Blame Pension, Mutual Fund Managers for Liability Worries

Regarding “Pensioners May Find They Are on Their Own,” by James Flanigan, and “Seeking a ‘New Financial Order,’ ” by Tom Petruno (both April 20):

It’s interesting to note that at this late date, after the horse is out of the barn, “concern is rising about the liabilities of pension funds in many of the biggest corporations in the land,” as Flanigan writes.

Presumably the folks who manage the pension funds for the companies that are having problems, as well as their highly paid mutual fund managers, each had an equal opportunity to read Robert Shiller’s excellent book “Irrational Exuberance.”

Had they done what they get paid for -- exercise fiduciary responsibility -- pension funds would have cut back their stock allocations to reflect the risk associated with the top of the biggest asset bubble in history, as Shiller recommended.

As to their inability to make up slack because of low interest rates: First, they’ve again got themselves to thank -- they should have been way down on their stock allocations and way up on their bond allocations three to five years ago, not waiting until today to cry about current low yields.

Second, the current rates are depressed because of Alan Greenspan’s inappropriate attempts to keep the various asset bubbles inflated by pouring the gasoline of low interest rates on the fires and stimulating ridiculous levels of corporate and private indebtedness.

I’m kind of amazed to read in Flanigan’s column that “a strong economic rebound and a bull market rally that brought equities back to their 1990s exuberance would relieve a lot of the pension problems.”

If one reads Schiller’s “Irrational Exuberance,” one would conclude that any near-term return to “equity exuberance” is most likely to be short-lived and will simply delay the day of reckoning for a lot of folks.

Bill Padian

Torrance