Class War in America: the Book

Economic absurdities that
Democrats must expose:

...because it's wrong to penalize success and hard work.

...therefore, we should eliminate the capital gains tax.

...After all, they came from, and understand, business.

...even though it is based on pitting the worlds' workers against each other.

...union bosses are only out for themselves.

...and the more the rich have, the more will trickle down to everyone else.

...Democrats are communists, or at least, socialists at heart. when we tax wealthy investors, we lose jobs. investors, not workers, create wealth. we should give them all the tax breaks possible.

...Democrats just want to tax and spend today.

General Issues:

...check out this 2-minute video.

...It's a mountain, and a terrible defense of globalization.

...for those of Indonesia, Mexico, China and India.

...and how not to do it again.

...and the "crisis" is just a ploy by those who want to destroy it.

...Republicans' most important propaganda technique.

...and get the media on your side

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The Conservative Takeover
of Social Security

Consider this. If an American worker

§    has a high school degree or less, and has worked hard all his life, or he

§    has a Ph.D. in physics, but he’s fifty and suddenly finds that his job has been subcontracted out to India, or he

§    is an engineer who has been “downsized,” and has spent his life’s savings to find a new job and to put his kids through college,

§    he can still count on having at least a bare-bones income for retirement because of our present, reliable Social Security system.

Social Security is an effective, efficient system for ensuring a decent retirement income for working Americans. Fundamental to its success is its philosophy that hard work is honorable, it contributes to our nation’s prosperity, and those who do it should be able to count on, at least, a minimally comfortable old age.

Under our present system, those who work hard don’t have to have greed or materialism as their primary or even secondary motivations. They don’t have to spend significant amounts of their time studying ways to get wealthy, to play the stock market, or to hoard real estate.

They can focus their efforts on their life’s work, whether that work is designing bridges, healing the sick or collecting garbage. Workers “invest” in the future by inventing, building, and maintaining this country—usually for relatively low incomes—and by having a Social Security system that properly recognizes their right to a decent income after they retire.

Our system also assumes that today’s workers will be able to make enough money to provide a retirement for those who preceded them—just as those who preceded them had paid for the retirements of their predecessors. Of course, trust funds have to be built up during prosperous times to make up for anticipated imbalances that may occur because of changing birth and retirement rates.

Conservatives want to change all that. The greed and materialism inherent in their philosophy places a premium on inherited wealth, investment income without work, and the manipulation of the markets that restrict workers’ wages. That is the way they “invest” in the future—for themselves and their own descendant royalty.

The most immediate beneficiaries of their transparent plans for “saving Social Security” will be Wall Street brokers, bankers, lawyers, everyone associated with the securities industry, and all those who already own massive amounts of stocks and bonds. If Alan Greenspan thought the market was overvalued in 1998 and ’99—wait until billions upon billions of government sponsored dollars hit the stock markets. The wealth of the already wealthy will soar as never before.

As is well known by now, the top 1% of Americans own 46.2% of all stocks and 54.2% of all bonds. The top 10% of Americans own 90% of all stocks and bonds. The bottom 70% of Americans own from $0 to $2,000 in securities; in today’s economy, that effectively translates into virtually no appreciable investment in today’s stock market.

Raising hypocrisy to a new level of sophistication, conservatives have gained respectability for privatizing Social Security by saying that workers should have the same opportunities to invest in the stock market as rich people do, and to realize the same benefits.

But what conservative politicians really want is to

§         provide vast sums of money to propel the stock market to ever higher levels, thus making present stockholders (themselves) even more wealthy,

§         return favors to many of their biggest campaign contributors—the securities and banking industries,

§         force people who don’t know the difference between a stock and a bond to compete in the financial markets with those who have made Wall Street, and the accumulation of money, their life’s work, and to

§         politicize the Social Security process; that is, enable politicians to decide which of their friends will handle workers’ investment money.         

In other words, conservatives want to create a new Social Security system with horrendous service charges (Wall Street firms, lawyers, brokers, analysts, investment bankers, advertising executives, accountants, etc.) for what is probably the most cost-efficient governmental system in our country. In 1997, Social Security paid benefits of $362 billion. The cost for administering the program was $3.4 billion, or only about .9% of benefits paid.

This is not to say that the system itself couldn’t make better investments than in conservative government bonds. However, whatever changes are made should give the same guarantees to retirees as they now have—and the Wall Street sharks should be kept out of the process as much as possible.

