Pick Wall Street or Main Street?

For Repub­li­cans and Democrats, trea­surer race a choice be­tween sea­soned politi­cians and can­di­dates with pri­vate sec­tor ex­pe­ri­ence

New Haven Register (Sunday) (New Haven, CT) - - NEWS - By Dan Haar dhaar@hearst­medi­act.com

Con­necti­cut has $34 bil­lion in its six pen­sion funds, far less than the state needs in or­der to meet its obli­ga­tions, but big enough that small in­vest­ment re­turn fluc­tu­a­tions mat­ter greatly.

Is that an ar­gu­ment for vot­ers to elect a Wall Street pro­fes­sional as the state trea­surer?

Repub­li­cans and Democrats face that ques­tion in both pri­mary elec­tions on Tues­day. Both par­ties of­fer the choice of a sea­soned money man­ager or trader who has never held elected of­fice against a vet­eran, high-pro­file elected of­fi­cial.

And in both par­ties, the can­di­dates with Wall Street ex­pe­ri­ence are mak­ing the case: Cities and states might not of­ten elect money man­agers and traders as their trea­sur­ers, but Con­necti­cut in 2018 is ex­actly the time and place for a pro­fes­sional to step into the job.

Not so, the po­lit­i­cal veter­ans say; the job is way broader than just in­vest­ing money.

It’s a ques­tion worth pon­der­ing at a time when the state’s un­funded li­a­bil­ity could be as high as a stag­ger­ing $100 bil­lion, de­pend­ing on whether we in­clude not only the deep pen­sion hole, but also health costs and reg­u­lar state bor­row­ing. As­sump­tions about how fast the funds will grow also af­fect the size of the short­fall, and right now we’re at high rates most of us would love to see in our 401(k)’s — 6.9 per­cent for the state em­ploy­ees’ pen­sion fund and 8 per­cent for the teach­ers’ pen­sion fund.

On the Re­pub­li­can side, it’s Thad Gray, 58, who re­tired in 2017 as a part­ner and chief in­vest­ment of­fi­cer in a mid­town Man­hat­tan as­set man­age­ment com­pany that worked with many pen­sion funds, against Art Linares, a three-term state sen­a­tor from West­brook who co-founded a so­lar power in­stal­la­tion com­pany at age 19. Gray, of Sal­is­bury, who’s ex­actly twice as old as the 29-year-old Linares, nar­rowly won the party en­dorse­ment.

Democrats have a less stark Wall Street vs. Main Street choice. Dita Bhar­gava, of Green­wich, worked for years as a hedge fund man­ager and in var­i­ous roles at in­vest­ment banks. She’d be a new­comer to elected of­fice, but she has been vice chair of the Demo­cratic state cen­tral com­mit­tee; in re­cent years she founded and ran a non­profit work­ing on pub­lic ed­u­ca­tion about gen­der eq­uity is­sues.

Shawn Wooden, 49, the en­dorsed Demo­crat, was un­til re­cently pres­i­dent of the city coun­cil in Hart­ford, and while he hasn’t worked in Wall street money man­age­ment, he’s a part­ner at the Day Pit­ney law firm, lead­ing the pub­lic pen­sion fund in­vest­ment prac­tice.

“I just think there’s way too much money at stake to trust it to some­one who doesn’t have in­vest­ment ex­pe­ri­ence, who hasn’t fol­lowed mar­kets for a long time, who hasn’t hired money man­agers,” said Gray, who holds an MBA from NYU, now the Stern School of Busi­ness.

“The job of be­ing trea­surer is not to be the state’s chief trader or chief stock picker,” Wooden said in re­sponse, as we piece to­gether a sim­u­lated con­ver­sa­tion through my in­ter­views.

Wooden added, “The trea­surer has broad re­spon­si­bil­i­ties for debt man­age­ment, pen­sion fund man­age­ment, short-term cash man­age­ment, cor­po­rate gov­er­nance, work­ers com­pen­sa­tion pay­ments,

Each of the four calls him­self or her­self “the only one in the race” on one point or an­other.

a col­lege sav­ings pro­gram and pol­icy . ... So, the job re­quires fi­nance, in­vest­ment, le­gal, pol­icy and man­age­ment skills along with ex­pe­ri­ence in gov­ern­ment.”

