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Calpers triggers legal fight with bankrupt San Bernardino over pension debt


By bgamall4   Follow   Wed, 28 Nov 2012, 12:43am PST   2,117 views   38 comments
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http://finance.yahoo.com/news/exclusive-calpers-triggers-legal-fight-093110813.html I have been saying for some time that this is Calpers versus Wall Street. Will the Federal judge screw with California law and let Wall Street win?

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Ceffer   Wed, 28 Nov 2012, 8:59am PST   Share   Quote   Permalink   Like   Dislike     Comment 1

It will be a fight among the creditors, secured, unsecured. The best Calpers can hope for is to be first in line amongst unsecured creditors. The situation hasn't been tested because the cities that have gone bankrupt did not want another costly legal entanglement and deferred to Calpers. However, the creditors can sue each other apparently, and that means Wall Street vs. Calpers.

I would imagine that ultimately Calpers will lose. Cowardly, pork barrel politicians won't solve the mess, only bankruptcy can cut the Gordian knot of waste and special interests.

bgamall4   Wed, 28 Nov 2012, 9:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 2

Ceffer says

I would imagine that ultimately Calpers will lose. Cowardly, pork barrel politicians won't solve the mess, only bankruptcy can cut the Gordian knot of waste and special interests

That would be too bad, because California law protects Calpers.

Wall Street must not win this.

Bap33   Wed, 28 Nov 2012, 11:10am PST   Share   Quote   Permalink   Like   Dislike     Comment 3

Oddly, the teacher's version of Calpers just don't get much press.

Bellingham Bill   Wed, 28 Nov 2012, 11:48am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 4

CalSTRS is at a 70% funding level:

http://www.pionline.com/article/20120409/REG/120409899

with $155B of investments under management.

CalPERS has $240B and allegedly is 80% funded.

But both of these funding levels are assuming ~7.5% long-run returns.

CalPERS's actual return for FY11 was . . . 0.1%.

The missing 7.5% of interest income is . . . $18B or so that either has to be made up immediately, or a lot more down the road, since by the rule 72, 7.5% interest doubles the principal in only 10 years . . .

I don't know what's going to happen with California's pension issue, but it's a major, major problem coming down the pike.

And all the people with spiked pensions and other miscellaneous bullshit is going to create an immense public backlash, too.

The Howard Jarvis people called me into a paid focus group not too long ago, and my advice to them was nail the unions on this pension issue, since that's their achilles heel.

Ceffer   Wed, 28 Nov 2012, 12:00pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 5

California judges have pensions, too. It would seem they have an automatic conflict of interest, which points to the Feds resolving the legal issues above the state level. State laws exist in force where they don't conflict with Federal laws. One would assume that the same legislators that give themselves the store are the ones who constructed the state laws about pensions.

bgamall4   Wed, 28 Nov 2012, 12:09pm PST   Share   Quote   Permalink   Like   Dislike     Comment 6

Bellingham Bill says

The Howard Jarvis people called me into a paid focus group not too long ago, and my advice to them was nail the unions on this pension issue, since that's their achilles heel.

So you are a Wall Street creep? Or what are you?

bgamall4   Wed, 28 Nov 2012, 12:11pm PST   Share   Quote   Permalink   Like   Dislike     Comment 7

Melmakian says

Thus this part is a complete legal fantasy on Calpers' part:

Calpers expressly stated that it was "concerned about inappropriate preferential treatment that might be given to other creditors" in San Bernardino's bankruptcy. Calpers has long argued that pension contributions cannot be touched, even in a bankruptcy.

Two laws. One governs pensions and another governs bankruptcy. The pension law should be preserved.

Ceffer   Wed, 28 Nov 2012, 12:19pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 8

The Rhode Island case does not bode well for Calpers. It is a feast for lawyers, but they should hone their negotiation skills rather than waste more mounds of money in court holding out for vapor.

Bellingham Bill   Wed, 28 Nov 2012, 12:23pm PST   Share   Quote   Permalink   Like   Dislike     Comment 9

bgamall4 says

So you are a Wall Street creep? Or what are you?

random "focus group". Paid $100 + a free subway sandwich. Thanks Howard Jarvis!

I detest Howard Jarvis organization completely, but everyone has their price.

