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Guest Post: Checkmate for Pensions?

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Submitted by Leo Kolivakis, publisher of Pension Pulse.


The FT reports that investment losses hit public sector pensions:

The crisis facing pension plans for US state and municipal employees is deepening as investment losses deplete the resources of retirement funds for teachers, police officers, firefighters and other local government workers.

The largest state and municipal pension plans lost 9 per cent of their value in the first two months of this year, according to data from Northern Trust. That followed a loss of 26 per cent in 2008. Smaller funds, which underperform the larger ones, lost more, experts say.

The pension funds, which number 2,600 in total, hold more than $2,000bn after losses last year of close to $1,000bn.

The losses have left retirement plans about 50 per cent funded – that is, they have only half the money needed to cover commitments to 22m current and former workers, experts say. State governments typically put the funding figures closer to 60-70 per cent, although most experts use different calculations.

“There is a massive national underfunding problem,” said Orin Kramer, chairman of the New Jersey pension fund. ”

Unlike company pension plans, state and municipal retirement funds have no federal guarantee fund. This has led to predictions of benefit cuts and possible federal intervention.

“The federal government will get involved, without question,” said Phillip Silitschanu, analyst at Aite Group, a consultancy. “They could provide federal loans, or demand cutbacks as a condition of stimulus money, or there could be a federalisation of some of these pensions.”

Without investment income, funds are liquidating assets at huge losses to pay pensions.

Police pensions are in especially poor shape, in part because states have promised earlier retirement on full pensions, but seldom increased contributions.

In late January, Terry Savage wrote that the pension tsunami is about to hit:

One day soon you may have to decide whose retirement comes first: yours or the fireman’s? Or the policeman’s? Or your child’s schoolteacher’s?

Your city and state have made generous pension promises to all those public servants—funded with your tax dollars. Only suddenly it turns out that those pensions aren’t very well-funded, after all!

While you’ve been worried about your shrinking 40l(k), our public servants have been smiling. They know their defined-benefits pensions are guaranteed by your local taxing body.

And while barely 20% of private-sector employees are eligible for defined-benefit pension plans, fully 90% of state and local workers get that coverage, according to the Federal Reserve Bank of Minneapolis.

But now, because of a combination of too-high estimates on investment returns, too-low annual contributions, and the current stock market losses, those pension funds are woefully underfunded!

Many funds’ 2008 market losses won’t be revealed for months. But the Center for Retirement Research at Boston College estimates that state pension plans have losses greater than $865 billion, a decline of nearly 40% in just the past year.

The National Bureau of Economic Research says the value of pension promises already made by US state governments will grow to approximately $7.9 trillion in just 15 years.

But the same report points out that states are unlikely to be able to keep those promises: “We conservatively predict a 50% chance of aggregate underfunding greater than $750 billion and a 25% chance of at least $1.75 trillion in underfunding.”

Put in current dollars, to bring those pension funds up to appropriate levels would cost almost $2 trillion. And while the Federal government can just “print” the money, the cities and states have no such option. That means we, the taxpayers, are facing hefty local tax hikes to pay for required pension plan contributions. Or we’ll face other cuts in state and municipal spending, for safety or education or Medicaid.

The Web site http://www.pensiontsunami.com/ has been tracking these issues as they arise around the country. California is the epicenter of the crisis for now—but this is certainly a national issue.

Could the cities and states simply default on their obligations when the time comes? At a recent Federal Reserve conference, attorney James Spiotto of Chapman and Cutler in Chicago noted: “There are varying levels of protection, ranging from strict constitutional rights to general statutory provisions, that might allow for some renegotiation of benefit levels in light of adverse conditions.” In other words, if the cities and states try to cut back on promised benefits, they will face a huge court battle.

Spiotto notes that since 1937, more than 564 cities have filed for Chapter 9 bankruptcy reorganization, which allows a city to renegotiate its union contracts and potentially abrogate previous pension deals. And while the federal Pension Benefit Guarantee Corporation protects at least some amount of private pension (up to $51,750 in 2008), there is no similar agency to protect public pensions.

