The “Financial Crisis” of 2008…

Financial Crisis Accounting Banking Economics ConceptThe “Financial Crisis” of 2008 was well orchestrated years earlier by banks and insurance companies through irresponsible over-leveraging of real estate purchases, including both residential and commercial properties.  Cheap bank lending rates and the emergence of shadow banking and off-balance sheet accounting fueled the institutional greed for over-leveraging.  When banks tightened their purse strings, insurance companies turned to high interest rate mezzanine and bridge loans obtained from shadow banks to obtain 80-90% leverage, feeding their greed even more.  By using off-balance sheet accounting, they did not have to report the excesses to their shareholders.  Both residential and commercial property values began to plummet in 2008, and the equity in the insurance company’s investments vaporized as the gross asset value plummeted well below the amounts borrowed.  Insurance companies like Principal Life Insurance Company had also engaged in shadow banking practices, providing loans to co-investors and other institutional investors that later defaulted on their loan obligations.  Unable to cover their losses, companies like Principal turned to net asset and equity values in their pension plans and defined contribution (401k) plans to resolve their troubled asset concerns.

I moved my entire 401k savings into one commercial real estate equity investment offered by Principal Life Insurance Company, because the account was called a fixed income account, ranking second only to a money market account as a safe investment in the online plan information provided by Principal.  After withdrawals in the account were frozen, and I began researching the Principal U.S. Property Separate Account, I learned the truth.

The most important advice I can offer to any 401(k) investor is, if your 401(k) is offered as a “group annuity” by any insurance company, get OUT…. NOW!  The group annuities are NOT regulated by ERISA, and the final outcome of your retirement is determined by the relationship between the insurance company and the State Insurance Commissioner!

This Bloomberg news story tells it ALL!

Author: Dennis Myhre

Mr. Myhre can be contacted at..... dmyhre@fiduciaryfactor.com