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Illinois Teachers' Retirement System Enters The Death Spiral: AIG Wannabe's Go-For-Broke Strategy Fails As Pension Fund Begins Liquidations
Two few months ago we disclosed how the Illinois Teachers' Retirement System (TRS) was doing all it can to become the next AIG. In addition to, or maybe precisely due to, its deplorable fundamental condition, which can be summarized as being 61% underfunded on its $33.7 billion in assets, with a performance record of down $4.4 billion in 2009 and 5% in 2008, the fund, courtesy of a detailed analysis by Alexandra Harris of the Medill Journalism school at Northwestern, was found to be on its way to trying to become a veritable self-made TBTF: as was described then, "TRS is largely on the risky side of the contracts, selling and writing OTC derivatives, including credit default swaps, insurance-like contracts that guarantee payment in the event of a default." In other words, TRS was selling substantial amounts of derivatives, which held the fund's other assets as hostage in case the collateral calls started coming in, as should the market broadly decline, the value of the downside derivatives would "increase" and the seller (in this case TRS) would need to pledge ever more collateral against these wrong way bets. Not only that, but the Fund is currently getting annihilated on its curve exposure: "TRS appears to be betting that long-term Treasury yields will greatly increase" we wrote back then. So as a result of i) its massive underfunded fundamentals and ii) a bet that the market would turn bullish, i.e., spreads would drop (they are rising), and treasuries would plunge (we all know where they are today), which was supposed to happen by now but isn't as the economy is now officially double dipping, the fund has basically thrown in the towel and is proceeding with liquidations. The problem there is that due to its derivative exposure, liquidations now become self-reinforcing, as more cash needs to be pledged as collateral in a declining market, and the AIG death spiral we all know and love, follows. The only thing missing is for Goldman to raise its overnight variation margin requirements and it's game over, as we get a brand new AIG on our hands. And since Goldman is among the 60 or so asset managers that actually decide how the fund invests its meager assets, it is fully aware of its precarious position, and it is a sure bet that Goldman is currently deciding when to pull the plug on the TRS life support.
All this is direct consequence of the disclosure in Crain's Chicago earlier that "Illinois Teachers' Retirement System, Springfield, plans to sell $3
billion in investments, or about 10% of its $33.1 billion in assets, in
the current fiscal year to pay pension benefits, according to Dave
Urbanek, public information officer."
More on the start of the TRS (not to be confused with Total Return Swap, an instrument, ironically, which we are sure the TRS is actively (ab)using to lever up its UST exposure by up to 50:1) toxic spiral:
Illinois State Universities Retirement System, Champaign, expects to sell $1.2 billion in investments from its $12.2 billion defined benefit fund this fiscal year to raise liquidity to pay benefits to participants.
The Illinois State Board of Investment, Chicago, could sell $840 million investments from its $9.9 billion fund to pay benefits of the Illinois State Employees' Retirement System, Illinois Judges' Retirement System and Illinois General Assembly Retirement System. ISBI oversees the investments of the three systems.
The liquidity stress from the investment sales at the five plans could force each of them to restructure their strategic asset allocations, terminate investment managers and search for new managers.
Illinois Teachers sold $290 million in investments so far this month and $200 million last month because of a lack of state contributions.
“Without the monthly state contribution, TRS estimates sales of roughly $3 billion for the entire fiscal year, or approximately $250 million every month,” Mr. Urbanek said in a statement in response to an inquiry.
There is, of course, the obligatory spin:
So far, TRS has accomplished the investment liquidation through “appropriate rebalancing,” Mr. Urbanek said in the statement. “As the year progresses, this approach will no longer be sufficient to cover the total amount of benefit payments and more targeted asset sales will need to be considered.
“TRS staff continues to study the impacts of the current liquidity situation on the total portfolio and recommendations will be made as necessary to adjust targets. These changes could include revisions to the system's target asset allocation and termination of investment manager relationships as 10% or more of the portfolio is liquidated to pay benefits this fiscal year,” he said.
