Capital Offers No Solution To It's Own Crisis

Capital's crisis is now fully public..
.Only twice in the past has the business confidence index been lower - in the third quarter of 2001 - during the bursting of the tech-bubble - and during the 1990-91 period, when a recession battered the real estate, financial and retail sectors.
"In both cases, the drops were followed by contracting business capital investment," the Conference Board said in a release.
Capital spending is a major engine of economic growth, combining with consumer and government spending and exports as the main pillars of the economy. Weak capital spending, at a time of falling consumer confidence and government cuts, will put a squeeze on growth.
The Conference Board said "the latest survey, conducted during the first three weeks of October, as mayhem gripped global financial markets, found businesses were "much more concerned" about the economy and their future financial situations than in the previous poll, taken during the summer.
Nearly 70 per cent of businesses responding to the survey believed that the economy would be in worse shape in six months - compared with 12 per cent who expected an improvement.
The net result of that negative view is that only 25.8 per cent of the business leaders surveyed believe now is a good time to make new investments in plants, technology and equipment, the board said.

And it is having a Flashback....

Hedge fund industry enters time-warp in January 1970, pops out virtually unchanged in 2008

Thought recent develops in the hedge fund industry such as poor performance, SEC registration, and taxation were unprecedented? Yeah, so did we - until Nicholas Motson of the Cass Business School (see related post), gave us a heads-up about a fascinating article from the January 1970 issue of FORTUNE magazine. The entire article can be downloaded here on the A.W. Jones & Co. website (yes, that A.W. Jones - the father of the hedge fund industry).
As you will see, the similarities between the hedge fund world of 1970 and that of 2008 and truly amazing - almost eerie in fact. Even the 39 year old Warren Buffett makes a cameo in this piece. As Motson pointed out to us, “…if you re-scale the numbers it could have been printed yesterday.”
The bizarre parallels begin with the article’s very title: “Hard Times Come to Hedge Funds“. It goes on to chronicle the travails of the $1 billion industry (as a point of reference, the US mutual fund sector managed about $50 billion at the time). FORTUNE estimated there were 3,000 investors in about 150 hedge funds by 1970. Most funds were launched between 1966 and 1970 and “the great bulk” were registered in Manhattan (that’s just south of Greenwich, for those who may not remember the old days).


Speaking of flashbacks the solution to this crisis is a New Regina Manifesto for the 21st Century.....

Public reading marks 75th anniversary of Regina Manifesto
'No CCF Government will rest content until it has eradicated capitalism.'
Ottawa (19 Aug. 2008) - Seventy-five years ago this summer, the Regina Manifesto was adopted at the first national convention of the Co-operative Commonwealth Federation (CCF) in Regina. The 4,300-word declaration laid out a socialist vision for the country and has influenced the Canadian left ever since. To this day the document remains an emotional symbol for the New Democratic Party (NDP) – which replaced the CCF in 1961 – even though it includes a utopian declaration that no socialist today expects ever to be realized


The former based upon Fabian Social Democratic tradiditons looked to the State and in particular its economists to deal with the crisis of capital during the Great Depression. As such capital was lost, in the collapse of the stock market. Today the same Great Crisis is occuring but what is obvious is that all socialization of capital can be accomplished without the State and centralized planning; rather through public ownership through workers control, a phenomenon denied by the CCF as implausable, impossible, and associated with the 'Imposibilists" of the Socialist Party of Canada.

Today we have the opportunity to mobilise the mass of social capital, the wealth created by workers through the production of surplus value, as well as through workers investments; their pension plans, RRSP's and investments. Share Capital, that the Wall Street pundits proclaim was the new capitalism, was in fact the expansion of the recognition that all capital is the result of creation of the proletariat.

That is when the casino market of investments and movement of fictional captial; finance captial, collapses all that is left to retrieve capital is real prudction; factories and workers. In other words all capital is actually based on two contradictory sources; inheritence, the dead capital of previous generations of workers, and productive capital; living workers and the means of production.