As pension-fund losses are disclosed and the extent of the underfunding is revealed, unrest will mount. Do you think those firemen, and policemen, and teachers are going to keep working—knowing that there is a question about their pension at the end of the line? And as a taxpayer, are you willing to make up the difference?

Unfortunately, these are the issues I have been writing about for months. We have reached a dangerous level of underfunding in pension plans across the world and politicians have not addressed this issue. In fact, the pension crisis was totally ignored at the G20 last week.

And let there be no doubt, the scale of this problem is global. In Japan, the $1.5 trillion state pension fund is likely to cut back its purchases of domestic stocks and foreign bonds this year, removing a key source of support for the Nikkei but providing some relief for the sliding yen:

With a major portfolio rebalancing out of the way, the Government Pension Investment Fund — the world’s largest pension fund—is expected to buy fewer assets within Japan and abroad, and may even need to sell assets as pension payments rise.

One of the biggest risks is for the Japanese government bond market, which is about to see a big increase in bond issues to pay for fiscal spending, just as the pension fund’s buying is expected to fade.

The pension fund was seen as one of the main drivers behind recent capital outflows from Japan that surprised the currency market with their size and persistence, analysts and traders said.

The rebalancing of the fund’s portfolio between October and March was cited as an important market factor, helping the Nikkei 225-share index hold above a 26-year low hit in October and playing a role in the yen’s broad slide to six-month lows against the dollar.

‘‘It was huge that there was buying by public funds,’’ said Toru Tanaka, senior manager for Mitsubishi’s treasury and foreign exchange office in Tokyo.

‘‘That did a lot to set the stage for the yen’s fall to 99 to the dollar,’’ he said. ‘‘If you can no longer hope for that to appear, it will be a positive factor for the yen.’’ Such buying was aimed at rebalancing the portfolio to keep the pension fund’s asset holdings in line with its preset target ranges, analysts said. After global stock markets slumped, it needed to buy domestic and overseas equities as its relative exposure to those asset classes shrank.

The pension fund may have to dish out more money than it receives this year as more of Japan’s baby boomers retire and begin receiving pensions, potentially leading the fund sell assets to raise cash.

The fund had earmarked ¥9.5 trillion, or about $95 billion, for financial market investment in the business year that ended in March. But starting this month, it will no longer have as much funding as loan payments from public entities dry up.

The fund ‘‘is not expected to sell or buy actively in stocks and foreign securities during the new business year,’’ said Takahiro Tsuchiya, a strategist at Daiwa Institute of Research.

The giant pension fund is estimated to have bought ¥2.2 trillion to ¥3.3 trillion in overseas equities between October and March.

In Switzerland, the global financial crisis has left almost six out of ten pension funds in Switzerland undercapitalised, the Federal Social Insurance Office said on Monday:

Close to 57 per cent of funds were unable to meet their obligations at the end of March, authorities said. Of those, two-thirds were capitalised between 90 and 100 per cent. The rest were capitalised below 90 per cent.

Some 43 per cent of a total of 1,900 funds nationwide were in sound financial shape. By the end of last year, the figure stood at 50 per cent.

Funds that are running a deficit have until the end of June to submit corrective action to the industry’s supervisory authority. Under Swiss law, any gap must be absorbed within a maximum of ten years.

Funds may pay out lower interest rates or could ask for contributions from policyholders and employers to rectify their shortfalls. Under federal regulations, they are not permitted to wait for the economy to stabilise to shore up their portfolios.

In the U.K., the aggregate deficit of the FTSE 100 pension schemes has almost doubled from 124 billion pounds ($185 billion) to 245 billion pounds in the year to the end of March on an “economic” basis, consultant Redington Partners said on Monday:

The economic basis calculates the deficit by measuring pension liabilities against the interest rate swaps curve as opposed to against AA-rated corporate bonds, the measure widely used by corporate sponsors to calculate pension deficits.

