' 4 As a result of these and other forms of discrimination due to sexism, older women over 65 who live alone constitute the poorest segment of our population...
...The law exempts extra benefits - such as profit sharing plans and special insurance coverage - from the $75,000 a year ceiling on pensions a company may pay under retirement plans...
...1 By early 1976 pension funds owned 15.3 percent of all common stock of U.S...
...Blackwell and Nader, op...
...Welfare...
...After gaining this impressive degree of control over the fund, Chase's attorneys then wrote into the contract a clause designed to legally protect Chase from mismanagement: The trustee (Chase] shall use due care and diligence in the exercise of its powers and the performance of its duties as Trustee hereunder but shall not be liable for any mistake of judgment or other action taken in good faith or for any loss unless resulting from its negligence Through a provision now illegal under ERISA, Chase made clear in this trust agreement that the bank was working for the company and not for the employees...
...First, much of the power of organized labor's leadership is not based upon rank and file support...
...1 6 This enormous concentration of pension wealth among a few large banks has occurred because of the paramount position these banks hold within monopoly capitalism...
...How the SEC Study Views Bank Trusts - and Vice Versa," Finance, May 1971...
...commercial banking operations...
...In 1926, Congress granted companies tax-exempt status for funds set aside for private pensions and more companies responded by establishing plans.s But it wasn't until after World War II, when health and welfare benefits became a demand of organized labor, that the companies were forced to work more systematically towards the protection of workers' rights after retirement...
...Wobbly song CORPORATE RELATIONS An examination of Chase's trust department and CIMC holdings reveals the ways in which the bank can use the funds under its management to further cement its ties with and increase its influence over corporations and the economy...
...But, in fact, investment advisory firms have lost pension clients to large banks due to the cooperation between the banks' commercial and trust departments...
...and Blackwell and Nader, op...
...Although social security benefits received by all workers are meager, women and minorities are given lowest amounts due to the institutionalized racism and sexism which brought them lower wages and fewer jobs throughout their working lives...
...and NYT, February 22, 1969...
...This money remains in the hands of the financial institutions and the large corporations for the benefit of the capitalists which control them...
...The trust department at Chase would continue to manage the $3 billion in individtial accounts for U.S...
...Both the worker and the employer make contributions to the pension fund, based on actuarial calculations of the workers' retirement needs...
...cit., p. 47...
...and by 1973, the funds equaled $160 billion...
...while at the other end marginal employment and poverty become the rule...
...and Standard and Poors Register of Corporation Directors and Executives, 1975...
...This relationship obviously gives the bank considerable influence in Firestone's affairs...
...heartbreak and fear in the people's eyes...
...Monthly Labor Review, September, 1968, quoted in Blackwell and Nader, op...
...cit., p. 103...
...s16 This article will examine the third "leg" of retirement security for workers, pensions...
...In 1969, for example, the SEC forced Chase to reveal it had offered to sell five percent of all the outstanding shares of Pan Am to Resorts International, a gambling casino and resort operator which was trying to acquire control of the airline...
...Suddenly a worker's retirement security depends upon how well Chase Manhattan performs or whether ITT can protect their profits through undermining the Allende government in Chile...
...The Employee Retirement Income Security Act (ERISA), as the new law is called, was heralded in with great fanfare, and in fact does protect certain employee rights...
...financial network...
...However, the struggle to obtain this control would bring rank and file into open conflict with capital and the labor bureaucrats who have negotiated the transfer of workers' pension assets to the big banks...
...In addition, the new law did not even address the most glaring defect in the private pension system: the fact that over 50 percent of wage and salary workers in the U.S...
...Consequently, the current leadership of organized labor has operated from a premise of an acceptance of capitalism, advocating a harmony of interests between labor and management...
...79, No...
...In 1947 the Federal Government enacted the Labor Management Relations Act (the Taft-Hartley Act) which stipulated the use of a Trust for providing employee benefits...
...But the law does nothing to regulate the banks' use of workers' money...
...Sponging off relatives...
...Although over 4,000 banks are eligible to handle the funds, the four largest (Morgan Guaranty, Bankers Trust, Citibank, and Chase Manhattan) hold 43 percent of all pension plan assets...
...In fact, many of today's leaders came to power at a time when progressive and communist-led rank and file movements were being repressed by the capitalist-controlled state...