The only question one has is whether as part of this "appropriate rebalancing" the TRS has covered its increasingly out of the money derivatives? And since the answer is most likely "no", as that would be the painful but prudent thing to do, and has likely only sold off instruments which are now losing more and more value with each passing day, each day will merely bring more and more P&L losses to the fund. Which means that as the market continues selling off, the derivatives will require that more assets are sold, which will push the market further lower, which will demand furhter margin calls, and so forth ad Chapter 7.
To be sure, the insolvent state of Illinois has not helped:
Since the start of the fiscal year on July 1 through Aug. 20, the system has received only $90 million in contributions from the state. For the current fiscal year, ending June 30, 2011, the system requested $2.35 billion in contributions from the state, Mr. Urbanek said.
In the last fiscal year, the system sold $1.3 billion in assets to pay pension benefits; it received $170.4 million in employer contributions and $899 million in member contributions, while requesting $2.08 billion in employer contributions alone.
Alas, at this point it is too late: for TRS, and likely for many, many other comparable pension funds, which had hoped that the Fed would by now inflate the economy, and fix their massively incorrect investment exposure, the jig may be up. As liquidations have already commenced, the fund is beyond the point where it can "extend and pretend", and absent the market staging a dramatic rally, government bonds plunging, and risk spreads on CDS collapsing, the fund is likely doomed to a slow at first, then ever faster death. Then one day, Goldman's risk officers will call the TRS back office, and advise them that due to its "suddenly riskier profile" established in no small part courtesy of Goldman's investment allocation advice, the collateral requirements have gone up by 50%. The next step is either Maiden Lane 4... or not. For the sake of the 355,000 full-time, part-time and substitute public school teachers and administrators working outside the city of Chicago, we hope that the TRS has now been inducted into the hall of the Too Big To Fail, as otherwise roughly $34 billion in (underfunded) pensions are about to disappear.
h/t Ed
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Just think for a mere 3 billion you can capture the entire CRIMEX Gold market
+1 (minus) -2 = anger
Don't worry this things about to blow and fast.
http://www.nytimes.com/2010/08/21/business/21pension.html?src=busln
Pension Fraud in New Jersey Puts Focus on IllinoisThe federal government’s crackdown on the State of New Jersey this week for misrepresenting the condition of its pension funds raises a question: Who else might have pension numbers that could draw regulatory fire?
Paradoxically, even though the state will make smaller contributions, the report forecasts that Illinois will get its pension funds back on track to a respectable 90 percent funding level by 2045. It projects that costs will increase slowly and an economic recovery will make cash available for the state to make the contributions it has failed to do in the past.
Whether that is even possible is contested by some actuaries who note that its family of pension funds is now only 39 percent funded. (If a company let its pension fund dwindle to that level, the federal government would probably step in, but federal officials have no authority to seize state pension funds.)
Some actuaries who have reviewed the state’s plans said that shrinking contributions would make the pension funds shakier, not stronger.
Indeed, one of them, Jeremy Gold, called Illinois’s plan “irresponsible” and said it could drive the pension funds to the brink.
(In my best Star Trek captains voice)...Steve Ratneeerrr...LOL.
And CNBC has been praising the GOP NJ Governor for "balancing the budget without new taxes"...we can see how. He just took a page from Wall Street and cooked books, marked to unicorn and hoped the Feds would look the other way....in the spirit of the age!
Ummm... the fraud in question is from his predecessors, not him.
The upcoming Christy quotes are going to be worth the price of admission. - Ned
Game over. This is the wave you see; the other 100 tidal waves are the ones that will take this market down 40%+.....
The Fed_WS combine will keep the market afloat EVEN if all pensions are wiped out and 60 million are out cooking rats on the street. Don't make the mistake of using the DOW as a barometer of the national economy. That's what they want you and the rest of the world to do, as you've been conditioned to by The Masters.
But don't you see? The DOW could be at 10K even when there's only bots left trading and all the humans have been vaporized.
