Tuesday, March 31, 2009

Pension Benefit Guaranty Corp in Trouble

We have another fine example of government stupidity in action. This time it's from the Pension Benefit Guaranty Corp or PBGC. The PBGC is the agency set up by the US government to cover the defined benefit pensions of employees of bankrupt companies.

The agency insures the retirements funds of 44 million Americans. And if GM is forced into bankruptcy, the PBGC will have even more defined benefits pensions to pay out in the coming years.

The PBGC unfortunately manages its own assets. The Boston Globe reports that "Just months before the start of last year's stock market collapse, the PBGC departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks. Switching from a heavy reliance on bonds, the PBGC decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds."

If the government can't manage pension funds, how do you the think the government will do at managing GM or our banking system?

No comments:

Post a Comment