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Detroit Emergency Manager Orders Probe Of Benefit Programs

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Detroit Emergency Manager Kevyn Orr ordered an investigation into employee benefit programs, including the insurance and pension systems.

Orr told the city’s inspector and auditor general, agencies that both have subpoena power, to report within 60 days in an order dated today.

The document should cover “next steps, and any corrective, prospective, legal, additional investigatory or other action designed to address any waste, abuse, fraud or corruption uncovered,” according to Orr’s order.

The emergency manager was appointed by Republican Governor Rick Snyder to remake the finances of the erstwhile industrial giant that’s lost a quarter of its population since 2000 and that teeters on the brink of a record bankruptcy. Orr’s advisers are meeting today with union leaders for about 30,000 active employees and retirees to discuss a restructuring plan.

Bill Nowling, Orr’s spokesman, said he wants to look into questionable investments by the two pensions, such as real-estate ventures. Nowling said both may have less money than needed to pay promised benefits, especially the General Retirement System, which he said may be 30 percent to 40 percent underfunded. State law allows Orr to assume control of the funds under certain conditions.

Is this going to set off a chain reaction restructuring pension funds? Mish has repeatedly highlighted that many pension funds are assuming 8% growth per annum, this is impossible as the economy doesn't function in that way.

It will be interesting to see what the outcome of this is.

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  • 242 Brexit, House prices and Summer 2020

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      • down 5% +
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