"We hope...Too Big To Fail..." Is this to mean that we hope that it gets saved by the taxpayer? Otherwise, the folks won't get their pensions. Isn't this a bit simplistic? The whole shebang is insolvent, given. Why does it boil down to 2 options? 1. Bail out by you and me, or 2. Pensioners starve. Is this a reasonable deduction from the article?
More sarcasm, less koolaid
I apologize for being too literal. Many have told me the same.
My detection of sarcasm is more visual than purely written. On the other hand, your sarcasm tends to balance on a knife edge. That makes it all the more difficult for me to detect.
well said rocky, very sensitive for a 'coon.
Its Illinois, they are made men. O takes care of his own.
The fund managers are certainly counting on 100% bailout from the Fed, and I think that was the point of both this post and the one a while back.
Fear not, they'll get their money.
Remember that those that Bk early are made whole. It's the ones that default at the end of the dusty road to perdition that burn. It's all about timing, and timing your pension crash just ahead of elections is probably the work of an evil genius.
but where do they "invest" the new money? Oh, yes, Gov't Motors and ultra-safe Treasuries. They sure have learned their lesson.
- Ned
How many other states have TRS in the same shape?
Dominoes that weigh a ton.
Pensions - the Chicago way.
No doubt President Two Iron bails-out these dopes, too.
" ... while he's writing them a check."
You forgot that part.
Edit: Ha! I read the parent as "balls-out" instead. I pictured O giving them a tongue-lashing while writing them a check. Never mind that it would have been "bawls-out" anyway. I bet he does, too. Won't matter though.
Don't you have that backward? They (as in the IL teachers and their extortion racket, I mean union) will be writing him a check.
Edit to your edit: HEH - no worries, cougar.
Oh it works both ways. It's called a "kick-back" everywhere else, not sure what they call it in Chicago. Probably "business as usual".
Got ya. Indeed.
I think it's just called - generically - The Chicago Way.
i was going say what cougar said, below. sounds appropriate†
President Two Iron Balls-out. beautiful.
It is too late for us all...
It covers the pensions for judges too, time to legilate from the bench and force this debt upon the last resort...taxpayers. Grab your ankles people.
I've been thinking the same thing. If the legislatures won't raise taxes the courts will do it. It's happened before.
I didn't realize that could happen... but if it can, as if it wont? That would be perfect, then no matter which of the two parties in name only the politicians come from, they can just blame the evil judges for teh tax increases
Thank Christ it's happening to the public school teachers. Hopefully this will discourage the bastards en masse as a "profession".
As more and more comes to light, it becomes starkly clear that the ship was held together with tape, twine and glue. Nothing was planned for a rainy day in the last 3 decades. To many of us here on ZH this comes as no surprise. To many others, the shocks will gradually awaken them from having their eyes wide shut. But never forget that many will refuse to see what's in front of them. In part because for some it's too much to bear. In part because the Kool Aid did it's job too well.
+ 1000 Caviar
And THAT is why I have appointed myself as Saver in Chief of my (small) family. I have been planning for TEOTWAWKI since Jimmy Carter. Hey, even a broken clock is right twice a day.
CogDis is the right guy to dissect those who refuse to see vs. the Kool Aid drinkers.
Great, great post, thanks.
