By Jeannine Aversa, Associated Press
The Arizona Republic
Friday, July 22, 2005
WASHINGTON - Any more moves by companies to dump troubled pension plans on the financially strapped agency that insures them would be troubling but shouldn't threaten the economy, Federal Reserve Chairman Alan Greenspan said Thursday
Greenspan made his remarks to the Senate Banking Committee after he delivered what may be his final economic outlook to Congress. He plans to step down early next year after 18 years on the job.
The Fed chief was asked by Sen. Jim Bunning, R-Ky., what the impact on the economy would be if more companies were to dump their pension plans on the Pension Benefit Guaranty Corp., an agency that is running a record deficit that tops $20 billion and that recently assumed the obligations of the United Airlines pension plans.
An additional pension burden for the PBGC "clearly is negative," Greenspan told Bunning. "I think it is a worrisome thing for American taxpayers, needless to say."
Private analysts and others worry that a taxpayer-funded bailout could happen at some point if the agency cannot get on firmer financial footing, especially if additional companies opt to dump their pension obligations.
The agency's operations are financed by insurance premiums, which are paid by companies that sponsor traditional pension plans.
It also earns money from investments and receives funds from pension plans that it takes over. The agency is not funded through tax revenues.
Even with his concerns, Greenspan said he didn't foresee the pension system's financial problems threatening the health of the economy at this point.
"It's hard to see at this stage any spillover effects yet on economic forces. As large as the numbers are, relative to a $12 trillion economy, obviously, they're not at a stage where it is critical," he said.
Various bills have been offered in Congress to shore up the agency.
Greenspan repeated his interest in seeing Congress rein in the massive portfolio holdings of Fannie Mac and Freddie Mac.
Congress is exploring various proposals to rein in Fannie Mae, the No. 1 U.S. buyer of home mortgages, and its rival, Freddie Mac, which ranks as the second-largest buyer. They were created by Congress to inject money into the home-loan market.