Sear’s Bankruptcy, Who Gets the Real Estate, and How the Pension Fund Got Hung Out to Dry Invade Mnuchin’s Senate Confirmation Hearing

“You were a Director at Sears for 12 years where you had oversight over the administration and investment in the pension fund.”

That Sears Holdings will file for bankruptcy appeared to be taken for granted in the confirmation hearings before the US Senate on Thursday. And when it does file, it’s going to get very complicated for Steven Mnuchin, the Trump administration’s appointment for Treasury Secretary. But the most fascinating part, for us as a non-political finance and economics site, is the dissection of the whole Sears deal.

Senator Bob Menendez (D-NJ), as he proceeds with his questioning, lays out how Sears Holding’s CEO “Eddie” Lampert, his hedge fund ESL, and some other entities have worked hard to get their hands on the real estate, while the pension fund, when Sears Holdings goes through bankruptcy, will be left behind as a sinkhole that taxpayers might be shanghaied into filling.

I postulated at the end of December that Sears Holdings will try to stay out of bankruptcy at least through July to avoid running afoul of fraudulent conveyance provisions in the bankruptcy code. But after that, all bets are off. So this  might transpire pretty soon.

The office of Senator Menendez emailed me the transcript of the hearings on the Sears situation. It’s posted below. The C-Span video clip (6 min) is at the bottom of the transcript:

Menendez: Thank you Mr. Chairman, you’ve heard a lot about pensions and I care about American workers and their pensions, and you served as director of Sears Holdings, which is the parent company of Sears and Kmart, for about 12 years, you served on the Finance Committee which was tasked with reviewing investment policies of the retirement plans of the Company and its subsidiaries, is that correct?

Mnuchin: That is correct

Menendez: And the Chairman and CEO of Sears Holdings is a gentleman named “Eddie” Lampert, who I understand is your former college roommate, correct?

Mnunchin: Yes and the benefit is he’s actually here with us today.

Menendez: Okay, good. So you’re also an investor in the hedge fund ESL Investments, which you are choosing not to divest yourself of as I understand from your disclosure. The hedge fund is also run by Mr. Lampert. You earned up to $26 million dollars from the hedge fund last year according to your disclosures. That same hedge fund currently holds 29% of its portfolio in Sears stock and Mr. Lampert himself effectively owns 49% of Sears’ stock according to public SEC filings. Is that all fair statements?

Mnuchin: I think actually I’ve invested close to $26 million, I didn’t make $26 million.

Menendez: Okay I won’t equivocate with you. Now Sears has been performing poorly and, as a result, forced to sell assets to cover operating costs and to contribute to its pension fund. Interestingly, several of the most valuable assets have been sold in part to Mr. Lampert’s hedge fund, including Lands End, Sears Canada, and most of Sears’ real estate.

The real estate was sold off to a different entity, whose largest shareholder is Mr. Lampert’s hedge fund. And that seems to have resulted in a shareholder lawsuit according to SEC filings.

The Pension Benefit Guaranty Corporation (PBGC) initiated an agreement with Sears to protect the pension benefits of the more than 200,000 plan participants after the real estate deal and significant cut to pensioners’ health subsidies that occurred during your watch.

Unfortunately, the agreement with the PBGC puts the plan’s pensioners behind Mr. Lampert’s hedge fund in the ability to get assets from Sears in any bankruptcy proceedings. Because of this, because Sears has received at least $800 million in secured loans from Mr. Lampert’s hedge fund, some of them secured by Sears properties. The Sears pension fund currently faces a $2.1 Billion dollar funding obligation gap. Now I take these all from filings and public reports and I assume that that basically is a fair statement.

Mnuchin: That sounds about right but let me…

Menendez: Are you aware that if you are confirmed as Treasury Secretary, you would become one of three board members of the Pension Benefit Guaranty Corporation that has the power to either accept or deny a pension plan termination application, such as could occur with Sears bankruptcy, making the Federal Government cover Sears’ pension tab? Do you recognize that you’re going to be part of that board?

Mnuchin: Yes

Menendez: You do? Now, so here’s where my concern is and maybe you can elucidate it for me. You were a Director at Sears for 12 years where you had oversight over the administration and investment in the pension fund. That pension fund has been underfunded, its benefits were cut during the time period you were there, it now faces a $2.1 Billion funding obligation gap.

Sears has sold off some of the most valuable assets while you’ve been on the board. Your college roommate’s hedge fund has large interests in the properties sold, numerous secured loans with Sears and owns a controlling share of Sears’ stock shares. You earned up to $26 million last year from your shares in that hedge fund and you’re refusing to divest yourself of the hedge fund.

Should Sears go bankrupt and you if confirmed as Treasury Secretary, are a PBGC director who would have a role in the Pension Benefit Guaranty Corporation’s attempts, as an unsecured creditor, to recover $2 Billion for the unfunded liabilities in the Sears pension fund while simultaneously trying to not lose money in your hedge fund investments in Sears that you hold with your college roommate who is the CEO of Sears. How is it that you’re going to do that?

Mnuchin: So let me just correct again because you said again that I made $26 million which I didn’t, I invested 26 million, so I just want to make sure that the record stated that. Let me first say that my original involvement with Mr. Lampert was with Kmart coming out of bankruptcy. Where all the professionals thought that Kmart should be liquidated, and Mr. Lampert… working for him saved tens of hundreds of thousands of jobs.