“Pension liabilities have risen very sharply, entire asset classes are in free fall and all at exactly the point of the most extreme weakening of the collective corporate covenant in history,” Dawid Konotey-Ahulu, partner at Redington, said.

“There have been many references in the past to a ‘perfect storm’ but this time it’s the real thing.”

On an IAS19 valuation basis whereby liabilities are calculated using yields on AA rated corporate bonds, FTSE 100 aggregated funds have dropped to a deficit of 51 billion pounds from a surplus of 21 billion pounds during the year to end of March.

Redington said the environment for pension funds is looking increasingly risky due to the onset of weakening corporate sponsor covenants.

The FTSE 100 market capitalisation has fallen to 989 billion pounds from 1.38 trillion in the past year meaning the aggregate deficit of the FTSE 100 pension schemes has increased to 25 percent of market capitalisation from 9 percent.

In response to the pension crisis, the FT reports that the Pension Protection Fund is seeking changes to pension payments:

Employers will have to pay more into the Pension Protection Fund during good economic times to offset lower payments in a recession, under changes to the scheme set to be looked at by the body that provides the official safety net for pension schemes.

Alan Rubenstein, new chief executive of the PPF, said “counter-cyclical” insurance premiums could provide a break for businesses, adding that the fund was sympathetic to complaints from employers about the rising costs of pensions.

“There is a thought that we should be much more countercyclical than we are now,” he said in his first interview since becoming chief executive last week. “If so, we would hold the levy – even in nominal terms – but raise it by more than the rate of inflation in future years.”

Mr Rubenstein said the subject was under discussion within the PPF and would have to be formally considered and approved by the full board.

If the board decided to adopt the proposal, he said, it would mean increasing premiums by more than inflation when times were flush but holding them in check when they were hard.

So far, the PPF has said it aims to hold the levy steady in real terms – rising only in line with wage inflation – until 2010-11. The fund raised £675m from employers last year and has said it would raise that to £700m this year, reflecting a 3.6 per cent rise in average wages. Holding that level into next year would mean a cut in employers’ costs in real terms.

The PPF was created to protect pension promises made by employers that later become insolvent, leaving behind an underfunded scheme. Currently, it has agreed to protect pension benefits for 31,191 people and is paying out benefits of about £4m a month.

However, the severe recession has raised concerns from some quarters that the PPF’s solvency itself is under threat. Last week, it assumed responsibility for its 100th scheme and there are another 290 schemes of insolvent employers being considered for admission.

Mr Rubenstein dismissed suggestions that the PPF was close to collapse as “nonsense”.

Because it is not a commercial insurer that can raise premiums when claims rise, the PPF is equally not bound by the requirement to have assets on hand at all times that are in excess of the sums it must pay out.

Although the PPF is carrying a deficit of about £500m, Mr -Rubenstein scoffs at the idea that the spate of companies failing could sink the fund, saying: “I don’t believe another big claim tips us from solvency to insolvency.”

Moreover, the PPF’s liquidity is bolstered every time it guarantees the benefits of a scheme because the investments of the entrant are immediately added to its own.

I am not going to debate the solvency of the Pension Protection Fund, but I believe when the full fury of the pension tsunami hits, its solvency will be severely tested. And as I have written in this blog, the solvency of the U.S. Pension Benefit Guarantee Corporation will also be severely tested as corporate insolvencies skyrocket.

The weakest pension funds are the smaller ones because they are heavily exposed to stocks and typically lack the resources to navigate through this financial crisis. But the larger pension funds are not faring that much better.

And are you ready for the kicker? Reuters reports that at least a dozen U.S. public pension funds, including the nation’s biggest, are mulling whether to put money behind the federal government’s plans to rid banks’ balance sheets of toxic assets:

The U.S. government hopes that if banks dispose of troubled assets, they will be better positioned to increase lending.

For their part, investors may scoop up the assets on the cheap with government-backed low-interest loans.

“People are exploring options which could potentially allow them to move forward,” the chairman of one public pension fund looking at investing in the assets said on Monday.

