A $4 Trillion Pension Bomb - Free Money for Everyone
- States and cities have lied to the voters about how un-funded the pension system is.
- Both political parties have sold out taxpayers in return for peace with labor unions.
- It appears no one in government has ever heard of 401K plans.
Drop your pants and bendover. The taxman is coming, and he is going to do the deepest colonoscopy you have ever seen.
J.P. Morgan went out and studied the public pension problem and found it was indeed as acute as feared.
The result wasn’t something J.P. Morgan, the largest underwriter of municipal debt, expected. The report was completed in March 2011 and showed that the problem with pension funds was indeed real: States and big cities had amassed trillions of dollars of unfunded liabilities for their public pension systems reports Fox Business News.
The J.P. Morgan study, labeled “strictly confidential” was authored by a trio of analysts in its municipal markets strategy group.
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Under the accounting rules used by most states and municipalities, less than $1 trillion in unfunded liabilities exist. But the real number, the report stated, is closer to $3.9 trillion because governments are not “setting aside sufficient assets to prefund these benefits.”
The solution, J.P. Morgan said, is pretty straightforward, though difficult for cash-strapped cities and states burdened by the after effects of the financial crisis with lower tax revenues and bloated governments: Fairly significant tax increases, drastic benefit cuts or a combination of both depending on the state or city.
J.P. Morgan decided that it would keep the study largely under wraps, according to people with direct knowledge of the matter. Only its best hedge fund clients and large institutional investors would receive the report. The cities and states at the heart of the analysis wouldn’t be informed, nor would most public investors.
J.P. Morgan didn’t include the report’s findings about rising pension costs -- one of the risk factors for any municipal bond -- in the disclosure documents of the state and city bond deals, according to people with direct knowledge of the matter. A review by the FOX Business Network of some these disclosure documents for bond deals underwritten by J.P. Morgan shows that, despite language involving unfunded pensions, the results of the study were not included.
That decision to hold back the study from broad public distribution was a “business decision,” according to an executive at the firm. “We didn’t want the public theatrics” where J.P. Morgan would be at the center of a debate over a looming national crisis, this executive said.
Another executive with knowledge of the report said “the firm was worried about offending municipal issuer clients and then losing business.”