Ugly tidings for pension funds aren’t just for states anymore. Big cities, corporations, and even some state and city agencies are facing some rather serious floggings after years of optimistic assumptions, generous benefits, poor management, and, in some cases, willful blindness. For the latter, you only have to look in the most obvious place: Illinois.
Starting with a $1.5 billion dollar hole in 2007, the high of the boom, is the first sign that you are dealing with misunderstood financial genius. Expecting the legislature to bail you out is, however, another story. Topping the cake is ignoring the people who actually understand, well, math, when deciding what to do next. (“I’m certain we can expect 8.75% over the long haul.”) It takes that kind of talent to start losing money on the proceeds of a bond issuance five months after it’s underwritten. Welcome to Chicago.
“We’ve identified the problem and a solution,” said CTA Chairman Carole Brown on April 16, 2007. The agency decided to raise money from a bond sale.
A year later, it asked Illinois Auditor General William Holland to research its plan. The state hired an actuary, did a study and, on July 17, concluded that the sale of bonds would most likely result in a loss of taxpayers’ money.
Thirteen days after that, the CTA ignored the warning and issued $1.9 billion in bonds. Before the year ended, the pension fund was paying out more to bondholders than it was earning on its new influx of money. Instead of closing its funding gap, the CTA was falling further behind.
Brace yourselves. There goes another $1 trillion.
Hidden Pension Fiasco May Foment Another $1 Trillion Bailout [Bloomberg]
Ah Chicago, so sad I moved.
That’s the Chicago way.
http://www.youtube.com/watch?v=7g0RLyxP13o
should have put it with Madoff
I’d like to see Kudlow change jobs with Billy Mayes for just one day.
1.6 billion and the train still barely works and that’s after walking 20 goddamn blocks to get to the closest one in sub-zero weather.
fuck this.
-mrp
“Ah, welcome to Chicago. Thish town shtinks worshe than a whorehoushe at low tide.”
-Officer Jimmy Malone
Hmmm so will this trump commercial real estate? or the consumer credit sector?
@6 – did ya park DA CAR?
lol
-mrp
No one is willing to make the hard choices as elected officials are in for such a short time and too risk adverse to make waves with the unions. This mess is everywhere and we as taxpayers we be paying for it along with all of the other mistakes….we are so f#cked
It’s all good
@5 And why in the fuck did the red line move slower than walking pace between Fullerton and Grand? Totally pointless.
They’d got high hopes
They’d got high hopes
They’d got high apple pie
in the sky hopes
So any time you’re feelin’ bad
‘stead of feelin’ sad
Just remember that ma’m
Oops there goes a billion dollars, damn
No surprise given our city motto is “Where’s mine?” (then you extend your hand for the envelope)
I’m sure giving ALL seniors a free ride didn’t help the CTA’s budget either.
I’m disappointed, EP. How could you not tie a story about something wrong in Illinois to Obama? It is a well demonstrated fact that everything wrong with America is his fault.
The article makes it sound almost like another Ponzi scheme.
@16 – Nicely done
Hey wait, which egalitarian progressive party has stranglehold on EVERYTHING in Chicago?
Where are you, hope and change apologists? How come the messiah never tried any of his miracles in hi backyard?
at least we have a big, shiny bean to see our reflections in …
at least we have a big, shiny bean to see our reflections in…
sorry for the double post @19 and 20. the site told me it didn’t go in. i’m from chicago, it’s not my fault… now where’s my TARP check?
@17 Everything is a Ponzi scheme. And that’s MadOff’s defense.
#13 – well played.
Carole Brown was employed at Lehman Brothers as a mamaging director through Oct 2009..