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Illinois Is Pension Basket Case You Forgot About - (www.bloomberg.com) Rod Blagojevich is in prison. But the worst things the former governor did to Illinois (BEESIL)weren’t even illegal. This month, the Teachers’ Retirement System of the State of Illinois made a dire announcementto its members. TRS, which covers most public-school teachers in Illinois outside Chicago and has more than 360,000 members, said the following: “If the General Assembly does not continue to provide all of the funding called for in state law, calculations done by TRS actuaries show that the System could become insolvent as soon as 2030. Preventing insolvency may include significant changes for TRS -- new revenues must be generated and if they are not benefits may have to be reduced.” The teachers’ fund is one of the country’s worst-financed statewide pension systems, reportingthat it is only 47 percent funded. And that’s if you buy the system’s rosy accounting assumptions, including that it will achieve 8.5 percent annual returns on its assets. This level is tied for the most aggressive investment assumption among state pension funds in the country, and the fund has had to get creative in an effort to meet it. Pensions & Investments magazine says it has the fourth-riskiest pension investment portfolio in the U.S., with less than 17 percent of its investments in fixed income and cash.
Matt Taibbi Shreds Obama Over JOBS Act That Will 'Nearly Legalize Fraud' - (www.businessinsider.com) Matt Taibbi thinks the JOBS Act signed by President Obama last week is just about the worst thing ever. To backup, the JOBS act has been called the "crowdfunding act" because it lifts various regulations on startups raising money, and how many shareholders it can have. The JOBS Act has been hailed as a bipartisan triumph. Here's the left's response, per Rolling Stone's Taibbi: The JOBS Act "couldn't suck worse." It will nearly legalize and encourage fraud on Wall Street. And it completely goes against the populist anger against Wall Street that sparked Occupy Wall Street. The worst aspect of the bill, Taibbi argues, is one that exempts firms from independent tests of internal controls. It's a "comedy routine," he writes, because the rationale is that it is costly for a firm to hire independent auditors and fill out legal forms. Here's a good analogy: This is like formally eliminating steroid testing for the first five years of a baseball player's career. Yes, you can pretty much bet that you'll see a lot of home runs in the first few years after you institute a rule like that. But you'd better be ready to stick a lot of asterisks in the record books ten or fifteen years down the line.
Companies use popular provision to avoid income taxes - (www.reuters.com) More than two dozen Fortune 500 companies paid no U.S. federal income taxes in recent years partly because of a corporate tax break that is broadly supported by Republicans and Democrats alike, a consumer group said on Monday. In at least half of the cases cited by the group, companies made use of accelerated depreciation, a tax provision that allows increased deductions in the early years of the life of an asset. Citizens for Tax Justice, which advocates steeper corporate taxes, said it surveyed major U.S. companies and found that 26 on average paid no net federal income taxes between 2008 and 2011, among them General Electric and Duke Energy. "This isn't fair to the rest of us," said Bob McIntyre, director of the left-leaning tax research group.
Spain Confronts Crisis Threat as Rajoy Seeks Deficit Cuts - (www.bloomberg.com) Spain’s efforts to calm investors with 10 billion euros ($13 billion) of budget cuts in education and health failed to stem concerns the nation may be the fourth euro member to need a bailout. The yield on Spain’s 10-year benchmark bond surged 20 basis points to 5.95 percent today as Economy Minister Luis de Guindos declined to rule out a rescue for Spain and Bank of Spain Governor Miguel Angel Fernandez Ordonez said the nation’s lenders may need additional capital if the economy weakens more than expected. Prime Minister Mariano Rajoy yesterday unexpectedly announced the 10 billion-euro package, less than two weeks after unveiling the most austere budget in more than three decades. Rajoy is targeting basic public services for the first time since his election in December in a bid to convince investors he can bring order to the nation’s finances. “There are growing fears that the Spanish economy is caught in a pernicious circle,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e- mailed response to questions. “The weakness of government finances, the fragility of banks and worries about the scale of the recession all feed on each other.”
Italian Stocks Sink Most in Five Months Amid Debt Concern - (www.bloomberg.com) Italian stocks retreated the most in five months as UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) led a decline in financial shares amid speculation the European sovereign-debt crisis is worsening. The benchmark FTSE MIB Index (FTSEMIB) sank 5 percent to 14,458.88 at the close in Milan, the largest drop since Nov. 1. The gauge climbed 14 percent in 2012 through March 19 as investors bet the European Central Bank’s $1.3 trillion longer term refinancing operation, or LTRO, would stop credit markets from freezing and help lenders. Since March 19, the measure has lost 16 percent. “The bears are in charge again,” said Filippo Garbarino, who oversees $50 million at Frontwave Capital Ltd. in Chiasso, Switzerland. “Bank balance sheets should have been de-risked, but exactly the opposite happened. The LTRO was used to buy even more government bonds of insolvent countries, so systemic risk is even higher.”
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