Tuesday, March 17, 2009

Pensions and AIG

Speaking of suicide, do you want to know what pensions have in common with AIG? Do you even have the strength of will to want to know?

What do pensions have in common with AIG? It turns out a lot. Both were claiming to run a core business when in reality they were fueling a Ponzi scheme using "sophisticated instruments" or "alternative investments" that threaten the security of the global financial system. That's why AIG's dismal results back in August spelled trouble for pension funds.

Just like AIG, most pension funds lack transparency, allowing them to operate beyond the reach of regulators. Moreover, there is no accountability or serious risk management taking place at any of these large pension funds, allowing senior managers to reap huge bonuses for taking excessive risks (typically by beating bogus benchmarks in private markets).

And just like AIG, when their financial solvency eventually reaches a breaking point, these pension funds are going to require billions, if not trillions, in bailout funds to allow them to meet their pension obligations.

You'd better get ready because Uncle Scam wants your money and there is nothing you can do to stop him.

Yes, there is, but it would require people getting out of bed and voting. Developing, as they say...

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