When the government of Bell, Calif was outed for paying exorbitant salaries, the mayor said his $800,000 city manager was worth it: "Our city is one of the best in the area. That is the result of the city manager. It's not because I say it. It's because my community says it."But things weren't actually going that well in the LA suburb. S&P just cut the city's bond rating to junk on warnings of an inability to pay debts due Nov. 1.
S&P lowered Bell’s general-obligation and pension bond ratings to BB, two levels below investment grade, from A-, and put it on a watchlist for potential further downgrade. The credit-rating company cited the resignations of top city officers amid a scandal over how much they were paid, and media reports about the decline in value of property financed with municipal debt in 2007 as reasons for the downgrade.
“The lack of good information is creating some uncertainty,” S&P analyst Sussan Corson said in a telephone interview. “There could be some stress on the city, and we think that the rating action is justified.”
The city manager and others have resigned after protest, but who knows how screwed up and corrupt the local finances are?
Tuesday, August 10, 2010
Life in "Progress" City - Bell CA edition
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Look at every single major financial crisis area in the western world today and start digging. At the root of every single one is at least one pension fund and they are all PUBLIC pensions (which includes social security).
Why pensions? 1) Because pensions are unsustainable when the number of people paying in is shrinking while the number drawing out is growing. Note the aging of western populations. 2) because pensions don't distribute from interest, they pay mostly from current receipts (a ponzi scheme). 3) Pensions are based 100% on the assumtion that the pensioner is in no way shape or form able to be responsible for their own future. That only a third party with no direct interest in the pensioner's future can properly pension manager can plan for that future. When you have this much of other people's money being controlled so disproportionately by the few, it's going to end up bad.
The private sector realized years ago that an upside down pension could be a liability that could blow a company apart. (Frankly a third grader could see that.). And they did away with them. But the socialized sector (government and unions) decided it would be simpler to outlaw pension failure. Hey politicians have overridden laws of physics, chemisty, and economics (see green cars that run on coal, global warming when it's cooling, and inconvenient laws supply and demand ) why not override laws of mathematics with pensions.
Now the bomb is ready to explode. Let's see if they can outlaw that.
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