I think pension obligation grew dramatically since decades ago. In recent years, many local governments dipped into risky financial instrument(derivatives) to earn enough revenue to keep the pension fund going. Now that those schemes all crashed, they created a big hole in the budget.
Yes, and every one of these investments were deliberately rated AAA by the ratings agencies who should have known better.
So you have pension funds all over the USA and Europe that bought junk bonds they thought were assured by the ratings agencies were as safe as Muni bonds. It is not as if these bonds were paying 15%, so a fund manager could ask “what’s the catch” or might think “if it seems to good to be true, it probably is.” No, these bonds paid scant more than muni’s were paying, so there was no reason to suspect they were just junk bonds.
Surprise!
You can say these pension fund managers did not do their due diligence. You can also say the ratings agencies are crooked. If you ask me, I think all buyers of these vehicles including pension funds looking for safety, were set up by the banks either intentionally or negligently.
The pension funds thought they were buying muni-bond safety.