But they wanted to keep the story to themselves:
JPMorgan recently circulated a “strictly confidential” report among leaders at the bank and with trusted hedge fund allies outside of the bank which details an impending public pension crisis. And we mean big time nastiness.
Massive cuts in services will have to happen, or massive tax increases will have to happen, or both, to keep many pensions and municipalities from going over a cliff. The politicians know that disaster is coming. JPMorgan and their hedge fund buddies know that it’s coming. The public, though it has a sense of impending doom, still doesn’t grasp the avalanche that is headed toward states and cities in the very near future.
Charlie Gasparino details in the attached article that JPMorgan did not want the information in the report to become public because it feared angering the politicians in the municipalities and states where default due to public pensions is a very real possibility. Many local politicians are lying when they tell their fire fighters and teachers that pensions are in good shape. According to what the report supposedly says these workers should probably start making alternative plans for retirement. But to say that is very messy politically.
JPMorgan didn’t want to lose its very profitable muni bond underwriting business in these same localities, which is determined to a large degree by these same lying local politicians, so this information was kept quiet.
via AgainstCronyCapitalism.org.
To the actual article:
OK, it’s no secret that nation’s public pension funds are in big trouble, holding large “unfunded” liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes — such as raising taxes on the rich or pruning benefits. …
Not so, warns a “strictly confidential” report JP Morgan issued last year. It describes in straightforward, frightening detail how underfunded pensions are huge ticking timebombs for many of the nation’s big cities and states. …
Nationwide, the actual size of unfunded public pension liabilities is four times larger than the $900-plus billion that officials are ’fessing up to. That’s right, the bank sees a $3.9 trillion hole; to plug that, states and cities will need large tax hikes, massive budget cuts or both. Plus, public-sector unions will have to accept smaller retirement packages, and later retirement ages, to keep the pension systems going. …
In New York, for example, JP Morgan said state officials would have to immediately cut spending by 12.3 percent or raise taxes on everyone by 7.4 percent. And they’d need to make these tax hikes and budget cuts permanent for the next two decades to fully fund public-employee pensions.
New Jersey faces an even bigger hole. Even after Christie’s reforms, it would still have to cut spending 30.8 percent or raise taxes another 17.2 percent, keeping them in place for two decades, to solve the problem.
via NY Post.
No word on how Illinois fares. But as we are the #1 unfunded pension state in the union it’s no doubt a bad, bad, bad situation.