KeNo's Housing and Economic Portal: Friday October 22 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Report warns of coming wave of municipal pension shortfalls - (www.washingtonpost.com) The nation's largest municipal pension plans are carrying a total unfunded liability of $574 billion, which comes on top of as much as $3 trillion in unfunded pension promises made by the states, according to a report released Tuesday. The report calls the unfunded pension obligations "off-the-balance-sheet debt" that threatens to starve services such as police protection, recreation centers, parks and libraries. "The ability of local governments, particularly cities, to provide the levels of service they do now is threatened by this liability," said Joshua Rauh, a Northwestern University business professor who co-authored the report with Robert Novy-Marx, a University of Rochester professor. The report is based on an analysis of pension funds in 50 major cities and counties that together account for two-thirds of the nation's 3 million local government employees. It argues that cities routinely cling to unrealistic projected investment earnings to understate their pension liabilities, a strategy that has been exposed by the financial crisis and recession, which severely diminished investment returns.

Banking's New Bailout - (www.newsweek.com) If you thought the bank bailouts were over, you thought wrong. You may have not noticed, but we are in the middle of the third major bailout of U.S. and European banks and their investors in as many years. First came the original financial-sector rescue after the 2008 collapse of Lehman Brothers, which has so far shifted an estimated $3.7 trillion in banks’ losses and problem assets to the taxpayers’ bill in the U.S. alone. Then came the European Union’s €750 billion bailout of its weaker members—essentially another attempt to stabilize Europe’s banks, which together funneled some $2 trillion into the bonds, banks, and real-estate sectors of Europe’s shakiest economies: Greece, Ireland, Portugal, Spain, and Belgium. Now, near-zero interest rates are shifting hundreds of billions from the pockets of savers—including millions of pensioners now earning next to no interest on their investments—into the coffers of banks and their investors. This stealth bailout—effectively a giant tax on savers—is worth nearly $1 trillion annually in the U.S. alone, according to an estimate by Offit Capital Advisors. Worse, critics argue that this little-mentioned bailout isn’t just fleecing savers, it’s slowing the global recovery. By sucking money out of the real economy and into the financial sector, low interest rates are doing the opposite of what they’re supposed to do—delaying restructuring of the West’s stricken financial sector and stifling the economy instead of reigniting growth.

Senior citizens brace for Social Security freeze - (finance.yahoo.com) Seniors prepared to cut back on everything from food to charitable donations to whiskey as word spread Monday that they will have to wait until at least 2012 to see their Social Security checks increase. The government is expected to announce this week that more than 58 million Social Security recipients will go through a second straight year without an increase in monthly benefits. This year was the first without an increase since automatic adjustments for inflation started in 1975. "I think it's disgusting," said Paul McNeil, 69, a retired state worker from Warwick, R.I., who said his food and utility costs have gone up, but his income has not. He lamented decisions by lawmakers that he said do not favor seniors. "They've got this idea that they've got to save money and basically they want to take it out of the people that will give them the least resistance," he said.

Your Household Owes $14,165 To Pay For Your City's Employees Retirements - (www.businessinsider.com) A new study on pension shortfalls is getting a lot of buzz this morning.It should sound a familiar theme -- thanks to unrealistic expectations, cities and states have much bigger pension shortfalls than they're willing to let on. All told, the gap could hit $3 trillion. So what's it going to cost you? WaPo: The result is a growing wave of pension shortfalls that threatens to wash over many local governments in the near future, the report said. The authors calculated that each household in the 50 cities and counties they studied owes an average of $14,165 to current and past government employees for their pensions.

France Getting Hammered As Strikes Threaten To Paralyze Economy - (www.businessinsider.com) Sarkozy can talk about cutting pensions, but if anti-cut strikes paralyze the economy the net effect will probably be negative. Right now stocks are getting whacked, perhaps on these fears. Bloomberg: Railway and Paris subway workers and as well as teachers, air-traffic controllers and port and refinery employees walked out to protest plans to raise the retirement age to 62 from 60 and lift the age for a full pension to 67 from 65. Unions, which warn they may renew the strike every 24 hours unless the government backs down, said 244 marches will take place across France today in cities including Toulouse, Marseille and Nantes.