...Edward S. Herman, Conflicts of Interest: Commercial Bank Trust Departments (New York: Twentieth Century Fund, 1975), p. 43...
...To earn a nonforfeitable pension (i.e., a pension that can not be taken away), even with the new law, an employee must work for at least five years with the same employer...
...We see the new law as a blessing, since it will lead to more plans moving into the larger institutions...
...Through their trust departments, however, large commercial banks have continued to manage (as trustees) the stock holdings of wealthy individuals, pension funds, college endowments, and other institutions...
...3. Statistics from Money Income in 1974 of Families and Persons in the U.S...
...NACLA interview, November 13, 1975...
...The welfare of pension beneficiaries is of secondary importance - if a consideration at all...
...While CIMC refuses to reveal its clients' names, an incomplete listing, compiled by NACLA from information supplied by the companies themselves, shows that Chase manages the retirement plans of at least 194 companies, including some of the world's largest corporations...
...Wall Street Journal, June 10, 1975...
...Senate, Committee on Government Operations, Subcommittee, Disclosure of Corporate Ownership, 93rd Congress, 2nd session, 1974, table 5, p. 24...
...Well over half of that figure, $7 billion, is in employee benefit funds.2 Chase's overall concern in the trust department areas, according to chairman David Rockefeller, is ". . . to create a clear-cut profit center within the bank...
...Ibid...
...2 8 CHASE - WIELDING PENSION POWER Chase has the fourth largest bank trust department operations in the United States, with total trust assets exceeding $12 billion...
...A 1974 Senate report, for example, revealed that Chase was in a position to exert considerable influence over the transportation industry...
...Chase officials acknowledged that the creation of CIMC was in part a response to mounting pressure in Congress...
...Six out of ten have incomes below the poverty level...
...2. Money Income and Poverty Statistics of Families and Persons in the United States in 1974...
...Eighty percent of all private pension funds are managed by bank trust departments...
...The complex of relationships which can arise is illustrated in the following example...
...Trust Assets of Insured Commercial Banks - 1974, Federal Deposit Insurance Corporation, p. 71...
...Hundreds of thousands of workers never see a penny of the money taken weekly from their paychecks in the name of "retirement security...
...and the Los Angeles Times, February 23, 1973...
...I've seen the weary farmer A 'plowing sod and loam...
...In April 1972, the Chase Manhattan Corporation (the holding company which owns the bank), set up Chase Investors Management Corporation (CIMC) as a wholly owned subsidiary to manage investment portfolios for pensions, foundations, endowments, international organizations, and foreign individuals...
...Those who eventually do receive retirement benefits at the end of their working lives have given over control of their pension assets to these same financial institutions...
...Adequate retirement security for all workers can only come about through a massive redistribution of wealth, a redistribution which capitalism is incapable of making...
...and E. K. Hunt and Howard J. Sherman, Economics (New York: Harper and Row, 1972), p. 220...
...Chase argued that CIMC should not be treated as an independent corporation, since the personnel running the new company would be the same people who had been responsible for the same portfolios within the bank...
...Despite these progressive aspects, ERISA as a whole has been oversold to the public...
...This is our business and we don't need it...
...The second "leg," social security, created in response to political demands of the 1930's, was never designed to protect the elderly from poverty, and it doesn't...
...They still are not covered, essentially because we still don't know how to do it...
...Second, the leadership of organized labor came to power during the ascendancy of U.S...
...and New York Times (NYT), March 16, 1970...
...Since in most areas of competition the major banks are more or less equal (i.e., fees charged, lending ability, etc...
...7 THE PRIVATE PENSION FUND INDUSTRY The first pension plans came into existence in the late 19th and early 20th centuries, as U.S...
...Or many other degradations inflicted by this loss of dignity through the loss of jobs...
...Department of Commerce, the poverty level is $2,364 a year for an individual above 65 living alone...
...However, if the investment manager does well the company can reduce its contribution proportionately...
...their paycheck deductions are not reduced and their pension benefits do not rise with improved pension fund investment performance...
...All of these practices are understood to occur regularly within Chase and the entire U.S...
...WORKERS' PENSIONS 1. U.S...
...He is now 86 and almost totally blind...
...The total funds to be put under CIMC management equalled $9 billion...
...WOMEN AND MINORITIES The pension system supported by the labor bureaucrats works particularly against the interests of women and minorities...
...imperialism, a period which allowed limited benefits to some sectors of the organized work force...