He and Linares, in short, in­sist their po­lit­i­cal ex­pe­ri­ence is cru­cial as they help shape pol­icy — in re­struc­tur­ing the pen­sion funds, to give one gi­ant ex­am­ple — by work­ing with the Gen­eral As­sem­bly and the gover­nor.

“You could hire War­ren Buf­fett to be the state trea­surer and you couldn’t in­vest your way out of the prob­lems that we are fac­ing today,” Linares said. “We need pen­sion and ben­e­fit re­form and my ex­pe­ri­ence as a busi­ness­man and a leg­is­la­tor trans­lates nicely to the trea­surer’s role.

Gray agrees with the part about the hir­ing. “The job is not to buy stocks and bonds, the job is to hire money man­agers who buy stocks and bonds,” he said — but he sticks to his in­sis­tence that a vet­eran money man­ager can best pick money man­agers.

But he slams Linares di­rectly, and Wooden in­di­rectly, on the way they see the broader roles of the of­fice.

“The trea­surer’s job is not a pol­icy job,” Gray said, “it’s an ex­e­cu­tion job. And I think that his view that his leg­isla­tive ex­pe­ri­ence has any bear­ing on the job is com­pletely mis­placed.”

Bhar­gava sees pol­icy as very much a part of the job, with an en­tire sec­tion of her cam­paign web­site devoted to so­cially re­spon­si­ble cor­po­rate gov­er­nance, for ex­am­ple, in­clud­ing gun di­vest­ment — which Wooden em­braces — and ad­dress­ing the opi­oid cri­sis through in­vest­ment mus­cle, as well as rein­ing in CEO pay.

State Trea­surer Denise L. Nap­pier, step­ping down af­ter 20 years on the job, pre­ceded by 10 years as the Hart­ford city trea­surer, has been one of the na­tion’s lead­ing pub­lic pen­sion fidu­cia­ries in ad­vo­cat­ing for re­spon­si­ble cor­po­rate gov­er­nance, at The Walt Dis­ney Co. and many other cor­po­ra­tions. She in­sists that’s all in the name of sound in­vest­ment re­turns, while both Repub­li­cans in the race say they’ll stay away from that course.

But that’s a de­bate for the gen­eral elec­tion. For now, we’re look­ing squarely at the ques­tion of pro­fes­sional money man­age­ment ex­pe­ri­ence vs. a broader po­lit­i­cal back­ground, and it’s get­ting nasty on the Re­pub­li­can side.

“Un­like my op­po­nent and many of his al­lies, my loy­alty and com­mit­ment will al­ways be to Main Street Con­necti­cut and the tax­pay­ers, not Wall Street,” Linares said.

Those al­le­ga­tions of so­called Wall Street in­ter­ests are an in­sult, Gray said. “I have no fi­nan­cial con­nec­tion to Wall Street of any kind.”

Each of the four calls him­self or her­self “the only one in the race” on one point or an­other. Bhar­gava is the only woman, she makes clear, and has ex­pe­ri­ence not only on Wall Street but in so­cial is­sues. Gray not only led an in­vest­ment firm work­ing with gi­ant pen­sion funds, he pre­vi­ously was an un­der­writer of cor­po­rate debt.

For Linares, it is his ex­pe­ri­ence at Green­skies Re­new­able En­ergy, a so­lar in­staller that counted Wal­mart as a cus­tomer. “I’m the only can­di­date in this race that has started a busi­ness and in­vested in grow­ing it in this state. I’ve cre­ated 100 jobs and sold the busi­ness and it’s still go­ing strong,” he said.

Linares wouldn’t say how im­por­tant or unim­por­tant Wall Street ex­pe­ri­ence is for the of­fice. Wooden, who pre­vi­ously worked in the in­vest­ment of­fice of the AFLCIO and was a mem­ber of the state ethics board, called it “one of many rel­e­vant skill sets.”

That’s a fair as­sess­ment. I’m not go­ing to say how big a factor it is, that’s up to you the vot­ers.

When I asked Gray why more state trea­sur­ers aren’t from Wall Street, he quickly noted the pay isn’t even close to what he made on the Street. “You’d have to be in­spired by the con­cept of pub­lic ser­vice,” he said.

Ev­ery­one in the race can agree on that.

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