Friday, September 16, 2011

Monday Monday

Reuters: Pennsylvania to rule on Pittsburgh pension takeover

My guess is that the city will be saved by the bell if only because the folks at PMRS will just kill the folks at PERC if they wind up being stuck with Pittsburgh's pension system.  Accounting fictions or not, will there be a literal cash issue at some point if all this goes through with so much notionality on the books?

Let them spend IOUs.

Seriously,  I would love the legal minds reading here to tell me if an asset is an asset if you can't sell it?  That and whether anyone really thinks the city's IOU to its own pension board could be sold to a third party for cash.  I bet one of those advertisers on tv offering to monetize the annuities some folks have would be happy to make an offer.  The interesting question is.. what would they value it at?



Anonymous BrianTH said...

It's an asset if the controlling entity can expect future economic benefits. There are various reasons why an asset might be inalienable, legally or practically.

The basic reason so many financial assets are alienable, and indeed designed to be as liquid as possible, is that the issuer will likely get the best price that way, and they don't particularly care about who ends up owning the asset. But in some cases it might make sense for the issuer to restrict ownership to a specific entity, and this might be such a case (or not--indeed, in my ideal world the pension fund would be allowed to diversify away from a holding like this, assuming an asset was created at all).

Friday, September 16, 2011 12:50:00 PM  
Anonymous BrianTH said...

Oh, and I still don't know what the City actually did (has the documentation ever been made public?). But people estimate the value of revenue bonds all the time. So hypothetically, if this otherwise just looked like a revenue bond, then even if it wasn't alienable you could have someone use the standard techniques to estimate its value.

Friday, September 16, 2011 12:58:00 PM  
Anonymous MH said...

(has the documentation ever been made public?)

Sure. Everybody but you has seen it.

Saturday, September 17, 2011 4:04:00 PM  
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Monday, September 19, 2011 12:57:00 AM  

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