Phil Angelides is a curious choice to lead such a seemingly important body as the FCIC. As treasurer of California from 1999 to 2007, he was the overseer of the California Public Employees’ Retirement System (Calpers). In 1999 Angelides stood by as Calpers made outlandish projections of future asset growth, providing the pretext for politicians to massively boost government workers’ pensions, with no increase in pension contributions. David Crane, special economic advisor to Governor Arnold Schwarzenegger, recently wrote in the San Diego Union-Tribune that Calpers’ implicit forecast was for the Dow Jones industrial average to reach 25,000 by the end of 2009, 595,000 by 2049 and 28 million by 2099. Talk about a huge miss! No wonder California’s pension costs have ballooned 2,000% in the past decade, the key factor in the Golden State’s descent into financial purgatory.
Why didn’t Angelides smack down those preposterous projections? Answer: He wanted to become governor and, therefore, went out of his way to pander to government workers’ unions instead of living up to his fiduciary responsibilities.
By the way, Calpers is still living in la-la land when it comes to assumptions. Crane: “Calpers is implicitly forecasting that the Dow will grow nearly four times more than it did in the entire 20th century. Warren Buffett’s implicit forecast for his own employee pension plans needs the Dow to close the century at one-fifth of the level Calpers now projects.”