USA

Bailout Nation?

Federal Lending to Insolvent Pension Plans Is Code for Bailout

Here’s a remarkable lending opportunity to consider:  Let’s make billions of dollars in loans to borrowers which “are insolvent” or in “critical or declining status.”  These loans would be unsecured and no payments of principal would be due for 30 years.  At that point, in case of default, the loans would be forgiven.  Would you make such a loan?  Obviously not, and neither would anybody else—except maybe the government.   

This idea is one only politicians could love, since it gives them a way to spend the taxpayers’ money without calling it spending. 

Making such loans is proposed in a bill before the House Ways and Means Committee, entitled “Rehabilitation for Multiemployer Pensions Act” (HR 397). The borrowers would be multiemployer (union) pension funds which are deeply underfunded, insolvent in the sense of having obligations much greater than their assets, and won’t have the money to pay the benefits they have promised.  A more forthright title for the bill would be the “Taxpayer Bailout of Multiemployer Pension Funds Act.”

DYI:  Anyone who has been following State and local government old style pension woes knew this was coming.  This is only pending legislation but if I was a betting man it is a high odds favorite to pass.  Political controllers have been priming the pump for a bailout over the past few years with TV drama political programs with scripts depicting politicians bailing out pension fund shortfalls as a moral righteous act.  Always remember the main stream media is the Federal government’s propaganda outlet.  Be as that may be the only way this should be done is as follows:

Once funds are received the government entity will have 180 days to end the old style pension and place all employees into a 401k style plan.  Those who have been in the old pension but not yet retired [defined benefit] will receive a lump sum commensurate to their time in service into their 401k type program.  Those who are retired will maintain their stated benefits.  And if this is NOT complied within the stated time period all funds are automatically refunded to the Federal government.

This will end the defined benefit pension plan nightmare and place government employees on a more level playing field with those who are in the private sector sharing the same risks and rewards of a 401k type program.  Will this be put into place?  I doubt it but one can only hope!

DYI