Wayland Rep Wants Pension Funds To Go To Local Banks
State Rep. Thomas Conroy, D-Wayland, thinks too few banks are lending money to businesses.
So, he wants to invest some of the state's pension money into local banks.
Extra capital for banks will encourage relaxation of lending standards and open credit to businesses, Conroy argues.
Conroy, the Wayland state representative since 2007, said he came up with the idea last year while mulling a run for state treasurer, which he has decided not to pursue.
But state pension officials said the $42 billion pension trust fund is not meant to be a stimulus tool - it's meant to create the highest return possible through a diversified investment strategy.
"It's the retiree's money, we're just the fiduciaries of it," said Michael Travaglini, executive director of the Pension Reserves Investment Management Board, or PRIM. "People come looking for us to invest in housing, jobs, and projects. But that's not our job. Our job is to get the best return on investment that we can."
The State's ROI
The state's Pension Reserves Investment Trust, or PRIT, is an approximately $42 billion fund that pays retirement benefits to all state employees, teachers and retirees from about 90 participating cities and towns.
The fund collects money through paycheck contributions, investment returns and from an annual state budget allocation. The fund's board then invests the money in an effort to build up money.
The management board uses a diversified investment strategy, which includes holdings in domestic and international stock markets, high-yield bonds, real estate and natural resources.
A portion of the $42 billion is held in a cash fund of about $8 billion that is used as liquid capital to pay benefits to retirees.
The cash fund is what Conroy said should be invested in local banks.
For example, Conroy said the board could invest a portion of the cash fund in multiple CDs, or certificates of deposit, at regional banks around the state. The board would still have access to money to pay benefits, while at the same time giving a "jolt" to local banks.
That's needed, Conroy said, because he's heard that businesses are having trouble accessing credit from banks. Giving banks additional capital will allow them to relax their lending requirements and open up credit flow, Conroy argues.
"There are such high credit rating standards, in essence money is not being handed out to these small businesses," Conroy said.
Travaglini doesn't seem enthused about the idea, however. He said the board's sole focus is getting the highest returns on the investment.
While the fund had its worst year in 2008 when the value of its portfolio fell by 29 percent, the fund rebounded slightly and grew 18 percent in 2009. That compares to annualized average returns of about 9.75 percent, Travaglini said.
Conroy said he'll discuss the issue with candidates running to replace Treasurer Tim Cahill, who is running for governor, and he may consider filing legislation.
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