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April 19, 2005
Unions Better Investors than Wall Street
Since we're on the theme of union corruption versus corporate malfeasance, here's a good head to head example. One of the more notoriously corrupt union institutions was the Teamsters Central States pension fund, which Jimmy Hoffa Sr. used to throw cash to his pals and hand money to insiders.
But the rank-and-file Teamsters actually did quite well off the fund. Still, in 1982 the federal government imposed a consent decree on the union and turned management of the fund over to federally-supervised investment experts.
Yet in these expert hands, the aging fund has fallen into greater financial peril than when James R. Hoffa, who built the Teamsters into a national power, used it as a slush fund.In contrast, the Western Conference of Teamsters pension fund, still controlled by union officials, is in great financial shape and road out the bear market at the beginning of this decade far better than most funds controlled by Wall Street firms.At the end of 2002, the pension fund had 60 cents for every dollar owed to present and future retirees - a dangerous level. In a rough comparison, the pension fund for US Airways' pilots had 74 cents for every dollar it owed in December 2002, just before it defaulted. During the bear market after the technology bubble burst, Central States' assets lost value as its obligations to retirees ballooned, causing a mismatch so severe that the fund had to reduce benefits last winter for the first time in its 49-year history.
"There never were benefit cuts in the 1970's," said Wayne Seale, 52, a long-haul driver from Houston and one of about 460,000 Teamsters participating in the fund. "We were happy. We were being taken care of."
So here you have the most direct head-to-head comparison between union and corporate management of pension funds-- and the union officials won hands down.
Posted by Nathan at April 19, 2005 08:52 AM
