Funky accounting tricks and Wall Street implosion causing $500B pension shortfall

Wall Street's problems continue to reverberate across the nation's economic system. Even those whose incomes were though secure and 'guaranteed', may find themselves in economic crisis, if the current problems with investment security continue.
If stock prices continue to fall, pension funds will find themselves unable to meet their commitments. Pension failures will result in more credit card default, more foreclosures, and more personal bankruptcies as people who counted on payments stop receiving them or receive less than they expected. This will lead to ever lower real estate prices, lower demand for all kinds of goods and services, and more business bankruptcies. (Brasschecktv.com)

This does not bode well for the increasing numbers of Baby Boomers who are currently retiring. These retirees will depend on private and public retirement funds, in terms of pensions, retirement investments and Social Security. Unfortunately, the investments which generate their income, have drastically decreased in value, from mortgages, mortgage-backed securities, real estate investments and beyond.

To make matters even worse: long before Wall Street crashed, the nation's pension guarantee programs warned of problems. According to the Buffalo News, in 2008, the New York State public employees pension fund dropped by some $30 billion. (Buffalo News, 11/4/08).

Five years ago, USA Today reported that “Boomers with pension plans have counted on monthly retirement checks at the end of their career, but more employers are ending their plans or halting future benefit accruals. Those at greatest risk include boomers in their late 40s and early 50s, who are still at least a decade from retirement but too old to save enough to make up the difference in their pension benefits.” (12-28-05 USA Today)

Pension problems have been rising for nine years, generated by stock market twitches and crashes. Investment based, pension value depends on the stock market, which we have seen, is no sure thing. State and local government pensions have been under-funded and troubled for years. So much so that the federal pension guarantor says it doesn't have enough money to cover the failure of more than a few troubled pension plans, and even then, there are limits.

According to the Washington Post,
age and ceiling rates for the government's pension guarantee are based on age and have limits. Unfortunately, as far as true "guarantees" are concerned, the fund also has monetary limits as well. Simply put, the Corporation (Pension Guarantee) does not have enough money to bail the pension industry out of a catastrophic failure, nor do "high value annuitants" have a guarantee that their income will remain the same should their pensions fail.These plans are insured by the government's Pension Benefit Guaranty Corp. up to a certain limit, which is currently about $44,000 a year for a 65-year-old. (Ibid)

Now, according to experts, more pension trouble is on the horizon. It seems Wall Street is not the only place using “aggressive accounting” and “creative” accounting. Government pension administrators are also dipping their fingers into the bean counter’s bag of tricks, as well—and the whole thing is coming back to bite them where it counts. According to the Financial Times, “Big US cities could be squeezed by unfunded public pensions as they and counties face a $574 billion funding gap, a study to be released on Tuesday shows.” (10-12-10)

Under-funded pensions have been a problem for states and cities for years. However, due to the devastation caused by the mortgage industry and mortgage backed securities, pension funds which heavily invested in those industries now find themselves fighting for their very survival. Now we add another component to the mess: failed investments and economic devastation.

“The financial demands of unfunded pension promises come as state and local governments grapple with years of falling tax revenue related to the recession.” (FT)

Just how many financial catastrophe will the taxpayer ultimately wind up bailing out? Banks. Mortgage holders. Insurance companies. Pensions.

And they keep saying Social Security is in trubble. What else is new? And how much will it cost to fix? Can this economy, and all of the financial Humpty Dumptys that have cracked and crashed be fixed?

About the author:Bio:
Monica Davis is an Indiana-based author/columnist/activist/radio personality with 10 years experience in marketing, advertising, investigation and activism. She is a hard driving activist, author with a passion for justice and a low tolerance of idiocy and is also Farming/Native American/African American editor on Beforeitsnews.com

She specializes in economic, history and public policy issues and has written articles on land loss, bank failure, institutional corruption/document deception, environmental justice and alternative energy. She is the author of six books and is published in Great Britain, Canada, the U.S. and India. Home schoolers in New Zealand have used her articles as teaching tools. Ms. Davis has given presentations on land lynching and the farm catastrophe at churches, museums and universities. She publishes regularly on Opednews,Indybay, Buzzflash,and Sfbayview. Her articles are used as primary research material by researchers and have been read into the Congressional Record in land loss hearings. She has been interviewed by numerous bloggers, radio and television journalists, including: Black Men Screaming TV Dr. Wilmer J. Leon, III on XM radio Radio stations in NYC, New Orleans Her articles have been read into the Congressional Record and used as the basis for interviews by other reporters. She is available for speaking engagements. Her books are available on Amazon. Her latest book, published in September is The Forever Dream: Making Social Activism Work Other books include: Land, Legacy and Lynching: Building the Future of Black America

She has ongoing projects in land loss and institutional corruption and may be reached at: davis4000_2000 [at] yahoo.com