Brad is absolutely correct. It is worse than it might sound. Corps. used their pension funds as piggy banks pretending that they could earn 10% or so routinely, putting the pensions in a hole, then refused to make up the shortfall as the problems accumulated. The moral hazard is that people like Wilbur Ross can buy up the companies, then shift the burden -- at least part of the burden since the resulting pensions are not nearly what was promised.
On Sun, Oct 30, 2005 at 12:24:04PM -0500, Yoshie Furuhashi wrote: > Thanks to Doug and Jim -- will be sure to read Teresa Ghilarducci, > look into the references in her articles, and write her. > > In the meantime, what do you think about this entry from Brad > DeLong's blog? > > <blockquote>I had convinced myself that the PBGC's problems were not > the result of moral hazard induced by its existence leading > corporations to fund their pension funds with too-risky investments. > I had convinced myself that the problem was that Congress (a) allows > companies to take money back from the pension fund when stocks went > up, while (b) letting them postpone putting money into the pension > fund when stocks went down. It's not a market failure, it's a Capitol > Hill failure. > <http://www.j-bradford-delong.net/movable_type/2005-2_archives/ > 000024.html></blockquote> > > Yoshie Furuhashi > <http://montages.blogspot.com> > <http://monthlyreview.org> > <http://mrzine.org> > * Mahmoud Ahmadinejad: <http://montages.blogspot.com/2005/07/mahmoud- > ahmadinejads-face.html>; <http://montages.blogspot.com/2005/07/chvez- > congratulates-ahmadinejad.html>; <http://montages.blogspot.com/ > 2005/06/iranian-working-class-rejects.html> -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
