Pension Obligation Bonds: Financial Crisis Exposes Risks
The brief’s key findings are:
- Some state and local governments issue Pension Obligation Bonds (POBs) to raise cash to cover their required pension contributions.
- POBs allow governments to avoid increasing taxes in bad times and could reduce pension costs, but they pose considerable risks.
- Those who issue POBs are often fiscally stressed and not well-positioned to handle the investment risk.