Pension Fund Giants - Global Viewpoint

Are pension funds "too big to fail."? When we label a pension fund public, we equate tax dollars to the support of the financial viability of that fund. In Illinois, the pension funds are decentralized into smaller individual governmental units. In Wisconsin, the pension funds are centralized under one umbrella - under one governing body's oversight and management control.

The pros and cons are many. Succinctly , the scale of economy for managing investment fees alone support a centralized management unit and conversely, the democracy of competing units supports the theory of decentralized pension funds.

Consolidating pension funds and having the management fall under the direction of one team that can specialize in the management of the portfolio is an important financial metric for citizens of the United States to actively consider.

The differences between two adjoining states - Wisconsin and Illinois give us the ability to see side by side the costs and benefits.

One item that must be clarified for Illinois, while the legal requirement require the reporting of fees, fees historically have been compiled on an annual basis rather than by each individual trade ticket. Is this practice in the best interest of the taxpayer? Is this practice in accordance with the intent of the law? Should financial firms be held accountable for not properly reporting fees of the pension funds' trades?

"Sole source defined benefit plans may be a disguise for socialized government."

American Choices

In reviewing the needs of our public pension funds, the viewpoint must be taken that the giants in the industry who are too big to fail are quasi governmental units.

If the funding source is ultimately, the American taxpayer, the pension fund rules must at the very least request the same best practices as the requirements and standards of the public pension funds.

• Golden parachute rules must be established with financial penalties for non-adherence.
• Responsibility measures for fiduciary duties must be more clearly defined for the taxpayers benefit.
• Platinum pensions must be viewed as a socialized regulation not as a democratic regulation.

Just Who Are the Pension Fund Giants?

The giants of the pension fund world include of course General Motors but also many teacher funds and state public employment funds.

Are all of these really private? Shouldn't we consider General Motors a public pension fund? If the taxpayer may support that fund? If the entity is deemed too big to fail - is it no longer then private?

Where are the antitrust laws? Where is the individual intelligence of the voting taxpayer?

Trade Tickets for Pension Funds Need Legal Mandate

Reporting fees should not be a year-end computation. To actively manage fees, all fees for fixed income and equity trades should be reported on each trade ticket. This should be not just a state mandate, it should be a federal mandate. If you think the banker's have been upset before, they will turn from red to purple with the installation of this requirement. I would go so far as to instill new bidding requirements that break out the fees anticipated in the bid.

Which brings to the investment bidding process. Fair market competition mandates a fair bid. Public funds that invest in securities need not just a strong financial manager but a manger who implements bidding procedures to ensure the market remains competitive.

The author believes strong that a return to matching geographical location of assets and liabilities needs to be gradually implemented. Regional banking has proven detrimental. The continuation of regional banking will lead to national banking and international regulation with no accountability.

Mortgage holders must be stakeholders in the communities where they hold assets.

A return to accountability and ownership can only be made IF the regulatory authorities recognize this basic financial principle. In the real estate world, it is well known that renters do not take care of properties, landlords do. A landlord who is more than 50 miles away ends up hurting the community where the asset is located. Likewise, financial institutions need to not just know their investment, they need to see the community that they are investing in.

Foreclosures are hurting not just homeowners and neighbors, they are hurting the American taxpayer.

Too big to fail is a lesson that regulators must take to heart and implement new regulations that migrate the financial market return to the marriage of local assets and local liabilities.

Platinum pensions where the defined benefit contribution plan is established as the sole source of retirement earnings is a disguise for socialized economic vehicles. This is contrary to the basic economic principals that the United States was founded upon - free commerce.

It is in short a wolf in sheep's clothing.

Defined benefit contribution plans have a time and place in limited quantities. The giants of too big to fail are now running our government and we run the risk of losing the very freedom that our valiant soldiers are fighting for.

Financial Fight for Freedom - For Our Future

The financial fight is "big fight". It is a fight for money and people will do and say crazy things.

This financial fight is more than a fight for today; it is a fight for the freedom of retirement for tomorrow and for the financial security of our children and grandchildren.