Carrying their blatant attack on working Americans further, Congress has raised the retirement age to 67 years, and some want to increase it to 70 years. This, at a time when the bodies of many manual laborers wear out before they are 60.

Naturally, those who are best able to work until they are 70 are those who never really worked with their bodies to begin with: investment bankers, college professors, stockbrokers, management consultants, corporate executives, lawyers, accountants, and so on. These are the very same people who paid their politicians to raise the retirement age, instead of raising taxes on themselves—the ones who are benefiting most, and sacrificing least, in today’s economy.

To get a better understanding of this subject, consider what our most prestigious conservative financial publications have to say about the nature of investing in Wall Street. If Social Security is privatized, it won’t be easy for workers to be successful, especially for those who lack a good financial education.

On the other hand, it will be incredibly easy for them to get taken for a disastrous ride by the army of stockbrokers who will crawl out from under the rocks to partake of this new bonanza.

Look, for example, at two articles from the well-regarded investment publication, Fortune magazine. Under the head “Even If You’re a Millionaire, Good Advice Is Hard to Find,” it gave an unvarnished assessment of what it takes to make money on Wall Street:

Arthur Pergament’s family did him in. He was just 27—a scion in place in his ancestral business—when his father and uncle sold Pergament Home Centers to a leveraged buyout firm in 1987.… In practice, Arthur Pergament was left without a job. In fact, all he had left was his family’s millions in cash.…

   Nine years later he still steams with memories of how big-money managers proposed to treat his precious stake.  “When you’ve got $10 million or less, you deal with some guy making $60,000 who’s trying to institutionalize you,” he says.… “You get lost in the soup.”1

A month later, Fortune expanded on the “it’s-hard-to-get-good-investment-advice” theme by describing “How to Pick Your Advisers”:

Don’t leave it to luck. To keep your retirement plan from becoming a financial nightmare, start assembling your financial experts now. Here’s how.… Personal finance has gotten so complicated that no one can hope to prepare for retirement without employing a large and rather expensive advisory team. Says Roy Ballentine, a consultant who assembles such teams: “We long ago concluded you’ll never find a single expert with all the answers.”2

If sophisticated readers of Fortune, with excellent financial backgrounds,  need to be concerned about how to invest for retirement, what does this suggest for those who cannot afford to make any mistakes at all?

So what’s a typical worker to do, when he doesn’t have enough money to hire an investment advisory team? Great news. Free advice will be available. When Social Security is privatized, millions of people will suddenly have free advice cascading down upon them—around dinnertime, of course. The Wall Street Journal gave us a glimpse of what is in store in its article, “‘Buffett Is Buying This’ And Other Sayings of the Cold-Call Crew”:

When the stockbroker called, Robert Gaddis wasn’t interested. He knew all about cold-callers and their high-pressure push to buy speculative stocks. Yet the Illinois insurance man says he eventually ended up sinking $6,000 into a little-known stock through the broker, and losing nearly all of it.… An underground collection of audiotapes circulates among young brokers showing how veterans of the boiler-room business repeatedly woo and win clients against high odds.3


Cold-calls from stockbrokers is just one of the downsides that privatization will lead to. For many of those planning for retirement—who don’t know the difference between a stock and a convertible bond—the challenges will be overwhelming. Conservative investors will have to select a good mutual fund from among the thousands available, and their luck may largely depend upon which salespersons first contact them. Aggressive investors who decide to try to hit the stock market jackpot will gamble their futures with brokers who promise them the greatest returns in the shortest time.

The following references to separate articles need no further comment about what conservatives want to exchange our efficient Social Security system for:


“Sleazy Doings on Wall Street …Why did prestigious Bear, Stearns get cozy with so many discredited bucket shops?… In failing, Baron [bankrupt brokerage company] laid bare a corner of the securities industry that is rarely seen but is hugely profitable: processing trades for other firms.… The whole situation stinks.”4

“Brokers don’t usually push closed-ends, since the commissions are low, and fund companies opt to spend ad budgets on mutual funds which can generate higher fees. Perhaps for this very reason, savvy investors should consider closed-end funds for their portfolios.”5

“The $700 Million Mystery …Big brokerages may have propped up David Askin’s funds.… Did some of Wall Street’s biggest brokerages—notably Kidder, Peabody & Co.—help Askin mislead investors?  Did Kidder and other firms, such as Bear, Stearns & Co. and Donaldson, Lufkin & Jenrette Securities Corp., improperly force his demise? Do they share in the potentially enormous liability—investor losses that exceed $400 million?”6    

