Mismanaged public pension funds demand taxpayer bailout

Let's touch base with reality for a moment: There is not enough money in the world to pay off on these politicians' promises of public employee post-retirement pension and health coverage benefits.

Not enough real money, that is. If the feds bailout every loser in sight, pour zillions into keynesian pump priming and in other ways destroy the currency, these can always be paid in fake money - wheelbarrows full of Zimbabwe or Weimar-type money.

Let's set aside that dead-end thought for the moment and imagine we're talking real money.

What that means is that these public employees will take "haircuts" on the promised benefits. Not "are going to have to take," but will take. Refer to paragraph one - not enough money in the world.

How do we get there from here politically? Not my problem. I could suggest state constitutional amendments on the pensions. Give voters a choice - say, accept a 40 percent state income tax, or give these government retirees haircuts. That will be fun.

The health care is a bit easier - in most cases they can just be trimmed in statute (that's the case in my state anyway).

Will this cause the political smack-down of the century when the privilgeged class of government workers are introduced to reality? No doubt, but too bad. Refer again to paragraph one - not enough money in the world.

When these realities start becoming apparent to voters, then the political class vs the people will become the most powerful dimension of American politics - it's already the most important. Candidates who get on the right side of it will both be demonized like you won't believe (imagine the Palin treatment tenfold) and will be immensely popular with the people. The parties may or may not be relevant to that divide.

Back in the 70s and 80s CALPERS was a leader in the shareholder activist movement that shook up the "tired old corporations" that were content with making a safe return on investment and paying regular dividends.  They used their considerable muscle to insist corporate leadership do something about share price as well.  For awhile CALPERS even published a list of worst performing companies as measured by share price appreciation and voted their shares to replace corporate boards and CEOs that could not generate consistent double didgit growth.  They were among the first to insist on linking CEO pay to changes in stock valuations. Their brand of growth at any price thinking helped fuel much of the leveraged buyouts of the 80s, the venture capital bubble of the 90s and the financial services fiascos of the 2000s.

Essentially, they knew it was next to impossible to deliver on the pension promises that were being made unless their investments appreciated at a much faster pace. So they used their proxy votes to shift corporate leadership from focusing on the long term health of their companies to the short term stock appreciation.  They inflated the bubbles, now they are bursting in their face. 

a large town in CT got crushed by the Madoff scam

http://blogs.courant.com/capitol_watch/2008/12/fairfield-ensnared-in-bernie-m.html

Officials in the town of Fairfield are scrambling to recover losses in their pension fund related to investments with Bernard Madoff, the once-high-flying Wall Street kingpin who served as the former chairman of the Nasdaq Stock Market.

Nearly 15 percent of the town's pension fund - or $42 million - had been entrusted to Madoff, who has been arrested and charged with securities fraud in what authorities believe is a $50 billion Ponzi scheme.

Everything was going well for years in Fairfield as the pension fund kept expanding. As a result of the good times, the town was able to avoid putting any money into the fund for about a decade.

Now, the town might have to put money into the fund - which could translate into a tax increase.

Since the political party that runs Fairfield is not mentioned in this story, use your imagination...

*crickets*

oh, that's right! NeverMIND that five to one leverage is CONSERVATIVE compared to most hedge funds. Compared to most investments, including OWNING A HOUSE. Twenty Percent down payment? That IS 80% leveraged!

Now here we have it folks, the man doesn't want us to own houses anymore!

The man is a nutcase blowing smoke out of his rear end at a small problem, rather than looking at the SOURCE of the problems.

In other news, the Federal Reserve is panicking. Short now or forever hold your peace.

The agency holding our saved money should really be noted as credible. Wasted money is hard to retrieve because it requires another amount or even greater to do so.Bernie Madoff ripped off a lot of people.  It comes as small consolation that Madoff is going to jail for the rest of his life, because he ruined the lives of so many.  An entire Connecticut town has filed suit against him, his family, his estate and all of his holdings, and also Fairfield Greenwich Group. The allegations is that after people in the town invested money from their pensions into the fund, and therefore to Madoff, he stole the money.   To retirees, pension is their lifeline – they cannot rely on payday loans alone.  If things go well and fortune smiles on them, they may be able to recover half their funds.  Let us hope they can get enough to not have to rely on payday loans instead of their pensions.