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A Win for Transparency in California, Part One

  California Assembly Bill 386, which one might charitably describe as a bill to encourage more innovative investment by the great California public pension manager, CalPERS, died in committee in the state Senate recently.



I don't mourn its passing, for a reason to which I'll come in tomorrow’s posting. Today, I’ll try to explain what the bill in question was.


The California Public Records Act requires state agencies and localities to make their records available for public inspection,unless a specific exemption from disclosure applies.


There is as the law stands an exemption for certain records regarding alternatives investments in which public investment funds invest. This  protects the arrangements that CalPERS makes with investment funds, "vehicles," including those which employ a private debt strategy. So in effect CalPERS can get into the private debt market only once it partners with a private investment fund already in that business. Then its records, for the dealing it has done with THAT vehicle, come under the exemption.


But the existing exemption does not shield from disclosure documents generated by direct loans from CalPERS to corporations or individuals. THOSE must still be documented in a way that would be available for the entire world. 


CalPERS wants to get into the business of direct lending in a big way, and it wants to be able to offer its borrowers as much privacy as a private sector non-bank lender can. Also, it contends that it shouldn’t have to cut into the deal the private sector fund which adds no value -- other than the value of allowing CalPERS to avail itself of a statutory exemption. 


Paying a piece of the action to those funds for this purpose presumably happens at the expense of the state’s pensioners.   So it has pressed for an exemption, or an expansion of the old exemption,


So a bill was until recently moving through the legislative process to broaden exemption, rescind CalPERS from the default transparency requirement.  


AB 386 had moved quickly through the Assembly and the matter was before the Senate before opposition made itself felt.


That’s the story, seraphically free of opinion. Tomorrow I will opine






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