The hedge funds and private capital investors who dominate the financial markets are based upon the former as George Soros ,himself a benfificary of the fictive capita of hedge funds,l takes pains to point out, the obvious, that without real capital; living workers and factories, all other capital is whiffenpoof.

And credit is the ultimate in dead capital, its only real is when it is spent by living workers through consumption and investment. Otherwise it is merely caluculations made by computers being used by international speculators. The use of 'creative' accounting practices by capitalists allows them to discount their losses over a period, to make them disappear, which has led us to this crisis. The real effect of these practices is to create actual unemployment of workers the very source of all capital.

While it may appear counterintuitive the practice worked for a decade as investors shored up companies that cutback workers, however in this crisis it is the reverse that is now required. Investment to be successful must create jobs such as in infrastructure. And the greatest source of capital remains living workers, both their labour to produce value and the capital they have created in pension funds, mortgages, RRSPs, savings accounts and government bonds. Its as clears as the nose on your face. The credit/capital crisis is the fact that Americans and Canadians have no savings, rather they are overextended on credit, they are in debt, so their nations are in debt. Laying off workers only worsens the crisis, since they now become permanent debtors.

Public ownership, the socialization of all capital under worker and community control, the creation of workers cooperatives as an alternative to corporations, and by extension the creation of peoples banks; credit unions under workers control, is the elephant in the room, that so terrifies the captialist class who keep telling us this meltdown is not the end of capitalism as we know it. Though it should be.

SEE:

There Is An Alternative To Capitalism

Business Unionism Offers No Solution To Capitalist Crisis

Auto Solution II

Super Bubble Burst

Your Pension Plan At Work

Gambling On Your Future

The End Of The Leisure Society

It's the Labour Theory of Value, stupid

Workers Control vs Corporate Welfare

NDP And Workers Control

A Peoples Program for Alberta

Left, Right and Liberty

State-less Socialism

Cooperative Commonwealth=Free Market

Not Your Usual Left Wing Rant

Populism and Producerism

THE BRITISH DISTRIBUTIONISTS

Historical Memory on the Eve of the Election

Calgary Herald Remembers R.B. Bennett

Social Credit And Western Canadian Radicalism




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Pension Rip Off

Canada's corporations are crying the blues again about the fact that they have underfunded liabilities regarding their pension obligations to their workers. While they may have a point that the government discourages them from putting extra into their pension funds, the fact is that they use this excuse to not max out their share of their pension responsibilites. Much like the government itself with its public sector plans, which are paid for by employers and employees, but the government never puts in its share, instead it uses its general funds to account for its future liablities, which of course gets it into trouble during periods of economic downturn and when the state runs up deficits and gets into debt as it did in the ninties.
That being said while corporations could benefit from legislative changes to the tax code, the fact remains that they would still prefer to invest in stocks and to pay their CEO's lucrative salaries and pay generous dividends to their shareholders before they invest in their own workers. Surprise, surprise. Now that market has melted down they cry the blues about not having paid their share into their future obligations to those who produce their wealth; their workers.

See
The Importance of Savings
Your Pension Dollars At Work
P3= Public Pension Partnerships
Chinese Social Security Scandal
Social Insecurity The Phony Pension Crisis
Pension Plunder
Labour Is Capital
Pension Free China
Kids Are Commodities
Workers vs Worker
Air Canada Profits From Bankruptcy
Are Income Trusts A Ponzi Scheme

Vencap
AIM High
P3 Myth Busting
Infrastructure Collapse
Fire Sale
Dumb and Dumber
Public Pensions Fund Private Partnerships
Golden Parachutes
Your Pension Dollars At Work

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Pay Day For Alberta Teachers

File this under cleaning up outstanding issues before calling an election. What a difference five months make.

Alberta is signing a $2.1-billion cheque to avert a province-wide teacher strike.The Alberta government announced Thursday it will assume the $2.1 billion teachers' portion of their unfunded pension liability. In return teachers' associations across the province must pledge five years of labour peace.

Since it was created in the 1930s, the teachers' pension fund has been underfunded by both the government and the ATA. The liability currently totals $7.1 billion, including $6.4 billion up to 1992 -- when both sides agreed to increase their contributions -- as well as $700 million since then.