Sears when he bought it was already a failing issue and he’s contributed, the company’s contributed multi billion dollars to that pension fund which were pension issues beforehand. I’m well aware of the pension issues and something that when I was on the board we were very cognizant of, very significant contributions. As it relates to your answer, obviously I will recuse myself in any way as it relates to being on the board if indeed there ever were an issue with Sears, whether I had an investment in ESL or I didn’t have an investment in ESL, I would be concerned about any appearance of conflict. So I would recuse myself.

Menendez: Well we’ll have to look at the consequences of any such recusal because there are 3 members of the board who get a vote and if you recuse yourself under those set of circumstance I’m not sure that the remaining 2 can ultimately make a decision on such a case that involves 200,000 peoples’ pensions. So it’s a serious issue and I urge your attention to it in terms of thinking about how this very well may happen because those pensions were underfunded and now we’re going to have a set of circumstances at some point where we’re going to have to deal with it. So I bring it to your attention because I think it’s a serious challenge.

Mnuchin: Again I will work with the Ethics Office and the General Counsel to work through that, and again I would just comment that Sears inherited, when it was purchased, underfunded, and has contributed billions of dollars to this along the way. Thank you sir.

Menendez: It may have inherited it, but by the same token it continued to underfund it.

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  94 comments for “Sear’s Bankruptcy, Who Gets the Real Estate, and How the Pension Fund Got Hung Out to Dry Invade Mnuchin’s Senate Confirmation Hearing

  1. Valuationguy says:

    Something like this would NORMALLY derail a confirmation…

    In the current climate it SHOULD derail a confirmation….

    But I predict very little of the public will hear anything about this via the news EXCEPT through your blog Wolf.

    Keep up the fight.

    • Bobber says:

      So we have very rich people taking over government with conflicts of interest. No wonder the voting public is hostile. The people who voted for Trump will turn on a dime if he doesn’t make better decisions. The cabinet picks are less than desirable.

      • Michael Fiorillo says:

        “Less than desirable” is too polite and courteous: these people are going to loot like there’s no tomorrow.

      • Arctic Melt says:

        Less than desirable? Trump’s cabinet picks are despicable… Horrifyingly putrid… Scientifically dangerous…And totally dishonest.

        • Norma says:

          Agreed, can´t barely think of a better bunch to put in front of a firing squad. Is there any chance at all he´s appointing them to follow the teachings of Don Vito Corleone?

          “Keep your friends close and your enemies closer”

          Maybe, but I wouldn´t bet a mexican peso on it.

        • Edward E says:

          Climate/environment, Health Care and Civil Rights had all been scrubbed from the website just as it began raining on the swamp leader taking to the stage. (h/t Charles P Pierce) Whitehouse jobs website is still not available. Need to fill 661 of 690 positions, fortunately he’s getting some fifty of Obama administration to stay on for national security reasons.

          David Dayen on Twitter is a good place to view the truths/lies hissing from Mnuchin, among hiss from other rattlesnake grillings for the new fraud factory. He knows the issues much better than some Senators.

          It was a rousing speech. No S, D & R from his lips yet… but listen for it

        • Commie killer says:

          The best in my lifetime.
          Ease up on the over the top dramatics.

      • Smingles says:

        “No wonder the voting public is hostile. The people who voted for Trump will turn on a dime if he doesn’t make better decisions.”

        No, most of them won’t. You are expecting far too much of Trump’s supporters.

        • Mike G says:

          This. Cantaloupe Ceaucescu will feed them a steady stream of scapegoats, social-issue distractions and shiny objects to keep them happy. He knows his audience.

        • Justin Decodence says:

          They will turn. They will turn in 12 months when they figure out Obamacare is really the Affordable Care Act.

    • alexaisback says:

      Many readers here do not seem to grasp the issue and appear to fall for the slight of hand by Mr. Menendez.

      1. Mnuchin did NOT make 26 Million – he INVESTED 26 million. Menendez knowingly stated that incorrectly

      and then repeated it incorrectly despite having been corrected.

      That deception is an ” art ” the way Menendez casually brushed it off ” Okay I won’t equivocate with you “….. Menedez indeed reported the exact factual opposite twice – clearly and intent to deceive.

      2. The Pension Program at SEARS was WORSE when it was taken over, while it was not perfected it was NOT made worse during Mnuchin’s 12 years.

      And during that 12 years they employed hundreds if not hundreds of thousands.

      3. KMART TOO was saved – for the time being as were ” tens of hundreds of thousands of jobs. ”

      For the time being I say because
      =========== WE ALL KNOW the retailers are suffering terribly – most if not all retailers are suffering terrible, it is a changing exconomy due to the internet.

      To lay that at Mnuchin’s feet is quite ridiculous, not everything is Mnuchin’s fault.

      As For The VOTE Menendez seems to think 3 people will make a much better decision than 2. I find that doubtful, very doubtful and have no issue with recusal which is a procedure that is often done.

      Or Why Not Make The Board FIVE members ?

