How will unfunded "pensions" affect the local economy?

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Submitted by phaster on September 1, 2014 - 7:48am

Here is a simple question, how do you think unfunded pensions affect the economy, specifically RE prices?

To illustrate specifically what I am concerned with, below is an outline of a local unfunded public pension issue....

*** WHAT YOU NEED TO KNOW ABOUT PUBLIC PENSIONS IN SAN DIEGO ***

A recent wall street journal article essentially said the SD county pension system was using derivaties to manage their portfolio.

"Simply put, it could have a market exposure of $20 billion despite only managing half that amount."

http://online.wsj.com/articles/san-diego...

To show why the current SD county pension "operations" is a bad idea, google "buying stocks on margin" and check out the first search result.

The math is pretty simple to understand (just add "000,000" to the following $ figures):

A Buying Power Example
Let's say that you deposit $10,000 in your margin account. Because you put up 50% of the purchase price, this means you have $20,000 worth of buying power.

http://www.investopedia.com/university/m...

Returning to our example of exaggerated profits, say that instead of rocketing up 25%, our shares fell 25%. Now your investment would be worth $15,000 (200 shares x $75). You sell the stock, pay back your broker the $10,000, and end up with $5,000. That's a 50% loss, plus commissions and interest, which otherwise would have been a loss of only 25%.

Think a 50% loss is bad? It can get much worse. Buying on margin is the only stock-based investment where you stand to lose more money than you invested. A dive of 50% or more will cause you to lose more than 100%, with interest and commissions on top of that.

http://www.investopedia.com/university/m...

A good basic math education, is all that is needed to understand the "downside" risk of a margin account (but all the reports in the media so far do not show this simple "downside" math).

Adding the "options" account variable complicates matters, but kinda explains the lackluster single digit portfolio returns of the SD county portfolio (i.e. the various options w/in the portfolio of "puts for downside protection and "calls" to try and win big on the upside" cancelled each other out - so far, in a market that has gone up), the big unknown is how the "options" are structured within the portfolio and how it react if there is sudden and dramatic turbulence.

Consider all it might take for the "local" house of cards to fall is some kind of foreign black swan event that drops the market towards 10% down, and because of leverage things could suddenly get ugly for the local economy (for example LTCM, which happened in a less complex world, now one has to factor in some thing akin to high speed robo traders, that will sell off a position because of a trigger event, thus converting a "paper" loss into a real loss for the pension portfolio??).

10 billion dollars placed into a margin account to play the options market IMHO is "insane" if anyone was investing their own money, but think I uncovered the motive.

The reason the county pension board might have taken such drastic action is the change in accounting rules which put public pensions on the balance sheet next year.

Few even in the investment community know that:

PUBLIC "Pension liabilities must be included on the balance sheets of the agencies responsible for funding their employees' pensions. Until now liabilities have been buried in arcane footnotes that few read and even fewer understood"

http://articles.latimes.com/2014/apr/09/...

NOTE if San Diego's pension board margin-option strategy fails, the tax payer is on the hook!

One other thing, there is a youtube video (starting at 3:24), where san diego is mentioned at the being at the top of the list (for being the deepest in the hole overall for unfunded pensions and having an unfunded health care plan)

https://www.youtube.com/watch?v=BRr49iAgI9g

If pensions and health care costs have to both be included on the balance sheet, the bond markets are in for a real shock which will ripple through the economy and affect everyone on main street.

If you want understand why there is a problem with pensions in San Diego, read the history of pensions at the state level (which started out well managed and over the years turned corrupt and mismanaged):

http://www.city-journal.org/2013/23_1_ca...

The local(s) (city and county) basically followed the CalPERS model, and what might be telling is the former CEO of CalPERS just plead guilty to a fraud, corruption charge

http://www.latimes.com/business/la-fi-ca...

Submitted by CA renter on September 2, 2014 - 1:52am.

Yes, the pension funds were once well-managed by staid, boring pension managers, most of whom were in-house.

Over the years, Wall Street has corrupted the public pension funds, and more and more of the pension money is being placed at greater and greater risk in more "financially innovative" investments. We have Wall Street and the Federal Reserve to blame for this. The Fed's insistence on keeping rates at ~0% are exacerbating the problems.

As for how it will affect the bond market, I believe that most people who work in these markets understand the risks...at least, I sure hope so.

It's important to note, though, that public employees have been the ones to take the biggest hits, so far. They've been moving more employees, especially the newer ones, into hybrid retirement plans, and most employees with most municipal agencies haven't been getting retiree healthcare for decades -- they've been phasing it out since the early/mid 90s. Also, PEPRA has made quite a few changes regarding pensionable compensation, benefit caps, and increased pension contributions from employees.

The above information is related mostly to changes in California, though I know that other states and municipalities are moving in the same direction.

Submitted by livinincali on September 2, 2014 - 12:35pm.

One way or another somebody is going to have less money spend. Whether it's the pensioners that take a haircut or the tax payers are forced to pay more in taxes. In general it's another headwind for continued price appreciation in real estate, but it might not be the biggest or even that significant.

I suppose it could trigger some movement in people. Pensioners facing a big haircut might move to a lower cost of living state. Huge tax increases might encourage businesses and individuals to leave the state/city.

I don't think the pension crisis is going to do anything good for the economy. Essentially it's a big debt and economic impact of that debt doesn't clear until the debt is paid off or you default on it.

Submitted by bearishgurl on September 2, 2014 - 2:02pm.

CA renter wrote:
Yes, the pension funds were once well-managed by staid, boring pension managers, most of whom were in-house.

Over the years, Wall Street has corrupted the public pension funds, and more and more of the pension money is being placed at greater and greater risk in more "financially innovative" investments. We have Wall Street and the Federal Reserve to blame for this. The Fed's insistence on keeping rates at ~0% are exacerbating the problems.

As for how it will affect the bond market, I believe that most people who work in these markets understand the risks...at least, I sure hope so.

It's important to note, though, that public employees have been the ones to take the biggest hits, so far. They've been moving more employees, especially the newer ones, into hybrid retirement plans, and most employees with most municipal agencies haven't been getting retiree healthcare for decades -- they've been phasing it out since the early/mid 90s. Also, PEPRA has made quite a few changes regarding pensionable compensation, benefit caps, and increased pension contributions from employees.

The above information is related mostly to changes in California, though I know that other states and municipalities are moving in the same direction.