If they accept the deal, teachers will stop paying pension liability contributions -- 3.1 per cent of their salaries this year. The deal would save teachers roughly $2,000 a year that has been deducted from their paycheques for years to help cover the pension liability.

They will also each get a $1,500 lump-sum payment and a yearly raise tied to the average weekly earnings index, which is also used to calculate MLA salaries.

The deal came with two months left to prevent province-wide walkouts. If ratified by the 62 affected union locals by Jan. 1, 2008, it will give teachers a 3% raise this year and assume their payments for the fund beginning this year, bringing the immediate salary increase to 6.1%.

Additionally, teachers are limited under the Education Act to working no more than 200 days per year.

If school boards and teachers' ratify the deal, it will eliminate any possibility of strikes or lockouts until September 2012.

Alberta Teachers' Association president Frank Bruseker called the agreement one of the highlights of his career. He pledged to do everything he can to ensure it's ratified at the board level.

Shannon McElroy, president of the Edmonton Catholic teachers' local of the ATA, also praised the pact. "From my perspective as a local president it's unprecedented, historically, that we would reach a deal ... of this magnitude on so many issues," McElroy said. "I'm not seeing any downside to this."

The winners are the teachers and school boards. The province has got province wide bargaining that they always wanted but now they have to foot the bill. Be careful of what you wish for. This frees up school boards to use provincial funding for public education instead of teacher salaries.

But don't think that it means that teachers will vote Tory. On the other hand it does mean the Alberta Liberals have just been screwed.

But the losers are the Alberta Liberals - who in times past acted like they were the political arm of the ATA. "In raw political terms," Liberal finance critic Rick Miller gulped, "this means our policy platform just got a page shorter."

And you just can't satisfy some folks.

But the Canadian Taxpayers Federation was scathing in its reaction to the deal, criticizing Stelmach for selling out taxpayers.

"Premier Stelmach has offered teachers $2.1 billion of taxpayers' money in exchange for them not going on strike during the upcoming provincial election," Scott Hennig, the group's Alberta director, said in a news release.

The federation calculated the deal will cost each Albertan $600, and called on the government to hold a plebiscite before signing any new agreement.

"Teachers are getting their debt paid off 52 years early and all taxpayers get is a lousy five years of no strikes."

$600 bucks for five years of labour peace. Priceless.

See

AIM High for more on the Alberta Government and its public pension plans.

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Your Pension Plan At Work

We may end up owning an airport in New Zealand. I can't wait to retire and visit.

WELLINGTON (Reuters) - The Canadian state pension fund said on Wednesday it would make a partial all-cash offer for NZ's Auckland International Airport Ltd (AIA.NZ: Quote), a week after the company rejected a previous offer.

The Canada Pension Plan Investment Board said it would offer NZ$3.6555 a share for up to 40 percent of Auckland Airport shares valuing the company at around NZ$4.5 billion ($3.5 billion). CPPIB said Auckland Airport shareholders encouraged it to bid again, after the board rejected the previous proposal as too risky.

Shares in Auckland Airport, 23 percent owned by two local authorities, closed on Tuesday at NZ$2.91, having traded between NZ$2.06 and NZ$3.50 over the past 12 months.

($1=$1.29)

In response to a stinging snub from the board of New Zealand's largest airport, the Canada Pension Plan Investment Board (CPPIB) has fired back with a plan to take its partial takeover offer directly to shareholders.

After a months-long friendly process in which the Canadian pension fund manager was given ample access to Auckland International Airport Ltd.'s books, its board put out a surprising and sharply worded release last week quashing the CPPIB's bid.

Four of its five members voted against the offer for up to 49 per cent of the company. The revised all-cash offer is valued at $1.8-billion New Zealand ($1.3-billion Canadian) for 40 per cent.

Alongside its concern about the level of debt involved in the partial privatization, Auckland International's board also took an unusual poke at the expertise level of the $120.5-billion (Canadian) pension fund manager, which is considered by many to be one of the world's most sophisticated investors in infrastructure.

