By Dale Kasler
Published: Friday, Dec. 3, 2010 – 12:00 am | Page 6B
CalPERS was among the big winners in an obscure Federal Reserve loan program aimed at rescuing the nation’s troubled credit markets last year.
The state’s other big pension fund, CalSTRS, also participated in the program, but to a much smaller degree, according to records released this week by the Federal Reserve.
The two California funds didn’t get bailouts of the sort the government arranged for distressed companies like AIG and General Motors.
Instead, they and other big investors took advantage of a $70 billion Federal Reserve loan program designed to pump money into the consumer and business lending markets.
CalPERS, in fact, was among the most enthusiastic participants. With $5.14 billion borrowed from the Fed, the California Public Employees’ Retirement System invested in a portfolio of high-performing credit card loans. CalPERS put in $350 million of its own money and earned a $175 million profit, a return of around 50 percent, said Curtis Ishii, a senior investment officer at the pension fund.
CalPERS has repaid the Fed loan.
The Fed’s program has come under some criticism because it lent the money under terms favorable to borrowers, many of whom were able to lock in attractive profits.
But the Fed says the program represented little or no risk to taxpayers and did what it was supposed to do: help unclog the nation’s credit markets.
“They were trying to reinvigorate the markets,” Ishii said. “Those markets were nonexistent.”
Banks and other lenders often bundle their loans into securities and sell them to investors, providing the banks with cash to make new loans. But that market all but dried up in 2009.
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