June 29th, 2009
Bernard Madoff gets to spend the rest of his life in federal prison serving a 150-year sentence for swindling upwards of $13 billion to $50 billion from his investors (depends on who is counting). He gets what he deserves and his wife gets to keep $2.5 million, which for most would be celebration worthy. We could live handsomely on that, couldn’t we?
So, Bernie heads for prison and his investors who might get back a few bucks figure out how to re-build their nest eggs. In today’s Associated Press story, I found this paragraph:
“Before Madoff became a symbol of Wall Street greed, he earned a reputation as a trusted money manager with a Midas touch. Even as the market fluctuated, clients of his secretive investment advisory business - from Florida retirees to celebrities such as Steven Spielberg, actor Kevin Bacon and Hall of Fame pitcher Sandy Koufax - for decades enjoyed steady double-digit returns.“
Please note the words in bold. Read them again. I have just one question for those clients: Were you beyond stupid or just so greedy you pretended not to notice it was just too good to be true?
June 29th, 2009
Illinois’ public officials and legislators learned a long time ago that short-term solutions get them re-elected and they can push the reckoning down the road a couple of decades.
The state’s pension system is the biggest, ugliest, meanest pig in the room — and no amount of lipstick makes that sucker look good. The public government types have perfected this decades-old dance with the state’s pension system, now somewhere between $54 billion and $73 billion in the hole. (The spread depends on who’s talking and what the stock market is doing, but those numbers are from the state budget forecasting department.)
That’s upwards of $75 billion in payouts to judges, teachers, cops, firefighters and assorted other public employees and legislators that the state must by law pay — but does not have, has no way of getting, and is simply pretending will not be a problem. Illinois has the worst track record in the country for chronic underfunding of its pension systems. Today, just a hair more than 50 cents on the dollar is available to pay retirement benefits for the state’s current and future pensioners.
The time will come when every tax dollar you and I feed into the coffers will go to pay for pensions. Every dollar. If we want streets paved, kids taught, criminals caught, then taxes will have to go up to compensate.
There’s nothing secret about all this. It’s been fact for decades. Newspaper editorial boards have railed about it for years. So have a handful of business people, mayors and the occasional state official.
But, every time the darn thing reared its nasty head, the public types drugged it back to sleep with financial sleights of hand ranging from shifting funds to bonds and borrowing — all accompanied by press conferences promising to get us to 80 percent funding in just a few short years.
Bogus. They lied. They have no intention of facing the brutal facts, of doing what needs to be done: (1) Reform the pension systems, including a two-tiered system in which new workers would get less; (2) reduce overall state spending; and, (3) raise the personal income tax.
Nope. Our legislators have no intention of taking on any of that. Instead, they’ll posture and opine and once again push the monster back under the bed.
Savor this from financier Warren Buffett: “Public pension promises are huge and, in many cases, funding is woefully inadequate. Because the fuse on this time bomb is long, politicians flinch from inflicting tax pain, given that the problems will only become apparent long after these officials have departed.”
