MOORLACH UPDATE — The Big Short — December 30, 2015

Happy New Year!

The OC Register‘s editorial board shared some of my concerns on the Orange County Board of Supervisors’ recent decision to approve the OCEA contract in their editorial below (see MOORLACH UPDATE — Merry Christmas — December 24, 2015 december 24, 2015 john moorlach).

BONUS:

Sunday evening I had the opportunity to see "The Big Short." I would strongly recommend your seeing this movie. If you are sensitive to profanity, then wait until an edited version is available on a network channel.

The County’s bankruptcy filing reached its 21st birthday this month (see MOORLACH UPDATE — Fixing California’s Finances — December 11, 2015 December 11, 2015December 11, 2015 John Moorlach). "The Big Short" provides a template for other current "bubbles," like public employee defined benefit pension plan unfunded liabilities and cash strapped municipalities. I’m just sayin’.

"The Big Short" is based on the book written by Michael Lewis. I would recommend that you also consider reading his book, "Liar’s Poker," which is about Salomon Brothers and even mention a partner who worked with Orange County during the bankruptcy days. Another Michael Lewis movie is "Moneyball," which has already become a classic.

The screenplay for "The Big Short" would be very similar to mine, if I had written one about my experiences in 1994. Trying to convince people in charge that they are headed for a crisis is not fun. Being treated like you’re an outcast is even more exhausting. Watching the investment bankers revel in their confidence. Watching Standard & Poor’s justify their ratings. Watching an industry close ranks. Watching a few that figured it out. Watching those who figured it out grieve over the reality of their predictions. It all hit home.

Watching Orange County become a national and international embarrassment in 1994 was extremely painful. All thanks to a countywide elected official who was playing with debt and derivatives in an interest rate environment that he could not control.

The housing bubble would and did occur, despite all the assurances that everything was fine. And it had a significant impact on the economy. We refer to it to this day as "the Great Recession." And we observed government bail outs on a grand scale.

Ironically, I would be the Chairman of the Board of Supervisors in 2008, the year of the "liquidity crisis" and the pinnacle of the story line in "The Big Short." To bring it closer to home, Orange County was the national headquarters of the major subprime lenders. And all their buildings would empty out and its well dressed occupants would then walk over to the County’s Social Services Agency offices for food stamps. It was not a pretty time in local, national and international history.

"The Big Short" is worth the time just to appreciate recent economic history. It is also a great reminder of greed and how it motivates individuals in both the public and private sector (the scene with a representative of the SEC also sent back echoes of disappointment from 21 years ago).

Thanks for letting me reminisce on years past. Let’s hope that 2016 provides us with clarity as to what is really going on and that we focus our priorities on fixing things where we can to make this a better state. Happy New Year!

Rush to contract judgment
Board rejects delay to allow for scrutiny.

It was a forgone conclusion. The Board of Supervisors unanimously approved its contract with the Orange County Employees Association, which includes a nearly 10 percent pay raise over three years. But seeing that the tentative agreement has been on the books since Dec. 16, what happened last week was just a formality.

There was a slight hiccup in the otherwise rubber-stamp process. Kathy Moran, a former staff member for then-Supervisor John ‍Moorlach, filed a last-minute public records request for the 32 proposals and counterproposals generated by the county and union.

Supervisor Todd Spitzer worried that Ms. Moran didn’t have sufficient time to look over the back-and-forth proposals and suggested that the vote be postponed two weeks until this taxpayer had enough time to digest the new information.

“My only point was the public knows nothing,” Mr. Spitzer said, according the Register. “This is their time to know about the process.”

His colleagues weren’t as willing. Supervisors Shawn Nelson and Michelle Steel didn’t think it fair to leave county employees in limbo over the holiday. Mr. Nelson also reiterated his belief that the negotiation process should be open to the public because there “shouldn’t be any secrets,” but that the deal was fair.

We commend Mr. Spitzer for his sentiment, not simply because of Ms. Moran’s request, but because the process appeared rushed and the timing suspect. Holidays are often cynically seen as a time for governments to push through potentially controversial items during a seasonal lull in public scrutiny. The deal may very well have been fair; it is hard to say the process has been.

Approving the county’s single largest expenditure the day before Christmas Eve should raise eyebrows. Further, according to the Register, Ms. Moran was supposedly informed the night before the meeting that the contract wasn’t expected to have long-term impact on the county’s unfunded pension liabilities. We find that curious, because it seems that any pay raise increases the figure later used to calculate pension payouts.

We’d be interested in seeing the math behind that assertion, but, in any event, the deal is done.

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This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District.

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