Treading the Murky Waters of the Investment Pool Fiasco

I don’t know about you, but nothing makes me more panicky than someone calling a press conference and telling me not to panic. So even without understanding all the ins and outs surrounding the plunge of Orange County’s investment fund, my palms are suddenly clammy in the wake of the county’s top money managers telling us all to relax.

Wasn’t “relax” the last word investors said in 1929 just before they started jumping out of 10th-floor windows?

But while I may not grasp the terminology of the investment-pool fiasco, I grasp the psychology. And my guess is that the public financial managers throughout Orange County who subscribed to “In Citron We Trust” are in for some lathering by their constituents.

All of a sudden, taxpayers and special-district ratepayers who had no idea where their money was now will be asking their elected representatives. From the sound of things, they won’t like the answers. The citizens probably won’t direct their fire at Robert L. Citron--if only because they don’t know him--but at the finance people at their local City Halls.

Citron has left those people in a major political box. They either can’t or don’t want to take their constituents’ money out of Citron’s pool, hoping to recoup the paper loss incurred so far but thus leaving them vulnerable to potential further losses. Now that the public is suddenly clued in to the high-stakes game Citron has been playing, citizens without his gaming spirit may start leaning on their elected reps to cash in.

If this were Japan, Citron would have resigned by now.

He doesn’t have to resign, but he should face the music. His performance last Thursday--the day the story broke--was somewhat less than admirable.

He said virtually nothing at the press conference, then made himself unavailable to the media on Friday. If this is his idea of the way to stem a loss of public confidence, he’s wrong. He surely knows the markets much better than the average citizen, so why not explain to us why a skid of $1.5 billion is nothing to worry about.

Unfortunately, his attitude reflected the way he ran his campaign against Republican challenger John Moorlach in the spring. Moorlach was all over Citron for risky investments, and Citron, first elected in 1970, acted like the feudal landlord being questioned by a serf. That the serf actually may have known what he was talking about is now rather obvious, and you’d think Citron would give us Joe Six-Packs of Orange County at least a primer on his investment strategies.

I’m not sophisticated in money matters, and if I were running the county’s investments, they’d be in a tin can buried in my back yard. But I can understand some basics, and I would have liked to have heard some good reasons from Citron as to why this is no time to panic, especially when other financial professionals are telling us to run for our lives.

Aren’t public officials supposed to soothe us from time to time?

Instead, Citron went to his bunker defense. During the campaign, the defense made sense, up to a point. He cited his long run of investment success, and said Moorlach’s naysaying was detrimental to the market. Voters, who may or may not have understood the nuances of his investment strategies, overwhelmingly reelected him. With his track record, Citron is no doubt indignant that anyone deigns to question him. Someone should tell him that attitude is never acceptable for a public official.

However hypocritical it may appear to Citron to be criticized for the recent swan-dive of the investment fund--given that that same strategy yielded high returns in years past--it’s perfectly appropriate. Yes, it’s 20-20 hindsight on his critics’ part, but hindsight is all we have, given his refusal to engage Moorlach in much debate during the campaign.

It’s not Citron’s fault that the public didn’t know how he was playing the county portfolio. It’s not his fault if people thought he was playing the “Don’t Pass” line and he was putting the money on six the hard way.

But now that we’ve added up the losses, even if it is the equivalent so far of house money, Citron needs to let us in on his thinking. Even we dullards know that speculation means risk, but explain how you misread the signs.

In other words, restore our confidence. All we know now is that $1.5 billion we had in hand a few months ago is now in the toilet.

That’s not the kind of news that makes us relax.

Dana Parsons’ column appears Wednesday, Friday and Sunday.