U.S. Pension Insurer Shifted to Stocks Ahead of Sept. Plunge

[Zenlitened]

Source: Boston Globe

WASHINGTON - Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent - and all of its stock-related investments were down 23 percent - as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.

(snip)

Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.

Read more: http://www.boston.com/news/nation/washington/articles/2009/03/30/pension_insurer_shifted_to_stocks/

---

[Hannah Bell]

1. eh, just months before, what a coincidence. sure are a lot of them these days.

[elleng]

2. This could be HUGE.

"The truth is, this could be huge," said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. "This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities" in pension plans that would be passed on to the agency.

In addition, Peter Orszag, head of the White House Office of Management and Budget, has "serious concerns" about the agency, according to an Obama administration spokesman.

Last year, as director of the Congressional Budget Office, Orszag expressed alarm that the agency was "investing a greater share of its assets in risky securities," which he said would make it "more likely to experience a decline in the value of its portfolio during an economic downturn the point at which it is most likely to have to assume responsibility for a larger number of underfunded pension plans."

However, Charles E.F. Millard, the former agency director who implemented the strategy until the Bush administration departed on Jan. 20, dismissed such concerns. Millard, a former managing director of Lehman Brothers, said flatly that "the new investment policy is not riskier than the old one."

[leveymg]

6. This guy was Managing Director of defaulted REIT, Broadway Partners

Under his direction, that company went on a buying binge of $13 billion of high-profile commercial real estate properties across the country. Then the whole edifice came crashing down. Bought high - sell low to the receivers. Great business savvy, this gent.

Extreme risk-taker. Right-wing columnist for the NY Post. Just the kind you want to head a pension guarantee agency. See,

REIT Wrecks | High Yield REITs and Commercial Real Estate ...Jan 12, 2009 ... Boston's Hancock Tower Goes Into Default. Broadway Partners, the heavily indebted private equity firm that purchased Boston’s landmark ...
http://www.reitwrecks.com/2009/01/bostons-hancock-tower-goes-into-default.html - 49k -

[elleng]

25. Yea, and he was hired when? by whom?

.

[tomm2thumbs]

3. so they are a Federal Agency but playing the stocks? I don't get it

[elleng]

26. Not a federal agency, exactly. Read the story.

And they have to 'play' something, considering their job.

[onethatcares]

4. just picture how well Social Security would be doing now,

if they ratbastards could have given it to wall street 7 years ago. Imagine how many people would be destitute. And they're coming for it again.

[Bluenorthwest]

5. The ratbastards ARE coming for it again

We must not let them destroy Social Security.

[annabanana]

7. crap..

We are all still sliding down that rusty razor, aren't we.

[jpak]

8. Keith O says it the best - "why Daddy went to jail"

'cept none of these assholes will...

[PSPS]

9. Probably at bush's request to prop up the market long enough for mccain to win.

[End Of The Road]

10. Betcha they did a credit default swap

with AIG!

[peacetalksforall]

11. Separation: Church and State. Separation: Federal and Wall Street.

The people have been taken to the cleaners by the Republican Party - the party of wall streeters, reverends, corporate media, weapons and war providers and 'serviceers' and lobbyists and politicians who facilitate the crime. And some Dems are not far behind.

We are heading to the rank of the most criminal nation in the world.

Where was the oversight from Congress?

[Blue Diadem]

12. That makes me so angry. PBGC has my husband's pension.

Why wouldn't they keep that money in safe investments instead of taking the risk?

[KittyWampus]

13. Pension Insurer Shifted To Stocks (Federal Agency Under Bush Bought Risk Just Before Market Crashed)

Source: Boston Globe

Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds. ...

Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.

Charles E.F. Millard, the former agency director who implemented the strategy until the Bush administration departed on Jan. 20, dismissed such concerns. Millard, a former managing director of Lehman Brothers, said flatly that "the new investment policy is not riskier than the old one." ...


Read more: http://www.boston.com/news/nation/washington/articles/2009/03/30/pension_insurer_shifted_to_stocks/?page=full

[hobbit709]

14. The sheer GALL of these bastards.

[Skink]

15. They couldn't get SS into the market but they got these guys in.

[KittyWampus]

16. that was my thought, exactly.

[DURHAM D]

17. Good God -

I am ready to take to the streets. Where do we meetup?

[marketcrazy1]

18. looking for their performance data, finding other interesting info

In the US, the asset base of pension plans for the various government workers is huge. At the end of October 2008, the $4 Trillion assets held by these plans had fallen by roughly $1 Trillion. As these plans are defined-benefit plans, the governments will make efforts to fill the gap in the future years either by raising the contributions from current employees or by raising taxes. However this does not affect the social security plan since those assets are not invested in the markets.

If employers go under taking the defined-pension plans with them, then the Federal agency Pension Benefit Guaranty Corporation (PBGC) guarantees payment to plan participants. However this creates a huge liability for the federal government.

According to a Mercer study in the US, the pension plans of the S&P 1500 companies have lost half a Trillion $ in 2008, of which 80% was lost in the last quarter.

[TayTay]

19. The number of people in plans that are now run by PBGC is growing

There annual reports, since the year 1995, are http://www.pbgc.gov/about/annreports.html">online at their site. PBGC currently is responsible for the plans of 44 million Americans. The liability for this could grow to $500 billion dollars and require a massive bailout.

[Skink]

20. I wonder if the government borrows from the plans like they borrow from SS?

[global1]

21. Is It Me Or Does It Look Like Someone, Somewhere Had A Plan And Implemented It.......

to bankrupt this country? The more and more that gets revealed every day - makes me wonder if this was a plan that was set in motion purposely.

[terisan]

22. Paulson would have known in January 2007 how dangerous that decision would be because

If he participated in the decision............

[theblasmo]

24. I still think...

... the Repubs were trying to make it so that when Obama took office, he'd have all this crash around him, but it got out of control earlier than they expected, so they had to try and "fix it". Given their politics of the past few years, I wouldn't be surprised.

[valerief]

23. K&R

:kick: