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Taxpayers get to cover CalPERS risky bets
Desert DIspatch ^ | December 21, 2008 - 11:22 AM | The Orange County Register

Posted on 12/21/2008 2:53:49 PM PST by BenLurkin

The front page of Wednesday's Wall Street Journal featured a shocking news story about severe financial problems in the public employees union-dominated California Public Employees' Retirement System, which has lost a quarter of its assets since July after investing heavily in real estate schemes — including high-risk speculative ventures on vacant land. According to the Journal, CalPERS has experienced its worst decline since 1932 and has lost 103 percent on its housing investments in the latest fiscal year. Here's the kicker: “CalPERS invested not only its own money, but billions of dollars of borrowed money that must be repaid even if the investment fails.” And this means that “[u]nless CalPERS' returns bounce back by June, the fund expects that the rates it charges government to participate in the pension could rise starting in 2010.”

The simple translation is that taxpayers are going to have to pay far more to prop union pensions because of CalPERS' imprudent investments. All told, CalPERS provides retirement and health benefits to more than 1.6 million state and local public employees and their families. It has $182 billion in assets, the most of any U.S. public pension fund, but in the past 14 months has lost nearly $80 billion, reports the Sacramento Bee.

“The use of debt is unconscionable,” said Supervisor John Moorlach, the former county Treasurer who predicted the county's bankruptcy in 1994 caused by the leverage-based investments made by former Treasurer Bob Citron. Mr. Moorlach, as well as the Register Editorial Board, have warned of an emerging pension debacle.

CalPERS plays games with amortization, Mr. Moorlach explains. Instead of amortizing its losses over five years, it amortizes them over 30 years, which pushes eventual costs into the future.

The leveraging is not illegal. Why not? If the investments work, then union members get even more financial benefits, but if they don't then they are still guaranteed their generous pensions, and taxpayers bail them out.

What happens when companies, unions, governments and other understand that taxpayers will bail out their worst financial decisions? The answer is “moral hazard.” Those who are protected from the consequences of their decisions will continue to make unnecessarily risky decisions. Expect more bad decisions and an endless number of taxpayer-funded bailouts.


TOPICS: Business/Economy
KEYWORDS: california; calpers; pers; swindle

1 posted on 12/21/2008 2:53:49 PM PST by BenLurkin
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To: jimtorr

Ping


2 posted on 12/21/2008 2:56:56 PM PST by BenLurkin (Mornie utilie. Mornie alantie.)
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To: BenLurkin

CALPERS invested in a bunch of crap including Ron Burkle and P Diddy. Calpers used to be tough on demanding transparency but now it is a union and democrat slush fund. It is a big pile of money Democrat loot to stay in power and award their friends.


3 posted on 12/21/2008 3:09:23 PM PST by Frantzie
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To: BenLurkin

California, feel free to become an independent nation, any time.


4 posted on 12/21/2008 3:18:04 PM PST by Kozak (USA 7/4/1776 to 1/20/2009 Requiescat In Pace)
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To: BenLurkin; Grampa Dave; SierraWasp; marsh2; ElkGroveDan; calcowgirl

Holey 82 BILLION DOLLAR loss Bat Man.

Coming to a pensioner near you...


5 posted on 12/21/2008 4:18:07 PM PST by tubebender (Retirement...The art and science of Killing time before it Kills you...)
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To: BenLurkin; informavoracious; larose; RJR_fan; Prospero; Conservative Vermont Vet; ...
+

Freep-mail me to get on or off my pro-life and Catholic List:

Add me / Remove me

Please ping me to note-worthy Pro-Life or Catholic threads, or other threads of interest.

Obama Says A Baby Is A Punishment

Obama: “If they make a mistake, I don’t want them punished with a baby.”

6 posted on 12/21/2008 4:21:48 PM PST by narses (http://www.theobamadisaster.com/)
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To: BenLurkin

Calpers and other like organizations make huge contributions to left wing causes and the Democratic Party.

Like the lost Madoff “investors”, they will demand the taxpayer provide corporate welfare to them.


7 posted on 12/21/2008 4:23:31 PM PST by Boiling Pots (The USA has become one huge pyramid scheme. Thanks George, John, Nancy and Harry.)
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To: BenLurkin
has lost a quarter of its assets since July after investing heavily in real estate schemes — including high-risk speculative ventures on vacant land.

so where's all this 'vacant'land, I wonder? Land may drop in value but it never drops to zero unless it's underwater

8 posted on 12/21/2008 11:29:42 PM PST by blueplum
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