The CPPIB's second wind, however, has come from institutional investors including the airport's largest, the Auckland City Council.

The council owns a 12.75-per-cent stake and has encouraged the pension fund to continue on with its plan.

"We are really going down this route because shareholders have lobbied us to find a way to opine on the proposal," Mark Wiseman, CPPIB senior vice-president, private investments, said in an interview.

The airport's other large shareholders include the Manakau City Council, the city just south of Auckland in which the airport is located, along with infrastructure investors Macquarie Bank of Australia and New Zealand's Infratil Ltd.

Actually this is another case of public sector funds being used as a P3 Public-Public-Partnership. Privatization by another name,except all the investors are publicly owned institutions or pension funds. Ironic that.

Privatization of infrastructure is now being paid for by public funds. No capitalist is willing to invest in long term infrastructure. Not private equity companies or Hedge Funds. So while neo-cons promote the myth that private capital is willing to invest in public infrastructure the reality is that it is workers pension funds, public funds that are used to rescue the public sector and the commercial private sector investments in infrastructure.

Canadian pension plans, Australian bank to acquire Puget Energy

A multinational consortium lead by an arm of Australia's Macquarie Bank and including three Canadian public-sector pension plans is acquiring Puget Energy (NYSE:PSD) amid continued infrastructure investments by major Canadian pension funds seeking more lucrative returns to pay pensions.

The deal values the U.S. utility company at US$7.4 billion, including $3.2 billion in shareholder capital provided by the consortium, $2.6 billion in existing debt that will be assumed and $1.6 billion of newly issued debt.

In addition to Macquarie, the consortium includes the Toronto-based CPP Investment Board, British Columbia Investment Management Corp. and Alberta Investment Management.

"PSE is Washington's oldest and largest energy utility - it is a strong, stable company with a growing customer base in a market that has displayed consistent demand over time," Christopher Leslie, chief executive of Macquarie Infrastructure Partners, stated Friday.

TORONTO, ONTARIO--(Marketwire - Nov. 1, 2007) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced its financial results for the three and nine months ended September 30, 2007.

Financial Highlights

RioCan reported net earnings for the quarter ended September 30, 2007 of $35,917,000 ($0.17 earnings per unit basic and diluted) as compared to net earnings of $41,763,000 ($0.21 per unit basic and diluted) for the three months ended September 30, 2006. For the nine months ended September 30, 2007, RioCan reported a net loss of $32,790,000 ($0.16 loss per unit basic and diluted) as compared to net earnings of $120,377,000 ($0.61 per unit basic and diluted) for the comparable period in 2006.

For the quarter ended September 30, 2007, rental revenue was $160,559,000 as compared to $145,339,000 for the three months ended September 30, 2006. Rental revenue for the nine months ended September 30, 2007 was $483,824,000 versus $429,291,000 for the comparable period in 2006.

FFO for the quarter ended September 30, 2007 was $76,029,000 ($0.36 per unit) as compared to $72,533,000 ($0.36 per unit) for the three months ended September 30, 2006. For the nine months ended September 30, 2007, FFO was $227,120,000 ($1.09 per unit) as compared to $209,440,000 ($1.06 per unit) for the nine months ended September 30, 2006.

RioCan's Consolidated Financial Statements, Management's Discussion and Analysis and a Supplemental Information Package for the three and nine months ended September 30, 2007 are available on RioCan's website at www.riocan.com.

FFO is a widely accepted supplemental measure of a Canadian real estate investment trust's performance and should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with Canadian generally accepted accounting principles. RioCan's method of calculating FFO may differ from certain other issuers' methods and accordingly may not be comparable to measures reported by other issuers.

Portfolio Stability

At September 30, 2007:

- Portfolio occupancy was 97.6%;

- 65.1% of rental revenue was derived from properties located in Canada's six high growth markets (including and surrounding Calgary, Edmonton, Montreal, Ottawa, Toronto and Vancouver);

- 82.6% of annualized rental revenue was derived from, and 83.1% of space was leased to, national and anchor tenants;

- Approximately 49.7% of annualized rental revenue was derived from its 25 largest tenants; and

- No individual tenant comprised more than 5.7% of annualized rental revenue.