“There is enough interest in the concept that people are going to try to work on options on how to potentially pursue it,” said the fund official, who requested anonymity.

The official was one from a dozen public pension funds, including representatives of funds from California, New York and New Jersey, who with some state treasurers, including Bill Lockyer of California, discussed the U.S. government’s plans on Friday by telephone with Sheila Bair, chairman of the Federal Deposit Insurance Corp.

The FDIC, which insures bank deposits and manages banks in receivership, and the U.S. Treasury are launching the Public-Private Investment Program to help sell distressed bank assets and are urging investors to join in.

The program will use government funds and private capital to buy up to $1 trillion (683 billion pounds) in distressed loans and securities. Investors would receive low-cost financing from the U.S. government to buy the “legacy” assets at auctions.

The U.S. government also plans to match private investment with its funds and to share in expenses and gains of the pools of distressed assets.

The FDIC is handling auctions to sell banks’ whole loans and the Treasury and Federal Reserve will oversee programs to handle banks’ mortgage-related securities.

The Treasury on Monday eased terms for fund managers to apply to its toxic securities investment program and said it will consider widening the number of companies it allows to run public-private investment funds under the program.

FDIC spokesman David Barr said Friday’s conference call was one of Bair’s first steps to brief investors on the programs.

“The FDIC is seeking as much input as possible from various participants during our open comment period in order to fully inform our rulemaking process and ensure the greatest opportunity for success of the program,” Barr said.

“We expect to hold an open call with the investor community next week and will announce the timing and details shortly,” Barr added.

Among the pension funds’ with representatives on Friday’s call with Bair were the $174 billion California Public Employees’ Retirement System, known as Calpers and the nation’s biggest public pension fund, and its sister fund, the California State Teachers’ Retirement System, or Calstrs.

Calpers spokesman Clark McKinley declined to comment on the call.

Calstrs spokeswoman Sherry Reser said the $114 billion fund already has a program in place to invest in assets of distressed companies with the potential for returns that are better than fixed income. “We’re certainly assuming that there are going to be some diamonds amid the bits of coal,” she said.

Calstrs, however, is waiting to learn more about the U.S. government’s plan for distressed bank assets. “We’re seeing how this program is going to gel,” Reser said. “We’re not making any commitments. It’s just way too early in the discussions.”

Are you worried? You should be because the IMF warned today that toxic debt at global banks could spiral to $4 trillion:

Toxic debts racked up by banks and insurers could spiral to $4 trillion, new forecasts from the International Monetary Fund are set to suggest, British daily The Times reported on its website without citing sources.

The IMF said in January that it expected the deterioration in U.S.-originated assets to reach $2.2 trillion by the end of next year.

But it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21, the newspaper reported.

In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia, the Times said.

That should give these giant pension funds some pause for concern. Once they start opening up this can of worms, they are going to be on the hook for a lot more than they bargained for.

Finally, please take the time to read Dean Baker’s excellent comment, A Trillion Dollars for Banks: How About a Second Opinion?:

Treasury Secretary Timothy Geithner wants to have the government lend up to a trillion dollars to hedge funds, private equity, funds and the banks themselves to clear their books of toxic assets. The plan implies a substantial subsidy to the banks. It is likely to result in the disposal of these assets at far above market value, with the government picking up the losses.

As much as we all want to help out the Wall Street bankers in their hour of need, taxpayers may reasonably ask whether this is the best use of our money. After all, the $1 trillion that is being set aside for this latest TARP variation is equal to 300 million SCHIP kid years. Congress has had heated debates over sums that were a small fraction of this size. To give another useful measuring stick, the Geithner plan could fund 1 million of the Woodstock museums that were the main prop of Senator McCain’s presidential campaign.

The core problem is that many of our big banks are bankrupt. If they had to acknowledge the losses that they have incurred on their housing related loans (and increasing their loans in commercial real estate) Citigroup, Bank of America, and many other large banks would be insolvent. Thus far, they have avoided reality by keeping these loans on their books at inflated prices.