Good point, CAR. In fact, SDCERA (mentioned in the OP's article) has substantially reduced their "Supplemental Benefit Allowance" (intended to help pay healthplan premiums, if not covered by someone else) in recent years for 99% of the workers who retired (or took "deferred retirement") after March 29, 2002 (Tier "A"):

http://www.sdcera.org/PDF/Supplemental_B...

This probability and also the fact that the SBA was could be withdrawn at any time was known to all active employees at the time of signing up for the plan (March 2002) but the vast majority elected to be folded into Tier "A" (from Tier I/II) at the time due to their future monthly retirement annuity being calculated upon a full percentage point higher of their highest annual salary. The caveat is that they would be required to contribute 7.5% of their salaries towards the (Tier "A") plan where Tier I/II employees were not. Fortunately, for taxpayers, a very large portion of Tier I/II retirees are now deceased, and, in any case, the portion still living (all folded into Tier I) have much smaller pensions than those in Tier "A" which are based upon a much less generous calculation and smaller highest-year salaries.

In addition, SDCERA has implemented Tier "B", a "defined contribution" plan or "hybrid plan," (as discussed above) offered to all employees who were first hired between 8/28/09 and 12/1/12:

http://www.sdcera.org/PDF/Tier-B_booklet...

... and Tier "C", an even scantier "defined-contribution" plan" offered to all employees who were first hired after 12/1/12:

http://www.sdcera.org/PDF/retirement_pla...

Here is an overview page of the 3 retirement tiers now administered by SDCERA which still have active employees:

http://www.sdcera.org/active_retirement_...

phaster wrote:
To show why the current SD county pension "operations" is a bad idea, google "buying stocks on margin" and check out the first search result.

The math is pretty simple to understand (just add "000,000" to the following $ figures):

A Buying Power Example
Let's say that you deposit $10,000 in your margin account. Because you put up 50% of the purchase price, this means you have $20,000 worth of buying power.

http://www.investopedia.com/university/m...

Returning to our example of exaggerated profits, say that instead of rocketing up 25%, our shares fell 25%. Now your investment would be worth $15,000 (200 shares x $75). You sell the stock, pay back your broker the $10,000, and end up with $5,000. That's a 50% loss, plus commissions and interest, which otherwise would have been a loss of only 25%.

Think a 50% loss is bad? It can get much worse. Buying on margin is the only stock-based investment where you stand to lose more money than you invested. A dive of 50% or more will cause you to lose more than 100%, with interest and commissions on top of that.

http://www.investopedia.com/university/margin/margin4.asp

[snip]

Uh, well, I don't think our fact-skimming newbie, Phaster, had a chance to see this recent piece from the UT (hint: google SDCERA and it comes up first :)):

.... For the past decade, San Diego County and its employees paid 100 percent or more of their annually required contribution to the SDCERA retirement fund. Consistent employee and employer contributions over the years have laid a foundation for investment gains and asset growth. SDCERA’s investment strategy helps the employer’s budgeting process and stabilizes employer costs by reducing the volatility of returns and steadily achieving the rate of return needed to fund the benefit.

At $10 billion, the SDCERA fund is able to pursue certain investment strategies that larger plans like CalPERS cannot access and smaller plans do not have the resources to deploy. SDCERA’s investment strategy is purposely designed to be no riskier than traditional pension fund asset allocation strategies. Risk-parity and trend strategies, which utilize leverage, are limited to 25 percent of the SDCERA portfolio, not the entire set of portfolio assets. The other 75 percent of the portfolio is managed using traditional asset allocation and rebalancing approaches...

http://www.utsandiego.com/news/2014/aug/...

see also: http://sdcera.com/investments.htm

Submitted by bearishgurl on September 2, 2014 - 2:17pm.

livinincali wrote:
. . . I suppose it could trigger some movement in people. Pensioners facing a big haircut might move to a lower cost of living state. Huge tax increases might encourage businesses and individuals to leave the state/city. . . .

Well, I'm representative of the typical local Suzy Q. Gubment-Pensioner with a fairly low income. But every time I look at listings the places I WOULD be interested in fleeing to (wine country and mtns, in and out of state), I'm finding the home prices to be just as much or higher than where I currently live ... and utilities higher or much higher. And I don't owe very much on my current home ... relative to its value .... and could pay it off anytime I so choose to. And I have a running vehicle and know how to get on the interstate ....

So there you have it .... the "real" dilemma facing state and local gubment pensioners who are native San Diegans or have resided in SD County nearly all of their lives.

Sorry, but I just don't see a "mass exodus" of SD County retirees, even if Tier "A" loses their (minuscule) Supplemental Benefit Allowance (this was supposed to happen 6/30/14 but SDCERA must have found a way to "patch the hole" for FY 14/15).

Submitted by harvey on September 3, 2014 - 7:29am.

"Wall Street" is an abstraction.

"Wall Street" does not manage any investments.

Pension funds in California are managed by public employees. Real agencies. Real people.

The public pension system has evolved into a complex and arcane bureaucracy over the decades as it was influenced by public sector employee unions, which are some of the best-funded political lobbying organizations in the nation:

https://www.opensecrets.org/orgs/list.php

Government exists to provide services to the public.

Government agencies hire employees to provide the service.

Pensions are simply a component of compensation for these employees.

Like any government activity, policy should seek to provide the service at the least cost.

Much of the complexity of the public sector pension systems simply does not need to exist. The bureaucracy is complex, by design, to allow the true cost of pension benefits to be hidden from the public and to allow politicians to defer costs.

The pension system is a useful tool for budget shenanigans.

And it is all totally unnecessary.

It is entirely possible to provide all government services without the overhead of the complex public pension system.

The solution is simple: End defined-benefit pension programs for government employees. Compensate public employees fairly and provide them with defined-contribution retirement benefits, just like the majority of the population and workforce.

Submitted by phaster on September 14, 2014 - 12:52am.

bearishgurl wrote:

Uh, well, I don't think our fact-skimming newbie, Phaster, had a chance to see this recent piece from the UT (hint: google SDCERA and it comes up first :)):

.... For the past decade, San Diego County and its employees paid 100 percent or more of their annually required contribution to the SDCERA retirement fund. Consistent employee and employer contributions over the years have laid a foundation for investment gains and asset growth. SDCERA’s investment strategy helps the employer’s budgeting process and stabilizes employer costs by reducing the volatility of returns and steadily achieving the rate of return needed to fund the benefit.