Development Activity

With over a billion dollars at cost of ongoing developments, project activities remained strong throughout the third quarter as RioCan continues to focus on its development program. At the end of the third quarter, approximately 8 million square feet was under development, of which RioCan's ownership interest was approximately 3.4 million square feet. Third quarter highlights include:

- Oakville, Ontario - RioCan Centre Burloak, located at the intersection of Burloak Drive and Queen Elizabeth Way, is a 552,000 square foot new format retail centre anchored by Home Depot (retailer owned), SilverCity Oakville Cinemas, Longo's and Home Outfitters. This joint venture with the Canada Pension Plan ("CPP") Investment Board is 100% leased with approximately 92% to be occupied by national and regional retailers.

Construction is well underway and store openings are now being phased-in. A number of retailers have recently opened for business including Home Depot, Nike, Sony and Tommy Hilfiger. Additional retailers opening by the end of 2007 include SilverCity Oakville Cinemas, Suzy Shier, Guess, La Vie En Rose, Reitmans, Le Chateau, Urban Barn, Benix & Co., Bowring and many more. Other retailers such as Longo's, Home Outfitters, Urban Planet, Kitchen Stuff Plus, Structube, Solutions, Kelsey's, Montana's and Swiss Chalet will be opening in 2008.



- Edmonton, Alberta - Construction is ongoing at RioCan Meadows, another development joint venture with CPP Investment Board. Upon completion, this 502,000 square foot new format retail centre will be anchored by a Real Canadian Superstore (retailer owned) and Home Depot. Some retailers that recently opened for business include Winners, Dollarama, TD Canada Trust and Wok Box. Additional retailers opening later this year and in 2008 include Petsmart, Reitmans, Laura, Scotia Bank and Swiss Chalet.

- Calgary, Alberta - Also moving towards completion is the construction of RioCan Beacon Hill, a 788,000 square foot new format retail centre featuring shadow anchors Costco and Home Depot, both of whom are open for business, as well as Canadian Tire and Shoppers Drug Mart, both of which are expected to open in spring 2008. This joint venture with Trinity Development Group Inc. and CPP Investment Board boasts a number of national retailers, many of which are already open for business, including Winners, HomeSense, Royal Bank, Linens 'N Things, Golf Town, Michaels, The Shoe Company, Mark's Work Wearhouse, LaSenza, Thyme Maternity and Sport Chek. Additional retailers such as EB Games, Telus and Bell Mobility are anticipated to open later this year.

However what remains lacking is shareholder control of our pension funds. Without that we have no checks and balances on how our funds are being used, for instance if jobs are cut at the airport which are not in our interests or those of the workers affected.

Or in the case of affordable housing our pension funds are being used for commercial real estate investments instead of creating affordable housing in overheated markets.

While institutional funds, as our public pension funds are called in the investment industry, cry for more control over the boardrooms of the companies they invest in, we the owners/shareholders of these funds have no say in their boardrooms.

This is an issue the labour movement and civil society needs to address soon.

Canada says G7 to discuss state investment funds

Group of Seven finance ministers will discuss the need for more transparency by state-backed investment funds in a meeting on Friday and will likely mention the issue in their final statement, a Canadian government official said on Tuesday.

Ministers from the world's richest nations will gather in Washington on Friday to discuss the global economic outlook following this summer's credit crunch as well as possible regulatory changes for financial market players.

But sovereign wealth funds are also high on the agenda and will be the subject of an "outreach session" with non-G7 members Friday evening, said the official, who declined to be named.

Although they are not new, these funds have grown in number and size in recent years as the central banks of oil-rich Middle Eastern countries and countries such as China, which have huge reserves, invest in riskier assets in search of higher returns.

The main concern in Canada and other countries is that not enough is known about the huge capital flows from these funds, which can create imbalances in the global financial system. The funds need to be guided by clearly stated market-based principles to assure the countries hosting their investments that they are not motivated by anything other than economics, the official said.

