Fair that Detroit bankrupcy will cut retiree pensions?

[JEDI]

http://money.cnn.com/2013/07/18/news/economy/detroit-bankruptcy/index.html?hpt=hp_t2

Detroit filed for bankruptcy Thursday afternoon, becoming the nation's largest public sector bankruptcy. The move could slash pension benefits to city workers and retirees, and leave investors holding the city's debt with only pennies on the dollar.


i can understand bondholders being shafted at pennies on the dollar.
and maybe even current workers for FUTURE pension promises.

but current retirees?!
i didnt even think it was possible?!

and i think obviously unfair!
they put in their time and work.

 

[JEDIYoda]

so if there is no money then who will pay the pensions??
Something is better than nothing...fair or not...

 

[highland145]

so if there is no money then who will pay the pensions??
Something is better than nothing...fair or not...

Uncle Sam could bail them out.

 

[poofyhairguy]

but current retirees?!
i didnt even think it was possible?!

That is why they went to bankruptcy. The judge will do it.

and i think obviously unfair!
they put in their time and work.

If the money doesn't exist it doesn't exist.

 

[Patranus]

This is my biggest issue with the current system in California.
Many of the public employee pensions are run through CalPERS or CalSTRS which are state wide agencies. These agencies have had massive financial issue but because they are state agencies, the taxpayer is on the hook.

One example was CalPERS $1 billion land deal with Lennar (which has a Pelosi as President of Land Acquisition....but I digress) which it lost 80% on the investment.

The reality is that NOTHING in life is guaranteed. My 401k is not guaranteed and that is filled with money I "earned".

Its not not should be the fault of the taxpayer that the unions ran their pension system into the ground.

 

[Fern]

http://money.cnn.com/2013/07/18/news/economy/detroit-bankruptcy/index.html?hpt=hp_t2

Detroit filed for bankruptcy Thursday afternoon, becoming the nation's largest public sector bankruptcy. The move could slash pension benefits to city workers and retirees, and leave investors holding the city's debt with only pennies on the dollar.


i can understand bondholders being shafted at pennies on the dollar.
and maybe even current workers for FUTURE pension promises.

but current retirees?!
i didnt even think it was possible?!

and i think obviously unfair!
they put in their time and work.

I don't see how it's fair that bondholders get shafted.

And I think to some extent, possibly to a great extent, the govt workers in Detroit are themselves directly responsible for the bankruptcy and their loss of pension and other benefits.

The city is famous for corruption and mismanagement by who? The govt workers and politicians. I realize that not every single Detroit govt worker was inept or corrupt, but IMO it is on them collectively.

And it seems to me that govt workers bargain with other govt workers to set up gold plated retirement and benefit plans. They got greedy, they got burned. Here again, they (govt workers) did it to themselves.

Fern

 

[Svnla]

Not just big cities such as Detroit but small towns like this too = http://blog.al.com/live/2012/05/prichards_collapsed_pension_pa.html

 

[JEDI]

This is my biggest issue with the current system in California.
Many of the public employee pensions are run through CalPERS or CalSTRS which are state wide agencies. These agencies have had massive financial issue but because they are state agencies, the taxpayer is on the hook.

One example was CalPERS $1 billion land deal with Lennar (which has a Pelosi as President of Land Acquisition....but I digress) which it lost 80% on the investment.

The reality is that NOTHING in life is guaranteed. My 401k is not guaranteed and that is filled with money I "earned".

Its not not should be the fault of the taxpayer that the unions ran their pension system into the ground.

wow.. pensions in CA are state and not city?
yeah, the CA tax payer is shafted since States are not allowed to declare bankrupcy.

and oh man i need to move to CA and be a public employee.

as for Detroit.. underfunded pension reserves. and no insurance to even partially protect the pension plans = screwed retiree

you're right poofyhairguy, if the $ doesnt exist.
i first read it as the city will raid the pension $ to pay some of its debt.

now it looks more like it'll lower the pension payouts to match what's available in the pension reserves.

 

[JEDI]

I don't see how it's fair that bondholders get shafted.

why not bondholders?!
when a company goes bankrupt, its bondholders get shafted. so why not a city?

and those bond buyers should have known what they were getting into (ie: risk) based on the credit rating of the bonds.

 

[boomerang]

I really don't know how these pension liabilities were set up or structured or whatever the terminology is, but I would hope that there would be a way that current retirees won't be affected. Those that are still working will take an enormous hit but that's far different from pulling the rug out from under people who have been dependent on those funds.

This whole situation is going to be very bad on many levels. Unfortunately, more than likely nothing will be learned from it.

 

[Fern]

why not bondholders?!
when a company goes bankrupt, its bondholders get shafted. so why not a city?

and those bond buyers should have known what they were getting into (ie: risk) based on the credit rating of the bonds.

I'm not arguing with that. If the bondholders invested their own money, they take their risks just like they'd take their rewards.

My problem is when you say it's OK for the bondholders to take the loss but then bemoan the govt employees having to also bear the loss. The bondholders didn't cause the city to go bankruptcy, but the govt employees did.

