[Congressional Record Volume 141, Number 76 (Tuesday, May 9, 1995)]
[Extensions of Remarks]
[Page E959]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page E959]]
             INTRODUCING THE PENSION PROTECTION ACT OF 1995

                                 ______


                            HON. JIM SAXTON

                             of new jersey

                    in the house of representatives

                          Tuesday, May 9, 1995
  Mr. SAXTON. Mr. Speaker, I am here to speak to you this morning 
because $3.5 trillion in private pension funds are at risk. Why? 
Because the Clinton administration has targeted private pension funds 
as a new way to finance their liberal social spending agenda.
  Faced with an angry revolt of voters, fed up with an oversized and 
overintrusive Federal Government, Clinton's advisers devised a behind 
the scenes, incremental strategy to achieve Clinton's pension grab.
  The overall strategy came from a campaign document called, A National 
Economic Strategy calling for an $80 billion investment in an array of 
social projects that will be leveraged with public and private 
pensions.
  President Clinton and his Department of Labor are trying to use 
private pensions to fund social investments. These social investments 
include: Public housing, infrastructure, and pork-barrel projects. The 
administration has dubbed these social projects economically targeted 
investments or ETI's, but I prefer to call them PTI's or politically 
targeted investments.
  Stage 2 in Clinton's great pension grab came in June 1994, when Labor 
Secretary Robert Reich issued an interpretive bulletin which defined 
ETI's in a way that makes them seem consistent with the Employee 
Retirement Income Security Act, or ERISA. This law was specifically 
designed to ensure the safety of America's private pension funds. The 
strength and force of this law has now been undermined.
  Stage 3 in Clinton's pension-fund grab was the establishment of a 
clearinghouse intended to showcase ETI investments and give them the 
Federal Government's seal of approval. The Clinton Labor Department, 
without congressional authorization I note, has already contracted to 
spend $1.2 million to get the clearinghouse up and running.
  Stage 4 is now in the process of unfolding. As members of the press 
know, it has been widely reported that the President will likely 
nominate Assistant Treasury Secretary Alicia Munnell to be the next 
Governor of the Federal Reserve Board. Not long ago, Munnell proposed a 
15-percent Federal tax on private pension funds to help finance the 
Federal Government's liberal spending habits. Once planted at the Fed, 
not only will Munnell be completely outside of the reach of Congress, 
she will also be strategically situated to help the administration 
execute its grab for private pensions.
  Let me emphasize that targeting private pension fund investments is a 
radical and dangerous idea. ETI's violate the clear mandate of ERISA 
that a pension fund manager must give complete and undivided loyalty to 
the pension beneficiaries. Let me quote directly from ERISA: a pension 
fund manager must ``discharge his duties with respect to a plan solely 
in the interest of the participants and beneficiaries and for the 
exclusive purpose of (i) providing benefits to participants and their 
beneficiaries; and (ii) defraying reasonable expenses of administering 
the plan.''
  Besides ETI's obvious conflict with ERISA, the best economic research 
indicates that pension funds that target social investments produce 
yields well below market averages. For instance, a 1983 study by none 
other than Alicia Munnell found that public pension funds that targeted 
social investments had assets that were significantly riskier, less 
liquid, and earned lower yields. Also, a 1993 study by Roberta Romano 
of Yale Law School concluded that the
 greater the political influence on the investment decision, the lower 
the corresponding return. And, a 1994 University of Pennsylvania study 
by Olivia Mitchell determined that public pension funds required to 
make a certain portion of in-State investments generated lower 
investment returns.

  In light of the empirical research on ETI's and given their dubious 
legal standing, stage five and beyond in the great pension fund grab 
becomes easy to predict. The President and his administration will seek 
ways for the Federal Government to offer subsidies, guarantees, and 
other imaginative techniques to shield pension trustees from blame when 
ETI investing pension funds get into trouble.
  Richard Ferlauto of the Center for Policy Alternatives gives us a 
clue to their plans: ``ETI programs must be enhanced through the 
development and use of appropriate risk reduction mechanisms. Examples 
include state-funded loan guarantee programs, state or private 
insurance pools, and insurance premiums . . .''
  This means taxpayers will be put at risk as well.
  The ultimate objective would be to implement a social-responsibility 
requirement for private pension funds similar to the one now being 
imposed on banks--an ETI quota for every private pension fund. One need 
only refer to the ETI quota bill introduced on February 24, 1995, in 
California to realize the potential damage to the pension community.
  What would a 5-percent quota mean if enforced at the national level? 
In 1993, total private pension fund assets in the United States 
amounted to $3.5 trillion. A 5-percent ETI quota would mean that the 
Government would suddenly have at its command a whopping $175 billion 
with which to enact the liberal social agenda. More insidiously still, 
a quota of even this magnitude would mean that politicians had 
succeeded in conscripting private pension funds into the compulsory 
economic service of the U.S. Government.
  What Secretary Reich would make permissible today, will become 
compulsory tomorrow.
  Today, I am introducing a bill that will protect the 36 million 
private pension participants from President Clinton's pension fund 
grab. My bill, the Pension Protection Act of 1995, will not alter the 
fiduciary duties laid out in ERISA. Instead, my bill will simply 
reiterate that the act means what it says, no more, or less.
  ERISA couldn't be clearer. Trustees may not invest in ETI's because 
by definition ETI's seek to benefit someone other than solely the 
participants and beneficiaries of the pension plan; and ETI's pursue an 
objective other than exclusively the interest of the plan's 
participants and beneficiaries.
  My bill removes any uncertainly by making it unambiguously clear that 
solely means solely not primarily or even overwhelmingly; and my bill 
makes it unambiguously clear that exclusively means exclusively not 
almost only or even just about completely. Exactly what parts of solely 
and exclusively doesn't the Clinton Labor Department understand?
  My bill also will prohibit the Federal Government from guaranteeing, 
subsidizing, or encouraging social investments. And, it will put an end 
to the clearinghouse.
  The security of our pension funds is no small issue. Every American 
who plans on retiring someday should be very concerned about what the 
Clinton administration is up to. I believe that if we act quickly, we 
can ensure that everyone working today can rest easier if my bill to 
protect their pensions is passed.


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