Financial News

[Balta1701]

Link

New York prosecutors are poised to file civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, saying the Big Four accounting firm stood by while the investment bank misled investors about its financial health, people familiar with the matter said.

 

State Attorney General Andrew Cuomo is close to filing the case, which would mark the first time a major accounting firm was targeted for its role in the financial crisis. The suit stems from transactions Lehman allegedly carried out to make its risk appear lower than it actually was.

[Jenksismyhero]

Good piece by 60 Minutes exposing the absolute trainwreck the states are in right now, especially Illinois.

 

Key lines: (1) Illinois spends TWICE as much money as it brings in. (2) Our Comptroller calls us the "Deadbeat State," and acknowledges we're the worst in the Union. State reps getting kicked out of office spaces for not paying bills, gas stations refusing to honor state credit cards...It's time for public pensions and benefits to take a major hit, just like the rest of us.

 

http://www.cbsnews.com/video/watch/?id=7166293n

 

 

[NorthSideSox72]

Good piece by 60 Minutes exposing the absolute trainwreck the states are in right now, especially Illinois.

 

Key lines: (1) Illinois spends TWICE as much money as it brings in. (2) Our Comptroller calls us the "Deadbeat State," and acknowledges we're the worst in the Union. State reps getting kicked out of office spaces for not paying bills, gas stations refusing to honor state credit cards...It's time for public pensions and benefits to take a major hit, just like the rest of us.

 

http://www.cbsnews.com/video/watch/?id=7166293n

As far as I'm concerned, Illinois and all other government agencies need to get out of the Pension business entirely. Go to 401k with match.

 

That said, even if that's the long term goal, its hard to reach that point when you don't even have the money to pay out current balances due.

 

[Balta1701]

As far as I'm concerned, Illinois and all other government agencies need to get out of the Pension business entirely. Go to 401k with match.

The problem with that concept is actually attracting skilled and competitive workers for the positions you have available. A big reason to go into any sort of government job is the benefits, because compared to a worker with equal education, you're taking a 20% pay cut on average to go into government work. The Pension and healthcare are your equalizers.

[NorthSideSox72]

The problem with that concept is actually attracting skilled and competitive workers for the positions you have available. A big reason to go into any sort of government job is the benefits, because compared to a worker with equal education, you're taking a 20% pay cut on average to go into government work. The Pension and healthcare are your equalizers.

Well, the benefits in general are the equalizers, along with knowing you will have a job with minimal extra-schedule demands, etc. Pension is certainly one of those. But a 401k with a good match can also look pretty darn good.

 

And frankly, this is a great opportunity for government agencies to hire more like the rest of the world. If they can hire for a job below market, then do it. If they need to go higher, do it. Be competitive with private business in either case. That is of course a challenge when you have a fixed budget to deal with, but its not THAT much different than private business has to address.

 

[Balta1701]

Well, the benefits in general are the equalizers, along with knowing you will have a job with minimal extra-schedule demands, etc. Pension is certainly one of those. But a 401k with a good match can also look pretty darn good.

 

And frankly, this is a great opportunity for government agencies to hire more like the rest of the world. If they can hire for a job below market, then do it. If they need to go higher, do it. Be competitive with private business in either case. That is of course a challenge when you have a fixed budget to deal with, but its not THAT much different than private business has to address.

There's a reason why the system has grown up this way though...the top line "average salary" number is the easy one to politick on. That's why you hear so often that "Government employees are overpaid!" as a general slam for why government employees are lazy and should all be fired. You even get the silly political game of "I'm going to freeze all government employee salaries and save $60 billion" thrown in there.

 

The reality is that raising the top line salary number to the point where it is competitive with the private sector offering for an equally educated worker is an impractical option politically. Once you get to that point, you'd need to offer better retirement plans than the private sector in order to stay competitive. So, it has to be a 401k with a better match than you could get from a private sector company, and on top of it, you can't offer benefits like cheap purchases of your own stock, since there's no such thing.

[NorthSideSox72]

There's a reason why the system has grown up this way though...the top line "average salary" number is the easy one to politick on. That's why you hear so often that "Government employees are overpaid!" as a general slam for why government employees are lazy and should all be fired. You even get the silly political game of "I'm going to freeze all government employee salaries and save $60 billion" thrown in there.

 

The reality is that raising the top line salary number to the point where it is competitive with the private sector offering for an equally educated worker is an impractical option politically. Once you get to that point, you'd need to offer better retirement plans than the private sector in order to stay competitive. So, it has to be a 401k with a better match than you could get from a private sector company, and on top of it, you can't offer benefits like cheap purchases of your own stock, since there's no such thing.

