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If you think detroit is bad, check out Puerto Rico, Detroit was able to file for bankruptcy to restructure their obligations, Puerto Rico does not.
And before you ask why the hell you care about Puerto Rico....1)it's a us territory so the federal gov't isn't going to sit by and watch it implode, 2) it's a HUGE issuer in the municipal bond market, and your retirement accounts likely hold it
Thats not entirely true.
Puerto Rico cant file Chapter 9 bankruptcy, but they could file Chapter 11 since some of the bond issuers are semi autonomous authorities. It wouldnt give them total relief but it would give some protection, even if limited.
Interesting read on Detroit's underfunded pensions and the problems that the Union had in causing it: The Looting of Detroit
Highlights:
-Detroit workers don't make any contributions into the pension.
-Detroit gave out generous 13th month checks around the holidays, which lost surpluses in good years that were needed to offset the bad years.
-Detroit's pension promises are not likely to come true based on what $ set aside and how much $ they promise to give back.
-Detroit pays a generous pension, the weighted down average of $20K includes many people who only work for a few years then leave employment.
-Detroit offers a supplementary defined retirement program like a 401K - where the employees contribute, but the city guarantees a 7.9% rate of return to the employee.
-Detroit would give out bonuses on top of the guaranteed 7.9% rate of return in bad years, so the workers were getting above a 7.9% rate of return even when the accounts lost money.
-Detroit borrowed money through bonds to make the pension appear more adequately funded.
-Union members run the board of trustees and would refuse to balance the pension books and stop giving out bonus payments.
The worker's unions supported this poor policy and the union refused to allow it to be fixed. How much blame belongs to the workers for not telling their union to be responsible?
Steal from taxpayers any way you can... Like liberals...
Anyone want to explain how the Social Security trust fund is any different?
It is very different, in the sense that the money from Social Security is paid by the federal government not a state or city. When the federal government needs more money to fund something like Social Security, it has the ability to 'borrow' money from the Federal Reserve and additional fiat money is created and then spent on things like Social Security that might be underfunded.
I don't mean to paint the pensions in a better light than they are, but most pensions currently use an accounting method called 'smoothing.' Long story short, it allows loses (and gains) to be 'smoothed' over a several year period, so a single years return, good or bad, won't have an immediate impact on funded ratios.
Bigger issue is the average annual discount rate most funds use. Typically 7-9%. With bond yields at such lows, no way these funds are earning 9% per year unless they are invested in toxic *****
Quote:
Originally Posted by Goodnight
These pension funds had historic returns since 2008, many of them were in the stock funds were in the 30-40% range for 2013. States that still have unfunded liabilities with this type of market are headed for some rather large problems, bankruptcy is right around the corner.
Does this include the actual commonwealth? Or just related issuers like the power company, water/sewer, etc?
Quote:
Originally Posted by pghquest
Thats not entirely true.
Puerto Rico cant file Chapter 9 bankruptcy, but they could file Chapter 11 since some of the bond issuers are semi autonomous authorities. It wouldnt give them total relief but it would give some protection, even if limited.
Absolutely false. Besides regurgitating occupy Wall Street rhetoric, please explain specific examples.
Wouldn't have anything to do with the outrageous benefits union members received for decades? Leadership simply kicking the can down the road? Phantom accounting that had unfunded pension liabilities go from $600m to $3.6bn overnight?
Quote:
Originally Posted by 73-79 ford fan
Detroit is another victim of Wall Street's toxic derivatives.
Does this include the actual commonwealth? Or just related issuers like the power company, water/sewer, etc?
The actual commonwealth.
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