Tanta,they had 47 brokers calling them within 5 minutes of that article appearing,and i shudder to think of the traffic jam caused by real estate people who googled their address and rushed to get there FIRST in their mercedes SUV's.
The Information Management Network couldn't have picked a more opportune time to host its inaugural Global ABCP and SIV's Summit, which was held last week. Against the backdrop of beautiful Paris, a roomful of industry players had some ugly matters to discuss.
As a police officer with a probation officer wife in CA, thanks to Gov Gray Davis, we are guaranteed 90% of our highest single year pay for life with a 2% annual Cost of Living adjustment. This is rather lucrative. As the WP suggests, anyone in the private sector would need to have saved several million dollars in their 401k's to do what our pensions do. While I am personally glad, of course, that this pension system is in place, and guaranteed by the tax payers of California, I frankly don't know how it can be done. The actuaries that the state used to determine life-expectancies of police officers are based upon officers that are dying now, and thus were cops in the heavy smoking, blue collar days of the 50-60-70's. The current police force is much different, more healthy, and considered much more white collar. They can be expected to live 30 years or more after retiring in their early to mid 50's. Which means that the state will pay them for 30 years + for doing nothing with their LOWEST year being equivalent to 90% of the HIGHEST year while actually working.
This is a little off-topic, I know. However, I predict a growing resentment and distress over the lucrative pensions of governement workers that will continue to add stress to already overburdened government expenses.
For those of you considereing a career. Get in while the getting's good. You may only make decent money for the first 30 years. But it's like hitting the lottery on the day your retire.
Asset Backed Alert, Harrison Scott Publications Inc. (September 21, 2007)
Chase Manhattan and Discover are quietly gauging investor demand for big credit-card securitizations that they could bring to market in the coming weeks.
Each transaction is expected to tip the scales at slightly more than $1 billion. Affiliate J.P. Morgan Chase is handling underwriting duties for the Chase deal, while Morgan Stanley is working on behalf of Discover, which it spun off in June.
A lot of talk centered around the securitization market this week, from former Federal Reserve chairman Alan Greenspan's gloomy remarks about the sector, to a midweek summit that attracted more than 900 industry delegates. What spoke volumes, however, was the uptick in securitization activity from various asset classes, including a small mortgage transaction from Yale.
[snip] (This is the money quote at the end of the article)
"We have to make better distinctions between triple-A's," Sinha said. "It always looks like there is a fundamental contradiction between triple-A and triple-A's on mezzanine."
He added that the ABS industry allowed derivatives into the sector and transformed subprime credits into triple-A-rated securities, employing techniques that seemed like alchemy to the outside world. Therefore, the ABS industry needs to make better distinctions between triple-A ratings.
"There should not be an insider's perspective, [while] to the outside world a triple-A is a triple-A," he said.
Glad to see they are so financially set. Not a surprise given they both sucked on the government teat for 30 years. And when I lived in that area, I paid an effective 50+% tax rate to support both of them.
In the same 30 years, I've had 10 jobs (been laid off of 6 of them), had two traditional pensions dissolved through bankruptcy. And there's been maybe 10 years of self-employment mixed in there as well. And I'm doing okay, but I'm at least another 15-20 years from retirement. That 2nd home in the country is a bit tougher to obtain in the real world --er-- private sector.
Oh, my planned retirement home is in the mountains of Tennessee and I plan to pay cash.
More than three-quarters of the institutional investors responding to the Greenwich Associates survey believe that the liquidity crisis will continue to spread into products and markets beyond mortgages, collateralized debt obligations and other structured products. "However, the investors are divided when it comes to the question of whether the current liquidity crunch represents a short-term event or a structural crisis," says Greenwich Associates consultant Lori Crosley. "Fifty-five percent of study participants see the liquidity crunch as a structural crisis, while 45% see it as a short-term event."
More than 45% of study participants say they have deliberately changed their portfolio's credit profile as a result of market conditions, including more than half the institutions with more than $100 billion in assets under management. The moves were almost universally in the same direction: away from risk in general and from mortgage and real estate exposure in particular, and into higher-rated instruments, especially shorter-duration government securities. "Institutions are also focused on limiting counterparty-risk in an atmosphere in which the full extent of the losses and exposures of individual counterparties can be difficult if not impossible to ascertain," says Greenwich Associates hedge fund specialist Karan Sampson.
I can't believe this drivle gets published. A couple brilliant quotes...
"Are some sellers giving in to lowball offers, fearful they can do no better in the wake of the subprime mortgage implosion and home sale bust?"
We wonder what's going on out there are sellers giving in to the bottom-feeders who are trolling for any hints of distress or urgency?
"Serious sellers can protect themselves against lowballers and vultures by hiring an experienced appraiser before listing."
No acknowlegement that prices might simply be falling. It's the "lowballers and vultures" who are taking advantage of the poor naive sellers. Heartbreaking, really.
So they're buying a second home, that' nice. But to buy a second home for $450,000 - about twice the national average - I think that's gross. It's like you don't know anymore which home is first. On the backdrop of falling home prices, I think it's, well, a courageous move.
Am I alone in thinking one home is more than enough upkeep? I suppose there are quite a few people on this blog who can afford a second "home", but it sounds like a big pain in the a$$ to me. Gloomy and pessimistic as I am, I just imagine everything going bad at the other place while you're gone. Who's gonna mow the lawn?
"As a police officer with a probation officer wife in CA, thanks to Gov Gray Davis, we are guaranteed 90% of our highest single year pay for life with a 2% annual Cost of Living adjustment.
...
For those of you considereing a career. Get in while the getting's good. You may only make decent money for the first 30 years. But it's like hitting the lottery on the day your retire."
Average Joe,
I see two little problems with this plan:
Although "guaranteed by the tax payers of California", many of those who are not at the front of the line are never going to collect. As you have stated, it is impossible to fund, and I believe there is eventually going to be a revolt by the people experiencing "growing resentment".
That 2% COLA will come no where near keeping someone ahead of even basic inflation, let alone what's on the horizon due to the fiscal disaster we are facing now.
However, I predict a growing resentment and distress over the lucrative pensions of governement workers that will continue to add stress to already overburdened government expenses.
California is in good shape compared to many state/local government entities. CA has a large enough tax base to raise taxes, and it will. Taxpayer resentment will grow, but your pension is good. Congratulations for having your years of public service pay off in retirement.
The same will not be true of many municipalities that have similar or greater long-term pension obligations, plus increasing retiree medical costs and skyrocketing social services burdens, due in part to foreclosures, the economic downturn and the stresses they are putting on the social/family fabric.
When these municipalities are forced to raise taxes, people (especially mobile retirees) will move away or refuse to move in. Hundreds of municipalities will have to declare bankruptcy in the years ahead, starting soon. The municipal bond market will be one of the next credit shoes to drop.
Speaking of eager real estate agents, some are not it seems all that eager. I emailed one in Phoenix to inquire about purchasing an expensive high rise condo. I incidentally expressed a few mild complaints about the site (no floor plans offered, etc.).
In return I got an insulting message telling me I was "rude" and inviting me to go elsewhere.
I thought Phoenix realtors needed customers, but this was didn't. Or else he was so soured by the state of the market that he just lashed out aimlessly at anyone who came near. Odd, I thought.
Rewinding to 1977, that was the year I decided not to drag my ass to some federal job for the next thirty years or even worse, become a school teacher. Hell, I didn't even have the foresight to join a union (they're evil anyway). Maybe I can find the Scrugg's number in the directory and see if they need a house cleaner for their second home.
energyecon - keep em coming. thats a great website.
AverageJoe- i live in Cal and i wish u the best of luck. i seriously hope the future doesn't cause the state legis to back out of its commitments but i am skeptical of them.
Hi
Aveage Joe Your right there are cities in the SF Bay Area trying to figure how to pay those pension now and with the down turn something has to give.
I've been self employeed and then have gotten a blue collar job, my only hope is it last 4 years so I can retire. It has a pension but that doesn't mean it will be there when I leave.
2nd home sounds nice but I can't afford the 1st 1 long time renter.
Thanks CR and Tanta
jo6pac
No new price and hence size of the haircut is mentioned, though it is at least a $400 million as the loan book is $4.5 billion and the previously mooted price was $4.9 billion - and rumored to be selling for less than the face value of the loans.
LONDON (Reuters) - Barclays (BARC.L: Quote, Profile, Research) is preparing to sell its FirstPlus sub-prime consumer loan business at a loss, according to a newspaper report on Sunday.
General Electric Co (GE.N: Quote, Profile, Research) and AIG (AIG.N: Quote, Profile, Research) are the frontrunners to acquire the business at a knock-down price, the Sunday Telegraph said. Barclays declined to comment.
"While I am personally glad, of course, that this pension system is in place, and guaranteed by the tax payers of California"
Not this one, I took my money and ran, nothing personal Average Joe my daughter is a prison guard in the golden state and that institution in my opinion should be privatized.
80K annual expenses with the home paid off? We live in different worlds. Seriously. Thoreau asked rhetorically that after the basic needs were met would people want more and bigger houses, hotter fires, etc. He had no idea the answer was why yes, of course.
What the heck were these people doing talking to a financial planner anyway? In their situation it doesn't seem to take a genius to figure out their finances. At their pay scale I'd guess they'd have to know something. The only thing I see is the disaster when they get bored and look to make some serious money investing their life savings in a Nigerian bank.
"While I am personally glad, of course, that this pension system is in place, and guaranteed by the tax payers of California"
The productive will leave high tax areas and only the recent immigrants that make proverty income will stay.
With the boommers retiring, states will compete for younger, productive workers buy offering lower tax rates. California will be suffer lower growth in the future....like the France of the US
Average Joe - I find myself looking for your comments. I'm sorry to say that I think this one is as insightful as your norm. Unless you can retire quite quickly, I don't think you will get your full pension. The growing public/private imbalance is a problem for the entire nation. When I was a kid public salaries were low but their benefits were far better than private. Now it's changed so both salaries and benefits are significantly better than private. It can't persist. (Btw, your combined salaries are above the mean, even for CA.)
If it's any comfort, I am pretty sure that NJ has a worse pension problem than CA. Granted, that's not saying much, but you and your wife should keep a weather eye on NJ, because it may be predictive of what happens in CA. NJ's working population is dropping because of the exodus.
It used to be that state employees were paid less than their private counterparts but had better pensions. With the economic developments of the last 20 years or so, the private effective wages have stagnated or declined, so the muni folks have passed us by.
Never the less, one likely way is that you will be paid 90% of some wage that has been murdered by inflation. Sad to say my 401K will be singularly wiped out.
In most places $116K annual pension income would be at least upper middle class and probably be considered wealthy. These are not average people in middle America - at least not in mine.
As to spending $80K/year w/o a mortgage, I recall the bond salesman Sherman McCoy in "Bonfire of the Vanities" explaining how one could not possibly live on a million$/year (80's dollars). He actually made a good case.
Yea, the pensions will likely be modified due to lack of funding, and the fact that the average taxpayer will not be interested in having retired govt employees doing much better than he.
One thing that might change that is for national single payer health care where the local/state govt can punt health care to the feds and use the savings to fund pensions.
If it's any comfort, I am pretty sure that NJ has a worse pension problem than CA. Granted, that's not saying much, but you and your wife should keep a weather eye on NJ, because it may be predictive of what happens in CA. NJ's working population is dropping because of the exodus.
You are right about NJ. But there isn't much comparison with CA.
In NJ, politicians looted the state pension system using fancy financial assumptions several years ago. They didn't pay in enough money. If NJ were a private enterprise, it would be bankrupt right now. PBGC would have to take them over.
CA will increase taxes and the taxpayers (who stay) will pay. NJ is a disaster.
I predict a growing resentment and distress over the lucrative pensions of
governement workers that will continue to add stress to already overburdened
government expenses.
You are correct that the math doesn't
work out. I predict a 2% COLA won't be enough to keep up with what's going
to happen to make the math work out.
Wash Post: "Traditional pensions. . . " - how insulting.
A Federal retirement and a teachers retirement. Stuff like that sucks the life out of our economy. And don't tell me about the sacrifice with all the Lexis's in the school parking lots and the full medical benefits on top.
As to spending $80K/year w/o a mortgage, I recall the bond salesman Sherman McCoy in "Bonfire of the Vanities" explaining how one could not possibly live on a million$/year (80's dollars). He actually made a good case.
That would be about 2 million and change now. But his "case" is not typical. Sherman had to keep a Park Ave. apartment, an expensive wife and an even more expensive mistress. And he lived in NYC. Put Sherman in Omaha Nebraska and everything changes.