The Geithner plan is an effort to rescue the banks by using government funding to prop up the price of these bad loans to levels that will allow the banks to stay solvent. It is not clear that the plan is big enough to accomplish this goal, but that is the basic intention. If it doesn’t work, then presumably Geithner will come out with another TARP permutation that involves giving the banks even more money.

There is an alternative. Rather than using government money to keep them alive, we could force the banks to go through a type of managed bankruptcy process like the one that is currently being proposed for General Motors and Chrysler.

Geithner has supposedly ruled out the bankruptcy option because when he, along with Henry Paulson and Ben Bernanke, tried letting Lehman Brothers go under last fall, it didn’t turn out very well. Of course, it is not necessary to go the route of an uncontrolled bankruptcy that Geithner and Co. pursued with Lehman.

The government could set up an arranged bankruptcy under which creditors have accepted conditions in advance. While this may not be easy to negotiate, the government does have enormous bargaining power in pursuing such a deal. The creditors (other than insured deposits, which will be paid in full) of these banks may end up with nothing if the government just let the banks sink.

The prospect of even an arranged bankruptcy of a major bank will undoubtedly shake up markets, but many safeguards have been put in place since the Lehman collapse. If the stock market goes down for a few weeks or months, who cares? Running the economy to serve the stock market is a sure recipe for disaster; if President Obama fixes the economy, the stock market will do just fine in the long run.

Anyhow, the Geithner crew insists that there are no alternatives to his plan; we have to just keep giving hundreds of billions of dollars to the banks. Perhaps Geithner is right. But before we throw such huge sums away, further enriching the bankers who wrecked the economy, maybe we should get a second opinion.

Suppose that Congress appropriated a modest chunk of money to have independent economists put together teams to construct alternative plans. Why not give M.I.T. professor Simon Johnson, a former chief economist of the IMF, $5 million to hire a crew to outline his preferred path? Congress could give Joe Stiglitz, a Nobel Prize winner and one-time chief economist to President Clinton, who is also a harsh critic of the Geithner plan, a similar sum to put together his own team.

These economists could develop their best plans and put them out for public consumption. Geithner’s crew can then tell us why their plans are unworkable and we must instead hand over the money to banks.

Given how much money Geithner wants to spend – putting it in the hands of the folks that brought on this economic crisis – it would seem appropriate to first examine all the alternatives. After all, we could find out what our options are in this case for the price of just a few A.I.G. executive bonuses. That has to be a good deal in anyone’s book.

Before pension funds throw billions of dollars behind the Geithner plan, we need a second opinion.

The pension tsunami has arrived and these dangerous policies will only exacerbate the pension crisis, enriching the financial oligarchs while the masses watch their retirement dreams turn into retirement nightmares.

If you ask me, it’s checkmate for pensions.

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22 comments

  1. Lucifer

    So tell me..

    Aren’t the people who will lose their pensions the same groups that were busy screwing up and controlling other people’s lives.

  2. Anonymous

    Leo, another great post!

    From Baker …

    “The core problem is that many of our big banks are bankrupt. If they had to acknowledge the losses that they have incurred on their housing related loans (and increasing their loans in commercial real estate) Citigroup, Bank of America, and many other large banks would be insolvent. Thus far, they have avoided reality by keeping these loans on their books at inflated prices.”

    The core problem is that we have a scam, non responsive to the people, government. This is an intentional global financial coup perpetrated by the wealthy ruling elite. The great ship Scamerica is listing and sinking fast and the gullible are still on the decks in ‘want to believe’ denial.

    Deception is the strongest political force on the planet.

    i on the ball patriot

  3. Michael Fiorillo

    Lucifer,

    No, the people who will lose their pensions are the one’s who respond to your 9/11 emergency calls and teach the children of the town or city where you live.

  4. Hayduke

    So let’s all pile on the local, state and federal workers. Employees at corporations know that the government jobs pay less, have no profit sharing, no stock options, no bonuses and generally a 3% or less cost of living adjustment. Gov’t employees understand they will get paid less than the private sector and may get furloughed or lose their jobs in hard times, in exchage for good, not great, benefits.