      • Hugh Upton says:

        In Gods name, what planet are you sitting on? Your comment appears to indicate you have zero understanding of pension fund obligations. Pensions are deferred wages no matter which side of the Canada/US border you are on. The essence of the Senators point is that the ESL Hedge Fund, as a creditor, gets paid off BEFORE the pension fund deficit is paid. That means that when the pension fund gets liquidated; as it will, the employees who have contributed end up with little more than they paid in (if they are lucky), people close to retirement will have a pension far less than what they banked on (if they are also lucky) and the retired ex employee may very well get their pension reduced.
        As to the issue of Board Members, if Mnuchin recuses himself and the two remaining members can’t agree, the process is probably thrown into suspension necessitating litigation for the next ten years with all the attendant legal costs – and guess who pays them? The pension fund.
        As to the matter that the pension fund was in serious deficit before ESL bought Sears, or for that matter Kmart, and these nice gentlemen tried to make it better, that, I suggest, is total hogwash. They made no attempt to cover the deficit, why should they? They had no legal or regulatory obligation other than maintain the status quo.
        Please look beyond the quiet soothing half truths of Mnuchin. He and his college room mate are the worst kind of corporate parasite. Go look up the Northern Telecom (Nortel) bankruptcy in Canada as a classic case of failure by regulatory agency’s to protect employee pension because of corporate lobbying – among other things.

        • Lee says:

          So where was the federal government under the Zero for the past eight years?

          Yeah, I guess you people can excuse them for doing nothing about the problem and start blaming Trump and his administration for something that hasn’t even happened yet.

          “They made no attempt to cover the deficit, why should they? They had no legal or regulatory obligation other than maintain the status quo.”

          That’s right as you stated: they had no requirement to do anything.

          Do you pay more taxes than you should? Did you donate some extra money to reduce the deficit? Maybe we should blame you for the increased deficit as well.

          I came to Wolf’s site to read about economics and finance and not to see the continual idiotic, anti-Trump posts about something that hasn’t happened yet or will not happen.

          These includes statements such as:

          “Less than desirable” is too polite and courteous: these people are going to loot like there’s no tomorrow.”

          Loot. huh?


          “Less than desirable? Trump’s cabinet picks are despicable… Horrifyingly putrid… Scientifically dangerous…And totally dishonest.”

          So you think that that the former Chairman of XOM is despicable?

          And you put General Mattis into that same category?

          And another:

          “………..and molesting cocktail waitresses.”

          That has to be be one of the dumbest posts ever put up on this blog. (Thanks for that Mary.)

          And more:

          “……is that Trump will rape you openly, spit in your face but somehow make you feel that America is Great Again.”

          A totally disgusting comment, Kent.

          No wonder many people are sick of this kind of crap and voted for Trump.

        • Gretchen says:


        • alexaisback says:

          claimed by Hugh:

          ” They made no attempt to cover the deficit, why should they? ”

          Show us any proof they did not attempt to decrease the pension deficit.

          What do you base that claim on ?


      • Bob M says:

        It’s also not the taxpayers’ fault yet with our grossly corrupt “government” the taxpayers always get stuck with the tab, be it Sears’ pensions or someone else’s preexisting medical conditions. But then again, transfer of wealth from the productive class to the non-productive corporate and social welfare class is precisely the purpose and modus operandi of the state.

      • chris Hauser says:

        um, which is the pot and which is the kettle?

        tepid tea, compared to 100 year bonds.

  2. mvojy says:

    Will ANY of Trump’s appointees NOT have a conflict of interest?

    • nhz says:

      even if they all had a conflict of interest, do you really think that is different from the previous administration or most of the critters in Senate and Con-gress? Wake up …

  3. william says:

    The pension train wreck can not be stopped. It’s impact may be lightened but it is inevitable. Trump may be blamed, and blamed for many things. It won’t be just pensions. Let me be first you hear tell you Trump will be blamed for falling college enrollments in the next four years. College enrollments are going to fall because of demographic trends. Yet, Trump will be blamed. You heard it on Wolf’s site first.

    • economicminor says:

      William, it isn’t that the pension tsunami isn’t going to happen, it is that someone in government could end up with monies that truly belong to the pension fund while the tax payers are again on the hook for the pensions.

      Trump and his administration are one huge Conflict of Interest that assuming normal human nature prevails, means they will get assets that should actually belong to others, Big Time.

      I thought the Clintons were corrupt, this appears to be so far beyond that. Will our way of life and our government actually survive this?

      • Cindy says:

        Wait…a hedge fund makes an investment and just like any private lender should ALWAYS get paid back first because it bailed out a risky company when that company couldn’t get a freaking loan anywhere—this is just normal business and that hedge fund should not be under scrutiny for such. I don’t think all business owners should be demonized —the owner tried to save as many jobs as possible and keep the ship sailing and actually got the situation better than where it was. That shows effort and good intentions. Not that it’s cut and dry because I don’t know al details. As previous business owner, I know the stress of many mouths to feed and try to do a good job. These guys will walk away ok and and always knew that…I don’t think their sole intention is to screw their employees but to just make a bad situation better.

        • economicminor says:

          Cindy, You are either being facetious or you have read stories that I haven’t read..

          From what I know of from reading, most hedge funds only interest is making lots of money on a medium term basis.

          What they do is buy out a company that has great assets which for some reason has had their stock beat up.. Short term problems sometimes but mostly has to do with revenue short falls..

          They buy them, usually with borrowed money, not to make them healthy long term but to make them look healthy by layoffs and cost cutting while they leverage the companies to the hilt. They get back their initial investment thru this leveraging. Often making a huge profit thru the sale of bonds. The bond’s can be sold directly to the hedge fund with only the real assets like the real estate as backing or they can package them up and sell the bonds to pension funds as buyers think that the company is worth lots because of the new higher earnings (not necessarily revenues)… but higher earning that is mostly due to cuts and selling off or not ordering new inventory. Lots of illusion as far as I can tell.

