It Begins: Pension Bailout Bill To Be Introduced This Week

Tyler Durden's picture

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.

The bill would also fund a program at the Pension Benefit Guaranty Corp. to finance any remaining needs of pension plans borrowing from the new program.

 

"Any money needed for the PBGC would be a tiny fraction of what it would otherwise be on the hook for if Congress fails to act," said an analysis by Mr. Brown's office.

Sen. Brown's angle was naturally populist, and aimed squarely at those whose pensions are likely to recoup pennies on the dollar under the current investing climate: union workers. Brown told a group of retired Teamsters in Ohio on Monday that the bill will be out shortly.

"It's bad enough that Wall Street squandered workers' money — and it's worse that the government that's supposed to look out for these folks is trying to break the promise made to these workers. Not on our watch. We won't allow that to happen," he said.

No, instead what will happen "under his watch" is that funds collected from taxpaying Americans will be spent to satisfy the ridiculous retirement promises and obligations made over the past few decades, and while the immediate recipients of the funds, i.e. those looking at near-term retirement will be made whole, everyone else, i.e., taxpayers will lose.

And now that the machinery for pension bailouts is finally in motion, we look forward to the next, and possibly final, tear in the American social fabric, that between workers who can't wait to retire to the generous pension promises (see "Why Illinois Is In Trouble - 63,000 Public Employees With $100,000+ Salaries Cost Taxpayers $10 Billion" and "Mapping The $100,000+ California Public Employee Pensions At CalPERS Costing Taxpayers $3.0B"), and all those other unluckly taxpayers, who will have to fund these promises.

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VWAndy's picture

 The stupid must be getting help. These levels of stupid just aint natural.

gatorengineer's picture

You never go full retard........ (Great Movie BTW)

Same day they rolled out the ban assault weapons bill.  As Trumps base fragments due to disappointment, they go full retard.

overbet's picture

I have a friend about 10-15 years ago built his fico up to 820s. Opened a bunch of credit cards and debt and had no intention of paying it back. He said he didnt give a shit about his credit score he just wanted the free money. He paid nothng back defaulted on all of it. I thought he was crazy at the time. Turns out he as ahead of the curve. 

JRobby's picture

Way ahead. Especially if he had an offshore haven set up and bolted to it.

Moral hazard?

What the fuck do you think the banksters and Bilderbergers talk about at their private meetings? Enslaving you just long enough so they get most of the interest and money back right before you die, finishing you off way ahead on $$$$.

How about a 50 year mortgage fucktards?

3LockBox's picture

The boomers won't stop until they have all the blood, sweat and tears from the rest of us.

Total BS.

All this while out spending the inheritance.

Why am I forced to pay into Social Security again?

This shit just drives me crazy especially when I take a peek at my paycheck!

 

JRobby's picture

Go self employed. Use all deduction strategies to reduce your SE tax to close to nothing. 

loebster's picture

USG should confiscate the assets of all THOSE who've been bleeding America dry and put them in the pension funds. https://goo.gl/bFYusM

sincerely_yours's picture

Let's start with the $7 Billion/year we send to Apartheid IsraHell.

abyssinian's picture

Fuckoff all you liberal scam tards! 

Manthong's picture

 

awshit….

Madoff had an ancient IBM 440 in the basement ….

Can’t the Fed and the US Treasury do any better?

 

Escrava Isaura's picture

3LockBox: All this while out spending……………….. This shit just drives me crazy especially when I take a peek at my paycheck!

You have a paycheck because someone is spending.

That’s the flaw with capitalism; to function, survive, and grow it constantly needs ‘new’ money.

When there’s no money, who has it ‘bankers’ can charge high and higher interest rates leaving people that produce with even less money from their labor.

The main flaw with capitalism, if one bothers to look at it carefully, which 99 percent don’t, it’s that the capital ‘a piece of paper’ becomes the wealth, and not the workers, the artisans, the crafters that do the ‘hard’ work.

The second flaw with capitalism is that, it is class driven, meaning that the educated ‘urban’ class does better than the less educated ‘rural’ class.

 

Manthong's picture

 

“the flaw with capitalism;”

…interesting concept……..

Unfortunately we do not live in a capitalist society anymoar.

Change your perspective to predatory financialism….

..that’s what is killing  the future of your kids.

Escrava Isaura's picture

Sorry. We do live in a capitalism system.

How that one know?

Easy, let’s look at the core of capitalism; how it starts.

Core of Capitalism for the serious observer: You, and your government (nation) work for the owners of capital, meaning you and your nation work for bankers/investors. You and your nation work for creditors. So, by government owning $20 trillion and private sector owning $43 trillion dollars to bankers; it doesn’t get any simpler than that.

Now to put capitalism into perspective, let’s look at its rival.

