CalPERS – how we got here

21 Sep

 

As we hear more about how pensions have taken down our economy and Jerry Brown’s feeble attempts to leash train his SEIU pitbulls, I have been doing some reading, trying to understand this whole mess, how it happened, and exactly what we, the taxpayers, are on the hook for.

I found an article from 2003, from the California Job Journal, that explained how it started. You can read the whole thing here:

http://www.zoominfo.com/CachedPage/?archive_id=0&page_id=523523781&page_url=//www.jobjournal.com/article_full_text.asp?artid=919&page_last_updated=2004-08-17T12:28:33

Right away you see that this is an article about finding lucrative jobs, and it’s steering people into the world of pension management.  “With baby boomers retiring at an escalating rate and becoming more concerned about their financial future, careers in institutional investing are likely to become hotter than a half-price sale at a Lexus dealership.”

As a baby boomer myself, I feel like I just picked up a menu that described ME as the main course.

This article, “Careers in Finance,” directs the job seeker first to the California Public Employee Retirement System. Apparently, CalPERS is a great jumping off point for those who want to make a bunch of money.    According to recruitment manager Linda Miller, the pay is low (stop laughing!), but the experience is money in the bank.   “Many return to million-dollar jobs in the private sector after learning about institutional investing with us,’ Miller reports.”

Here I have a question: do these people get public pensions? I’m pretty sure they do. You only have to work for the state for a few years at full time before you are eligible for a pension.  She says, they “return” to the private sector…” So, was that the whole point? Get a job at CalPERS to learn, then return to the private sector with your nice fat public pension? And benefits? And everything you need to know about ripping off the taxpayers?

What I really found interesting about this article:

  • in 2003 there were over 140 employees of CalPERS. Miller says people make more money in the private sector, but admits they’d work longer hours. And, she says, “We offer sick leave, retirement and lots of holidays, and that is a plus. In addition, there is stability and training available.” All paid for by US, the taxpayers.
  • in 2003, CalPERS had “assets totaling over $137.8 billion.
  • nine years later they’re flat broke and costing us millions in interest to pay off their obligations

And if you want to work in the private sector, you will not be trained, you will need either a Bachelor’s degree, subsidized by the taxpayers,  or experience in the public sector, provided of course by the taxpayers.  According to Maripili Tovar, of Bear Stearns in San Francisco, “”We look for people with a strong background in finance and business and a bachelor’s degree in either of those two fields.”  She adds,  “We are not hiring at this time because we are still feeling the effects of 9/11. But slowly I feel the market and the economy getting healthier.”

But, at  the same time,  CalPERS was recruiting, offering training,  benefits, pensions and “lots of holidays”?

Here we have the story of an agency that has been embezzled by it’s former employees. These people went to CalPERS, not necessarily for training, but to find out what they need to know to get over $137 billion in assets.

How would you explain what happened?

The article goes on to describe how ANYBODY can make a killing in the world of high finance. There are the “third party administrators,” or as my grandma would say, “another layer of fat you don’t need.”

“In a nutshell, we’re third-party administrators and we don’t sponsor or write investments plans,” explains consultant Bob de Montigny. “We do the accounting, tax-form preparation and consulting for long-term retirement. We rely solely on the information from the plan’s administrators.”  

So, here’s a guy who doesn’t even write your package for you, he just takes care of it.  This hound is full of fleas.

We are looking out for the little guy in the retirement plan to make sure the business owner isn’t getting all the money,” states de Montigny. “We do 100 percent of benefit consulting and administration, and take care to see that all the deadlines and deduction limits are met. It’s a very detailed job.”  Wow, I had no idea – how does the business owner “get all the money”? Sounds like the world of finance is a regular snake pit, doesn’t it?  Or, at least, it behooves some people for the pensioner to think that way.

The article says, “Prerequisites for this career include a strong accounting background, knowledge of investments, and proficiency in math. You have to know your way around monthly balance and income statements and understand what money is going in and out of a trust, and why. You also need a fairly strong background in composition and business English.”  Frankly, I’d think if you were competent to do the job that got you the pension, you’re competent to administer your own pension, but hey, we’re talking about public workers here. As we ascertained above, public workers don’t need as much skill to do their jobs as do private workers, so maybe that lack of skill is also at play in their personal lives? They can’t do their own bookkeeping, but they can do ours, that’s just great.

Furthermore, “The field (of third party administrators) is a niche business and there are job opportunities if you have the qualifications. The ups and down of the stock market has little effect on the business.”  Oh, that’s great, these people can send their clients down the market toilet, but the same market “has little effect” on them.

My, oh my, have I learned something about the CalPERS disaster. We have an industry that uses a taxpayer supported agency to train their workers. These workers took  knowledge they gained in their public trough experience through the revolving door to the private industry and then proceeded to rip off their former employers for over $137 BILLION.

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