At $10 billion, the SDCERA fund is able to pursue certain investment strategies that larger plans like CalPERS cannot access and smaller plans do not have the resources to deploy. SDCERA’s investment strategy is purposely designed to be no riskier than traditional pension fund asset allocation strategies. Risk-parity and trend strategies, which utilize leverage, are limited to 25 percent of the SDCERA portfolio, not the entire set of portfolio assets. The other 75 percent of the portfolio is managed using traditional asset allocation and rebalancing approaches...

http://www.utsandiego.com/news/2014/aug/...

see also: http://sdcera.com/investments.htm

I'm just a knuckle head that is honest enough to admit that I'm not a "investment expert."

Since I am not an "investment expert" I won't buy into the latest investment fad hype (such as "risk parity") without pondering the downside.

Nor do I pretend to understand all the details about Tier "a" employees vs Tier I/II employees, or care about employees that say they paid their annual required contribution, because basically my goal is to try to understand general trends.

To that end, the wall street journal article as I understand it has three key facts:

1) SD county has "currently" about 10 billion in its pension fund account

2) there is some kind of pension short fall (i.e. underfunding issue)

3) to make up for the "unfunded" pension obligations, the pension board adopted a strategy to use "leverage" on the order of 100% (in other words taking out a loan equal to the amount the pension board has in its account or a total of about 20 billion bucks and playing the markets)

Next I know if I go to a broker, I can place money for "investing" in one of three general types of account(s):

1) a "cash" account

(www.scottrade.com/investment-products/st...)

2) a "margin" account

(www.scottrade.com/investment-products/in...)

3) an "options" account

(www.scottrade.com/investment-products/op...)

Perhaps its just me but after reading the "definitions" from the "investopedia DOT com" website, and "skimming" a typical broker website, the reported decision to borrow 10 billion against the 10 billion the SD pension board has in its account - sure looks like the definition of a "margin" account (with its associated risks)

One reason I'm guessing the SD pension board emphasize they are investing using "risk parity" in a "press release," is its a marketing/spin/propaganda ploy.

Basically they (the SD pension board) are selling the idea to the joe/jane taxpayer, that the "derivatives" strategy involves little or no risk (something akin to why the name "credit default swap" was given to what is essentially "insurance on a bond").

FYI while trying to understand why the economy imploded a few years ago, I read if the term "insurance" was used instead of the term "CDS" (credit default swap), then an inconvenient rule about the level of capital reserves required by regulators to back traditional insurance policies would apply. BTW guess what exotic financial instrument had a big hand in taking down the economy last time...

Back to the matter at hand, the only conclusion I can draw (translating all the B$ terms and given all the data), is that the SD pension board is seeing the handwriting on the wall with the "change in accounting rules, which requires pension obligations be placed on the balance sheet" and is borrowing an amount equal to what they currently have in the bank and "investing" the whole pile of cash (20 billion) hoping to grow the "value" of the pool of assets and makeup for the short fall.

Like any investor, they (the pension board) are looking for some kind of investment "vehicle" (like: stocks, put options, call options, bonds, credit default swaps which is a fancy name for insurance on bonds that they might or might not own, commodities, derivatives, real estate, etc.) that increases in value.

Given that a "margined account" consists of a pool of money which has to be invested in some kind of investment "vehicle," it does not matter what the exact asset mix is, because the market "value" for the pool of assets can be looked at as, ending up in one of three states:

1) going down over time

If the "assets" w/in the pension portfolio go down overall, this would be considered a "loss," on top of which there also would be some kind of "rent" payment paid to the broker (over the life of the "margin" loan)

In absolute terms if all the "assets" were sold off and the loan from the broker paid back, there would be a lot less money in the pension account (than at the beginning).

Perhaps as described in the "risk" section describing a "margin account," the pension board might owe the broker more money than they initially bet, BUT it won't matter to them because no matter what happens the taxpayer picks up the tab.

2) holding more or less, "constant" over time

If the "assets" w/in the pension portfolio are constant over time, the fact of the matter is this too would be considered a "loss" because some kind of "rent" payment will have to be paid to the broker (over the life of the "margin" loan).

In absolute terms if all the "assets" were sold off and the loan to the broker paid back, there would be less money in the pension account (than at the beginning).

Again in this case, any pension shortfall would be backstopped by the tax payers.

3) going up over time

If the various "assets" w/in the pension portfolio go up overall, this "might be considered a win" BUT like in the two cases above, one also has to consider the drag of servicing the "margin" loan (and also thrown away costs of "unused" expired options, etc., which is also a consideration in the two cases above).

But for sake of simplicity, lets ignore debit service payments, etc. and just say the PortfolioValue(final) > PortfolioValue(initial), then this would considered a "win!"

In this case "hopefully" the pension pool assets grow in value fast enough to satisfy the promises made by past political leaders to public employees (i.e public employee union members), and the tax payer is off the hook. Basically this is the la la land, "Hollywood" fairy tail happy ending!!

So (at best) I basically see the simple odds being 1/3 "successful" vs 2/3 "unsuccessful" (and a very "deadly" downside) with the reported SD pension "derivative" portfolio strategy

Knowing there are three basic "endgame" states, I guess I could write a fancy monte carlo computer simulation, and forecast the exact date of the SD pension fund implosion and $uckness for all parties involves (i.e. exact doller values).

But such a forecast would only be a "guesstimate" because its impossible write an equation that accurately describes the psychological pain of all players in the system, along with their responses.

It is this impossibility to write an exact math equation which describes all the variables and gives exact predictive answers, which is why "economics" is called "the dismal science"

http://en.wikipedia.org/wiki/The_dismal_...

I know it is impossible to remove all risk from a portfolio, yet get the feeling the SD pension board thinks otherwise (and is tying to sell their idea to the financially illiterate public/taxpayers)

Just hope my worst fears don't come true, cause from what I've read and understand about markets, the derivate strategy for managing what should be boring and safe "retirement" portfolio, could economically implode in a spectacular fashion.

Submitted by phaster on September 3, 2014 - 11:55pm.

CA renter wrote:

The Fed's insistence on keeping rates at ~0% are exacerbating the problems.

As for how it will affect the bond market, I believe that most people who work in these markets understand the risks...at least, I sure hope so.

The fed is keeping interest rates near "0" because historically that is how economic activity was kickstarted.

The mechanism by which the fed directed interest rates, was by printing money and lending it out to credit worth institutions, who in turn lent it out to credit worth people... (see the problem?)

