Ellen Brown
“Most billionaires don’t park their money in making more businesses. They park their money in the stock market. That is not meaningfully investing in opportunity, it’s just investing in other billionaires.” So said Abdul El-Sayed, who narrowly won Michigan’s Democratic Senate primary in August. He said that he would rather “have an economy that makes a thousand millionaires than one billionaire,” and that money that would otherwise go into the S&P 500 should go instead to “good schools, good infrastructure, health care, child care.”
It’s a laudable sentiment, but those thousand millionaires would probably still be parking their money in investments designed to make more money without producing anything. When an investor buys Nvidia shares on the stock market, the money goes to whoever sold the shares, not to Nvidia. A company gets new capital only when it issues new stock. The profits from stock market trades go either to the buyer or the seller, depending on which way the penny falls. And it’s not just the billionaires and millionaires playing those financial markets. Our household savings, corporate funds and pension funds are gambling there as well.
State and local pension funds hold $6.2 trillion, more than a fifth of the GDP of the U.S. economy. That massive pool of money is not building housing, infrastructure or local businesses. It is parked in Wall Street’s casino, bidding up the price of existing assets, while asset managers collect their fees whether the pension funds win or lose. And many pundits are predicting an imminent market crash, in which the funds will lose big.
Worse, the returns to the pension funds are no better than they could get from a simple index fund without incurring outside management fees, and sometimes they are worse. Meanwhile, the nation’s only state-owned bank, the Bank of North Dakota, earned a 17.2% return on its capital in 2025 while lending into its state’s own economy, and paid $258 million of its profits back to the state. North Dakota’s money is safe, earning, and invested in local productivity.
The House Always Wins
“Everything feels like a casino,” said UK financial commentator Anna Bocca in a March 2026 video titled “How Financialisation Rewired the Economy.” “Financialization” is the process by which financial markets and institutions have gained growing influence over economic policy and investing, shifting the focus from making physical goods and services to using money to make more money. The “house” in today’s financial casino is the asset manager collecting our pension money – Bocca names BlackRock, State Street, and Vanguard – and the house wins even when the pensioners lose.
Consider New York City. Its five pension funds held $326.3 billion as of June 30, 2026. The city pays about $10 billion a year into them, even as it struggles to close a projected $5.4 billion budget deficit. What does the city get for its money? In 2015, then-Comptroller Scott Stringer examined ten years of results from the asset managers running the city’s pension funds. Managers of public stocks and bonds had beaten their benchmarks (the returns the same money would have earned in a standard market index such as the S&P 500) by $2.063 billion. But that was before deducting the managers’ fees. The fees consumed more than 95% of the gain, leaving the funds only an estimated $40 million ahead. Managers of the funds’ private investments (stakes in assets not traded on public exchanges, such as private equity and real estate funds) fell $2.6 billion short of their benchmarks after fees. Overall, the outside managers fell more than $2.5 billion dollars short of benchmark returns over the ten year period. The pension funds would have done better in plain index funds. “Right now, heads or tails, Wall Street wins,” Stringer said.
Stringer’s study was cited by Scott Baker, managing editor at OpEdNews and a Public Banking Institute expert on pension funds, in a November 2025 article titled “The Case for Selling off the New York City Pension Funds.” Baker asks, “Why do we need pension funds at all?” More on his answer after a look at pension fund financing as it has evolved over the last half-century.
How Our Pensions Got into the Casino
The evolution of pension fund financing was traced in a July 2025 report from the American Federation of Teachers (AFT) and other sponsors titled “From Public Pensions to Private Fortunes: How Working People’s Retirements Line Billionaire Pockets.” The authors observed that before 1980, state and local pension funds were often treated as a “pay as you go” system: a portion of current employee premiums was used to pay benefits to retirees, similar to Social Security. Then a new “actuarial” accounting approach began treating any shortfall between a fund’s assets and its future obligations as an “unfunded” liability. The pressure to close that apparent gap “drove an unprecedented accumulation of assets” – money-producing investments such as stocks, bonds, real estate and stakes in private equity. Between 1980 and 2007, state and local pension assets grew from $183 billion to $3.2 trillion, from 6% to 23% of GDP. By 2024, they stood at $6.2 trillion (an equivalent percentage of GDP, which had also grown).
