Bankrupt California city provides cautionary tale

[HiPointDem]

6. that's spending, not investments. i mean investments, like bonds, etc. as i recall, stockton was

Last edited Sun Jul 8, 2012, 02:54 AM - Edit history (3)

conned into taking on some shady investments -- maybe related to mortgage derivatives or something similar.

i'll google around tomorrow & see if i can confirm my memory.

on edit: what happened was calpers invested stockton's pension $$$ in mortgage-related shit.

In 2007, the city borrowed $125 million and put the money into Calpers, the giant California pension fund, betting that investment managers could earn more than the interest Stockton owed on the debt. When the market tanked, Calpers lost 24%-30% of the loan's principal, according to city budget documents.

i also found out that stockton has about half their "pension obligations" in hand (cash or convertible). what i couldn't find was what kind of actuarial window they're basing that on. which i'd like to, because if they're using, e.g., a 75-year window like Social security does, this bankruptcy may be a kind of scam as well.