The Next Bailout? Think Pensions

Don't buy that Winnebago quite yet! The government's pension bailout agency will probably need a bailout of its own pretty soon.

For years, hundreds of our country’s biggest corporations have been underfunding their pension  plans. But not to worry. When the bill comes due and they can’t support their retired workers, they simply dump the costs onto the federal government.

On second thought, maybe it is time to worry after all. From the Boston Globe:

Oops. Talk about bad timing. And they didn’t just buy your grandmother’s boring old blue chips either:

Why in the world would the PBGC, a staid government agency protecting millions of American pensions suddenly start doing its best impersonation of Lehman Brothers, the once mighty Wall Street firm that immolated itself on a raging pyre of high risk financial gambles? Maybe because the guy who was in charge of PBGC until recently, Charles Millard, used to run … Lehman Brothers!

No. We’re not making that up.

How much did the PBGC lose? They’re not saying. But they were kind enough to reveal that, as of last September, they were down about 23%. Of course, the stock market didn’t start tanking in earnest until October, so that number must be a gross underestimation of the real losses. You know things are bad when losing a quarter of your investment looks optimistic!

To make matters worse, the agency was already $13 billion in the hole before it decided to start playing Mad Money. And if corporate behemoths like GM and Chrysler go under, who do you think is going to be expected to pick up all those millions of pensions on their books? You guessed it. The good old Pension Benefit Guaranty Corporation. But where will this bailout agency go for its bailout?

The same place everyone goes these days. To your wallet.