on Nov 8th, 2007Did Your Pension Fund Buy Sub-Prime Investment Vehicles?
Newsflash: “Analysts said the alarming write-downs at a handful of Wall Street firms could pale in comparison to the possible damage from shaky paper striking at the heart of assets held by insurance giants, mutual funds and big pension funds.”
If you thought only guys like casino owner Steve Wynn were allowed to gamble away fortunes in order to make fortunes, guess again. While you were busy running on your salary treadmill, the clever folks at major wall street banks were busy hard selling “investment vehicles” to your pension fund managers. Investment vehicles are packaged loans that are sold off with what are supposed to be predictable revenue streams…unless, of course, things change, and the value of what got packaged turns out to be worth far less than originally thought…as in the case of sub-prime loans based on real estate values that were grossly inflated because every Tom, Dick and Linda thought they could buy a house, mow the lawn, and flip it for twice its value. That block party is now long over, but the hangover continues.
The greedy banks bundled these investment vehicles and sold them as if they all were going to pay out a jackpot of appreciation. The banks blame ratings’ companies like Moody’s for not recognizing the packaged value was cockamamie. So when Moody’s finally wiped the shine off them, they “discovered” nothing but a bucket of empty quarter papers. Betting with other people’s money is always so much more fun than depleting your own bank account.
Our advice: pick up a survival manual at your local gun shop. You may need to learn how to live off the grid in the near future. Maybe now would be a good time to ask a presidential candidate what they intend to do to curb this kind of legalized gambling with people’s future retirement checks.