New York, its the 70's all over again!

[Mega]

http://www.nytimes.com/2010/06/12/ny...ension.html?hp
Mike

[big67]

Re: New York, its the 70's all over again!

hi Mega
this make perfectly sense
I think they know quite well that the coming great inflation will eat much of this in the next few years, so they are kicking the can hoping it plunges in a hole

[BigBagel]

Re: New York, its the 70's all over again!

It's called quantitative easing on the Federal level.

[bpr]

Re: New York, its the 70's all over again!

It's called quantitative easing on the Federal level.

That fancy talk. A year ago they would've called it a ponzi scheme.

Basically, they're borrowing from the pension to pay the fund's current liabilities.

They must've studied Madoff closely.

There's an untold cost here, too: who is the custodian of the New York State pension? Usually these things have a bank (State Street is a big one, also Citi) that acts as a custodian and collects a "management fee" for every transaction.

So, the fund will likely pay the custodian to borrow from its own funds.

A quick Google search pulled up this story from December about the former custodian of the NYS pension fund:

New York Attorney General Andrew M. Cuomo said in a news release announcing the plea that Broidy’s gifts “for the benefit” of officials in former Comptroller Alan Hevesi’s office were part of a pay-to-play scheme in the New York State Common Retirement Fund to steer business to Broidy’s Markstone Capital Partners, L.P. According to Cuomo, the pension fund also paid over $18 million in management fees to Markstone
Cuomo said Broidy pleaded guilty to a felony charge of rewarding official misconduct, will cooperate in the Attorney General’s ongoing investigation, and will forfeit $18 million in connection with his plea. Broidy resigned from his management role in Markstone on Tuesday. He was also a trustee of the Los Angeles Fire and Police Pension fund from 2002 until he resigned in May 2009.
“Broidy paid nearly a million dollars in bribes to get a quarter billion dollar investment. For Broidy, this was a small price to pay. For New York taxpayers, the harm is incalculable,” said Cuomo, in the news release. “Corruption corrodes the integrity of the pension system and the public’s trust in government. That is too high a price to bear.”

http://www.plansponsor.com/Topics.aspx?id=4294967378


The current custodian is probably not much better.

[don]

Re: New York, its the 70's all over again!

'highlights' from the cited article:

The maneuver ($6 billion borrowed) would cost the state and local governments about $1.85 billion in interest payments, according to an estimate by the State Senate.

Another oddity of the plan is that the pension fund, which assumes its assets will earn 8 percent a year, would accept interest payments from the state that would probably be 4.5 percent to 5.5 percent.

This guy has a future in Washington:

“We’re not borrowing,” said Robert Megna, the state budget director and one of the governor’s top advisers.

Mr. DiNapoli, the comptroller, said: “We would view it more as an extended-payment plan.”

Don't millions of Americans have those? Aren't they called revolving credit.

The final confidence builder:

In 2004 and 2005, the state borrowed $655 million from the pension fund; it still owes more than $400 million.