'Did you hear the one from 1840 about the great returns slave ships were bringing to their investors....?' Four Cheers for Randi! Wall Street Journal editorialists fulminate and fume against AFT president for opposing hedge fund union busters as investment managers for public pension funds
Not just three cheers -- four cheers -- for AFT President Randi Weingarten. On April 19, 2013, the Wall Street Journal's editorialists, who are the voice of the "one percent" if anyone on Earth is, fulminated for half their editorial column against Randi. Why? AFT is urging public workers pension funds to oppose investments in hedge funds and other outfits (private equity) that union bust and teacher bash. Basically, if the billionaires who operate these outfits support the likes of Michelle Rhee ("Students First") or the union busting charter schools that are expanding like mould after a flood, then the unions and our pension funds should not encourage them by spending our money on them. It makes perfect sense, since teacher pension funds, the honest democratic ones, are responsible not only for "return" on investment but for the things we believe in. The tradition of opposing the worst excesses of capitalism go back to the days of slavery and continued in recently years to the days of apartheid in South Africa. We have every right to avoid the monsters who profit from the worst that commodity reality has to trade in -- no matter what the "rate of return" promised.
The Wall Street Journal and the rest of the Race To The Top crowd would flunk history easily, since their versions of the economic, political and social histories of capitalism leave completely out the ugly parts -- which in a lot of places are most of the history. Capitalism birthed the chattel slavery of the Western Hemisphere between the 16th and 19th centuries. Some historians argue that the profits from slavery and the slave trade formed the basis for the majority of the wealthiest families in the USA during the decades following the American Revolution. And everyone knows that "all men are created equal..." left out most human beings. But the predations of capitalists didn't end in 1865. At every turn, from the looting of the continents the fell prey to imperialism to the more recent examples of bad food, tainted medications and other horrors. Let's face it, the dynamic system that gets five starts from the Ayn Rand disciples who write for The Wall Street Journal hasn't been nice to most people on most parts of Earth since it was invented.
Therefore, capitalists have to be outed and their crimes exposes. And when we can actually do something, like not giving them out business, it's a great idea.
But not to the ideologues at the editorial page of The Wall Street Journal, as the wordage below shows.
American Federation of Teachers (AFT) President Randi Weingarten (above) chairing one of the general sessions of the AFT convention in Detroit on July 28, 2012. Substance photo by Kati Gilson.HERE IS WHAT THE WALL STREET JOURNAL FULMINATED ABOUT RANDI THIS MORNING (APRIL 20, 2013) IN ITS LEAD EDITORIAL
Public pension funds are frantically chasing higher yields to reduce their roughly $3 trillion in unfunded liabilities. But don't tell that to Randi Weingarten, the teachers union el supremo, who is trying to strong-arm pension trustees not to invest in hedge funds or private-equity funds that support education reform.
That's the remarkable story that emerged this week as the American Federation of Teachers president tried to sandbag hedge fund investor Dan Loeb at a conference sponsored by the Council of Institutional Investors. CII had invited Mr. Loeb, who runs Third Point LLC, to talk about investment opportunities and corporate governance. Ms. Weingarten is an officer and board member of CII.
But Ms. Weingarten's real concern is that Mr. Loeb puts his own money behind school reform and charter schools. In particular, Mr. Loeb is on the board of the New York chapter of StudentsFirst. That's the education outfit founded by former Washington, D.C., schools chief Michelle Rhee that is pushing for more charters and teacher accountability, among other desperately needed reforms.
Ms. Weingarten sent Mr. Loeb a letter demanding a meeting at the CII conference with her and "a small group of pension fund trustees," including "two funds that are current clients of yours." Her agenda? "These plans are concerned about their ability to invest with your firm going forward," Ms. Weingarten wrote, given Mr. Loeb's support for StudentsFirst and its "outspoken attacks" on defined-benefit pension plans.
Mr. Loeb wisely declined the honor of showing up for this political mugging, which means that everyone else at CII lost an opportunity to hear how they might be able to boost their investment returns to finance teacher retirements.
But no one should think that Mr. Loeb is Ms. Weingarten's only target. Her attempted ambush coincides with a new report that her union sent to pension trustees this week called "Ranking Asset Managers." Ms. Weingarten isn't interested in how they rank by return on investment.
Her "rankings" are all about politics. The union report says it wants pension trustees to "take into account certain collateral factors, such as a manager's position on collective bargaining, privatization [read: vouchers] or proposals to discontinue providing benefits through defined benefit plans."
The report adds the lovely threat that "The American Federation of Teachers is committed to shining a bright light on organizations that harm public sector workers, especially when those organizations are financed by individuals who earn their money from the deferred wages of our teachers."
The report goes on to list StudentsFirst, the Show Me Institute and the Manhattan Institute as special bêtes noires that promote school and pension reform. And it helpfully lists no fewer than 34 funds whose "directors, managers, advisors and executives" have dared to support reform organizations. The funds on the blackball list include such well-known names as Appaloosa Management, Elliott Management, Khronos, KKR KKR -2.18% and Tudor Investment.
Mr. Loeb is cited for being "a director of StudentsFirst New York" who "has funded the organization's New York political activities." David Tepper of Appaloosa is described as "a known funder of StudentsFirst," with "known funder" underlined, as if he were on the FBI's Most Wanted list. You gotta love the implication that it is sinister to support the idea that poor kids should be able to attend schools that are better than the failure factories that Ms. Weingarten wants to condemn them to.
The other issue raised by this union bullying concerns fiduciary responsibility. The main obligation of pension trustees is to ensure the retirement security for their members. These pensions are financed primarily by taxpayers, not by employee wages, and the funds are under no obligation to protect union interests or to promote Ms. Weingarten's pet political causes. To the extent that her causes interfere with getting higher returns from the best-performing investment funds, the trustees would be violating their duties and the law to take her bad counsel.
We should add that StudentsFirst hasn't even strongly advocated for switching teachers to defined-contribution plans in New York because the political prospects are nonexistent. That's too bad because sooner or later the defined-benefit plans are going to run out of money and benefits will be cut—especially if pension trustees let Randi Weingarten serve as chief investment officer. The main focus of StudentsFirst in New York has been expanding school choice via charters and reforming teacher evaluations and tenure.
And this is the real source of Ms. Weingarten's union fury. She knows unions are losing the moral and political debate over reform, as more Americans conclude that her policies are consigning millions of children to a life of diminished opportunity.
So now she stoops to bullying pension trustees to bully hedge funds to cut off funding for poor kids in Harlem. Every time we wonder if we're too cynical about unions, they remind us that we're not nearly cynical enough.
A version of this article appeared April 19, 2013, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: Randi Weingarten's Pension Veto.