I want my MTV (X 16) Now look at them yo-yo's that's the way you do it You play the guitar on the MTV That ain't workin' that's the way you do it Money for nothin' and your chicks for free Now that ain't workin' that's the way you do it Lemme tell ya them guys ain't dumb Maybe get a blister on your little finger Maybe get a blister on your thumb We gotta install microwave ovens Custom kitchen deliveries We gotta move these refrigerators We gotta move these color TV's (See the little faggot with the earring and the makeup Yeah buddy that's his own hair That little faggot got his own jet airplane That little faggot he's a millionaire) Gotta install microwave ovens Custom kitchen deliveries We gotta move these refrigerators Gotta move these color TV's I shoulda learned to play the guitar I shoulda learned to play them drums Look at that mama, she got it stickin' in the camera Man we could have some And he's up there, what's that? Hawaiian noises? Bangin' on the bongos like a chimpanzee That ain't workin' that's the way you do it Get your money for nothin' get your chicks for free We gotta install microwave ovens Custom kitchens deliveries We gotta move these refrigerators We gotta move these color TV's Look a' here That ain't workin' that's the way you do it You play the guitar on your MTV That ain't workin' that's the way you do it Money for nothin' and your chicks for free Money for nothin' and chicks for free Money for nothin' and your chicks for free Look at that, look at that Money for nothin' and your chicks for free I want my, I want my, I want my MTV Money for nothin' and chicks for free (Fade) I want my, I want my, I want my MTV
Money for nothin' and your chicks for free
let's put this video up, guyz. forget who?
kathy, here you go: http://www.youtube.com/watch?v=dlPjxz4LGak
Dire Straits
-- Ned
[ed. Tom A wins]
Dire Straits indeed.
How about a little music to go with those words.
Dire Straits - Money for Nothing
http://www.youtube.com/watch?v=dlPjxz4LGak&feature=fvw
Great song and video.
May I add "Broken Train" by Beck (on "Midnight Vultures" CD):
(incomplete but relevant refrains)The snipers are passed out
In the bushes again
I'm glad I got my suit dry-cleaned
Before the riots started
'Cause there's only rehashed faces
On the bread line tonight
Soon you'll be a figment
Of some infamous life
Billionaires smile like weapons
Passing out platinum pensions
They're out of control
No one knows how low they'll go
(Hold on)
Take a ride on a broken train
(Hold on)
Take a ride on a broken train
<snip>
We need this guy:
http://www.youtube.com/watch?v=itmNiTwHOsM
Here's a link to the TRS Asset Allocation. Not sure under what shell the TRS is hiding the pea. TRS Asset Allocation does not list "OTC derivatives, including credit default swaps".
http://trs.illinois.gov/subsections/investments/investments.htm
don't worry hussein will bail them out...
All the losses or shortfalls in state pensions will be rolled into the Pension Guarantee Corporation and will be funded through the federal reserve.
PBGC is for private pensions, I think.
Yep, through the states defaulting.
all commin' down.
- Ned
The lines will blur and these rules will no longer matter. You need to erase the states and make everything flow to the federal government in order to bring about a new world order.
well, they do need to do that.
next up, a consitiution of "positive rights."
- Ned
Wonder if they loaded up on any NS 100-year bonds.
Since the bonds weren't zeroes, probably not.
Can someone from Illinois please explain what the fuck is going on in your state. First it's Obama, then Blago, now this.
I guess all that bratwurst does erode the brain:
http://www.youtube.com/watch?v=2kXX0xxuF3A
DarkMath
https://secure.wikimedia.org/wikipedia/en/wiki/Cook_County_Democratic_Or...
The Cook County Democratic Organization is one of the most powerful political machines in American history. Commonly called the "Chicago Democratic machine", or simply the "Chicago Machine", the organization has dominated Chicago politics since the 1930s. It relies on a tight organizational structure of ward committeemen and precinct captains to elect candidates.
Illinois politicians are a microcosm of DC; they don't give a fuck about anyone or anything, other than being reelected - period. They will do and say ANYTHING to make the garden variety shit-for-brains electorate in the this State vote for them - and they do repeatedly - after being lied to over & over again. It's fucking pathetic!
First off, bratwurst is a Wisconsin thing, so you obviously are not from Chicago. Secondly, this state is controlled by a powerful Democrat machine. Thirdly, My experience is that nearly every politician, whether Democrat or Republican, from your local small town mayor up to the governor, is corrupt to some degree. Most people in Chicago, at least that I know and meet, blindly vote Democrat. Most don't even know why except that they believe the inanely simplistic mantra that has been firmly instilled in them that the Democrats look out for little guy and the Republicans only look out for the rich.
