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?

Global Viewpoint Pension Assets as of 2009
Global Viewpoint Pension Assets as of 2009 | Source

Paradigm of Sole Source Pension Needs to Change

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

American Choices

Public or Private Pension Giants

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.

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

Pension Fund Investment Results Must Include Geography

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.

Liberty and the Pursuit of Freedom

Statue of Liberty - symbol of freedome
Statue of Liberty - symbol of freedome | Source

Platinum Pensions Can Shield Socialized Economic Vehicles

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 loosing 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.

© 2012 American_Choices

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Comments 4 comments

HowardBThiname profile image

HowardBThiname 4 years ago from Midwest

Excellent! I've only been on HubPages for a short time, but this is the best hub I've read here!

Your quote, "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," are words to live by, indeed.

To be truthful, I'd never really considered the impact of these mega pension funds.

Thanks for this article. It belongs on a much bigger media source, though. You deserve some recognition for this one.


American_Choices profile image

American_Choices 4 years ago from USA Author

HowardBThiname,

Your high marks mean allot. I wrote this from the heart and hesitated to show my emotions. I have been listening from the sidelines and know the back office of the real figures of the pension funds. Luckily someone else had already compiled the numbers for me.

Putting the numbers together for us to make good decisions is my specialty.

Your words mean allot to this lonely writer. Thank you!


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast)

Hi, AC, you recognized that defined benefit pension plans have a place in limited quantities. What would you consider limiited quantities and what is your definition of a 'platinum pension plan'?


American_Choices profile image

American_Choices 4 years ago from USA Author

Credence2,

Great question which I can only answer in a limited fashion because the quantitative factors are too many to explore.

Having stated that, I would define 'platinum pensions' as those that are seeking be the sole income. The social security system and the defined pensions both I feel should be supplemental income not a 'sole source'.

The theory is simple - change the way we view the pensions overall. Gone are the days of not paying the bill, now that the bill is here we must realize we cannot afford the cake and the appetizer and a glass of wine all on the public bill.

If the private sector - the true private section can afford platinum pensions - that is their option but we as citizens must start realizing there is a cost to us as a society.

Migrating away from sole source is a step, a big step in correcting decades of problems that we have chosen to ignore. Pay day is here and we are hurting. We must step up to the plate and be accounted for.

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