    Yes, let’s keep attacking the autoworkers and other middle class folks. That is exactly what Wall Street wants – for us to attack our own and distract us from the real culprits. So far it’s working.

  5. K Ackermann

    You could take the “free market” approach and look at this as not a problem of undefunding, but a problem of over-liable.

    By not disbursing money to these old, unproductive people, the problem will take care of itself.

    Yes, it may lower consumption, but the free market has a solution for that too; instruct the government to begin mandatory purchases of goods to buy for people who might not otherwise be able or willing to purchase themselves.

    Once you stop becoming a profit center and become a liability instead, then you do not belong in a free market society. We wouldn’t want to become wealth-redistributing dirty socialists, would we?

    Maybe someone will start selling swaps against this event, kind of like health coverage. You might suffer from incompetence and incontinence when you get old.

  6. dh

    Another reason why Statement 157’s disclosure requirements are not
    appropriate for defined benefit pension and other postretirement plans, that is
    not articulated in the FSP, is because pension plan assets correspond to cash
    flows for plan obligations that may occur years, or even decades, into the
    New Developments Summary 3
    future. Therefore, when evaluating the impact of changes in the fair value of
    plan assets on future cash flows, those changes may not be strictly comparable
    with changes in the fair values of derivatives, for example, which have short
    terms, and corresponding effects on cash flows and earnings.

    This is from a link I just posted on Yves story and I’m too tired to go get it…

  7. Anonymous

    I work at a public university. The community college down the road pays better. But people have hung in there for 20, 30 and more years to get that pension.

    If the uni paid what private industry does, you couldn’t afford to send your kiddies there. For the value of “you” that doesn’t have the money to send your spawn to a private college.

    But I’m all in favor of low wages and no pension fund. If the fed pick up the mandate to guarantee a secure retirement for all Americans, _not_ based on how much money they made while working, or where they worked.

    You pay the piper one way, or you pay him another. But you never don’t pay him — that was an infantile fantasy of the last 20 years.

  8. Anonymous

    “No, the people who will lose their pensions are the one’s who respond to your 9/11 emergency calls and teach the children of the town or city where you live.”

    We’ll they can work like everyone else — without a pension.

  9. Yves Smith

    Anon of 1:49 AM,

    You are really choosing to miss the point. The pension was one of the factors that people weighed in taking these jobs.

    If you took a job to get health insurance, went to the hospital, and then were told your employer lied, you didn’t have health insurance, how would you react?

    I love the way the sort of people who invoke sanctity of contracts are perfectly happy to see them broken if it is the other guy that suffers.

  10. spare some change?

    Yves @ 1:54 AM:

    The problem is, the governments have contractually agreed to deliver the impossible. Contracts which can’t be fufilled will be defaulted on, through bankruptcy or insolvency.

    Michael @ 10:54 PM:

    The people getting screwed will also include the cop who perjured himself to save his own ass (and screwed me over), not to mention thousands of others who underperform and over-require compensation for their lack of effort. Isn’t that always the way? The innocent suffer alongside the guilty. Collective consequences are meted out unfairly, no question about it.

  11. mrmetrowest

    Ax to grind maybe?

    I’ve worked in the private sector and in the public sector. If you’re just a working stiff, as opposed to a connected fat cat, compensation is less in the public sector, even after the public sector perks are calculated. Not paying agreed upon bennies is no different from non-payment of wages.

    As to defaulting on contracts – sure, if local, state and the feds go bankrupt, those contracts will be void. So will life as we have known it, and I doubt the new order will be pleasant. Plenty of stuff to blog about, though.

  12. TruthToPensionAbusers

    “…No, the people who will lose their pensions are the one’s who respond to your 9/11 emergency calls and teach the children of the town or city where you live.”

