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Some states do not cover medical benefits. However most do and it will kill most state pension funds. The teachers in the Southern state where I grew up were in the same boat. They had to pay a big part of their medical benefits when they retired. So it did not matter if you were in your mid 50's and had 30 years in. They could not afford to retire so they did not. Their pension check would be to small to retire on so they kept working. This may become a tend in the future retirees may pay more of their medical benefits when they retire. If so state workers will not retire they will not be able to. But I do not think most baby bommers will be able to retire anyway at the rate things are going.
So much of our "recovery" has been related to accounting tricks. From banks, mortgage companies, to states, to the feds, you have a plethora of accounting tricks that lead to considerable questions about the financial health of various institutions.
The only reform needed is a law that requires the government and all companies to state their total liabilities, including unfunded liabilities, and total cash on hand, and a prohibition against stating anything else, including assets, except for cold hard cash.
The moment you allow them to start claiming receivables and tangible and intangible "assets" you open the door for manipulation and exploitation. Net losses start appearing as net profits on the books and other cute games go on as well.
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Originally Posted by collegeguy35
The recession will go on at least 3 to 5 more years.
It'll go on a lot longer than that. The same thing that happened to the mortgage companies is happening to the states.
As riskier mortgages started to pile up, investors wanted a greater return for the risk, and then eventually, the investors pulled the plug when the risk became to great.
As state's credit ratings get down-graded, their ability to borrow or issue bonds becomes limited, and eventually it will collapse as investors pull the plug on various states.
I was surprised that FL and GA didn't rank on that first list. I've been trying to find info about sales tax revenues for those states lately but can't seem to get any info. GA has seen a decline in sales tax revenue for like 18 months straight, with no sign of stabilization.
GA is still in the dumps for sure. There has been an eerie silence from the gold dome about the budget. There was talk of furloughing all teachers state-wide for 10 days next school year, including keeping students home for a full week. (Southern style = just cancel school state-wide because we don't have the money!) That really makes me mad. Meanwhile, lawmakers proposed cutting 4-H, the arts council, etc but people complained, so those programs were saved. Class sizes will be "maxed out" whatever that means.
I don't see how the states will survive (1) paying back the borrowed unemployment funds to the feds (2) pension fund losses (3) huge increases in Medicaid rolls in a few years when the healthcare reform bill kicks in. GA and FL estimate liabilities to be in the hundreds of millions per year for all of the new Medicaid enrollees. I'm most worried about the increased Medicaid spending crowding out other spending, mainly education, in states like FL and GA.
Just let all states borrow huge amounts of cash from China like our federal govt. does.
Problem solved!
Some states, like Alaska and Hawaii, could even do some bartering with China if they run into serious financial difficulties, bartering off one island at a time.
California? Let's see, how much is Catalina Island worth? Or Alcatraz?
the problem with the government is that we don't have government enforcement of the laws anymore. The FDIC has a law called "Prompt Corrective Action" (USC 12 Chap 16 Section 1831o) which the FDIC and other regulators have absolutely ignored for the last three years.
This law applies to all insured depository institutions, including the "too big to fails" such as Wells, Citibank and JP Morgan. It was put in place after the S&L crisis specifically to prevent the abuses that were rampant during those years, including evasion of capital requirements, lies about asset valuations and other forms of control fraud that led to bank executives stealing billions from taxpayers and prudent institutions during the S&L crisis.
This law begins with:
Each appropriate Federal banking agency and the Corporation [that's the FDIC - ed] (acting in the Corporation’s capacity as the insurer of depository institutions under this chapter) shall carry out the purpose of this section by taking prompt corrective action to resolve the problems of insured depository institutions.
Note that it doesn't say "may", it doesn't say "except for institutions we think are too big to fail", it doesn't say "except for politically connected firms that are performing obscene acts on myself and other banking regulators, whether they be acts of bribery with money, votes or sexual favors."
It says shall and it provides no leeway or discretion.
This law, if followed, absolutely prevents the FDIC from taking deposit fund losses. It also prevents "too big to fails" from being too big to fail, since they are subject to the same sanctions and closure as is the small local bank on the corner.
It was and is the willful refusal of Sheila, along with Dugan at OCC, to follow this law as written that has enabled the "too big to fails" to continue to operate. Had that law been followed EACH AND EVERY ONE OF THESE INSTITUTIONS THAT TAKE DEPOSITS WOULD TODAY BE CLOSED AND DISSOLVED as the law provides for NO DISCRETION in the actions of these regulators. (denninger, who is right on target again here).
we have a system currently in place that is totally setting itself up to FAIL big time at some point in willful violation of the law.
That's completely right - The FIRREA Act of 1991 forbids the "too big to Fail" label to be placed on a financial institution. When the administration comes out and bails out only certain banks, but then turns around and announces to the smaller banks "No More Bailouts" - you know the rules mean nothing.
The downgrade to Baa2, just two steps above junk, and a warning the rating could fall further still, means the third-biggest U.S. city could face even higher costs in the future if banks choose to terminate other interest-rate hedges against fluctuations in interest rates. All told, Chicago holds swaps contracts covering $2.67 billion in debt, according to a disclosure late last year.
So your point is that those horror stories from 4 years ago didnt destroy the world.....so this is nothing to worry about? Or?
From the article...
Quote:
Chicago is defending a 2014 Illinois law that boosted pension contributions by the city and its workers to two of its retirement funds and reduced benefits. In the affidavit and in testimony earlier this month in Cook County Circuit Court, Chicago CFO Scott quantified the city's exposure to a variety of credit instruments as a result of further rating downgrades.
Under a three-notch downgrade, Chicago would default on about $2.8 billion of credit facilities, including letters of credit, that the city would likely not be able to replace, according to Scott. Moody's analysts said most of Chicago's $806 million of variable-rate GO bonds are tied to swaps.
The take-away from all this should be that CA has seen a vast reversal of fortune since then, i.e a budget surplus. Seems you cannot always forecast the future!
Hmmmm. I was really freaking out. Until I saw 2010 as the date of the story.
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