NYC Mayoral Candidate Mismanged City Pensions for Years

The American Interest ^ | September 3, 2013 | Walter Russell Mead

[neverdem]

Former NYC Comptroller Bill Thompson is looking to vault ahead of frontrunner Bill de Blasio in the city’s mayoral race, but a recent exposée of his tenure as comptroller will do little to help his chances. As Comptroller, Thompson was responsible for handling investment decisions by the city’s pension systems. Thompson has touted this experience during the campaign, but the New York Times has examined his track record, and what it found isn’t pretty. Not only did New York’s pensions consistently underperform their peers; Thompson frequently used his position to invest city pensions in funds controlled by major donors, which charged the city hefty fees for middling results:

As he oversaw the city’s $85 billion pension system, Mr. Thompson steered the funds into a diverse range of new investment categories, expanding from heavy concentrations in stocks and bonds into private equity, real estate and niche funds. Yet performance was lackluster: nationwide, more than half of large public pension funds outperformed the five city funds’ combined 4.84 percent return from 2002 through 2009, according to a widely used yardstick compiled by Wilshire Associates, an investment advisory firm. Meanwhile, the city’s roster of fund managers, and their fees, tripled—and Mr. Thompson collected more than $500,000 in campaign donations from them. [...]

In draft audits prepared in mid-2005, halfway through Mr. Thompson’s tenure, the examiners reported, among other things, that investment decisions were made without the comptroller’s opinion on whether they would meet the funds’ goals; that little attention was paid to expenses; and that investment policies seemed to be discussed only when hiring companies to manage the money, raising concerns that the “the policies might have been adjusted to justify the choice of a particular provider.”

We’ve complained about politicians using pension fund investments for political purposes before, but this takes the practice to an entirely new level. In a state where hundreds of cities are on the brink of pension meltdown, playing games with pensioners’ money for political gain is a moral failing of the highest order. Pensioners and taxpayers alike already have plenty of reasons to distrust the decisions ostensibly made on their behalf by politicians and fund managers without adding outright cronyism and graft to the mix. Unfortunately it appears that the ugly machine of public-sector unions, politicians and Wall Street that has wrecked pension systems across the country is alive and well in the heart of blue America.

[Bill Thompson photo courtesy of New Yorkers For Thompson]

[deadrock]

The perfect candidate then?