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Old 12-21-2011, 01:00 PM   #121
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But in the end, if there is no money.... guess what The bondholder does not get paid... muni bond defaults happen....
That's why you only buy GO's and only from states. They can't file for bankruptcy, at least not under current law. They can be ordered to raise taxes or cut spending elsewhere to meet their bond obligations.
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Old 12-21-2011, 01:48 PM   #122
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That's why you only buy GO's and only from states. They can't file for bankruptcy, at least not under current law. They can be ordered to raise taxes or cut spending elsewhere to meet their bond obligations.

Agree with your comment.... but as you say, under current law....


This was from a LONG time ago, and I am sure I am going to butcher it badly.... but Citi had lent a lot of money to different countries... and when investors asked the CEO about the loans his comment was something like 'countries can not go bankrupt'....

We have learned that is not true... and even if they do not, look at what is being proposed for Greece.... a 50% haircut to the bond holders without it being considered a 'default'....


And in this case, the people are losing part of their pension without the city going into bankruptcy (IIRC)....
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Old 12-21-2011, 02:18 PM   #123
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Agree with your comment.... but as you say, under current law....
I know there is talk of changing the law to allow state bankruptcies. I guess I am neutral on that. But if BK is allowed it will definitely drive up borrowing costs for states. And many states have a lot of assets including massive amounts of land, highways, etc. It would be interesting to see creditors attach forests, state parks, and even the governor's mansion. Heck, that might be worth the price of admission!

That was a pretty stupid statement for Citi to make. Countries have nationalized assets forever and there is no reason that they couldn't cancel debt. If you look at the strict definition of nationalization you could argue that our own takeover of GM and several financial institutions was nationalization.
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Old 12-21-2011, 06:35 PM   #124
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This is like saying that it's the woman's fault she was raped........ "she lacked the backbone to prevent it!" Or the shop owner who was robbed and beaten brought it upon herself by not being properly armed and trained in self-defense.
I really don't get your analogy. Are you suggesting that managements' had no choice?
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Old 12-21-2011, 08:03 PM   #125
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In both cases, it was the press of unions for rich benefits and lack of backbone by managements.
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This is like saying that it's the woman's fault she was raped........ "she lacked the backbone to prevent it!" Or the shop owner who was robbed and beaten brought it upon herself by not being properly armed and trained in self-defense.
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I really don't get your analogy. Are you suggesting that managements' had no choice?
Ill take a stab at it -

Picture yourself as the CEO of an auto company. Auto mfg is an extremely capital intensive business. If your plant is sitting idle, you still have many, many HUGE bills to pay, and no money coming in. During the time you are not producing cars, some of your customers will go to the competition, and many of them might just stick with them once they switch ( there is a certain amount of plain old inertia in buying decisions like these).

The short term and long term consequences are HUGE.

So, the union comes and asks for 5% more of whatever you thought you could offer. And they threaten to strike if you don't give it to them.

So, take a hit for 5% labor costs or see your plants shut down? It's a regular Morton's Fork (heh-heh - see "Hobson's Choice"), but you decide to go with the demands. And you get them next contract time too, and the next.... Rarely seems to be worth shutting down the plant, but they all add up.

What would you and your backbone do?

PS: Not to say auto management didn't make mistakes that led to problems for the industry, but that's another discussion.

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Old 12-21-2011, 09:22 PM   #126
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You are right - the long term consequences of conceding to the union demands are HUGE because the company cannot afford the cost and remain competitive. I would fight with the unions for something the company can afford and if they strike, so be it.

Ronald Reagan fired the striking air traffic controllers and replaced them. The automakers could have done the same. Don't forget, there will be similar pressures on union leaders from their workers to settle so the workers can get back to work.

I'll try to convince the BOD that this is the right thing for the company in the long run. Perhaps they'll fire me, perhaps they won't. Even if they do, that's ok as I'd rather be fired than command a sinking ship.

Many times the right thing is the hard thing and I get paid the big bucks to do the right thing for the company and it shareholders.
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Old 12-21-2011, 10:08 PM   #127
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pb4uski......

Are you actually in a current situation involving union negotiations? Or is this just hypothetical at the moment? If you are, is it in a private sector setting? industrial?

