Gov't Pension "Protection"

With the news today that both GM and Chrysler may not be long for this world -- and my grandfather must be rolling over in his grave at this news! -- a lot of focus is on the pension funds for these companies. Will the auto makers be able to fund their retirement obligations as they go under? If not, will the government fund that is supposed to make up the difference be there to do just that? Turns out the answer to the second question is likely a big, fat "no" thanks to yet another Bush administration failure. And by "failure," I mean actual sabotage of the country.

The Boston Globe reports the following:

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. ...

No statistics on the fund's subsequent performance were released.

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.

TPM has more details here.

30 March 2009

Addition: Still more from TPM.