THE FEDS WANT

YOUR RETIREMENT
ACCOUNTS

JOHN WHITE

THE FEDS WANT YOUR RETIREMENT ACCOUNTS

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Quietly, behind the scenes, the groundwork is being laid

for federal government confiscation of tax-deferred
retirement accounts such as IRAs. Slowly, the cat is being let
out of the bag.
Last January 18th, in a little noticed interview of Richard
Cordray, acting head of the Consumer Financial Protection
Bureau, Bloomberg reported "the U.S. Consumer Financial
Protection Bureau [CFPB] is weighing whether it should take
on a role in helping Americans manage the $19.4 trillion they
have put into retirement savings, a move that would be the
agency's first foray into consumer investments." That thought
generates some skepticism, as aptly expressed by the Richard
Terrell cartoon published by American Thinker.
Days later On January 24th President Obama
renominated Cordray as CFPB director even though his
recess appointment was not due to expire until the end of
2013.
One day later, in the first significant resistance to
President Obama's concentration of presidential power, a
three judge panel of the U.S. Court of Appeals in
Washington DC unanimously said that Obama's Recess
Appointments to the National Labor Relations Board are
unconstitutional. Similar litigation testing the Cordray
appointment to the CFPB is in the pipeline.

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The Consumer Financial Protection Bureau (CFPB)

created by the 2,319 page Dodd-Frank legislation is a new
and little known bureau with wide-ranging powers. Placed
within the Federal Reserve, a corporation privately owned by
member banks, the CFPB is insulated from oversight by
either the President or Congress, its budget not
subjectlegislative control. It is not even clear that a new

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President can replace the CFPB director on taking office.

Unusual legal and political environments have a impact
on the CFPB. With Cordray's recess appointment in doubt
several questions remain unanswered.

What will become of the CFPB whenCordray's

appointment is found invalid?
An indicator comes from the NRLB, which operated
unconstitutionally for years without a quorum. In 2007 the
Senate threatened no NLRB nominations reported out of
committee.
The NLRB continued operating with two members.
Then a Supreme Court ruling in June of 2010 invalidated the
NLRB decisions for lack of a quorum. Fisher & Phillips give
the details about what was done next.
But recovery from the Supreme Court's sting was quick,
with Liebman and Schaumber still on the Board and with
two new Members confirmed, ... the suddenly full-strength
Board simply added a new Member to the "rump panel" of
the original decisions and managed to rubber-stamp many
of the disputed Orders - at a record-setting pace - with the
same result...
This may explain why President Obama renominated
Cordray a year early. Once confirmed Cordray can rubberstamp decisions made while he was unconstitutionally
appointed. Otherwise those decisions will be invalidated.

What will the CFPB do with your money?

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The CFPB incursion into individual personal order to

control how you invest your money, isn't a new idea.

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Current proposals grew from a policy analysis as disclosed

by Roger Hedgecock.
On Nov. 20, 2007, Theresa Ghilarducci, professor of
economic policy analysis at the New School for Social
Research in New York, presented a paper proposing that the
feds eliminate the tax deferral for private retirement
accounts, confiscate the balance of those accounts, give each
worker a $600 annual "contribution," assess a mandatory
savings tax on every worker and guarantee a 3 percent rate
of return on the newly titled "Guaranteed Retirement
Accounts," or GRAs.

How would that be accomplished?

The Carolina Journal reported Ghilarducci's 2008
testimony
to
Nancy
Pelosi's
House.
Democrats in the U.S. House have been conducting hearings
on proposals to confiscate workers' personal retirement
accounts "including 401(k)s and IRAs" and convert them to
accounts managed by the Social Security Administration.
Your Government universal GRA investment savings
account is an annuity managed by Social Security.
Hedgecock noted '[m]ake no mistake here: Obama is after
your retirement money. The "annuities" will "invest" not in
the familiar packages of bond and stock mutual funds but in
the Treasury debt!'

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By 2010 Bloomberg published an article titled "US

Government Takes Two More Steps Toward Nationalization
of Private Retirement Account Assets." people used to the
idea that the retirement assets they had accumulated would
no longer be part of their estate when they died.

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So the Government would get the money, not the estate

or family of the people who saved the money during a
lifetime of work. That's a one hundred percent death tax on
savings. Worse, the most responsible and poorest families
will be penalized.
Democrats had a blueprint for diverting people's savings
from private investment to government debt. Then in 2010
the Tea Party won the house...

Why should the Government intervene in people's

savings decisions?
The justifications for Government intervention in
private financial decisions are varied. Panic over the
economy, Wall Street, mandating savings equity, eliminating
investment risk, financial crisis losses, retirement security,
much-needed oversight, your 401K becomes a 201K, shoddy
financial products, and predatory investment bankers are
just a few.
If the financial industry is so predatory, how is it
possible that savers keep any money? More importantly,
we have all those government agencies, FDIC, FINRA, SEC,
Labor Department, Treasury Department, NCUA, Office of
Thrift Supervision, FHFA, NCUSIF, Comptroller of the
Currency, Office of Foreign Assets Control, Pension Benefit
Guaranty Corporation, hundreds of criminal penalties, and
state level regulators. Are we admitting the Government is
incapable of policing criminal and predatory behavior? Do
we have invincible predators plundering the people, or do
politicians Cry Wolf?
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And about that crisis in the economy. Former

Congressman Barney Frank, one of the authors of DoddFrank, admitted to Larry Kudlow that Government was to
blame for the housing crisis.
Professor Ghilarducci said "humans often lack the
foresight, discipline, and investing skills required to sustain a
savings plan." Professor Ghilarducci tells us that people are
flawed, no argument there.
Her solution, substitute Government decisions for the
judgment of the millions of people who actually earned and
saved the money. She fails to mention the government
bureaucrats wielding the power to compel you to comply are
themselves imperfect. Which is preferable, one faulty
Government solution or millions of individual free choices?

