posted on Apr, 22 2010 @ 05:48 PM
reply to post by elfie
The "average joe" is a part of this problem on the investment side of the equation as well and that includes folks like teachers and union folks.
During the run-up of the market based on speculative practices, CDOs and the like, investors were pushing their pension fund committees for higher and
higher return vehicles. The pension funds which are large institutional investors pushed the asset management firms for more return on their
investment. That was one of the reasons that these banks continued to push the envelope of risk within their portfolios. In an asset management,
fee based environment the loss of a large public employee pension account like Nevada's teachers or CALPERS means $billions of lost assets and
millions of lost revenue and these firms were doing what they could to keep their clients.
Did all of these shops do that? No and they lost significant asset base and many were either bought or went out of business.
You never hear about the retired Teamster who shows up at his union pension committee annual meeting and pounds the table about inadequate returns on
his pension account. "Why did we get an 8% increase on our fund when the XZYZ Janus fund was up 90% year over year?" If you don't think that
has an impact on the risk that portfolio managers take, you are wrong.
Keep in mind that the folks running these public pensions are highly paid and have a significant stake in happy account holders. Some of these gents
hire outside firms to manage the cash and some have staffs that manage the staff, but either way they stood to lose their jobs because the account
holder, e.g. teacher or plumber was demanding more money out of them.
The greed in this deal was not just at the top, but at the bottom as well.