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Comment by kmc059000 | Hacker News Reader

Here is an article on the Dallas pension problem. http://www.economist.com/news/finance-and-economics/21711335...

The gist as I understand is that pensioners were promised a 8.5% return (which didnt happen) and (some?) retirees are able to withdraw their current value in their pension in full. There is talk of reducing benefits, which is causing a situation much like a run on banks to occur.

I've seen a few proposed solutions such as having the state of Texas help pay, to pillaging funds from DART (public transit), to tax increases.

It is a complete mess, and PR must be in such a bad position. In Dallas' case, it is obviously corruption that caused the problem, with no penalty, and the only recourse is to penalize those that did not cause the problem. Seems like PR is in a similar yet more dire situation.

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Great find and thank you for kicking in - what the backstory might not address is that in pursuit of the 8.5% return, the fund management engaged in exceptionally risky investment schemes. Took trips to "scope out opportunities" on the Pension tab year after year totaling a bunch. The whole operation was shady and unchecked for at least a decade.

By the time anybody started paying attention, the wound had festered into a real infection. An almost uncontrolled fiasco of promises to the Police/Fire Unions and no chance of hitting the returns, and essentially gambling away millions that will only lose more in 10 years if that garbage isn't unwound like a bunch of bad Bear Stearns Swaps.

It's so ugly. It's an embarrassment. And the people who end up holding the bag look terrible for telling a 53 year old retired cop he shouldn't be able to pull out $1.7M in benefits and put a run on the account. Ugh!

Offering recourse to the pension-holders will clearly require penalizing groups that did not cause the problem.

But can't we also penalize those that made the un-keepable promises and mismanaged the funds? This won't make the policemen financially whole, but it would offer at least some sense of justice, and, more importantly, send a message to others currently operating similar schemes.

I'm not sure that is possible and I question if their actions were illegal. Investing is risky and when actual returns did not beat the guarantees, the investors decided to invest in riskier assets to attempt to make them whole. However I'm not excusing their behavior and they are clearly to blame. There was also questionable behavior but I'm not sure how illegal it was.

And if their actions were illegal, I wonder how many people were involved and able to be prosecuted. I imagine there are many, from investors to politicians, and thus an expensive endeavor for the city and state.

I think the best thing is to prevent this from happening in the future by monitoring and exposing these shenanigans early rather than before it is too late. Cities and states with pensions should take note of Dallas' problem and act accordingly. Contracts should include clauses for penalties and recourse so as to allow civil lawsuits.

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