          So this new lean machine is actually a hollow shell of its former self but on paper looks pretty good.. So they either sell the stocks or IPO it back into the market.. After all they got all their money and some back in the new leverage and the real estate too.. So the poor new company either kind of continues like Sears or it collapses. Hardly matters to the hedge fund as they got their money back if they did things right and will get to keep the real estate.

          I just have not read about the hedge funds that are such great honorable patricians who cared about the workers or their pensions. Maybe some are, I just haven’t read about them.

    • Mike says:

      The point of examination of political appointees is to exclude predators from control of public (and protected) assets. Munchin and every other Trump appointee (including Mattis) are clearly top-level predators and believing they will refrain from attacking soft targets is stupid.

  4. zoomev says:

    I’ve stopped watching the national news since Nov. 8th. I haven’t spoken or written a word about what I believe is the bottom line until now.

    The people that voted for Trump really betrayed their country.

    • Sure, you are right ( /sarc=on)

      Like the EIGHT YEARS OF CONTINUOUS WAR UNDER the big O did not betray the USA

      Like the TOP ONE PERCENT ENJOYING RAPACIOUS gains ( for eight years ) under the big O did not betray the USA

      Like the continued and continuing DESTRUCTION of the INNER CITIES for eight years under Obama did not betray the USA.

      Like the fact that FULL-TIME GOOD-PAY JOBS were lost and REPLACED WITH PART-TIME LOW-WAGE HOSPITALITY jobs did not betray the USA. All under Obama of course.

      Like the fact that 95 millions of people OUT OF THE JOB FORCE did not betray the USA ( I’ll skip the repetitious attribution to Obama from here on out )

      Like the ALMOST 50 MILLIONS OF PEOPLE ON FOOD STAMPS did not betray the USA

      Just for good measure, throw in Chicago ( any way you want to look at it, ANY WAY ! ) under the big O’s buddy Rahm Emmanuel . . .

      Just how have poor African Americans done under Obama since he took office ? Certainly another betrayal.

      Did I mention 8 YEARS OF WAR ? Of course I did — I am mentioning it again just for emphasis. Nobel Peace Prize, Harrruummmph ! ! !

      Well, there’s always PEACE BREAKING OUT ALL OVER THE MIDDLE EAST ! ! ! Thanks to Obama, Hillary and Kerry.

      ( /sarc=off )

      Really ? People that voted for Trump betrayed the USA ? Just how did they, given Obama’s “successes” ?


      • alexaisback says:

        While not yet completing one full day in office

        Trump has saved more American manufacturing jobs then Obama did in 8 years Obama spending over 10 trillion.

        That is a fact that cannot be refuted, regardless of politic.
        . Lets face it, Obama did not have the experience, knowledge or nerve to do what Trump did with the auto and air conditioning manufacturers.

        • Harrison says:

          I seem to remember GM and Chrysler approaching bankruptcy during the first few months of Obama’s term….

      • Tom Kauser says:

        Hoarders porn?

      • Commiekiller says:

        Raping and pillaging?

        Cmon dude, you can look smarter than that.

        Going to the Pussy riots?

    • economicminor says:

      I think this whole rape and pillage scam goes all the way back to Reagan and was really expanded under Clinton.. Bush 2 was just an ignoramus that went along to get along while others ran the government for their own and their friends benefit. Obama was voted in to Change things and he just went along.. put the crooks in charge again…Good speaker and good front but not so good for We the People. No one wanted a continuation of that but we voted Change again and got worse. This administration looks to be expanding that Rape and Pillage theme quite dramatically.

      With Global Climate change accelerating and a denier in charge of the EPA and pillagers in every other cabinet post I think anyone who has a child after today should be convicted of child endangerment.. Irrational exponential growth when the world is already severely affected by to much carbon, filth pollution and over use is beyond stupid, it is suicide. Just what we need are more GMO foods spread out across the world with no nutritional value except carbs. That’s the agenda of the new Trade Czar.

      Very entertaining in a very Bazaro sort of way..

      • nhz says:

        I predict this agenda is not going to work, because America cannot dictate its policy or what scientists believe to everyone else. If you listen closely you can see that Trump has already changed his mind a bit on many topics, and that much of the original rhetoric about climate change etc. was for public consumption.

        Even China is now putting huge amounts of money into green power and environmental cleanup … If America wants to go back to the Middle Ages under Trump and put gospel above science (like much of the US population seems to want, so they can drive their gas-guzzlers a bit longer), w’ll see what happens. I don’t think it will work out for them.

      • A S says:

        whole rape and pillage scam – goes all the way back to 1913, Thomas DiLorenzo’s ‘The Revolution of 1913’ explains why; creation of the ‘federal reserve system’, the creation of the ‘income tax’ and the 17th amendment to’ directly elect Senators’….
        Rid ourselves of the BIG banks by taking your ‘money’ = ‘federal reserve notes’ out of the BIG banks and put it into “CREDIT UNIONS” wiki pedia; In part;
        Tension has always existed between member-owned cooperative credit unions and for-profit banks in the United States. When credit unions were first organizing in the US in the early 20th century, the banking industry was opposed, remaining so ever since.
        The FDIC does not provide deposit insurance for credit unions, which are insured by the National Credit Union Administration (NCUA).
        The National Credit Union Administration (NCUA) is the independent federal agency created by the U.S. Congress to regulate, charter, and supervise federal credit unions
        A credit union is a member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.[1][2][3]….
        AND there is no law that requires a person to have a social security or one to pay income taxes… claim EXEMPT….

