The global settlement required Citigroup to pay $7 billion based on its conduct in packaging, issuing, and selling residential mortgage-backed securities prior to 2009. California received a total of $102 million in damages and $90 million in consumer relief.
As part of the settlement, Citigroup acknowledged it made serious misrepresentations to the public, including investors, about the mortgage loans it securitized in residential mortgage-backed securities.
Last month, CalPERS announced it will get back up to $250 million in damages from Bank of America in a federal investigation settlement over its role in the 2008 financial crisis, due to its misrepresentation of mortgage-backed securities it sold along with those sold by Merrill Lynch and Countrywide Financial, two companies it acquired in 2008.
CalPERS estimated total recovery on losses sustained from investments in mortgage-backed securities is more than $500 million.
In other CalPERS news, Ted Eliopoulos has been selected as CalPERS chief investment officer (CIO), permanently assuming responsibility for leading the investment office at the nation’s largest public pension fund. Eliopoulos currently serves as CalPERS’ interim chief investment officer. He takes over the position from the late Joe Dear, and was previously the senior investment officer (SIO) for real assets at CalPERS.
CalPERS also announced it signed the Montreal Carbon Pledge, committing to measure and publicly disclose the carbon footprint of its investment portfolio. The pledge was coordinated by the United Nations-supported Principles for Responsible Investment (PRI) at its annual conference in Montreal, Quebec. The pledge commits CalPERS to mapping the carbon footprint in its investment portfolio, starting with equities, by December 2015. The pension system also committed to using the results of the mapping information to develop an engagement strategy and/or set portfolio carbon footprint reduction targets.
The pledge is aligned with CalPERS Investment Beliefs that state long-term value creation can be achieved by managing financial, physical, and human capital, which includes a strong understanding of climate risks and opportunities.
CalPERS also recently outlined plans to engage in policy discussions around derivatives, housing finance, and credit rating agencies as part of its renewed focus on risk, governance, and transparency in the financial markets. A lawsuit brought by CalPERS against the three major ratings agencies has ultimately survived motions for dismissal.
CalPERS says it is called to action in this arena by its formal investment beliefs, the second of which states that “a long time investment horizon is a responsibility and an advantage.” The belief expands on this notion by pointing out that CalPERS can take action by advocating “for public policies that promote fair, orderly and effectively regulated capital markets.”
Separately, CalPERS’ revised Financial Markets Principles will refocus the work CalPERS and other U.S. pension funds completed in 2009 by adopting the Principles of Financial Regulation Reform, which were aimed at restoring trust in financial markets following the global financial crisis.
CalPERS says it hopes its advocacy will promote fuller disclosure so that the market provides incentives that accurately price risk and opportunity. CalPERS also hopes to foster alignment of interests, protect investor rights, and the ensure the independence of regulators. And, it will seek earlier identification and action by regulators regarding issues that give rise to systemic risks that threaten overall global markets.