Zero Hedge: Harry Markopolos, the investigator who exposed the Bernie Madoff Ponzi scheme, has uncovered a new fraud. The unfunded status of the pension fund of the Boston Transit Authority (the “MBTA”) is $500 million bigger than previously thought, according to Markopolos. This will have a significant impact on the municipal bond market, especially if it turns out that the MBTA’s problems are endemic among similar pension funds.
Although the full details are not yet known, Markopolos said the $500 million gap is due to bad investments, fraudulent accounting and unrealistic actuarial assumptions.
Markopolos called what is left of the MBTA’s pension a “Tender Vittles” retirement plan,” meaning (sarcastically) that its participants would be eating cat food. more …
Opinion: Merrily we roll along, roll along, roll along … until, that is, the money stops.
I will have to admit it has been some time since I worked with pension plans, since I spent the last 20 years of my career in financial services in management.
Back then, pensions were under strict investment guidelines called ERISA, nicknamed ‘every ridiculous idea since Adam’ by Ronald Reagan.
It wasn’t until 2011 that pension plans began using Hedge funds to manage assets. Since most government pension plans needed to earn an 8% return each year to pay out bloated retirement checks, private hedge funds seemed like a good alternative despite nose bleed fees.
And it wasn’t the lavish life styles of fund managers complete with Ferraris and mega-yachts that made municipalities nervous, it was poor performance that caused many plans to pull the money.
The next problem for managers after closing out of hedge funds was what to do with the cash, since government bonds have only yielded a paltry 2-3% for over a decade, well below the needed 8%.
I have said this before, what makes this a very big deal is since most government retirees were promised unrealistic retirement checks, they have historically been poor savers.
I am not going to mention Revelation 6:5-6 or Haggai 1:6 again. Period.
(Thanks to Leo for sending this in)