“Retired Americans Should Be on Guard Against Abuse From Financial Advisers …Regulators say the culprits run the gamut from brokers with well-known firms to financial planners who work out of their homes. ‘Seniors are being targeted and scammed,’ says Michael T. Kogut, Massachusetts assistant attorney general for elder protection.”7

“Wall Street’s biggest ever ‘test-taker-for-hire’ scam could be more organized than originally believed. As expected, the Manhattan district attorney’s office yesterday announced the indictment and arrests of 53 stockbrokers for cheating on broker-licensing examinations.”8

“Beware the Scalpers …As often as not, funds the independent brokers sell carry famous brand names: Oppenheimer, Putnam, Franklin. Wrapped around these funds, however, is a latticework of extras such as ‘timing services’ or consultation fees that can easily create a combined expense burden topping 4% of assets annually.”9  

“How One Stockbroker Keeps On Selling, Despite Complaints …[H]e is just one of 112 individuals still active in the securities industry even though they have been on the losing side of two or more customer arbitrations from 1991 to 1995.… This, critics say, is an extraordinary record of survival in an industry that claims its self-policing methods amply protect investors.”10 

“The government’s case against Mr. Wolfson, they say, underscores one of the principal perils of today’s markets: Promoters are hyping small stocks and unloading them on a new generation of bull-market investors, flouting the civil penalties and other traditional techniques available to regulators.”11

“Investor beware. A big chunk of the money you sink into small stocks may be lining your broker’s pocket. Within the broad community of Nasdaq Stock Market dealers, many brokerage firms that make markets in smaller stocks are in the habit of paying their brokers extra money to sell them, regulators say.”12   

“Unusually heavy trading in Fund American Cos. Stock and options before yesterday’s announcement of the sale of its insurance unit to Allianz AG suggests there was trading on inside information as early as three days before the deal was disclosed.… ‘Greed is as American as apple pie,’ said Bruce Baird, former chief of the securities and commodities fraud unit in the Manhattan U.S. attorney’s office.”13    

“When Michael R. Milken’s junk-bond market fell, some of America’s flashiest wheeler-dealers went down with it. The collapse also snared Sara Webb. The 73-year-old Tennessee widow lost almost half of her $20,000 investment in Memphis municipal bonds, which turned out to be tied to the sinking fortunes of junk bonds.”14    

“The activities of Prudential Insurance and its brokerage unit present a case study in how a stodgy corporate image can sometimes mask a far more aggressive reality. What irks many investors now is the Prudential Insurance was used as a major marketing tool in promoting the Pru-Bache partnerships.”15    

“A three-month investigation reveals that organized crime has made shocking inroads into the small-cap stock market.… Today, the stock market is confronting a vexing problem that, so far, the industry and regulators have seemed reluctant to face—or even acknowledge. Call it what you will: organized crime, the Mafia, wiseguys.”16

“‘In-House’ Trades Can Be Costly for Small Investors …[T]he Wall Street stock trader sounds a little sheepish. ‘It’s like taking candy from a baby,’ he says of his job, in which he fills small-investor orders at not-always-the-best prices.… It’s typically quite legal, though small investors usually aren’t aware of it.”17   

“The Rich Have Their Own Means of Staying That Way …While these small stocks are volatile, wealthy clients have the ‘fiscal fortitude’ to tough out the ups and downs, says Mr. Elliott. In contrast, he says, the typical small investor usually bails out at the first sign of a downturn.”18   

“Short-Sellers & The Seamy Side of Wall Street …It’s a tale of skullduggery and possible extortion… Add to this pungent recipe greed, fear, and dishonesty, and also cameo appearances by celebrities from Dan Dorfman, whose TV broadcasts helped out the shorts, to baseball tycoon George Steinbrenner III, who was one of 66,000 brokerage customers unhappily caught up in the action.”19                        

“Fund-Industry Trade Group Picks a Lemon …Dean Witter InterCapital decided last month to take the unusual step of liquidating Dean Witter Premium Income Trust because its assets ‘have steadily decreased over the past several years.…’ Such funds, like Dean Witter Premier Income, are supposed to be havens. They buy government bonds and other securities that are considered low-risk.”20                