DOn't worry about CA pension problem, its spread out with disability and comp.
Law enforcement at 19-1/2 years (6 months before scheduled retirement) usually pulls the "stress" disability claim to get even higher benefits, a bonus, tax free.
(I thought the 20 year retirement was for added stress)
I am going to pray every day that pensions of you and parasites like you get wiped out - all of a sudden - completely. The only interaction I had so far was with traffic police, and I thought they were greedy setting up traps to collect money, rather than making roads safer.
I am an average California resident paying 10% income and sales taxes. I do not have a house and do not get any prop-13 benefit of low house tax. This state is on the verge of bankruptcy, and only the housing bubble postponed the inevitable by few years.
Such an interesting ploy, average Joe, (I'm following MOM who's following you) and agree on how those health care benefits will pay out once you retire...(GM, the policy leader, clues us in).
Also following rich and the looming crises for municipalities whose revenues may be going the way of the housing market...of course this doesn't mean there is a spillover...a correction maybe...Maybe like a monumental adjustment.
Sippn, Troll Brothers, Yikes! I've known a number of school teachers and cops, and they certainly aren't known for their lavish lifestyles. If they can retire comfortably, all the better, they deserve it. Now pension plans are going to be cut back, but this is a bad thing that can't be avoided, not an opportunity to take glee in the suffering of others. Save your spite for more deserving characters, e.g., Kenneth Lay - Wikipedia, the free encyclopedia
It's funny... the people who complain about public workers "sucking off the government teat" are the same ones who say union members shouldn't strike, they should just get a better job. That teat's there for anyone to suck on -- if you think CA prison guards get a ridiculously good deal, then why don't you apply? They're hiring now!
But if you must ask, new & existing home sales were thrashed in the last 60 days with financial market fallout, data already out in SoCal. LEN/KB - I still think public builders are rationing land writeoffs hoping for a miracle or time to blend in new lower land purchases with old junk, but I'm not Ivy Z.
Regarding housing recovery, I think it needs consumer confidence, the first step taken by the PHeD Tuesday, because pricing alone hasn't created much market velocity.
Read somewhere (probably here) that there was a 4-6 month lag in real estate market response to Fed changes.
re: retirement income. I assume that the income is not free from state tax so that part of your state retirement is self funded. The way this all ends is inflation. It is the unkindest tax of all just for this reason - it robs the pensioner of the buying power of their pension. The COLA protected pension will be inflated into higher tax brackets and government will no longer be able to index tax rates to inflation.
The good news is that this will take decades to play out. California enjoys enough natural advantages that, once housing becomes affordable again, demographics work in your favor. Believe it or not, one of my favorite places is Ridgecrest, CA out there in the middle of the desert.
There are a lot of boomers with substantial assets. A growth industry will be attracting them for retirement (with younger workers meet their needs). This assumes that they are able to preserve their assets through the coming troubles.
When it comes to safety nets, I depend on my government. Everybody should become government employees for the fantastic retirement benefits. And since they can print more money anytime they want, you don't need to worry about your pension going bust. If anybody deserves a plush retirement it is government employees. A just reward for all the public wealth they have created during their service. Without the investment in new committees, advisors, and policymakers where would this country be? And let's not forget private government contractors and all that they have sacrificed to make this country great. Why can't we have PBGC also pay for their retirement? God Bless Free Money, God Bless The US of A! See, all it took was some strong leadership from the public sector and all our problems have been solved!
sippin, sounds about right to me. KBH will recogize sale of their french operations this qtr. That might soften the implosion in their topline numbers or could be used obscure their writedowns, enabling them to take a bigger hit now so they can appear less weak next report and claim a turning point. There will be one sooner or later. I doubt it'll be this past qtr.
California is leading the way in creeping Hillarycare. The simple fact is that the State cannot afford the public sector promises it has made. This is not hyperbole. Existing obligations are already driving out the middle class and creating an underground economy in an increasingly business hostile economy. The result is the potential to default on retirement outlays unless the healthcare portion can be nationalized. The domestic automakers need this as well. Bailouts are all the vogue. What's one more?
The First thing I would do if I were Avg Joe, is on the day of reitrement, I would contract with a lump sum distibution company, and sell my annuity reitrement for as much cash As I could get...
The idea that you can just inflate away the costs of inflation-adjusted (Medicare) or COLA-adjusted (Social Security, Joe's pension) benefits is ridiculous.
Such entitlements become back-breaking liabilities for government in times of high inflation. This is especially true when the cost of entitlements is rising faster than GDP. And that's where we are sure to be for the next 30 years.
What you end up with, with COLAs and high inflation, is old people having all the money and young people not working because there's no use.
You had the opportunity to be a govt employee, but chose to take your chances in the private sector. Just because you didn't plan for the future doesn't mean that some of us didn't.
My govt retirement is what made getting shot at, deployments, and other joys of the military worth it.
And the best part is in Jan, As a military retiree, I can go civil service & get another pension (at 56) and with both of them, I might almost have enough to live on as a "double-dipping" retiree.
i dont get it, why dont you just get moved to the bulgary buy nice house at the beach for peanuts 30k and pay monthly health insurance cca 50 usd a month ok 100 if you want vip treatment xD
my parents have many friends living in usa who are waiting to get SS and their pension and get the hell out of there to enjoy the life in eastern europe
If journalists tried to write about the average American, and not the lone exception to every rule, who would read their stuff? It would bore us to tears. Hence the stupendous stories that amaze all but to which no one can really relate personally.
Avg. Joe, you're taking a lot of heat, but I have 2 family members retired and living off the public trough and they are doing just fine and dandy. I always said - when I get to be 45 I'm getting a federal job so I can retire with ease. Ah, 45 has come and gone and I'm not doing it, but I still think it would be a great way to go.
Tanta, I've been missing your wit and I'm glad to see it back, and with a vengeance.
I do suspect that the pensions won't last. When things get bad enough, the cornucopia that Gray Davis opened up for public safety pensions at the height of the dotcom boom (when we'd all be rich forever) will close. Public safety unions have a lot of clout, so it will take a while. But if things get bad enough, it will happen.
My brother-in-law the retired Richmond fireman told me that the younger firefighters won't get nearly as good a deal on health insurance and other benes in retirement as he did -- so the process has begun on some level. By the way, he died this year at 58 of something like natural causes.
I do not wish to deny you a good pension and healthcare for your service. You deserve them. I guess my point is that we all deserve security in our old age, if not necessarily enough to buy second homes and vacation overseas. People shouldn't ask that security be taken away out of envy; they should ask why it's not available to them.
All that said: nobody's factoring in the built-in inflation-fighter that public safety employees have in California: as their retirement is based on their highest paying year (or average pay over the last x number of years, depending on contract), many workers near retirement load up on overtime so that their highest-paying year is 150 percent or even 200 percent of their actual base pay. That's what my brother-in-law did; he retired on much more than his base salary. That's the one thing that I resent.
You had the opportunity to be a govt employee, but chose to take your chances in the private sector. Just because you didn't plan for the future doesn't mean that some of us didn't.
My govt retirement is what made getting shot at, deployments, and other joys of the military worth it.
And the best part is in Jan, As a military retiree, I can go civil service & get another pension (at 56) and with both of them, I might almost have enough to live on as a "double-dipping" retiree."
Yes, that's great and will last until enough of us in the private sector can't afford to pay you anymore...because we are paying you...you do realize that right??? Oh, and in case you think everyone went into the private sector so they could get rich, think again dumbass.
There are two separate issues. One is reducing the entitlements of younger people. The second is reducing entitlements that have already been granted and begun.
For 3 reasons, it will very difficult to do the second:
Powerful political backlash from older voters.
Negative impact on the economy. It means people on fixed incomes would have less to spend.
Increasing burdens on the social services network.
So, if Optimistic Joe can lock in his first pension check, I think he's in pretty good shape.
Cutting benefits of younger workers (but not older benefiaries) is just another type of generational transfer tax.
Your minimum Social Security benefit (with unlimited COLA tied to CPI) is locked in by formula at age 60.
Thanks to all the responses to my entry. (I'm flattered that MaxedOutMoma even reads my comments!)
But just so we're all clear on my perspective:
I think my pension is ludicrously lucrative. I understand that there is no way, based upon the 9% of my salary my city pays toward the pension fund (Calpers), that mine and all other pensioners can be fully funded without going to the taxpayer for help at some point. If the taxpayer won't help, as I suspect they won't or at least won't want to, then future cops (i.e. the taxpayers indirectly) will pay for me out of their paychecks with increased contributions combined with diminished benefits. Sound familiar: Social Security anyone? (Which I am ironically exempt from paying toward).
I am preparing for my pension to disappear even though it will be next to impossible to do since it is protected by law. I am maxing out mine and my wife's 457 plan (she has a 401b also).
Combined we make $170 grand a year and put $44 grand of it away in retirement accounts. Although we have saved quite a bit of money ($400,000 so far in 16 years), I realize it will come no where near replacing what the state is promising us. I also know that many who make what we make and save how we save in a 401k in the private sector will very likely not do as well.
Unfortunately we are to a point where the risk takers are supporting too many people with too lucrative of benefits. This will cause increased tensions and financial hardship for communities.
I understand this. I have no point to make. I am just being honest. I am not going to quit or ask for a reduced paycheck. I don't want them to reduce or eliminate my pension, even though it's probably necessary and fair. I will continue to try to pay as little in taxes as possible.
I do not begrudge the Scruggs for their good fortune. But the fact that they can deduct the interest on a second home is just another example of why the mortgage tax deduction needs to be eliminated (or at least drastically revised). The Scruggs are in a financially better situation than most Americans. Our tax code should not be subsidizing their purchase of a luxury.
"I understand this. I have no point to make. I am just being honest. I am not going to quit or ask for a reduced paycheck. I don't want them to reduce or eliminate my pension, even though it's probably necessary and fair. I will continue to try to pay as little in taxes as possible.
I'm human."
Average Joe
Yes AJ, and don't begrudge me if I fight tooth and nail to ensure that more of you are not continually added to the tax base that I, as Gen Xer, is expected to pay. I mean it, tooth and nail.
75% of the US population does not receive, or is eligible to receive a pension of any kind. I don't see how it is a problem for our economy if all pensions went bankrupt. 75% of the population will be just fine with that.
Average Joe, you are more that human. You are an intelligent human. You seem to have made a very rational analysis of the situation, and what's more, you actually seem to be making good choices based on that analysis.
Still, I must add my voices to those expressing outrage at the level of retirement benefits you and others in the government have been promised.
Not all retirement pensions are that great. My wife has 30 years as a teaching in Indiana. With a master's degree and about the highest seniority in her school, she makes 55k/year for 10 months and is likely to get a 14K pension if she retires in 5 years with 35 years of service. Remember that the pensions are subject to income taxes. She also has a 403(b) with a modest match. A pension is a pension and it would take a good chunk of savings to replace it. Still, teaching is not a lucrative profession.
I think my pension is ludicrously lucrative. I understand that there is no way, based upon the 9% of my salary my city pays toward the pension fund (Calpers),
Finally we get to the heart of the matter....
Calpers was SCREAMING for yield thru 01-02...
without some new mechanism, there accounts were going to be underfunded... the market literally had to go up..
thanks to your Ws derivatives guru...
we get a host of acronyms and a steady bull market in debt and equity.
those derivatives guys are all worth the mega-millions they recieved just so calpers can look whole on the surface...
What happens when real estate is reassessed at 50% off in Florida, Arizona, Nevada, and California? Does this not affect the national economy?
Keep in mind that not all locations in those states has been subject to ludicrous RE inflation. I was appalled when 2-ac lots in my area (of Florida) were being listed at $45K (22K/ac). That may have been wishful thinking, as a 23-ac lot near me just sold for $175K (7.6K/ac). More in line with what I would have expected ... maybe even a tad low. I don't think it was a pricing crash, just more a realistic sale.
Not unless you are a teacher in Long Island a suburb of NYC. From an article in 2005 that cites 2001 to 2003 data
"...One in 12 teachers in Nassau, Suffolk, Westchester, Rockland and Putnam Counties now earns more than $100,000, and the ranks are growing fast, according to an analysis of state data by The New York Times. On Long Island from 2001 to 2003 (the most recent figures available), the number grew fivefold, to 2,800, including 498 elementary school teachers, 29 physical education teachers and 83 kindergarten teachers."
That's the heart of the pension issue -- overly rosy estimates of future yields. Real returns will range from shockingly low to substantially negative, devastating these funds.
Furthermore, future contributions will slow dramatically as public institutions lay off personnel and freeze wages in the coming depression.
