Looks like CalPERS is responding to political pressure in an attempt to prop up the share prices of Goldman Sachs and Morgan Stanley. The "volatility" statement is obviously BS; they could simply charge more for the loan of shares if they were worried about getting paid back. We're looking at pure desperation now.
This thing could get a lot crazier.
Pension funds halt lending of Morgan Stanley, Goldman shares
By Wallace Witkowski
Last update: 2:09 p.m. EDT Sept. 18, 2008
SAN FRANCSICO (MarketWatch) -- Pension fund managers Calpers (sic) and Calstrs (sic) said thursday that it has temporarily halting lending of Morgan Stanley and Goldman Sachs Group Inc. shares. A Calpers spokeswoman said that its securities lending program remains "very active," and that the temporary halt stems from the huge volatility in Morgan Stanley and Goldman Sachs shares. Once market volatility abates, the shares will be lent again, the spokeswoman said.