Full plate awaiting PBGC chief

Joshua Gotbaum, President Barack Obama's nominee to lead the Pension Benefit Guaranty Corp., will have a long to-do list at the agency.

For starters, he'll have a deficit of $22 billion to deal with, according to the agency's management report for fiscal 2009, which ended Sept. 30. That's up 96% from the deficit of $11.2 billion a year previously.

The agency did not include any recommendations for dealing with its soaring budget deficit in the annual management report assessing its financial performance, which was released Nov. 13.

“The PBGC's long-term deficit is a policy issue that would have to be addressed by Congress,” said Jeffrey Speicher, a PBGC spokesman.

But that's not all.

A new investment policy will be among his top priorities. The PBGC board in May suspended the investment policy adopted in February 2008, after the former PBGC director, Charles E.F. Millard, was accused by the agency's inspector general of making inappropriate contacts with managers before they were hired (P&I Daily, July 29).

Mr. Gotbaum is an operating partner at private equity firm Blue Wolf Capital Management LLC, New York, and previously spent more than a decade as an investment banker with Lazard Freres & Co. LLC. But his resume doesn't necessarily give any hints as to what Mr. Gotbaum has in mind for the agency policy.

“It is always difficult to predict where investment policy will go,” said James Keightley, a partner with Keightley & Ashner LLP, Washington, and former PBGC general counsel. “Democratic appointees have invested aggressively and Republican appointees have invested conservatively,” Mr. Keightley added. Jennifer Psaki, a White House spokeswoman, declined comment.

Under the investment policy suspended by the PBGC board, 45% of the $48 billion in PBGC assets available for investment were to be in equities, 45% in fixed income and 10% in alternatives. Previously, 75% to 85% of the PBGC's assets were in a liability-driven strategy, with the balance invested in stocks.

Mr. Gotbaum, reached by telephone, declined to comment for this story. His Blue Wolf partners were also declining interviews pending Mr. Gotbaum's Senate confirmation, said Caroline Luz, a Blue Wolf spokeswoman.

Labor officials said Mr. Gotbaum has worked closely with unions.

“SEIU fully supports the nomination and looks forward to working with Mr. Gotbaum to strengthen the PBGC and to working with him on a new universal secure and adequate retirement system for American workers,” said Mark McCullough, a spokesman for the Service Employees International Union, Washington.

As an investment banker at Lazard Freres, New York, from 1981 to 1994, Mr. Gotbaum “advised businesses, unions and governments on a diverse range of mergers, acquisitions and restructurings, in steel, transportation and many other industries,” a White House news release said.

Mr. Gotbaum has had a long run as a Washington insider, most recently as a leader of the Obama presidential campaign's transition team for the Department of Treasury.

He also served in the Clinton administration as executive associate director and controller in the White House Office of Management and Budget, and assistant secretary in Treasury for economic policy and in the Defense Department for economic security, according to the White House news release and government documents.

Mr. Gotbaum also served as associate director for economics on President Jimmy Carter's White House staff, according to another government document.

Pending Senate confirmation, Mr. Gotbaum will take the agency reins from Vince Snowbarger, PBGC deputy director of operations, who has been acting director since Mr. Millard stepped down on Jan. 20.

Under a legislative provision in the Pension Protection Act of 2006, Mr. Gotbaum's nomination must be approved the Senate Finance and the Health, Education, Labor and Pensions committees before a confirmation vote on the Senate floor.

Mr. Gotbaum was also the trustee in Chapter 11 bankruptcy reorganization of Honolulu-based Hawaiian Airlines Inc. from 2003 to 2005, the White House news release said.