Oregon PERS To Cash in on Foreclosures – Part II

Please read the previous blog post on January 31, 2008 for important background details regarding this controversial investment in Lone Star. Also view the brief youtube video with ACTUAL SHORT VIDEO CLIPS from the meeting in which Oregon PERS voted unamimously to give Lone Star $600 million to cash in on foreclosures.

After attending the January 30, 2008 monthly Oregon Investment Council meeting, I contacted Ted Sickinger of the Oregonian, who was not at the meeting, and suggested he do a story regarding Oregon PERS plan to invest $600 million in Lone Star. Numerous detailed quotes were provided to Sickinger regarding Grayken’s comments with the hope the paper would get the story right.

One week later on February 6th a Sickinger’s collegue, Ryan Frank, wrote a story titled “Oregon invests in housing’s bad luck.” Rather than respond directly to problems with the story, you be the judge after you view the video. Keep in mind the sound quality is poor and therefore you might need external speakers. Do also note that 5 days “prior” to the Oregonian story a South Korean court convicted Lone Star of stock manipulation and sentenced its President there to 5 years in prison.

While Frank quoted State Treasurer Randall Edwards as indicating this was all politics, my sense is that the executive sentenced to 5 years in prison, a fact not noted in Frank’s article, might think differently. Again, the youtube video is actualo footage from the meeting so you can be the judge. Note the sound quality, although poor, is audible if you adjust your speakers. A few highlights include

1) Chair Richard Solomon asking Grayken if this investment would be in the US. The response by Grayken was yes, particularly subprime.

2) Grayken also notes in the video that banks will be destabilized and present “rescue opportunities.” When we buy their securities portfolios we basically get the rest of the bank for free, it’s cream, he added.

3) State Treasurer Randall Edwards, upon being told the real estate market will likely decline furthur by PERS staff and that this would hurt their existing real estate portfolio, suggested increasing the investment to Lone Star.

4) The only stated candidate for State Treasurer, Ben Westlund, had been attending most monthly meetings yet was unable to attend. As a state legislator he was in Salem putting forth legislation to help people prevent their homes from being foreclosed. Westlund’s efforts have been featured in numerous Oregonian articles recently. Note their is no comment from Westlund in Frank’s article.

5) Lone Star’s Grayken specifically noted the key to getting the big returns and “playing this situation” was gaining control of the underlying collateral. Simply put, Lone Star is a foreclosure machine, and this should at a minimum cause the legislature to discuss this situation with adequate details.

In any event, here is the link but do read the January 31, 2008 blog post prior to viewing this 5 minute video summary. My hope is that the Oregonian do a follow up story and get it right so that legislators and others will have a better chance of shaping the dialogue.