On the other hand, once out of Cook County and into the collar counties most people vote Republican but at least have reasons such as wanting lower taxes, less gov interference...etc. No mantra but more like Fox news and Rush regurgitated.
What I am getting at is that talking to most people that I know in Chicago about things discussed on ZH is like trying to talk to Homer Simpson and trying to talk to suburbanites is useless because if it's not on Fox or Rush then it's not important. Generally, the biggest problem with people I know in Illinois (And I am sure this is not exclusive to this state.) is way too much free time spent watching teevee and becoming emotionally attached to tv shows and sports and intellectual laziness.
Don't forget that before Obama and Blago we had George Ryan and Dan Walker. I will say for Blago, at least he kept his pledge to not raise the state income tax, which imo is what caused his party to turn on him. It is rare that an Illinois governor makes and keeps a pledge such as that and is something that causes me to have a certain degree of respect for him even though I did not vote for him.
It's all that damn italian beef and celery salt LOL
yes sir†
Could also be the Maxwell Street polish sausage!
your talented.
Head - TRS wins, tails - Obummer will bail them out (he's from Illionois after all!)
They can't lose! (their bonuses, that is)
They will get bailed but I don't think it will be in a hail of fireworks like the TARP was.
Some bullshit will happen like:
-Pension funds suddenly get Fed discount window access
-Pension Funds get open swap lines with the Fed
Or something. Something will happen but it will be opaque and 99% of people won't understand it, or care. And if you don't think they won't come up with some off the balls ridiculous shit you laughed about while smoking out of JC's bong than think again.
I hadn't thought of that approach...you may be correct. However, I'm still guessing the Marxist president "spreading the wealth is good for everybody" will simply nationalize them.
They'll get the standard PBGC payout or there'll be a sh*tshorm of epic proportions. Too many people are awake now, and those awake people get nothin' but SS. No way these pensions will get more than the standard issue bailout.
The PBGC would issue an IMMEDIATE 30% haircut (minimum) to these pensions.
Maybe they will go the California route and issue IOU's to the pensioners.
I heard 2 analysts on Bloomberg tonight, both matter-of-factly talking about the Fed and QE2. They were using the term "trillions" and saying it would be great for stocks.
Fed will printprintprint and try to paper over everything, including bankrupt pensions. The dollar is f***ed, the only question is how long it will take. You think you've seen money printing so far? You ain't seen nothing yet.
Helicopters ain't gonna cut it. Probably have to go with C 130s.
With the new $500 Obama FRNs...
AC-130 GUNSHIPS firing 105mm howitzer rounds of FRNs!
- may even have to call-in the C-5's and C-7teens.
Oh, I anticipate AC-130's circling US mobs in the not too distant future, but I don't think it will be Fiatscos that they'll be firing.
This has all got to be a put on. There seriously cannot be this much unraveling going on...its insane I can barely write this because I am laughing so hard. Illinois, ahahhahahahahahah...Its a Madhouse !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
two things: one, I am AMAZED that there is any money at all in Illinois pensions, that the governors there haven't looted it, all the ghetto pavement apes and their less-pigmented enablers, the whole fucking lot of them, crooks.
Second thing is look at what GS is doing...look at what wall street is doing. Encouraging the pension trustees to go for fucking broke; they CANNOT STAND that there is money out there somewhere. These IBs EXIST to find people with money and bust them out.
Wall Street has to go, the parasitic banking clan has to go, the entire industry of usury has to go, and if it means ovens, then so be it. They WILL NOT STOP until there is mass starvation and they are made to stop. Because they don't fucking CARE about anyone other than themselves and their cousins. Not a fucking whit.
The Street will attempt to take every dollar from everyone it can find, even if it has to BRIBE every trustee directly to get them to sell their pensioners into poverty. The Street MUST GO. And take the Fed with them.
+1913
How much time are we giving The Squid to create a synthetic short on TRS? What the hell am I thinking...
