States Looking For Ways Not To Have To Pay Pensions.

[greenbuddha]

Might want to keep a close eye on Lansing.

 

Michigan, along with other States may be looking for a way out of paying State employees their pensions due to the Wall Street collapse and bad investments of employee pension funds.

 

And, NO, this is NOT a conspiracy post.

 

A Path Is Sought for States to Escape Their Debt Burdens

 

By MARY WILLIAMS WALSH

 

Published: January 20, 2011

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Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.

 

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Stephen Crowley/The New York Times

Senator John Cornyn asked this month whether Congress should consider establishing a bankruptcy procedure for states. More Photos »

 

 

 

Weighing In on State Bankruptcies

 

 

Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.

 

But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.

 

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

 

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

 

“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.

 

For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.

 

House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.

 

Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.

 

Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.

 

“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.”

 

Mr. Loveless said he was meeting with potential allies on Capitol Hill, making the point that certain states might indeed have financial problems, but public employees and their benefits were not the cause. The Center on Budget and Policy Priorities released a report on Thursday warning against a tendency to confuse the states’ immediate budget gaps with their long-term structural deficits.

 

“States have adequate tools and means to meet their obligations,” the report stated.

 

No state is known to want to declare bankruptcy, and some question the wisdom of offering them the ability to do so now, given the jitters in the normally staid municipal bond market.

 

Slightly more than $25 billion has flowed out of mutual funds that invest in muni bonds in the last two months, according to the Investment Company Institute. Many analysts say they consider a bond default by any state extremely unlikely, but they also say that when politicians take an interest in the bond market, surprises are apt to follow.

 

Mr. Maco said the mere introduction of a state bankruptcy bill could lead to “some kind of market penalty,” even if it never passed. That “penalty” might be higher borrowing costs for a state and downward pressure on the value of its bonds. Individual bondholders would not realize any losses unless they sold.

 

But institutional investors in municipal bonds, like insurance companies, are required to keep certain levels of capital. And they might retreat from additional investments. A deeply troubled state could eventually be priced out of the capital markets.

 

“The precipitating event at G.M. was they were out of cash and had no ability to raise the capital they needed,” said Harry J. Wilson, the lone Republican on President Obama’s special auto task force, which led G.M. and Chrysler through an unusual restructuring in bankruptcy, financed by the federal government.

 

Mr. Wilson, who ran an unsuccessful campaign for New York State comptroller last year, has said he believes that New York and some other states need some type of a financial restructuring.

 

He noted that G.M. was salvaged only through an administration-led effort that Congress initially resisted, with legislators voting against financial assistance to G.M. in late 2008.

 

“Now Congress is much more conservative,” he said. “A state shows up and wants cash, Congress says no, and it will probably be at the last minute and it’s a real problem. That’s what I’m concerned about.”

 

Discussion of a new bankruptcy option for the states appears to have taken off in November, after Mr. Gingrich gave a speech about the country’s big challenges, including government debt and an uncompetitive labor market.

[MORE COWBELL]

it is robbery by the banking hegemony!

 

THEY GOT OUR MONEY FIRST FROM HOLDING A GUN TO THE HEAD OF THE POWERS THAT BE..THREATENING COLLAPSE OF MODERN SOCIETY!

NOW THEY WANT THE REST OF EVERYONE'S RETIREMENT SINCE SOCIAL SECURITY HAS NOT BEEN PRIVATIZED-------------

 

 

 

ONE WAY OR ANOTHER WALL STREET IS TAKING ALL THE MONEY WE HAVE EARNED AS A PLANET-

 

the program now is MONEY TRANSFER TO THE WEALTHIEST SINCE WE DON'T KNOW HOW TO SPEND IT OURSELVES PROPERLY IN THEIR EYES!

 

resistance seems futile

[imiubu]

[imiubu]

it is robbery by the banking hegemony!

 

THEY GOT OUR MONEY FIRST FROM HOLDING A GUN TO THE HEAD OF THE POWERS THAT BE..THREATENING COLLAPSE OF MODERN SOCIETY NOW THEY WANT THE REST OF EVERYONES RETIREMENT SINCE SOCIAL SECURITY HAS NOT BEEN PRIVATIZED-------------

 

 

 

ONE WAY OR ANOTHER WALL STREET IS TAKING ALL THE MONEY WE HAVE EARNED AS A PLANET-MONEY TRANSFER TO THE WEALTHIEST SINCE WE DON'T KNOW HOW TO SPEND IT OURSELVES PROPERLY IN THEIR EYES!

 

resistance is futile

 

Resistance is VITAL!

[thanks2]

Once the money enters the governments hands it is hard to pry out.

 

If men can not govern their selves, how can men govern other men?

[Croppled1]

Once the money enters the governments hands it is hard to pry out.

 

If men can not govern their selves, how can men govern other men?

 

 

I have no other comment on this but to say this happened to my Mother whose company was bought by GE then bankrupted by what to me seemed to be a break through of criminal fidicuary duty as they were investing on demand deposits in Mortgage Backed Securities to squeeze extra income . There was no ability to repay them when the MBS market crashed . . She lost her medical coverage but the small pension was guaranteed similar to the banks FDIC program by the pension assurance insurance of the Fed . There are caps on benefits . I hope the idea of pension insurance helps some and applies to State workers . ..

[thanks2]

I have no other comment on this but to say this happened to my Mother whose company was bought by GE then bankrupted by what to me seemed to be a break through of criminal fidicuary duty as they were investing on demand deposits in Mortgage Backed Securities to squeeze extra income . There was no ability to repay them when the MBS market crashed . . She lost her medical coverage but the small pension was guaranteed similar to the banks FDIC program by the pension assurance insurance of the Fed . There are caps on benefits . I hope the idea of pension insurance helps some and applies to State workers . ..

Yeah, this has happened to many different corporate employees. Many of them did not qualify for the pension insurance. To throw salt on the injury, many of these corporations required their employees to hold company stock to utilize their private tax shelter accounts(401k). So the employees lost everything. The government is a corporation. Corporations run our government. The concept is the same. Give your money to anyone and they WILL mismanage and steal it.