Risky investments by the federal agency that provides pension protection put retirement funds at risk. One more big bankruptcy -- say General Motors, for example -- might trigger yet another taxpayer bailout.
The federal agency that protects pension plans from becoming bankruptcy casualties shifted more investments into stocks ahead of the market collapse last year in an ill-timed move intended to improve returns. While previous managers of the U.S. Pension Benefit Guaranty Corporation, or PBGC, opted to play it safe, the director who took over during the Bush administration, Charles Millard, adopted a more aggressive approach with the hope of eliminating the agency's $11 billion deficit. Now the deficit is no doubt worse than ever. Nice going Millard! After Millard arrived in 2007, the PBGC more than doubled the percentage of its insurance fund invested in stocks and real estate to 55%, according to a report by the Boston Globe earlier this week. (Kudos to good old-fashioned newspaper reporting for continuing to look out for the common folk even as people turn away from their printed pages). I wonder what's left of the $64 billion the agency once had in its fund. Is there enough to cover the pensions of General Motors and Chrysler if the carmakers wind up in bankruptcy? That's how it played out previously with the airline industry bankruptcies that dumped pensions from Delta Air Lines ( DAL), UAL's ( UAUA) United Air Lines and US Airways ( LCC) onto the PBGC. The collapse of Lehman Brothers also added to the PBGC's burden and I can't even imagine the damage that would come if the agency suddenly had to take on pensions from another major bank such as Citigroup ( C) or Bank of America ( BAC) on top of those from GM. Let's hope that doesn't happen.