Few institutions have their books in order, same goes for people (fewer people have the capacity to take on more debt), yet since 2008 the fed has created something like 4 TRILLION dollars in an attempt to try and get the economy going (but most of the printed credit "money" is just sitting on ledger sheets at the fed and big banks)

As I see it we're in twilight zone of global "mild stagflation" waiting for something to give...

I say that is because if ya think the US FED printing 4 TRILLION or so is a big number, consider the mind-blowing 15+ TRILLION the bank of china has printed since 2008.

I'd bet that most people who work in the "bond" market don't ponder such things, and only see a limited picture of stuff around them and not the BIG "crazy" picture.

It is this narrow world view, that caused 99% of "financial experts" to miss seeing the bubble in housing, systemic problems caused by CDOs, etc. last time around.

Perhaps, I might be fooling my self looking at all the data trying to grasp the big picture, but feel the next implosion is going to be government debt at the city and state level.

Unlike the federal level which can print money and have deficit spending, there is no similar pressure relief valve "mechanism" at the city and state level AND the unfunded "pension" debt is a huge value - in the billions or tens of billions for large cities, and "collectively" hundreds of billions at the state level.

Muni bonds are based on the faith, that the city and states will pay back bondholders, so when I read that new account rule about public pension debts being required to be placed on the balance sheet (I kinda think that a "debt" tidal wave seemingly appearing out of nowhere is something to be concerned about, because somehow its going to affect bond ratings, investors perceptions and in time the outlook of joe six pack walking down main street)

Its going to be interesting in years ahead, cause somehow something BIG has to give with all the mismanagement...

Submitted by CA renter on September 4, 2014 - 1:52am.

harvey wrote:
"Wall Street" is an abstraction.

"Wall Street" does not manage any investments.

Pension funds in California are managed by public employees. Real agencies. Real people.

The public pension system has evolved into a complex and arcane bureaucracy over the decades as it was influenced by public sector employee unions, which are some of the best-funded political lobbying organizations in the nation:

https://www.opensecrets.org/orgs/list.php

Government exists to provide services to the public.

Government agencies hire employees to provide the service.

Pensions are simply a component of compensation for these employees.

Like any government activity, policy should seek to provide the service at the least cost.

Much of the complexity of the public sector pension systems simply does not need to exist. The bureaucracy is complex, by design, to allow the true cost of pension benefits to be hidden from the public and to allow politicians to defer costs.

The pension system is a useful tool for budget shenanigans.

And it is all totally unnecessary.

It is entirely possible to provide all government services without the overhead of the complex public pension system.

The solution is simple: End defined-benefit pension programs for government employees. Compensate public employees fairly and provide them with defined-contribution retirement benefits, just like the majority of the population and workforce.

Once again, you're proving how totally ignorant and uninformed you are. Nothing new here. Wall Street firms (and other outside money management firms) are absolutely managing public pension money, and they've been doing so for quite awhile.

Just a couple of examples of what happens when Wall Street corrupts public pension funds:

http://www.nakedcapitalism.com/2014/07/f...

http://www.businessweek.com/magazine/con...

What once was the boring business of in-house investment managers buying very safe Treasuries and highly-rated municipal bonds, with a smattering of very highly-rated corporate bonds, has become an insidiously corrupt casino where "pay to play" is an expected part of the investment dance. It is unacceptable.

Submitted by CA renter on September 4, 2014 - 1:25am.

phaster wrote:
CA renter wrote:

The Fed's insistence on keeping rates at ~0% are exacerbating the problems.

As for how it will affect the bond market, I believe that most people who work in these markets understand the risks...at least, I sure hope so.

The fed is keeping interest rates near "0" because historically that is how economic activity was kickstarted.

The mechanism by which the fed directed interest rates, was by printing money and lending it out to credit worth institutions, who in turn lent it out to credit worth people... (see the problem?)

Few institutions have their books in order, same goes for people (fewer people have the capacity to take on more debt), yet since 2008 the fed has created something like 4 TRILLION dollars in an attempt to try and get the economy going (but most of the printed credit "money" is just sitting on ledger sheets at the fed and big banks)

As I see it we're in twilight zone of global "mild stagflation" waiting for something to give...

I say that is because if ya think the US FED printing 4 TRILLION or so is a big number, consider the mind-blowing 15+ TRILLION the bank of china has printed since 2008.

I'd bet that most people who work in the "bond" market don't ponder such things, and only see a limited picture of stuff around them and not the BIG "crazy" picture.

It is this narrow world view, that caused 99% of "financial experts" to miss seeing the bubble in housing, systemic problems caused by CDOs, etc. last time around.

Perhaps, I might be fooling my self looking at all the data trying to grasp the big picture, but feel the next implosion is going to be government debt at the city and state level.

Unlike the federal level which can print money and have deficit spending, there is no similar pressure relief valve "mechanism" at the city and state level AND the unfunded "pension" debt is a huge value - in the billions or tens of billions for large cities, and "collectively" hundreds of billions at the state level.

Muni bonds are based on the faith, that the city and states will pay back bondholders, so when I read that new account rule about public pension debts being required to be placed on the balance sheet (I kinda think that a "debt" tidal wave seemingly appearing out of nowhere is something to be concerned about, because somehow its going to affect bond ratings, investors perceptions and in time the outlook of joe six pack walking down main street)

Its going to be interesting in years ahead, cause somehow something BIG has to give with all the mismanagement...

The Fed cannot kick-start an economic recovery as much as it can unleash a speculative wave of misallocated money...rushing around the globe in search of yield. I, for one, have long been staunchly opposed to the Fed's responses to recessions and the corrections of these monetary misallocations.

As to the rest, the government debt implosion has already happened. It's been on the radar for many years, now. If someone isn't aware of it, they certainly have no business in the financial markets.

But to think that these debt problems are solely due to public pensions is to ignore all of the other deficit spending done during the monetary free-for-all. Pensions are only one piece of the puzzle, and they're not even the major piece in many cases. ALL stakeholders need to come to the table in order to fix this mess -- taxpayers (many of whom have been getting tax subsidies, like Prop 13, that we have no business giving away, especially for real estate that isn't a primary residence), bondholders, public employees, government contractors, (illegal) immigration advocates, and VOTERS who've voted in every election to spend money that we do not have.

Submitted by harvey on September 4, 2014 - 7:00am.

