To understand the political issues that determine the rise and fall of New York Attorney Generals and Governors such as Eliot Spitzer, it is helpful to map the financial flows in New York and how they relate to both local and global financial flows managed through Wall Street and lower and mid-town Manhattan in New York City.
Some of the most powerful pools of governmental capital in New York are the city and state pension funds. Understanding these pension funds and their role in financing and doing business with the key players in the subprime mortgage, leveraged buyout and other various credit crises is important background in understanding the political challenge before us.
Millions of citizens who have worked hard at modest incomes all their lives have been assured that their retirement savings are prudently managed. If they had, at any point since 1996, questioned why so much of their savings was going to finance large mortgage lenders and mortgage pools, they would have been assured that these were sound investments, with good ratings that produced a competitive yield.
It was highly unlikely they were assured that their hard earned retirement savings were being used to finance predatory lending that was destroying their communities in a manner that would leave the houses around them troubled or empty, their municipal and county governments in precarious financial condition, and worst of all, drain the pension plans they were depending on for a secure retirement. Nor would there have been any mention that while their retirement savings financed a large debt bubble, trillions of capital was being quietly shifted out of the country to be reinvested in Asia and the emerging markets.
Thousands of teachers and public employees were “left behind.” Their savings were financing the end game, while the people who ultimately managed their money moved profitably to higher ground.
For a sense of the magnitude of the issue, the New York State Teachers’ Retirement System has 270,000 active members and over 133,000 retirees and beneficiaries. Based on a quick review of the System’s 2007 year-end holdings, I estimate these teachers and their families provided the following funds, investing in the stocks, bonds and mortgage pools of the players named in the subprime mortgage crisis. These amounts do not include investment management and brokerage fees generated by the same companies, which may also be significant.
If any of our readers estimate mortgage exposure by accessing the financial and investment information available at the websites for the New York funds or for the pension funds for your city, state or company, please send or post in the comments.
Here are the websites for the large New York funds.
New York City:
New York City Employees’ Retirement System
Teachers’ Retirement System of the City of New York
New York City Board of Education Retirement System
New York State:
- Fixed Income Holdings: Link to pdf
- Equity Holdings: Link to pdf
- ADR Holdings: Link to pdf
Master Link:
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- To identify mortgage and other holdings by your state retirement system, here is a master link to state systems.
http://www.seiu.org/mbe/retirement_security/pensionfundsites.cfm