I foresee plenty of circumstances where municipalities will be cutting active cops / firefighters / etc. to pay for retired cops / firefighters / etc. How long will taxpayers put up with that?
Oh, and btw - a friend of the family who works in the California court system points out that all the court officers make sure they take a short tour of duty in the prisons to push up their retirement package. It's apparently a well known secret.
The problem is "math doesn't revise it's rules for political needs"
.
The regular political response is to float bonds in the short term (sell today's hole for a bigger hole to be delivered later) followed in the long term by either dollar devaluation or bankruptcy to make the equation work.
Social security payments are fairly good. I'm surprised no one has mentioned them that much.
My wife and I togather draw more than $30k a year from social security which in itself is a good pension especially with the COLA. Plus we have a seperate pension from my old company.
May I remind everyone that the Bush administration objected to counting future Social Security & Medicare obligations since (to paraphrase) "those programs can be cut or canceled at any time."
Just to really rub salt in the wound. A little accounting trick called the "spike" is being employed as an added bargaining tool by cities.
Our last contract approved it.
It works this way. Normaly our city pays 9% of our salary directly to Calpers. The last year however, they pay it to me, and I hand it directly over to Calpers. My pay is unchanged but it looks 9% higher my last year. Thereby making me get 90% of a 9% higher number. In other words, about 97% of my pay for life with a 2% COLA. Since I no longer put into retirement or pay union dues, I actually make much more money the day after I retire than I ever made working. As a healthy 55 year old with many working years ahead of me, I am paid alot to stay home and do nothing.
Although I personally hope you don't win, (at least not within the next 40years or so) I don't blame anyone for fighting this. I would too.
I do not care what kind of job you choose to accept. If you don't like the fact that, in the future, a job like teacher, cop, fire fighter, trash person, or public employee job, doesn't offer a public pension , then don't apply for it. Trust me, there are plenty of people who will.
I don't blame anyone for fighting this. I would too.
Average Joe,
Always liked your posts, and I find you absolutely sincere in this regard, too.
That said, I don't think it's a matter of fighting it. Like the housing bubble, these circumstances are simply unsustainable. Anything that can't work won't.
I don't belittle anyone who collects a nice retirement pension. Like Arthur Godfrey said, if it's free, take it. It's just that I think people who are not eligible for them, should not have to pay for the ones that are.
Bad ideas then, worse now
EntitlementProgramsStarted1930 | 09.23.07 - 6:20 pm | #
LOL. Do a repeat the 30s and they'll look like genius going forward.
Avoid the thirties and they can and will pass...
Irony is those that hate 'entitlements' the most are the very same folks voting to gut oversight & regulation... thus ensuring environments like the 30s repeat. Again and again.
Cool huh?
'Go long' entitlements, short 'regulatory reform'... that's my motto.
And 'yes' it isn't a good idea - but lotsa bad idea keep coming back 'cause worse ideas were put forward making the bad idea inevitable.
tj, I was astonished at the amount of social security we were eligible for when we applied for it a couple of years ago. Especially in light of the bad publicity re it.
Still, there are an enormous number of people receiving it today. I'd bet whichever party that dropped it would promptly be voted out of office by those currently receiving it plus those within a couple three years of eligibility.
Although I personally hope you don't win, (at least not within the next 40years or so) I don't blame anyone for fighting this. I would too.
Nothing stopping you from doing 'good' with the money... My dad did 25 years military (5 active war time and 20 yrs reserve/guard - very nice pension)... he also made money in business.
He left us with some and still had a pile left over to buy some land for conservation & donate it to the state.
Wow, what a lynch mob! If you've got a problem with AJ's pension after he planned ahead, worked and saved for 30 years, then 30 years ago, you should have organized a referendum to scale back the promises made at the time.
rich - great points. I'd only amend #2 to say that it is "negative for the economy TODAY, vx. tomorrow". Which goes along with the Baby Boom generation - get paid today and spend today and let everybody else clean up our mess when we're dead.
The Baby Boom generation continues it's spoiled-brat-ways and will set this country and their kids back significantly. Of course, if enough people vote for Ron Paul, we'll be okay, but that's the right thing to do, so I'm sure it won't happen. Nobody wants to face reality - "delay it until I'm dead" is the mantra.
"75% of the US population does not receive, or is eligible to receive a pension of any kind. I don't see how it is a problem for our economy if all pensions went bankrupt. 75% of the population will be just fine with that."
I work for a company with a defined benefit pension plan. Part of my decision to work there and the way I rationalize my pay rate assumes that pension plan remains in place and is funded according to their claims. I view it as a contract with my employer. It's on my benefit statement. If it gets taken away I will be more than a little angry because I can't go back and modify my past earnings to compensate for it. I feel that way about all pension plans. SS and Medicare need to be funded too.
This statement just proves that older people couldn't give a rats ass about their children or their grand children. For this reason alone, this election cycle, the younger generation should register as republican in droves, and vote for Ron Paul.
At another point, in response to a question from Democratic Senator Jack Reed of Rhode Island, Greenspan said, ``We can guarantee cash benefits as far out and at whatever size you like, but we cannot guarantee their purchasing power."
90% of higest year??? That applies only to police officers, for everyone else it's the usual 1.5% a year up to 20 years and 2% a year over 20 years. Health care isn't "guaranteed for life", unused sick leave is monetized and can be applied toward health insurance premiums for as long as it lasts.
The article is nothing more than public baiting, if my calculations are right the retired teacher and her "public servant" husband were pulling down nearly $200,000, meaning that he's a high level, 125K+, bureaucrat. And BTW who spends $80K annually with a paid off mortgage and then has the gall to describe themselves as frugal.
"
Bankruptcy? What happens when civil bodies do it?"
It gets nasty. I don't remember the technical terms, but basically an outside committee of trustees appointed by creditors takes charge of the financial end of things, and they cut the budget as much as they can until the agreed-upon settlement is paid off and the city is in the black. Little cuts, like police, fire, parks, maintenance. There may not be much city left which all is said and done.
Average Joe - once again you nailed the issue. It is sustainability. People don't understand that the value of our houses and assets are only going to be sound in the future if we have managed to create a situation in which younger people will be able to afford the same things. Otherwise, our assets will be confiscated through high taxation or will devalue because no one can buy them. If your $500,000 house ends up being worth $300,000 in 15 years, it will be because the younger people can't afford to pay any more. There's lots of ways for assets to vanish.
The question is why does a retired cop think this way, when politicians don't? Btw, I don't think you are doing nothing by sitting home and asking these sorts of questions. We all have to start thinking this way.
To those freaking out about public pensions, there's a darned good reason why firefighters and police need to get out early. That is, unless you want a 63 year old with slowing reflexes and on BP meds trying to face down a 20 year old armed robber, or trying to get you out of a burning house.
Of course, as Average Joe explained, it's a worry if the pension system set up for older officers can't work for younger officers. After all, fires and robberies happen to retired firefighters and police too! We all NEED these people.
many will argue that the #1 reson for the programs was to provide the safety net for people so that we would'nt have people go begging in the streets for food.
80 year old hungry men and women, in droves, is not pretty.
however, that concept does'nt solve the problem it was desingnated to solve. that cost, of housing and feeding the poor who, thru a long life, just could'nt keep it together, could be done far less expensively.
Also, what good does it do the wealthy(relatively) to recieve a ss stipend when there pension,military, whatever other retirement income more than meets there needs, as will be the case for Aj(if it were assumed he retired tommorrow)?
See, it does'nt meet the stated/assumed objectives.
and more, why is the cap 97k?
"Not all retirement pensions are that great. My wife has 30 years as a teaching in Indiana. With a master's degree and about the highest seniority in her school, she makes 55k/year for 10 months and is likely to get a 14K pension if she retires in 5 years with 35 years of service."
Here's a nasty little secret about teacher pensions -- the feds get to deduct money from your social security payment to "compensate" for the big bucks you get form your teacher pension -- even though you paid full SS taxes!
How did this happen? Because it's almost always safe politically to give teachers the short end of the stick. So before you put the hate on teachers, think about that. And that the profession is so tough, and paid so mediocrely in most localities (NY is an exception, people), that most teachers get out after 5-7 years. I'm no teacher, but I've seen it.
Plus, if you move from district to district, the new dist. may not -- usually will not -- honor all your seniority, so you go from 15 years back maybe to seven or eight.
Still think teachers are living off the fat of the land?
however, that concept does'nt solve the problem it was desingnated to solve. that cost, of housing and feeding the poor who, thru a long life, just could'nt keep it together, could be done far less expensively.
Ya, ya, ya... I'm sure there's a 'privatize it' pony in there somewhere. All that horse s***, must be a pony somewhere.
ot a chance...that's gw's plan. invest the fund asset's(in cdo's).
The people i know who currently recieve it ,certainly don't need it.
They use it for there CC Social.
And that's another complaint...
"hey, I paid into it!" i should get it back...
i'm 38...I paid in for 8 years...I don't expect to ever recieve anything from it, nor would i want to if I have a house over my head and money in the bank... but that's jus me
Just a thought; could municipalities re-incorporate and evade accrued pension liabilities? For example, could two adjoining towns combine and form a new one?
"Average Joe didn't work and risk his life for us. He worked for that old town that used to be here."
I haven't done too much nonprofit accounting, but this would just mirror some of the games played in private industry.
i'm 38...I paid in for 8 years...I don't expect to ever recieve anything from it, nor would i want to if I have a house over my head and money in the bank... but that's jus me
You'll probably get every penny you invested in SS or a pension... the question - as tj pointed out from the AG quote is what will those pennies be worth?
I've said all along that the problem isn't the 'accounting' in MOST cases... its 'production'. That problem isn't any easier to solve if its privately or publicly funded 7 administered. Or even individually. We as a society need to produce enough stuff so that the there is ample supply for young and old and still have enough left over to reinvest for future generations.
We aren't doing it - not with a negative savings rate - and it isn't all just 'boomers'. Everyone, every generation, currently has a hand in that cookie jar.
So while I understand and agree in principle there is a problem - I don't buy into any of the current 'quick answers' - neither the 'its all F/U and I'll never see any of it' nor the 'its all okay why worry'. I say worry - but not for the reasons we are being told.
I view it as a contract with my employer. It's on my benefit statement. If it gets taken away I will be more than a little angry because I can't go back and modify my past earnings to compensate for it. I feel that way about all pension plans. SS and Medicare need to be funded too.
Your defined benefit pension is more than a contract with your employer. It is a contract with the U.S. economy. Your employer pays premiums into an insurance scheme called the Pension Benefit Guaranty Corp (PBGC) that guarantees you will be paid your pension, within limits. If your plan defaults on its obligations to you, PGBC would be obligated to take over your plan and make good on most of what you are owed. PBGC is too big to fail. The government will not let PBGC fail. I hope this makes you sleep better.
Entitlement, don't blame you a bit. Just refuse it when offered.
Also, don't call 911, use the post office, don't drive on the expressways, skip ER (it was a life saver for me a few years ago), forget the fire and police, disability (comes in handy if something like happend to my BIL happens to you), medicaid, medicare, unemployment insurance, etc.
Be the rugged individualist. Sounds good to me for you to do it. I bet you can't make it though.
I haven't done too much nonprofit accounting, but this would just mirror some of the games played in private industry.
If there is a prayer it can work it will be tried - that's my guess.
The other question I'd like to know is AJ's pension fully 'vested' no matter what or is a condition of this contract?
Meaning lets say LA renegotiates a very different contract, one where they don't offer anywhere near as cushy benefits to retirees... can they pull some of his benefits away or are they locked in forever, say by the statute, even if the new contract is very different?
I realize the current contract wouldn't allow for AJs benies to disappear... but as all these younger guys come up with weaker benefits and older dudes with better benies die off... at a certain tipping point management can buy the younger guys contract vote with a pay increase and take it (and way more) from the older retirees who are out numbered.
I mean to a great extent that is what GM is trying to do... convince current rank and file there will be no tomorrow unless the cost of carrying retirees is made more manageable.
This is one of the final shoes to drop before a recession is definate. Some people say unemployment is a lagger... some say a co-incident indicator... whatever.
Michigan has been in recession for maybe a year already. Not it looks likje California is tipping.
Hang on folks, I think the clicking sound is ending, on this roller coaster!
dryfly, I would bet these future benefits can be modified. My company froze its retirement plan a year ago. No new entrants and no increases in benefits for those who retire under it in the future.
I've read that IBM switched from their regular retirement plan to a cash-balance system. Not sure what that means except that long term employees get less in benefits than what they were originally promised.