...9 If added to other bank trust department investments and other bank lending and service relationships with corporations, pension fund investments give the big banks substantial influence over individual companies, over whole industries, and over entire segments of the economy...
...Last, and most importantly, Chase disassociated itself from guaranteeing the protection of workers' retirement benefits...
...Were the CIMC to have been a truly independent investment advisor, then it would have fallen under SEC jurisdiction...
...INTRODUCTION Local 250 of the United Auto Workers (UAW) represented from 500 to 600 workers at the Gar Wood plant (a manufacturer of truck bodies) in Wayne, Michigan...
...Information on Chase's stockholdings is from Comptroller of the Currency statistics on Chase Manhattan Bank, N.A...
...Broken down according to sex, white males received $186, white women $149, non-white males $151, and non-white women $117.4"* *As defined by the U.S...
...Under capitalism tremendous wealth tends to accumulate among the few at one pole...
...Between 1950 and 1958 bank-managed pension fund investments in stock rose from 12 percent to 27 percent of total bank-managed pension assets - and correspondingly investments in fixed interest govermnent securities and corporate bonds dropped from 77 percent to 62 percent.17 Since 1960, the bank-managed pension funds' equity Investments have skyrocketed and today represent 70 to 80 percent of all such funds' assets...
...WSJ, February 24, 1969...
...Few workers can count on retiring to adequate savings when they must spend their entire working lives paying off homes, cats, and appliances...
...These financial institutions are the centers of professional "money-management" within the U.S...
...For example, the bank may invest pension money in the stock of companies on whose board of directors its own officers sit or in companies that are important commercial clients...
...8. Brooks, op...
...In 1968 the BLS's Monthly Labor Review reported that 50 percent of retired working women aged sixty to sixty-four had less than 9.4 years of continuous service with the same employer...
...Chase president Willard Butcher sits on Firestone's board...
...But the company was heavily in debt to the bank and had no choice...
...1975, U.S...
...Where do they go from here...
...From this perspective, allowing the best "money-managers" available to invest workers' pension money in corporate stock makes sense, and on the surface appears to enhance workers' retirement incomes and promote a stable * Though here we give totals for private and public pension reserves, this article will focus on the reserves of private industry pensions and not those of public (government) pensions.17 and growing economy...
...corporations and represented the largest single bloc of invested wealth in the stock market...
...Two years later, Sargent decided to close down its manufacturing operations at Wayne and move the work to other Sargent facilities including those at Enterprise, Alabama, where anti-union legislation helps keep wages and pension benefits low...
...According to the Securities and Exchange Commission (SEC), banks have sole investment authority over 75 percent of their employee benefit funds...
...Information on Chase's pension fund clients from "Investment Services Index of Tax-Exempt Funds," Money Market Directory 1975, Part III...
...emphasis added I As a Chase official said in a recent NACLA interview, the bank's "boss is the pension fund...
...by 1960 they stood at $52 billion...
...see also Maurice Zeitlin, "Corporate Ownership and Control: The Large Corporation and the Capitalist Class," American Journal of Sociology, Vol...
...These shares, the bank disclosed, were from 140 different pension funds under its management...
...Thus, with pensions invested on the stock market, "the upside potential is the corporation's...
...According to the BLS, this eliminates 58 percent of the work force from receiving their pension benefits due to high labor turnover...
...An analysis of the new law clarifies its class nature...
...Neither savings nor social security nor pensions can alone provide adequate retirement security -- together they barely provide subsistence...
...A pension industry "rule of thumb" is that a 1 percent improvement in fund investment performance means a 10 percent reduction in the corporate contribution to the fund...
...Chase was empowered to...
...The ten largest bank trust departments hold 58 percent...
...SUBTERFUGING CONGRESSIONAL CRITICISMS In 1970-72, Chase and the entire banking industry came under extensive criticism from Congress around the conflict of interest between the banks' trust operations and their commercial banking operations...
...Five months after the creation of CIMC, the Chase Manhattan Corporation quietly asked the Securities and Exchange Commission (SEC) to exempt its new subsidiary from SEC regulations...
...On their own, the employees, whose money Chase was investing, did not have access to the information which indicates the security of their future retirement incomes...
...Government figures) of the total population live in poverty.2* The highest percentage of any age group forced into poverty (through the functioning of the system) is the elderly...
...Furthermore, Chase argued, since CIMC and the bank were under common ownership, the new company was really no different from the bank...
