Friday, July 31, 2009

The real investor

America is a wonderful land for people to control business. In this great land of ours, the individual investor has immense power over corporations. In reality, it is not the chairman of the corporation that runs it, but the individual investors, who have the power to dismiss the entire board at any time.

In a word, poppycock.

Your ten shares of Apple stock aren't going to force the company to supply Steve Jobs' blood pressure readings, and even your two hundred shares of GM stock are...well, they're worthless.

But there are some investors that have a bit more power than most - namely, the pension funds. And out my way, we have the pension fund of all pension funds, the California Public Employees Retirement System, fondly known as Calpers. So all of the right-wingers who rail against the danged unions and their control over the California legislature don't know half the story. Because Calpers, due to its investment power, has the ability to influence the businesses in which they invest.

And they also potentially have power over the entities that provide investors with advice. And they're not happy with the advice that they received:

The nation’s largest public pension fund has filed suit in California state court in connection with $1 billion in losses that it says were caused by “wildly inaccurate” credit ratings from the three leading ratings agencies....

Calpers maintains that in giving [structured investment vehicles] the agencies’ highest credit rating, the three top ratings agencies — Moody’s Investors Service, Standard & Poor’s and Fitch — “made negligent misrepresentation” to the pension fund

More here at the New York Times.
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