Then one day, Goldman's risk officers will call the TRS back office, and advise them that due to its "suddenly riskier profile" established in no small part courtesy of Goldman's investment allocation advice, the collateral requirements have gone up by 50%.
It has already a done deal. LOL!
God Damn stupid corrupt idiot Mutha Fuckas, Son of a bitch!
No pension bailouts, fuckem!
If you don't like it then come to the left coast, we got this crap called CALPERS to sell you.
AIG puked $180 Billion in their contorted attempt to squeeze another 20 basis points out of their assets. Nice risk reward profile.
The usual I win, you lose attitude. There will be a bailout here so it's best to be first at the door because there's an iceberg world of others hiding their dirty mess.
The advisors on all these bridges to nowhere are pretty much the same cast of characters. They also win, we lose.
David Crane of the WSJ reports, Dow 28,000,000: The Unbelievable Expectations of California's Pension System:
Debt and deficits don't matter.
Municipal bonds are flying....
It's a lot about insurance. I'll take Alaska and a pass on Prudential
We have all been guilty of laughing at Cheney's comment, "deficits don't matter".
I, however, think of it as being from the Yogi Berra school of philosophy. Deficits don't matter when we don't plan on paying back the money to begin with. He really was ahead of his time when he said that. We were the blind ones.
Deficits do not matter until they do.
As long as the people who have the fiduciary duty to manage the pension fund can engage in these shenanigans without going to jail, the Squid will continue to prey on public funds wherever it finds them. Fortunately for us, I'm sure the new Financial Regs (Fag Barney's gift to his Wall Street owners) includes provisions to prevent such malfeasance in the future, so this will be the last bailout we will need...
TLT bumping @108. Sick. Next June 85 puts...
Hey do you know that dude on the Dual Survivor show that goes barefoot all the time ? My kids watch the show. I used to laugh at him, now with the world imploding, I find that he is one smart freaking Master of Survival tactics and I listen to everything he has to say....
I think the Illinois teachers pension collapse is just the tip of the iceberg. The socialists pretend they can bridge their growing problems with stimulus tax money; keeping the wheels turning and teachers at work and when blue skies come out again, the unions can be on their own again. In the meantime, “they just need a little help.”
I don’t think that’s what’s going to happen. I think we’re seeing the funeral of socialism by Big Government and TBTF bankers picking the winners and the losers in America. With Socialist Democrats picking the winners, they pick their buddies--the teachers and public employee unions, La Raza and the minorities, the feminists and liberals and other people who help them stay in power. Fascist Republicans join in by providing socialism for the international corporations, such as for agribusiness, sending the taxpayer the tab for the housing, the healthcare, the schools, the roads, etc. for their legal and illegal farm workers, etc.
Well, it turns out many of these groups are the habitual non-producers. The teachers are a service sector. And they vote their pocketbook in support of immigration to expand their school district enrollment, thereby increasing the budget available for salaries.
According to Ed-Data, using National Center for Education Statistics 2005-06 data, Hispanics now make up nearly 50% of California’s 6,259,972 student population; whites comprise only 31% of California’s students. About half of California students (49%) are eligible for free or reduced-priced meals, compared to about 43% nationally.
http://www.ed-data.k12.ca.us/articles/article.asp?title=california%20comparison
And they all, including the Fed, pick the same loser—the middle class taxpayer, otherwise known as the “rich" when you need him for fleecing.
I think the harbinger of the future is New Jersey—the Chris Christies.
Illinois looks like a garden party compared to New Jersey. NJ had one of the most crooked, high-tax, buddy-buddy, blackmail-oriented governments in history. It finally came to the point where it couldn’t go there anymore. And, still, the Wall Street Goldman Sachs candidate wanted to be reelected as governor to continue business as usual.
But he ran up against a guy who could talk. Chris Christie weighs 300 lbs and the only thing Goldman could criticize him on was that he was too heavy for the job.