...NACLA interview, November 13, 1975...
...While workers could demand pension coverage, the administration of the funds remained within the Trust as established in the Taft-Hartley Act...
...3 7 3. Chase has director interlocks with one third of the 72 companies...
...and other sources, including interviews and newspaper articles...
...Since then these leaders have served capital by not taking the initiative in organizing the unorganized, partially out of fear of unleashing forces beyond their control...
...While making it more attractive for companies to scrap existing plans, it aids higher salary executives and professionals in setting up their own personal plans...
...While 1.6 percent of the population owns 82 percent of all corporate stock, over 12 percent (according to U.S...
...cit., and Comptroller of the Currency statistics, op cit...
...Scrap heap...
...THE PENSION MANAGEMENT CONTRACT On the 27th floor of the Chase Manhattan Bank building, the bank's law firm, Milbank, Tweed, Hadley & McCloy, hammers out contracts with companies which hand over their pension assets for management...
...34.NYT, September 21, 1972...
...Since the cut, he wiD probably get around $30 a month...
...see also San Francisco Chronicle, February 20, 1976...
...do not participate in any pension plan at all...
...12 LABOR BUREAUCRATS With pension benefits meager and with only 25 percent of all workers receiving pension benefits, why does union leadership go along with the present pension system...
...9 The growth of pension reserves has been spectacular...
...In April 1970, the conglomerate, Sargent Industries, purchased Gar Wood...
...4 s Its "boss" is not the workers covered by the plan, but rather the money generated by the workers and turned over to the bank...
...Thus according to one consulting firm, "You're going to see a proliferation of supplemental benefit plans for high paid executives...
...Herman Brotman, a participant in the writing of the original social security bill, "homemakers" were not covered because "we didn't know how to do it...
...the act does not guarantee a pension to anyone...
...During this period pensions grew slowly, and were set up by capitalists mainly to save money, rather than out of concern for retired workers...
...The influence and control over corporations exercised by the big U.S...
...and Money Income in 1974 of Families and Persons in the U.S., op...
...Banks often invest the funds in their own interests, or the interests of one of their officers rather than the interests of the sponsoring company or the pensioners...
...As Duncan Smith, in charge of marketing for Lionel D. Edie, an investment advisory subsidiary of Merrill Lynch, explained: In one case, the president of a pension-sponsoring company said there was no question that Edie could do a better job with its pension fund than had the present bank trustee...
...There are five major progressive areas contained in the new law: (1) The establishment of the Pension Benefit Guarantee Corporation (PBGC), a government insurance company for private pension plans...
...cit., p. 76...
...101, issued January 1976, p. 108, Table 54...
...Thus as long as the bankers keep the funds performing well, their investment authority is rarely challenged...
...Today pension reserves surpass $180 billion and represent one-third of the nation's total available investable wealth.' 0 In selecting the trustees to manage and invest these huge sums, union and management usually decide to rely upon the services of a bank, a trust company, an investment counseling firm, or an insurance company...
...ERISA In 1974, as the nation slid into an economic recession, public dissatisfaction with the faulty pension system forced Congress to act...
...banking community, and are examples of how pensions serve finance capitalists in their drive for corporate control, profits, and economic power...
...This is primarily due to the following reasons: (1) They usually earn fewer pension credits because the duration of their work is far shorter than white males, (2) They are concentrated in the less skilled jobs, and consequently are more vulnerable to layoffs, which can mean loss of pensions, and, (3) women and minorities usually earn lower wages and therefore receive smaller retirement benefits...
...Pension funds thus become an important element in Chase's drive for corporate control...
...Firestone is a commercial customer of Chase and the bank's trust department holds 950,000 shares in Firestone...
...Despite the recently passed pension reform law (see ERISA below), pensions rarely provide enough money to live on...
...Chase wants to turn that money into more money, and use the expanding assets in its drive for greater corporate control and economic power...
...Thus an essential prerequisite would be for rankand-file workers to develop organizations and leadership capable of carrying out a long-range program for the establishment of a society controlled by the interests of labor, rather than capital...
...We raise the question of why organized labor has allowed this to happen and conclude by pointing to an analysis which supports the creation of a system which really does serve labor's interests...
...Therefore, for the company, meager pensions often equaled increased profits...
...Business Week, July 24, 1971...