Then offer a really solid 401k match. This isn't that tough to solve. If you can't offer competitive salary, then you have multiple other options - better benefits, better working conditions or schedule, 401k match level, performance incentives, special pay enhancements (hazard, OT, etc.), outsource the job to private sector, etc. You do not have to saddle your taxpayers with a pension system that is bound to cause major financial headaches.

 

[Balta1701]

Outsourcing the job to the private sector consistently proves more expensive as well in terms of actual budgeting. It's another of those political games...you get to be nice to a contributor and you get to take the salary officially off your books, but when you do the real math, the price goes up significantly.

[Jenksismyhero]

The problem with that concept is actually attracting skilled and competitive workers for the positions you have available. A big reason to go into any sort of government job is the benefits, because compared to a worker with equal education, you're taking a 20% pay cut on average to go into government work. The Pension and healthcare are your equalizers.

 

link? I thought a study just last year said that public now out pays private? Regardless, I have to believe if you ignore the Fortune 500 CEO salaries, and you look at the "average" worker, it's a helluva lot better to be a public employee once you factor in all the added benefits.

 

[Y2HH]

Outsourcing the job to the private sector consistently proves more expensive as well in terms of actual budgeting. It's another of those political games...you get to be nice to a contributor and you get to take the salary officially off your books, but when you do the real math, the price goes up significantly.

 

I somewhat agree with Balta on this one, but have a few observations (don't I always?) in regard to a few things mentioned here.

 

One of the historic benefits of government jobs (public works, etc.), was two fold. 1) Job security. 2) Pensions. Speaking on the latter, we see what they've done with Pensions, how they've abused them, stolen from them, or bastardized them to the point they're paying out far more than they've made back via poor investments or otherwise. Example, due to very poor investments, the Chicago Police pension has made less money in the past decade then your Social Security did. This is one of the BIG reasons I'm against privatization of Social Security, and should serve as a warning to those who think it's a good idea. At the very least, with a 401K, you get to decide which funds to put your money into from a variety of choices. Those who pay into pensions do not get to decide...their money is invested as someone else sees fit, and whether that works out in the long run depends on that performance. In the case of the Chicago Police, their investments LOST money...and now they have no way to make up for the loss aside from cutting new officers off of the pension system. Social Security needs some work, however, it should never EVER be privatized for this very reason.

 

On outsourcing. If done properly, it can be a benefit to cost savings in many ways, from training to insurance to pay level, however, more often than not, it's not done properly. The only thing they care is the immediate short term cost savings, but never considered the possible future implications. See examples, Microsoft, Dell, HP, etc. Done improperly, it can become cumbersome, more expensive and devastating to your companies reputation. As a non business user, having to speak to someone from China/India named "Chad", who barely speaks English (communication barrier), and is clearly reading simple instructions off of a script that may help Grandma, but do nothing but waste my time makes me look for alternatives the next time I'm ready for purchase. This also falls over into business decisions where I happen to work...having a bad Dell experience has caused me to move two different companies away from anything Dell related. Their poor decision to outsource actually cost them hundreds of thousands of dollars due to my repeated bad experiences.

[Balta1701]

link? I thought a study just last year said that public now out pays private?

Public workers do get a lot more than private workers on average...if you fail to control for education and for experience level. If you look at the average pay that you would get for the same job for a public position versus a private position, the differences vanish, and it winds up being a question of the exact type of work you're really doing.

 

The "Public workers are overpaid!" meme is another of those things Fox News loves to harp on, that ought to tell you how accurate it is.

 

[Jenksismyhero]

Public workers do get a lot more than private workers on average...if you fail to control for education and for experience level. If you look at the average pay that you would get for the same job for a public position versus a private position, the differences vanish, and it winds up being a question of the exact type of work you're really doing.

 

The "Public workers are overpaid!" meme is another of those things Fox News loves to harp on, that ought to tell you how accurate it is.

 

So, you just played the role of Fox News, claiming that people have to take a 20% pay cut to go public, when in reality it's not a whole lot different, and it really depends on the type of job you're going for yes?

 

Edit: And that doesn't speak to benefits right? That just talks about pure annual income.

Edited December 21, 2010 by Jenksismybitch

[Balta1701]

So, you just played the role of Fox News, claiming that people have to take a 20% pay cut to go public, when in reality it's not a whole lot different, and it really depends on the type of job you're going for yes?

