Part 1....
Once again Bush is on prime time television pushing his boondoggle of a program for some lucky contractor (Carlyle Bank anyone?). Let's do some numbers and think of nifty ways CB can make oodles of money.
1. Let's be optimistic and dismiss the 70% that don't like this plan, and instead assume that Bush is right and that we all jump at the chance to invest in our VOLUNTEER Personal Retirement Accounts. So we'll figure that 100 million workers will jump on the bushwagon and 'invest' the full $1500 a year in their brand new retirement accounts.
2. Let's say fees will be maxed out at 1% of the assets - which is the going rate of most of the current crop of investment firms. So of the $150 billion invested in one year, 1.5 billion in fees would be paid to the Retirement Accounts Privitization Entity each year. Think of that as guaranteed income for that group. Mind you these are asset based fees, so compounding will apply in later years. So if you're crying foul and want to use TSP's rate of 0.06%, then the windfall is only $90 million. But this isn't where the real money is.
3. Now conventional wisdom states that 5% is a decent return, but for you frothing at the mouth types, let's go ahead and up that to 7% - a safe historical return for the stock market when it used to actually make money and not go sideways. So of 150 billion, r.a.p.e. would make 10.5 billion, of which 9.0 billion would make it back to the holders of the new fangled private social security accounts (r.a.p.e.).
4. Who is r.a.p.e. investing in? Let's make it easy and say it's all in company B, Super Happy Investment Manager's fund. Now if you had $150 billion to invest and all you had to return was something close to 7%, don't you think you could find lots of high quality investments returning say 10% - 12%. Don't believe you can get 10% - 12%, look what United Defense made for Carlye. Anyway 10% of $150 billion leaves you with $15 billion, and the 'notes' you sold to r.a.p.e were for 7% so you only have to give 10.5 billion back and get to keep 4.5 billion. Not a bad profit.
5. What do you want to bet that both r.a.p.e. and SHIM would be owned by the same lot of Bush's cronies. Once again that contract would be awarded like more than 60% of the Pentagon's contracts have been -- on a no compete basis. Favored winners in Iraq/Afghanistan are currently Carlyle Group's 'investments' & Halliburton. I'm pretty sure they or any number of other related companies would win the r.a.p.e contract. Can you imagine a guaranteed income of $6 billion (or $4.5 billion using TSP fee rates) and rising each year due to compounding? How many companies make that much in pure profit each year, and without having to do much? Sound familar?
From the Carlyle Group's main web page :
"Our mission is to be the premier global private equity firm, leveraging the insight of Carlyle's team of investment professionals to generate extraordinary returns across a range of investment choices, while maintaining our good name and the good name of our investors."
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