Although I retired from a non-union, industrial setting, I spent a number of years managing in an industrial, unionized setting and have been through three major strikes, two with Steelworkers (USW) and one with Teamsters (1970's). The last strike did in fact result in closing the plant and led to my eventual employment with the company from which I retired.

I'd love to know more about your situation. If you're uncomfortable discussing via post, feel free to PM me.

I admire your do the "right thing" despite it being the "hard thing" attitude, but understand that appropriate and possible actions are situational and sometimes "taking the bullet" isn't as successful or satisfying as you might imagine.
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Old 12-22-2011, 07:14 AM   #128
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It is easy to blame the unions for the fact that management negotiated contracts it didn't honor (i.e. failed to properly fund). But corporate profits are soaring and US private sector unions are an endangered species. Reality is more nuanced.
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Old 12-22-2011, 08:47 AM   #129
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It is easy to blame the unions for the fact that management negotiated contracts it didn't honor (i.e. failed to properly fund). But corporate profits are soaring and US private sector unions are an endangered species. Reality is more nuanced.
Right...... That's why GM recently went through Chapter 11, they were doing so very well.

A shutdown strike, or the threat of one is about as nuanced as a baseball bat up-side the head. It is a devastating hit to the company that has to fund those 'negotiated' benefits.

Even if there is some truth in what you say, that is the current situation, it doesn't change the past, and we were talking about past negotiations which affected the future. If anything, you are supporting what we are saying. You indicate that companies are doing better now that unions are weaker. OK.

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Old 12-22-2011, 08:53 AM   #130
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As expected, I was slammed with emails from retired family members, all on public sector pensions, and they are panicking. As I read it, these folks agreed to reduce their pensions, correct? And as such their action does not set any sort of precedent for other locals, right?

thank you for any insight.
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Old 12-22-2011, 10:08 AM   #131
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As expected, I was slammed with emails from retired family members, all on public sector pensions, and they are panicking. As I read it, these folks agreed to reduce their pensions, correct? And as such their action does not set any sort of precedent for other locals, right?

thank you for any insight.
Of course they are panicking. Many of them worked for 20-30 years with the promise of a certain pension. They made financial and career decisions based at least partly on their pension benefits. They worked to earn the pension and are now thinking somebody may take part of it away. Who would not be concerned? They cannot go back in time and redo 20 to 30 years of their lives.

And, let's face it, many if not most pensioners, are at an age where they simply don't have the health or energy to re-earn their retirement benefits. They may have a sickness or a minor disablity. It might just be painful hips and knees, or vision problems. All keep us from being what we were in our 30's and 40's. And, let's face it, age discriminatin is rampant. Even if older workers were willing and able to go back to work, in order to beef up their retirement, who is going to hire them at other than low paying jobs?

Imagine this, you work all year for a salary of $50,000. In December your boss comes to you and says"joe, we paid you $50,000 plust benefits this year because we thought we were going to make a profit of at least $100,000,000 this year, but we fell short by 30%. The economy was poor and the executives decided to buy a new corporate jet. So we are taking back $10,000 of your earnings for this year and reducing your paid vacation to two weeks from three this year. Oh, you already took your three weeks?? Well, I guess that will cost you another week's pay."

Pensions are part of the total compensation package and cannot be considered separately as though they are not part of that compensation.
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Old 12-22-2011, 10:13 AM   #132
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It is easy to blame the unions for the fact that management negotiated contracts it didn't honor (i.e. failed to properly fund). But corporate profits are soaring and US private sector unions are an endangered species. Reality is more nuanced.
I have never been a big union guy, even when I belonged to one. I did not like their politics, and often the language of the leadership was inflammatory. But, I now see they serve a purpose. Look at the people in private industry who were screwed out of their pensions by clever use of the laws and gaps in the laws. Look at miners who are killed because mines are not properly run. Look at how many workers are treated - disposable cogs in a machine - expendible. I have seen it first hand, thankfully, I have not experienced it. Read the history of this country and others. Unions were not formed because the workers had nothing better to do on Sunday. There were very serious problems in how companies treated workers.

We all need to take care of ourselves and keep our skills and abilities up to date. Never assume that anybody owes you a job or a living. But, when you have earned something, it should not be taken away. That is capitalism. We make a deal and we keep it even if it is to our disadvantage.
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Old 12-22-2011, 10:50 AM   #133
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Right...... That's why GM recently went through Chapter 11, they were doing so very well.

