Remember Charles Millard, who we told you about earlier this week?
He was the Bush-appointed head of the government agency that guarantees workers’ pensions, who made the genius decision to switch the agency’s investments from conservative bonds to risky stocks — right before the stock market tanked. The result: the Pension Benefit Guaranty Corporation’s stock-related investments were down 23 percent as of September — the up-to-date figure is believed to be much higher — putting in grave doubt its ability to cover the expected losses in private pension funds that the market slump has already caused.
And it turns out that members of Congress had specifically expressed concerns about Millard’s risky strategy. First, during Millard’s 2007 confirmation hearing for the post, in front of the Senate Health, Education, Labor, and Pensions committee, Barbara Mikulski of Maryland declared that “a change in the investment policy of the funds of the Pension Guarantee is a very significant public policy step,” and requested that Millard pledge to notify the committee before undertaking such a shift. Millard said he would.
Then Mikulski, along with Ted Kennedy, the committee chair, followed up with a letter to Millard, obtained by TPMmuckraker, which laid out some concerns.
The senators warned: “[I]f there is a sharp decline in the stock market, the agency could face difficulties in making payments to retirees.” They asked Millard to “avoid investments that risk PBGC’s short-term or long-term ability to meet its obligations,” as well as to provide the committee with any analyses done by PGBC or its contractors which showed changes in the agency’s risk portfolio as a result of changes in its investment strategy.
We’ve also learned that Millard did indeed notify the committee when the shift went into effect, as he had pledged to do. But it remains unclear what happened after this. Did Mikulski or other lawmakers object any further to the shift? Or did they essentially sign off on it, while continuing to request that Millard keep them in the loop? We’re hoping to have some answers to those questions later today.
It’s also worth noting that Time’s smart business writer, Justin Fox, has poured a bit of cold water on this story, pointing out that the agency’s annual report for the fiscal year ending last September suggests that the shift hadn’t gone into effect yet.
But even if that’s true, the most severe losses would be expected to have been absorbed in the period after September 2008, when the stock market plunge really began in earnest. So we won’t know the true extent of the damage until the agency releases updated figures.
And in any case, Millard himself, who left office with the end of the Bush administration, defenfed the new strategy to the Boston Globe this week, saying it would make it easier for the agency to close its deficit. So he seems to think it went into effect a some point, and has had a significant effect.