    • NM Rancher says:

      “You Lie”

      I am so sick and tired of your ilk. He is the last hope to turn this country around.

      You must have voted for that corrupt globalist Hillary. The Clinton Foundation just transferred 2 BILLION dollars to Qatar where they can protect it from the coming prosecutions.

      You mention “betrayal” … Her wide open mail server was created specifically so she could sell top secret information to the highest bidder.

      Her criminal acts involving Top Secret information border on one of the worst intelligence breaches in US history yet she was not prosecuted.

      Her bribery and pay to play activity brought the Clintons from zero dollars to hundreds of millions of dollars net worth.

      For what? Show me how they earned all that money. I can show you but I doubt that you’d even understand half of what I told you.

      • night-train says:

        NM Rancher: You seem to think Mr. Trump gets a pass after folks of your “ilk” called the former President everything under the sun. That’s not how real life works. Strap on partner. You got a whole heap of crap coming your way.

        Personally, I am tired of corporate socialism. Tired of the tax payers back-stopping every private sector bad act that can be thought up. We have better uses for our tax revenues. But I have less than little faith in the Trump’s leadership. ” I can’t tell if he is picking a cabinet, or outfitting a pirate ship”. So said Mr. John Cleese.

      • Michael Fiorillo says:

        There’s a very basic failure of logic here: just because Hillary is awful doesn’t make Trump good.

  5. Kent says:

    Read this an threw up a little in the back of my mouth. The sleaze is really coming out of the wood work. Mnuchin is Eddie Lambert’s best bud? Awe Jeez. Say it isn’t so.

    • Dan Romig says:

      Thank you. Those are some interesting, and IMO true quotes from Carl Jung, Neil Kramer and Sri Aurobindo. Kramer’s line, “Mass culture is a control mechanism …” certainly brings to mind Edward Bernays.

      One of the Twin Cities’ big grocery chain (where I do much of my shopping at Cub stores), Super Value, has been hurting, and they too have very underfunded pension obligations. No PE firm has taken over and raided them – yet.

      • nhz says:

        The same has happend over the last few years with most of the Dutch retail chains; in most cases they were bled dry by US hedgefunds who killed the company for a quick profit and raped the Dutch tax office for huge amounts of money in addition. Rinse and repeat, our tax office seems to encourage this kind of bad US practices …

        And the funny thing is, the Dutch worker unions invest much of their pension money in these same US hedge funds, because they offer high returns; even the workers are now crooked little capitalists.

    • Gretchen says:

      Well this essay blew my everloving mind!

  6. Mary says:

    So he was going to drain the swamp, eh? More like suck up the very worst swamp creatures and direct the sump pump outflow right into the new Trump West Wing.

    Trump got what he wanted. He “won” and can now resume favorite activities like insulting enemies on Twitter and molesting cocktail waitresses. The actual governing of these United States will be done by the same self-dealing insiders that have long controlled the Republican Party.

  7. JC says:

    Trump fills the swamp and betrayed the people who voted for him. The Goldman Sachs people runs and controls the presidency and the government, which does not bode well for American people. If Mnuchin were to confirm as Treasury Secretary he can sell his investment tax free. This can be another Hank Paulson moment i.e., scaring the government if you do not bail the big banks/corporation, the US economy will crash – it is too big to fail. Could be another TARP part deux?

    • Lee says:

      A quote from the President of the USA, Donald Trump:

      “I find the people who are the best in the world at what needs to be done, then I hire them to do it, and then I let them do it … but I always watch over them.”

      FYI, NOBODY controls Donald Trump, and by now everyone including the poor Hillary losers should know that.

  8. Paulo says:

    Sears is a metaphor for what has and will continue in all of the western world, including Canada…my home. Nay, all of the world.

    *There is manipulation by the powerful.
    *Insiders get first dibs.
    *The employees are squeezed and shafted.
    *Smaller ‘outsider’ investors get hosed.
    *There is a decline and eventual collapse.
    *Employees are scapegoated, (wage levels, pensions, vacation time, etc).
    *The company is disolved.
    *Insiders pick up the spoils.
    *Employees get hosed, and take the blame.
    *Taxpayers are manipulated into anger at the employees, and prodded to help them. (Insider owned media corporations)
    *The Mnuchins are rewarded and their families prosper.
    *The insiders then take over the Govt.

    Rinse and repeat.

    It reminds me of the movie Good Fellas when they take over a bar and run it into the ground…then have a fire, finally collecting on the insurance.

    But this, including all the economic malfeasance, has all been justified because it is ‘legal’.

    • Michael Fiorillo says:

      Goodfellas/Sopranos analogies are apt; it’s the “busting out” America.

      It’s been happening for decades now, but these characters are pure smash-and-grab, insatiable Ids. Their soulless voids can never be filled.

      That said, no one should continue mis-underestimating Trump, and, while Trump-as-Hitler hysterics are overblown, here’s a Nazi-era analogy that I believe will play out: Hitler was not initially supported by German capital, but they quickly came around when they realized that the “socialist” in National Socialist was intended to misdirect and divide the German working class, and that there was much money to be made.