Tom Sgouros, a public finance consultant, former senior policy advisor to the Rhode Island General Treasurer and fellow at Brown University’s Policy Lab, has questioned the need for this accumulation of financial assets at the expense of productive investment. In a 2022 report for the National Conference on Public Employee Retirement Systems, he pointed out that a public pension plan, unlike a private one, “need not worry about the disappearance of its sponsoring employer,” in this case the city. Cities can go bankrupt, but they will always be there. A new government will just replace the old one.
Until the 1960s, according to a November 2024 housing report co-authored by Sgouros for Americans for Financial Reform (AFR) and Georgetown University, it was “unremarkable” for pension funds to invest in state and local government bonds. Today, however, it is rare. Most municipal bonds are tax-exempt and pay lower interest rates than corporate bonds; and pension funds, which pay no taxes, get no benefit from the tax break. The older arrangement, which Sgouros calls “fiscal mutualism,” meant that public workers’ savings financed public needs: their pension funds lent to their own cities and states for schools and other projects, and were paid back with interest. This mutually beneficial arrangement unraveled when pension funds began chasing higher yields in corporate bonds, forcing local governments to borrow on the open market at higher rates and fees.
Meanwhile, most private sector workers have lost their guaranteed pensions altogether. According to a March 2026 Congressional Research Service report, only 14% of private sector workers had access in 2025 to a “defined benefit” pension (one that guarantees a set monthly payment for life, usually based on salary and years of service), compared to 70% with access to a “defined contribution” plan such as a 401(k), whose value rises and falls with the markets.
“Patsies for the Private Equity Industry”
According to Reason Foundation data, in 2001 public pension funds held 57.7% of their assets in publicly-traded stocks, 31.4% in bonds, and 9% in “alternatives” — private equity, hedge funds, real estate and commodities. By fiscal year 2024, 34% of pension fund investments were in the alternatives, which carry significantly more costs and risks even than the stock market.
Private equity (PE) is particularly risky and controversial. It relies heavily on borrowed money, and investors must commit their money for ten years or more. The management fees are also far higher – typically 2% of asset values plus 20% of profits – and according to the AFT report, “PE managers frequently manipulate reported asset values.” Correcting for these factors, the report concludes, private equity’s “yield advantage is little more than a mirage, facilitated by leverage used for buyouts.”
Yet public pension funds are the biggest backers of the private equity industry. According to the AFT report, public pensions “make up almost a third of all investors to private equity funds and contribute an astonishing 67 percent of their capital.”
PE firms are notorious for the leveraged buyout, described by the AFR housing report as “using a company’s own assets to finance its takeover by private investors and then looting them after: selling off real estate, closing pension plans, abruptly shuttering less-profitable divisions and major layoffs.” Employment at companies bought by private equity shrinks significantly, and a leveraged buyout can result in bankruptcy. The report points to the devastating collapse of two private equity-owned hospital chains, Steward Health Care and Prospect Medical Holdings.
What do the pension funds get for backing PE firms? In a 2020 study titled “An Inconvenient Fact: Private Equity Returns & The Billionaire Factory,” Oxford professor Ludovic Phalippou found that private equity funds “have returned about the same as public equity indices since at least 2006.” Yet the performance fees on funds raised from 2006 to 2015 were estimated at $230 billion. In an interview, Phalippou called it a “wealth transfer from several hundred million pension scheme members to a few thousand people working in private equity,” one that “might be one of the largest in the history of modern finance.”
In an April 2024 podcast, financial journalist Bethany McLean countered the fiction that pension fund managers are sophisticated investors, stating, “They’re just the patsies for the private equity industry.”
Bailing Out the Casino
Privatization, says Bocca, has “shifted all financial risk and reward away from the state and onto the individual pensioner,” while funneling trillions of dollars into the hands of global asset managers. BlackRock alone now manages a record $15.3 trillion.
Bocca describes the pursuit of shareholder profit over company productivity as “cost cutting instead of long-term innovation, debt loading instead of reinvestment, outsourcing instead of stable employment, stock buybacks instead of wage growth.” When a private equity firm loads a company with debt and it collapses, “it’s often the workers, residents, or taxpayers who end up bearing the consequences.” Asset managers’ fees grow with the size of the pool, not necessarily with its performance; and when markets crash, the losses are absorbed by the pensioners.
