Groups of pension executives and money managers have sent two separate open letters to President Barack Obama and members of Congress regarding the current debt ceiling crisis.
The first, calling on Mr. Obama and the U.S. Congress to “fix the deficit for real,” was sent to P&I Daily by BlackRock, one of the letter’s signatories.
Addressing the current federal debt ceiling crisis alone will not fix the entire problem, the letter states, and as “custodians of Americans’ savings,” the letter urges the Obama administration and Congress to “reduce the deficit substantially.”
The investors also warn of the impact of the current crisis on America’s debt rating with the result that investors “may simply give up on America.”
Among the signatories to the letter were the $158.8 billion Florida State Board of Administration; the $74.7 billion New Jersey Division of Investment; the $72.4 billion North Carolina Retirement Systems; the $20 billion Mississippi Public Employees’ Retirement System; Legg Mason and Allianz Global Investors.
The second letter, signed by representatives of 12 of the nation’s largest public pension plans, warned of the impact of the U.S. losing its AAA credit rating, reducing its rating below that of six countries, including France and Germany, “signaling America’s diminished ability to pay its debt.”
The letter also warns of the inflationary risk of foreign countries investing their wealth in currencies other than the devalued U.S. dollar.
Among the signatories were representatives of the $237.6 billion California Public Employees’ Retirement System; the $154.2 billion California State Teachers’ Retirement System; the $146.5 billion New York State Common Retirement Fund; the $119 billion New York City Retirement Systems; the $76.5 billion Ohio Public Employees Retirement System; the $41.4 billion Colorado Public Employees’ Retirement Association; and the Florida SBA.
Separately, North Carolina state Treasurer Janet Cowell alerted the state’s congressional delegation about possible repercussions in a letter sent July 18. Since then, the state has been warned by Standard & Poor’s of a possible rating downgrade if negotiations remain stalled, and notified by Moody’s Investors Service that it will be part of this week’s review of AAA rated states for possible downgrades as well.
In her letter, Ms. Cowell warned the state’s Capitol Hill delegation that ratings agencies might be concerned by the state’s large numbers of military (personnel) and Medicaid recipients that rely on federal finances. “Despite strong fiscal management of our own house, Washington's failure to find a solution puts us all at risk,” Ms. Cowell said in a statement.
Washington reporter Hazel Bradford contributed to this story