Friday, April 11, 2008

"Perry and Secretary of State Phil Wilson had dinner at Fleming’s steakhouse Wednesday night with a murderer’s row of Wall Street"

Perry, politics, pensions and Wall Street (updated)

April 11, 2008

By Robert Elder
Austin American-Statesman
Copyright 2008

With the heads of four big investment banks in town this week, Gov. Rick Perry figured he might as well get a little schmoozing in. Perry and Secretary of State Phil Wilson had dinner at Fleming’s steakhouse Wednesday night with a murderer’s row of Wall Street: Jamie Dimon of JP Morgan Chase; Lawrence Fink of BlackRock; Dick Fuld of Lehman Brothers; and John Mack of Morgan Stanley.

Also attending was James Lee, a prominent Republican contributor whom Perry recently appointed as chairman of the TRS board of trustees, and a TRS official or two.

The Wall Streeters weren’t in Austin just to see Perry. Each of their firms was chosen by the Teacher Retirement System of Texas to be a “strategic partner.” That means the TRS — at $108 billion, one of the nation’s largest pension funds — gives each of four firms $1 billion each to invest in public markets worldwide. It’s part of TRS investment chief Britt Harris’ plan to boost returns at the fund by tapping the expertise of institutional investors who have deep global investing experience.

Each of the firms will be paid based on performance. But there is a base fee that works out to about $2 million for each firm regardless of how well their investments perform. That sounds like an astounding sum, but in this type of investing it’s not at all extreme. The firms will earn the really big money if they outperform investment benchmarks set by TRS.

I’m sure the potentially lucrative partnership played a role in getting the big four to come to Austin. All of them, with the exception of Dimon, appeared at the TRS board meeting Thursday. (JP Morgan was represented by James “Jes” Staley, the firm’s head of asset management.)

Perry spokesman Robert Black told me today the dinner was set up by Wilson. (Wilson has informally added “chief economic development officer” to his secretary of state duties. Nothing unusual about that; the secretary’s job has been molded to the occupant’s desires and interests for decades.)

“The governor just went to pitch them and sell them on investing in a lot of different areas in Texas,” Black said. “Whenever you have the opportunity to get those types of CEOs in front of the state’s CEO, it can be nothing but beneficial.

“The governor took the opportunity to talk about opportunities for investment that may be available now or in the future,” he said.

Anything specific?

“Nothing yet,” Black said. “Maybe later, though.”

Lee didn’t return a phone message today, but he sent a statement through TRS’ communications office: “This week, the TRS Board approved creation of a groundbreaking partnership with four of the world’s leading investment firms… . Since millions of Texas educators will benefit from the program, I invited Secretary of State Phil Wilson to join us so he could personally welcome the CEOs to Texas and thank them for their willingness to participate in our program. When Wilson learned that Texas would have the first partnership of this kind, he also invited the governor to join us. It was a great opportunity for the CEOs to see how much we in Texas appreciate their commitment to strengthening our trust fund.”

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