Donald Trump has spent much of his second term using the U.S. presidency as a giant ATM for himself, his family, and his cronies. Now he’s devised a way for the cryptocurrency and private equity industries to do the same—while further lining his own pockets and putting Americans’ nest eggs at risk.
The Trump administration on Monday announced plans to open 401(k) retirement plans to investments like crypto and private equity that are subject to far fewer safeguards than publicly traded assets like stocks and bonds. Critics warn the move threatens the retirement savings of millions of Americans while delivering a massive windfall for crypto and private equity moguls. The stakes are enormous: If Americans collectively shifted just 1 percent of their 401(k) assets into crypto and private equity, those industries would be flooded with more than $100 billion in new capital.
Free-market zealots have long wanted to gamble with the retirement savings of Americans. Republicans regularly fantasize about privatizing Social Security, handing over a wildly popular pillar of the social safety net to the whims of Wall Street. But the public strongly opposes the idea, so the president has turned to the next best thing. It’s the latest brazen example of Trump socializing risk and privatizing profit through his own pitiless brand of market capitalism—and yet another opportunity for him to haul off with loot on the backs of the American people.
It should shock no one that Trump is delivering a giant gift to the crypto industry. He and his family own billions of dollars’ worth of crypto and related investments, and will personally benefit as swarms of new buyers push up the price of those assets. The newly departed head of the White House crypto working group, which wrote the administration’s crypto policy, was a pro-crypto billionaire. And Trump’s minions have dramatically reduced regulatory oversight of the industry while acting as its de facto marketing arm.
“What you see here is a continuation of the Trump administration’s fundamentally corrupted approach toward policy, which appears designed to benefit the financial backers of his campaign and his family investments,” said Todd H. Baker, a senior fellow at the Richman Center for Business, Law and Public Policy at Columbia Business and Law Schools. “You have a major desire to boost the troubled crypto asset business, which is really a form of gambling unsupported by any productive economic activity.”
Last month, Trump’s Securities and Exchange Commission chairman—former crypto industry lobbyist Paul Atkins—declared that most crypto assets, including the “meme coins” and other tokens that have generated a windfall for Trump and his family, are not securities and therefore not subject to SEC regulations protecting investors. That move set the stage for the Labor Department, which regulates employers, to propose a new rule on Monday—in the works since a Trump executive order last year—making it much easier for 401(k) plans to invest in crypto and private equity by shielding plan managers from investor lawsuits over excessive risk. (There is now a 60-day public comment period on the rule.)
The timing could not be better for the crypto industry—or more bleakly illuminating for investors. Crypto asset prices have plunged by nearly 50 percent over the last six months, wiping out $1 trillion in wealth during this latest “crypto winter.” (It turns out there were fewer “greater fools” than expected.) By making crypto products more widely available to millions of Americans, Trump is delivering a desperately needed bailout to a battered industry in which he happens to be a major investor.
What does the crypto industry actually produce? Highly speculative and volatile digital assets with zero intrinsic value that are traded in markets rife with con artists and engineered for insider trading and fraud. Now these assets will be available to tens of millions of workers through their retirement accounts—accounts designed and marketed to safely build long-term financial security. What could possibly go wrong?
American workers collectively hold more than $10 trillion worth of investments in employer-matched 401(k) accounts. They’re the most common way that Americans plan for retirement, with some 100 million accounts nationwide, and they’re mostly made up of mutual and index funds that broadly track the stock and bond markets. Workers can tweak their risk exposure, but these accounts are purposefully designed to safely build long-term financial security—and historically they have.
Federal law does not prohibit employers from offering crypto or private equity investments in 401(k) accounts, but plan managers have a legally required fiduciary duty to employees and can be sued for mismanagement or excessive fees, which is why they’ve been extremely reluctant to offer such risky products in the past. As part of the new Labor Department rule, the Trump administration wants to introduce a “safe harbor” shield making it much harder for employees to sue employer plan managers, giving them the green light to roll the dice on crypto and private investments.
Like the crypto industry, private equity firms are salivating over the prospect of gaining access to Americans’ 401(k) plans, especially at a time when traditional investments from onetime cash cows like pensions and endowments are declining. In recent years, Wall Street private equity giants like Blackstone, KKR, and Apollo, which are famous for saddling struggling companies with debt and then strip-mining them with zero regard for workers, have mounted a vigorous lobbying campaign claiming that opening up retirement plans to their products will “democratize” finance by giving millions of workers access to greater returns than index funds.
Many retirement investors are wary, for good reason. Private equity and credit markets are highly illiquid and lack transparency—not to mention strong regulatory oversight—making it difficult for investors to access funds, accurately value assets, and spot risks on the horizon. And there’s no guarantee that private investments, despite having much higher fees than index funds, will outperform them—in fact, there’s growing evidence to the contrary. Look no further than the troubled $2 trillion private credit market, which has suffered major losses as investors question the quality of private loans, particularly to software companies under threat from artificial intelligence. In a rare moment of candor, a top private equity executive recently warned that offering such products to individual investors “is not going to end well.”
“This is a massive bailout for the struggling private equity and private credit industries,” said Jim Baker, executive director of the Private Equity Stakeholder Project, a financial watchdog group (no relation to Todd). “Both private equity and private credit have been having challenges in raising money and in selling companies. So they turned to the Trump administration and got them to issue a rule that would provide substantially easier access for those private equity firms to your and my retirement savings.”
Opening Americans’ 401(k) accounts to crypto and private assets means socializing the risks of opaque, often illiquid investments that are shrouded from public and regulatory view, while delivering outsize profits to a small number of wealthy private investors. If crypto and private investments outperform public markets—and that’s a big “if”—some workers may occasionally do somewhat better than if they had invested in index funds. But private equity firms newly flush with retirement cash will make out like bandits thanks to huge fees and deal commissions. And when the inevitable crash comes, everyday investors will suffer while Wall Street moguls, who are far better positioned to weather downturns, beg for taxpayer bailouts. Caveat emptor.