CA renter wrote:
Once again, you're proving how totally ignorant and uninformed you are. Nothing new here. Wall Street firms (and other outside money management firms) are absolutely managing public pension money, and they've been doing so for quite awhile.

Thanks for the links. For those that need a summary:

- Frank Buenrostro was the CEO of CalPERS.

- Frame Buenrostro made the investment decisions, including which funds to use.

- Frank Buenrostro was a public employee when he committed fraud.

The State of California exists to provide services to the people of California.

Why is the State of California in the investment business -- why does the state manage the largest investment fund in the country, a fund that only serves a small fraction of the population?

Why do we have this massive, opaque bureaucracy riddled with unnecessary financial risk? (thanks for the example.)

Why do government jobs need such ridiculously complex compensation rules?

http://reason.com/archives/2014/08/29/ca...

Under the current public pay system, clerical employees get extra cash for typing and taking dictation — activities that seem like basic parts of the job description. Likewise, police officers who attend physical-fitness programs get paid extra. Librarians get extra payments if they routinely help library patrons find books and resources.

Why can't CalTrans engineers, CHP officers, librarians, fireighters, and park rangers be compensated with a base salary and defined contribution plan, like everyone almost everyone else in the workforce?

Would park rangers be less effective if there were no CalPERS?

Submitted by CA renter on September 4, 2014 - 7:19am.

Yes, Wall Street has corrupted the pension plans. That's exactly what I had said in my previous post.

Yes, public employees would be less effective without these benefits, and turnover rates would be much higher. These jobs value experience, because that's the ONLY way you're going to know how to do your job in many of these positions. The costs to recruit, train, and equip many of these employees are extremely high, so turnover is a huge cost to public employers.

Defined benefit plans encourage the most experienced and valuable employees to stay, and this reduces costs for the public employers, while also ensuring that they have the highest-qualified workforce.

And the "state of California" isn't in the investment business. The pension funds most certainly are, as they should be.

Once again, private sector workers have Social Security AND defined contribution plans. In many cases, this costs almost as much as a DB plan (most public employees who've worked long enough to get the full defined benefit do not get Social Security).

And not "everyone else in the workforce" has a DC pension plan. Many have defined benefits, and DB plans were the norm a few decades ago...you know, when the middle class and the economy were at their strongest. Corporate greed has caused the demise of the middle class; not unions, and not DB pension plans.

It's amazing how the right-wing propagandists have managed to fool so many people into working against their own interests.

Submitted by CA renter on September 4, 2014 - 7:25am.

harvey wrote:

The public pension system has evolved into a complex and arcane bureaucracy over the decades as it was influenced by public sector employee unions, which are some of the best-funded political lobbying organizations in the nation:

https://www.opensecrets.org/orgs/list.php

And this goofy claim of yours needs to be clarified, as well. From your link:

-------

Heavy Hitters: Top All-Time Donors, 1989-2014

This list includes the organizations that have historically qualified as "heavy hitters" — groups that lobby and spend big, with large sums sent to candidates, parties and leadership PACs. Individuals and organizations have been able to make extremely large donations to outside spending groups in the last few years. While contributions to outside groups like super PACs do not factor into an organization's designation as a "heavy hitter" (a listing of about 150 groups), those numbers are included for the roster below.

For example, this list does not include casino magnate Sheldon Adelson. He and his wife Miriam donated nearly $93 million in 2012 alone to conservative super PACs — enough to put him at No. 2 on this list. Similarly, the list excludes former New York City mayor Michael Bloomberg, who has donated more than $19 million in the past two years, largely to groups that support gun control. Neither Adelson nor Bloomberg — or the organizations they report as their employers — qualifies as a "heavy hitter" under our current definition. It's also important to note that we aren't including donations to politically active dark money groups, like Americans for Prosperity, a group linked to the Koch brothers, or the liberal group Patriot Majority — because these groups hide their donors; see a list of top donors that we've been able to identify to such groups. We are working to revise this list to take into account the new realities of campaign finance created by the Citizens United decision, but as it currently stands, there are significant omissions.

It is also worth noting that certain organizations, such as ActBlue and Club for Growth, are included although they function for the most part as pass-through entities: individual donors give to them with the contributions earmarked for specific candidates.

Submitted by CA renter on September 4, 2014 - 7:30am.

Let's look at where the real money is coming from, and whether it's supporting labor or capital, shall we?

[formatting issues, but click on the link]

Grand Total Democrats Republicans Dem % Repub %
Business $698,136,635 $295,238,284 $398,886,016 43% 57%

Labor $284,017 $272,187 $8,855 97% 3%

------------

The broadest classification of political donors separates them into business, labor, or ideological interests. Whatever slice you look at, business interests dominate, with an overall advantage over organized labor of about 15-to-1.

Even among PACs - the favored means of delivering funds by labor unions - business has a more than 3-to-1 fundraising advantage. In soft money, the ratio is nearly 17-to-1.

An important caveat must be added to these figures: "business" contributions from individuals are based on the donor's occupation/employer. Since nearly everyone works for someone, and since union affiliation is not listed on FEC reports, totals for business are somewhat overstated, while labor is understated. Still, the base of large individual donors is predominantly made up of business executives and professionals. Contributions under $200 are not included in these numbers, as they are not itemized.

https://www.opensecrets.org/overview/bli...

Submitted by livinincali on September 4, 2014 - 8:03am.

CA renter wrote:

Yes, public employees would be less effective without these benefits, and turnover rates would be much higher. These jobs value experience, because that's the ONLY way you're going to know how to do your job in many of these positions. The costs to recruit, train, and equip many of these employees are extremely high, so turnover is a huge cost to public employers.

Defined benefit plans encourage the most experienced and valuable employees to stay, and this reduces costs for the public employers, while also ensuring that they have the highest-qualified workforce.

It also encourages the worst and most disgruntled to stay as well. Once you get 10-12 years into city employment the benefit to stay on even though you hate doing what you're doing is too high. Why do we want to lock down the best and the brightest shouldn't they have freedom to pursue other opportunities like the rest of us. If you have someone that is truly great and want to keep them throw out the silly bucket pay scales and pay them what they are worth on the free market. Seriously where is the 10-15 year teacher making $60K in pay, $15K in medical benefits and probably another $10K in pension benefit going to go in the private sector and make a comparable amount.

Submitted by EconProf on September 4, 2014 - 10:29am.

CA renter wrote:
Let's look at where the real money is coming from, and whether it's supporting labor or capital, shall we?