I also think the unfunded liability issue for California is truly stupendously critical. The two pension funds need 5% REAL returns or things are going to get pretty sticky 10-20 years down the road.

http://research.stlouisfed.org/fred2/series/WGS30YR

Entitlemented   Wed, 28 Nov 2012, 1:11pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 10

As an Engineer who has a few patents and made a bunch of equipment used in part by law enforcement, I am a bit alarmed by the pay of police in Bell California.

http://latimesblogs.latimes.com/lanow/2012/08/ousted-bell-police-chief-wants-severance-pay-.html

Might also have something to do with my pension is about 1/40th of this dude.

Keep on voting for Democrats, Cali............

Goran_K   Wed, 28 Nov 2012, 1:13pm PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 11

CalPERs helping put another city into fiscal ruin. No surprise here.

Entitlemented   Wed, 28 Nov 2012, 1:22pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 12

Developing a Bell Curve, If we have about 30K Cali Union and Public workers getting over $100K, this is an annual obligation of about $3B per year. This is about 1/4th the Cali Annual Deficit, I recall.

Would really be interesting to track back to when Cali was making computers, electronics, Blackbirds, Apollo, and Space Shuttle.

The private sector shrivels, and the public sector grows. Democrats are brilliant!

Goran_K   Wed, 28 Nov 2012, 1:31pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 13

Social engineering never works. Want to see what it eventually creates? Just take a look at Stockton, CA.

Bellingham Bill   Wed, 28 Nov 2012, 1:34pm PST   Share   Quote   Permalink   Like   Dislike     Comment 14

Entitlemented says

Cali was making computers

Dude, Apple & Google's market caps are $800B.

Entitlemented says

The private sector shrivels, and the public sector grows. Democrats are brilliant!

California's imbalance is mainly our high cost of housing, which is in fact stripping hundreds of billions out of the paycheck economy into the hands of the 1%.

Compared to that structural imbalance the pension BS is miniscule.

Bellingham Bill   Wed, 28 Nov 2012, 1:35pm PST   Share   Quote   Permalink   Like   Dislike     Comment 15

Goran_K says

Just take a look at Stockton, CA.

take a look at Stockholm, SE and get back to me on that minarchist bullshit.

Entitlemented   Wed, 28 Nov 2012, 1:42pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 16

Take out a calculator. Most of the stuff of Apple is made in China, whos labor costs are lower, and have enterprize low tax zones.

Now look back to 1980 when 20% of Californians worked in R&D, manufacturing, and Engineering, of products that could be sold and taxed in California.

Now look at Californias 8% current manufacturing and R&D (Counting also that the stuff not all made here). I think that agric is also counted in this?

Also, look up where Apple is incorporated.

Before you yell, please punch in a few number in your calculator.

It not just housing, Dems have lowered rates to keep housing high (for continued payments to CALPERS, and other treats)

Goran_K   Wed, 28 Nov 2012, 1:58pm PST   Share   Quote   Permalink   Like   Dislike     Comment 17

Bellingham Bill says

take a look at Stockholm, SE and get back to me on that minarchist bullshit.

Yes, their welfare state giving out ridiculous loans to any unqualified buyer nearly cost the country its solvency in 1992. Guess how they got out of that pickle?

Oh yeah, reducing welfare, and privatizing public services (including credit). Now they are one of the wealthiest nations in Europe.

You want to take your foot out of your mouth now?

Bellingham Bill   Wed, 28 Nov 2012, 2:08pm PST   Share   Quote   Permalink   Like   Dislike     Comment 18

Entitlemented says

Also, look up where Apple is incorporated.

The Company is a California corporation established in 1977.

Now look back to 1980 when 20% of Californians worked in R&D, manufacturing, and Engineering

GMAFB.

The 1980s saw the government tear out our defense establishment for the most part. That produced the 1990s LA recession, and LA remained depressed until the housing boom got started there ca. 2002.

It is true that mfg has taken it in the pants, falling from 2M in 1990 to 1.2M today, but that's to be expected when China's monthly wage is $200-300.

Entitlemented says

Dems have lowered rates

part of the problem with you conservative posters here is that you've got Dems on the brain. You guys can't think at all about our real problems, you just point the finger at Democrats and blindly blame them without actually detailing the alleged "Democratic" screwup.

When in fact a lot of the root causes we face now are actually caused by conservatives and their dysfunctional ideology of greed, and fraud -- disempowering government and then wondering why their sanctified "free market" totally fucks itself up not soon after.

"Dems" didn't lower rates, first Greenspan did in the 2001-2004 period (to do what he could to get Bush reelected) and then since 2008 Bernanke has lowered rates because the alternative is simply a cross-default collapse of the economy of debt, an economy of debt CREATED when the Republicans were running the show:

http://research.stlouisfed.org/fred2/graph/?g=dez

Bellingham Bill   Wed, 28 Nov 2012, 2:11pm PST   Share   Quote   Permalink   Like   Dislike     Comment 19

Goran_K says

You want to take your foot out of your mouth now?