Well, Chris was too good for them. The best thing he ever said was, We don’t have a budget problem, we have a spending problem and the people of New Jersey say they want us to run the state on this amount of money. You can get rid of me later but at the moment, we’re going to run the state on that amount of money. And no new taxes.
And he cut, cut, cut. And those who screamed loudest, of course, were the unions. But the people loved it.
To criticize Chris, you need to go over and stand with the communists.
I've experienced that Jersey corruption, it was deep.
The system is burning down. Jersey and every other state will only get a tiny fraction of what they get now from the Federal Government. Here in Maryland it's at least 29% of the states annual operating budget. Might be much higher, they hide things in many places. They are living off the Feds. When it goes, the system folds.
My point is that Chris Christie is an excellent Governor, but the real cuts have yet to be made.
I don't get these people. My understanding is that we reached spreads this run up that were reached at the height of the bubble. If spreads reach a record narrow which way do they expect it to go.
Then as you makes more and more money one direction you've got to start to hedge in the other direction, have a buy stop on treasuries or something
don't these fools read about financial crisis and have an idea that they take a long time to resolve or that there are huge structural problems in the united states.
Who would be stupid enough to work with goldman on anything.
The list goes on
There is a reason these people are called the dumb money.
Too weird. Had to be a mistake.
Federal payments to states should be outlawed if we all survive this. It is a drug, a false form of control. And it is abundantly clear that any money given to states was simply borrowed by Washington. So government payments influenced states to do things they probably should not have done, state governments became less efficient as a result and now we have $16 trillion in real debt $60 trillion in Fed obligations and untold trillions in obligations that many big states won't be paying. The question is, who really benefitted most from the insane corrupt shell game of the last 40 years ? Was it the very wealthy whose ranks have swelled to the point where even billionaires don't get into the Forbes 400 ? Federal and state workers with their easy jobs, benefits and pensions ? The increasing ranks of low income folk, 20 million who are here illegally, and who pay zero tax even after social security ? Or the middle and upper class and their houses, toys, kids, ipads, flat screens, cruises ? Getting everyone around an imaginary table, who pays what in order to get debt down to $8 trillion over the next five years ? Top 5% pay $2 trillion more in taxes over this period. Fed and State workers pay and benefits cut by $2 trillion over this period. Swelling ranks of the poor - all 150 million of them -have their services cut by $2 trillion over the next 5 years and finally the now tiny middle class with say a $.5 trillion hit and upper class a $1.5 trillion hit. Meanwhile, govt spending gets cut to 75% of its current level over 5 years. New laws eliminate accounting gimmicks by Congress and outlaw any discussion of Social Security "Trust Fund". Will never happen of course, as it is "Damn the ice bergs" in some conversations or "What icebergs ? " in others and the President thinking "This won't get me re-elected"...
there is no problem with the fund. management is ALWAYS right. therefore there is no problem. is this fund run by mba wunderkinds? or just ba wunderkinds?
the fund can't go bankrupt since it is managed by the best and the brightest. the fund managers need a special consultation with orange county government leaders c. 1994 on how to structure derivatives.
Reminds me of Sentinel in 2007..
http://www.usatoday.com/money/markets/2007-08-14-sentinel_N.htm
The big scam here in Illinois, as in some other states is for the government employees to get huge raises in their last year of work. Their final salary sets the pension. It is crazy. How did we get here, the teacher union and other public unions had a sweet heart deal going with key democrats (and certain Republicans too).. The unions got out the vote, their members enjoyed nice pay increases and received great pensions. The key pol's namely the State House leader Mike Madigan built a huge political machine whom the Governor's lacked the power to cross. Madigan, no dummy by the way, built a thriving law practice that, get this, specializes in reducing corporate/commercial tax assessments. Nice huh? Rather than tangle with Madigan, much of the business community kisses his pinky ring, pays a fee and receives a tax reduction. The result, commercial tax revenues have declined as home owner tax revenue have gone up.@#$%^& the little guy.