...6 And finally, the benefits for the rank and file who do receive pension allocations remains meager - an average of $133 a month, or $1,605 a year...
...Within the upper echelons of high-finance, however, the competition is intense...
...According to Steven Dunne, Vice-President of Marine Midland Bank of New York: "Banks are not buying this kind of insurance...
...and Chase Investors Management Corporation (New York) as of December 31, 1974...
...Women's home labor was not considered of economic value...
...cit., p. 47...
...The creation of the CIMC was a ploy designed to defuse the rising demands for a break-up of the concentration of economic power within the large banks.20 BANKS OF MARBLE Oh, the banks are made of marble With a guard at every door...
...Corporate managers need to maintain close ties with one (or more) of these large banks to insure access to a continuous source of capital...
...The case of Albert Davenport, who retired at age 68 under compulsory retirement...
...The turning over of pension assets to a large bank is a means of solidifying the corporation's relationship to a powerful lender...
...the downside risk is the pensioner's...
...for a family of four, it is S5,038...
...House of Representatives, Committee on Banking and Currency, Subcommittee on Domestic Finance, Commercial Banks and Their Trust Activities: Emerging Influence on the American Economy, 90th Congress, 2nd session, 1968, p. 91...
...3) Guarantees that any worker over twenty-five after one year of at least half-time employment becomes eligible for participation in the firm's pension plan...
...For example: 1. 83 percent of the 72 companies are customers of Chase's commercial banking department.36 2. Chase-managed portfolios hold stock in 75 percent of the 72 companies...
...4. Statistical Abstract of the U.S...
...He did not have 25 years retirement credits at the time of retirement...
...Competition for pension fund management within the banking industry as a whole, therefore, does not exist, for only the largest banks can fill these needs...
...the Trustee shall not be responsible in any respect for administering the Plan nor shall the Trustee be responsible for the adequacy of the Fund to meet and discharge all payments and liabilities under the Plan...
...That's the thing that discourages me most...
...Charles Leinenweber, "The Great American Pension Machine," Ramparts, June 1972, p. 31...
...banks through their trust department operations has been the focus of several recent Congressional investigations...
...5. U.S...
...In recent NACLA interviews, officials at Chase disclosed that the bank worked "behind the scenes" while the pension reform law was before Congress helping write many of the provisions which were inserted into the Act.Y Chase's efforts paid off, for the large financial institutions are the big winners with ERISA...
...The Chairman of Local 250 UAW Retirees Chapter, Mike Daly, saw...
...In addition, the act is so complicated that it is deterring many small companies from setting up a pension fund at all, encouraging the scrapping of existing plans, and making it more difficult for labor to negotiate a plan...
...Information on director interlocks primarily from Who's Who in America 1974 and 1975...
...The older workers at Gar Wood were faced with no other choice but to retire in near or actual poverty...
...In the United States, 25 percent of the aged (people 65 years and older) live below the poverty level, with another 25-30 percent on the border...
...Further, the Bureau of Labor Statistics (BLS) estimates more than half of all corporate employees now covered by pension plans will never collect a penny of benefits...
...In addition, these large banks tend to charge the lowest fees for managing large trusts and have research departments which can compete with those of most other "money managers...
...Originally banks were able to attract penion funds due to their supposed conservativism and solidity, which were considered important for long-term planning of retirement incomes...
...The shift to stocks began in the 1950's...
...According to Dr...
...cit., p. 10...
...Department of Commerce, Bureau of the Census, Series P-66, No...
...Journal of Commerce, March 12, 1975...
...CONCLUSION The private pension system redistributes wealth to the rich, rather than to the workers or the poor...
...House of Representatives Committee on Labor, November 25, 1975...
...Thus the same exemption from SEC regulations that Chase's trust department already enjoys should also apply to CIMC...
...Leinenweber, op...
...The congressmen wanted to separate the trust operations from commercial banking - thus forcing the banks to divest themselves of their trust departments.* 3 1 In defense, many banks (including Chase) use the analogy of a "Chinese wall" in describing their supposed self-enforced separation of trust and commercial operations...
...Thus, Chase, as the trustee, was authorized to utilize the securities it bought with Anaconda's pension assets to exercise influence over the companies in which it acquired an interest...
...Depending on level of wages and length of work, a worker will receive from $101 to $355 a month (or will receive nothing if not employed long enough to meet minimum requirements...
...Older women are particularly hard hit by pension discrimination...
