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Thursday, November 09, 2017

It Begins: Pension Bailout Bill To Be Introduced This Week

Over the past year we have provided extensive coverage of what will likely be the biggest, most politically charged, and most significant financial crisis facing the aging U.S. population: a multi-trillion pension storm, which was recently dubbed "one of the most heated battles of a lifetime" by John Mauldin. The reason, in a nutshell, why the US public pension problem has stumped so many professionals is simple: for lack of a better word, it is an unsustainable Ponzi scheme, in which satisfying accrued pension and retirement obligations requires not only a constant inflow of new money, but also fixed income returns, typically in the 6%+ range, which are virtually unfeasible in a world where global debt/GDP is in the 300%+ range. Which is why we, and many others, have long speculated that it is only a matter of time before the matter receives political attention, and ultimately, a taxpayer bailout.

That moment may be imminent. According to Pensions and Investments magazine, Democratic Senator Sherrod Brown from Ohio plans to introduce legislation that would allow struggling multiemployer pension funds to borrow from the U.S. Treasury to remain solvent.

The bill, which is co-sponsored by another Democrat, Rep. Tim Ryan, also of Ohio, could be introduced as soon as this week or shortly after. It would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates. The one, and painfully amusing, restriction for borrowers is "they could not make risky investments", which of course will be promptly circumvented in hopes of generating outsized returns and repaying the Treasury's "bailout" loan, ultimately leading to massive losses on what is effectively a taxpayer-funded pension bailout.



Anonymous said...

Borrow is OK - no resolution through bankruptcy - they have made an agreement with the pensioners for work received.....

Meanwhile, change the rules for new participants to prevent this from recurring in the future!

Anonymous said...

Keep kicking the can down the road....there won't be a future for anyone!

Anonymous said...

To all of you city of Salisbury employees your time is coming with Jake day as mayor!! He will take funds from any avenue available to pursue his fantasy agenda

Anonymous said...

43 years ago, I did not join the Union because I did the math on its retirement promises. The math simply did not work out to reality, and that's back when savings actually paid real interest! I predicted this at age 20.

Here we are!

Anonymous said...

Totally ridiculous my pension is shrinking SSI checks.

Anonymous said...

To borrow from the Treasury is a joke. Remember it's the Treasury's policy of buying up all the bonds, bad debt, print and distribute more cash, and low interest rates that has put us in this mess in first place. These were the policies of the Obama Administration under what they call "quantitative easing". Unfortunately the real solution is to allow some of these funds to go bankrupt. The US Supreme Court ruled on this a couple of years ago. If pensions force an entity to declare bankruptcy then the contract with that pension fund can be voided. That way people who invest wisely won't have to bail out government pension that have been mishandled.

Steve said...

And now, at 63, I wind up paying for other people who didn't do the math and signed up for their mistake. Why? I made an intelligent decision at age 20 that guided my life, and now you are asking me to pay for the ones who made bad decisions back then 43 years ago?

No! Absolutely NOT! We all KNEW we were Baby Boomers, and there would be more of us than contributing workers when we turned 65. It has always been a no brainer! Now, all of a sudden, there's a CRISIS? Really?

We all paid our money back then, and it was supposed to earn interest and be available in keeping with inflation now. But no. It was not saved with interest at all. It was squandered piteously without our permission on personal political agendas that were NEVER in our interests.

Why should I pay now for that?