THE BURNED OVER DISTRICT

Has anyone noticed how little Wall St has created and how much of the newest "waelth" has merely been a redistribution of accumulated assets from those who generated them to those lust after them? The Washington Post today writes about the latest scheme in this never ending chicanery, buying frozen pension plans.

Most employers seeking to end pension plans or get rid of frozen plans issue a lump-sum payment to employees and retirees, or they buy annuities from insurance companies, which take over management of the assets. The assets then fall under state insurance regulations, which require that the companies maintain certain reserves to balance risks in the investment portfolio.

The buyout proposals suggest a different scenario: Financial firms would take control of the assets and liabilities of a pension plan, and continue to operate it under the Employee Retirement Income Security Act of 1974. ERISA, which governs company-run pension plans and establishes minimum standards, requires that the assets be invested with "care, skill, prudence and diligence." The PBGC is the final backstop for failed pensions.

The financial services firms are in discussions with the federal agencies that interpret and enforce pension laws, including the PBGC, the Labor Department and the Internal Revenue Service, to sort out legal and regulatory questions. The firms are seeking a ruling on whether a buyout firm would be a legitimate sponsor of a pension plan and, if so, whether it could continue to receive tax breaks on contributions to the pension plan.

First off, none of the players, which include the likes of Citigroup and J P Morgan Chase, would give this a second thought if there were not visions of LARGE profits to be made or HUGE tax benefits. Naturally these would be at the expense of the beneficiaries or the rest of us taxpayers. And there is no downside, if they can't make money by hook or by crook, they just dump it on the Pension Benefit Guaranty Corp a/k/a us taxpayers.

Some critics fear that a financial entity might buy out a pension fund and gamble with its assets, knowing that if the investments made money, the firm would reap the excess profits, and if it lost money, the PBGC, which is funded by insurance premiums paid by pension funds, would be the backup.

"This is like the latest wonderful product from the people who brought you the subprime disaster," said Damon A. Silvers, associate general counsel of the AFL-CIO. "When you have a situation in which a risk is being laid off, and none of the participants in the transaction have that much of an interest in seeing that the benefits are being paid . . . the likelihood that there are going to be inadequate assets is pretty high."

Just the latest in a long line of sleazy and easily fraudulent schemes to take your money from you, and all they need is a few rules changed, maybe a law here or there and with this crew in DC, who can doubt they will get what they want.