The Securities and Exchange Commission should stay out of public pension fund politics.
The SEC is considering regulating the political fund-raising activities of officials who oversee state and other public funds. It could consider banning public elected officials from accepting political contributions from money management firms.
H. Carl McCall, the elected New York state comptroller who is sole trustee of the $88 billion New York State Common Retirement Fund, has the right perspective on this issue.
Mr. McCall, who, like his predecessors, has received thousands of dollars in political contributions from investment-related businesses, believes money management donations shouldn't be singled out, according to a spokesman cited in Pensions & Investments.
Mr. McCall, who, the spokesman said, strongly supports campaign reform, believes money management contributions should be treated no differently from political donations from construction firms to politicians who control building projects.
Local voters and politicians, not federal bureaucrats, should decide whether New York, or any other state, ought reform its campaign contribution rules.
Political contributions can be corrupting. No doubt some money managers give to political campaigns because they seek to be considered for an investment assignment, or because they don't want to be excluded from consideration because they did not give. Few expect the contribution to actually buy an assignment.
Others may give because they genuinely like a candidate's political philosophy or administrative ideas, or maybe because of a friendship.
While the issue of political contributions by managers and would-be managers is troubling, it becomes corruption only when a contribution leads to one manager being favored over an equally competent, non-contributing one.
Competition can mitigate the effect of contributions. These contributions come from competing money managers and also go to competing candidates, although the incumbent usually has a major advantage.
This is a state and local matter.
Connecticut bars political donors from doing business with the state pension fund.
In Oregon, while there is no law, the oversight board of the Oregon Public Employes' Retirement System won't allow anyone running for state treasurer to take contributions from firms seeking or doing business with the state pension fund.
In California, as in New York and many other states, the contributions are legal. Both Kathleen Connell, California state controller, and Matthew Fong, California state treasurer, who oversee state pension funds, accept political contributions from investment professionals. Thomas Flanigan, California State Teachers' Retirement System's former chief investment officer, criticized the practice, stirring an inquiry. Mr. Flanigan is right to worry about the possible harmful effects of contributions in managing the funds. But the problem should be addressed at the local level.
Banning contributions doesn't ensure a well-run fund, either. The Oregon fund dropped a number of managers for poor performance and moved more to indexing.
If any managers and the pension funds that employ them are somehow manipulating the market or the price of a security, the SEC already has the power to investigate them and take action. That is its proper role; instituting campaign reform in state politics is not.