Core of socialism: The workers, the craftsmen, the artists own their production, meaning, they are not hourly wage slave of people with capital.

Italy and Greece were great examples of socialism. Right after WW2 as Americans and British were arriving in those nations, the locals were running the business already. No bosses. Their main concern was employment to everyone in the town and villages. Both Italy and Greece were crashed by the CIA.     

American Revolution was also based in this social principle, because Americans back then believed wage slave, having to work the whole day for a wage to survive was as bad as chattel slave.

Then, those Americans workers, meaning the people that actually do the work, the producers tried to build brotherhoods and organized labor parties they were demonized, some even killed as anti-Americans by the capitalist ‘opportunists/usury’ classes.

This concept of demonization still works to this day.

 

Kayman's picture

Capitalism means you earn your capital.  We live in Central Bank Cronyism- aided and abetted by governments- where money is conjured- destroying capital.

Karl Marx was a lazy fucking idiot whose family would have starved to death without Engels welfare payments.

Kidbuck's picture

Doesn't need new money unless you want inflation. Simply needs honest money that responds to supply and demand. With honest capitalism/money falling prices would benifit the frugal and hard woking savers.

Fuck the Fed.

Escrava Isaura's picture

Your concept can only work in a rural/small society.

However, we live in an industrial society.

Even China moved away from this ‘small society’ thing.

Otherwise they can’t defend themselves.

You see this same phenomenon with the American rural/working classes in the US. They are falling behind and they are powerless in stopping it.

Industrialization overwhelmed them.

As it did to the third world.  

 

Second, there can’t be honest money because people can’t be honest, unless you’re an Aborigine or a Jain that don't care about money.

 

 

BigJim's picture

You are a deeply confused individual.

Manthong's picture

 

+ 100....

Confusing  the ideal of capitalism with the reality of FASCISM.........

smithcreek's picture

But people will be "honest" in a socialist system?  You're a fuckin dope.

Kayman's picture

Escrap

So you are saying the Industrial Revolution never happened, since there were no Central Banks at the time. 

Better to stay silent and be thought a fool....

Buzz Fuzzel's picture

The pension fund will borrow from the treasury which is loaning money printed by the Fed.  The term "money" has become meaningless.

VIS MAIOR's picture

Fuck off retard!! he say true.. send 0 to usrahell!!

11b40's picture

Can you tell us why we should be sending our tax dollars to Israel?

Or, maybe you want to challenge the apartied statement?

By the way, if there is a scam, it is coming from the recipients of the funds, not the payers, or am I missing something?

abyssinian's picture

Fuckoff all you liberal scam tards! 

bidaskspread's picture

I wonder how the ex-employees of Enron feel about this bill.

BennyBoy's picture

 

"Borrow" to fund Ponzi schemes?

HAHAHAHAHAHAHAHAHHAAAAAAAAAAA!!!

Matchless's picture

We send more than that to countries who hate us, don't be such a dope. 

Five Star's picture

Every states pension underfunding given real market values in terms of tax revenues. Terrifying:

http://thesoundingline.com/accounting-for-reality-pension-funds-are-in-b...

AldousHuxley's picture

30 year mortgage on overprice POS house.....4% interest rate

4 year student loan.....4.45% ~ 7% interest rate

 

Market is saying that it is safer to put downpayment on a house and rent it out instead of going to college.

Of course it you are comp sci major at MIT then borrow away, but liberal artsy fartsy types better think twice...but then if you hve to "learn how to think" in college after signing your life away then you kind of deserve it.

 

Remember....the winners from gold rush were not the miners but those who serviced them with shovels, hotels, restaurants, etc.

 

Trump U was executed in a shady way, but Trump knews a good scam when he smelled it.....remember he is not a gambler...he is a casino house brand owner....the very best margins in business.

yogibear's picture

Flood more H1Bs from India so they can layoff more Americans. Make matters worse will you.

QQQBall's picture

no dude, a house is collateral, a student loan is hope. 

harleyjohn45's picture

If you plan on going self employed entirely, then plan on working until you die.  I'm 80 yo and I have a pension, but I still work at rental properties.  I have no faith in government.  I have been debt free since 1974, but I still worry.  No one knows what they will come up with next.

johnduncan78's picture

Hardly. I was self empoyed all my life. Hard sweaty hard work-owned a refinihing business. Saved, lived within my means-NEVER BORROWWED MONEY and saved. Retired at 62 comfortably. Bought gold starting in 1971.

ATM's picture

You care to explain to me how I can do that? I am already self employed. Which deductions are you referencing?

11b40's picture

First, anything that may remotely be considered as a business expense should be purchased through the company, and that includes medical insurance & HSA's.  Set up your retirement accounts and contribute as much as you can pre-tax.  Phones, computers, & other electronics, Internet connections, etc.  The company buys all those things.  Can you put any family members on the payroll?  The wife has worked for me for 40 years, with a very flexible schedule. 

