Erik Gerding has a nice analysis of the SEC's lawsuit against NJ:
According to the SEC release, New Jersey failed to disclose in 79 state bond offerings between 2001 and 2007 (totaling $26 billlion) that two public employee pension funds were underfunded. According to the SEC, the failure to disclose masked
the fact that New Jersey was unable to make contributions to [the pension funds] without raising taxes, cutting other services or otherwise affecting its budget. As a result, investors were not provided adequate information to evaluate the state's ability to fund the pensions or assess their impact on the state's financial condition....
New Jersey is a special state in many ways, but my gut instincts tell me this SEC action is just the vanguard of a coming wave of state and municipal securities litigation. We have all the ingredients for an epidemic ....
He also adds an interesting thought:
Here is a more puckish thought for cheering up – would the SEC ever bring charges against the U.S. Treasury? Might certain federal programs be underfunded, and fixing the gap might be impossible for the country “without raising taxes, cutting other services or otherwise affecting its budget”?
Go read the whole thing.
