On January 31st I posted a brief video on youtube summarizing a program in which the Oregon Investment Council is lending its securities portfolios, using State Street as an intermediary, to hedge funds and private equity firms so that they may meet the ownership standards required to conduct short selling– betting on the declines of stocks. The video can be seen by searching for Bill Parish Public at youtube.com or by following this link: Public Pensions Fuel Short Selling.
Below is the Agenda, note this was for January 2009, it mistakenly lists Jan 2008, highlighting the review of this program in addition to a photo of Tom Motley, the representative from State Street in charge of Security Lending.
It is somewhat astonishing that these hedge and private equity firms are therefore profiting on the decline of the very same securities owned by the Oregon Investment Council. Clearly, the lending of securities owned by public pensions should be banned immediately by the Obama administration. While short selling may be an important part of the overall market, the notion that right of ownership can be lent for the purpose of such investments is simply ridiculous, no matter how long it has gone on.
A link to this video was also sent to several leading journalists and today the Wall Street Journal printed a story today regarding AIG’s security lending portfolio. Although AIG’s program is different in detail, the same overall concept is used. That is, AIG was lending its right of ownership to others so they could engage in transactions which regulators would otherwise prohibit.