Wednesday, April 8, 2009

Pension Benefit Guaranty Corporation (PBGC)

With the discussions of a GM bankruptcy heating up, the press has turned to an examination of the GM pension plan. According to a Bloomberg article, the PBGC would be on the hook for about $4 billion of the $20 billion plan short-fall. GM workers would take a $16 billion hit.

So I took a look at the books of the PBGC. Amazingly, they are ALREADY operating at a deficit. As of 9/2008, the PBGC has a negative net worth of $11.15 billion. They have a $100 million credit line with the Treasury. Any material borrowing to cover deficits will be on the back of the taxpayer via debt issuance. Sound familiar? FDIC, NCUA and PBGC: the taxpayer covers for corporate malfeasance and regulatory incompetence.

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