[formatting issues, but click on the link]

Grand Total Democrats Republicans Dem % Repub %
Business $698,136,635 $295,238,284 $398,886,016 43% 57%

Labor $284,017 $272,187 $8,855 97% 3%

------------

The broadest classification of political donors separates them into business, labor, or ideological interests. Whatever slice you look at, business interests dominate, with an overall advantage over organized labor of about 15-to-1.

Even among PACs - the favored means of delivering funds by labor unions - business has a more than 3-to-1 fundraising advantage. In soft money, the ratio is nearly 17-to-1.

An important caveat must be added to these figures: "business" contributions from individuals are based on the donor's occupation/employer. Since nearly everyone works for someone, and since union affiliation is not listed on FEC reports, totals for business are somewhat overstated, while labor is understated. Still, the base of large individual donors is predominantly made up of business executives and professionals. Contributions under $200 are not included in these numbers, as they are not itemized.

https://www.opensecrets.org/overview/blio.php


CAR: You report how business donations far outweigh labor donations. But don't a lot of businesses support liberal causes? Solyndra comes to mind. With crony capitalism under Obama, big business is "persuaded" to help out the existing administration, whether Democrat or Republican. Let's remember that true conservatives do not automatically support big business.
I recall media reports that in present House and Senage races, the Republicans are being outspent by Democrats, even with the troubled economy and foreign policy.
I don't know if this funding difference is true or not, so perhaps you can look it up. Your research seems to be thorough, so I tend to trust what you will reveal to us.

Submitted by FlyerInHi on September 4, 2014 - 2:11pm.

EconProf wrote:
CAR: You report how business donations far outweigh labor donations. But don't a lot of businesses support liberal causes? Solyndra comes to mind. With crony capitalism under Obama, big business is "persuaded" to help out the existing administration, whether Democrat or Republican. Let's remember that true conservatives do not automatically support big business.

I think true conservatives would not focus on solyndra, which is small fish. They would focus of the homeland security and military industrial complex that has built up in the DC area and across the country.

They would also focus on how our military has screwed things up that we have to keep on using the military on unscrew things. That situation seems like the perfect climate for the security/armament/defense business.

Submitted by CA renter on September 4, 2014 - 6:00pm.

livinincali wrote:
CA renter wrote:

Yes, public employees would be less effective without these benefits, and turnover rates would be much higher. These jobs value experience, because that's the ONLY way you're going to know how to do your job in many of these positions. The costs to recruit, train, and equip many of these employees are extremely high, so turnover is a huge cost to public employers.

Defined benefit plans encourage the most experienced and valuable employees to stay, and this reduces costs for the public employers, while also ensuring that they have the highest-qualified workforce.

It also encourages the worst and most disgruntled to stay as well. Once you get 10-12 years into city employment the benefit to stay on even though you hate doing what you're doing is too high. Why do we want to lock down the best and the brightest shouldn't they have freedom to pursue other opportunities like the rest of us. If you have someone that is truly great and want to keep them throw out the silly bucket pay scales and pay them what they are worth on the free market. Seriously where is the 10-15 year teacher making $60K in pay, $15K in medical benefits and probably another $10K in pension benefit going to go in the private sector and make a comparable amount.

The worst employees tend to leave before benefits vest to any large extent. That doesn't mean that some dead wood isn't hanging around after too many years -- and I absolutely support making it easier to fire truly bad employees. It's more important to keep the good ones than to worry about the average or slightly less-than-average ones. Also, there's no guarantee that if you got rid of the bottom 10%, that you'd get a new group that is better. Churning costs money, and it doesn't necessarily mean that you're getting better quality employees. And many of the best employees might not want to stick around, either, if they think that management is indiscriminately or wrongly terminating their coworkers.

As for the argument that there is any kind of a "free market" in labor...you clearly aren't looking at the same things that I am. Employers are always conspiring to drive down wages and benefits, and they do so on many levels, including political, which is why we desperately need politically active unions..."united we negotiate, divided we beg," and all that.

And that teacher going into another profession where s/he can make the same or better compensation? Lots of them do exactly that. Again, look at the attrition rate for teachers. Many teachers also come from the private sector where they were making more money, but they change for lifestyle or other factors (often to get hours that match their children's hours). But since you've asked the question, how many professional athletes can leave the profession and make more money in another field? How many CEOs can leave that position and make anywhere near the same amount in another position? How about investment bankers? And how about the techies? Think they can leave tech and make more money elsewhere? Obviously, people tend to gravitate toward positions that give them the best of what they're looking for with respect to job satisfaction, freedom, lifestyle, compensation, etc. That goes for everybody, not just teachers and other public servants.

Submitted by CA renter on September 4, 2014 - 6:04pm.

FlyerInHi wrote:
EconProf wrote:
CAR: You report how business donations far outweigh labor donations. But don't a lot of businesses support liberal causes? Solyndra comes to mind. With crony capitalism under Obama, big business is "persuaded" to help out the existing administration, whether Democrat or Republican. Let's remember that true conservatives do not automatically support big business.

I think true conservatives would not focus on solyndra, which is small fish. They would focus of the homeland security and military industrial complex that has built up in the DC area and across the country.

They would also focus on how our military has screwed things up that we have to keep on using the military on unscrew things. That situation seems like the perfect climate for the security/armament/defense business.

I don't get distracted by non-economic issues where politics are concerned. That's not to say that these issues are unimportant, but that they pale in comparison to economics. I'm far more concerned about what the donors are doing WRT the position of labor (union and non-union workers), and how their actions and activities affect workers' compensation and general quality of life vs that of "capital" (those who do not work for their living, but invest/speculate for a living, instead). When looked at from that perspective, there is no question that capital has been outspending labor by many multiples. See my link, above, for the info.

Submitted by CA renter on September 5, 2014 - 1:10am.

And in case you've missed this:

---------

McConnell opened his remarks at the California resort with a tip of the hat to the wealthy conservative activists hosting the summit — whose network raised over $400 million for the Republican cause in 2012 alone — saying “I want to start by thanking you, Charles and David (Koch), for the important work you’re doing. I don’t know where we’d be without you…”

The senator devoted most of his speech to his desire to free up unlimited political spending, or what he calls “free speech.” He described the campaign finance reform movement beginning during the Watergate scandal as an effort by “the political left” to control the political process, though neglecting to mention his support for strict contribution limits and public financing of elections during the 1970s, when he called the corrupting influence of money in politics a “cancer” on democracy.