This round of elections may -may- change things. We should wind up with a Republican Governor and probably a R US Senator. The Dems may run scared and in an effort to save their own hides, screw over the unions at least to the extent of reforming the pension system on a go forward basis and limit/curtail new/existing employees to qualify for the current defined benefit plan. Here is hoping.
http://www.madigetz.com/attorneys/michael-j-madigan.html
http://articles.chicagotribune.com/2010-01-22/news/chi-100121-madigan-main-story_1_madigan-getzendanner-madigan-rules-conduct-and-compliance
http://www.chicagonow.com/blogs/chicago-political-commentary/2010/08/michael-madigans-lets-deal-with-it-really-means-lets-make-a-deal.html
unfunded liability is $42,000 per Illinois household.
http://articles.chicagotribune.com/2010-08-13/news/ct-oped-0813-pensions...
If this is semi-consisent through out the rest of the country, I think that makes our national debt double what it is advertised to be
Japan's fiscal crisis- An Anatomy of a Keynesian Failure
One kick question: are we talking "just" about retirement fund liabilities ? Or does it include also unfunded health care liabilities?
My issue is that several companies (at least in Europe) have the mix of unfunded retirement+health care liabilities and while some are clearly stated in the reports, others are not that transparent about heath care responsibilities towards retired employees...
And, since there are talks about nursing and heathcare I could not refraing from posting a link to a related (crude) joke ... may this be the future that lays before us, dictated by the recent H.O.'s ?
http://nursingspins.blogspot.com/2010/08/did-someone-talked-about-stock-markets.html
Btw I've just seen this one in a discussion about the MSNBC piece "In striking shift, small investors flee stock markets" at
http://world-news.newsvine.com/_news/2010/08/22/4947727-in-striking-shift-small-investors-flee-stock-markets-?threadId=1051832&commentId=16795617#c16795617
What do you mean...?
Were you not told "ahead of time" by the brilliant Bernanke, Geithner, and Summers....that a "0%" interest rate policy basically eliminates 99% of the pension retirements ?
Had enough of the "Princeton Harvard Yale Club" yet ?????
Here is their response....
OH....OH that thing.....
Yes it's true our students have been slipping the past few decades and it's true that it's nearly impossible to fire a bad teacher or promote a good one without tenure but we still say UNION YES!!! Now quit f***ing with our pensions.
Don't worry, Pat Quinn is on the Job... protecting Illinois Pet owners. >.>
http://www.youtube.com/watch?v=bPax3vqQbgsClueless comments as usual.
A sizable percentage of the workers in this country are uneeded to support the future level of economic activity. The pensions, SS and other entitlements people expect to receive in the future will be slashed or eliminated. Any fool who is railing against Unions pensions will get a rude surprise when their own retirement nest egg is also looted. Police, Fire, Military ..etc pensions and benefits will be slashed or eliminated. 401K and mutual funds will be destroyed. Bank after bank will fold.
The games being played in Washington and Wall St are not designed to stop the Titanic from hitting the iceburg. The plan to "starve the beast" has been in the works for years. All the Teabaggers are going to be shocked when they are thrown to the trash heap by the very people they back.
Everyone needs to look in the mirror and decide if they are a useful asset to the elite or a useless eater. The majority of people have worthless or redundant skill sets. The future is clear for the majority, you are uneeded. The elite will decide if you are worth feeding.
http://en.wikipedia.org/wiki/Starve_the_beast
Hey big A, love the pic, and you are correct. The problem is that government employees at all levels think the "deserve better" than everyone else. They think they are the "new elite" and we owe them for the terrible job they have been doing. This is not going to end well.
Government employees are not the only ones. The average American worker is clueless. The skill set of the average worker is beyond pathetic. Too many feel they are entitled to good pay, nice house and car and a comfortable retirement. The term redundant will become something the average worker is going to have to come to terms with.
The US is in a decline that cannot be stopped. The US will need less workers than now and those working will get lower pay and benefits. There will be civil unrest as the safety net and entitlements fall by the wayside.
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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