The U.S. Taxpayer may have to bailout American Airlines’ Union Pension Plan

Posted by PITHOCRATES - December 4th, 2011

Week in Review

We simply can’t afford pension plans anymore.  Defined benefit plans need to go the way of the dinosaurs and fast.  Most retirement plans have already gone to employee 401(k) plans.  Where the employer pays the employee and forgets about him.  Or her.  Only unions and the public sector cling to these golden parachutes.  Because they know in the end they can get the taxpayer to pay for them when their greed gets the better of them (see US may have to foot American Airlines’ pension bill by NEWSCORE posted 12/1/2011 on the New York Post).

US firms or taxpayers may be on the hook to pay for American Airlines’ massive pension bill, if the bankrupt carrier chooses to drop its pension plans as part of restructuring efforts, the Financial Times reported Thursday.

Joshua Gotbaum, director of the Pension Benefit Guaranty Corporation (PBGC), told the FT that taking on American’s pension plans would worsen the insurer’s deficit and might trigger higher premiums for the companies that finance it.

The PBGC is funded by US firms that offer defined benefit pension plans. The agency insures about 27,600 single employer plans and 1,500 multi-employer plans, guaranteeing defined pension plans for about 44 million US workers…

PBGC has already requested permission from Congress to raise the premium it charges US corporations by $16 billion over 10 years.

America can’t afford a privileged class any longer.  The declining birth rate put an end to that a long time ago.  For pyramid schemes don’t work when the top is wider than the base.

We need to transition from defined benefit to defined contribution.  No more pensions.  People must save for their own retirement with a 401(k), IRA, annuity, etc.  And that goes for Social Security, too.  Not now.  But some future generation will have to pay for their own retirement.  Because sometime in the future Social Security just won’t be there anymore.  Not with a declining birth rate.  And unless you want to establish strict Catholicism as the state religion (no birth control or abortion), that birthrate isn’t going to change.  So that leaves only one option.  No more pensions.  Or privileged classes.

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After Enabling the Subprime Mortgage Crisis, Fannie and Freddie are still Losing Money and want Another Bailout

Posted by PITHOCRATES - November 13th, 2011

Week in Review

Fannie Mae and Freddie Mac are still losing money.  And are now asking for another taxpayer bailout.  Imagine that (see Falling home prices leads to bigger Fannie Mae loss; asks taxpayers for $7.8 billion more by the Associated Press posted 11/8/2011 on The Washington Post).

Mortgage giant Fannie Mae is asking the federal government for $7.8 billion in aid to cover its losses in the July-September quarter…

Michael Williams, Fannie’s president and CEO, said Fannie’s losses are increasing for two reasons: Some homeowners are paying less interest after refinancing at historically low mortgage rates; others are defaulting on their mortgages.

When property values drop, homeowners default, either because they are unable to afford the payments or because they owe more than the property is worth. Because of the guarantees, Fannie and Freddie must pay for the losses.

The problem now isn’t low mortgage rates and defaults.  That was the problem when government policy used Fannie and Freddie to create a housing bubble.  This is what gave us the subprime mortgage crisis.  Putting people into houses they couldn’t afford.  By forcing banks to qualify the unqualified.  And then having Fannie and Freddie buy these toxic mortgages from the banks.  So the banks could qualify more of the unqualified.  And continue the cycle.  All the while putting more and more risk onto the American taxpayer.  Because, as we have seen, it is the American taxpayer that bailed out Fannie and Freddie.  And now they’re asking for more money.

Government created the subprime mortgage crisis.  With their enablers of bad credit Fannie and Freddie.

Washington-based Fannie and McLean, Va.-based Freddie own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.

Fannie and Freddie buy home loans from banks and other lenders, package them with bonds with a guarantee against default and sell them to investors around the world. The companies nearly folded three years ago because of big losses on risky mortgages they purchased.

This wasn’t the banks on Wall Street causing this mess.  The deed was already done by the time they sold those toxic mortgages.  For had it not been for Fannie and Freddie they would have been no toxic mortgages for Wall Street to sell.  And no subprime mortgage crisis.

And there would have been no Fannie and Freddie mess without their overseers.  The federal government.  And their policy to put as many people into houses.  Whether they could afford it or not.

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