Pension Insurer Switched To Stocks Right Before Crash
I've been thinking lately that it makes a lot more sense to have national health care and a national pension plan. This only confirms it:
WASHINGTON - Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.
Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.
The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent - and all of its stock-related investments were down 23 percent - as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.
No statistics on the fund's subsequent performance were released.
Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.
"The truth is, this could be huge," said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. "This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities" in pension plans that would be passed on to the agency.
[...] Analysts also believe the strategy would not have been approved if the government had foreseen the precipitous decline in the stock market.
Now, they warn about a "perfect storm" scenario in which the agency's fund plummets in value just as more companies go into bankruptcy and pass their pension responsibilities onto the insurance fund. Many analysts say it is inevitable that the agency will face significantly increased liabilities in coming months.
"The worst case scenario is coming to pass," said Mark Ruloff, a fellow at the Pension Finance Institute, an independent group that monitors pensions. He said the agency leaders "fail to realize that they are an insurer of pension plans and therefore should be investing differently than the risk their participants are taking."
In vain.
Americans trust their government. Still do.
What PBGC did was criminal. The managers got paid off.
Intent.
The wheels were already coming off by mid 2008, the writing was on the wall. This was done KNOWING that there would be a major financial catastrophe and subsequent stock market collapse.
GWB's administration did this knowing the consequences.
BushCo just raped this country of 100's of billions on their way out the door.
What we need is a list of the Bush people involved.
That sounds like what we should be doing with these selfish CEO's.
Put them in stocks.
Diabolus est Deus Inversus
WHY?
why did "the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks."
probably for selfish and/or nefarious reasons, but then why?
shrink the american government until it's small enough to take into the bathroom and drown it in the bathtub.
Some stuff you can't make up!
The answer is to borrow from the Chinese to cover the losses. Isn't that the answer to every problem our corporate oligarchy has created?
why go for losses?
Its all for sale to the lowest bidder, just so they can take their bonuses and prolong/delay the crisis until somebody else takes over next term, rinse repeat.
“I've been thinking lately that it makes a lot more sense to have national health care and a national pension plan.”
But, isn't the Pension Benefit Guaranty Corporation run by the government. Wouldn't the government also run any National pension plan? I don't know where that would make a difference.
It does occur to me if we stop spending 50¢ for every dollar spend in the world on defense, we would have money for some of our other priorities.
NOBODY anywhere ever publicly asks the government and demands a response to that issue. Why does the US gov't feel a need to waste so much money on the military when it isn't necessary?
I was watching the GM/Obama matter tonight on several news programs. There was 0% coverage relating to the role health costs were playing in GM's insolvency.
As far as national pensions are concerned, we have one, Social Security. Bush at one time said it would cost about $500B to fix it. Now, they don't want to spend the $500B, and in addition, don't want to pay back the money they "borrowed" from Social Security.
We have an out-of-control corporate oligarchy for our government. I hope the G20 wakes up and recognizes that.
Does anyone have any idea how many more of these parting gifts GWB & GOP have left the American people? I'm getting just a little tired of finding 'just one more' mess for us to clean up.
just patched up and sold as new.
any department or agency responsible for handling money.
Some stuff you can't make up!
They needed money pumped into the stock market so that we would since the market is up they could ride this out for the next President that was to be John McCain...Remember the saving and loan the shit hit the fan after Bush 1 was president even though most of American didn't know much of what was happening under Reagan/Bush.
Oh nobody could have foreseen this coming...
unfunded pension liabilities have been on the RISE that means TAXpayer contributions will rise as well. this will supply plenty of of older low wage workers in the consumerism system. i'm somewhat suspicious
of the timing of this. this seems to be more socializing the losses and further reducing the middleclass. maybe now corporations can compete with the likes of china by increasing the "cheap labor" here in the united states.
It seemed intuitively clear to me that if the U.S. was to compete with the 3rd world labor pools, we would have to give up our health care and start living in tents.
Now that these tent cities are springing up, Wall Street must be heartened that Main Street is getting the message.
this is the hell reagan brought upon us when he said companies could withdraw pension benefits
The wheels were coming off a year before they announced it but if they could hold off the bad news in the MSM until at least after Nov and preferably after Jan then they would blame everything on Obama. As I recall the Florida's Teacher's pension went that way in the Enron mess.
And BTW We Have a national pension system! It is called Social Security. Also much looted, they simply need to bring up the returns to a living wage and pay for it with a tax on the looters.
The Gang Of Pirates need to be kept away from any pools of money. They will loot a private pension as fast as a public one. Until they fear the result they will continue to do so. It is the GOP that makes stuff go wrong, not anything to do with a Corporate/Government divide that grows increasingly imaginary.
Things seem to be snowballing. I too believe that the funds were used to bolster the stock market prior to the election, much like the market lobbied to eliminate company pension plans in favor of 401's, pumping (and artificially inflating) the market. In my neck of the woods thay have a saying "The arse is out of 'er boys"
Just another Ponzi Scheme that's your pension.
