Reader comment on: Let States Divest From Iran
in response to reader comment: Reply to Policy Center Reply of September 2, 2007
Submitted by Jeffrey L.Glasgow (United States), Sep 3, 2007 12:18
This will be my last post on your blog. When Mr. Schanzer responded that I had "raised an excellent question" in my suggestion that the burden of the cost of divestment should be spread around to all taxpayers of the United States and not fall solely on participants in pension and mutual funds, I naively assumed that there would be a discussion of the issue that addressed the point Mr. Schanzer described as "excellent." That assumption was wrong. This "discussion" has been like "discussing" evolution with Jerry Falwell.
This is the United States, and you are obviously entitled to your point of view and I to mine. I am less disappointed with the fact that you believe as you do than with the fact that you invited me to a sham discussion. Two examples from the last posts:
First, your contention that: "Iran divestment is NOT being mandated. The states are doing this on their own volition." A half-truth at best. This would only be true if the states were divesting stocks that were owned by the state. These stocks are owned by retirees, even though the administrator is a stat-created entity. You have steadfastly refused to even acknowledge this distinction. The fact is that the state of Ohio statute requires me to divest by forcing my pension fund to divest stocks whose return is my and a million Ohio retirees' money. The divestment mandate you describe as "voluntary" is as involuntary as a mugging, an analogy that I believe I made in my first post.
You have continually responded that I am not going to lose money, or that it will be de minimus. You have asked me to tell you what stocks I am talking about. You should know that it is irrelevant what stocks are in the retirement systems' portfolios it doesn't matter whether divestment earns me money or loses money. If you divest and you earn money while I don't, more power to you. In case you really don't understand what I am trying to say, (and I believe that you understand perfectly well) I will use the example of the Libertarians. They want government out of their lives. I want government out of my pension system. It is as simple as that.
You still have not gotten the picture, and I am tired of trying to convince you. I assume that the second numbered paragraph of you response states your final reason as to why divestment is appropriate. I quote: "I have now clearly stated several times that beneficiaries will be protected, by virtue of the fact that there are plenty of other good investment choices out there." I would repeat to you, I am not debating that point. I concede that there are "plenty" of good investments out there. What I am saying, and what you either unwilling or incapable of understanding, is that the divestment bills will not assure me that the decisions as to which of those "plenty of good investments" will be made with my interests as the basis. I suggest that you look up fiduciary duty in either a legal encyclopedia or state statute. I do not know in which state you publish your blog, but I will quote Ohio Revised Code Section 145.11 (A). This section provides:
The members of the public employees retirement board shall be the trustees of the funds created by section 145.23 of the Revised Code. The board shall have full power to invest the funds. The board and other fiduciaries shall discharge their duties with respect to the funds solely in the interest of the participants and beneficiaries; for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the public employees retirement system; with care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims; and by diversifying the investments of the system so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. (Emphasis added)
Those who seek forced divestment use an external political standard—the foreign policy of Iran—to force decisions that may, or may not be, in the interest of the participants. Your concept of divestment per se is a violation of this fiduciary duty. Each and every divestment mandate bill recognizes this by explicitly eliminating this fiduciary duty. I wish I had had such conclusive proof when I was trying criminals for theft, with which these divestment bills have eerie similarities.
Mr. Slugh argued that my suggestions that forced divesture was an abuse of the fiduciary duty was "simply untrue" because investments in Iran were "risky." Of course they are. However, degree of risk is one of the factors that a fiduciary is supposed to decide. If a fiduciary invests in an unreasonable risky investment and that investment loses money, his beneficiaries may sue him for that loss. What Mr. Slugh is advocating is for the government to decide for its reasons whether divesture should be made and let the fiduciary off the hook for the losses the losses that may occur. Whether divestment may be a good idea is irrelevant. It is the identity of the decision maker that is totally relevant. Neither you, nor the government has any right to tell me what my investments should be—particularly when they are perfectly legal. That is unfair and borderline theft in my book.
You dismiss my suggestion about England Argentina as preposterous. Have you never engaged in a real debate? Do you actually suppose that I am not aware that it is unlikely that we would ever sanction these countries? The illustration, in case you really did miss the point and are not merely being intellectually dishonest, is that once you change the rules and remove a protection for a certain class of people, if leadership changes, what was done for an expedient purpose comes back to haunt the parties who remove the protections. A more contemporary example will be the chagrin felt by Republicans feel when and if President Hillary Clinton exercises the powerful presidency created by Dick Cheney for the Bush administration. Circumstance change.
You should also be aware that each and every stock held by public pension systems is a legal investment under the laws of the United States and the State of Ohio. At the time of the introduction of the Ohio divestment bill, both of its sponsors held stock in GE which apparently would not have passed muster under their own law. Rep. Mandel divested when informed of that fact. Rep. Jones did not, at least as of my last report. Public retirement systems follow the federal laws on prohibited transactions. If the federal government has listed a stock as prohibited, the pension systems do not purchase that stock. Mr. Mandel and Ms. Jones, in their briefing packet to the Ohio House of Representatives explicitly stated that the stocks of which they wanted the pension systems to divest were legal investments.
You at least acknowledge that you read the Burton article. If you are so tied to your position as to ignore professor Burton, my point is proven. He is a man with vast experience, both in the market and in academia. You have his CV from the last post. Did you bother to read it?? I am aware of other articles from investment professionals that make the same point. I am not going to waste my time sending them to you.
It has been an interesting experience talking at you. It is not sufficiently interesting to continue to waste my time.
As a former prosecuting attorney, I hate to not have the last word, but since it is your forum, you will obviously have the opportunity to rebut this as you choose. So be it. I will not waste any more of my time and energy arguing with you.
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