Sweden is still a million times more socialist than us.

http://en.wikipedia.org/wiki/File:Tax-Revenues-As-GDP-Percentage

Dodge noted, though.

Vicente   Wed, 28 Nov 2012, 2:16pm PST   Share   Quote   Permalink   Like   Dislike     Comment 20

Melmakian says

Ummm...the US Constitution explicitly gives Congress the right to set bankruptcy law, dude. The Supremacy Clause clearly applies thereby.

STATES RIGHTS!

Let's Teabag those Federales.

Entitlemented   Wed, 28 Nov 2012, 3:00pm PST   Share   Quote   Permalink   Like   Dislike     Comment 21

Apple is headquartered in CA, Incorporated in: http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?pagewanted=all

The State of CA chased out much industry in tandem with the decline of defense spending.

Dems caused housing to go up with CRA, and the imposition of CRA funding on FHA and private loans.

NAFTA was debated, and Ross Perot, the only one with a business background debating was correct.

Californias liberal mindset did California in. If high taxes and large government were the way to go, then CA would be flush with money, the State and Cities would be solvent. However, even with the highest amount of taxes, lots of technology, CA is having severe issues.

NAFTA did not work, - we cant outsource our way to prosperity. Its taken some time for us to get in this situation, but many cannot even see the cause and the effect.

Entitlemented   Wed, 28 Nov 2012, 3:27pm PST   Share   Quote   Permalink   Like   Dislike     Comment 22

Clinton alteration of CRA forced much more securitization.

Rubins, an treasuring for Clinton and then moved on to CITI, and oversaw an exceleration of CDO by CITI.

However, they needed Glass Stegal overturned, and the dems got this done by marching 30 Dems into the leading Republicans office when he did not want to undo Glass Stegal.

So the liberals actually did the subprime mess, but the media does not bring this up.

The US government meddling in home finance did this. And the Dems altruistic goals for the poor? They fared worse than the middle class............

Goran_K   Wed, 28 Nov 2012, 3:39pm PST   Share   Quote   Permalink   Like   Dislike     Comment 23

Bellingham Bill says

Sweden is still a million times more socialist than us.

http://en.wikipedia.org/wiki/File:Tax-Revenues-As-GDP-Percentage

Dodge noted, though.

Yeah, you totally got me.

bgamall4   Wed, 28 Nov 2012, 4:17pm PST   Share   Quote   Permalink   Like   Dislike     Comment 24

Goran_K says

CalPERs helping put another city into fiscal ruin. No surprise here.

Sorry, Wall Street helped a lot of cities into ruin.

http://bgamall.hubpages.com/hub/Wall-Street-Bankers-Are-the-Prime-Opposition-to-Public-School-Teachers

and

http://www.businessinsider.com/cities-be-like-oakland-and-walk-away-from-interest-swap-payments-to-goldman-and-bankers-2012-7

I wrote both. It is all a scam. First, the scam is with charter schools that cherry pick students and are backed by big money to bash teachers' unions and second are the cities who have been helped by Bernanke to reap a windfall from governments, city governments included.

bgamall4   Wed, 28 Nov 2012, 4:18pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 25

Goran_K says

Social engineering never works

True, but then why do you support the greatest social engineer, Wall Street?

bgamall4   Wed, 28 Nov 2012, 4:20pm PST   Share   Quote   Permalink   Like   Dislike     Comment 26

Bellingham Bill says

random "focus group". Paid $100 + a free subway sandwich. Thanks Howard Jarvis!

I detest Howard Jarvis organization completely, but everyone has their price.

I also think the unfunded liability issue for California is truly stupendously critical. The two pension funds need 5% REAL returns or things are going to get pretty sticky 10-20 years down the road.

Fair enough. Unfunded liabilities are not helped by Bernanke. Neither are banks with no real interest profits. Neither are investors in bonds.

Bernanke needs to throw main street a bone. That could be in the form of just slightly higher interest rates. Otherwise, people take risk and then Wall Street will crash the stock market yet again.

bgamall4   Wed, 28 Nov 2012, 4:27pm PST   Share   Quote   Permalink   Like   Dislike     Comment 27

Entitlemented says

Clinton alteration of CRA forced much more securitization.

Rubins, an treasuring for Clinton and then moved on to CITI, and oversaw an exceleration of CDO by CITI.

