California pension managers sticking with questionable bank

June 15, 2012

Representatives of the state retirement system say they are standing by JPMorgan Chase for now despite a recent $2 billion trading loss that has sparked two federal investigations and reignited calls for tougher bank oversight. [CaliforniaWatch]

Both the California State Teachers Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) have no immediate plans to stop investing with the bank over its recent trading woes. That controversy swirled in Washington on Wednesday, with the Senate Banking Committee grilling JPMorgan Chase CEO Jamie Dimon, California Watch said.

JPMorgan, an international banking conglomerate and one of the four biggest banks in the United States, has been reeling since disclosures in April that its London-based investment office lost at least $2 billion over risky trades of exotic financial instruments.

The SEC, FBI, and Commodity’s Future Trading Commission are investigating whether the bank withheld critical information about the trades from investors.

Brad Pacheco, spokesman for the state employee retirement system, told California Watch no pension fund money was directly impacted by the JPMorgan trades now under investigation.

“We don’t have any exposure to the type of synthetic credit securities (JPMorgan) was trading,” Pacheco wrote in an email to California Watch. “We are monitoring the issues related to the company but I have nothing further at the moment.”

The commitment from the California pension funds represent the bank’s biggest bloc of pension fund stockholders. In late April, CalSTRs, which has invested in JPMorgan since 1973, owned about 12.2 million shares in JPMorgan stock, worth $522 million. CalPERS owned more than 12.4 million shares, with a total value of $565 million, officials told California Watch.

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Why should the pension fund managers be concerned about how they manage the fund? Since the taxpayers are on the hook for any under funding and losses, and since the fund does not have to stand on its own, these managers have little concern for the questionable investments they make. This will not change unitl these pension funds have to support themselves and these managers have to be concerned if the funds don’t make the capital to payout at the current rate

You mean like the federal government’s ponzi scheme called Social Security? Or an IRS code that pays people money even those people pay no taxes at all?

What, you mean there is more than one corupt or broken system in government, by all means then let’s not fix any of them.

“That controversy swirled in Washington on Wednesday, with the Senate Banking Committee grilling JPMorgan Chase CEO Jamie Dimon, California Watch said.” Uh, not quite a “grilling”, more like a q & a session by the Senators who cooed and clucked over the appearance of Jamie Dimon before their committee. For an ironic view of what happened before the Senate Banking Committee, link here to a “comedic bit” by Jon Stewart on The Daily Show. In his clip he shows only Republican Senators frothing with praise for this CEO, but I’m sure that the Democratic Senators would have (or even did) the same. There isn’t enough space between our government “leaders” and big business, regardless of party affiliation.

Having large investors like pension fund managers being more proactive in shying away from risky investments is the only way the large banks are going to get slapped down in their risky behavior since our Senators are only going to grovel before the likes of Jamie Dimon.

Thanks for the info. Now I know that if my bank goes under, my retirement funds go with it. Somehow this doesn’t make me feel better.

For those who don’t know, the new Dodd-Frank bank regulation laws, offer the government an opening to track all gold purchases and sales. Hopefully, this won’t happen but most of the regulations have not even been written yet. So, far the money tracking being done through Dodd-Frank seems to apply to the honest citizen trying to buy a house or get a small business loan. If you provide all cash for your home purchase, there is no tracking required. It’s only if you have bank accounts that you have to show every transaction made. This doesn’t do anything to prevent money laundering. Who is more likely to have gotten their money from drug deals and criminal activities–the one who has legitimate bank accounts or the one who shows up with cash?