MOORLACH CAMPAIGN UPDATE — Then There Were Two — February 2, 2019

The Daily Pilot’s electronic edition piece below provides the strong potential for another upcoming announcement for next year’s campaign season.

25th ANNIVERSARY LOOK BACK

Derivatives Week
, a publication of Institutional Investor, Inc., had a revealing headline in its January 31, 1994 edition: “ORANGE COUNTY NETS BIG RETURNS WITH GUTSY REPO STRATEGY.”

The front-page teaser had a small error, as it was not the pension fund, although some pension funds were in the Orange County Investment Pool. However, this paragraph provided the crux of my campaign. For a tutorial on reverse repurchase agreements (reverse repos), see MOORLACH UPDATE — The Tarnished State — December 17, 2018. For more on the inverted yield curve, see MOORLACH UPDATE — Judicious Budget — December 18, 2018.

Orange County California’s $7.5 billion pension fund has profited handsomely by amassing an average monthly position of $5 billion in reverse repos, but an inversion of the yield curve or an interest rate rise could leave the fund with hefty losses, according to dealers who question the prudence of the practice. “On the Street, we call this kind of leveraged reverse repo strategy the death spiral because one significant market move can blow down the strategy in one puff,” said one muni expert. “I think it is a scandal waiting to happen. It is a brilliant idea for hedge funds, but I am not sure it is a good idea for a muni fund,” said another banker.

Derivatives Week was no minor magazine and its piece would be mentioned in articles during the upcoming campaign. The “death spiral” and “scandal waiting to happen” quotes have since made it to numerous publications and books subsequent to the Orange County Chapter 9 filing (see MOORLACH UPDATE — Global Derivative Debacles — February 1, 2011).

Political Landscape: Costa Mesa Mayor Katrina Foley takes step toward possible state Senate bid

By DAILY PILOT STAFF

https://www.latimes.com/socal/daily-pilot/news/tn-dpt-me-political-landscape-20190201-story.html

Costa Mesa Mayor Katrina Foley has filed campaign paperwork indicating she’s considering a run for the state’s 37th Senate District seat in 2020, according to information posted online by the California secretary of state’s office.

The move positions her to potentially mount a bid against state Sen. John Moorlach (R-Costa Mesa), who has held the seat since 2015.

Foley did not respond to requests for comment this week.

The 37th District covers a swath of Orange County including Costa Mesa, Newport Beach, Irvine, Laguna Beach and parts of Huntington Beach.

Foley, a Democrat and lawyer, rejoined the Costa Mesa City Council in 2014 after having served from 2004 to 2010. She became the city’s first directly elected mayor in November, winning a two-year term.

Should she officially decide to run, Foley would be the second Democrat to enter the state Senate race. The other is Irvine resident Dave Min, a law professor at UC Irvine.

In a news release announcing his candidacy, Min said he’s running “to build a brighter economic future for all 37th District families and to provide them with representation that reflects our values and priorities,” including the“need to focus on universal health care, protecting our environment, ending the gun violence epidemic, building more affordable housing and protecting our immigrant communities from the disastrous policies of the Trump administration.”