      Likewise, don’t be surprised if/when Wall St., Silicon Valley and the Chamber of Commerce coalesce behind Trump. Warren Buffett, chief sleight-of-hand performer/political weathervane for the Overclass, has already done so.

  9. AlbieOK says:

    While I in no way support Mnuchin or his ilk for any position in the government, I do find it highly ironic that Menendez is the one questioning his integrity and ethics. Mr. Pot, meet Mr. Kettle.

    • walter map says:

      “Mr. Pot, meet Mr. Kettle.”

      An unfair comparison. Menendez is dirty interstellar dust, but Mnuchin is a black hole. But Republicans agree with you, and thank you for your service.

      In point of fact the choice is always between the lesser of two evils, because there are no perfect candidates. With Democrats the U.S. middle class had some chance of restoration, or at least survival. Now it has no chance. None at all.

      Who’s Jill Stein?

      Sears didn’t die because of declining sales or poor management. Those are just the smokescreen. It died because it was deliberately plundered to death by the wolves who weaseled some of the hens into letting them take over the henhouse. The U.S. economy as a whole faces a similar fate.

      It hurts to admit when you make mistakes – but when they’re big enough, the pain only lasts a second. This one isn’t quite that large, so it’s going to linger a bit.

      • Kent says:

        With Bernie the middle class had some chance for survival. Under Clinton it would have died. The only difference between Clinton and Trump is that Trump will rape you openly, spit in your face but somehow make you feel that America is Great Again. Under Clinton, well, you would just feel gross.

        But I agree, these once great United States are pretty much done in. Whether democrat or republican doesn’t really matter. Not sure where you are from Walter, but keep your eye out.

  10. Mike R. says:

    It is virtually impossible in today’s political structure to attract talent to serve in government that doesn’t have money and by extension, lots of ties to others with money.

    Salaries and benefits for top federal positions are token payments at best.

    Most Americans now should understand that good people in these positions is going to involve conflicts of interest from time -to – time. The only quesiton is how much and how obvious. Let’s wait and see how Obama cashes in on the Presidency; not that I blame him mind you. What was his salary? $250K/year or something like that. And the job responsibility? Keep in mind that Dimon and Blankfein each have made $1B over their careers.

    • walter map says:

      “Salaries and benefits for top federal positions are token payments at best.”

      You didn’t think he was going to be president for a lousy $400,000 a week, did you?

  11. mynamett says:

    Few Canadian remember that in 1994 the federal government was bankrupt and was ready to ask about IMF bailout.

    What Canada did is to take some money from the unemplymen insurance fund and the federal employees pension plan to help balance the budget. Using pension fund as a source of revenue for gouvement worldwide will be done again.

    The population is broke and living pay check from pay check. Few have any saving. The few saving that the population has are in pension fund.
    Expect government around to world to use that money to pay for government expense and expect the rich (hedge fund, mutal fund) to after that money too.

    Nothing new that worldwide gouverment looking at pension funds. It just indicate that the end game is coming fast.

    • mynamett says:

      It seems that Trump is about to deregulating the pension fund industry and allowing easier accept to people pension fund. Basically the rich are at it again trying to gain easier accept to people money and making it easier for them to steal it..

      Allowing brokers to provide advice without being a fiduciary, as the Trump administration might do, would promote an environment which may lead to higher-cost plan services and potential conflicts of interest, as brokers may choose to seek out the arrangements that pay them the most, rather than do what’s in the best interests of plan sponsors and participants.

    • nhz says:

      and where does the money in the government pension fund or unemployment insurance funds come from? Transferred from taxpayers (the middle class, mostly) to government workers who were promised impossible pensions …

      In my country (Netherlands) government workers still get outrageous pensions (taking out many times more than they ever paid in contributions), while many workers outside government have lost all their pension money over the last 10-15 years due to stock market woes and hefty fees for the pension funds. No one compensates them, but the government workers are entitled to their ultra-fat pensions that still assume 8-9% ROI. Government simply increases taxes to fill their pension fund coffers or lends a bit more money thanks to ECB NIRP policy and uses that to increase government wages even more.
      Lately they have been talking about cuts to government pensions and sometimes REAL cuts have been enforced to the tune of 1 euro per month or so… Every time the subject comes up government changes the rules so no real pension cuts are necessary. It’s good to be an ex-government worker, a lot less good to be a young government worker because this Ponzi will fail, spectacularly ;-(

    • mynamett says:

      There we go. It is look like Trump will make easier for the financial industry to steal people money. Watch them go after pension money.

      Trump is expected to impose a federal hiring freeze and take steps to delay a Labor Department rule due to take effect in April that would require brokers who give retirement advice to put their clients’ best interests first.

      Remember who Trump advisor are, big fat cat from Wall Street. Now it is easier for them to access your money and lie to you. Trump is just another narcissist self center individual that using populism and phrase like I work for you manipulate people. This is nothing new.

      Let wait and see what he does regarding rule due to take effect in April that would require brokers who give retirement advice to put their clients’ best interests first. Then we will know who he is working for

  12. michael says:

    Instead of buying in to the mainstream media narrative and speculating about what Trump will or will not do, I would recommend you avoid judgement until the point in time that he does something to prove you right or wrong.

