Congressman Says Let's Have Public Sector Pension Funds Bail Out the Banks!

One of the most unenlightening debates that has resulted from the financial crisis has been the one where advocates of defined benefit pension plans argue that the market crash proves that 401(k)-style plans can't work and therefore we need to increase the number of people in defined benefit plans, while advocates of 401(k)s argue that the market crash proves that defined benefit plans don't work, and therefore we need to increase the number of people in 401(k)-style plans.

This argument is inane. Without robust market growth, nobody's plan for a multi-year retirement is going to work.

What has remained true, however, both before and after the crash, is that public sector defined-benefit plans require putting a huge single pool of money under the control of politicians and that the odds of a big pool of money, under the control of politicians for multiple decades, not getting raided for something stupid, are virtually negligible.

Case and point, from the New York Times via Instapundit, is Congressman Gary Ackerman's plan to a) bail out banks using pension fund money and, even better, b) his attitude that this is not a problem, because the government can magically "guarantee" an 8.5% return on investment...

Financial institutions in the United States probably need hundreds of billions of dollars in additional assistance, and one congressman wants to harness state and local pension funds to help them.

Rather than rely more heavily on the Treasury, which has already put $350 billion in the nation’s banks, Representative Gary L. Ackerman sees an opportunity in the trillions of dollars in public pension funds, The New York Times’s Mary Williams Walsh reported....

Mr. Ackerman, Democrat of New York, is sponsoring legislation that would allow public pension funds to pool some of their money and use it to create a sole-purpose entity that would buy $50 billion to $250 billion worth of preferred stock in America’s banks. That would strengthen the banks’ balance sheets and, Mr. Ackerman hopes, get them lending again.

Some of us are getting tired of writing checks with public money.