more on Pension Bill - BEST BILL MONEY CAN BUY!!!! (an even darker flip side)

[David Farber <dave () farber net>]

Begin forwarded message:

From: Ethan Ackerman <eackerma () u washington edu>
Date: March 19, 2006 10:54:22 AM EST
To: dave () farber net
Subject: RE: [IP] Pension Bill - BEST BILL MONEY CAN BUY!!!! (an even  
darker flip side)
Reply-To: eackerma () u washington edu

Greetings Dave,

There is a lot of (accurate) criticism that the current pension  
legislation
is larded with shortcomings, and not enough "putting corporate feet  
to the
fire" of pension funding obligations, but the 'rest of the story' bears
looking at as well - it's even worse.

Some in Congress are rationalizing this bill, saying 'If you were a
Congressperson, would you want to be the one known for sending American
workers (with their negative savings rate) from a questionably  
solvent but
AT LEAST existing program that MIGHT get better into a world of wholly
voluntary savings programs with NO guarantees and market risk borne  
entirely
by them?   That's what'd happen if we held companies responsible -  
they'd
ditch pensions. Bleak choice.'

The problem the NYTimes was too reserved to point out, lest it be  
labeled
'political,' was that a sizeable chunk of Congress IS attempting to  
ditch
pensions.  While no pensions means no retirement savings for a large  
swath
of Americans, it also means more money for the financial industry (at  
least
in the short term.)  It's not surprising that the financial industry  
is the
largest backer of this legislation.  Rather than Morgan Stanley and  
Merrill
Lynch competing hard to win Ford's pension plan business, they can  
each sell
individual retirement accounts to the few Ford employees who would  
save for
retirement as a result of having no pensions.

Wall Street would gladly give up large institutional clients (with  
the gall
and clout to demand low fees) in exchange for 1000s of small clients  
without
bargaining power.  Why compete for a .5% commission on a $5Billion  
pension
fund when you can charge a 5% commission on $1Billion in IRA assets,  
plus
fees, plus account costs, plus selling customized 'investment advice' to
your new (and not particularly savvy) customers.  At the end of the day,
retirement savings freefalls (because, not surprisingly, less people  
invest
when it is voluntary rather than done for them,) but Wall Street's  
profit
skyrockets, for a while.

As if this weren't a big enough boon for Wall Street, it has a silver  
lining
to boot.  Institutional investors like pension funds are almost the only
investors capable of asserting shareholder power against corporate
(mis)management.  When corporate management proposes officer raises,  
board
raises, sr. management stock options, loans to officers, pointless  
mergers,
etc.,  institutional investors are usually the only ones with enough  
clout
to oppose these actions.  (Think CALPERS and other pension investors -
http://www.bizjournals.com/sanfrancisco/stories/1996/06/24/ 
story5.html )  In
fact, the CALPERS analogy is particularly apt.  The current California
administration has already attempted to 'terminate' the CALPERS pension
system with a 401(k)-like substitute, in part because of similar
motivations -
http://www.bizjournals.com/sanjose/stories/2004/12/20/editorial5.html )

While reasonable minds can differ about mandatory participation and  
taxpayer
contributions and even the relative merits of individual voluntary  
investing
vs. automatic employer-provided investing, what is happening here is
Congress is effectively cutting the knees out from under millions of
employees who HAVE decided they want pensions.

The highly cynical political observer would suggest that this bill is
intended PRECISELY to sink pension plans.

-Ethan


-----Original Message-----
From: David Farber [mailto:dave () farber net]
Sent: Saturday, March 18, 2006 6:33 PM
To: ip () v2 listbox com
Subject: [IP] Summary of Major Changes Raise Concerns on Pension Bill  
- BEST
BILL MONEY CAN BUY!!!!




http://www.nytimes.com/2006/03/19/business/19pension.html? 
hp&ex=1142744400&e
n=aedadeb0f2299749&ei=5094&partner=homepage

[...]



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