BusinessWeek reports that Wall Street has its eye on a new pot of cash -- your pension. And it's a mighty big pot -- $2.3 trillion. But Wall Street is not looking at the entire pension industry, just a $500 billion portion known as "frozen plans" that are closed to new employees and whose benefits are capped. McKinsey forecasts that frozen plans will triple to a hefty $1.5 trillion by 2013.

As usual, Wall Street's plan to buy these frozen pensions will line its own pockets and it will help companies as well. For example, if Wall Street charged a 2% management fee, that alone would generate $30 billion in revenues by 2013 if it bought all the frozen plans, but that fee income is probably the tip of the iceberg.

Companies are eager to dump their frozen pension plans. Why? These limping plans weigh down corporate balance sheet and new accounting rules will require companies to mark the value of their pension assets to market each quarter. In a down market, that could wipe out a company's operating profits.

Continue reading Does John McCain want to help Wall Street wipe out your pension?

Does John McCain want to help Wall Street wipe out your pension? originally appeared on BloggingStocks on Wed, 06 Aug 2008 09:44:00 EST. Please see our terms for use of feeds.

Does America really need an economy that depends on creating new bubbles to get us out of the mess caused by the bursting of old ones? Is it possible to replace this with an economic system that generates growth without bubbles? I think the answers to these questions are No and Yes.

The most recent example of this bubble economy is the way the dot-com frenzy's aftermath was replaced by a debt bubble, which was focused heavily on a now-imploding mortgage-backed securities (MBS) industry. The dot-com bubble expanded thanks to the public's insatiable appetite for dot-com IPOs, regardless of whether the issuer was or could become profitable. The MBS bubble grew thanks to rock-bottom interest rates, rising housing prices and institutional investor demand for higher "risk-free" yields, all of which ignored the cost of a market reversal.

But the MBS part of the current bubble may not be the last to burst. There are also the leveraged loans that fueled a boom in private equity -- a market which has lost 70% of its business in the last year. Thankfully, massive defaults in such loans have yet to occur. The New York Times reports that capital-starved banks are starting to limit commercial and industrial loans that fuel normal business expansion. It reports that such loans have dropped 3% since 2007, from $3.36 trillion to $3.27 trillion.

Continue reading Creating a post-bubble economy

Creating a post-bubble economy originally appeared on BloggingStocks on Mon, 28 Jul 2008 11:30:00 EST. Please see our terms for use of feeds.

Bloomberg News reports that 10 of the biggest names in investment banking are blocking investors from getting their hands on their share of the $330 billion Auction Rate Securities (ARS) that they were told was as safe as a money market fund.

I first posted about this back in February and now it has 4,325 comments from people trying to get at their money. Bloomberg quotes one victim of frozen ARS syndrome: Franklin Biddar, a 65-year old real estate investor who can't get his $100,000. "I can't do anything," said Biddar, who was so eager to unlock his money that he was willing to accept 11 percent less than what he paid for the securities. "Bank of America (NYSE: BAC) got me into these securities that are supposed to be as safe as a money market, and now they won't get me out."

Here's a list of the banks involved in this money blocking operation and the volume of municipal ARSs they issued between 2001 and 2007:

Continue reading Rogues gallery of banks block investor access to $330 billion

Rogues gallery of banks block investor access to $330 billion originally appeared on BloggingStocks on Fri, 06 Jun 2008 13:26:00 EST. Please see our terms for use of feeds.