The U.S. Department of Justice announced a $16.6 billion settlement between six states’ attorneys general and Bank of America Thursday over fraudulent mortgage-backed securities that fueled the 2008 financial crash. The settlement includes $23 million for investments made by the Kentucky Retirement System.
Kentucky Attorney General Jack Conway announced the details of Kentucky's share of the settlement in a conference call from Washington.
He said the state will recoup $23 million toward $21.6 million in losses incurred by KRS over fraudulent securities that the pension's investment team purchased from BofA and its subsidiaries.
"Classic securities fraud 101. In essence, that Bank of America entities knew that they were packaging subprime mortgages into the securities that they were marketing yet were not informing investors about the risk inherent in the securities they were selling," said Conway.
State employees with higher pensions should pay more to help the underfunded systems recover, Kentucky House Speaker Greg Stumbo said in a recent interview. One thing Stumbo doesn't want to see is lawmakers floating bonds to help pay for the state’s underfunded pensions.
Kentucky's state pension plans have problems, and a bipartisan legislative task force has approved sweeping recommendations to overhaul them -- including putting new employees in a hybrid plans akin to 401Ks.
The task force -- with an 11-1 vote -- is recommending that the General Assembly start fully funding their pension contributions starting with the next budget in 2014. Lawmakers’ inability to do that is part of the pension plans problems.
A group of GOP House candidates are encouraging one Republican leader to take a bold stance on a pension issue. Republicans Chris Hightower, Jason Crockett, Lynn Bechler, Bryan Lutz and Matt Lockett are all in competitive races for the state House this election cycle.
A relatively new economic think tank in Kentucky has released a report that pushes back on calls to cut the state's pension benefits. The report from the Kentucky Center for Economic Policy says the idea that public pensioners are well-compensated compared to their private sector counterparts is inaccurate.
A group of Kentucky lawmakers has a new summer assignment: shoring up the state’s failing pension systems. At least two of Kentucky’s six pension plans are at a high risk for failure. And their troubles have been highlighted by Bloomberg, the New York Times and the Pew Center.