One is some income related pay in scheme, the other is a standard $200 pw everyman type.
The first one is identical to private pensions, but the gov plays with the invested funds, up or down depending on whatever they invest it in.
With the flat rate pension, it is like a ponzi but it doesn't matter, taxpayers fund it, anybody who needs it gets it. Thats the social way.
This is the way Britain handles its state pensions, the top up version is called SERPS, 'state earnings related pension scheme'
they decreased the premiums the PBGC had to PAY. that was a loss of about 80 billion dollars. during 2002 PBGC's balance sheet went from 7.7 billion surplus to a 3.6 billion deficit. that's a 11.3 billion dollar loss. sometimes i wonder if the conspiracy people are on to something. i understand interconnectedness
and greed but this seems very much like the "perfect storm".
it's reality.
and so bristling with facts - NOT!!!!
Some stuff you can't make up!
it does make me wonder if perhaps a Republican administration which fought to keep what was going on in the markets secret and unregulated might perhaps have had some ulterior motive for pouring huge amounts of money into the market with a pivotal election coming up. I mean, if you didn't assume good faith, you might almost think they were hoping to prop up the markets for long enough to avoid the consequences of their fraud and mismanagement at the voting booth.
After all, it's not as if it was their money.
President Obama is leaning right more and more these days. I am starting to regret the time I put in to have him elected. He is gonna fuck the UAW and support wall street. Guess as liberal as I am I can see that he may have put a big con job on America. One and done unless he starts a swift turn around.
If you were the Prez, what would you do in his situation.
Bankruptcy?
What is your conceptual, continuity?
....and let god sort it out. The too big to fail banks, the Fed,AIG. Fire the financial captains of industry before you start firing Auto company CEOs. They are as much a victim of the huge Ponzi scheme as the rest of us. Bernie Madoff was a dilettante. Class warfare started 30 years ago and most of the middle and lower classes are just beginning to notice.
http://www.theatlantic.com/doc/200905/imf-advice
http://www.rollingstone.com/politics/story/26...
what's the name for people who infiltrate and stir up trouble among friends?
they were quite prevalent during the election process...
instigators.
Some stuff you can't make up!
I assume it was being run by a Bush loyalist that believes only the rich should retire, for everyone else, the golden years means working at McDonalds in your 70's? This needs to be investigated, obviously.
These are the games the players play with other peoples money in Wall Street, pity the states like Florida that have tax revenues tied up in failing SIVs.
and I bet it was done to ensure the destruction of the pension system. when you want slaves, you need to make sure they have nothing to fall back on. not a damn thing.
Some stuff you can't make up!
that this happens just as millions of baby boomers are nearing retirement. Elderly slaves aren't going to be much use...
"In the early years of the George W. Bush presidency, the agency took a conservative investment approach under director Bradley N. Belt, who favored putting only between 15 and 25 percent of the fund into stocks.
Belt said in an interview that he operated under "a more prudent risk management" style and said he "would have maintained the investment strategy we had in place." Belt left in 2006 and Millard arrived in 2007."
"Under Millard's strategy, the pension agency was directed to invest 55 percent of its funds in stocks and real estate. That included 20 percent in US stocks, 19 percent in foreign stocks, 6 percent in what the agency's records term "emerging market" stocks, 5 percent in private real estate and 5 percent in private equity firms."
Even if that were a more prudent long term strategy, why would you make such a shift at a time when real estate was already crashing and stocks were poised to crash? The story noted that Millard previously worked as a managing director for Lehman Brothers. Were there any conflicts of interest in his actions? Who benefited from this shift in investment strategy? Did anything criminal occur? Will there be an investigation by the Justice Department? Eric Holder, where are you?
"Millard said he thought he had little choice but to seek a higher investment return in part because Congress had limited the agency's ability to charge higher premiums based on each plan's likelihood of drawing on the agency's funds."
Shouldn't such a shift have involved more discussion instead of unilateral action?
was made over trying to privatize Social Security, while this later flew straight under the radar of everyone in Congress in both parties? Bullshit. Yet another reason to jail Bush, but you can't tell me that many in the democratic party weren't aware of this happening as well-and for some reason they kept their mouths shut.
It's hard to say whether this is incompetence (What sort of a moron invests pension insurance largely in the highly volitile stock market? and then says ask me in 20 years if it's a good idea) or if it's criminal conspiracy (to prop up the markets to try to influence the elections). Based on the Bush record, I'd say incompetence is most likely.
At the very least, Millard should be raked over the fucking coals and be sued for criminal negligence. His personal fortune wouldn't make a dent in the taxpayer money he's lost, but it might encourage a higher level of attention to the PBGC's finances from future directors.
there is no doubt in my mind that this is criminal conspiracy, right along with the even more massive criminal conspiracy that has and is taking place in the private financial sector.
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