Pensions: $1.3+ Trillion Shortfall, Beneficiaries Unaware

When the great call comes for pension benefits that are unfunded workers who depended on using their retirement money to survive will find that the money managers have been taking outsize fees while investing in world class scam on Wall Street.

Banks win, everyone else loses. Everyone is kicking the can down the road to avoid a revolt. The “shortfall” means that there won’t be enough money to pay out all the benefits that workers and their employers invested for their retirement. The cause is mostly the worthless “mortgage-backed securities” and a fair share of other forms of mismanagement.

Besides the shortfall many of these people were unknowingly contributing to their own demise: The money went into managed, funds, fund managers (companies) assumed the job of management, and portfolio managers actually did the management of the money — badly.



Workers who put money away for retirement were actually providing seed money for an enterprise devoted to scorched earth profits from fictitious “investment” vehicles that ultimately resulted in foreclosure on the same people who invested in the first place.

The real “investors” are those who have stashed money away for retirement. Many of them lost their homes in foreclosure in the name of a vehicle (Trust) they never heard of where the “Trust” had no actual existence. The securities issued by the Trusts were therefore worthless while everyone pretended the trusts and hence the securities issued in the name of the Trust were real. Even the Federal reserve bought some $3 Trillion at face value — but they “bought” MBS from the banks and not the investors who held them.

So the portfolio managers don’t want their name on a write down of the MBS to zero because that would endanger their job and bonuses and even subject them to liability for clawback of past compensation or bonuses. Their employers — the companies who manage funds — won’t admit that they failed to peek under the hood of the issuing trusts. Each portfolio is vastly overstated as to assets and understated as to liabilities.

All of this was well-known to the professionals and even many commentators as far back as 2007. For pensions that are government guaranteed we will eventually see a great wave of literally bankrupt pension funds being bailed out. For the rest, we will see bankrupt pension funds simply deny pension benefits simply because there isn’t enough money in the find — mostly not for lack of contributions but for lack of proper management.

Whose interest has been well-served by the tidal wave of “foreclosures”? Not the beneficiaries of pension funds whose money was invested in worthless MBS. Not the homeowners. Not the municipalities who were hurt first by bad assumptions of rising tax revenue. Not the federal or State government. Then who? Obviously the megabanks were the only ones to win. Bailouts and buyouts went to the banks. not investors. Settlements for illegal foreclosure practices never stopped the flow of illegal foreclosures.

What is necessary to start healing from this gaping wound? I join many people who say that the linchpin is elimination of the current servicers and their so-called rights to recover servicer advances” (that were funded with investor money, not their own). Put the real investors — the groups of disparate workers (beneficiaries of pension funds etc.) who will soon be desperate — in touch with the homeowners. Move back to the era when rational workouts were achieved for “troubled” loans that were inflated and fraudulently sold in the first place first to the portfolio managers who were more interested in looking good than being good.

The government had a chose to make — whether to “save” the banks or save its citizens. They chose wrong the first time, maybe with this urgent call for retirement benefits, they will finally choose the victims instead of the perpetrators.

5 Responses

  1. Do some States get kick backs from banks when a home is foreclosed because they bought bad investments from banks for their pension funds with no derivatives?

  2. Reblogged this on California freelance paralegal.

  3. As long as the US Dollar is the World Reserve Currency, we will never go broke…because we can simply print more money…a fact that the Federal Reserve is very aware of…so what happens when the $1.7 trillion dollars in MBS’s that the Fed is currently holding as ‘paper assets’ issued by the GSE’s suddenly loses value? The reason the GSE’s are so resistant to have anyone (in the public sphere) look at their books is obvious…they are purchasing ‘garbage’…just like they were doing in 2006…and the Americans who are generating these loans are pushed to the breaking point with a over-whelming debt load…they are just one or two paychecks away from mortgage default…My God…look at the data…student loan debt defaults…car loan debt defaults…credit card debt defaults…the lack of any effective ‘savings’ by the general American Public…yet Wall Street is ‘flying high’ and the Stock Market is booming…while ‘Real Inflation’…not the ‘made up numbers’, but ‘Real Purchasing Power’ is sinking before our eyes…not 5 years ago, I could go to the grocery store and buy a loaf of bread for $1…now that same loaf cost $1.25…that is Real Inflation. This article by Garfield discusses the various unfunded Public Pensions…just yesterday I saw a story on MSN ‘bemoaning’ that Public Officials, upon retirement, were collecting ‘huge payouts’…( )…yet where is the ‘outrage’ over the payouts that private CEO’s get? Even disgraced ones, like the Wells Fargo Executives who oversaw criminal actions on their watch…and actively ‘encouraged’ such activities…but a Public Official…who put in 30 years with no scandals or other illegal activities…is chastised for claiming ‘SICK DAYS’? Folks, the Natural Business Cycle…which is a easily verifiable FACT…indicates we are due for a contraction…and at the last ‘contraction’, the Fed was positioned to ‘take effective action’ by lowering interest rates and expanding it’s balance sheet to ‘keep the Economy moving’ via the Housing Market (hence the unprecedented amount of ‘Agency Debt’ currently held as ‘assets’ by the Fed… )…but what are they going to do this time…?

  4. scumbags , all of them!

  5. break up the big banks, reinstall glass steagall and stop letting the banks play with other peoples money like it is a monopoly game. jamie dimon should have to forfeit his home and wealth that has been made on the back of the taxpayer. Bankrupt all the bank execs like they did to us.

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