    Do not be a sheep.

    • nhz says:


      Unfortunately, the MSM is counting on ‘cognitive dissonance’ to work its magic. So they make sure that everyone ‘knows’ that Trump is evil before he has any chance to act. The sheeple will ignore anything positive that comes out of the new administration and only see their own negative opinions confirmed, whatever happens in the real world. Just like most of the sheeple probably still believes that Obama brought ‘hope and change’ to America …

      • chris Hauser says:

        i like the appointment of rex tillerson, it’s a realist perspective on what our foreign policy problems are.
        energy and cash flows from energy.

        though it may fill the bag with cats.

    • NM says:

      We all need to stop calling them the “mainstream media” and start labeling them for what they are… “corporate media” … Boycott all corporate media.

  13. Petunia says:

    Where was Senator Menendez’s dissent when Obama put Holder a banker’s lawyer in charge of the Justice Dept, insuring no banker would be persecuted. Where was the Senator when Jon Corzine stole billions of customer’s money from MF Global, in his state. If the Senator had been doing his job, Mnuchin would have been prosecuted during the financial crisis, instead of being rewarded with a better perch.

    • robt says:

      The good news for investors in MF Global is that they’ve been 100% compensated for the misdirection of their funds during MF’s liquidity crisis.
      Corzine was assessed a 5 million dollar fine and is banned for life from trading.

      • robt says:

        I should clarify that the customers were compensated from the liquidation of MF Global’s assets, not from government funds.

      • Marty says:

        There was no good news about MF Global. 100% compensated, my eye.

        We had all our cash stolen by a sleaze bag criminal resulting in immediate margin calls. I lost 10% of my account on that move and certainly was never compensated for that. There were many others who weren’t as well capitalized as I who had huge margin calls. It took over 18 mos to get all our cash back. Were we compensated for not having the use of our money that whole time? Of course not.

        Corzine stole over a $1 billion, and it’s ok that he gets a slap on the wrist? If a black kid stole a bag of chips from a 7-11, they’d throw him in jail, but Corzine got a fine and was told to go play in another sand box and that’s ok???????????????

        The exchange should have back stopped all our accounts, and Corzine should be in an orange jump suit. PERIOD.

        • Wolf Richter says:

          Sorry to hear that you got wrapped up in the MF Global deal. These things are terrible, not just financially, but also emotionally.

        • polecat says:

          Corzine … campaign bundler extraordinary deluxe, for the DNC …. THAT Corzine …. !!

          but He’s soooo good … he’s on the side of virtue … lol


      • Frederick says:

        5 million dollar fine haha That’s a slap on the wrist and banned for life another joke because he’s like 70 right? Anyone else doing what he did they’d be in Leavenworth or Guantanomo Carlin referred to his ilk

    • nhz says:

      some pigs are more equal …

      How many big criminals were prosecuted by the Obama administration? Seems O was too busy prosecuting and eliminating whistleblowers to care about how the rich and powerful were raping the world like never before. Zero real convictions for big financial crimes, just some symbolic slaps on the wrist.

      free Corzine! Oh wait …

    • Chicken says:

      I’ve been keeping periodic tabs on Cherokee investment Partners but Corzine keeps popping up in numerous venues, mostly unassociated with Cherokee.

  14. 33925 says:

    I believe annual pension contributions of US Corporations are limited by Federal tax laws. It is not clear if the company made maximum funding contributions over the past 12 years. Congress has also passed legislation allowing favored large corporations to contribute less than the minimum pension funding amount to “encourage” them not to terminate defined benefit plans or to forestall bankruptcy in a difficult year. It is not clear that assets were removed from Sears Holding at other than fair value. Related party transactions are expected to be completed at fair value. Apparently, this fact is being challenged in court by shareholders and will be resolved in that venue. Lot of blame to go around as to why corporations have underfunded pension plans but I would suspect much of that blame can be placed at the feet of Congress as they establish the funding levels and limitations for Corporate defined benefit plans. Seems like good political theater and not much substance. The problem is complicated by design and unfortunately the little person is left holding the loss with no clear person or entity to blame.

    • Marty says:

      Gee, do you think that 8 long years of 0% interest rates has something to do with pension problems?

      End the FED.

      • nhz says:

        Yes, exactly the same pension fund problems in Europe. End the ECB and all other central banks that play this devious game.

        Of course, there would have been a problem anyway even without recent ZIRP/NIRP policy, it just brought the endgame closer. In Europe most funds are working around the problem by still assuming that they will make at least 8% ROI for the next 10-20 years, although returns have been far below that for the last years and will almost by definition remain far below 8% for many more years. Assuming 8% forever (and increasing the retirement age) will allow the boomers to pillage what remains in the funds, and when at some time in the future the pension buffers are gone “nobody could have foreseen that” …

  15. Gretchen says:

    Sears sits on the sweetest real estate in every town in the US. It was pretty clear to see as the years went by, and the stores got shabbier and shabbier, what was going to go down. It’s so sad to see Sears gutted, though.

    • Wolf Richter says:

      Uber bought the beautiful art-deco Sears building in Oakland. It’s doing a huge remodeling job on it and then will move its headquarters into it (from San Francisco). I think people will continue to call it the “Sears building” – perhaps for decades to come. In this manner, Sears lives on.

      • Tinky says:

        Also, Wolf, don’t forget that the Sears catalogue (lingerie section) will always hold a special place in the heart of American baby-boomer males!