...But in reality their needs conflict...
...and the top 20 manage 72 percent...
...According to a close observer of the pension industry, these may represent only half the total number of corporate pension accounts under Chase management, since many companies refuse to reveal who manages their funds.3s From this list of 194 we selected only those companies with retirement funds worth more than $10 million each, reducing the total to 72 companies...
...In 1945, private and public pension reserves* were only $5.4 billion...
...The law requires diversification of investments, but establishes no absolute standards, and provides for no administrative corrective action if a pension fund manager does not diversify...
...Dated as of April 1, 1968...
...Information on Chase customers is from the bank's Corporate Customer Directory, Information and Computer Service Team, Corporate Banking Department, January 16, 1975...
...and Kate Blackwell and Ralph Nader, You and Your Pension (New York: Grossman Publishers, 1973), p. 13...
...cit., p. 36...
...NACLA interview with Michael J. Clowes, Executive Editor, Pensions and Investments, March 15, 1976...
...As a result, provisions protecting workers' rights to and eligibility for a pension cover only about one-third of the labor force.* As pension expert Merton C. Berstein, a former attorney for the Senate Labor and Public Welfare Committee, said: "It will be a long time before the people realize that they've been had...
...A major factor contributing to the Congressional movement was the revelation of Chase's role in the Penn Central bankruptcy...
...Widows of covered workers often receive nothing from their husbands' pension plan, or at the most receive a pittance...
...In most cases, corporations are merely informed several times a year by the banks as to where their pension funds are invested...
...The CIMC manages or serves as investment advisor for hundreds of corporate pension funds, retirement income plans and profit-sharing plans...
...citizens...
...And I've heard the auction hammer A'knockingdownhishome...
...i.e., to further disguise the irreconcilable differences between capital and labor...
...Thus today, 78 percent of the workforce has no organization committed to protecting its interests, let alone its retirement benefits.'" And, rank and file movements within organized unions - including efforts to control their pension funds - are often seen as potential threats to the bureaucrats' hold over the unions...
...Brooks, op...
...Banks don't see the need for insurance, since their present investment policies are felt to be adequate, and since it is more difficult to sue a large bank...
...cit., p. 9-10...
...and "Big Money in Pensions, But for Whom?," Dollars and Sense, September 1975...
...Department of Labor, July 26, 1959...
...Progressive legislation, designed to alleviate some of the most glaring defects in the system was approved by the legislators and signed into law by President Ford...
...9. Daniel F. McGinn, "Fundamentals of Multi-Employer Negotiated Pension Plans," unpublished paper, April 30, 1970...
...The bank was urged: to join in or oppose any reorganization, recapitalization, consolidation, merger or liquidation, or any plan therefor, or any lease, mortgage or sale of the property of any organization the securities of which are held in the Fund...
...Select Committee on Aging, op...
...Such insurance is costly, and thus their fees will rise faster than those of the large banks...
...As admitted by Manufacturers Hanover Trust on a recent Senate questionnaire: ". . . it is sometimes desirable for such holdings [in corporate stock] to be sufficiently large so that executors' and trustees' views will carry more than normal weight when presented to company managements .. ."4 Pension funds help the banks gain "more than normal weight" within the corporations...
...cit., p. 25...
...5) Requirements that workers must be informed of changes in the plan and how much they have in the fund...
...2) More stringent "funding" guidelines that a company must adhere to in establishing a plan...
...Just as with any three-legged stool, if a leg gets cut off or is shorter than the others, the person using the stool wobbles and often crashes...
...I've seen my brothers working Throughout this mighty land And I pray we get together And together take a stand...
...Chase was further authorized to become involved in the administration of the companies in which Anaconda's pensions are invested...
...In addition, the contract permitted Chase to borrow money from itself, and pledge the pension fund as collateral for the loan, and to "do all other acts that the Trustee (Chase) may deem necessary or proper to carry out any of the powers set forth...
...officials in charge of programs for the elderly use the analogy of a three-legged stool in describing the basis of worker's future security...
...3 3 In actuality Chase created CIMC to prevent distance from being put between the two...
...Only a "person or persons as the company shall designate" was allowed to inspect the receipts, investments and disbursements of the fund...
...3 2 Anxious to protect their overall operations, Chase moved to circumvent the growing clamor for a separation of trust from * In 1933 the Glass-Steagal Act, trying to prevent some of the banking practices which led to the 1929 stock market crash, prohibited commercial banks from directly owning other companies' stock...