These are private company examples but there are probably nice loop-holes for city, state gov'ts to slither thru and exploit. My hunch anyway. FWIW.
Hazard,
I missed your leap from entitlement programs providing a social safety net, to f,s,l taxes that cover said programs...
The safety net, again , is to ensure that we don't have hunger in america, the breadbasket of the world(supposedly, quickly becoming the b-85 barrel of the world)
How do you equate that and the other programs you mentioned?
If i'm so lucky to reach the age where i could draw on ss, and i'm not homeless or dirt poor, and they won't simply allow me to refuse the check , then i'm sure there are numerous food/hunger related charities that i could/will donate it to.
is that so wrong...
And again, why is the cap 87k?
Hey guys off topic but 50% off sale on Miami Condos. Video at Housing Doom. Looks like they better hurry with that bailout 20 more buildings nearing completion.
Social security payments are fairly good. I'm surprised no one has mentioned them that much.
A lot of Boomers will just be shocked at how much Social Security they stand to get. It's up to three times as much as their parents are getting.
There are two basic variables that determine your benefits: 1) how much you earned in your 35 highest years, up to the SS maximum; and 2) the National Average Wage Index, which is Social Security's index of U.S. wages. What most people don't realize is that their benefits are indexed to average U.S. wages through 60, then CPI after. But wages have beat CPI by about 1-2% for the last quarter century. And the Social Security maximum has gone up sharply in recent years, too.
If you assume 3% average CPI inflation in the future, an individual Boomer who retires five years from now and qualifies for the maximum SS benefit stands to receive a total of about $1.4 million over the next 25 years, under current law.
To future generations, the SS benefits earned by Boomers will look hideous, unless the law changes. The main change I anticipate in the law over the next few years is to make 100% of SS benefits taxable for almost everybody, vs. a maximum of 85% today for middle income and up.
75% of the US population does not receive, or is eligible to receive a pension of any kind. I don't see how it is a problem for our economy if all pensions went bankrupt. 75% of the population will be just fine with that.
As others have said, Average Joe is talking about what is one of the most generous pensions around for people whose job titles don't consist of three capital letters starting with "C". The problem isn't pensions. The problem is police unions that are too strong.
As a general rule, I'm pro-labor, but police unions drive me crazy. One part of it is the compensation, but another is the way these fraternal brotherhoods manage to eliminate accountability for their members. Minneapolis keeps losing excessive force suits from the same group of officers, and they can't fire them.
My parent's - highranking 30 years military. think stars. Pops turned 67 yesterday. they certainly don't need there ss checks. how does that help the safety net?
they
I watched my California small town City Council try to retain a decent police department without raising pensions, but other municipalities outbit them with higher pension benefits. Eventually, the City Council was forced to increase pensions. This is a race to the bottom not unlike the housing mess. Everyone knows its crazy, but somehow the system prevents one from stopping the insanity. I fear it will be the demise of this great country if the pension, SS, and Medicare problems are not addressed soon. Maybe a serious recession, or depression, is what the US needs to clear the decks.
So what if 83 kindergarten teachers on LI make more than $100k. That's what, maybe 1 in 100? 1 in 1,000? I'll bet the fraction of people at Google making six figures is much, much higher. Why don't you get worked up about that? I know, the argument is that you have to pay taxes, but you don't have to pay Google. But, really, do you think you could stop any of your money going to Google, or any other big company? Even if you throw away your computer, they'll still be taking a small cut of every purchase you make (via the advertising budgets of the companies you do deal with). You have no choice to opt out, and you have no say in what they do with the money. But all the outrage goes to some teacher with 35 years of seniority who gets $101,000/yr for taking on admin work over the summer.
"I fear it will be the demise of this great country if the pension, SS, and Medicare problems are not addressed soon. Maybe a serious recession, or depression, is what the US needs to clear the decks."
As they say: if something can't go on forever, it won't. Of course, there are answers for all these problems; they just aren't politically acceptable. But come a serious economic crises, as you imply -- they might become acceptable.
PBGC is too big to fail. The government will not let PBGC fail.
Hahahaha... too funny. PBGC is pretty much insolvent already, and once the automakers dump their pensions it will be toast for sure. Besides, PBGC only guarantees part of the promised pension; those pilots got hammered.
I just retired and have contributed to the Social security system for 40 years. With the employer match actual contributions have been 250K.
Now compute the value of the 250K if it had been invested @ 5% a year.
And if I die before I become eligible, I get nothing and the government keeps the principle. SS is not an investment, it's a Ponzi scheme.
Boomers are getting screwed just like everybody else.
As a 29 year old the biggest problem I see for the future of America is that nobody I know can afford to have a kid after the student loans, $3/gallon gas, health care, credit cards, and lack of wage growth.
I know two people who bought houses in San Diego. Both of them are facing bankruptcy. The rest of us have simply come to the conclusion that we're never going to be able to afford to live in the neighborhoods we grew up in.
I make a pretty good living in software and I'm just trying to save money because I'm terrified of what mortgage resets and debt orgy are going to do to the economy.
So to the cop who thinks we're going to fund his fat retirement I'd say think again.
In our country, for better or worse, we have an idea that we will not let people (especially old people) die of starvation or poverty.
In Mexico and some other underdeveloped countries, it's the family's obligation to take care of old people. But here in our advanced civilization, families are too busy and have other priorities.
So, unless we had some kind of old-age social insurance (Social Security), we would have poor old people going door-to-door begging. Most rich people would ignore them, of course, but they would feel guilty.
I took early retirement in a lump sum payment last year. Sure it would have been much bigger if I had stayed another 5 years. But would I have gotten it? There was already talk of limiting lump sum payouts. I'm too young to actually use it without penalty for 7 more years and the wife is still working. Of course the return on investments between my 401k and my lump sum this past year was more than I made annually so I'm not complaining. (oil and PM's) (not investment advice)
As a dedicated public servant for the past 11 years, and a laborer in many cube farms before that...I know Oregon's public retirement system has done stupid things in the past, like guaranteeing certain rates of return..
On the other hand, Home Depot's Robert Nardelli got what... 200 million bucks when he was asked to leave his 'failed presidency'? I imagine his minions will get much less.
Hey, wait... doesn't the Home Depot board have fiduciary responsibility to their stockholders?
Why don't 'conservatives' show up at one of Nardelli's mansions, with pitchforks and torches? Oh. He's one of them. Got it.
I guess public employees are easier targets.
Yossarian: Why don't 'conservatives' show up at one of Nardelli's mansions, with pitchforks and torches? Oh. He's one of them. Got it.
I guess public employees are easier targets.
Because they are not forced to send their money to Home Depot?
The issue is about what level of retirement is "fair". That money has to come from either somebody's productive labor or inflation at some point. Unless of course there exists some magic wealth creation device... maybe the central banker's true power comes from a magic genie in a bottle?
Because they are not forced to send their money to Home Depot?
But they pretty much are, or to some other company that's more or less the same. The only way to opt out of contributing to inflated CEO salaries is to go live in a cave in the desert, and if you do that you can probably get away without paying taxes too.
Average Joe's pension arrangements have generated a lot of emotive huffing and puffing and like "jus me" I think the time to complain was decades ago, not now. And in the news today, we have the poster child for ridiculous pensions and benefits, ready to strike for more. What planet do these guys live on?
Public pensions for Police and fire are out of control. Here in Florida overtime pay is added to your salary for the last three years of service. It is especcially galling when overtime pay earned "free lancing" in the private sector is added to your last years earnings. My upper end community in the West Palm area has Palm Beach County rent a cops stacking there pensions with $35/hr overtime pay. I have never seen so many captians and majors sitting in cars drinking coffee and watching movies on their government issued laptops and in drive home police vehicles (some marked and unmarked).
In the mean time my private sector regulated utility changed to a cash basis pension in 98 and eliminated retire health benefits to new hires. They also have admitted to annual increase in pay having been less than the average increase in inflation. Why so stingy. Because they can and the decrease in benefits to J6P does not affect their salaries or benefits which are contracted out seperately than the employees who actually do the work.
This is the future of Americia. But short term profits can only equate to long term disaster especially in an economy the is as consumer driven and consumption oriented as ours.
Public pensions for Police and fire are out of control. Here in Florida overtime pay is added to your salary for the last three years of service. It is especcially galling when overtime pay earned "free lancing" in the private sector is added to your last years earnings. My upper end community in the West Palm area has Palm Beach County rent a cops stacking there pensions with $35/hr overtime pay. I have never seen so many captians and majors sitting in cars drinking coffee and watching movies on their government issued laptops and in drive home police vehicles (some marked and unmarked).
In the mean time my private sector regulated utility changed to a cash basis pension in 98 and eliminated retire health benefits to new hires. They also have admitted to annual increase in pay having been less than the average increase in inflation. Why so stingy. Because they can and the decrease in benefits to J6P does not affect their salaries or benefits which are contracted out seperately than the employees who actually do the work.
This is the future of Americia. But short term profits can only equate to long term disaster especially in an economy the is as consumer driven and consumption oriented as ours.
Regarding guilt insurance........My 91 year old Mother-in-law and my 85 year Mom live with me and my wife. I guess I'm one baby boomer who's the exception.
my daughter is a prison guard in the golden state and that institution in my opinion should be privatized.
Privatized prisons set up an incentive system where private prison firms make campaign contributions to legislators to lock up people for longer sentences so they can make more money. All paid for by you of course. It's not a coincidence that the states with the most privatized prisons and prison servicess have the highest incarceration rates.
In addition to things like "bridges to nowhere", you get "prisons for no good reason". Isn't there enough of this stuff already?
Oh BTW, privatization of military services (like you know where) sets up a similar incentive system to start wars. Eisenhower had a few words to say about that.
The only interaction I had so far was with traffic police, and I thought they were greedy setting up traps to collect money, rather than making roads safer.
Hello? You think the police themselves receive traffic fines? Have you taken too many trips to Mexico?
They police departments don't get the money either, they go into state revenue to be spent as the legislature and governor decide. You know, the guys that you elected.
First to troll.
Where is everybody? Hell-o?
Tanta,they had 47 brokers calling them within 5 minutes of that article appearing,and i shudder to think of the traffic jam caused by real estate people who googled their address and rushed to get there FIRST in their mercedes SUV's.
OT but timely
Urgency in ABCP Grips Europe: Will the European ABS market learn from Northern Rock?
Asset Securitization Report--SourceMedia (September 24, 2007)
Jacob Gaffney
The Information Management Network couldn't have picked a more opportune time to host its inaugural Global ABCP and SIV's Summit, which was held last week. Against the backdrop of beautiful Paris, a roomful of industry players had some ugly matters to discuss.
As a police officer with a probation officer wife in CA, thanks to Gov Gray Davis, we are guaranteed 90% of our highest single year pay for life with a 2% annual Cost of Living adjustment. This is rather lucrative. As the WP suggests, anyone in the private sector would need to have saved several million dollars in their 401k's to do what our pensions do. While I am personally glad, of course, that this pension system is in place, and guaranteed by the tax payers of California, I frankly don't know how it can be done. The actuaries that the state used to determine life-expectancies of police officers are based upon officers that are dying now, and thus were cops in the heavy smoking, blue collar days of the 50-60-70's. The current police force is much different, more healthy, and considered much more white collar. They can be expected to live 30 years or more after retiring in their early to mid 50's. Which means that the state will pay them for 30 years + for doing nothing with their LOWEST year being equivalent to 90% of the HIGHEST year while actually working.
This is a little off-topic, I know. However, I predict a growing resentment and distress over the lucrative pensions of governement workers that will continue to add stress to already overburdened government expenses.
For those of you considereing a career. Get in while the getting's good. You may only make decent money for the first 30 years. But it's like hitting the lottery on the day your retire.
And there are some ABS issuances occurring...
Chase, Discover Tiptoe Back Into Market
Asset Backed Alert, Harrison Scott Publications Inc. (September 21, 2007)
Chase Manhattan and Discover are quietly gauging investor demand for big credit-card securitizations that they could bring to market in the coming weeks.
Each transaction is expected to tip the scales at slightly more than $1 billion. Affiliate J.P. Morgan Chase is handling underwriting duties for the Chase deal, while Morgan Stanley is working on behalf of Discover, which it spun off in June.
[snip]
Pair of Auto Deals Helps Sustain ABS Issuance
Donna Mitchell
A lot of talk centered around the securitization market this week, from former Federal Reserve chairman Alan Greenspan's gloomy remarks about the sector, to a midweek summit that attracted more than 900 industry delegates. What spoke volumes, however, was the uptick in securitization activity from various asset classes, including a small mortgage transaction from Yale.
