BAILOUT MANIA ~ Hidden Pension Fiasco May Foment Another $1 Trillion Bailout

peaceandlove · 03-21-2009, 01:06 AM

BAILOUT MANIA, no end in sight.

Hidden Pension Fiasco May Foment Another $1 Trillion Bailout

By David Evans

March 3 (Bloomberg) -- The Chicago Transit Authority retirement plan had a $1.5 billion hole in its stash of assets in 2007. At the height of a four-year bull market, it didn’t have enough cash on hand to pay its retirees through 2013, meaning it was underfunded to the tune of 62 percent.

The CTA, which manages the second-largest public transit system in the U.S., had to hope for a huge contribution from the Illinois state legislature. That wasn’t going to happen.

Then the authority found an answer.

“We’ve identified the problem and a solution,” said CTA Chairman Carole Brown on April 16, 2007. The agency decided to raise money from a bond sale.

A year later, it asked Illinois Auditor General William Holland to research its plan. The state hired an actuary, did a study and, on July 17, concluded that the sale of bonds would most likely result in a loss of taxpayers’ money.

Thirteen days after that, the CTA ignored the warning and issued $1.9 billion in bonds. Before the year ended, the pension fund was paying out more to bondholders than it was earning on its new influx of money. Instead of closing its funding gap, the CTA was falling further behind.

Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy.

Article continues: http://www.bloomberg.com/apps/news?p...1EA&refer=home

03-21-2009, 01:06 AM	#1
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	BAILOUT MANIA ~ Hidden Pension Fiasco May Foment Another $1 Trillion Bailout BAILOUT MANIA, no end in sight. Hidden Pension Fiasco May Foment Another $1 Trillion Bailout By David Evans March 3 (Bloomberg) -- The Chicago Transit Authority retirement plan had a $1.5 billion hole in its stash of assets in 2007. At the height of a four-year bull market, it didn’t have enough cash on hand to pay its retirees through 2013, meaning it was underfunded to the tune of 62 percent. The CTA, which manages the second-largest public transit system in the U.S., had to hope for a huge contribution from the Illinois state legislature. That wasn’t going to happen. Then the authority found an answer. “We’ve identified the problem and a solution,” said CTA Chairman Carole Brown on April 16, 2007. The agency decided to raise money from a bond sale. A year later, it asked Illinois Auditor General William Holland to research its plan. The state hired an actuary, did a study and, on July 17, concluded that the sale of bonds would most likely result in a loss of taxpayers’ money. Thirteen days after that, the CTA ignored the warning and issued $1.9 billion in bonds. Before the year ended, the pension fund was paying out more to bondholders than it was earning on its new influx of money. Instead of closing its funding gap, the CTA was falling further behind. Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy. Article continues: http://www.bloomberg.com/apps/news?p...1EA&refer=home