A Good Question That Calpers Shouldn’t Duck

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

The New York Times recently put a very good, very direct question to Calpers. And Calpers ducked. Californians, and The Times, deserve a real answer.

In her column Sunday, Gretchen Morgenson took note of two facts regarding Calpers and credit rating agencies.

The first is that Calpers has sued two of the rating agencies for how it rated mortgage securities on which the pension fund suffered heavy losses.

The second is that Calpers won’t invest in corporate bonds unless they are rated investment grade by those same credit rating agencies.

Morgenson reported: “I asked Calpers why its investment staff must rely on ratings from the same companies that it is suinig for negligence.” And?

“A spokesman declined to answer my question.”

C’mon, Calpers.

Let me make it even more pointed. Why on earth should Californians trust Calpers if it persists in trust agencies that Calpers itself believe can’t be trusted?

And a follow-up: why should taxpayers be on the hook if Calpers fails to make its investment targets, when its investments depend on these agencies?

I await answers from Calpers.

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