On Asset-Liability Matching and Federal Deposit and Pension Insurance/Commentary

Review - Federal Reserve Bank of St. Louis,  July, 2006  by Lucas, Deborah J; Bodie, Zvi

Tags: Pension Benefit Guaranty Corp.

• E-mail
• Print
• Link

Asset-liability mismatch was a principal cause of the Savings and Loan Crisis of the 1980s. The federal government's failure to recognize the mismatch risk early on and manage it properly led to huge losses by the Federal Savings and Loan Insurance Corporation, which had to be covered by taxpayers.

In dealing with the problems now facing the defined-benefit pension system and the Pension Benefit Guaranty Corporation (PBGC), the government seems to be making some of the same mistakes it made then. Among the causes is the fallacious belief that because pension funds have a long time horizon the ...

Read the rest of this article with a Free Trial at HighBeam Research.