What’s Your Exposure?

There is much talk about the impact on Wall Street and the banking system of the dramatic drop in the price of mortgage backed securities. Last week I heard a presentation that estimated that 94% of all BBB CDO’s would default and 16% of all AAA CDO’s would default. The silence about what this will do to US pension funds, particularly public pension funds is quite eerie.

Here is a link to Public Pension Fund Web Sites:


For instance, in the Ohio Public Employee Retirements System (OPERS), at the end of 2006, had $7.5billion in mortgage-backed bonds, accounting for 9.7% of the total value of the portfolio. Add to that government securities related to the mortgage markets, US real estate investments as well as homebuilding and related stocks (like banks and Wall Street firms) and we are talking about a lot of money.
In the Montana Teachers’ Retirement System fund, the ten largest fixed income holdings at market value (then, we wonder about the true market value now) are mortgage securities:

1. Freddie Mac——————————-$12,951,830
2. Federal Home Loan Mortgage Corp——12,770,069
3. Federal Home Loan Pool G11812———12,400,941
4. Federal National Mortgage Assn———-11,749,780
5. Federal Home Loan Pool G02070———11,001,336
6. FNMA Pool 745250 ————————10,722,292
7. Federal Home Loan Pool G11777———10,278,513
8. Federal Home Loan Pool G11670———–9,962,779
9. ARIA CDO————————————-9,651,403
10. Cypresstree Synthetic CDO—————–9,290,660

The fastest way to finance successful communities is to stop financing the destruction of communities. Do you know where your retirement savings is and what it is doing? We encourage you to start digging through the available financial disclosure….

1 Comment

  1. Catherine, thank you for opening up this very large question. I’ve been wondering about the other side of this ‘annuities’ problem for months. Maybe this is the key to why the Big 3 are handing over pension fund management to the unions.

    Unions, and pension funds, beware.

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