By Iuliana Petre

Killeen Daily Herald

In a 45-minute, statewide teleconference call Monday hosted by the Teacher Retirement System of Texas, Roel Campos, a fiduciary councilman from Austin who is on the government and ethics board for TRS's board of trustees, commented on the reasons for the current financial crisis and how the government's plan affects TRS members.

Campos, a Texan who was educated in the state's public school system, said he acts in the best legal interest of TRS's many members and weigh many options for the TRS's board of trustees who then make the best decisions possible.

He opened the teleconference with a thorough explanation about what caused the nation's financial issues. He said sub-prime mortgages, which "became all the rage over the last four or five years," are the financial crisis' biggest offender.

These high interest rate loans – of which more than a $1 trillion worth were issued – were given to home buyers with poor credit or no equity and left many brokers, lenders, underwriters, banks and salesmen with the false promise that regardless of foreclosures or other troubles, they would walk way with lots of money.

"Banks were funding these particular loans from unregulated brokers and were not paying attention to the fact that the people (receiving the loans) couldn't afford them," Campos said.

"Brokers, underwriters, banks, salesmen all thought they created something that could 'defy gravity,' that could 'fly' – with high returns and little or no risk," Campos said, adding that banks thought they had enough good loans in their portfolios to cover "bad loans" in the event of financial wavering.

But when the sub-prime loans started defaulting, everyone was trying to get rid of them at one time, which caused a decrease in the loans' value, Campos said.

The new legislation – the financial rescue plan passed on Friday – allows the government to buy bad loans, get them off of the banks' books and allow banks to make loans to businesses that actually need them, Campos said.

But, the 400-page bill won't solve all the problems, Campos said, explaining that the bill is not related to how the stock market performs. But, if the bill serves it's purpose then confidence can be restored in Americans.

"The $700 billion will provide stability and liquidity to the financial market and economic well-being in America," Campos said.

Campos answered questions e-mailed by TRS members, such as: How does the bill affect TRS members? How safe is my money? Should I take it out of TRS and put it in a bank? If yes, how do I do this? And will the money taken out of my check go directly to the government's bail out package approved by Congress?

Campos explained that because TRS's pension plan for retirees is a defined benefit plan, it's tied to a retiree's age, years of service and salary, and that member's benefits are secure.

For those members who are worried about the safety of their money, Campos said that in a defined benefit plan, the money is not invested and turned over to it's members. But, those who choose to terminate their employment can request a refund with a 10 percent penalty for retiring early, or just wait until retirement to draw the benefits.

But since the money invested by TRS is earning a five percent interest rate, "it's pretty safe," Campos said.

As far as whether a contributor's money will go directly into the government's bail out package approved by Congress, Campos simply said no.

One listener, Stephen Caruso, a Texas Retired Teachers Association state legislative committee representative from Central Texas, said the teleconference gave him a better understanding of how we got to this financial problem and added that Campos did a good job giving the background to a systemic problem.

"The system failed," Caruso said. "The financial system failed through a number of steps. From lenders lending to home buyers who were not eligible, to credit rating agencies giving approval to non-deserving packages, to insurance contracts. I look at it from the standpoint that the system failed. All of these folks are trying to make a dollar. Greed has a lot to do with what happened here."

Caruso viewed the conference call in two parts: the national theme and its effect on TRS.

"Yes, they are related because we have investments in the market and the market has declined significantly," he said. "But in respect to TRS, the key point is that retirees under TRS are in a defined benefit retirement plan and their annuities are not affected."

Contact Iuliana Petre at or (254) 501-7469.

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