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CNBC Reporter
At first glance, we should all be outraged that State Street Bank allegedly ripped off California teachers and state pensioners for 8 years. California Attorney General Jerry Brown filed suit against the Boston-based bank Tuesday accusing them of “massive” fraud, by overcharging the state’s two huge pension funds to the tune of $56 million over the last eight years. Brown says State Street [STT
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] conveniently picked an exchange rate that always worked in the bank’s favor, and against the clients’ best interest, contrary to contractual obligations.
But on closer inspection this looks more like a naked attempt at boosting a Brown run for Governor than it is about protecting fire fighters' retirement funds.
Let me give you some other numbers. Calpers, the California Public Employees' Retirement System has $173 BILLION in assets. Calsters, the California State Teachers Retirement System, has $114 BILLION in assets.
I don’t question the merits of the suit, and yes, $56 million is a lot of money (with penalties, California is seeking $200 million from State Street). But in the context of a state that is $26 billion in the hole, and state pension funds of nearly $300 BILLION in assets, this smacks of Attorney General Brown trying to make headlines.
$56 million over 8 years? In a state of 36 million people, that works out to 19 cents per person per year. Brown wants another $144 million in penalties too. That’s another 50cents. Shoot, in his heyday, Elliot Spitzer would have used this lawsuit to wipe his nose after sneezing. Can't you hear Spitzer now?: "Jerry, how quaint. Let me show you how it’s really done when you want to be governor."
Brown took umbrage when I suggested he was doing this for political reasons (He recently filed papers allowing him to explore a run for governor). You can watch the interview at left. It was a good smack down and he scored a point or two. He also countered by asking why we invited him on in the first place. It’s a good question. Here’s why.
Because Brown's office started leaking the night before that he would be making a BIG announcement Tuesday about a lawsuit against a "major bank" which had committed "massive" fraud. His office wouldn't say which bank; it was a big secret to be revealed at a press conference. But we took him at his word and invited him on CNBC. You’d do the same thing if you were running a business-news network and an attorney general says he’s going to file suit against a major bank.
So he shouldn’t have been surprised when I asked about his political motives for making such a big show about this suit. It is politically expedient to go after “major banks” right now in this economic climate, especially when exploring a run for governor. Public officials have no right to expect a walk in the park regardless of who did the “inviting.”
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