Fern

 

[SheHateMe]

Will my Grandparent's pensions with GM and Ford be affected? They have been retired for maybe 30 years.

 

[Fern]

I really don't know how these pension liabilities were set up or structured or whatever the terminology is, but I would hope that there would be a way that current retirees won't be affected. Those that are still working will take an enormous hit but that's far different from pulling the rug out from under people who have been dependent on those funds.

This whole situation is going to be very bad on many levels. Unfortunately, more than likely nothing will be learned from it.

IMO, they set themselves up with a big fat Ponzi scheme (excessively generous pension plans and other benefits). Now that the 'jig is up' I feel no sympathy for them (as a group - individually? maybe some).

This was all foreseeable. Who should have foreseen it? The city govt finance dept employees and those employees running the thing

Fern

 

[Fern]

Will my Grandparent's pensions with GM and Ford be affected? They have been retired for maybe 30 years.

No.

This is about Detroit city govt workers, not auto manufacturing employees.

Fern

 

[etrigan420]

IMO, they set themselves up with a big fat Ponzi scheme (excessively generous pension plans and other benefits). Now that the 'jig is up' I feel no sympathy for them (as a group - individually? maybe some).

This was all foreseeable. Who should have foreseen it? The city govt finance dept employees and those employees running the thing

Fern

Wow dude, get butt raped by a government employee or something?

You should just write these retirees a "budget"...that'll solve everything.

 

[rudder]

I really don't know how these pension liabilities were set up or structured or whatever the terminology is, but I would hope that there would be a way that current retirees won't be affected. Those that are still working will take an enormous hit but that's far different from pulling the rug out from under people who have been dependent on those funds.

This whole situation is going to be very bad on many levels. Unfortunately, more than likely nothing will be learned from it.

Well you get these unionized public sector employees... who basically end up representing themselves in city government.... and they vote in big nice pensions... never thinking about the long term ability of the city to generate the revenue to pay for them.

It is not just Detroit.

http://www.pensiontsunami.com/

Also kind of the same with the Post Office. Those fat pensions are nice as long as they are hard working taxpayers footing the bill. Yes it sucks for these workers. Some probably not involved enough to really understand it all. But Detroit needs more revenue and they just don't have it. It just as unfair to have the American taxpayer bail out the city for decades of mismanagement.

 

[Attic]

Not a fan of government pensions. Way too much abuse involved given the overall quality of folks involved for that system to be tolerated.

 

[boomerang]

IMO, they set themselves up with a big fat Ponzi scheme (excessively generous pension plans and other benefits). Now that the 'jig is up' I feel no sympathy for them (as a group - individually? maybe some).

This was all foreseeable. Who should have foreseen it? The city govt finance dept employees and those employees running the thing

Fern

I don't disagree with you one bit. It's not the only Ponzi scheme going on in the cities, the states and the nation - and I know you're well aware of that. The deck of cards is collapsing.

Saw on cable news this evening that there are "funded" and unfunded pension liabilities. The funded ones aren't fully funded so current pensioners are going to take a haircut.

I've got an anarchist side to my personality but we need as few people as possible thrust into poverty, losing their homes, etc. Just postponing the inevitable, I know... This is the end result of unions having to promise more and more and more to their members to justify their existence. It takes two to tango. I get that.

 

[glenn1]

If the government employees wanted their pensions, then maybe they shouldn't have run their city into the ground.

 

[boomerang]

It just as unfair to have the American taxpayer bail out the city for decades of mismanagement.

When I look at D.C. and then I look at Detroit I just know there's a bailout coming. Perhaps not, but I'd be really surprised if it doesn't happen. Not a good precedent to be setting.

50+ years of Democrat rule in the City of Detroit. The end result is not pretty. As we can see.

 

[Hayabusa Rider]

I'm not arguing with that. If the bondholders invested their own money, they take their risks just like they'd take their rewards.

My problem is when you say it's OK for the bondholders to take the loss but then bemoan the govt employees having to also bear the loss. The bondholders didn't cause the city to go bankruptcy, but the govt employees did.

Fern

The management of the city did. The employees worked in good faith with an understanding that they would receive benefits. The bondholders however know that there is a risk involved with any investment. Now if you want to go after the politicians and seize their income and wealth and kick them to the street as paupers, be my guest. Those who went to work to do a job with what was a clear understanding of what to expect? I'm not for blaming them.

 

[poofyhairguy]

The decisions that were made when autos boomed don't apply today.

These pensions aren't getting cut, they are being adjusted to reality.

The big problem was so many people were sold on a result that couldn't be delivered so they suffer due to compounded bad decisions.

 

[sactoking]

Would anyone be supportive of a bankruptcy court seizing 401(k) accounts? For the average worker there would be no difference.

 

[JEDI]

Would anyone be supportive of a bankruptcy court seizing 401(k) accounts? For the average worker there would be no difference.

except 401ks are fully funded

 

[poofyhairguy]

Well yeah. 401k is my money I put in.