“Banks and the investing public gave Dino DeLaurentiis nearly $200 million to build a film company. The money is gone and the company in ruins, but some of Dino’s friends and relatives aren’t hurting.… Enter Paine Webber. If the industry wouldn’t finance him, the public would.… [T]he brokerage house raised $107 million for De Laurentis, selling stock, junk bonds and units of a limited partnership.21

“Nearly three dozen Wall Street securities firms have begun preliminary settlement discussions with the Securities and Exchange Commission over alleged trading violations in the past on the Nasdaq Stock Market.… Among the firms that the SEC has held settlement discussions with are Merrill Lynch & Co., the nation’s biggest brokerage firm; Morgan Stanley Dean Witter & Co., Paine Webber Group Inc.; Warburg Dillon Read,…and Charles Schwab Corp.’s Mayer & Schweitzer Inc. unit.”22      

“It’s one of Wall Street’s best-kept secrets: While securities firms allow big institutional investors to dump hot new stocks at their whim, often within hours or minutes of the stock’s first trade, they try to persuade individual investors to hold on to IPOs (initial public offerings), for better or worse.… ‘While institutions are dumping IPOs, retail [small investors] is stuck holding the bag,’ says Lori Dennis, a former Merrill Lynch & Co. broker.”23                   

“Although no one knows exactly how many investors aren’t getting the money they are due, plaintiffs’ attorneys say the number of unpaid arbitration awards has been rising in tandem with the growth of small firms that specialize in highly speculative small-company shares.”24  

“401(k) Do-it-yourselfers Could Use Some Help …The rise of 401(k)s requires workers to pony up not only the money they’ll need for retirement but the time and effort to fathom Wall Street’s Mysteries. For vast numbers, that’s one burden too many.”25  

“The SEC Should Keep Fund Managers Honest …Michael L. Schonberg has been put on paid leave while at least three investigations—including the FBI—probe his personal ownership of penny stocks purchased by his two ‘aggressive growth’ funds. But no amount of investigating will resolve the thorniest question raised by this mess: Should the Securities and Exchange Commission require that personal trading by fund managers be disclosed, restricted—or banned entirely?”26

“Don’t Be a Victim …The bull market in stocks has bred a bull market in fraud.… Because bull markets tend to push all stock prices up, many investment frauds remain hidden. Only when the bull turns tail do these swindles come to light. Bull markets just make people more gullible. They are more likely to believe in miracles.”27 

“Nationsbank Corp. agreed to pay $6,750,000 to settle civil charges that its employees deliberately misled investors—most of them elderly—in selling them two risky bond funds.”28   

“Just how little many investors know about [mutual] fund fees became a hot topic in May, when Securities and Exchange Commission Chairman Arthur Levitt rebuked fund companies for building ‘unrealistic expectations through performance hype’ and not providing enough information on fees and expenses.”29 

“‘Flat Fee’ Accounts: Read the Fine Print …Brokers’ no-commission offerings may have hidden charges.… It has been a problem since the dawn of the retail brokerage business: Brokers have a strong incentive to get customers to trade when it might be in clients’ interest to do nothing.”30      

“Authorities Probe Growing Wave of Stock-Market Touts …Here is something else for investors to worry about: tainted financial advice. Stock gurus are sprouting in increasing numbers on radio, TV, the Internet and in newsletters and, according to regulators and law-enforcement officials, more of them are getting paid under the table by executives of the companies they tout.”31

“CFTC Accuses 2 Firms of Fraud …ITG customers had losses of $428 million, while ITG made $283 million in commissions between January 1984 and May 1989, according to the suit. During the same period, Siegel made about $40 million in commissions, while its customers lost $33.6 million.”32

“Charles Steadman is probably the most consistent mutual fund manager in America. And that’s bad news. Three of the four mutual funds in Mr. Steadman’s Steadman Group have lost money during the past five years of the bull market.”33       

“For years seniors have been a target not only of scam artists trying to chisel them out of their savings, but also of unscrupulous or not-so-bright brokers urging inappropriate investments.”34

“You’d think that with inflation in abeyance, high-fee commodity funds would be gone. But there’s a sucker born every minute.… What’s wrong with these as investments? Three things. They are dragged down by exorbitant fees, they are usually very risky and they do a poor job of diversifying a stock portfolio.”35

