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.And, saving the truly best for last, here is Congressman Ackerman’s explanation of why he favors this plan, because…
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.
Never let the facts get in the way of your “economic” argument Andrew. No wonder more and more people just come here for the laughs.
What a wunnerful idea. Let’s take up to 1/4 trillion dollars out of public pension plans – that already are in trouble – and invest in the biggest screw-ups in the whole economy. The biggest screw-ups outside of government, that is.
Mr. Crowley, do you seriously want this to happen with your unionist’s pension money? Or do you just assume the taxpayer will make it up through additional tax levies later?
>>Mr. Crowley, do you seriously want this to happen with your unionist’s pension money?
Union run pension funds are notoriously mismanaged and underfunded, so don’t expect much financial expertise from that corner.
Ackerman’s moronic proposal reflects the same “I’ll gladly pay you Tuesday for the hamburger you buy me today” mentality that brought us the “Social Security Trust Fund” … and Subprime Barney Frank’s Fannie and Freddie Mae … and Comrade Obama’s fostering fear to grease the skids for his reprise of “FDR’s first 100 days” disguised as a “stimulus” package.
You think things are bad now, wait 8-10 years from now when Social Security goes cash flow negative.
If not sooner, as Obama’s package won’t stimulate anything but the welfare state (which is its intended purpose, by the way).
Tom
I’ve always suspected that union trust funds are mismanaged, and regarding many of them, so do Fed criminal investigators.
I’d like to hear Mr Crowley’s answer though. I think his comment indicates he’s suffering from ADS (Andrew derangement syndrome).
Pat,
Which of my facts are you objecting to, that pension funds rely on investment growth, that the government can’t really guarantee that an investment in a bank return 8.5%, or something else?