(5-12-08) Last week we saw increasing signs of further serious deterioration in the nation's public and private defined benefits and pension system.

Attention got refocused on this issue when State Street Bank, which is not only a large commercial and investment bank, but also happens to be the largest manager of public and corporate defined-benefit pension plans in the United States, announced that it has taken fresh billions in write-downs due to its investments in subprime et al.

Thus, State Street Bank, of course, joins a growing list of commercial and investment banks which have announced staggering losses due to the subprime debacle.

The venerable old State Street Bank has been a victim, as a pension fund manager and like all investment banks, in that the pension monies that they invest have been largely committed to subprime/CDO/CMO paper, because traditionally about a third of pension monies get invested in some sort of real estate related paper.

That investment model has been around for a very long time but in the advent of so-called large packaged CDOs (Collateralized Debt Obligations) and CMOs (Collateralized Mortgage Obligations), this is a relatively new development.