The Pension Problem – “at least 50 WorldComs”

I’ve been writing about corporate pension funds, the “other” accounting problem (here and here).

Today Paul Krugman in the New York Times talks about the issue, “As the current issue of Business Week explains, the pension time bomb involves large numbers; I’d say it’s the equivalent of at least 50 WorldComs.”

From the Business Week piece, “Amid the wreckage of the worst bear market in at least three decades, hemorrhaging corporate pension plans are rapidly becoming Wall Street’s biggest new worry. They have lost hundreds of billions of dollars, and now companies face the end of their long-running holiday from writing checks to the plans. Over the next 18 months or so, companies ranging from General Motors to United Technologies face having to pump billions into their plans to comply with federal laws to protect pensioners.”

“The squeeze on U.S. pension funds has the potential to be the defining U.S. financial crisis of the 2000s, like the savings and loan squeeze of the 1980s,” says Bob Prince, director of research and trading at money manager Bridgewater Associates.”