At both the Sept. 19 and Oct. 3 Mission Viejo council meetings, I presented public comments about the city’s general account. This account indicates that 56 percent to 57percent of our assets are invested in government agency issues. The general account is required to be invested in such government issues as treasuries, government agencies, commercial paper, government money market funds, tax allocation notes and California agency funds with maturities of five years or less.

Probably due to low interest rates in the past several years, the account has gravitated to agencies such as Farm Credit Banks and Freddie Mac issues instead of treasury issues because of the interest rate differential. Such treasury issues as bills, notes or bonds are direct treasury obligations of the federal treasury and cannot be rescheduled. Agency issues are obligations of various federal agencies and are subject to those agencies or Congress.

With the federal debt issues and our overheated housing market and rising interest rates, perhaps a change would be in order to a preponderance of treasury securities with fewer agency issues in the portfolio. As agency bonds mature, the funds could go into treasury securities to take advantage of rising rates.

It would be better to err on the side of an abundance of caution than to err on the side of
market risk. One should hope the inverted state of the general account will be corrected over time as maturities occur.

James Edward Woodin
Mission Viejo