CalPERS to aid muni bond issuers
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The California Public Employees’ Retirement System said Tuesday that it would provide additional letters of credit to municipal debt issuers to help ease disruptions in the muni bond market caused by the troubles of bond insurance firms.
Under CalPERS’ program, the giant pension fund sells letters of credit and so-called standby purchase agreements to municipal bond issuers for a fee. The bond issuer benefits by gaining CalPERS’ AAA credit rating on its bonds.
CalPERS set aside $5 billion for its bond program in 2004, but spent only $1.5 billion since then as competition kept prices low.
By ramping up the program anew, “I hope we aren’t just going to be vultures here, but rather try to help local agencies while making a little bit of profit,” said California Treasurer Bill Lockyer, a member of the pension fund’s governing board.
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