Referring to the Supreme Court’s 2010 Citizens United decision that freed up unlimited political spending by corporations and Super PACs, McConnell said the decision “leveled the playing field” for corporations, ushering in “the most free and open system we’ve had in modern times.” McConnell added, “I pray for the health of the five” justices who ruled his way in the case.

While most of McConnell’s comments on campaign finance mirrored his public statements, he did add this eye-opening quote on the passage of the 2002 McCain-Feingold bill that regulated electioneering communications.

“The worst day of my political life was when President George W. Bush signed McCain-Feingold into law in the early part of his first Administration,” said McConnell.

Commentators have noted that McConnell’s tenure in the Senate has included two government shutdowns, multiple wars, the 9/11 attacks, and the financial collapse of 2008. Regarding the latter, McConnell said at the time that the passage of the $700 billion Wall Street bailout for firms directly implicated in the crash was “the Senate at its finest.”

In other words, legislation limiting political spending by the wealthy was his worst day in the Senate, and legislation giving a $700 billion handout to the wealthy was his finest day in the Senate.

Regarding the newly proposed amendment to the Constitution to overrule Citizens United, McConnell fielded a question from David Koch and told the crowd that this is radical legislation seeking to silence the wealthy.

http://insiderlouisville.com/metro/leake...

-------------

Yet, some people still claim that we don't need unions, or that we don't need politically active unions. And these very same people will say there is a "level playing field" in politics... The level of ignorance out there is off the charts.

Submitted by harvey on September 5, 2014 - 9:35am.

Right, organized labor has no political power, they are helpless victims of "wall street."

Of course compensation is important for retention. That explains why police officers in one nearby community get more than five times the people that they serve:

http://www.nytimes.com/2013/12/28/us/pol...

The average pay and benefits package for a police officer here had been worth $177,203 per year, in a city where the median household income was $31,356 in 2011, according to the Census Bureau. All of this had gone largely unnoticed until becoming the center of debate during the recent municipal election.

Defined benefit pensions make it way too easy for politicians and unions to hide the true cost of services and to defer those costs until long after the politicians are gone. This is why we are seeing a wave of municipal bankruptcies. Politicians and public-sector unions gave themselves a sweet deal years ago, using the arcane pension system to hide the cost, until eventually the day of reckoning comes.

Defined benefit pensions for public employees are a completely unnecessary risk.

Of course there is the alternate explanation: That big, bad wall street "forced" these modest public servants to take their $177K compensation.

Wall street made them do it!

Submitted by livinincali on September 5, 2014 - 1:39pm.

CA renter wrote:

And that teacher going into another profession where s/he can make the same or better compensation? Lots of them do exactly that. Again, look at the attrition rate for teachers. Many teachers also come from the private sector where they were making more money, but they change for lifestyle or other factors (often to get hours that match their children's hours). But since you've asked the question, how many professional athletes can leave the profession and make more money in another field? How many CEOs can leave that position and make anywhere near the same amount in another position? How about investment bankers? And how about the techies? Think they can leave tech and make more money elsewhere? Obviously, people tend to gravitate toward positions that give them the best of what they're looking for with respect to job satisfaction, freedom, lifestyle, compensation, etc. That goes for everybody, not just teachers and other public servants.

But your argument was that we need defined benefit pension plans to keep people yet you say people stay and leave for other reasons. Just like how they do in the private sector. If that's you argument than don't you have to give up the argument that you NEED to offer guaranteed benefit contribution plans in order to make people stay.

Submitted by FlyerInHi on September 5, 2014 - 3:55pm.

Why not pay them compensations up front?

If they're not good at managing their money for retirement, then they're are not the cream of the crop, are they?

Submitted by CA renter on September 6, 2014 - 1:57am.

livinincali wrote:

But your argument was that we need defined benefit pension plans to keep people yet you say people stay and leave for other reasons. Just like how they do in the private sector. If that's you argument than don't you have to give up the argument that you NEED to offer guaranteed benefit contribution plans in order to make people stay.

Of course, there will always be somemovement. The goal is to keep the churning to a minimum and to keep the most valuable employees in place once you've spent all that time and money on hiring and training them.

Submitted by CA renter on September 6, 2014 - 2:02am.

FlyerInHi wrote:
Why not pay them compensations up front?

If they're not good at managing their money for retirement, then they're are not the cream of the crop, are they?

Not that they are necessarily bad with money (some are, some aren't; but public employees do tend to have better credit than most*), but the skills that make a good money manager don't necessarily translate into making a good cop, firefighter, teacher, etc.

*Most public employers do run a credit check during the hiring process, and candidates with low credit scores are unlikely to get a job with the government.

http://money.msn.com/credit-rating/3-job...

Submitted by CA renter on September 6, 2014 - 2:25am.

harvey wrote:
Right, organized labor has no political power, they are helpless victims of "wall street."

Of course compensation is important for retention. That explains why police officers in one nearby community get more than five times the people that they serve:

http://www.nytimes.com/2013/12/28/us/pol...

The average pay and benefits package for a police officer here had been worth $177,203 per year, in a city where the median household income was $31,356 in 2011, according to the Census Bureau. All of this had gone largely unnoticed until becoming the center of debate during the recent municipal election.

Defined benefit pensions make it way too easy for politicians and unions to hide the true cost of services and to defer those costs until long after the politicians are gone. This is why we are seeing a wave of municipal bankruptcies. Politicians and public-sector unions gave themselves a sweet deal years ago, using the arcane pension system to hide the cost, until eventually the day of reckoning comes.

Defined benefit pensions for public employees are a completely unnecessary risk.

Of course there is the alternate explanation: That big, bad wall street "forced" these modest public servants to take their $177K compensation.

Wall street made them do it!

That's Desert Hot Springs. They seem incapable of managing their finances, and not just because of pensions.

From your link:

This is not Desert Hot Springs’ first experience with fiscal problems. In 2001, it went bankrupt after losing a $10 million lawsuit brought by a developer who complained that the city was thwarting his efforts to build affordable housing. The city had to borrow to pay the judgment and is still paying off that debt — a struggle for a working-class town.

...

Also from your link:

The city, Desert Hot Springs, population 27,000, is slowly edging toward bankruptcy, largely because of police salaries and skyrocketing pension costs, but also because of years of spending and unrealistic revenue estimates. It is mostly the police, though, who have found themselves in the cross hairs recently.

In other words, the other spending that caused the crisis is already spent, so the easy targets are the public employees whose pay is deferred and still under the control of the public entities.

