Griffin
11-26-2007, 12:53 PM
TSP has long been held as the model for privitizing social security, the idea dates back a decade.
Is the recent IFT limitation really a move by the FRTIB to clean up the books and make TSP more palatable to those that oppose privitization?
Let's stick to the issue of privitizing social security and if it is the underlying motive behind the boards recent move.
Here's an interesting excerpt from an 8 year old article
http://money.cnn.com/magazines/fortune/fortune_archive/1999/03/01/255846/index.htm
The 12-year-old federal employees' Thrift Savings Plan (TSP) now holds about $48 billion in stock and corporate-bond index funds. By limiting investment to index funds, the government takes itself out of the investment decision. All the stock trading and all the shareholder voting is done by a private asset manager hired by the TSP's board. Congress (which knows itself only too well) designed the board to resist political meddling. Among other safeguards, it is not hostage to the congressional appropriations process; the funds themselves pick up the board's expenses. In addition, each member is a named fiduciary, meaning he can go to jail if he fails to act solely in the interests of the fund's participants.
So far, politicians have yet to interfere in a single decision--and not because they've suddenly become virtuous. "I heard from plenty of Congressmen and Senators," says Francis X. Cavanaugh, the board's CEO from 1986 to 1994. "I read them back my duties under the law they themselves had written, and that ended that."
To be sure, many reasonable people are not convinced that a TSP-like board could protect a huge trust fund. Most prominent among them is Federal Reserve Chairman Alan Greenspan, who testified before the Senate Budget Committee: "Even with Herculean efforts, I doubt if it would be feasible to insulate, over the long run, the trust funds from political pressure." Before we let Greenspan's opposition kill the idea, however, we should ask whether it's any easier to insulate private accounts. How long could Congress resist proposals to allow people to withdraw money for a sick child, or to make the down payment on a house, or to send a kid to college? After all, in recent years Congress has done nothing but liberalize access to IRAs and 401(k)s. The politician's instinct to make crowd-pleasing gestures with other people's money remains under either system. The only difference is that with private accounts there would be no fiduciary board or public watchdogs to keep Congress from letting people spend their retirement savings. In fact, the pressure would be just the opposite. After all, aren't private accounts "your money"?
Is the recent IFT limitation really a move by the FRTIB to clean up the books and make TSP more palatable to those that oppose privitization?
Let's stick to the issue of privitizing social security and if it is the underlying motive behind the boards recent move.
Here's an interesting excerpt from an 8 year old article
http://money.cnn.com/magazines/fortune/fortune_archive/1999/03/01/255846/index.htm
The 12-year-old federal employees' Thrift Savings Plan (TSP) now holds about $48 billion in stock and corporate-bond index funds. By limiting investment to index funds, the government takes itself out of the investment decision. All the stock trading and all the shareholder voting is done by a private asset manager hired by the TSP's board. Congress (which knows itself only too well) designed the board to resist political meddling. Among other safeguards, it is not hostage to the congressional appropriations process; the funds themselves pick up the board's expenses. In addition, each member is a named fiduciary, meaning he can go to jail if he fails to act solely in the interests of the fund's participants.
So far, politicians have yet to interfere in a single decision--and not because they've suddenly become virtuous. "I heard from plenty of Congressmen and Senators," says Francis X. Cavanaugh, the board's CEO from 1986 to 1994. "I read them back my duties under the law they themselves had written, and that ended that."
To be sure, many reasonable people are not convinced that a TSP-like board could protect a huge trust fund. Most prominent among them is Federal Reserve Chairman Alan Greenspan, who testified before the Senate Budget Committee: "Even with Herculean efforts, I doubt if it would be feasible to insulate, over the long run, the trust funds from political pressure." Before we let Greenspan's opposition kill the idea, however, we should ask whether it's any easier to insulate private accounts. How long could Congress resist proposals to allow people to withdraw money for a sick child, or to make the down payment on a house, or to send a kid to college? After all, in recent years Congress has done nothing but liberalize access to IRAs and 401(k)s. The politician's instinct to make crowd-pleasing gestures with other people's money remains under either system. The only difference is that with private accounts there would be no fiduciary board or public watchdogs to keep Congress from letting people spend their retirement savings. In fact, the pressure would be just the opposite. After all, aren't private accounts "your money"?