At a special meeting that will also include China, Korea, Kuwait, Norway, Russia, Saudi Arabia, Singapore and the United Arab Emirates, Canada will hold up its Canada Pension Plan Investment Board as a model of accountability that could be adopted by state-owned investment funds. Norway's state fund is another model.

The CPP Investment Board is responsible for investing pooled pension assets worth C$120.5 billion and operates at arm's length from the government, with an independent board of directors. It undergoes external audits every year and tri-annual reviews by government authorities.

It is required also to hold public meetings periodically and to disclose its investment performance on its Web site.

Charge higher CPP premiums to firms without pension plans

The National Union of Public and General Employees (NUPGE) is launching a campaign to change Canada Pension Plan rules, requiring employers without workplace pension plans to pay higher Canada Pension Plan (CPP) premiums.

The extra money would be used to pay higher CPP benefits at retirement to workers who do not have a workplace pension plan.

NUPGE outlined the proposal at a recent conference attended by more than 300 union representatives and leading pension policy experts. The event was arranged by the Canadian Labour Congress (CLC), which brings together affiliated unions with a combined membership of more than three million members.

NUPGE is one of Canada's largest unions, representing 340,000 public and private sector workers across the country. Collectively, the NUPGE members participate in pension funds with combined assets of more than $100 billion.

The union recently released a research report identifying an alarming decline in pension coverage in Canada. The report revealed that the percentage of the Canadian workers covered by a pension plan declined from 46% in 1991 to 38.5% in 2005.

Employers lack incentives to provide pensions

Larry Brown, NUPGE's national secretary-treasurer, says Canada now provides few incentives for employers to create pension plans, despite the obvious social and economic benefits of doing so for workers and for society in general. In fact, disincentives exist to discourage employers from setting up their own plans, he said.

Brown says employers with pension plans now pay exactly the same CPP premiums as those without plans. At the same time, they assume legitimate administrative costs and requirements set out in pension legislation, including funding obligations and reporting and actuarial evaluations, he said.

“Employers have a moral obligation to their employees to provide decent pensions, but our system does very little to encourage this behavior. Instead, it subjects employers who provide pensions to necessary but often complex legislative requirements,” Brown notes.

"Why should an employer assuming the burdens and obligations of providing a pension plan pay the same CPP premiums as employers who do not?" he asks.

“We don’t think that makes sense and we’re launching a campaign that calls for an extra payment to the CPP from those employers that don’t offer a workplace pension plan,” he says.

"We are saying that employees should receive improved CPP benefit coverage during any years they work for employers without a workplace plan, and those benefits should be financed by additional CPP premiums collected from employers who do not offer pension plans.”

Brown says this would create an incentive for employers to provide pension plans. "They would pay for a workplace pension plan, or pay higher CPP premiums. Either way, they would be required to meet their moral obligations to their employees”, he said.

SEE:

Vencap

AIM High

P3 Myth Busting

Infrastructure Collapse

Fire Sale

Dumb and Dumber

Public Pensions Fund Private Partnerships

Golden Parachutes

Your Pension Dollars At Work

P3= Public Pension Partnerships

Find blog posts, photos, events and more off-site about:
Alberta, Heritage Trust Fund, LAPP, Alberta Investment Management Corporation, Canada, Pensions, P3, public-private-partnerships, OMERS, CPP, Ontario-Teachers-Fund, OTF, Canada, investment, infrastructure, VenCap, shareholders, economics,

Pension Fraud Brings Down Japans Government

In a society that once had cradle to grave employment for its workers Japan for the past twenty years has been in an economic downward spiral. Each attempt to follow American recommendations to privatize their economy has exposed Japan's political establishment as incompetent if not downright criminal.

This weekends election exposed the weakness of such reforms in Japan as well as other existing capitalist economies as they rely on looting public pension funds for venture capital.

However, voters on Sunday were obviously far more concerned with bread-and-butter issues that directly affect their daily lives.

Key among those issues was concern about the state of the public pension system.