        • nick kelly says:

          When the Sears catalogue first arrived in the Canadian north in the 50’s the Inuit (Eskimos) were dazzled by it.
          One day a successful trapper walked into the trading post and opened the book to the lingerie section. pointed to the model and said he wanted to order….her.

    • Justin Decodence says:

      Sears prime real estate holdings were spun off into Seritage back in 2015.

  16. Sporkfed says:

    Aren’t unpaid wages, which pensions are, to be paid first in case of corporate bankruptcy ?
    So the rush to sell assets and pay equity and debt holders prior to bankruptcy is a looting
    of the company by the hedge fund. My guess is they continue load Sears up with debt prior to BK to funnel even more money to the hedge fund.

    • nick kelly says:

      In most jurisdictions, unpaid wages come quite a way down the list, unless altered by statute.
      Pensions are further down- close to last.

  17. walter map says:

    We thought appropriate to retreat to the dungeons this evening to watch 1984. I suppose some of you Yanks will be watching V for Vendetta. Just remember the latter is sheer fiction, while the former is a documentary.

    Both feature the estimable John Hurt in leading but diametrically opposite roles. I’m sure there’s some cosmic significance to that but for the life of me I have no idea what it could be.

    • nhz says:

      I was surprised that V was aired on TV in my country last year; plenty realistic, people might get some ideas about what is going on in the world and what to do about it ;-)

  18. beadblonde says:

    St. Ronald and the ensuing thirty years of biblical size financial crime; now even the reasonable are at daggers drawn.

  19. Chhelo says:

    Maybe one should start here:

    Central Bank Charter

    “It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law.


    In 1913, the Sixteenth Amendment to the U.S. Constitution was ratified. It empowered Congress to tax “incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

    As long as you have their baggage to carry the workers hard earned wealth will be plundered and the politicians will be able to buy the votes required to keep the train rolling full speed ahead.

    Clinton, Bush, Obama or Trump are just the puppets on the strings of the Banksters. Enjoy the show!

  20. Lars says:

    Could Trump make it so that the Pension Fund would be required to be paid before the Hedge Fund ?
    If so, how can that be done ? And if he does, that will be a most excellent political move to get a second term !!!

    • Lars says:

      Reagan and the Air Traffic Controllers Strike.
      I remember this early issue in Reagan’s presidency. The Controllers had real grievances, 60 hour mandated work weeks were impossibly difficult for them and put the public at great risk. Reagan fired them all as it was illegal for them to strike. He shouldn’t have done that. He should have listened to their protests and respected them, and then brought in military controllers to help with the under-staffing problem, while the air traffic system was upgraded with computers. I disliked Reagan very much for his insensitive handling of this affair.

      Sears and the Pension Fund debacle during Bankruptcy.
      This is looking to possibly be an early issue in Trump’s presidency.
      How Trump handles this could be a real litmus test of his character and resolve as President. I suggest that he ‘make it so’ that the Pension Fund must be made whole before any profits go to Sears Holding’s CEO “Eddie” Lampert and his hedge fund ESL.

      Mnuchin as Treasury Secretary might be a good way to get this done, however it requires Mnuchin to ‘repent’ any financiers’ greedy ways and be compassionate towards the workers, whose money the Pension Fund manages to begin with. Stealing from the workers to the benefit of already wealthy financiers is anathema to Trump’s stated policies in his Inaugural Address.

  21. d says:

    The BIGGEST hoot in all of this is that the FEDERAL government sits in judgement of this problem…while they are BANKRUPT and have UNFUNDED liabilities of 200 TRILLION DOLLARS……lol

  22. Coaster Noster says:

    Thank YOU Wolf, for providing the transcript, and thanks to all those that provided detail and commentary. Bumpersticker remarks (e.g. “When guns are outlawed, only outlaws will have guns.” ) make make the purveyor feel smug, but do not inform. I’ve called this posting remarks phenomenon “Format Authority”. When we type words, and a website re-configures the font and layout, it harkens back to the time when newspaper editors weighed a writer’s remarks, and did NOT publish writing that was foolish, incomprehensible, useless, and defamatory, etc. Implicit now is the “stamp of authority”…”Hey, I wrote it, it must be true!”
    Usually not worthy. And, when I see “it’s” I read “it is”, which kills my appreciation of the author’s remarks if…’s is misused.

    • Lars says:

      Roller Coaster Noster –
      Bumper Stickers you’ll probably never see:

      If you don’t live once, why do you expect to live twice.

      The next war will be won in cyberspace before a shot is ever fired.

      Time spent planning is time well spent.

      The shortest (most efficient) distance between two points is a curved line.

      Those who work the hardest get paid the least.

      Don’t take anything with you that you can’t afford to lose, and don’t leave anything behind that you wouldn’t mind if it was gone by the time you got back.

      Inefficiency is sometimes beneficial.

      It’s all in the set-up.

      That Bozo’s a light year late and a parsec short.

      Support Organized Crime, Buy a Lottery Ticket
      Support Organized Crime; Join a Labor Union or work for Management

      That’s the great thing about Life, it never ends.
      (meaning: the problems in life, never end)

      Why do I feel guilty when I’m not doing something.

      Dream Big or go back to sleep.

      The road apple doesn’t fall far from the horses’ ass.

      If at first you don’t succeed, try something else.

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