America's pensions can't beat Vanguard but they can close a hospital

Private equity: definitions, harms, and regulation

• Participants disagree on what “private equity” even means: anything non‑public, a fund structure, or specifically leveraged buyouts (LBOs).
• Critics focus on LBO-style deals that load acquired companies with debt, extract cash, and sometimes leave collapse and job loss; they see this as value‑destruction and a systemic loophole.
• Defenders argue PE is just ownership and investing, sometimes saving firms that would otherwise fail, and that bad cases are overrepresented in media.
• There is interest in banning specific practices (debt pushdown, dividend recapitalizations, paying dividends with borrowed money, tax and capital-rule preferences) rather than banning “PE” outright.
• Some note PE’s dependence on favorable regulation and tax treatment, and worry about PE’s role in healthcare and housing.

ETFs, index funds, and crash risk

• Debate over whether “crashing ETFs” is meaningfully different from broad market crashes, since ETFs track underlying indices.
• Some point out mechanical risks in ETF structure (discounts to NAV when market makers withdraw), but most agree the main risk is still underlying asset prices.
• A minority fear indexation and constant inflows could amplify a future downturn; others see this as speculative.

Public pensions, PE, and return assumptions

• Commenters note US public pensions often assume ~7%+ returns, far above individual “safe withdrawal rate” norms (3–4%), forcing them into higher‑risk assets like PE.
• Some argue this is fundamentally unsound and politically driven: benefits promised without adequate current funding, with shortfalls pushed to future taxpayers.
• Others counter that pooling longevity risk justifies somewhat higher withdrawal rates, but not to current levels.
• Claims that PE allocations (e.g., CalPERS) have “solved” return problems are disputed; skeptics cite opaque valuations, slow write‑downs, and industry‑wide liquidity concerns.
• Several argue pensions could meet goals with cheap index funds rather than fee‑heavy “alternative” assets.

Pensions as “paperclip maximizers” and alternative mandates

• One theme: pensions are narrowly tasked with maximizing financial returns, even if that means investing in activities that harm retirees’ communities (hospital closures, housing buy‑ups).
• Some propose rules steering pension capital toward investments that lower key costs for retirees (housing, healthcare, clean energy), trading some yield for real‑world security.
• Others prefer strict financial neutrality: pensions should seek best risk‑adjusted returns (likely via indices), and social goals should be handled separately by policy.

Student loans, bailouts, and moral hazard (tangent but central in thread)

• A long subthread compares SVB depositor protection with resistance to student loan forgiveness.
• One side: making depositors whole is core to banking stability and not comparable to forgiving voluntary education debt; student loan forgiveness is inflationary, regressive, and encourages tuition inflation.
• The other side highlights asymmetry: rapid interventions for banks vs decades‑long, non‑dischargeable debts for young borrowers.
• Many criticize US student loans as near‑usurious and structurally unique (hard to discharge in bankruptcy), arguing for:
  • Bankruptcy dischargeability after some time,
  • Government‑rate loans with minimal spread,
  • Or wholesale system redesign (more public funding, tuition caps, or even ending federal loan programs to force price correction).
• There is deep disagreement on fairness: whether forgiving loans is unjust to non‑degree holders and past payers, or necessary to fix a generational policy error.

Demographics and structural pension strain

• Some attribute pension stress mainly to demographics: more years in retirement, fewer workers per retiree, expanded expectations of lifestyle in old age.
• Others argue the main problem is political: underfunding using overly optimistic return assumptions instead of raising contributions, with the bill deferred to the future.