Be frugal & practical.  For just one big example, if you drive a lot, look at using your personal auto for business and paying yourself mileage.  This year, the rate is about $.54/mile.  If you drive 20,000K, you write yourself expense checks for $10,800 for the year.  If you think you have to have a brand new $50K car or truck, as a small business owner, maybe you need to re-think.  If you buy a nice used ride that has 40-60,000 miles and then drive it for 5 years, which is not hard to do, you will have paid yourself $54,000 to drive your car.  I have been buying used Caddy's for over 30 years and using this method.  Never paid more than $20K for one, and always made a profit on my cars.

The trick is, think hard about your expenses and look at how to reduce the costs of what you MUST have.  Then, look at everything else you spend personal after tax money on and think of how any of those expenses could be shifted to the company.  Get a business account as Sam's or Costco and buy your supplies in bulk.  Little guys have to learn to think like the giant corporations.  Literally everything is deductible until someone tells you it is not.  You don't get in trouble for doing things incorrectly, but you do if you cover things up.  If there is an audit, the more things that are a little questionable that you can argue about, the better off you are.  That is the way the corporate world thinks, and it seems to work well for them......just keep records, but jot too meticulous.  For instance, a hotel receipt for an out of town stay opens the door to meals, cabs, business entertainment, tips, shoe shines, etc., and you only have to have receipts for expenses over $75.00.

Most importantly, go talk to your accountant, and get a good one, too.

 

thinkmoretalkless's picture

SSN? That’s no problem...just got to find that “lock box” Algore talked so eloquently about before he went all global warming.

lasvegaspersona's picture

...sez the man child....

In hyperinflation it is those on fixed income who starve,,,

...be patient...your hatred will pay off....

fbazzrea's picture

The boomers won't stop until they have all the blood, sweat and tears from the rest of us.

Referring to Social Security, who's money do you think those b*stards in DC have been spending all these years? It damn sure wasn't Generation Xers or Millennials. And those were REAL dollars, not these worthless pieces of TP floating around now. We paid into our "trust fund" but the spendthrifts in power stole the money and replaced it with debt vouchers.

hang 'em high!

wolfnipplechips's picture

Boomers will take out far more than they ever "put" in.  But then again, they never really had that money to put in anyway.  They borrowed that money in the hundreds of billions back in their hay-days of social spending.  Welfare, MIC, pensions, blah, blah, blah.  All purchased with the debt enslavement of their children and their grand-children.  And they didn't give two fvks about it.  The boomers elected those creeps that "stole" the so-called borrowed $$ they put in.

So go cry somewhere else when younger generations don't give two fvks about your pensions.  

11b40's picture

Says the generation who gave us Obama.

fbazzrea's picture

i'm not the one crying... i'm just pointing out that the Boomers are not the source of the problem. perhaps people like you who lump an entire generation into some contrived stereotype to fit your own opinion could accept some of the blame since obviously you are so enlightened.

what have you done about it? or are you just another all-hat no-horse know-it-all condescending asshole?

waspwench's picture

It isn't the boomers;  it's the banksters and the corrupt government which is bought and sold by every big corporation in the country.

There is, seemingly, plenty of money to pay the MIC for endless wars.   There is plenty of money to pay for free housing, medical care, education, etc. for illegal aliens and so-called "refugees."   There is an endless flood of money to support the banks.   There is plenty of money for foreign aid and aid to Israel and to prop up any despotic regime that is willing to do our bidding.   Congress has the best medical insurance available and can vote itself a raise whenever it feels like it.

And you blame the boomers!   Get real.   The boomers are screwed just like everyone else, and are likely to be screwed even worse than everyone else when hyperinflation hits.

new game's picture

lock tard box, get a fuking clue, ya dumb fuk. 1 percent are screwing everybody. simple shit maynard.

i will continue to ram into your brainless skull some moar insight. blame your dog for lack of food in the cupboards. think? duh, fuk off...

JohnGaltUk's picture

I was born at the end of the baby boomers, 2nd to last year. I did some figures on the back of an envelope back in the 80s and knew this day was coming. I have always argued about the moral hazard of borrowing money now so we can party like its 1999 and then hand the bill onto your kids. Its fucken sick, baby boomers are destroying their own childrens future. It will soon fall apart soon.

philipat's picture

So let me see if I get this straight. Government at all levels promises to pay juicy pensions to employees then, because they don't have the money, underfund them. Then, when TSHTF they ask the taxpayers for more money to bail them out?

Solution: Stop the politicians making promises that cannot, and should not, be kept and convert all Government pension programs to Defined Contribution schemes just like throughout the private sector. Oh, and no bailouts.

JRobby's picture

I have no response to that since it's not what my post was about.