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Home › Forums › Financial Markets/Economics › Excellent Economist Mag. article on CA’s Gov. retiree Pension problems › briansd1 wrote:gandalf

November 14, 2011 at 12:40 PM #732908
Allan from Fallbrook
Participant

[quote=briansd1][quote=gandalf]That doesn’t make sense. The average employee contributing a portion of their paycheck to pension for 25 years had very little to do with the investing decisions between CitiBank and the State and County Employees of Wherever.[/quote]

As people here know, I’m not crazy about Republicans.

But the public employees contributed too little as did the governments. They could all have assumed a lower rate of return and contributed more.

It’s not like governments didn’t benefit from Wall Street. The promised unsustainable returns of Wall Street enabled governments to overspend.

If there were no Wall Street, governments would have had to set aside larger portions of their annual budgets to pensions.

Now, the government retirees are not hurting. Citizens are suffering from higher taxes and cuts in services.[/quote]

Brian: As people here know, I’m not crazy about Democrats (especially the California variety). However, and I cannot believe I’m doing this, but my sympathies are more with the individual public sector workers than with Wall Street (I know, I can’t believe this, either).

I was working as a corporate controller in Orange County in 1994 when Robert Citron, OC Treasurer, blew it up after losing his ass on highly leveraged investments. Ironically enough, I’d had a visit earlier in the year from an investment banker looking to sell me on “low-risk, high-yield” repos (repurchase agreements) that were yielding anywhere from 18% to 25% and were underwritten by “big name firms” on Wall Street. I declined and six months later the shit hit the fan and Orange County went BK.

My point is that municipalities and states will always spend to their level of income and that these various Treasurers, Controllers and Comptrollers have NO business being in the business of investments that they don’t understand. The reason I gave the investment “opportunity” a miss, was that I didn’t understand a friggin’ word this guy was telling me (and I suspect he didn’t know fuck-all about the investments, either) and it seemed too good to be true. When you have CalPERS predicating pension payouts on an annualized 8% rate of return EVERY year, well, at some point the chickens come home to roost. And here we are.