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Utterly amazing and horrifying financial scandals!

1. FDIC bailout needed

FDIC conveniently stopped asking big banks to pay insurance premiums between 1996-2006. Now because banks are so fragile, Congress will be asked to pay $500 billion for  insurance premiums which the bank claim they are too poor to pay. Think about that. They are exempted from paying premiums when the  fund is too healthy. Then when the fund has gone to the crapper, they are exempted from paying premiums because they are too sick.

2. State pension/retirement funds are in deep doodoo, not because of the recent economic downturn but because they have been misrepresenting their returns to their states. Guess what? They will be asking for a bailout pretty soon too (in the form of pension bonds which will kick  the can into the future).

Texas, California and Illinois are heavily damaged. Sample hair-raising quote:

The Teacher Retirement System of Texas, the seventh-largest public pension fund in the U.S., reports each year that its expected rate of return is 8 percent. Public records show the fund has had an average return of 2.6 percent during the past 10 years.

The nation’s largest public pension fund, California Public Employees’ Retirement System, has been reporting an expected rate of return of 7.75 percent for the past eight years, and 8 percent before that, according to Calpers spokesman Clark McKinley.

Its annual return during the decade from Dec. 31, 1998, to Dec. 31, 2008, has been 3.32 percent, and last year, when markets tanked, it lost 27 percent.

‘It’s Pitiful’

“It’s pitiful, isn’t it?” says Frederick “Shad” Rowe, a member of the Texas Pension Review Board, which monitors state and local government pension funds. “My experience has been that pension funds misfire from every direction. They overstate expected returns and understate future costs. The combination is debilitating over time.”

3. Time magazine cover story on health insurance coverage.  (specifically talks about a San Antonio person who bought short-term insurance and realized too late that these short term insurance plans cover diddlysquat). This amazing factoid:

A 2006 Commonwealth Fund study found that only 1 in 10 people who shopped for insurance in the individual market ended up buying a policy. Most of the others couldn’t find the coverage they needed at a price they could afford.

The article was about how temporary individual health plans provide minimal coverage, something I discovered in 1998. (Gosh, maybe I should have written a Time magazine cover story about it). I actually did compile links for Texans  about buying individual health insurance a few months ago.  Main lessons learned:
1. Use ehealthinsurance.com and 2.the state insurance board sets minimum coverage policies for all insurers.

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