Representatives of the city’s police, firefighters, and city workers unions and retirees are up in arms over plans to restructure the boards that oversee their pensions. Their pension funds lost almost one-quarter of their value in the recent stock market plummet, leaving them with $3.2 billion. Now the city is planning to replace its representatives on the oversight board with council-appointed delegates who do not work for the city or do business with it.
According to the employees and retirees, this does not preclude executives from banks and insurance companies that were largely responsible for the recent meltdown of the country’s financial markets. They also oppose the proposal to pay these new representatives as much as $40,000 each to serve on the board.
The restructuring was proposed by Cortex Applied Research, a Canadian firm hired by the city to review the current oversight structure. Cortex found that many of the board members had conflicts of interest, and suggested that they be replaced by external professionals.
Read More at The Mercury News.
The fact that Charles Rufus Reed hasa investments with several Canadian energy firms that do business with Cortex should not surprise anyone, right?
This sounds like a town hall meeting on Obamacare – but without the liberal politician’s and media criticism of the protesters.
Maybe they can get Bernie Madoff.
The way I understand it, City retirees’ benefits are guaranteed. As a consequence, there’s no incentive for them to care whether or not their pension fund is being managed with financial probity. If there’s a shortfall, for whatever reason, the taxpayers will make up the difference anyway.
A system structured this way is begging to be corrupted and one must wonder just who the major objectors to the restructuring are and what they stand to lose.
John Galt,
Given that the performance of the city’s pension funds has been consistent with, and often better, than those governed by the “experts” in the private sector, I suspect these proposed changes to be simply a power play, one executed by the very body that has in the past sought ways to get its hands on those retirement billions. City and county administrations have long lusted for a chance to “responsibly” make use of those billions of accumulated dollars—to do things, no doubt, like level playing fields, close achievement gaps, and pursue other projects critical to maintaining their delusions. Employee groups, having no illusions about the competence of their bosses, have been highly motivated and, up to now, largely successful in controlling the number of seats possessed by those who might be easily compromised.
If the city wants to hire better management, then we, as taxpayers, should insist that the managers they consider demonstrate how they, and those clients they advise, managed to weather this latest economic storm fiscally uninjured. Since there are no such financial managers in existence, so extensive was the meltdown, this fake reform attempt should be promptly abandoned.
Well said, Finfan. Reflecting on the financial “experts” who almost drove our country into a depression, and the subsequent lack of faith of these “experts”, I don’t blame city employees who do not want these outside “experts” tampering with their retirement. I would not trust them either, or those at the city who want to bring in these experts.
Also, where is the city going to come up with the $40,000 a year they are proposing to pay these people, and how long would it be before everyone on the retirement board would want this money?
Am I to understand that the pension board itself was making the investments on behalf of the retirees? Or were they overseeing financial managers who were acting as advisers?
I suspect that the “experts” (not our globe-trotting board members) were the ones responsible for the fund performance.
I would hope it was the pension board making the decisions. Given the past couple of years, I would sure trust them more than financial managers.
According to the SJ Federated annual report for 2007-2008, investment managers included: Atlanta Capital Management, Brandywine Asset Management, Eagle Asset Management, Northern Trust Global Investmenets, Dodge & Cox, Fidelity Investments, GE Asset Management, Pathway Capital Management, & Prudential Real Estate Investors, among others.
The pension board makes the decision on what to allocate to whom, but the “experts” are doing the heavy lifting.
There is a big difference between choosing one of these companies, based on their performance, to invest money with or use for guidance, versus having them directly sit on the executive board with you. After what we have gone thru the last couple years, there is little to no trust with most associated to the world of finance so why in the world would the city give an unknown entity a seat or seats on the retirement board? Can you guarantee this company is not guided by the next Bernie Madoff or Michael Milken?
In a normal world, I would have no objection to my employee investing his retirement savings any way he sees fit. But in San Jose bizarro world if he invests it stupidly, he’s not risking a damned thing. Effectively, he’s playing with my money since I’m the one who’ll be on the hook for it if he loses it.
Until this preposterous “defined benefit” is phased out, the City has the right- not just the right but the responsibility, to see that my interests are protected.
“Protecting my interests” also includes limiting the effectiveness of the City’s adversaries when possible- particularly the employee unions.
Why should I be a chump and trust the unions, who have on many occassions demonstrated greed, animosity, and vindictiveness toward me, not to use the considerable influence of the billions of dollars in the funds, to expand their power over me?
They want full control over their retirement fund? Fine. They just need to join the rest of us over here in the real world who have learned that we must live with the consequences of the financial decisions that we make.
With the rapidly changing world, the best factor to do is always to be well- educated concerning the existing investment trends, know a lot more about economic preparing at the same time as realizing each and every feasible possibilities there’s.
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