Editor’s Note: Recently, while attending the Money Show in Orlando, FL, Michael Checkan was asked by long-time friend and associate, Gary Scott, to speak at his conference in Mt. Dora, FL about protecting retirement assets through alternative investments. Gary devoted a good portion of this seminar to the growing threat to the safety of your hard-earned retirement nest egg. Based upon his article below, there is good cause for us all to be concerned enough to take steps to protect our way of life after our career ends.
The latest move by the U.S. Justice Department against Wegelin & Co., Switzerland's oldest bank, was one more step in stopping Americans from banking abroad. In February 2012, the department called Wegelin a fugitive from justice after it didn't send a representative to a court hearing in New York.
Wegelin was founded in 1741, and is accused of helping U.S. clients conceal $1.2 billion from the Internal Revenue Service.
The bank was summoned to appear in Federal court but stated that it had not been properly served and was not able to appear in court according to Swiss law.
No one attended on the bank's behalf even though U.S. Federal authorities had seized $16 million that the bank held in a U.S. correspondent account.
This is part of a 40 year process I have observed that makes it increasingly hard (impossible for most) for Americans to bank abroad. Now, the government is taking a similar approach aimed at controlling 3.6 trillion dollars stashed away in private pensions.
This is a concern for anyone who has a private retirement plan, 401 K, or IRA.
The pension problem has been growing for some time, but the newest thrust was taken during the Federal Budget crisis of 2011. The U.S. government was only able to remain open by taking Federal workers’ pension money as a temporary measure. The government’s next step in its plan is to make funds in 401(k)s and IRAs available for government spending as well.
That plan was floated as a trial balloon even before the debt crisis… as early as January 2010.
Bloomberg Business Week reported about that and said: The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
There is “a tremendous amount of interest in the White House” in retirement-security initiatives, Borzi, who heads the Labor Department’s Employee Benefits Security Administration, said in an interview.
Retirement plans, including 401(k) accounts, held $3.6 trillion in assets at the end of the second quarter of 2009, while annuity investments of all kinds totaled about $2.3 trillion, according to figures from the Washington-based Investment Company Institute, a trade association for asset managers.
Having watched the government gradually… over 40 years make it almost impossible for average Americans to bank abroad, I can see how the attack on private pensions is working in a similar way.
The Administration is using a similar approach to make it almost impossible for Americans to invest their retirement plans anywhere but in U.S. government bonds and bills… in other words, to put all investments in private pensions into the government’s hands.
The FDIC (Federal Deposit Insurance Corporation) took one-step in 2010 when, for the first time, they audited all IRA Custodians. In advance of the audit, they sent a letter to all custodians addressing areas of concern, which included though was not limited to Foreign Real Estate and Foreign Companies. The letter specifically focused on the risks that overseas countries represent.
This could be a precursor to a “this is for your own good” approach to private pensions, something like the FDA’s approach to not allowing Americans to buy pharmaceuticals, or the SEC’s approach to not letting Americans make investments in other countries.
”They are not safe” is the mantra. Americans cannot buy investments in Canada because the SEC cannot protect them. Americans cannot fill prescriptions in Canada because the FDA cannot protect them. I think you get the drift.
The plan to take over personal pensions could unfold in three steps.
First, the FDIC will want to regulate where an American can invest in another country by determining if that country is “too risky” or not.
The second step will be to allow the FDIC to determine if any investment… even in the USA… is too risky. Slowly, only U.S. government bonds, bill, Trills, etc. could be deemed safe enough.
This is exactly what has happened with the ability of Americans to bank abroad. First, layer upon layer of regulations were placed upon non-U.S. banks.
This legislation made it so expensive for non-U.S. banks to have American clients that only really wealthy investors can have overseas bank accounts.
Second, the Fed lowered interest rates so the average American earns almost nothing at U.S. banks where they are forced to leave their funds.
There is not a single line of legislation that prohibits Americans from banking abroad. Instead, the government regulates overseas banks who accept American customers. Slowly, layer upon layer upon layer of compliance requirements have been added that made it so expensive for a non-U.S. bank to comply that most have had to stop accepting U.S. clients.
The key in the Fed’s private retirement plan attack will be to place the burdens on the pension custodians, not on the owners of the retirement plans.
The FDIC could determine it is “risky” and hence expensive to allow for foreign assets. This will force custodians to only allow U.S. investments, and later, only government assets. These government assets could then be trimmed to pay almost nothing… reducing the pension’s purchasing power.
This is how the government destroyed the ability of Americans to bank abroad.
This is how the government spent the Social Security Fund.
Here is how Forbes magazine describes the Social Security trust fund in an article "What Happened to the $2.6 Trillion Social Security Trust Fund?"
The article said: Here’s how President Barack Obama answered CBS’s Scott Pelley’s question about whether he could guarantee that Social Security checks would go out on August 3, the day after the government is supposed to reach its debt limit: “I cannot guarantee that those checks [he included veterans and the disabled, in addition to Social Security] go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”
Social Security status-quo defenders have assured us for the past 25 years that Social Security is fully funded—for the next 25 years, or 2036. So if there are real assets in the Social Security Trust Fund—$2.6 trillion allegedly—then how could failure to reach a debt-ceiling agreement possibly threaten seniors’ Social Security checks?
The answer is that the federal government has borrowed all of that trust fund money and spent it. And the only way the trust fund can get some cash to pay Social Security benefits is if the federal government draws it from general revenues or borrows the money—, which, of course, it can’t do because of the debt ceiling.
There you have it. The U.S. government has spent the Social Security Trust funds. Then, they tapped into Federal employee pension funds.
Now, the same government has been using the recent recession and the current financial crisis in Europe to “prove to you” that they can make your retirement plan safer than you can by investing it in government bonds. “It’s for your own good.”
That is not far-fetched, and this is no new phenomenon. Hungary, Poland, Bulgaria, Ireland and France – have taken over their citizens’ private pension money to make up deficits and budget shortfalls. There are battles raging over this in Britain, Canada and Greece to mention a few right now.
I am so concerned that the attack on private pensions will grow after November 2012 that I invited a specialist on “How to Invest Private Pensions in Precious Metals, Real Estate and Structures Abroad” to speak along with Michael Checkan of Asset Strategies at our February 2012 Quantum Thinking + Investing and Business course in Mt. Dora, Florida.
We recorded his speech on how to invest private pensions and IRAS in ways that will protect against the government’s pension protection plan.
This recording is available in an MP3 file for $49.
Gary A. Scott was one of the first publishers to suggest global investing. May 2011 was the 43rd anniversary of his reporting on international investments. Gary is an entrepreneur, author, and investment publisher who began writing about multi currency portfolios four decades ago, when many thought he was crazy. His first book, “Passport to International Profit” on international investing and business was published in the 1970s.