[snip] (This is the money quote at the end of the article)
"We have to make better distinctions between triple-A's," Sinha said. "It always looks like there is a fundamental contradiction between triple-A and triple-A's on mezzanine."
He added that the ABS industry allowed derivatives into the sector and transformed subprime credits into triple-A-rated securities, employing techniques that seemed like alchemy to the outside world. Therefore, the ABS industry needs to make better distinctions between triple-A ratings.
"There should not be an insider's perspective, [while] to the outside world a triple-A is a triple-A," he said.
Check out Martha's breezy and peppy prior columns:
"Debt so good: Why pay off your mortgage?..."
Martha M. Hamilton - Homeowners' Get-Out-of-Debt Instinct - washingtonpost.com
"...because I sure haven't - i'm up to my eyeballs in debt-which makes me ever so qualified to offer everyone else financial advice!":
Martha M. Hamilton - Seeking Guidance For Our Savings - washingtonpost.com
Glad to see they are so financially set. Not a surprise given they both sucked on the government teat for 30 years. And when I lived in that area, I paid an effective 50+% tax rate to support both of them.
In the same 30 years, I've had 10 jobs (been laid off of 6 of them), had two traditional pensions dissolved through bankruptcy. And there's been maybe 10 years of self-employment mixed in there as well. And I'm doing okay, but I'm at least another 15-20 years from retirement. That 2nd home in the country is a bit tougher to obtain in the real world --er-- private sector.
Oh, my planned retirement home is in the mountains of Tennessee and I plan to pay cash.
OK OK I will try and stop blasting OT posts from Securitzation.net, but they just posted a slew of new stuff that bears community review...
Assessing The Damage Of The 2007 Liquidity Crunch
( Greenwich Associates )
(September 20, 2007)
Credit Crisis Fractures Trust in Rating Agencies
[snip]
More than three-quarters of the institutional investors responding to the Greenwich Associates survey believe that the liquidity crisis will continue to spread into products and markets beyond mortgages, collateralized debt obligations and other structured products. "However, the investors are divided when it comes to the question of whether the current liquidity crunch represents a short-term event or a structural crisis," says Greenwich Associates consultant Lori Crosley. "Fifty-five percent of study participants see the liquidity crunch as a structural crisis, while 45% see it as a short-term event."
More than 45% of study participants say they have deliberately changed their portfolio's credit profile as a result of market conditions, including more than half the institutions with more than $100 billion in assets under management. The moves were almost universally in the same direction: away from risk in general and from mortgage and real estate exposure in particular, and into higher-rated instruments, especially shorter-duration government securities. "Institutions are also focused on limiting counterparty-risk in an atmosphere in which the full extent of the losses and exposures of individual counterparties can be difficult if not impossible to ascertain," says Greenwich Associates hedge fund specialist Karan Sampson.
[snip]
How about this gem from the San Diego Union Tribune?
Appraisals continue to be high despite actual selling price
I can't believe this drivle gets published. A couple brilliant quotes...
"Are some sellers giving in to lowball offers, fearful they can do no better in the wake of the subprime mortgage implosion and home sale bust?"
We wonder what's going on out there are sellers giving in to the bottom-feeders who are trolling for any hints of distress or urgency?
"Serious sellers can protect themselves against lowballers and vultures by hiring an experienced appraiser before listing."
No acknowlegement that prices might simply be falling. It's the "lowballers and vultures" who are taking advantage of the poor naive sellers. Heartbreaking, really.
John S.,
Will you have indoor plumbing or aren't you going for the luxuries?
So they're buying a second home, that' nice. But to buy a second home for $450,000 - about twice the national average - I think that's gross. It's like you don't know anymore which home is first. On the backdrop of falling home prices, I think it's, well, a courageous move.
Am I alone in thinking one home is more than enough upkeep? I suppose there are quite a few people on this blog who can afford a second "home", but it sounds like a big pain in the a$$ to me. Gloomy and pessimistic as I am, I just imagine everything going bad at the other place while you're gone. Who's gonna mow the lawn?
"As a police officer with a probation officer wife in CA, thanks to Gov Gray Davis, we are guaranteed 90% of our highest single year pay for life with a 2% annual Cost of Living adjustment.
...
For those of you considereing a career. Get in while the getting's good. You may only make decent money for the first 30 years. But it's like hitting the lottery on the day your retire."
Average Joe,
I see two little problems with this plan:
Just my opinion...
Average Joe,
California is in good shape compared to many state/local government entities. CA has a large enough tax base to raise taxes, and it will. Taxpayer resentment will grow, but your pension is good. Congratulations for having your years of public service pay off in retirement.
The same will not be true of many municipalities that have similar or greater long-term pension obligations, plus increasing retiree medical costs and skyrocketing social services burdens, due in part to foreclosures, the economic downturn and the stresses they are putting on the social/family fabric.
When these municipalities are forced to raise taxes, people (especially mobile retirees) will move away or refuse to move in. Hundreds of municipalities will have to declare bankruptcy in the years ahead, starting soon. The municipal bond market will be one of the next credit shoes to drop.
Speaking of eager real estate agents, some are not it seems all that eager. I emailed one in Phoenix to inquire about purchasing an expensive high rise condo. I incidentally expressed a few mild complaints about the site (no floor plans offered, etc.).
In return I got an insulting message telling me I was "rude" and inviting me to go elsewhere.
I thought Phoenix realtors needed customers, but this was didn't. Or else he was so soured by the state of the market that he just lashed out aimlessly at anyone who came near. Odd, I thought.
Rewinding to 1977, that was the year I decided not to drag my ass to some federal job for the next thirty years or even worse, become a school teacher. Hell, I didn't even have the foresight to join a union (they're evil anyway). Maybe I can find the Scrugg's number in the directory and see if they need a house cleaner for their second home.
energyecon - keep em coming. thats a great website.
AverageJoe- i live in Cal and i wish u the best of luck. i seriously hope the future doesn't cause the state legis to back out of its commitments but i am skeptical of them.
Hi
Aveage Joe Your right there are cities in the SF Bay Area trying to figure how to pay those pension now and with the down turn something has to give.
I've been self employeed and then have gotten a blue collar job, my only hope is it last 4 years so I can retire. It has a pension but that doesn't mean it will be there when I leave.
2nd home sounds nice but I can't afford the 1st 1 long time renter.
Thanks CR and Tanta
jo6pac
No new price and hence size of the haircut is mentioned, though it is at least a $400 million as the loan book is $4.5 billion and the previously mooted price was $4.9 billion - and rumored to be selling for less than the face value of the loans.
Barclays may face loss on FirstPlus sale: paper
LONDON (Reuters) - Barclays (BARC.L: Quote, Profile, Research) is preparing to sell its FirstPlus sub-prime consumer loan business at a loss, according to a newspaper report on Sunday.
General Electric Co (GE.N: Quote, Profile, Research) and AIG (AIG.N: Quote, Profile, Research) are the frontrunners to acquire the business at a knock-down price, the Sunday Telegraph said. Barclays declined to comment.
[snip]
"While I am personally glad, of course, that this pension system is in place, and guaranteed by the tax payers of California"
Not this one, I took my money and ran, nothing personal Average Joe my daughter is a prison guard in the golden state and that institution in my opinion should be privatized.
80K annual expenses with the home paid off? We live in different worlds. Seriously. Thoreau asked rhetorically that after the basic needs were met would people want more and bigger houses, hotter fires, etc. He had no idea the answer was why yes, of course.
What the heck were these people doing talking to a financial planner anyway? In their situation it doesn't seem to take a genius to figure out their finances. At their pay scale I'd guess they'd have to know something. The only thing I see is the disaster when they get bored and look to make some serious money investing their life savings in a Nigerian bank.
"While I am personally glad, of course, that this pension system is in place, and guaranteed by the tax payers of California"
The productive will leave high tax areas and only the recent immigrants that make proverty income will stay.
With the boommers retiring, states will compete for younger, productive workers buy offering lower tax rates. California will be suffer lower growth in the future....like the France of the US
Average Joe - I find myself looking for your comments. I'm sorry to say that I think this one is as insightful as your norm. Unless you can retire quite quickly, I don't think you will get your full pension. The growing public/private imbalance is a problem for the entire nation. When I was a kid public salaries were low but their benefits were far better than private. Now it's changed so both salaries and benefits are significantly better than private. It can't persist. (Btw, your combined salaries are above the mean, even for CA.)
If it's any comfort, I am pretty sure that NJ has a worse pension problem than CA. Granted, that's not saying much, but you and your wife should keep a weather eye on NJ, because it may be predictive of what happens in CA. NJ's working population is dropping because of the exodus.
Average Joe
I expect that inflation will wipe both of us out.
It used to be that state employees were paid less than their private counterparts but had better pensions. With the economic developments of the last 20 years or so, the private effective wages have stagnated or declined, so the muni folks have passed us by.
Never the less, one likely way is that you will be paid 90% of some wage that has been murdered by inflation. Sad to say my 401K will be singularly wiped out.
In most places $116K annual pension income would be at least upper middle class and probably be considered wealthy. These are not average people in middle America - at least not in mine.
As to spending $80K/year w/o a mortgage, I recall the bond salesman Sherman McCoy in "Bonfire of the Vanities" explaining how one could not possibly live on a million$/year (80's dollars). He actually made a good case.
Yea, the pensions will likely be modified due to lack of funding, and the fact that the average taxpayer will not be interested in having retired govt employees doing much better than he.
One thing that might change that is for national single payer health care where the local/state govt can punt health care to the feds and use the savings to fund pensions.
You are right about NJ. But there isn't much comparison with CA.
In NJ, politicians looted the state pension system using fancy financial assumptions several years ago. They didn't pay in enough money. If NJ were a private enterprise, it would be bankrupt right now. PBGC would have to take them over.
CA will increase taxes and the taxpayers (who stay) will pay. NJ is a disaster.
You are correct that the math doesn't
work out. I predict a 2% COLA won't be enough to keep up with what's going
to happen to make the math work out.
Wash Post: "Traditional pensions. . . " - how insulting.
A Federal retirement and a teachers retirement. Stuff like that sucks the life out of our economy. And don't tell me about the sacrifice with all the Lexis's in the school parking lots and the full medical benefits on top.
"A" was followed by "AA", which
was followed by "AAA"....do I detect
a pattern? Are we about to see the
birth of "AAAA".
As to spending $80K/year w/o a mortgage, I recall the bond salesman Sherman McCoy in "Bonfire of the Vanities" explaining how one could not possibly live on a million$/year (80's dollars). He actually made a good case.
That would be about 2 million and change now. But his "case" is not typical. Sherman had to keep a Park Ave. apartment, an expensive wife and an even more expensive mistress. And he lived in NYC. Put Sherman in Omaha Nebraska and everything changes.
DOn't worry about CA pension problem, its spread out with disability and comp.
Law enforcement at 19-1/2 years (6 months before scheduled retirement) usually pulls the "stress" disability claim to get even higher benefits, a bonus, tax free.
(I thought the 20 year retirement was for added stress)
Average Joe,
I am going to pray every day that pensions of you and parasites like you get wiped out - all of a sudden - completely. The only interaction I had so far was with traffic police, and I thought they were greedy setting up traps to collect money, rather than making roads safer.
I am an average California resident paying 10% income and sales taxes. I do not have a house and do not get any prop-13 benefit of low house tax. This state is on the verge of bankruptcy, and only the housing bubble postponed the inevitable by few years.
Best to you,
TB
Such an interesting ploy, average Joe, (I'm following MOM who's following you) and agree on how those health care benefits will pay out once you retire...(GM, the policy leader, clues us in).
Also following rich and the looming crises for municipalities whose revenues may be going the way of the housing market...of course this doesn't mean there is a spillover...a correction maybe...Maybe like a monumental adjustment.
Kevin i heard there was a loophole which enabled prison guards in CA to make with overtime 250k a year, but its probably already closed
Boy, the most useless comments ever!!!!!!!!!!!!!
......
Sippn, Troll Brothers, Yikes! I've known a number of school teachers and cops, and they certainly aren't known for their lavish lifestyles. If they can retire comfortably, all the better, they deserve it. Now pension plans are going to be cut back, but this is a bad thing that can't be avoided, not an opportunity to take glee in the suffering of others. Save your spite for more deserving characters, e.g., Kenneth Lay - Wikipedia, the free encyclopedia
sippin & number2son, any thoughts on this week with New&Existing sales and LEN & KBH? You guys have been pretty much hitting it out of the park.
