Calpers shows the way

Neel Tushar Kashkari is an American banker and politician. As interim Assistant Secretary of the Treasury for Financial Stability from October 2008 to May 2009, he oversaw the Troubled Asset Relief Program (TARP) Odds are that if California elects Kashkari (fittingly pronounced “cash-carry”) lots of his old Wall St. pals will get richer and voters will get poorer.

Unless people are working for a city, county or some other kind of municipality (obviously not those in so-called “right to work” states, the chances they have retirement insurance, otherwise known as a pension, are somewhere between slim and none. For those that do have access to pensions there’s a growing awareness that the people funds hire to turn money into more money are shady rip-off artists that pay themselves top dollar while they lose (bad stock bets) and take (fees) all our money

Bloomberg News reports that the latest Moody’s ratings calculations say the 25 largest public pensions in the USA are now roughly $2 trillion in the red. In other words the 25 largest funds owe pensioners $2 trillion more than they can cover.

For context, the national debt, in its entirety is about $17 trillion. That’s a misleading figure though because it does not take into consideration what other countries owe us.

According to Bloomberg: “The 25 biggest systems by assets averaged a 7.45 percent return from 2004 to 2013, close to the expected 7.65 percent rate.”

So if large pension funds like Calpers got about what they thought they’d get where did all the all the money go?

“Despite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns,” Moody’s said. “This growth is due to inadequate pension contributions, stemming from a variety of actuarial and funding practices.”

If you’re a PubCecAlliance member you can cut through all that nonsense simply by looking at New Jersey Governor Chris Christie’s approach to making the payments required to the state pension fund.

His approach was, “Screw the employees. Let’s use their retirement money for just about anything and everything else.”

Sadly for public employees in New Jersey the Gov. and his bankster buddies operate with impunity and actually brag about screwing the working man on the campaign trail.

The good news is that Calpers has gone the opposite way of New Jersey and told the hedge funds to pound sand. They’re going with less risky S&P 500 investments that carry far less risk for similar returns on investments. And, more importantly, do not involve fees paid to wealthy moneymen that can cripple the solvency of large pension funds.

Pension funds, like anyone else that doesn’t want to lose their shirt and get hosed for fees that no one can explain, would do well to avoid and so-called “innovations” emanating from the so-called “financial services” industry.