However, they needed Glass Stegal overturned, and the dems got this done by marching 30 Dems into the leading Republicans office when he did not want to undo Glass Stegal.

So the liberals actually did the subprime mess, but the media does not bring this up.

This is all a lie. Read Ritholz, read me. First, Glass-Steagall repeal and derivatives as gambling repeal were sponsored by the Gramms, Phil and Wendy, Republicans.

The vote in the senate was along party lines, until the Republicans talked the Dems into going along. The vote was 90 to 8 for Glass-Steagall repeal. Barbara Boxer voted AGAINST repealing Glass-Steagall and you can't get more liberal than that.

The CRA was only about 25 percent of subprime. The rest was bogus rated AAA private MBS. The CRA pulled back from origination when securitization took over. The Fed has a chart on it and it is found in my ebook, Ponzi Housing Scheme 21st Century. It is also found online.

It is true that Citi got a waiver from Glass-Steagall in 1997. But what you need to know is that the toxic loans came from the UK, where they were called self certified loans. They were imported from the Square Mile, which never had Glass-Steagall like laws.

So, it all came from the UK and Basil 2. The risk was mispriced, on purpose, because of a formula given to the central banks by an employee of JP Morgan. It was adopted and applied, circa 2003. Both parties were involved as Geithner allowed the bogus risk CDO's to be spread and Henry Paulson spread them like wildfire in 2004.

So that is the story. The public guaranteed pools tried to catch up later, but the real bubble was private.

Goran_K   Thu, 29 Nov 2012, 3:02am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 28

bgamall4 says

True, but then why do you support the greatest social engineer, Wall Street?

Why do you keep insisting I'm a wall street shill?

I simply don't want to fund old-timer retirement funds with my taxes. If anything that makes me a libertarian.

Entitlemented   Thu, 29 Nov 2012, 3:22am PST   Share   Quote   Permalink   Like   Dislike     Comment 29

Moodys view of California Cities

http://www.moodys.com/research/Moodys-reviews-ratings-of-32-California-cities-nine-pension-bonds--PR_257248

bgamall4   Thu, 29 Nov 2012, 11:31am PST   Share   Quote   Permalink   Like   Dislike     Comment 30

Melmakian says

Ah, name calling when you can't make an intelligent counter-argument. Nice.

I didn't name call. I asked him. You aren't reading carefully Alf.

bgamall4   Thu, 29 Nov 2012, 11:31am PST   Share   Quote   Permalink   Like   Dislike     Comment 31

Melmakian says

One is a state law and the other is a federal. The federal one ALSO covers pensions. Why is R-E-A-L-I-T-Y so difficult for you to accept?

So you are rooting for Wall Street Alf?

bgamall4   Thu, 29 Nov 2012, 11:33am PST   Share   Quote   Permalink   Like   Dislike     Comment 32

Melmakian says

Now, all you NON-Californians will be forking over dough to bail out California public workers.

Much of California's taxes to the Federal Government goes to Red States. So a little payback would be just fine.

bgamall4   Thu, 29 Nov 2012, 11:34am PST   Share   Quote   Permalink   Like   Dislike     Comment 33

Melmakian says

Bernanke shouldn't be throwing ANYONE a bone. He should only be limited to maintaining a sound money supply, that's it.

The bone is slightly higher interest rates. That would mean less need for QE.

bgamall4   Thu, 29 Nov 2012, 11:35am PST   Share   Quote   Permalink   Like   Dislike     Comment 34

Melmakian says

How is protecting one's investment and contractual rights constitute 'helping a lot of cities into ruin'. Answer: It doesn't. The idiots who took their funding from Wall Street did themselves in.

No, the cities should walk away from the bogus Wall Street scams. And they should stop allowing Wall Street to advise them.

taxee   Thu, 29 Nov 2012, 6:21pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 35

taxee   Thu, 29 Nov 2012, 6:23pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 36

bgamall4   Fri, 30 Nov 2012, 12:34pm PST   Share   Quote   Permalink   Like   Dislike     Comment 37

Melmakian says

Wall Street has NOTHING to do with the cities not bring able to make good on their pension promises.

Yes, Wall Street is behind the plan to crowd out Calpers from the protection of state law.

bgamall4   Fri, 30 Nov 2012, 12:36pm PST   Share   Quote   Permalink   Like   Dislike     Comment 38

Melmakian says

No they don't. Not when you factor in the ability of Californians deducting their state income taxes from their federal ones.

According to charts, which are admittedly back in 2006 or so, you are incorrect.

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