...

And the city council was unwilling to consider options that would fix the problem (the claim that it would only "delay the reckoning" is subjective, and not fact-based).

Mr. Phillips, the police union lawyer, said the current crisis had been driven by the new majority on the City Council — including Mayor Sanchez and Mr. Betts — that was philosophically opposed to tax increases. The union’s own proposal to address the budget shortfall — by cutting the size of the force and filling in with overtime work for which the officers would defer payment for 17 months, as well as raising the local sales tax — was rejected by city officials, who said it would only delay the reckoning.

==========================

Now, there IS a real problem with the changes made to pension benefit formulas under Gray Davis, as mentioned here:

Mr. Adams said that California’s rich police pensions were first offered to prison guards by former Gov. Gray Davis more than a decade ago. The move set off a chain reaction, with the California Highway Patrol soon clamoring for the deal, and then city police officers all over the state.

I have ALWAYS been opposed to these pension changes, long before you were ever aware of how public pensions worked, and long before the "pension crisis" that was 100% caused by Wall Street (and they were also responsible for those pension changes during the internet/stock market bubble in the late 90s...I was there, and I was warning about it back then).

Additionally, while the pension system might be "arcane" to you, it's perfectly transparent and easy to understand to those who know what they are looking at. All of the numbers are available on the CalPERS website.

I also want to point out that while contribution amounts were raised after the Wall Street crisis, these public employers were paying very little, and usually NOTHING AT ALL during the years of the stock market bubble. That's what enabled them to enhance the pension formulas...because the pension funds were OVER-funded.

Submitted by no_such_reality on September 6, 2014 - 8:02am.

It's going to resolve itself the same way any significant health issue resolves itself that you ignore, like being too fat, eating poorly and not exercising.

We wil either wake up one day and address it and start making improvements, eating better, putting the cigs down, and exercising. Or we won't. There are some signs we
Ve taking baby steps in addressing the blatant problems

When the bubble burst Cali had its first heart attack. We've made some changes but I give it 50/50 odds we just go back to the old patterns of financial management and political graft

Submitted by harvey on September 7, 2014 - 8:33am.

Tony "Mack" Rodriguez, a retired sergeant on the Desert Hot Springs police force describes how the situation came about. "The union told us that the revenue estimates were unrealistic, and we should do something about it. We were talking about deferring some raises, or maybe cutting back overtime. We had a plan."

But Rodriguez said the union proposal never made through because of interference from a number of investment firms. "Our plan never got too far. These Wall Street guys came in and made us take raises. They increased the pension payouts and lowered the retirement age. They were ruthless, there was no stopping them."

Now Rodriguez , 51, is not working but is forced to receive 90% of his prior salary of $132.000. "I'm stuck with these paychecks, for life" he said. "I could live till I'm eighty-five, and I'll have to deal with this for the next thirty years."

The situation has required him to fill his garage with motorsport vehicles he rarely uses. He recently was forced to purchase a fifty foot RV. "We had to buy a bigger house because of all this stuff" lamented Rodriguez. "I even had to get a disability tax break because the Wall Street guy told me that my knee hurts."

Submitted by CA renter on September 7, 2014 - 9:40pm.

Blah, blah, blah...

Nice try, pri.

For those of you who haven't figured it out yet, that wasn't an actual quote. This is what harvey/pri does -- quotes or claims things that aren't real.

Submitted by phaster on September 7, 2014 - 10:41pm.

CA renter wrote:

But to think that these debt problems are solely due to public pensions is to ignore all of the other deficit spending done during the monetary free-for-all. Pensions are only one piece of the puzzle, and they're not even the major piece in many cases.

Let's try and stay focused, and look at only the public pension vs the local economy.

I am ignoring federal programs like social security, medicare, military spending, because the federal government has tools like a printing press, and deficit spending, but local and state governments do not (unless I am mistaken).

The way muni and state governments can raise funds, is by property taxes, sales taxes and selling bonds.

Given new accounting rules which put public pensions on the balance sheet, I think there will be "downgrades" as what just happened with NJ just a few days ago

http://www.bondbuyer.com/news/regionalne...

My concern is "realistic estimates" not the B$ there is no problem view of politicians who seem to be on various drugs:

http://www.webmd.com/depression/depressi...

will reveal the magnitude of unfunded pensions BILLIONS higher than TPTB are saying "publicly" now.

Or put another way, think what would happen to bonds floated by SD if they are poorly rated w.r.t. other muni bonds (I'd think this would start some kind of death spiral "feedback loop," because bond bought by large pension funds would avoid SD bonds because of a negative rating, etc.). Its kinda like the problem detroit has right now with trying to raise money in the bond market (in other words because detroit has bad press, its bonds are looked upon as being garbage that will only pay cents on the dollar, so the city of detroit gets more bad press, the bonds get harder to sell, etc., etc., etc.)

If I was a poker player, I'd see the actions of the SD pension reported in the WSJ strike me as being one of desperation, basically asking why double down now?

Seems like a bluff when they say their investment strategy is sound, when I have shown the simple odds of success is 1 in 3 (and that "win" covers a range of values from small to big) AND it seems SD is betting big because they are short big time...

Putting 10 billion down into a margin account (so they can bet as if they have 20 billion, in the pot), either means they have have a good hand or they are desperate (I'd bet good money, its the latter).

Consider in investing, an actively managed account is less likely to beat the market average (i.e. index fund)

http://www.marketwatch.com/story/with-ac...

As I said I don't pretend to be a market expert, nor do I have a degree in economics or finance. But I think my three case(s) of a portfolio outcome are one good way to explain why actively managed accounts, fail to beat their index benchmark 2/3 of the time...

So the way I see things, the unfunded SD pension and the strategy to try and make the pension whole, is an armed weapon of financial mass destruction.

One other thing that worries me about local RE is

https://www.youtube.com/watch?v=yBfbBjEisD4

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the impending second wave of the lastest mortgage crisis, this time due to Helocs (Home equity lines of credit) and HAMP (Home Affordable Modification Program) interest rate resets. In the second half, Max interviews Aaron Krowne on the true state of the housing market across America - from home ownership rates to mortgage arrears.

Submitted by spdrun on September 7, 2014 - 10:47pm.

Why worry? If rates reset and we end up with a lot of short sales slamming prices down, it will be an opportunity to pick up cheap(er) r.e. before the gov steps in again and kicks the can further down the road.

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