Tag Archives: City of Chico considering Pension Obligation Bond

David Crane: “POBs are meritless products deliberately misnamed by bankers in search of fees. Just say no.”

7 Dec

Thank Dave for sending me this “5 minute read” on Pension Obligation Bonds from David Crane. It’s certainly worth more discussion.

https://davidgcrane.medium.com/pobs-bankers-as-pushers-f0963bf853b8

David Crane

David Crane

LecturerLecturer in Public Policy

About

David Crane is a lecturer in Public Policy at Stanford University and president of Govern for California. From 2004-2010 he served as a special adviser to Governor Arnold Schwarzenegger and from 1979-2003 he was a partner at Babcock & Brown, a financial services company. Crane also serves on the board of the Goldman School of Public Policy at the University of California and formerly served on the University of California Board of Regents and as a director of the California State Teachers Retirement System, Environmental Defense Fund, and the Volcker-Ravitch Task Force on the State Budget Crisis.

While I have no formal background in finance, I think it’s obvious that POB’s are a scam that is only going to benefit pensioners and bond holders. But maybe people would rather hear it from a guy with many degrees and respectable credentials. Crane puts it very simply, “Pension Obligation Bonds (POBs) do NOT reduce pension obligations.”

“POBs would be a truthful title if the bonds actually reduced pension obligations. But they don’t. All they do is increase pension assets, which produces an accounting benefit (more assets — the same liabilities = a lower unfunded liability). Economically, a POB is no more than a “carry trade,” which is borrowing at a low rate to bet on hopefully-higher-yielding assets (e.g. stocks, private equity, hedge funds, etc). Not surprisingly, Wall Street also sells and manages those products.”

And here’s an important point – these bonds are SOLD to public agencies by bond managers, people who make a lot of money selling and managing these bonds. Read on. 

“When the smoke clears, a POB issuer has (i) the same pension obligations it had before, (ii) more debt, (iii) paid investment banking fees, and (iv) gambled the proceeds on products that beget even more fees for bankers.”

That seems pretty clear to me, even a housewife can see what’s going on here. You must wonder, are there kickbacks to city staffers? 

Crane concludes, “POBs are meritless products deliberately misnamed by bankers in search of fees. Just say no.”

That’s right, say it loud, and say it now. Besides sending emails to your newly elected “fiscally conservative” council, you can comment in the consent agenda at Chico Engaged:

https://chico-ca.granicusideas.com/meetings/349-12-slash-1-slash-20-postponed-to-12-slash-8-slash-20-city-council-meeting/agenda_items/5fbdb04ff395e7fe1d013e64-2-consent-agenda-all-matters-listed-under-the

And, Mike Wolcott is looking for “Pro vs Con” writers to argue issues like this – you can reach him at mwolcott@chicoer.com

No on Measure E; and there will be a quiz later today about that Finance Committe meeting!

16 Oct

Wow, who would have guessed Measure E – city council districts – would be such a hot topic. Looking at the stats the last week or so, that’s what people have been hitting – “Measure E – Divide and Conquer”.

In the music business, they would call that a “throwaway piece.” I was just annoyed and frustrated over the response I got from the city clerk when I asked about this measure. The clerk is like a sphinx, you could know her 30 years, and I almost have, and never know what’s on her mind. She states the facts, she answers a question as you ask it. Never opines. But, this time she seemed genuinely confused – it’s a stupid measure. And it makes a person think, council pulled a fast one – like the cell phone tax they collected illegally for years – and they need the public to approve it.

I hope that’s what other people are thinking, and I hope it fails. Districts are not only unnecessary, they are a ploy by both the liberals and the conservatives, who both seem to think they can manipulate this system.

Prepare to be manipulated!

And if somebody feels like emailing city finance man Scott Dowell, scott.dowell@chicoca.gov, they could ask him how much it is going to cost to REDRAW THE DISTRICTS after the upcoming CENSUS.

I’m also shocked to see how interested people are in the school board race. I’m sure glad, and I’m sorry I don’t have anything better to offer than “vote for people who aren’t/haven’t ever been school district employees”, but that’s my story, and I’m standing by it.

But I’m sincerely grateful to those of you who have downloaded and watched the video I posted –

https://gofile.io/d/zqp5BI

with big THANKS to DAVE for that link. Since I posted that last Friday, almost 100 people have seen it, and, as committee member Sean Morgan agreed, that’s a helluva lot more people than actually attend those meetings.

So, after I finish my chores this morning, I’m going to make a QUIZ! We all love a quiz, don’t we? I’ll try to make it good and tough. And yeah, I’ll probably allow cheating. The teachers I learned the most from were the ones who allowed open book/notes tests. And that’s the point here, I want more people to see how the city operates behind closed doors.