Putting the Crony into Capitalism

Article excerpt

Let's see if we have this right. The folks who have been withholding a rising slice of our paychecks, in the guise of stashing it in a retirement trust fund that has no money, now say they want to fix the system, by picking stocks with our money. What a deal! One wonders where these Warren Buffett wannabes and closet Peter Lynchs and Abby Cohens have been hiding. Deep inside the bureaucracy of the U.S. Treasury-or maybe it's the Bureau of Mines.

One can imagine what kind of stocks our solons in Washington would pick for us, too. Imagine your Social Security equity portfolio chock full of Penn Central and U.S. Steel-type shares. You can forget about Big Tobacco. Can't see the Georgetown crowd taking a liking to Microsoft either. GM, Ford, or DaimlerChrysler? Not unless they roll over and play dead for OSHA and EPA. Caterpillar? Not if the UAW has any say in the matter. What about banks and insurance companies? Uh oh, not enough lowincome housing and statesanctioned local development. The chemical industry? Defense? Forget it. Nevermind, once the Feds take a controlling position, they'll grab a few board seats and insist on vague catchall provisions that the company's products and services "promote the welfare of the state," as Ohio's state pension fund did. This is social responsibility with a vengeance.

What about financial returns? As it happens, a number of scholars have looked into this question. John R. Nofsinger of Marquette University found that economically targeted investments by government agencies depress annual returns by more than 1. …