A case in point is Blackstone, considered the world’s largest asset manager and the largest landlord in the United States. Blackstone is funded by CalPERS and many other public pension funds. In 2021, it bought 5,600 affordable housing units in San Diego and raised rents by 43% to 65% in two years. “Among the most troubling aspects of the housing crisis,” wrote the authors of the AFR housing report, “is the extent to which workers’ own capital is being used to make it worse.” The pension fund that is supposed to secure a teacher’s retirement may be financing the landlord raising her rent.
The asset managers’ fastest growing product is private credit — loans made directly to companies by investment funds rather than banks. According to the AFT report, private credit loans “are not regulated and not covered by securities laws or even rated,” and private credit “also relies heavily on public pensions.” It is now seeing rising defaults on its loans, which are often to companies owned by PE firms. Yet an August 2025 executive order directed regulators to ease the way for private equity and other alternative assets to be included in 401(k) plans.
When the whole casino is in trouble, the public again bails it out. When markets froze in March 2020, the Federal Reserve hired BlackRock to manage its new corporate debt-buying programs. The flood of central bank money lifted asset prices, and those who owned the most assets gained the most. According to Oxfam, billionaires’ wealth rose more in the first 24 months of Covid-19 than in the previous 23 years combined. “Investors keep the upside,” says Bocca. “Society absorbs the downside.” Today, Moneywise reports, the U.S. has a record 989 billionaires, and the 400 wealthiest Americans are worth a record $8 trillion, up from $6.6 trillion a year earlier.
A Better Way: Pay As You Go, and a Public Bank
Scott Baker’s proposal for New York City is to get out of the money-making-money business altogether. The city could guarantee retirees their current benefits plus annual cost-of-living increases, and pay them as Social Security does, from current revenues. It could lay off the outside investment managers and sell off the fund assets gradually over about five years. Part of the proceeds could pay down city debt, immediately raising the city’s credit rating and lowering borrowing costs. The rest could capitalize a public bank. Baker envisions a bank with about $50 billion in deposits, lending to local small businesses and individuals that large commercial banks pass over.
The stellar U.S. model is the Bank of North Dakota (BND), founded in 1919. By law, state funds are deposited in the BND, which uses them to back loans into the state, mostly in partnership with local banks. As noted above, BND earned net income of $231.8 million in 2025 – a 17.2% return – and paid $210 million into the state’s general fund and another $48.3 million to other state funds. There is no house taking a cut.
Momentum for public banks is building around the country, as detailed at a Public Banking Institute conference in Philadelphia on October 22-24. In Washington State and New Mexico, enthusiastic support for public bank bills followed presentations earlier this year by BND president Don Morgan on the mechanics and benefits of the BND. City-owned banks are also in the works. On October 21, the Los Angeles City Council voted 11 to 3 to identify $460,000 for a feasibility study for a city-owned bank; and on November 3, two other California cities will vote on public bank initiatives. San Francisco’s Proposition B would create a municipal finance corporation as the first step toward a city-owned public bank, and Berkeley voters will decide on a citizen-initiated parcel tax that would raise $58 million over six years to capitalize a public bank. In Philadelphia, where the City Council voted in 2022 to create a Public Financial Authority as a first step toward a public bank, advocates are pushing “Project Beloved Community,” a ten-year plan that includes a city public bank and proposes investing city pension funds in local housing, clean energy and community-owned businesses. In New York City, Mayor Mamdani and Comptroller Levine have begun moving city deposits to community lenders, a first step while advocates press Albany to pass the New York Public Banking Act. And at the national level, The National Infrastructure Bank Act, HR 5356, now has 65 co-sponsors.
The money is already ours — our pension contributions, our tax dollars and our public deposits. Rather than handing it to a casino where the house always wins and the pensioners absorb the losses, we can put it to work building homes, businesses and infrastructure in our own communities, and keep the profits for ourselves.
Ellen Brown is an attorney, founder of the Public Banking Institute, and author of thirteen books including Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. Her 500+ blog articles are posted at EllenBrown.com.
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