We’re going all different directions here, but I think I can address them each one at a time.

[quote=briansd1]Ok, SK, if we assume that Wall Street caused our problems, let’s find a way to tax them and make them pay.
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I’m not sure who the “we” is that should find a way to tax them and make them pay. The government doesn’t usually reimburse people for bad investment decisions. There probably are viable tort claims that should be pursued, some already have been.

[quote=briansd1]So in that case, we all are “owed” something. So whatever amount is “recovered” through taxation should go to the general fund, not the public pensions. [/quote]

I’m not sure that we’re all owed anything, other than criminal prosecutions. Given the influence of the financial sector on both parties in Washington, that seems unlikely. Some might be. See tort claim issue above. Additionally, the losses didn’t occur within state or municipality accounts, they occurred within pension trusts. “Recovery through taxation” (whatever that means) would go to the states or municipalities, not pension trusts, except to the extent those additional taxes are used to fund those pensions.

[quote=briansd1]I don’t see why the public pension funds should be made whole to their peak values when everybody else suffers. [/quote]

The public pensions should be made whole the same reason a private company has a legal responsibilty to fully fund its contractual pension obligations. It has nothing to do with restoring them to their peak. Just to restoring them to actuarialy fully funded. The alternative to fully fund those obligations is bankruptcy. You can argue that the contracts should never have been agreed to. But they were. And where the pension obligations are in the list of creditor priority both at the state and municipal level, they will be funded. There is no choice.

[quote=briansd1]Now if the public pensions funds can successfully sue Wall Street to recover money, then all the better for them.[/quote]

They may be able to. It has already started.

[quote=briansd1]If you look at the Maddoff lawsuits, the investors who “lost money”, are only entitled to the capital they contributed, not the value of their portfolios. If they withdrew any of their gains, they are having to pay them back.[/quote]

Maddoff is not currently relevant because that’s a federal bankruptcy issue. There are no state or municipal pension funds in bankruptcy.