The total cost number is including benefits. When you include the value of the pension benefits and healthcare, that's when they become similar. If you're talking strictly the total that you get as a paycheck every month, the private sector wins.

[Y2HH]

Public workers do get a lot more than private workers on average...if you fail to control for education and for experience level. If you look at the average pay that you would get for the same job for a public position versus a private position, the differences vanish, and it winds up being a question of the exact type of work you're really doing.

 

The "Public workers are overpaid!" meme is another of those things Fox News loves to harp on, that ought to tell you how accurate it is.

 

I think the big equalizer here is that the bottom end salaries of public workers tend to be higher, but the top end is FAR lower, if you can get that far in the private sector, anyway. And I'm not talking about millionaire executives, but managers, etc. Their reputation also has a lot to do with reading things every other day about people like Todd Strogers 2nd cousins friend who was making 120,000 a year and stealing 20,000 contracts, etc. While I made up that specific story, Strogers been involved in a NUMBER of things like this, as have many MANY others in the public sector. While they're in the minority of most public workers, it's all you read about these days, so it's starting to sound like it's "everyone".

[NorthSideSox72]

Outsourcing the job to the private sector consistently proves more expensive as well in terms of actual budgeting. It's another of those political games...you get to be nice to a contributor and you get to take the salary officially off your books, but when you do the real math, the price goes up significantly.

 

The price goes up in the recurring cost, because that's the REAL cost of doing that job. But you then don't have the pension overhead issues.

 

I somewhat agree with Balta on this one, but have a few observations (don't I always?) in regard to a few things mentioned here.

 

One of the historic benefits of government jobs (public works, etc.), was two fold. 1) Job security. 2) Pensions. Speaking on the latter, we see what they've done with Pensions, how they've abused them, stolen from them, or bastardized them to the point they're paying out far more than they've made back via poor investments or otherwise. Example, due to very poor investments, the Chicago Police pension has made less money in the past decade then your Social Security did. This is one of the BIG reasons I'm against privatization of Social Security, and should serve as a warning to those who think it's a good idea. At the very least, with a 401K, you get to decide which funds to put your money into from a variety of choices. Those who pay into pensions do not get to decide...their money is invested as someone else sees fit, and whether that works out in the long run depends on that performance. In the case of the Chicago Police, their investments LOST money...and now they have no way to make up for the loss aside from cutting new officers off of the pension system. Social Security needs some work, however, it should never EVER be privatized for this very reason.

 

On outsourcing. If done properly, it can be a benefit to cost savings in many ways, from training to insurance to pay level, however, more often than not, it's not done properly. The only thing they care is the immediate short term cost savings, but never considered the possible future implications. See examples, Microsoft, Dell, HP, etc. Done improperly, it can become cumbersome, more expensive and devastating to your companies reputation. As a non business user, having to speak to someone from China/India named "Chad", who barely speaks English (communication barrier), and is clearly reading simple instructions off of a script that may help Grandma, but do nothing but waste my time makes me look for alternatives the next time I'm ready for purchase. This also falls over into business decisions where I happen to work...having a bad Dell experience has caused me to move two different companies away from anything Dell related. Their poor decision to outsource actually cost them hundreds of thousands of dollars due to my repeated bad experiences.

Seems like your argument makes a case FOR privitization of social security, not against it. Your concerns are about mismanagement of a future cash flow scenario - if the money is invested in the markets, you don't have that risk. Instead, your risk and reward is tied to the success of the businesses in this country (or whatever investment assets you choose).

 

And when I say outsourcing, I don't mean help desks in India. I mean, generally, private business taking over operations where they can and should.

 

[Y2HH]

The price goes up in the recurring cost, because that's the REAL cost of doing that job. But you then don't have the pension overhead issues.

 

 

Seems like your argument makes a case FOR privitization of social security, not against it. Your concerns are about mismanagement of a future cash flow scenario - if the money is invested in the markets, you don't have that risk. Instead, your risk and reward is tied to the success of the businesses in this country (or whatever investment assets you choose).

 

And when I say outsourcing, I don't mean help desks in India. I mean, generally, private business taking over operations where they can and should.

 

No, I'm against privatization of social security, no where did I make a point that shows otherwise.

 

I think a 401k is better than a pension, but I do NOT think a 401k implementation on social security is a good idea in ANY way.

[NorthSideSox72]

No, I'm against privatization of social security, no where did I make a point that shows otherwise.

 

I think a 401k is better than a pension, but I do NOT think a 401k implementation on social security is a good idea in ANY way.