Are there other forces pushing Government to

confiscate people's savings?
With $16 trillion in debt the short answer is yes. When
governments embark on a path of spending money they
don't have, they resort to financial repression.
According to Wikipedia:
Financial repression is any of the measures that
governments employ to channel funds to themselves, that, in
a deregulated market, would go elsewhere. Financial
repression can be particularly effective at liquidating debt.

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Do we have any evidence that the US Government is

pursuing financial repression? Yes we do. Jeff Cox at CNBC.
"US and European regulators are essentially forcing banks to
buy up their own government's debt-a move that could end up
making the debt crisis even worse, a Citigroup analysis says.

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An Investors Business Daily article, Banks Pressured to

Buy Government Debts, notes that "[b]anks can't say no.
They fear the political fallout. So they meekly submit to the
government's dictates."
Meanwhile the Wall Street Journal reports that "in 2011,
the Fed purchased a stunning 61% of Treasury issuance."
Then a CNS News article revealed that "so far this calendar
year [2013], the Federal Reserve has bought up more U.S.
government debt than the U.S. Treasury has issued."

Is the health of Social Security (SS) a factor?

There are several potential measures of when Social
Security retirement goes broke. One measure is when FICA
tax income doesn't cover the cost of retirement checks. We
have passed that point already. Others say that SS is fine
until the lock box runs out ospecial issue bonds (IOUs).
Even though the SS bonds in the lock box cannot be sold
on the open market, the Treasury Department remains
under political pressure to honor that obligation by
borrowing real cash to redeem the IOUs. At least until the
IOUs in the lock box are gone. How long is that? Based on a
credible source, Bruce Krasting atZerohedge suggests not
long.
SS consists of two different pieces. The Old Age and
Survivors Insurance (OASI) and Disability Insurance (DI).
Both entities have their own Trust Funds (TF). OASI has a
big TF that will, in theory, allow for SS retirement benefits to
be paid for another 15+ years. On the other hand, the DI
fund will run completely dry during the 1stQ of 2016.
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So Krasting expects the President and Congress will

soon be forced to choose between 4 solutions: 1 - Increase
Income Taxes; 2 - Increase Payroll Taxes; 3 - Cut disability
benefits by 30%; 4 - Kick the can down the road and raid the
retirement fund to pay for disability shortfalls.
Krasting predicts Congress and Obama will be behind
door number four. His credible source is the Congressional
Budget Office report Social Security Trust Fund--February
2013 Baseline. In the footnotes it projects a $1 Trillion drain
on the retirement fund which currently holds $2.8 Trillion.
That's a loss of approximately one third of the retirement
IOUs.
Krasting however omits another possible solution,
politicians can raid private retirement savings to put more
IOUs in the lock boxes and more real money in the
Treasury. Other people's money is a temptation and $19.4
Trillion is a very large temptation.
Social Security is the largest entitlement program with a
trust fund of $2.8 Trillion IOUs, soon to be reduced by
another $1 Trillion. Can any politician, addicted to
spending, resist that temptation of $19.4 Trillion? That's real
people's real money that will be spent by Government in
exchange for IOUs given to the SS lock box.
Meanwhile newly minted Senator Elizabeth Warren has
entered the debate. Conservatives and Republicans have
challenged the CFPB in the wake of the unconstitutional
recess appointment. Bloomberg speculates that Warren
might agree to trim the CFPB powers in a compromise.
Bloomberg reported:
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"A strong independent consumer agency is good for

families and lenders that follow the rules and good for the
economy as a whole," Warren said yesterday in an interview.
"I will keep fighting for that."
Some observers have suggested that Warren's original
support for a commission-led bureau might mean she be
amenable to compromise on that issue. Warren spokesman
Dan Geldon said such speculation is mistaken.
"Senator Warren thinks the single director structure
makes sense and that CFPB should continue to be able to
operate, like every other banking regulator, without relying on
appropriations for its funding," Geldon said.
Bloomberg also notes that soon "the Senate will have to
decide whether to vote to confirm director Richard Cordray in
his post, which would make a legal challenge pointless."
Conservatives and Republicans challenge the surrender
of legislative power to the bureau, the concentrated power of
a single director, the unconstitutional recess appointments,
and the violation of constitutional separation of powers. The
Republican position is the constitutional questions and
litigation presently underway should be resolved prior to
approving a director of CFPB.
The constitutional issues surrounding Dodd -- Frank
and the CFPB are beyond the space for this article. For those
interested in the legal issues, a good synopsis can be found at
the Mark Levin Radio Show podcast for February 18th.
Mark is an attorney and his Landmark Legal Foundation has
argued many cases before the Supreme Court. He can
explain complex legal issues in straightforward language.
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THE FEDS WANT YOUR RETIREMENT ACCOUNTS

Fidelity Financial Co., LLC

215 S. 88th Street
Omaha, NE 68114
Mark T. Houston
(402) 880-7008
mark@fidfin.co

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