...Their lips moved but not a sound...
...A careful reading of the legal jargon in one of these contracts (with Anaconda) helps clarify Chase's interests in seeking the pension management business...
...On the other hand, investment losses can result in a decrease or a cessation of employee benefits...
...Department of Commerce, Bureau of the Census, Income Series P-60, No...
...4421 In addition to this unlimited investment control, Chase was given total voting rights over the securities purchased Chase was empowered: To exercise, personally or by general or limited proxy, the right to vote any shares of stock, bonds or other securities held in the Fund...
...a18 major area of competition is performance...
...And the vaults are stuffed with silver That the people sweated for...
...A closer examination of Chase's relationship with these 72 pension management clients reveals that the bank is closely intertwined with most of them...
...cit., p. 109, table 54...
...Then, through a detailed look at bank pension fund management operations in general, and Chase's in particular, this article will show how finance capital, rather than labor, is the real beneficiary of the pension system...
...Department of Labor, Bureau of Labor Statistics, p. 366...
...This act requires that payments by employers for employee benefits can not be made to a union, but only to a Trust jointly administered by union and employer representatives...
...Chase did not concern itself with whether or not the fund was adequately "funded" i.e., had enough money to meet the actual and potential retirement needs of the workers at the company...
...The funds are often used as a form of commercial bribery, by making loans to a company dependent upon the banks' receipt of that company's pension management contract...
...Chase jointly manages, with three other banks, a $423 million pension and retirement fund for Firestone...
...Senate, Committee on Finance, Hearings Before the Subcommittee on Private Pension Plans (Part I), Testimony of Mike Daly, United Auto Workers, 93rd Congress, May 21-23, 1973, p. 454-455...
...99, July 1975...
...The Social Security system was created in 1935 and embodied the sex roles prevailing under capitalism - the man works and the woman is his dependent...
...News, U.S...
...industry brought more workers from rural and semi-rural areas (where the elderly traditionally had been provided for by the younger generation) into urban and industrial environments...
...The bank's trust department (over half of whose assets were accounted for by pension funds) held between seven and nine percent of the stock in each of four airlines and between five and eight percent of the stock in each of six railroads...
...Handbook of Labor Statistics 1974...
...for minorities it was $137...
...Workers, however, do not benefit from increased performance...
...One alternative to capitalist control of labor's pension funds would be rank-and-file control...
...First, in this agreement Chase as a trustee was given virtually total control over investment of the funds, with no restrictions as to diversification or fiduciary responsibility...
...NACLA Interview with Vance Anderson, Pension Fund Task Force, U.S...
...But the overall result of turning pension money over to banks for investment in corporate stock is to connect working class interests with the survival of the capitalist system...
...See "Corporate Relations" below...
...only five percent have incomes of more than $5,000 a year...
...by the end of 1975 the total surpassed $105 billion...
...If Chase's boss were the workers rather than the money itself, the bank's outlook and investments would certainly be different...
...Shortly thereafter, in 1949 (when the Supreme Court sided with organized labor in the Inland Steel case), pensions were legally classified as a form of remuneration and thus a proper subject for collective bargaining between management and labor unions...
...Recognizing that pensions provide an extra lever of financial control, banks generally retain discretionary power over the investment of the funds...
...Mental Institutions...
...But, as the large banks competed for the funds, they began to sink their managed funds into more speculative equities (stocks) and attempted to "out-perform" each other...
...Companies understood that a small pension plan could serve their interests in two ways: 1) by tying pension benefits to 30-40 years of continuous service, the plan reduced costly labor turnover by inducing employees to stay with the employer, and 2) the pension plan could be less expensive than keeping unproductive elderly workers on the payroll...
...2 0 As Edna Ehrlich, manager of the International Research Department for the Federal Reserve Bank of New York, wrote: "The degree of responsibility given to trustee banks for [pension fund] investment decisions varies, but some of the larger banks usually demand and obtain sole investment responsibility...
...For an executive, such as former Chase chairman George Champion, in contrast, pension benefits exceed $101,217 a year...
...take the case of the widow of Walter Miller, who was buried on Saturday, twb weeks ago, May 5. She stood before her husband's casket and asked me does his pension cease, and must I pay for my own Blue Cross, and I had to answer yes...
Vol. 10 • April 1976 • No. 4