It's funny... the people who complain about public workers "sucking off the government teat" are the same ones who say union members shouldn't strike, they should just get a better job. That teat's there for anyone to suck on -- if you think CA prison guards get a ridiculously good deal, then why don't you apply? They're hiring now!
Knot,
That or alt-'AAA'!
Tanta,
Can we seriously consider buying...
You know something is wrong when the word "seriously" needs to be said. As opposed to what, jokingly?
What ever happened to:
If you have to ask, you can't afford it.
Barely - you're joking right?
But if you must ask, new & existing home sales were thrashed in the last 60 days with financial market fallout, data already out in SoCal. LEN/KB - I still think public builders are rationing land writeoffs hoping for a miracle or time to blend in new lower land purchases with old junk, but I'm not Ivy Z.
Regarding housing recovery, I think it needs consumer confidence, the first step taken by the PHeD Tuesday, because pricing alone hasn't created much market velocity.
Read somewhere (probably here) that there was a 4-6 month lag in real estate market response to Fed changes.
re: retirement income. I assume that the income is not free from state tax so that part of your state retirement is self funded. The way this all ends is inflation. It is the unkindest tax of all just for this reason - it robs the pensioner of the buying power of their pension. The COLA protected pension will be inflated into higher tax brackets and government will no longer be able to index tax rates to inflation.
The good news is that this will take decades to play out. California enjoys enough natural advantages that, once housing becomes affordable again, demographics work in your favor. Believe it or not, one of my favorite places is Ridgecrest, CA out there in the middle of the desert.
There are a lot of boomers with substantial assets. A growth industry will be attracting them for retirement (with younger workers meet their needs). This assumes that they are able to preserve their assets through the coming troubles.
When it comes to safety nets, I depend on my government. Everybody should become government employees for the fantastic retirement benefits. And since they can print more money anytime they want, you don't need to worry about your pension going bust. If anybody deserves a plush retirement it is government employees. A just reward for all the public wealth they have created during their service. Without the investment in new committees, advisors, and policymakers where would this country be? And let's not forget private government contractors and all that they have sacrificed to make this country great. Why can't we have PBGC also pay for their retirement? God Bless Free Money, God Bless The US of A! See, all it took was some strong leadership from the public sector and all our problems have been solved!
sippin, sounds about right to me. KBH will recogize sale of their french operations this qtr. That might soften the implosion in their topline numbers or could be used obscure their writedowns, enabling them to take a bigger hit now so they can appear less weak next report and claim a turning point. There will be one sooner or later. I doubt it'll be this past qtr.
This week could be tough on the sector.
California is leading the way in creeping Hillarycare. The simple fact is that the State cannot afford the public sector promises it has made. This is not hyperbole. Existing obligations are already driving out the middle class and creating an underground economy in an increasingly business hostile economy. The result is the potential to default on retirement outlays unless the healthcare portion can be nationalized. The domestic automakers need this as well. Bailouts are all the vogue. What's one more?
The First thing I would do if I were Avg Joe, is on the day of reitrement, I would contract with a lump sum distibution company, and sell my annuity reitrement for as much cash As I could get...
The idea that you can just inflate away the costs of inflation-adjusted (Medicare) or COLA-adjusted (Social Security, Joe's pension) benefits is ridiculous.
Such entitlements become back-breaking liabilities for government in times of high inflation. This is especially true when the cost of entitlements is rising faster than GDP. And that's where we are sure to be for the next 30 years.
What you end up with, with COLAs and high inflation, is old people having all the money and young people not working because there's no use.
Think about it.
Don't be a hater.....
You had the opportunity to be a govt employee, but chose to take your chances in the private sector. Just because you didn't plan for the future doesn't mean that some of us didn't.
My govt retirement is what made getting shot at, deployments, and other joys of the military worth it.
And the best part is in Jan, As a military retiree, I can go civil service & get another pension (at 56) and with both of them, I might almost have enough to live on as a "double-dipping" retiree.
i dont get it, why dont you just get moved to the bulgary buy nice house at the beach for peanuts 30k and pay monthly health insurance cca 50 usd a month ok 100 if you want vip treatment xD
my parents have many friends living in usa who are waiting to get SS and their pension and get the hell out of there to enjoy the life in eastern europe
If journalists tried to write about the average American, and not the lone exception to every rule, who would read their stuff? It would bore us to tears. Hence the stupendous stories that amaze all but to which no one can really relate personally.
Avg. Joe, you're taking a lot of heat, but I have 2 family members retired and living off the public trough and they are doing just fine and dandy. I always said - when I get to be 45 I'm getting a federal job so I can retire with ease. Ah, 45 has come and gone and I'm not doing it, but I still think it would be a great way to go.
Tanta, I've been missing your wit and I'm glad to see it back, and with a vengeance.
Average Joe, the Police Officer, just makes one of my long standing points:
Manufacturing has not left the USSA for China due to cheaper wages.
Manufacturing left because the Commie Chinese government is less expensive than the USSA government. Cheaper wages is just the sounds good reason.
USSA? Is that a combo of USSR and USA?
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Average Joe:
I do suspect that the pensions won't last. When things get bad enough, the cornucopia that Gray Davis opened up for public safety pensions at the height of the dotcom boom (when we'd all be rich forever) will close. Public safety unions have a lot of clout, so it will take a while. But if things get bad enough, it will happen.
My brother-in-law the retired Richmond fireman told me that the younger firefighters won't get nearly as good a deal on health insurance and other benes in retirement as he did -- so the process has begun on some level. By the way, he died this year at 58 of something like natural causes.
I do not wish to deny you a good pension and healthcare for your service. You deserve them. I guess my point is that we all deserve security in our old age, if not necessarily enough to buy second homes and vacation overseas. People shouldn't ask that security be taken away out of envy; they should ask why it's not available to them.
All that said: nobody's factoring in the built-in inflation-fighter that public safety employees have in California: as their retirement is based on their highest paying year (or average pay over the last x number of years, depending on contract), many workers near retirement load up on overtime so that their highest-paying year is 150 percent or even 200 percent of their actual base pay. That's what my brother-in-law did; he retired on much more than his base salary. That's the one thing that I resent.
"Don't be a hater.....
You had the opportunity to be a govt employee, but chose to take your chances in the private sector. Just because you didn't plan for the future doesn't mean that some of us didn't.
My govt retirement is what made getting shot at, deployments, and other joys of the military worth it.
And the best part is in Jan, As a military retiree, I can go civil service & get another pension (at 56) and with both of them, I might almost have enough to live on as a "double-dipping" retiree."
Yes, that's great and will last until enough of us in the private sector can't afford to pay you anymore...because we are paying you...you do realize that right??? Oh, and in case you think everyone went into the private sector so they could get rich, think again dumbass.
There are two separate issues. One is reducing the entitlements of younger people. The second is reducing entitlements that have already been granted and begun.
For 3 reasons, it will very difficult to do the second:
So, if Optimistic Joe can lock in his first pension check, I think he's in pretty good shape.
Cutting benefits of younger workers (but not older benefiaries) is just another type of generational transfer tax.
Your minimum Social Security benefit (with unlimited COLA tied to CPI) is locked in by formula at age 60.
Get to 60 as fast as you can.
rich,
Get to 60 as fast as you can.
Only 17 years to go! Woohoo!
I never did mind the little things. - Bridget Fonda, Point of No Retur
IMHO anyone depending upon future fixed pension benefits to retire ought to seriously consider backup strategies.
Bad ideas then, worse now
Ojoe needs to also vote for immigrants amnesty programs
Gloomy and pessimistic as I am, I just imagine everything going bad at the other place while you're gone. Who's gonna mow the lawn?
I think Martha's Vineyard, Sun Valley, Tahoe, Jackson Hole, Palm beach part timer's have solved that dilema
What happens when real estate is reassessed at 50% off in Florida, Arizona, Nevada, and California? Does this not affect the national economy?
Thanks to all the responses to my entry. (I'm flattered that MaxedOutMoma even reads my comments!)
But just so we're all clear on my perspective:
I think my pension is ludicrously lucrative. I understand that there is no way, based upon the 9% of my salary my city pays toward the pension fund (Calpers), that mine and all other pensioners can be fully funded without going to the taxpayer for help at some point. If the taxpayer won't help, as I suspect they won't or at least won't want to, then future cops (i.e. the taxpayers indirectly) will pay for me out of their paychecks with increased contributions combined with diminished benefits. Sound familiar: Social Security anyone? (Which I am ironically exempt from paying toward).
I am preparing for my pension to disappear even though it will be next to impossible to do since it is protected by law. I am maxing out mine and my wife's 457 plan (she has a 401b also).
Combined we make $170 grand a year and put $44 grand of it away in retirement accounts. Although we have saved quite a bit of money ($400,000 so far in 16 years), I realize it will come no where near replacing what the state is promising us. I also know that many who make what we make and save how we save in a 401k in the private sector will very likely not do as well.
Unfortunately we are to a point where the risk takers are supporting too many people with too lucrative of benefits. This will cause increased tensions and financial hardship for communities.
I understand this. I have no point to make. I am just being honest. I am not going to quit or ask for a reduced paycheck. I don't want them to reduce or eliminate my pension, even though it's probably necessary and fair. I will continue to try to pay as little in taxes as possible.
I'm human.
I do not begrudge the Scruggs for their good fortune. But the fact that they can deduct the interest on a second home is just another example of why the mortgage tax deduction needs to be eliminated (or at least drastically revised). The Scruggs are in a financially better situation than most Americans. Our tax code should not be subsidizing their purchase of a luxury.
"I understand this. I have no point to make. I am just being honest. I am not going to quit or ask for a reduced paycheck. I don't want them to reduce or eliminate my pension, even though it's probably necessary and fair. I will continue to try to pay as little in taxes as possible.
I'm human."
Average Joe
Yes AJ, and don't begrudge me if I fight tooth and nail to ensure that more of you are not continually added to the tax base that I, as Gen Xer, is expected to pay. I mean it, tooth and nail.
75% of the US population does not receive, or is eligible to receive a pension of any kind. I don't see how it is a problem for our economy if all pensions went bankrupt. 75% of the population will be just fine with that.
Average Joe, you are more that human. You are an intelligent human. You seem to have made a very rational analysis of the situation, and what's more, you actually seem to be making good choices based on that analysis.
Still, I must add my voices to those expressing outrage at the level of retirement benefits you and others in the government have been promised.
http://tinyurl.com/394xc2
Cr Fan
omg roflmao tt
a building half full of greedy overpayer's and half full of lowballers
O the fun on Community night
Not all retirement pensions are that great. My wife has 30 years as a teaching in Indiana. With a master's degree and about the highest seniority in her school, she makes 55k/year for 10 months and is likely to get a 14K pension if she retires in 5 years with 35 years of service. Remember that the pensions are subject to income taxes. She also has a 403(b) with a modest match. A pension is a pension and it would take a good chunk of savings to replace it. Still, teaching is not a lucrative profession.
I think my pension is ludicrously lucrative. I understand that there is no way, based upon the 9% of my salary my city pays toward the pension fund (Calpers),
Finally we get to the heart of the matter....
Calpers was SCREAMING for yield thru 01-02...
without some new mechanism, there accounts were going to be underfunded... the market literally had to go up..
thanks to your Ws derivatives guru...
we get a host of acronyms and a steady bull market in debt and equity.
those derivatives guys are all worth the mega-millions they recieved just so calpers can look whole on the surface...
Mike/a.k.a.Sage
What happens when real estate is reassessed at 50% off in Florida, Arizona, Nevada, and California? Does this not affect the national economy?
Keep in mind that not all locations in those states has been subject to ludicrous RE inflation. I was appalled when 2-ac lots in my area (of Florida) were being listed at $45K (22K/ac). That may have been wishful thinking, as a 23-ac lot near me just sold for $175K (7.6K/ac). More in line with what I would have expected ... maybe even a tad low. I don't think it was a pricing crash, just more a realistic sale.
Not unless you are a teacher in Long Island a suburb of NYC. From an article in 2005 that cites 2001 to 2003 data
"...One in 12 teachers in Nassau, Suffolk, Westchester, Rockland and Putnam Counties now earns more than $100,000, and the ranks are growing fast, according to an analysis of state data by The New York Times. On Long Island from 2001 to 2003 (the most recent figures available), the number grew fivefold, to 2,800, including 498 elementary school teachers, 29 physical education teachers and 83 kindergarten teachers."
- NY Times
Sorry I'm lame I can't get the hang of this html stuff with italics and creating links...
I don't see why 75% of the population,who do not receive pensions, must guarantee pensions for 25% of the population who do receive them.
That's the heart of the pension issue -- overly rosy estimates of future yields. Real returns will range from shockingly low to substantially negative, devastating these funds.