This is an interesting discussion topic - how money in Social Security should be invested. I've always been on the fence on this topic, because I see really good arguments for any number of methodologies, ranging from the current status quo, all the way to full-on privitization. Probably something in between is a good idea. I actually supported W's general idea on this, to allow for elective choice in investment of social security money.

 

[Jenksismyhero]

The total cost number is including benefits. When you include the value of the pension benefits and healthcare, that's when they become similar. If you're talking strictly the total that you get as a paycheck every month, the private sector wins.

 

are you reading the link you provided?

[Y2HH]

This is an interesting discussion topic - how money in Social Security should be invested. I've always been on the fence on this topic, because I see really good arguments for any number of methodologies, ranging from the current status quo, all the way to full-on privitization. Probably something in between is a good idea. I actually supported W's general idea on this, to allow for elective choice in investment of social security money.

 

This can be harder to explain on line than in person, unfortunately, but I'll give it a try.

 

The #1 reason why privatization of Social Security is a bad idea is because I'd estimate that 95% of the American public have no idea how to invest, not even in something like a 401k. They don't understand what a cost basis is, how it works, and most take more aggressive routes regardless of other options. Also, most have no idea how mutual funds or indexes work, or what they've even invested in or why. They read a 1 page Morningstar report and made the decision to invest in THAT fund because Morningstar rated it 4 stars+ and right in the middle of safe and aggressive. Bad idea.

 

Now add in the "pay for advice" givers that would inevitably come out of the woodwork, showing that their clients have made more money on average than traditional Social Security gains in the past 5 years. While 5 years sounds like a really great investment track record for most Americans, it's not, but it would be enough to gain the trust of many. Enter the first bull market and they'll have their way when they show impossibly huge gains over the past 12 months, people will want to jump on that bandwagon and start investing in mutual funds making such gains. Fast forward a decade or two, everything looking wonderful...and one big crash can wreck it all. Look at the 2000's, the lost decade of investment, for example. In the end, many would or could end up with nothing and now you have a REAL problem on your hands as they've blown their safety nets...and we now have to enact NEW entitlements because we can't, as a civilized nation, just let our elders rot in poverty due to poor decisions, con jobs, or otherwise.

 

Privatization of Social Security would benefit me, for example -- but I'm not the majority I'm worried about. I know how to invest, and you may know how to invest, so it would benefit you, too...but most people do NOT know how to invest, and we would wind up with more people losing than winning. In this case, we cannot end up with more losing than winning...not with Social Security. In the end, the SAFEST investment is the exact investments that Social Security is allowed to make right now, and I think it needs to remain that way, because IMO, this is one safety net we cannot afford to mess up even more...and opening it up would do exactly that for the majority.

[Balta1701]

are you reading the link you provided?

Yes. The Politifact link only provides total dollar amounts in their comparison and refers to them as "Wages". Those amounts are reflecting the total value of compensation given to the worker. The comparison numbers there are your total compensation figures, counting health care costs, probably social security taxes, and whatever retirement accounts exist as well.

[StrangeSox]

Right, what Y2HH is saying. Privatizing SS would be a huge handout to money managers/evil, nefarious Wall Street Bankers, but it wouldn't benefit an overwhelming majority of people.

[Jenksismyhero]

Yes. The Politifact link only provides total dollar amounts in their comparison and refers to them as "Wages". Those amounts are reflecting the total value of compensation given to the worker. The comparison numbers there are your total compensation figures, counting health care costs, probably social security taxes, and whatever retirement accounts exist as well.

 

How do you know? I just don't see any reference to that anywhere there.

[Jenksismyhero]

Right, what Y2HH is saying. Privatizing SS would be a huge handout to money managers/evil, nefarious Wall Street Bankers, but it wouldn't benefit an overwhelming majority of people.

 

but it would to some, which is why we should be given a choice.

[StrangeSox]

but it would to some, which is why we should be given a choice.

 

It's an all-or-nothing thing by nature, and it would harm way more than it would help while enriching a very small handful of people. Sounds like a pretty terrible idea to me.

[Y2HH]

It's an all-or-nothing thing by nature, and it would harm way more than it would help while enriching a very small handful of people. Sounds like a pretty terrible idea to me.

 

Exactly, like I said, it would benefit people like myself. But for all the others who try, fail and lose everything...then what? It would cause more potential problems than it would solve. For the good of the many, this needs to be left alone, despite the fact that it would benefit me.

Edited December 21, 2010 by Y2HH