    This is called waving the bloody shirt. This is the favorite device of state and federal workers who try to claim collective credit for the hard work of a tiny minority within that group. Thus, if you’re a firefighter and somebody attacks your job performance in any way, you claim that the attack is really aimed at all firefighters, including your poor buddy Bob who just rescued thirty people from a fire. And what kind of person would attack Bob?

    The overwhelming majority of govt’l workers getting pensions are not first responders, or heroic firefighters, but paper pushers, no-show-jobbers, etc. Example: My secretary’s husband. He is retired now on a govt’l “old age” pension. He is 47 years old, and in excellent health. He works part-time for a tree cutting service for pocket money and spends the rest of his days golfing, boating and sitting at coffee shops with his fellow 40-50 year old govt’l retirees bitching about the lack of work ethic nowadays. By the way, he retired after 20 years as a deputy administrator (desk job) working 37.5 hours per week, with an average of six weeks vacation every year. But of course, I shouldn’t criticize him, because if I do I’m also impliedly criticizing firefighetrs who retired after saving a zillion people from a zillion fires, yadda-yadda-yadda…

    And I think the word “teach” as you used in your statement was incorrectly used. I think you meant to say “Misteach” or “fail to teach”

  13. Anonymous

    Leo,

    You’re really good with your first trick when you stick to it and don’t stray into tedious partisanship.

    However, the post was 3x longer than it should have been for the Blogosphere Commentariat. Extreme selectivity is needed.

    You can improve in the future by cutting ‘n pasting less source text. A few sentences and a link to the source is sufficient. Entire paragraphs are both too long for the blog format while not being long enough to reproduce the entire article.

    :-)

  14. Dan Duncan

    To Lucifer:

    Your failed attempt at irreverence reveals nothing but your ignorance of your irrelevance.

    But the Lucifer moniker…oohhh so edgy. Satanic commentary…ooohh scary. Now all you need is a little devil emoticon to insert inside your posts and you’ll really be pushing those buttons!

    And TruthtoPensionAbusers responds:

    “This is called waving the bloody shirt. This is the favorite device of state and federal workers who try to claim collective credit for the hard work of a tiny minority within that group.”

    And that response is called “hopelessly missing the point”. It’s not about whether you like policemen and firemen. It’s about pension administration.

    [Although, after reading about the issues you clearly have with your secretary's husband...an inane anecdote that has absolutely nothing to do with the matter at hand...I can't say I blame you for being angry with your teachers.]

    Yeah…my post was “snarky” as many like to say.

    Sometimes, though, snark is deserved.

  15. Anonymous

    I work at a public university.

    I believe it too. Rather, I believe you are paid by a public university. The American university is the last bastion on Earth of utterly discredited and failed Marxism, as shown by this statement of yours:

    I’m all in favor of low wages and no pension fund. If the fed pick up the mandate to guarantee a secure retirement for all Americans, _not_ based on how much money they made while working, or where they worked.

    Ruthless, merciless downsizing of the corrupt educational con game is called for. Charles Murray is right.

  16. TruthToPensionAbusers

    “…And that response is called “hopelessly missing the point”. It’s not about whether you like policemen and firemen. It’s about pension administration.”

    No, you are missing the point. My point is that pension reform is not likely to the extent that any attempt at pension reform is considered an unregretful attack on heroic firefighters, selfless first responders, etc. This political ruse has worked well to deter reform. My further point was that pensions are being given to those who have failed to labor in any meaningful way for these pensions. As for my story, its a typical example of pension abuse. It is but one of many examples.

  17. DownSouth

    Superb post, Leo.

    Maybe another Bonus Army confrontation is in our near future:

    On 28 July, 1932, Attorney General Mitchell ordered the police evacuation of the Bonus Army veterans, who resisted; the police shot at them, and killed two. When told of the killings, President Hoover ordered the U.S. Army to effect the evacuation of the Bonus Army from Washington, D.C.