A shutdown strike, or the threat of one is about as nuanced as a baseball bat up-side the head. It is a devastating hit to the company that has to fund those 'negotiated' benefits.

Even if there is some truth in what you say, that is the current situation, it doesn't change the past, and we were talking about past negotiations which affected the future. If anything, you are supporting what we are saying. You indicate that companies are doing better now that unions are weaker. OK.

-ERD50
Believe it or not I am half way with you on this issue. That is why I said it is nuanced. GM loved to blame its union issues for all of it's problems but we were not all buying Toyotas because we didn't like GM's unions it was because their products sucked. I get the impression they are catching up now -- after the bailout.
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Old 12-22-2011, 11:09 AM   #134
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Imagine this, you work all year for a salary of $50,000. In December your boss comes to you and says"joe, we paid you $50,000 plust benefits this year because we thought we were going to make a profit of at least $100,000,000 this year, but we fell short by 30%. The economy was poor and the executives decided to buy a new corporate jet. So we are taking back $10,000 of your earnings for this year and reducing your paid vacation to two weeks from three this year. Oh, you already took your three weeks?? Well, I guess that will cost you another week's pay."
Chuckanut,
as I told you last month - I don't need to imagine this, as it already happened to me last year (although our retroactive salary reduction was only 10% not 20%). According to the corp lawyers the only state they could not do it legally was California.
So read your pension contract and see what they can legally do.
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Old 12-22-2011, 11:37 AM   #135
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Believe it or not I am half way with you on this issue. That is why I said it is nuanced. GM loved to blame its union issues for all of it's problems but we were not all buying Toyotas because we didn't like GM's unions it was because their products sucked. I get the impression they are catching up now -- after the bailout.
I believe you, in fact I'd say we are in full agreement on that issue, but it's actually irrelevant to this particular discussion. I'm not blaming the union for all of it's (GM's) problems either (although the Union wages/comp did cause their cars to also be more $ than Toyotas, that didn't help either).

But what I was discussing, and what is relevant to this thread, was that the Union Leaders had a responsibility (and to a lesser extent, the Union workers), to assure that the pension was funded. They dropped the ball on this. And I suspect it was intentional - they did not want it to be fully funded, as that would have drawn attention to just how much this was costing the taxpayer, and the taxpayer might have fought it. I think they preferred to let the problem be pushed into the future, and just maybe it would right itself, and for sure they would be out of office or retired or moved onto other positions before the stuff hit the fan. It was a win-win in the short term, and that's all they cared about.

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Old 12-22-2011, 12:46 PM   #136
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<snip> we were not all buying Toyotas because we didn't like GM's unions it was because their products sucked. I get the impression they are catching up now -- after the bailout.
My experience exactly. I bought one GM car in the 80's. At 140,000 miles it died for good. This after spending thousand of dollars a year on repairs to keep it running. It was in the shop once every three months, often for the same repairs it had only a few years before. I can't tell you how many steering racks it went through, and the transmission....!!

I hear GM is doing better these days, and that is good news. i hope they continue the trend.
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Old 12-22-2011, 12:51 PM   #137
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Ahh,, Hobson's pitchfork! Or some such thing...
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Old 12-22-2011, 12:58 PM   #138
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All of this proves we need some hard-headed reform when it comes to worker compensation. I wish we had the leadership that would take this seriously. I can't believe we cannot find a workable balance.
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Old 12-22-2011, 01:03 PM   #139
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We kinda got away from the public pensions, to corporate pensions/management. Since the subject of this thread was public pensions, I'll bow out of any further corporate discussion.

I'm not saying the points aren't worth discussing, and I don't mind tackling the subject, but I do think it should be in another thread. This one has already got pretty long just trying to deal with public pensions.


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Old 12-22-2011, 01:18 PM   #140
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That is a sad state of affairs and shows just how badly the working person is being treated. As I recall they more or less gave you the choice of accept this or leave. Correct?
Yes.
And semantically I think it's closer to Hobson's choice (take it or leave it)
than Morton's fork (either stay and get paid less or leave and get paid fully for already worked time)
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