Furthermore, future contributions will slow dramatically as public institutions lay off personnel and freeze wages in the coming depression.
I foresee plenty of circumstances where municipalities will be cutting active cops / firefighters / etc. to pay for retired cops / firefighters / etc. How long will taxpayers put up with that?
A 2% COLA cap -- think about that.
And that's without bringing up government cost-of-living statistical shennanigans.
I don't see why 75% of the population,who do not receive pensions, must guarantee pensions for 25% of the population who do receive them.
Sort of like the 75% of true owners & renters bailing out those 25% with mortgages -- isn't going to happen.
Oh, and btw - a friend of the family who works in the California court system points out that all the court officers make sure they take a short tour of duty in the prisons to push up their retirement package. It's apparently a well known secret.
The problem is "math doesn't revise it's rules for political needs"
.
The regular political response is to float bonds in the short term (sell today's hole for a bigger hole to be delivered later) followed in the long term by either dollar devaluation or bankruptcy to make the equation work.
Social security payments are fairly good. I'm surprised no one has mentioned them that much.
My wife and I togather draw more than $30k a year from social security which in itself is a good pension especially with the COLA. Plus we have a seperate pension from my old company.
May I remind everyone that the Bush administration objected to counting future Social Security & Medicare obligations since (to paraphrase) "those programs can be cut or canceled at any time."
Just to really rub salt in the wound. A little accounting trick called the "spike" is being employed as an added bargaining tool by cities.
Our last contract approved it.
It works this way. Normaly our city pays 9% of our salary directly to Calpers. The last year however, they pay it to me, and I hand it directly over to Calpers. My pay is unchanged but it looks 9% higher my last year. Thereby making me get 90% of a 9% higher number. In other words, about 97% of my pay for life with a 2% COLA. Since I no longer put into retirement or pay union dues, I actually make much more money the day after I retire than I ever made working. As a healthy 55 year old with many working years ahead of me, I am paid alot to stay home and do nothing.
Although I personally hope you don't win, (at least not within the next 40years or so) I don't blame anyone for fighting this. I would too.
I do not care what kind of job you choose to accept. If you don't like the fact that, in the future, a job like teacher, cop, fire fighter, trash person, or public employee job, doesn't offer a public pension , then don't apply for it. Trust me, there are plenty of people who will.
I take it Ivy League Financial Advisors can hook them up with a broker?
Wonder what they paid for this advice.
Buddy
I don't blame anyone for fighting this. I would too.
Average Joe,
Always liked your posts, and I find you absolutely sincere in this regard, too.
That said, I don't think it's a matter of fighting it. Like the housing bubble, these circumstances are simply unsustainable. Anything that can't work won't.
I don't belittle anyone who collects a nice retirement pension. Like Arthur Godfrey said, if it's free, take it. It's just that I think people who are not eligible for them, should not have to pay for the ones that are.
Bad ideas then, worse now
EntitlementProgramsStarted1930 | 09.23.07 - 6:20 pm | #
LOL. Do a repeat the 30s and they'll look like genius going forward.
Avoid the thirties and they can and will pass...
Irony is those that hate 'entitlements' the most are the very same folks voting to gut oversight & regulation... thus ensuring environments like the 30s repeat. Again and again.
Cool huh?
'Go long' entitlements, short 'regulatory reform'... that's my motto.
And 'yes' it isn't a good idea - but lotsa bad idea keep coming back 'cause worse ideas were put forward making the bad idea inevitable.
tj, I was astonished at the amount of social security we were eligible for when we applied for it a couple of years ago. Especially in light of the bad publicity re it.
Still, there are an enormous number of people receiving it today. I'd bet whichever party that dropped it would promptly be voted out of office by those currently receiving it plus those within a couple three years of eligibility.
Although I personally hope you don't win, (at least not within the next 40years or so) I don't blame anyone for fighting this. I would too.
Nothing stopping you from doing 'good' with the money... My dad did 25 years military (5 active war time and 20 yrs reserve/guard - very nice pension)... he also made money in business.
He left us with some and still had a pile left over to buy some land for conservation & donate it to the state.
Wow, what a lynch mob! If you've got a problem with AJ's pension after he planned ahead, worked and saved for 30 years, then 30 years ago, you should have organized a referendum to scale back the promises made at the time.
Now it's a little late to whine "it's not fair"
rich - great points. I'd only amend #2 to say that it is "negative for the economy TODAY, vx. tomorrow". Which goes along with the Baby Boom generation - get paid today and spend today and let everybody else clean up our mess when we're dead.
The Baby Boom generation continues it's spoiled-brat-ways and will set this country and their kids back significantly. Of course, if enough people vote for Ron Paul, we'll be okay, but that's the right thing to do, so I'm sure it won't happen. Nobody wants to face reality - "delay it until I'm dead" is the mantra.
"How can they continue..." - Average Joe
Bankruptcy? What happens when civil bodies do it?
Buddy
"75% of the US population does not receive, or is eligible to receive a pension of any kind. I don't see how it is a problem for our economy if all pensions went bankrupt. 75% of the population will be just fine with that."
I work for a company with a defined benefit pension plan. Part of my decision to work there and the way I rationalize my pay rate assumes that pension plan remains in place and is funded according to their claims. I view it as a contract with my employer. It's on my benefit statement. If it gets taken away I will be more than a little angry because I can't go back and modify my past earnings to compensate for it. I feel that way about all pension plans. SS and Medicare need to be funded too.
"delay it until I'm dead" is the mantra."
This statement just proves that older people couldn't give a rats ass about their children or their grand children. For this reason alone, this election cycle, the younger generation should register as republican in droves, and vote for Ron Paul.
At another point, in response to a question from Democratic Senator Jack Reed of Rhode Island, Greenspan said, ``We can guarantee cash benefits as far out and at whatever size you like, but we cannot guarantee their purchasing power."
90% of higest year??? That applies only to police officers, for everyone else it's the usual 1.5% a year up to 20 years and 2% a year over 20 years. Health care isn't "guaranteed for life", unused sick leave is monetized and can be applied toward health insurance premiums for as long as it lasts.
The article is nothing more than public baiting, if my calculations are right the retired teacher and her "public servant" husband were pulling down nearly $200,000, meaning that he's a high level, 125K+, bureaucrat. And BTW who spends $80K annually with a paid off mortgage and then has the gall to describe themselves as frugal.
"
Bankruptcy? What happens when civil bodies do it?"
It gets nasty. I don't remember the technical terms, but basically an outside committee of trustees appointed by creditors takes charge of the financial end of things, and they cut the budget as much as they can until the agreed-upon settlement is paid off and the city is in the black. Little cuts, like police, fire, parks, maintenance. There may not be much city left which all is said and done.
Average Joe - once again you nailed the issue. It is sustainability. People don't understand that the value of our houses and assets are only going to be sound in the future if we have managed to create a situation in which younger people will be able to afford the same things. Otherwise, our assets will be confiscated through high taxation or will devalue because no one can buy them. If your $500,000 house ends up being worth $300,000 in 15 years, it will be because the younger people can't afford to pay any more. There's lots of ways for assets to vanish.
The question is why does a retired cop think this way, when politicians don't? Btw, I don't think you are doing nothing by sitting home and asking these sorts of questions. We all have to start thinking this way.
To those freaking out about public pensions, there's a darned good reason why firefighters and police need to get out early. That is, unless you want a 63 year old with slowing reflexes and on BP meds trying to face down a 20 year old armed robber, or trying to get you out of a burning house.
Of course, as Average Joe explained, it's a worry if the pension system set up for older officers can't work for younger officers. After all, fires and robberies happen to retired firefighters and police too! We all NEED these people.
many will argue that the #1 reson for the programs was to provide the safety net for people so that we would'nt have people go begging in the streets for food.
80 year old hungry men and women, in droves, is not pretty.
however, that concept does'nt solve the problem it was desingnated to solve. that cost, of housing and feeding the poor who, thru a long life, just could'nt keep it together, could be done far less expensively.
Also, what good does it do the wealthy(relatively) to recieve a ss stipend when there pension,military, whatever other retirement income more than meets there needs, as will be the case for Aj(if it were assumed he retired tommorrow)?
See, it does'nt meet the stated/assumed objectives.
and more, why is the cap 97k?
"Not all retirement pensions are that great. My wife has 30 years as a teaching in Indiana. With a master's degree and about the highest seniority in her school, she makes 55k/year for 10 months and is likely to get a 14K pension if she retires in 5 years with 35 years of service."
Here's a nasty little secret about teacher pensions -- the feds get to deduct money from your social security payment to "compensate" for the big bucks you get form your teacher pension -- even though you paid full SS taxes!
How did this happen? Because it's almost always safe politically to give teachers the short end of the stick. So before you put the hate on teachers, think about that. And that the profession is so tough, and paid so mediocrely in most localities (NY is an exception, people), that most teachers get out after 5-7 years. I'm no teacher, but I've seen it.
Plus, if you move from district to district, the new dist. may not -- usually will not -- honor all your seniority, so you go from 15 years back maybe to seven or eight.
Still think teachers are living off the fat of the land?
Still think teachers are living off the fat of the land?
I agree Bob - seen it too.
When was the last time a US municipality went BK? Was it Orange County?
however, that concept does'nt solve the problem it was desingnated to solve. that cost, of housing and feeding the poor who, thru a long life, just could'nt keep it together, could be done far less expensively.
Ya, ya, ya... I'm sure there's a 'privatize it' pony in there somewhere. All that horse s***, must be a pony somewhere.
ot a chance...that's gw's plan. invest the fund asset's(in cdo's).
The people i know who currently recieve it ,certainly don't need it.
They use it for there CC Social.
And that's another complaint...
"hey, I paid into it!" i should get it back...
i'm 38...I paid in for 8 years...I don't expect to ever recieve anything from it, nor would i want to if I have a house over my head and money in the bank... but that's jus me
Just a thought; could municipalities re-incorporate and evade accrued pension liabilities? For example, could two adjoining towns combine and form a new one?
"Average Joe didn't work and risk his life for us. He worked for that old town that used to be here."
I haven't done too much nonprofit accounting, but this would just mirror some of the games played in private industry.
i'm 38...I paid in for 8 years...I don't expect to ever recieve anything from it, nor would i want to if I have a house over my head and money in the bank... but that's jus me
You'll probably get every penny you invested in SS or a pension... the question - as tj pointed out from the AG quote is what will those pennies be worth?
I've said all along that the problem isn't the 'accounting' in MOST cases... its 'production'. That problem isn't any easier to solve if its privately or publicly funded 7 administered. Or even individually. We as a society need to produce enough stuff so that the there is ample supply for young and old and still have enough left over to reinvest for future generations.
We aren't doing it - not with a negative savings rate - and it isn't all just 'boomers'. Everyone, every generation, currently has a hand in that cookie jar.
So while I understand and agree in principle there is a problem - I don't buy into any of the current 'quick answers' - neither the 'its all F/U and I'll never see any of it' nor the 'its all okay why worry'. I say worry - but not for the reasons we are being told.
barely
Your defined benefit pension is more than a contract with your employer. It is a contract with the U.S. economy. Your employer pays premiums into an insurance scheme called the Pension Benefit Guaranty Corp (PBGC) that guarantees you will be paid your pension, within limits. If your plan defaults on its obligations to you, PGBC would be obligated to take over your plan and make good on most of what you are owed. PBGC is too big to fail. The government will not let PBGC fail. I hope this makes you sleep better.
Entitlement, don't blame you a bit. Just refuse it when offered.
Also, don't call 911, use the post office, don't drive on the expressways, skip ER (it was a life saver for me a few years ago), forget the fire and police, disability (comes in handy if something like happend to my BIL happens to you), medicaid, medicare, unemployment insurance, etc.
Be the rugged individualist. Sounds good to me for you to do it. I bet you can't make it though.
I haven't done too much nonprofit accounting, but this would just mirror some of the games played in private industry.
If there is a prayer it can work it will be tried - that's my guess.
The other question I'd like to know is AJ's pension fully 'vested' no matter what or is a condition of this contract?
Meaning lets say LA renegotiates a very different contract, one where they don't offer anywhere near as cushy benefits to retirees... can they pull some of his benefits away or are they locked in forever, say by the statute, even if the new contract is very different?
I realize the current contract wouldn't allow for AJs benies to disappear... but as all these younger guys come up with weaker benefits and older dudes with better benies die off... at a certain tipping point management can buy the younger guys contract vote with a pay increase and take it (and way more) from the older retirees who are out numbered.
