I suppose we are learning just how long the SEC can pretend that pension funds are not just like a 1929 era bank, with stocks as assets.

The Yahoo link to a Reuters article is here.

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission is looking into possible accounting abuses involving companies' assumptions about employee pension funds, the SEC's top enforcement official said on Thursday.

"We're looking at assumptions made in connection with pension accounting to determine whether those assumptions were reached to drive earnings results," said SEC Enforcement Division Director Stephen Cutler in an interview.

Hundreds of companies last year updated key assumptions in their accounting for post-retirement benefits, Business Week magazine reported in its Oct. 25 edition.

The SEC is looking into whether some of these changes were overly aggressive and made with an eye to enhancing companies' profits and balance sheet figures, Business Week said.

Instead of just thinking of assumptions in pensions sponsored by private companies think of assumptions in pensions sponsored by state and local governments. While the first can be tweaked to be rosy for profits the other can be tweaked to give the illusion of health and thus justify extra ordinary payments to the beneficiaries.

Here is an example of how the rosy assumptions are being played out in California today. Via TheReporter.com

Incompetency threatens state, says McClintock

By Jason Massad/Staff Writer

It's safe to say that state Sen. Tom McClintock, a stalwart conservative, was preaching to the choir Thursday night with his fiery brand of politics.

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Then his comments moved to the more serious accusation that massive government waste and incompetency is threatening California's status as the best place in the nation to live and do business.

"No act of God could wreak such havoc on the state of California," he said. "Only acts of government could do that."

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In picking apart the inefficiencies, McClintock focused more than once on public employee unions that he said operate on "both sides of the bargaining table."

Unions, he said, were originally envisioned to represent employees to faceless managers in industry. In the case of modern public employee unions, he said, they exert enormous influence on the politicians that they help get elected.

The effect - exploding pension benefits for public employees around the state that are forcing counties like San Diego to the brink of bankruptcy, he said.

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I had raised the Chiles case in a memorandum once and I don’t know if the judge even read the reasoning that accompanied the citation. Minority shareholders are at least due a minimum level of protection by the majority. When union voters get a chance (partial as it is) to pick their bargaining opponent through the election process they can fully disarm the adversarial nature of employer/employee bargaining. The most analogous semi vigorous bargaining was the Chiles case. The court there was reluctant to interfere with the business judgment but nevertheless allowed some limited review.

The bluntness of a McClintock is an understatement of the true state of affairs across the country. Portland Oregon, for example, is enduring a full fledged corruption of the election process today over the Repeal of the Multnomah County income tax and the various parties getting public attention are not even yet breathing a hint of recognition that it is as corrupt as hell. The half bargain struck by the teachers union with the school board was approved Thursday night. It is an incomplete bargain and thus the negotiations should not yet end. What remains is the unlawful threat of cutting school days, which can not, under state law, be committed to writing in a collective bargain agreement – so they just leave it out and then have an unwritten agreement to defy the law in the event that the Repeal is successful.

I wanted to redirect the school board back to the 500 million dollar bond issue that the shady actuaries peddled to the nitwit unwitting idiots managing Oregon’s finances. We borrowed money that was then unlawfully transferred to PERS, nominally, for the benefit of the teachers. Really it was that the tag team of the actuaries and bond rating entities want local government to borrow money and transfer it to the stockmarket. The rosy assumptions cause a double whammy problem. First they lead decision-makers to give unjustifiably high pension benefit payouts and second, after the 2000-2002 stock market drop the rosy assumptions remained in place rather than being corrected and led to huge borrowing rather than corrected payments.

At least in San Diego there is now talk of voiding the pension gifts due to conflicts of interest. In Oregon, the watchdogs, the local DA’s and the AG’s office, are filled with people who participate in PERS and personally benefit from the continued belief in rosy assumptions. The public attorney’s representing the cities and counties and every conceivable public body also participate in PERS and personally benefit from the continued belief in rosy assumptions. The bar association is likewise corrupted.

If the public pension funds were not managed by the government, but by a common trustee, perhaps even a union trustee, the public in Oregon would not have spent in excess of 6 billion dollars extra in the last couple years, in off budget spending, to transfer local wealth to the stock market scammers. If you are going to run a corrupt scheme you might as well think big, really big, and you might escape notice.

The threat to unlawfully shut Portland schools down early, rather than re-think the pension theft scenario, is a continuing corrupt activity (pertaining to the pensions) if someone with real legal power wishes to finally clean up the system. I will try to get the district to at least document some stuff pertaining to the future pension impact of the latest bargaining agreement.

Assumptions. Assumptions. Assumptions. They have got to go out the window.