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Gina Raimondo

Let’s imagine for a moment that you are a public school teacher in Rhode Island and that you work in a district that deposits your weekly retirement savings into the state public pension system, known as the Employees’ Retirement System of Rhode Island (ERSRI). Then imagine that a general treasurer was elected as a “reform” candidate and proceeded to invest the pension in hedge funds that in turn finance charter schools, meaning that on every pay stub you see a deduction to bust your own labor union. Think this is the stuff of a bad Kafka impersonator? Think again, it’s not a fantasy; this is the real world! And it only gets loonier as we go along, kids!

Let’s start with the most recent development in a saga that is nearing its tenth anniversary of complete lunacy. On January 5, The Real News filed a story headlined Warren Buffett Wins $1 Million Bet That Hedge Funds Are a Rip-Off. As told by reporter Gregory Wilpert, interviewing economist William K. Black: “Ten years ago, Buffett placed a bet against the managers of the hedge fund Protégé Partners, saying that an investment in a stock index would outperform an investment in a basket of hedge funds. The bet concluded at the end of 2017, and it was clear that the stock index had outperformed the hedge funds by a factor of 3:1.”

Now let’s step back to 2010. Rhode Island’s political landscape is an infamous hive of corruption that stems from how the old ethnic gangs went legit and became politicians after the Second World War, with Irish and Italians being particularly prevalent. For decades the treasury had been run as a bail-out fund by the state legislature to finance idiotic moves.

In 2010, Gina Raimondo took office as general treasurer, which proved to be a stepping stone to the governor’s office in 2014. A fresh-faced venture capitalist who maintained appearances of being divorced from the shenanigans of her predecessors, Raimondo took substantial campaign funds from Enron alum John Arnold, who has a longtime axe to grind against public pensions. Raimondo’s hubby, Andrew Moffit, is himself a charter school industrial player of dubious merit.

The record of charter schools is as ghastly as it is corrupt. The financial abuses rampant in the system are small potatoes next to the massive systemic wrongs that come into play with regards to special education, minority and English as a Second Language. Scandals across the country stemming from charter schools’ poor management of budgets, abuse of students and lack of job protections for teachers fill reams of paper.

The financial industry uses hedge funds to finance efforts at privatizing all types of public assets. Wall Street’s targeting of public education and teacher unions has been so substantial that American Federation of Teachers president Randi Weingarten (not known as a firebrand and whose endorsement of Hillary sealed the fate of Bernie Sanders with the AFL-CIO) created a blacklist of anti-union firms that her constituent unions should divest from and/or not invest with in the future. Such a move sent up such red flags that, as a response, the blacklisted firms put up giant billboards in Times Square as retribution.

Once in office, Raimondo reformed the pension system by investing it in these hedge funds, such as Dan Loeb’s Third Point Management, as well as a not-so-blind trust that she put her assets into when she entered public service.

In the debate leading up to that policy shift, Raimondo used highfalutin business speak that left most union members dumbfounded and confused, something profiled brilliantly several years ago in a story by Matt Taibbi. He quoted Paul Doughty, the current president of the Providence firefighters union, saying, “She’s Yale, Harvard, Oxford – she worked on Wall Street. Nobody wanted to be the first to raise his hand and admit he didn’t know what the fuck she was talking about.”

When all was said and done, Raimondo promised that her investments were going to yield substantial returns. This was despite the very public bet the Oracle of Omaha had made about such investments three years earlier.

Now Buffett has definitively shown that all this was nonsense and obfuscation. Here is how Black put it on The Real News:

Hedge funds, unlike the big banks, are not typically publicly traded, so you actually have very little information about them. But very commonly, they pay out far more. Little hedge funds pay out far more in compensation for their CEOs than do the absolute largest banks in the world, and this can be by a factor of 10. In other words, there are a number of hedge funds in any given year that may pay the CEO more than $100 million, in fact, well over $100 million in a year. Right? So, presumably, they must be doing something fantastic to warrant that money that the rest of us couldn’t possibly do, and mere top bankers in the world can’t do. And so Buffett’s bet tested that proposition and it found it was all an enormous lie.

Now the question is whether Raimondo knew she was sinking all that pension money into a failure — with an estimated loss of nearly $2 billion in June 2015, now calculated as the largest financial scandal in the state’s long history of fiscal fiascos — or because she was just a combination of naive and stupid.

Either way, Raimondo has a lot to answer for. As Vice Chair of the Democratic Governors Association for the 2018 election cycle, a Clinton 2016 super-delegate, member of the Council on Foreign Relations and an Aspen Institute Rodel fellow, it looks obvious to many in the Ocean State she has her eyes on Washington. Whether Buffett’s bet will focus attention on the fact that she is responsible for the largest fiscal loss in the state’s history is anyone’s guess.

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