I mean to a great extent that is what GM is trying to do... convince current rank and file there will be no tomorrow unless the cost of carrying retirees is made more manageable.
Anyone?
We don't have an open thread today, so I'll just stick this here.
404 - Not Found - sacbee.com
This is one of the final shoes to drop before a recession is definate. Some people say unemployment is a lagger... some say a co-incident indicator... whatever.
Michigan has been in recession for maybe a year already. Not it looks likje California is tipping.
Hang on folks, I think the clicking sound is ending, on this roller coaster!
typo. "Now it looks like California is tipping"
GM has a DEAL...close
Not
Bloomberg,yahoo, drudge have been running the same news for
9
Days
Oh yeah, Fresno gets to join the party too. The ugly stuff is getting close to the fan.
http://www.fresnobee.com/business/story/145472.html
dryfly, I would bet these future benefits can be modified. My company froze its retirement plan a year ago. No new entrants and no increases in benefits for those who retire under it in the future.
I've read that IBM switched from their regular retirement plan to a cash-balance system. Not sure what that means except that long term employees get less in benefits than what they were originally promised.
These are private company examples but there are probably nice loop-holes for city, state gov'ts to slither thru and exploit. My hunch anyway. FWIW.
Hazard,
I missed your leap from entitlement programs providing a social safety net, to f,s,l taxes that cover said programs...
The safety net, again , is to ensure that we don't have hunger in america, the breadbasket of the world(supposedly, quickly becoming the b-85 barrel of the world)
How do you equate that and the other programs you mentioned?
If i'm so lucky to reach the age where i could draw on ss, and i'm not homeless or dirt poor, and they won't simply allow me to refuse the check , then i'm sure there are numerous food/hunger related charities that i could/will donate it to.
is that so wrong...
And again, why is the cap 87k?
Hey guys off topic but 50% off sale on Miami Condos. Video at Housing Doom. Looks like they better hurry with that bailout 20 more buildings nearing completion.
Panic early and price accordingly!!!!!!!
Sorry Entitlement, thought you were against all programs that provide some sort of public benefit.
A lot of Boomers will just be shocked at how much Social Security they stand to get. It's up to three times as much as their parents are getting.
There are two basic variables that determine your benefits: 1) how much you earned in your 35 highest years, up to the SS maximum; and 2) the National Average Wage Index, which is Social Security's index of U.S. wages. What most people don't realize is that their benefits are indexed to average U.S. wages through 60, then CPI after. But wages have beat CPI by about 1-2% for the last quarter century. And the Social Security maximum has gone up sharply in recent years, too.
If you assume 3% average CPI inflation in the future, an individual Boomer who retires five years from now and qualifies for the maximum SS benefit stands to receive a total of about $1.4 million over the next 25 years, under current law.
To future generations, the SS benefits earned by Boomers will look hideous, unless the law changes. The main change I anticipate in the law over the next few years is to make 100% of SS benefits taxable for almost everybody, vs. a maximum of 85% today for middle income and up.
as AG said , it can be paid , forever;
but what will it buy .
2002 usd .87 = euro 1.00
now usd 1.41 = euro 1.00
extrapolate that out for aways.
i do read , but the rest of my family is unaware.
where do i tell them the value went ? thx
75% of the US population does not receive, or is eligible to receive a pension of any kind. I don't see how it is a problem for our economy if all pensions went bankrupt. 75% of the population will be just fine with that.
As others have said, Average Joe is talking about what is one of the most generous pensions around for people whose job titles don't consist of three capital letters starting with "C". The problem isn't pensions. The problem is police unions that are too strong.
As a general rule, I'm pro-labor, but police unions drive me crazy. One part of it is the compensation, but another is the way these fraternal brotherhoods manage to eliminate accountability for their members. Minneapolis keeps losing excessive force suits from the same group of officers, and they can't fire them.
Rich, thanks for sharing...
that's F INSANE
sorry, rant..
what's the median us wage? 50g's?
My parent's - highranking 30 years military. think stars. Pops turned 67 yesterday. they certainly don't need there ss checks. how does that help the safety net?
they
I need addresses to right some wrongs...
Thx,
i've got 1600 Pennsy
I watched my California small town City Council try to retain a decent police department without raising pensions, but other municipalities outbit them with higher pension benefits. Eventually, the City Council was forced to increase pensions. This is a race to the bottom not unlike the housing mess. Everyone knows its crazy, but somehow the system prevents one from stopping the insanity. I fear it will be the demise of this great country if the pension, SS, and Medicare problems are not addressed soon. Maybe a serious recession, or depression, is what the US needs to clear the decks.
So what if 83 kindergarten teachers on LI make more than $100k. That's what, maybe 1 in 100? 1 in 1,000? I'll bet the fraction of people at Google making six figures is much, much higher. Why don't you get worked up about that? I know, the argument is that you have to pay taxes, but you don't have to pay Google. But, really, do you think you could stop any of your money going to Google, or any other big company? Even if you throw away your computer, they'll still be taking a small cut of every purchase you make (via the advertising budgets of the companies you do deal with). You have no choice to opt out, and you have no say in what they do with the money. But all the outrage goes to some teacher with 35 years of seniority who gets $101,000/yr for taking on admin work over the summer.
"I fear it will be the demise of this great country if the pension, SS, and Medicare problems are not addressed soon. Maybe a serious recession, or depression, is what the US needs to clear the decks."
As they say: if something can't go on forever, it won't. Of course, there are answers for all these problems; they just aren't politically acceptable. But come a serious economic crises, as you imply -- they might become acceptable.
Chinese bank manager sentenced to death
A former Chinese bank manager has been sentenced to death for taking payoffs that led to losses of US$108 million.
Chinese bank manager sentenced to death
China taking out the trash, a little of this in the US would fix a bunch of this crap
PBGC is too big to fail. The government will not let PBGC fail.
Hahahaha... too funny. PBGC is pretty much insolvent already, and once the automakers dump their pensions it will be toast for sure. Besides, PBGC only guarantees part of the promised pension; those pilots got hammered.
Eventually, the City Council was forced to increase pensions.
Why couldn't they have just raised the pay? Better to pay-as-you-go then forever after.
Rich:
I just retired and have contributed to the Social security system for 40 years. With the employer match actual contributions have been 250K.
Now compute the value of the 250K if it had been invested @ 5% a year.
And if I die before I become eligible, I get nothing and the government keeps the principle. SS is not an investment, it's a Ponzi scheme.
Boomers are getting screwed just like everybody else.
TJ,
The Cops wanted the pension. They aren't stupid.
A MUST read. brilliant.
Between The Lines › Is The Fed Flushing Out The “Excess Credit” Demons?
Wheat Farmers Signal Price Drop With Increased Sowing (Update4) - Bloomberg.com
shoulda bot wheat
so , what's next... fresh dollars have been printed in the last 30 days...
they need a new market that's screaming!
Besides, PBGC only guarantees part of the promised pension; those pilots got hammered.
Only those that worked for NWA.
As a 29 year old the biggest problem I see for the future of America is that nobody I know can afford to have a kid after the student loans, $3/gallon gas, health care, credit cards, and lack of wage growth.
I know two people who bought houses in San Diego. Both of them are facing bankruptcy. The rest of us have simply come to the conclusion that we're never going to be able to afford to live in the neighborhoods we grew up in.
I make a pretty good living in software and I'm just trying to save money because I'm terrified of what mortgage resets and debt orgy are going to do to the economy.
So to the cop who thinks we're going to fund his fat retirement I'd say think again.
Tripleplay,
In our country, for better or worse, we have an idea that we will not let people (especially old people) die of starvation or poverty.
In Mexico and some other underdeveloped countries, it's the family's obligation to take care of old people. But here in our advanced civilization, families are too busy and have other priorities.
So, unless we had some kind of old-age social insurance (Social Security), we would have poor old people going door-to-door begging. Most rich people would ignore them, of course, but they would feel guilty.
Think of Social Security as guilt insurance.
I took early retirement in a lump sum payment last year. Sure it would have been much bigger if I had stayed another 5 years. But would I have gotten it? There was already talk of limiting lump sum payouts. I'm too young to actually use it without penalty for 7 more years and the wife is still working. Of course the return on investments between my 401k and my lump sum this past year was more than I made annually so I'm not complaining. (oil and PM's) (not investment advice)
My observation is that about 1/2 of all people are more stupid than average.
As a dedicated public servant for the past 11 years, and a laborer in many cube farms before that...I know Oregon's public retirement system has done stupid things in the past, like guaranteeing certain rates of return..
On the other hand, Home Depot's Robert Nardelli got what... 200 million bucks when he was asked to leave his 'failed presidency'? I imagine his minions will get much less.
Hey, wait... doesn't the Home Depot board have fiduciary responsibility to their stockholders?
Why don't 'conservatives' show up at one of Nardelli's mansions, with pitchforks and torches? Oh. He's one of them. Got it.
I guess public employees are easier targets.
Yossarian: Why don't 'conservatives' show up at one of Nardelli's mansions, with pitchforks and torches? Oh. He's one of them. Got it.
I guess public employees are easier targets.
Because they are not forced to send their money to Home Depot?
The issue is about what level of retirement is "fair". That money has to come from either somebody's productive labor or inflation at some point. Unless of course there exists some magic wealth creation device... maybe the central banker's true power comes from a magic genie in a bottle?
Vote Free Lunch Party 2008!
Because they are not forced to send their money to Home Depot?
But they pretty much are, or to some other company that's more or less the same. The only way to opt out of contributing to inflated CEO salaries is to go live in a cave in the desert, and if you do that you can probably get away without paying taxes too.
Average Joe's pension arrangements have generated a lot of emotive huffing and puffing and like "jus me" I think the time to complain was decades ago, not now. And in the news today, we have the poster child for ridiculous pensions and benefits, ready to strike for more. What planet do these guys live on?
General Motors Faces Auto Union Strike Deadline Today (Update9) - Bloomberg.com
Public pensions for Police and fire are out of control. Here in Florida overtime pay is added to your salary for the last three years of service. It is especcially galling when overtime pay earned "free lancing" in the private sector is added to your last years earnings. My upper end community in the West Palm area has Palm Beach County rent a cops stacking there pensions with $35/hr overtime pay. I have never seen so many captians and majors sitting in cars drinking coffee and watching movies on their government issued laptops and in drive home police vehicles (some marked and unmarked).
In the mean time my private sector regulated utility changed to a cash basis pension in 98 and eliminated retire health benefits to new hires. They also have admitted to annual increase in pay having been less than the average increase in inflation. Why so stingy. Because they can and the decrease in benefits to J6P does not affect their salaries or benefits which are contracted out seperately than the employees who actually do the work.
This is the future of Americia. But short term profits can only equate to long term disaster especially in an economy the is as consumer driven and consumption oriented as ours.
Public pensions for Police and fire are out of control. Here in Florida overtime pay is added to your salary for the last three years of service. It is especcially galling when overtime pay earned "free lancing" in the private sector is added to your last years earnings. My upper end community in the West Palm area has Palm Beach County rent a cops stacking there pensions with $35/hr overtime pay. I have never seen so many captians and majors sitting in cars drinking coffee and watching movies on their government issued laptops and in drive home police vehicles (some marked and unmarked).
In the mean time my private sector regulated utility changed to a cash basis pension in 98 and eliminated retire health benefits to new hires. They also have admitted to annual increase in pay having been less than the average increase in inflation. Why so stingy. Because they can and the decrease in benefits to J6P does not affect their salaries or benefits which are contracted out seperately than the employees who actually do the work.
This is the future of Americia. But short term profits can only equate to long term disaster especially in an economy the is as consumer driven and consumption oriented as ours.
Rich:
Regarding guilt insurance........My 91 year old Mother-in-law and my 85 year Mom live with me and my wife. I guess I'm one baby boomer who's the exception.
my daughter is a prison guard in the golden state and that institution in my opinion should be privatized.
Privatized prisons set up an incentive system where private prison firms make campaign contributions to legislators to lock up people for longer sentences so they can make more money. All paid for by you of course. It's not a coincidence that the states with the most privatized prisons and prison servicess have the highest incarceration rates.
In addition to things like "bridges to nowhere", you get "prisons for no good reason". Isn't there enough of this stuff already?
Oh BTW, privatization of military services (like you know where) sets up a similar incentive system to start wars. Eisenhower had a few words to say about that.
The only interaction I had so far was with traffic police, and I thought they were greedy setting up traps to collect money, rather than making roads safer.
Hello? You think the police themselves receive traffic fines? Have you taken too many trips to Mexico?
They police departments don't get the money either, they go into state revenue to be spent as the legislature and governor decide. You know, the guys that you elected.