“Don’t Panic. Social Security Will Be There For You …According to government estimates, the Social Security trust fund will be perfectly solvent for the next 32 years…. We’ll all hear plenty of scare stories between now and 2029 since fear mongering is a way of life in Washington. But truth be told, there isn’t much reason to panic.… Gambling (with the future) may be legalized. Wall Street is salivating at the prospect of investing even a fraction of the half-trillion-dollar Social Security trust fund.”36   

“Wall Street Wants the ‘Little Guy,’ and It Will Merge to Get Him …Blue-chip investment bank Morgan Stanley Group Inc. and Dean Witter, Discover & Co., a ‘retail’ brokerage house catering to individual investors, confirmed that they plan a stock swap to create the nation’s largest securities firm.… Driving it was a bid to snare the burgeoning assets of small investors, particularly in mutual funds.… The merger comes as several other Wall Street firms are looking at ways to reach small investors.”37

The last two excerpts are especially significant. Fortune (36) clearly admitted that Social Security isn’t broken. The real reason for the Social Security “crisis” is that the securities industry needs a new source of funds to keep the stock market rolling. Washington’s new growth industry—privatized Social Security—will be just another means of transferring wealth from workers to sophisticated investors who know how to take advantage of the unsophisticated.

And no wonder “Wall Street is salivating.” Privatizing Social Security will allow Wall Street—with its aggressive sales persons, fraud, greed, corruption, incompetence, hidden fees, false advertising, and outright lying—to take a huge cut out of the most efficient governmental program we have.

The Journal (37) described Wall Street’s new strategy to get control of the assets of small investors, which will dramatically increase if Social Security is privatized. They not only will have a massive amount of investment funds—in total—they will also be able to manipulate the small investor for their own benefit. Financial institutions and wealthy investors will also be able to transfer many of their risks and expenses to small investors, who have no negotiating power.

Review the previous excerpts from separate articles. Bear in mind that all of them came from America’s premier conservative financial publications, and not the “biased liberal news media.” Note that in all aspects of investing—fees, IPOs, accurate information, and so on—brokers give significant advantages to institutions and wealthy investors; the little guy is always last in line and, if anyone’s account has to be sacrificed for the sake of “the market,” it’ll be his.

For another perspective about privatizing Social Security, look at the U.K.’s experience during a prosperous economic period. The Wall Street Journal’s analysis, “Social Security Switch in U.K. Is Disastrous; A Caution to the U.S.?” suggests that a privatized retirement program for unsophisticated investors could be a serious mistake:

Britain’s pension industry is reeling from the financial fallout of a decade-old, government-backed program that led millions of Britons to opt out of their public and company-sponsored pension plans and invest the money themselves….

   Dubbed the “pension misselling” scandal, it is expected to cost British insurers an estimated $18 billion in compensation payments to nurses, miners, schoolteachers and other workers who were hurt by bad advice.38

One has to wonder: Why hasn’t the U.K.’s experience been more widely publicized in the U.S.?

§         Undoubtedly, some persons in the U.K. invested their pension money wisely and ended up better off.  A privatization of such a program gives significant advantages to those who are sophisticated and well-connected. But what happens to those for whom it was a disaster?

§         The Social Security system isn’t supposed to be a test of one’s investment skills. It is supposed to provide a minimum guaranteed retirement fund for every worker—regardless of his or her personal financial sophistication.

§         If Social Security is privatized, what will we do for those people who worked hard all their lives and who are “hurt by bad advice,” even advice from reputable investment firms? And that doesn’t even take into account the effects of the deplorable moral standards—deception, fraud, etc.—of so many of today’s investment professionals.

Those who think that retiring workers need to be responsible for their own investments and for protecting themselves from bad advice miss the whole purpose of the Social Security system. Of course, those who want to privatize Social Security aren’t interested in the welfare of workers to begin with.

This whole privatization move is just another way to allow America’s most powerful corporations to take control of, and profit from, every aspect of American life.


America’s most prestigious investment firms are represented in the excerpts presented in this chapter, and these excerpts represent a small fraction of what has been reported in recent years. In many cases, the examples of deceit, irresponsibility and fraud are specific to individual firms, but in many others they represent industry-wide practices.

This is the industry that Republicans and conservative Democrats want to control the retirement funds of persons who have little or no sophistication in investments or money markets.

Of course, the control that the investment and securities industries already have over American lives is only a part of the problem. Now it’s time to consider the extent to which conservatives have allowed investors and the corporate world to wrest control—from our democratically elected government—over other aspects of our lives.



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