When money talks, Wall Street usually listens. And lately, some of the loudest moneyed voices are those of state treasurers.
Quite apart from their traditional roles of poring over bond prospectuses and chasing down lost-property owners, more treasurers have been taking high-profile, public stances on issues including New York Stock Exchange reforms, the mutual fund scandal and even global warming.
They're wielding the power of substantial purses: Treasurers typically function as their states' chief financial officers and as such have input, if not direct authority, over huge state pension fund investments in stocks and bonds, and the hefty money management fees and brokerage commissions that go with them.
A tough public statement from some state finance officials was widely viewed as the final push that toppled Richard Grasso from his post as NYSE chairman two months ago, amid outrage over his massive pay package.
Last month, California and other states yanked billions of pension dollars from Putnam Investments after the Boston mutual fund giant was accused of letting employees engage in market-timing trades at the expense of fund investors.
But as treasurers seek to spread their influence, some critics have questioned where prudent financial stewardship ends and self-serving politicking begins.
Last week, California Treasurer Phil Angelides, New York State Comptroller Alan Hevesi and counterparts from five other states appeared at the United Nations to demand more comprehensive disclosure of the risks that companies, and their investors, face from climate change.
They said the Securities and Exchange Commission wasn't doing enough to enforce regulations requiring disclosure of factors that could have a "material impact" on companies' financial results and thus the performance of their stocks. Global warming is one such factor, the group said.
The U.N. meeting came in the midst of a busy few days in New York for treasurers, with Angelides and others lobbing more criticism at the NYSE, and a delegation from the National Assn. of State Treasurers touring the Nasdaq Stock Market and ringing the opening bell at the Big Board.
"There's a saying that if you speak once in a meeting everyone listens to you, but if you speak three or four times people start to tune you out," said corporate governance expert Charles M. Elson.
"The treasurers have made a good difference so far, but the further afield they wander, the more they risk diluting their message," added Elson, director of the University of Delaware's John L. Weinberg Center for Corporate Governance.
Nevada State Treasurer Brian K. Krolicki, who as head of the treasurers association rang the NYSE bell, said in an interview this week that treasurers don't often find themselves in a position where the public is interested in their opinions.
When it happens, he said, it makes sense to take advantage of the "bully pulpit," especially where the integrity of the markets is concerned.
"It's appropriate and wholesome that we've gotten the attention of the Securities and Exchange Commission and the NYSE," he said.
Krolicki acknowledged, however, that he sometimes differs with fellow treasurers over which issues are most appropriate for public comment. He offered no opinion on global warming, and the treasurers' association didn't formally join the U.N. meeting.
Activism on the part of state finance officials is hardly a new phenomenon. Some observers date the trend to the 1980s when then-California Treasurer Jesse M. Unruh on the West Coast and New York State Comptroller Ned Regan on the East Coast pushed for reforms that would give shareholders a greater voice in corporate affairs.
Regan, in an interview this week, recalled a phone call in which Unruh told him: "If we put CalPERS [the California Public Employees' Retirement System] and the New York state pension funds together, we'd really have some clout."
The big issue at the time was "greenmail" and the tendency of company managers to pay off corporate raiders -- with shareholders' money -- to save their jobs.
Soon, however, state finance officials moved on to other hot-button issues, such as whether to fight apartheid by divesting the shares of firms doing business with South Africa. Divestiture has since become a popular means of putting pressure on, for example, tobacco firms or companies perceived to have ethical problems.
In most states, the treasurer is one of a handful of statewide elected officials. The narrow scope of the job hasn't kept officeholders from trying to use it as a political springboard -- unsuccessfully, in the cases of two recent California treasurers. Democrat Kathleen Brown lost her 1994 bid for governor, and Republican Matt Fong failed in his 1998 attempt to unseat U.S. Sen. Barbara Boxer. Hevesi was defeated in his 2001 race for mayor of New York.
Angelides, a Democrat, is widely assumed to be interested in running for governor of California in 2006.
Despite the treasurers' higher profiles this year, the campaign for NYSE reform may have exposed the limits of their influence. One of their chief demands was that one or more seats officially be set aside on the exchange's board of directors for public investors. But Interim NYSE Chairman John S. Reed ignored the demand in his reform plan, instead providing seats on a new non-voting advisory board.
William J. Higgins of Pine Beach, N.J., the owner of an NYSE trading seat, said recently that he resented the state officials' attempts to dictate policy at what is, after all, a privately owned organization.
"Angelides thinks he's a big player," Higgins said in an interview. "If his business was to go away tomorrow, it wouldn't be noticed," he said, referring to money management fees and brokerage commissions the state and its pension funds pay.
William Fleckenstein, a Seattle-based investment fund manager who has been unswervingly pessimistic about the stock market for years, said that he welcomes efforts by the treasurers and especially by New York Atty. Gen. Eliot Spitzer to attack corporate corruption and push for greater disclosure.
In Fleckenstein's view, such activism balances out the activism of the Federal Reserve Board, which he criticizes for using an easy-credit policy in recent years to prop up the stock market.
"We need some political activism," he said. "In order to get that, if it means in addition to doing the right things on exposing corruption they have to opine on global warming, that's OK."
Angelides, in an interview this week, said he is "against trying to deal with every social issue."
"I've chosen my spots well," he said, identifying his main issues as corporate governance reform, inner-city investment and the intersection of business and the environment. "Those are all mega-trends worth paying attention to," he added.
It makes sense for pension funds, which must provide income for retirees many decades into the future, to think of investments from a perspective of 30 years or more, Angelides said.
Jeb Spaulding, Vermont's treasurer, also joined Angelides in the U.N. statement. He said in an interview that he had been reluctant to speak out on the NYSE because he feared such efforts might result in hamstringing the exchange with too much regulation.
But global warming struck Spaulding as a natural issue for a state that depends so heavily on cold-weather tourism.
"To the extent that we don't make maple syrup in Vermont anymore or our ski areas don't have snow, that has a huge impact on our economy," he said.
"I would hope we're not going to just start weighing in on every current issue of the day," Spaulding said. "But climate change and global warming? As far as I'm concerned, that's the big enchilada."