    At 4:45 p.m., commanded by Gen. Douglas MacArthur, the 12th Infantry Regiment, Fort Howard, Maryland, and the 3rd Cavalry Regiment, supported by six battle tanks commanded by Maj. George S. Patton, Fort Myer, Virginia, formed in Pennsylvania Avenue while thousands of Civil Service employees left work to line the street and watch the U.S. Army attack its own veterans. The Bonus Marchers, believing the display was in their honour, cheered the troops until Maj. Patton charged the cavalry against them — an action which prompted the Civil Service employee spectators to yell, “Shame! Shame!”

    After the cavalry charge, infantry, with fixed bayonets and adamsite gas, entered the Bonus Army camps, evicting veterans, families, and camp followers. The veterans fled across the Anacostia River, to their largest camp; President Hoover ordered the Army assault stopped, however, Gen. MacArthur—feeling this free-speech exercise was a Communist attempt at overthrowing the U.S. Government—ignored the President and ordered a new attack. Hundreds of veterans were injured, several were killed — including William Hushka and Eric Carlson; a veteran’s wife miscarried; and many other veterans were hurt.

    http://en.wikipedia.org/wiki/Bonus_Army

    Oh well, the Ayn Rand types would love it.

  18. Anonymous

    Wow. Sometimes the comments threads are excellent, and then sometimes…this dreck. Bloody shirt? Last bastion on Earth of … Marxism?

    Sad and dispiriting. As always, to all those who comment, before posting something that implies you know everything there is to know about a subject, it might be useful to step back and question whether or not you do in fact know everything there is to know about that subject. Anecdotes and vast overgeneralizations are sometimes useful, yes, but it is rare and it is only in context and with proper acknowledgment of their limited value.

  19. sanjay

    Unlike an automobile company a new bank is easy to set up if it has a line of credit at the Federal Reserve. Rather than trying to rescue the existing banks the Government should have set up an alternative banking system. The Government could have underwritten the capital of the new banks (offered the shares in the new bank to all citizens/residents of the US and taken up any that were not subscribed to). If the problem was that banks were not lending because of toxic assets – voila a bank with no toxic assets.

  20. Anonymous

    Are we heading towards Hungary?

    http://online.wsj.com/article/SB123793340762430957.html

    We’re in a balance sheet recession. The individual is repairing their balance sheet with increased savings. The government is destroying their balance sheet with increased debt.

    It seems that this a political crisis more than a financial crisis. The political will does not exist to restructure the debt be it corporate bondholders, mortgage holders or pensioners and/or enact the reforms necessary to put debt junkies (on all scales) into rehab.

    Is the trajectory default, currency collapse, French Revolution and/or something else?

  21. Leo Kolivakis

    Anon said:

    “You’re really good with your first trick when you stick to it and don’t stray into tedious partisanship.

    However, the post was 3x longer than it should have been for the Blogosphere Commentariat. Extreme selectivity is needed.”

    I realize that blog entries are longer than almost everyone out there, but articles tend to get lost after a while, so I like to paste them for future reference. But I will try to be more selective.

    As far as pensions are concerned, we need another G20 focusing solely on the global pension crisis.

    My thoughts are that we need to secure retirement income for all, not just public servants. This is not going to be easy, but the current system isn’t working, leaving far too many people to fend for themselves.

    cheers,

    Leo

  22. Anonymous

    My thoughts are that we need to secure retirement income for all, not just public servants. This is not going to be easy, but the current system isn’t working, leaving far too many people to fend for themselves

    I won’t argue with you in principle. The devil’s in the details.

    We “secured” people’s old age retirements previously. It’s called “Social Security”. When ivory tower economists accuse Americans of not saving they very conveniently overlook social security withholding taxes.

    And the academic/legal/political/bureaucratic class proved to be the most dishonest fiduciaries possible. They possess “sovereign immunity” that shields them from being jailed like Madoff for running a vast Ponzi scheme with the People’s retirement savings.

    I am therefore close-minded to any solutions that would provide further funds to the same failed fiduciaries. There is no reason to think that giving them a further increment would cause them to change. It’s more likely to subsidize and reinforce their existing behavior. Just as we’ve seen with all other forms of easy credit and “bailout” lately.

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