For practically his entire 18-month term directing the obscure Pension Benefits Guaranty Corporation, Charlie Millard could not stop talking about his radical new plan to plow the majority of the agency’s coffers — which offer partial bankruptcy insurance to the retirement funds of 44 million Americans — into stocks, real estate and private equity.
Well, that ended today.
Millard pleaded the Fifth three times before a Senate subcommittee convened to discuss the fund this afternoon, refusing to answer any questions about his controversial tenure, which began when Bush appointed him interim director in May 2007 and ended when Obama was sworn into office. There are some pretty good reasons for him to : last week four senators formally requested the Office of the Inspector General to open a criminal investigation into Millard’s activities in response to a preliminary OIG report detailing the former Lehman Brother’s executive’s eyebrow-raising call logs during his time at the office. The report showed that Millard made hundreds of calls to Wall Street investment banks in line for lucrative contracts managing the fund’s money under the new investment regime, and traded dozens of emails with a Goldman Sachs executive assisting Millard’s post-D.C. job hunt after Goldman was awarded just such a contract.
The PBGC says most of Millard’s planned asset reallocation had yet to be completed when he left, and that it is now considering tearing up some of the contracts under which it planned to farm out the funds to the likes of Goldman, JP Morgan, BlackRock and others. But the fund still managed to triple the size of its deficit in the six months between September 30 and March 30, according to numbers released by the Senate today — meaning the fund currently owes $33.5 billion more than it has the money to cover.
The PBGC blamed the string of corporate bankruptcies, not Millard’s re-jiggering of the portfolio, which it has yet to execute, for most of the recent ballooning of the deficit — neatly underscoring the inherent danger in Millard’s plan to switch the fund from bonds to stocks, which unlike bonds lose virtually all their value in corporate bankruptcies.
But as ProPublica pointed out yesterday in a story on the rationale behind Millard’s bizarre investment strategy (and as we pointed out last week) any claim that stocks outperform bonds over time — which Millard was insisting as recently as last March — has been near-wholly discredited by the current crisis.