Thursday, June 1, 2017

Jerry does the Puerto Rico

California Policy Center:

In 2008, Puerto Rico opted to plug a hole in its retirement system funding by issuing Pension Obligation Bonds (POBs). The Commonwealth borrowed $3 billion from bond investors to contribute to its Employees Retirement System (ERS), Puerto Rico’s analog to CalPERS.
Puerto Rico’s timing could not have been much worse. Between early 2008 and early 2009, the Dow Jones Industrial Average declined by about 50%.
When the market crashes debt is expensive  a Jerry will pay high interest charges to replace those short term funds when they are most needed.  Jerry will be joining ten or twenty other Cal municipalities in chasing short term debt to cover obligations in a market correction. 

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