Even though the government passed legislation to reorganize the scandal-tainted Social Insurance Agency, the public was clearly not convinced that everything had been done to address their concerns about 50 million or so missing pension accounts or whether the new entity would operate in an efficient manner that would ease their fears about retirement.

Abe learned late last year about the pension debacle, but did nothing to deal with the matter until Minshuto (Democratic Party of Japan) raised this issue in the Diet, triggering a public uproar this spring.

Abe had no alternative but to come up with measures at the last minute to placate the public.

Abe promised to sort out every single pension account and notify individuals by next March at the latest about the status of their payments.

However, opinion surveys showed that the public had not yet forgiven the government for its handling of the problem.

In contrast, Minshuto focused on the pension issue by again proposing a minimum pension program. It also proposed other livelihood measures, such as steps to bridge the growing disparity in incomes as well as moves to help Japan's farmers and child-rearing families with direct subsidies.

Sunday's results left no doubt that Minshuto's policies resonated with voters. The major political question now is whether Abe will continue as prime minister.

SEE:

Japanese State Capitalism

Gambling On Your Future

Public Pensions Fund Private Partnerships

The Importance of Savings

Social Insecurity The Phony Pension Crisis

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Blackstone Hi-jinx

Having appointed former PM the RH Brian Mulroney to the board, Blackstone the private equity hedge fund went public with an IPO. In the two weeks it has made no money on its posting in the stock market, but had paid off its CEO handsomely. This week it offered to buy out Hilton Hotels, with a bid that led to cries of insider trading. If any fallout occurs then Blackstone can always call on Mulroney to bail them out as he did with ADM.

Since the close on its first full day of trading on June 22nd, Blackstone Group (BX) has not finished a single session in positive territory.

Blackstone, whose founder Stephen Schwarzman pocketed $677 million from his IPO's proceeds.

Shares of Hilton Hotels Corp. rose 6.44% to close at $36.05 Tuesday -- ahead of the announcement of the company's sale to the Blackstone Group for approximately $20 billion in cash. After the close, Blackstone said it would pay $47.50 per share for Hilton, a 32% premium. The pre-news rise -- the shares' strongest surge since 2005 -- has prompted calls of insider trading.

Although much of the attention on Blackstone has centered on CEO and co-founder Stephen Schwarzman, it is Hamilton "Tony" James who runs the firm, his hand on everything from private equity deals to real estate transactions to advisory work.

As Blackstone's No. 2, the pressure is on James to lead the firm through its new chapter as a public company and steer the massive money machine through the rough waters facing private equity firms.

With the private equity industry booming, James earned more than the CEOs of Goldman Sachs (GS.N: Quote, Profile, Research) and JPMorgan (JPM.N: Quote, Profile, Research) combined last year and his stake in the firm is currently worth $1.55 billion after its June IPO -- a huge amount considering his riches have come neither as a chief executive nor a company founder.

The billions Blackstone's top executives raked in through the $4 billion IPO however, attracted the scrutiny of lawmakers, who proposed legislation to jack up the firm's tax bill.

"I'm worried about the fact that private equity has grown so quickly and so fast that it's made itself a natural target for speculation and resentment," James said at the Reuters Investment Banking Summit in November. "It has made a lot of money."

Also worrying are investor doubts about Blackstone's high valuation and a pullback in the credit markets, factors that have sent shares of the company lower since their debut.

See:

The Ethanol Scam: ADM and Brian Mulroney

Criminal Capitalism Business As Usual

Gambling On Your Future

Criminal Capitalism Redux

Golden Parachutes

Rich Getting Richer

CEO Cream Sour Milk for Workers

Criminal Capitalism The Story of 2006

White Collar Crime Reporter 1

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criminology, corporate-crime, white-collar-crime, sociology, fraud, ADM, Blackstone, Mulroney, scandal, criminal-capitalism, workers, employees, theft, crime,
Hilton, IPO, Canada,
CEO, pay, goldenparachutes, Corporations, fatcats, rich, superrich,

Overturn This

Our law and order pro military federal government likes to overturn Liberal government laws, how about this one. Betcha they don't.

