reply to post by kozmo
- PERIOD! I do not want to see more tax-payer money thrown down the drain - PERIOD!
I guess I still haven't make it clear that if they ARE allowed to go bankrupt, it will cost the US taxpayer MORE money, than if they are given the
loan. I don't know how much clearer I can be, that GM's retirement plan is covered by the PBGC. For those that are not familiar with it, here is a
brief summary of what it is:
BGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of nearly 44
million American workers and retirees in more than 29,000 private single-employer and multiemployer defined benefit pension plans. PBGC receives no
funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans,
investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.
I strongly suggest that those who wish to debate this topic, go to their website and see exactly how they are involved here, by an act of Congress:
www.pbgc.gov...
Although GM has its retiree pool funded for several years, if it were to go bankrupt, many of the present workers would be eligible for retirement
payments, and the fund would be quickly overwhelmed, especially since there would be no substantial reduction of retiree pay, since the average now is
about $18,000 per year, well below the maximum paid by PBGC.
Therefore, the current retiree cost of about 7 billion dollars per year, would swell to over 10 billion per year, and the PBGC would end up taking
over the fund at a cost of $10 billion per year.
Add the cost of unemployment for up to 3 million workers, if all three go out, with the cascading job losses, or 300,000 unemployed if GM goes out,
PLUS several hundred thousand more in ancillary job loss, plus LOSS of TAX REVENUE from those unemployed people, and the cost per year of bankruptcy
would easily reach $25 billion in new costs to the Federal government, and that doesn't even include the losses to state and local government, in
lost taxes, unemployment payments, and welfare of one sort or another.
When people lose jobs in the US, as in most free markets, everyone suffers.
Here is a site that discusses some of the issues regarding the PGBC and the funding issues involved:
gangbox.wordpress.com...
er-of-going-insolvent/
I direct you to part of that article:
However, Joshua D. Rauh, associate professor of finance at the University of Chicago Booth School of Business, has argued that it’s impossible
to know the exact government liability of any potential bankruptcy at the automakers. The United Airlines bankruptcy case, where pension plans were
turned over to the PBGC, resulted in far more liability than anyone anticipated. Rauh has estimated that stock market losses, among other things,
have worsened the funding gap taxpayers would face if GM’s plans ended up being turned over to the PBGC. Rauh, who opposes a federal bailout for
automakers, estimates that a GM bankruptcy could cost taxpayers $23 billion in underfunded liabilities. “When the pension safety net blows a hole
in it, then what happens?” asked Samuel J. Gerdano, executive director for the American Bankruptcy Institute in Alexandria, Va. He said 104 public
companies had filed for bankruptcy this year through mid-November. That’s up significantly, compared with 78 filings for all of 2007. In general,
pension plans could be weaker because some saw startling losses during the meltdown on Wall Street. The total value of pension plan assets for the
largest U.S. companies in the Standard & Poor’s 1500 was $1.66 trillion — compared with total liabilities of $1.6 trillion at the end of 2007.
That was a surplus of $60 billion. But by the end of November, those funds had a deficit of about $280 billion, according to Mercer’s latest
analysis of defined benefit pension plans sponsored by companies in the Standard & Poor’s 1500 index.
The PBGC pays about $4.3 billion annually in pension benefits
Note that current payments are $4.3 billion per year. A GM failure alone would triple that payout per year, once the GM pension funds are gone. At a
minimum, premiums for PBGC, which would in essence flow down to the workers. However, also note:
However, most experts say the political reality is that Congress cannot afford to let the PBGC fail and leave retirees in every state without
pension checks.
Translation- they would authorize funding with another bailout, paid by, you know who, the taxpayer.
By the way, if you DON'T know anything about the PBGC, and you are eligible for a defined pension plan(not 401K plans). you should check to see if
your pension is covered by it,(ask your plan administrator) OR you could wait until retirement, and find out that your pension is gone, and not
covered.
