Monday :: Mar 30, 2009

Pension Benefit Guaranty Corporation: A Case of Outright Theft

by Mary

The Boston Globe says that three of Bush's Cabinet Secretaries approved the scam to switch the Pension Benefit Guaranty Corporation investment model from a conservative model (15-25% in Stocks and Real Estate) to a highly risky investment model (55% in Stocks and Real Estate) in February 2008.

The Cabinet Secretaries that approved this switch? Treasury, Labor and Commerce. And who was Secretary of Treasury then? Why, that would have been Mr. Paulsen, the ex-CEO of Goldman, Sachs.

And why was that a problem? Because it would be hard to believe that he and his friends wouldn't have know about what had been happening in the late stages of the mortgage bubble. In June 2007, Tanta wrote a piece for Calculated Risk called Reelin' in the Suckers which talked about how the investment banks were digging deep for new suckers (public pension funds) to keep pulling in more money.

June 1 (Bloomberg) -- Bear Stearns Cos., the fifth-largest U.S. securities firm, is hawking the riskiest portions of collateralized debt obligations to public pension funds.

At a sales presentation of the bank's CDOs to 50 public pension fund managers in a Las Vegas hotel ballroom, Jean Fleischhacker, Bear Stearns senior managing director, tells fund managers they can get a 20 percent annual return from the bottom level of a CDO....

...Kay Chippeaux, fixed-income portfolio manager of the New Mexico council, says it decided to buy equity tranches after listening to pitches from Merrill Lynch & Co., Wachovia Corp. and Bear Stearns.

"We got very interested in them just because a broker brought them to our attention," Chippeaux, 50, says. She says the investment is worth the risk because the fund may be able to get higher returns than it can from bonds. The council has purchased equity tranches from Bear Stearns, Citigroup, Merrill Lynch and Morgan Stanley.

The council is relying on advice from bankers who are selling the CDOs, Chippeaux says. "We manage risk through who we invest with," she says. "I don't have a lot of control over individual pieces of the subprime."...

The financial detectives need to look at what tranches Mr. Charles E.F. Millard bought for the PBGC. Because this looks like he and Mr. Bush's Cabinet Secretaries can be charged with fiduciary liability.

Guess who Mr. Millard worked for? He was a former managing director at Lehman Brothers and he swears it wasn't a risky bet.

Mary :: 6:26 PM :: Comments (9) :: Digg It!