The General Accounting Office has released TROUBLED ASSET RELIEF PROGRAM:  Automaker Pension Funding and Multiple Federal Roles Pose Challenges for the Future, brought to my attention by my colleague, Anne Lawton.  The general subject is the impact of GM/Chrysler failure on the Pension Benefit Guaranty Corporation ("PGBC") and the conflict inherent in the government's role as shareholder.  Anne has looked over the executive summary and what follows is based on her report.

First point. Over the next 5 years, GM and Chrysler will need to make significant contributions in order to satisfy minimum funding requirements for their defined benefit plans. For example, GM projects that total to be $12.3 billion for 2013 and 2014, with the possibility of additional further contributions. That's fine if the firms are profitable enough to make those contributions. But, what happens if the pension funds fail? About a year ago, PBGC estimated that the losses from failure of GM's and Chrysler's defined benefit plans would be $14.5 billion.

Second point. The Treasury is a shareholder in the firms. But, PBGC is governed by a three-member board and the Treasury Secretary (along with Labor and Commerce Secretaries) are the board members (right now, the Assistant Secretary of the Treasury for Financial Institutions is the board rep.) So, the report asks, how is the government "dealing with the potential tensions between its multiple roles as pension regulator and insurer, and its new roles as shareholder and creditor?" 

That's a good question.  To remind you, the report is here.

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