Tuesday, July 20, 2010

Disinformation spread by Canadian lobbyists

The NRPC has put together a leaflet on their web site that gives the NRPC view on specific topics, where lobbyists have been active in poisoning the thinking of MPs and the Canadian public in general. I have copied the information and displayed it below with some of my own editing shown in italics. The NRPC calls these items lies and believes that it has answered them with the real truth, and urges you to include the facts in your letters and emails to elected officials and the media.

Again I would remind you that this blog is not connected with, or part of,either the NRPC or the NUSRPC, it is solely my opinion and I am just providing this material for your information.

# 1:
Many countries don’t give preferred status to pension plan deficits so Canada should not.

The facts:
Many countries, like the USA and UK, have guaranteed pension replacement in bankruptcy or insist that pension plans be fully funded, like the Netherlands. They don’t need to give pensioners preferred status in a bankruptcy. Many Nortel pensioners in the US and UK, (who meet specific requirements of the government funded programs), are getting virtually their full pensions. In the absence of such programs in Canada, preferred status for pensioners and employees is the best alternative right now.

# 2:
Giving pensioners and employees preferred status will discourage investors from lending money to distressed companies and will cause more bankruptcies

The facts
There is a major section of the capital markets that specializes in lending to distressed companies. They are called junk-bond lenders. They charge high interest rates depending on the credit rating of the borrower. The also use Credit Default Swaps (CDS) to insure their loans. They will continue to lend but may charge slightly more to companies with significantly under-funded employee plans. Also their CDS insurance combined with Canada’s weak bankruptcy laws allows them to make a profit by double-dipping in the bankruptcy process. It is the CDS problem that is distorting the Canadian bankruptcy system and may create more bankruptcies.

# 3:
The Canadian government has already made changes to pension and bankruptcy laws.

The facts:
Canada’s pension and bankruptcy laws are fractured across the federal and provincial scene. The federal changes to date apply to only about 7% of private sector pension plans. Even so they do not provide for pension guarantees or enforce full funding of pension plans. They do not address the critical issues of employee related claims for pension plan deficits, health care, disability benefits and life insurance in the
bankruptcy court.

# 4:
Giving preferred status to employee and pensioner claims will hurt small investors and pension funds.

The facts:
Neither pension funds nor small investors typically put or keep their money in the below investment grade bonds of companies that are at risk of bankruptcy. That territory is the preserve of the junk-bond lender.

# 5:
Giving preferred status to employee and pensioner claims will cause companies to stop offering defined-benefit pension plans.

The facts:
Lobbyists claim (on the one hand) that private-sector defined benefit plans are a valuable part of today's retirement savings regime and are good for Canadian workers. Yet(on the other hand) they also want CEOs to retain the right to renege on a company’s promises to employees and pensioners. (The NRPC view is that); Companies that want to build and retain a world-class workforce will offer defined benefit pension plans and will fund them properly. Sweden is an example of an advanced country that provides protection to retirees and has retained a predominance of defined benefit pension plans within a healthy economy.

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