Ottawa has always admitted mismanaging the veterans funds by failing to invest the money or to credit them with any interest.

However, the government decided to start paying interest in 1990, but passed legislation blocking claims for interest before then.

It was that law the Supreme Court upheld in 2003.

By some estimates, the award would have topped $6 billion with accrued interest had it been allowed to stand.

SEE:

Rememberance or Revisionism

Harper War Monger

An End to Colonial Assimilation?

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Appropriately Named

An appropriate name and appellation for a fund manager;
Ontario Teachers' Wants to Keep BCE Executives, Leech Says

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Monopoly Capitalism in Cyberspace

Telus

BCE

CRTC

Bernier

P3

AIM High

Your Pension Dollars At Work

P3= Public Pension Partnerships

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Gambling On Your Future

Here is another reason we need to democratize defined benefit pension plans, whether run by the government or through our employers. While these institutional funds talk about the need for shareholder democracy; they deny the same to us.

They are using their vast reserves of captial now to play the market place investing in risky enterprises like hedge funds and private equity funds.

Canada's three-largest pension fund managers, unable to meet the long-term needs of retirees with returns from stocks and bonds, plan to increase private-equity investments after spending about C$50 billion ($47 billion) buying companies, toll roads and gas pipelines.

The pension funds added C$31.7 billion to private equity holdings in their most recent fiscal year, almost double the amount of the previous 12 months. The retirement plans are buying riskier assets because they don't expect publicly traded securities to provide high enough returns to pay the more than C$1.56 trillion of benefits owed to retirees over the next 50 years, according to annual reports from the pension funds.

The ability of workers to control, or even to influence, the investment of their deferred wages in pension funds — which are now by far the nation’s largest source of capital — is an old but recurring debate. Unions played a leading role in the creation and expansion of private pension trusts, particularly the traditional defined-benefit plans that are funded almost entirely by employer contributions.4 Yet because control over how pension assets would be invested was
never made a bargaining priority, today at least 90 percent of private sector pension fund assets are controlled exclusively by management.

Since the Second World War a number of factors have led to increased investment by institutional investors in public corporations. There has been the use of superannuation and pension schemes. There has been an increase in insurance linked investment products and other forms of indirect investment. Trustee investment rules have been relaxed, enabling trustees to invest in equities

The result is that in Australia, New Zealand, the USA and the UK more than 50% of all equities are held by institutional investors and the tendency is to increase. Add to this the traditional domination by institutions of the bond market and we have the beginning of the growth of a significant counterveiling power if the economic strength is harnessed to a common cause. Listed corporations are becoming the servants of global financial activity rather than its masters.

Peter Drucker argued that this led to a quiet revolution – ‘The Unseen Revolution...The US is the first truly Socialist country."This was simply reflecting what Berle in his later workings had identified and his research student Paul Harbrecht had called ‘The Paraproprietal Society’ – the evolution of a new form of property.

Until the late 1980s the tendency of the institutions was to be a sleeping giant. There were instances of discrete intervention but by and large the institutions voted with their feet and followed the Wall Street Walk – if in doubt, sell.

Institutions themselves came under attack and we see two developments. First, the involvement by them in promotion of improved corporate governance and secondly the use of specialist funds managers. The latter makes it more unlikely for institutions to become activists in particular companies although there have been exceptional cases where a group of funds managers have taken action.

Institutions are primarily focussed on profit and liquidity and have been attacked for short termism in their approach to companies. There is also a problem of lack of coincidence between the interests of institutions and other smaller shareholders in takeover situations. Often institutions collectively have strategically significant holdings.

Institutions sometimes encounter legal problems in increased shareholder activism.

It is sometimes argued that public sector pension funds are more likely to take a long term strategic view and certainly the US and the UK public sector funds have had a tendency at least to mouth the appropriate rhetoric.

See:

Public Pensions Fund Private Partnerships

AIM High

Golden Parachutes

Your Pension Dollars At Work

P3= Public Pension Partnerships

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