Whatever you call this, it’s not free enterprise.
Of course it isn’t- it is a legally sanctioned attempt to pass on the financial obligations of private corporations to the public. And it is going to be successful.
The company underfunded the pension program with the sanction of the government, knowing with full confidence that the 1974 creation of the Pension Benefit Guaranty Corporation that they were now completely covered to do whatever they wanted as long as they paid their premiums. They then underfunded their pension, which probably allowed them to overstate profits or to maintain a veneer of financial responsibility, which gave creditors the cover to keep lending ( and if the new Bankruptcy Bill shows anything about the mindset of the powers that be, only creditors matter) and shareholders to keep earning returns on stock prices that were over-inflated due to the cooked books (hat tip Kevin Drum):
During the “hostile takeover” craze in the 1980s and 90s, “overfunded” pensions were “relieved” of their excess capital.
As happened in the mid-1980s, rapid appreciation in the value of equity investments has pushed many defined benefit (DB) pension plans into a position of substantial overfunding. Unlike the mid-1980s, however, a pension plan sponsor cannot tap these excess assets for other corporate purposes. Or can it?
(Source: Michael S. Melbinger: Gaining Access to Excess Pension Assets [This article appeared in Pension Management, August 1995][Emphasis added])
Now, of course, the brilliant business strategy of tapping pension “surpluses” for extra cash has reached its inevitable outcome: suddenly all those ‘overfunded” pensions are now “underfunded.”
In The $4.7 Trillion Ponzi Scheme, Michael Hudson explains how this looting in the form of relieving excess capital took place:
The problem was created by fund managers and CFOs who believed