It's the Pension Benefit Guaranty Corporation and it is still
technically not taxpayer-funded. All employers with defined benefit
plans pay insurance premiums that in theory will cover the cost of
bailouts, assuming that not too many are needed. UAL does not yet break
the bank but it comes close. Then, as with the S&L crisis, Congress
will end up authorizing a payout from the General Fund.

This is a class-A debacle because every option si in a sense bad. The
judge in the case basically said, better to have the company stay in
business and pay *some* obligations than go bust and pay none. If UAL
were to be liquidated it would be quite a foodfight. Would today's
retirees do better that way? Highly unlikely. It's crazy to think so.
So keeping UAL going is in one sense better for all UAL people.

However, by allowing UAL to do this, the court has created a major
moral hazard with regards to Delta and American, whose pensions are
just as expensive. Basically the gov't says to your competitor, "Oh,
that huge expense you were required by law to take? We'll let you take
a mulligan on it." Delta et. al. now have a very legitimate claim that
UAL is being given a very unfair advantage against them, and will over
the next few years likely end up weaseling out of their pensions too.

This is why I ultimately come down against it. Liquidating UAL would
really be in the best interests of the broader market (partly by
getting rid of UAL's inventory, thereby allowing prices to rise a
little) but in the short term this is like chemotherapy. Sure, maybe it
kills the cancer, but in the meantime you wonder whether you weren't
better off dead.

I've read btw that GM's cost of providing benefits to retirees comes
out to something like $15k per current employee annually. If that isn't
a drag on wages I don't know what is. If any of you are WSJ subscribers
there's a good article on it he
http://online.wsj.com/article/0,,SB1...Business+World.
The whole concept of society paying for individuals' retirement turns
out to be a bust. It worked as long as it did in the US and Europe
becuase of strong post-WWII economic growth. The US baby boom gave us a
demographic bubble that could sustain the concept for one generation
more than in Europe but it is just as doomed here. It's a nice idea in
principle but in practice it wrecks both companies and economies
leaving everyone but a lucky older generation that got there first
worse off.

-cwk.